Dive Brief:

• Thermo Fisher Scientific is predicting COVID-19 testing could create a $750 million tailwind in the second quarter. But in first quarter results posted Wednesday, the company also said that benefit is likely to be more than offset by disruptions from COVID-19, which could cause overall sales to fall 15% on an organic basis.

• Roche also reported first quarter financials Wednesday, with diagnostic division revenues rising 5%, driven by a 29% jump in molecular diagnostic sales. But testing declines amid lockdowns in China suggests trickier times may be ahead now that COVID-19 has gone global.

• Roche’s first quarter results largely mirror those of Thermo Fisher and its other medtech peers, at least in relation to COVID-19. The timing of the arrival of the SARS-CoV-2 virus in North America and Europe meant those key regions faced minimal headwinds in the first quarter. 

Dive Insight:

Thermo Fisher alerted investors to the impact of COVID-19 earlier this month when it withdrew its guidance for 2020. All the while, Thermo Fisher’s units continued along pre-pandemic trajectories in the first quarter, with life science and lab products still growing, analytical instruments still contracting and specialty diagnostics still flat as reported.

Cowen analysts called the results “largely in line with pre-COVID-19 expectations,” with all units except for analytical instruments beating original forecasts. Last month, the analysts cut their forecast for the first quarter by 14%. In reality, total sales almost hit the original forecast, leading the analysts to say the results were “better than feared” and express growing confidence that Thermo Fisher “is well-positioned to weather COVID-19 headwinds.”

But effects of COVID-19 are over time showing greater impact. Thermo Fisher sales in China fell 25% in the quarter, contributing to a 6% headwind tied to COVID-19 in the quarter. The company’s Europe and North America units only started to feel the impact of the pandemic very late in March. In its current worst-case plausible scenario, Thermo Fisher thinks it could face headwinds of 25% in the second quarter. 

The breadth of Thermo Fisher’s portfolio means COVID-19 is also creating lucrative opportunities. Thermo Fisher calculated the tailwind added up to 3% of revenue in the first quarter. The diagnostic unit was the biggest beneficiary of the trend, driving sales up in the low double digits on an organic basis. Depending on the level of COVID-19 testing in the second quarter, Thermo Fisher thinks the pandemic could add between $400 million and $750 million to revenues in the current financial period.

Even with the pandemic, Thermo Fisher said it is on track to close its $11.5 billion takeover of Qiagen in the first half of next year. 

As for Roche, buoyed by rising demand for molecular testing, North American sales rose 12% in the recent quarter. However, the situation in China suggests Roche’s Western units are unlikely to escape unscathed. In the first quarter, sales of Roche’s diagnostics fell 11% in Asia Pacific having been “strongly impacted by the COVID-19 pandemic shutdown in China.” Roche said routine testing fell in the quarter.

With the dynamics China faced in the first quarter now affecting Western countries, routine testing is likely in decline in the U.S. and other key markets, set to affect Roche’s second quarter results.

Similar to Thermo Fisher, Roche has pandemic-related testing tailwinds, too. In recent weeks, Roche won FDA emergency use authorization for a coronavirus test and outlined plans to produce many millions of SARS-CoV-2 antibody tests by June. Demand for the COVID-19 tests could offset falling use of routine diagnostics. Roche confirmed its 2020 outlook.