Dive Brief:
- Thermo Fisher Scientific Monday reported fourth-quarter revenue of $10.5 billion, up 54% year over year, fueled by continued COVID-19 tailwinds.
- The company beat Wall Street expectations by about $1 billion on the back of $3.2 billion in coronavirus-related revenue and accelerating growth momentum in its base business which grew 5% organically. CEO Marc Casper told investors Monday that the diagnostics and healthcare business grew more than 200% driven by COVID-19 testing revenue.
- While Thermo Fisher sees continued strong demand for coronavirus tests in 2021, CFO Stephen Williamson said testing-related revenue of $7.1 billion is "assumed to be very front end-loaded" this year with first quarter levels similar to the fourth quarter of 2020, adding that test demand "may begin to moderate" in the second quarter and further later in 2021.
Dive Insight:
J.P. Morgan analyst Tycho Peterson noted that Thermo Fisher's expected COVID-19 testing drop-off in 2021 is "steeper than what we've heard from others such as Hologic and Abbott."
Abbott last week reported fourth-quarter sales of $10.7 billion, including $2.4 billion generated by COVID-19 diagnostic testing, beating consensus expectations of $9.9 billion. CEO Robert Ford told investors on last week's earnings call that he sees "sustainability" in 2021 for testing despite the rollout of vaccines.
Looking ahead, Thermo Fisher provided 2021 financial guidance with an expectation this year of $35.1 billion in revenue, which would represent reported growth of 9% over 2020. The company provided COVID-19 testing revenue guidance of $7.1 billion for the year.
Williamson said demand for COVID-19 tests is anticipated to be strong in the first quarter of 2021 but is expected to decline over successive quarters. Still, he opined "should the pandemic be longer lasting" and the need for coronavirus testing be maintained "then there's sizable upside" particularly in the second half of the year.
Although Thermo Fisher envisions testing demand slowing in 2021, the company last month announced it will acquire privately-held molecular diagnostic maker Mesa Biotech for $450 million in cash, with the potential for an additional $100 million upon the completion of certain milestones. The deal is expected to be completed in the first quarter of this year.
On Monday's investor call, Casper said the acquisition adds Mesa's PCR-based Accula rapid point-of-care test platform for SARS-CoV-2, Influenza A and B, RSV and Strep A to Thermo's portfolio of tests.
Overall, Casper on Monday's investor call described 2020 as the "strongest year" in Thermo Fisher's history. The company reported that revenue for the full year grew 26% to $32.2 billion, beating the consensus analyst estimate of $31.1 billion.
While its base business grew 5% organically in the fourth quarter, for the full year it was "essentially flat" as a result of "slower economic activity" earlier in 2020 due to the pandemic, according to Williamson. Though the level of routine diagnostics testing activity was higher in the fourth quarter than the third quarter, he said it still remains below pre-pandemic levels. 2021 guidance assumed base business growth rate of 7%.
