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Thermo Fisher Scientific Details Impact of COVID-19 Pandemic on Business

NEW YORK – Thermo Fisher Scientific provided some insight on Wednesday into how the COVID-19 pandemic has impacted its business, providing both opportunities from coronavirus testing and research while reducing demand from customers who had to scale down or shut their operations.

During a conference call to discuss the firm's first quarter financial results, President, Chairman, and CEO Marc Casper said that "our most important story in Q1 was our role in helping customers respond to the pandemic.

Based on what the company had witnessed early in the year in China, it quickly developed its Applied Biosystems TaqPath COVID-19 diagnostic test, he said. "We knew the most important activity in the short term was ramping up our diagnostic testing capability."

The test received Emergency Use Authorization from the US Food and Drug Administration in mid-March and the CE mark shortly after, which led to further authorizations in nearly 50 countries, he said, including Canada, Brazil, India, and Australia. In addition, the company's specialty diagnostics business launched the AcroMetrix Coronavirus 2019 RNA control, which labs can use to monitor the quality of their tests and to validate them.

Thermo Fisher is now producing more than 5 million coronavirus diagnostic tests per week, Casper said. The company has the largest installed based of qPCR instruments in the world, numbering tens of thousands of machines, and many customers are now starting to ramp up COVID-19 testing on them. "Our expectation is that we will have demand that ultimately is in excess of our supply of test kits," he said, adding that the company is working on streamlining workflows.

Thermo Fisher has also been working "side by side" with governments around the world, including at the state and federal level in the US, to help develop testing strategies and protocols, Casper said, and the firm has been installing its testing platform in public health laboratories, hospital labs, and reference labs.

The firm is also looking into different options for partnerships to bring a COVID-19 serology test to market, he said, which could leverage its large installed base of instruments to run those tests. "We just want to make sure that anything we put our brand on is something that's going to be world-class in quality," he said. Coronavirus serology tests have been under heavy discussion in recent weeks as a way to determine who has been infected with the virus and mounted an immune response. However, there have been questions around their accuracy.

"More still needs to be done to further expand testing capacity to facilitate the reopening of the economy," Casper said.

In addition, Thermo Fisher has been enabling researchers since the start of the pandemic to study all aspects of the SARS-CoV-2 virus. "In China, we immediately mobilized a 24/7 service to support the Chinese Centers for Disease Control and Prevention, as well as hospitals and independent clinical labs across the country," Casper said. In addition, researchers have been using the company's cryo-electron microscopes to study the structure of the coronavirus spike protein and its cellular receptor, leading to findings that "are paving the way for accelerating the development of treatments and vaccines," he added.

The firm has also partnered with a number of pharmaceutical and biotech customers who have been working on manufacturing existing drugs that show promise in treating COVID-19, as well as on developing new therapies and vaccines.

Finally, the company has been selling personal protective equipment for healthcare and other essential workers through its research and safety market channel and its healthcare market channel, including face masks and shields, respirators, gloves, and hand sanitizer, he said.

But while parts of Thermo Fisher's business continued to thrive during the pandemic, its own operations, like those of every company, were also affected. "When the virus began to spread from China to other countries, we took quick and decisive action to further control cost and offset some of the negative revenue impact," Casper said. "At the same time, we accelerated development of our COVID-19 diagnostic test."

A significant number of the firm's 75,000 employees are working from home now, he said, but others are still going to work – following health and safety protocols – to keep serving customers. The company is following CDC guidelines and local regulations in its operations, Casper said, and has assembled a panel of outside medical expert to advise it. "Once the pandemic hit, we immediately established incident response teams to create a process for managing new protocols at our sites and navigating the challenges presented by the situation," he said. "I'm pleased to say that every one of our sites has continued to operate during this period, and our supply chains have experienced minimal disruption.

Casper added that "the overwhelming appreciation we're hearing from our customers during this time has been especially gratifying."

Despite the pandemic, Thermo Fisher still managed to grow revenues 2 percent in the first quarter as a result of having "strong momentum early in the year before the outbreak in China," he said.

The coronavirus had both a positive and negative effect on the company, depending on the part of its operations. According to Senior VP and CFO Stephen Williamson, COVID-related opportunities grew revenues 3 percent, but a shutdown of customer sites in China because of the pandemic also lowered revenues by around 6 percent, for a net COVID-related revenue reduction of 3 percent in Q1.

"It's worth noting that large parts of our business are relatively unaffected by COVID-19, including our bioproduction business and the majority of our pharma services business," Williamson said. "We still need to manage through any potential COVID-19 impact at those sites, but customer demand for these businesses is relatively unaffected."

Not surprisingly, the firm's Q1 business in China was down about 25 percent in the quarter. North America and Europe, on the other hand, did well "and we didn't see the impact in those geographies until very late in March," Casper said.

Thermo Fisher's pharma and biotech business "was essentially unaffected by the pandemic in Q1," he said, with high single-digit growth, especially in the bioproduction and pharma services businesses.

Business in the diagnostics and healthcare end market grew in the low double digits, benefitting from the rapid uptake of coronavirus test kits.

The industrial and applied markets business, on the other hand, declined 10 percent in Q1, primarily due to COVID-19-related shutdowns in China, and revenues from the academic and government sector declined in the mid-single digits as academic labs started to close, first in China and later in other countries.

Looking toward the future, Williamson provided a broad organic revenue estimate for Q2, ranging from 0 percent growth to 15 percent reduction. "Where we end up in the range of outcomes with COVID-19 headwinds will depend on a combination of factors, including the impact of country and state restrictions, the speed with which they are lifted, how quickly our customers ramp up their activity, and the COVID-19 impact on our supply chain," he said. Making revenue predictions beyond Q2 is more difficult, he acknowledged.

Looking at China, Casper said that universities there remain closed, although their research activities are starting to come back online now, while the economy overall is starting to reopen. Overall, business activity for Thermo Fisher in China is about 60 to 70 percent right now of what it used to be.

"We remain confident in our ability to continue to drive share gains," Williamson said. "In challenging times like this, we need to rely on our trusted partners … and the great relationships we have built over the years with our customers across the globe."