Dive Brief:
- Thermo Fisher Scientific on Wednesday reduced the company's COVID-19 testing revenue guidance by $900 million for the rest of the year. It now expects at least $4.9 billion in revenue for 2021, of which $3.8 billion was delivered the first half of the year, leaving nearly $1 billion in expected revenue remaining.
- While Thermo Fisher reported second-quarter revenue grew 34% year over year and that the company raised its 2021 guidance by $300 million, CEO Marc Casper told an investor call that the company is "de-risking the outlook" for COVID-19 testing for the second half of the year. "Taking it off the table felt like the right thing to do," Casper said given current market dynamics.
- CFO Stephen Williamson called it "prudent" for Thermo Fisher to "significantly de-risk the outlook" for COVID-19 testing. Second-quarter revenue for coronavirus-related tests was about $1.4 billion but company executives expect test demand to slow for the rest of 2021. Williamson said "there continues to be a wide range of outcomes for testing in the second half of the year" including an intensification of the pandemic "driving a higher need" for COVID-19 tests with emerging delta variant.
Dive Insight:
Since the start of the pandemic in early 2020, Thermo Fisher has rolled out a portfolio of COVID-19 molecular diagnostic tools and testing products for which the company has secured FDA emergency use authorizations. The company has benefited over successive quarters from strong demand for those tests. However, like diagnostics competitors Abbott and Quidel, Thermo Fisher has adjusted its testing guidance for the rest of 2021.
Thermo Fisher's coronavirus-related products allowed the company in the second quarter to "deliver exceptional performance in revenue, earnings and free cash flow," according to Casper. Overall revenue in the quarter attributed to COVID-19 response was $1.9 billion, of which approximately $1.4 billion came from testing.
However, Thermo Fisher has pulled back from full-year guidance it gave in February for COVID-19 testing revenue. At the time, CFO Williamson warned that the company's test-related revenue was "assumed to be very front end-loaded" this year and that demand "may begin to moderate" in the second quarter and later in the year.
Nonetheless, Thermo Fisher said it is raising full-year revenue guidance for 2021 to $35.9 billion, an increase of $300 million, which the company said represents 11% reported growth over 2020 and reflects the strength of the company's second-quarter performance.
Evercore ISI analysts, in a note prior to Wednesday morning's investor call, commented that given Thermo Fisher's second-quarter revenue beat of approximately $550 million they "would be curious whether the guide raise implies perhaps a tad lower expectation" for COVID-19 diagnostics revenue in the second half of 2021 "which is perfectly consistent with industry commentary."
Despite waning demand for coronavirus tests, Casper noted on the investor call the company's increasingly "significant role" in COVID-19 vaccines and therapies as well as the strength of Thermo Fisher's base business in the second quarter, which reported 27% organic revenue growth.
The company expects $1.8 billion in COVID-19 vaccines and therapies revenue in 2021, up $300 million from prior guidance. Thermo Fisher also increased its full-year base business organic growth outlook from 8% to 12%.
"We're seeing customer demand in our base business approach pre-pandemic levels," Casper said. As a result, he contends the company is positioned "exceptionally well to deliver a fantastic 2021."
