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Stockwatch: Tools Giants Foresee Revenue Impacts From Tariffs, Job Cuts
Looming tariffs and recent job cuts from Washington have impacted two of the largest biotech tools companies that released first-quarter results this past week, prompting one to lower its earnings guidance to investors for the rest of 2025, while the other is maintaining its revenue forecast.
Thermo Fisher Scientific (NYSE: TMO) and Danaher (NYSE: DHR) both acknowledged that their sales to academic and government (A&G) customers will shrink this year as researchers scramble to adjust their research budgets to spending cuts from the NIH, which in February capped at 15% its funding of indirect costs in the basic research grants it awards to researchers. The cap is essentially a cut for most labs since, according to the agency, indirect costs have averaged between 27% and 28%, with many organizations charging the agency indirect rates of more than 50%.
Thermo Fisher is projecting that tariffs on pharmaceutical imports will cost the company about $400 million in revenue this year, not counting additional costs for parts and sub-assemblies of tool components made in China, while Danaher estimated a $350 million impact for the rest of 2025. Thermo Fisher also estimated a $500 million revenue loss from academic and government (A&G) customers attributable to U.S. policy changes.
Marc N. Casper, Thermo Fisher Scientific chairman, president, and CEO“We’ve seen $200 million of studies canceled or put on hold, specifically vaccine,” Thermo Fisher chairman, president, and CEO Marc N. Casper told analysts on his company’s quarterly earnings call Wednesday. “About half of that is directly funded by the government through innovators, and about half of it is just from the innovators themselves. Every other aspect of clinical trial-related activity seems to be normal.”
“We would expect that U.S. academics would be relatively soft of the balance of the year,” Casper added. “That’s what we embedded in our guidance going forward, and that it could improve based on the appropriations on dynamics this summer.”
Thermo Fisher finished Q1 with $1.511 billion in net income, up 13.5% from $1.331 billion a year earlier, on revenue that rose 0.2% year-over-year to $10.364 billion from $10.345 billion in Q1 2024. Danaher saw its net earnings shrink 12% in the first three months of 2025, to $954 million from $1.088 billion in Q1 2024, on revenue that dipped 1% year over year to $5.741 billion from $5.796 billion—results the company said were better than expected.
“Low single-digit” decline
Danaher did not pinpoint a dollar amount of revenue lost from A&G customers, except to say it was “down [in the] mid-single-digit-type range.” Core revenue in its life sciences instrument businesses declined in the “low single digits” in Q1, Danaher president and CEO Rainer M. Blair told analysts Tuesday on his company’s earnings call.
Danaher president and CEO, Rainer M. Blair“Demand across pharma, clinical, and applied markets, which make up the majority of our revenues in these businesses, held up well globally, while academic and government demand softened through the quarter, particularly in the United States,” Blair said. “We expect the U.S. government and academic market to continue to soften with the noise that we’re hearing.”
The percentage of orders from new customers “declined in the teens range,” Danaher said in a follow-up call cited by J.P. Morgan analyst Rachel Vatnsdal in a research note.
“The products affected in these softening conditions include instruments used in research, laboratory consumables, and reagents for U.S. government-funded labs,” Vatnsdale reported. “When considering guidance regarding U.S. A&G conditions, DHR stated it expects further softening throughout the year due to ongoing funding concerns, which will also impact genomics customers in the research segment.”
Blair told analysts that customers directly funded by NIH accounted for less than 1% of Danaher revenue, while revenue from government and academic customers globally amounted to “low single digits.”
While tools account for less than 10% of revenue for Danaher’s Life Science segment, which includes instruments, consumables, services, and software primarily used to study DNA, RNA, nucleic acid, proteins, metabolites, and cells. Those products are used toward understanding causes of disease, identifying new therapies, and testing and manufacturing new drugs, vaccines, and gene editing technologies.
“Outside of the U.S. government and academic segment, the market conditions are stable, and why is that? Because we’ve dialed our portfolio into what we believe are the more attractive market segments here. For the long term, pharma, clinical, and applied are by far how we’ve positioned our business.”
Opposite directions
The tariff and policy revenue losses had the stocks of both tools giants going in opposite directions. At the closing bell Friday, Thermo Fisher shares had dipped 2.4% since the release of its Q1 results, from $434.73 to $424.24. Danaher shares have climbed nearly 7% since its Q1 results came out, rising from $184.96 to $197.14.
Puneet Souda, senior managing director, life science tools and diagnostics and a senior research analyst with Leerink Partners, raised his 12-month price target on Danaher shares 2%, from $225 to $230, while lowering Thermo Fisher’s price target 4% from $625 to $600, citing Thermo Fisher’s lower enterprise value of 16 times EBITDA (earnings before interest, taxes, depreciation, and amortization) vs. 19 times for Danaher. However, Souda kept the firm’s “Outperform” rating for both companies.
Danaher’s increase reflects better-than-expected overall results, especially for its bioprocessing business, which grew sequentially for the seventh quarter in a row. During Q1 it rose by “high-single digits” to drive a 6% year-over-year revenue jump (from $1.524 billion to $1.612 billion) in the company’s “Biotechnology” segment, which also includes sales of equipment, consumables and services primarily used in research, development, manufacture, and delivery of biologics. Danaher raised its quarterly guidance for bioprocessing from the 6–7% range to “high single digits.”
For Thermo Fisher, the lost revenue from tariffs and policy each accounts for about 1% of the $43.3 billion it now projects at the low end of its range of projected revenue it will generate in 2025, down 0.5% from its initial low-end forecast of $43.5 billion. The company raised its high-end revenue guidance by $200 million or 0.5%, from $44 billion to $44.2 billion.
Also, as a result of anticipating less revenue, Thermo Fisher has lowered its earnings per share forecast roughly 3% to 6%, to between $21.76 and $22.84 from its initial range of between $23.10 to $23.50.
“We’ve been operating with agility to assess the changes as they come, and we’re actively managing our business to mitigate the impact and capitalize on new opportunities,” Casper told analysts Wednesday on the company’s earnings call following the release of first quarter results. “As a result, we’re able to offset a large amount of the impact of the macro changes in 2025 and more fully offset them when the full impact of our mitigation actions is realized next year.”
Those mitigation actions, according to Thermo Fisher, include localizing its manufacturing within regions, sourcing materials from local suppliers whenever possible, and “cost out” actions designed to eliminate costs across the company’s supply chain.
$2B U.S. manufacturing effort
The day of its earnings call, Thermo Fisher highlighted one initiative aimed at localizing manufacturing: The company committed to spending an additional $2 billion over the next four years on manufacturing within the United States, consisting of:
- $1.5 billion in capital expenditures designed to expand and improve U.S. manufacturing operations
- $500 million in additional R&D spending focused on high-impact innovation—36% of the $1.39 billion that Thermo Fisher spent on R&D during 2024, and 46% more than the $342 million that the company spent on R&D during Q1 of this year
“The tariffs and policy changes are also creating some very relevant medium- and long-term opportunities, and we’re working to maximize these upsides, including leveraging our extensive U.S. manufacturing capabilities to help our customers navigate their own potential tariff impact,” Stephen Williamson, Thermo Fisher’s senior vice president and CFO, told investors. “This will have minimal impact in 2025, but it’s expected to be an important contributor going forward.
Thermo Fisher already has a sizeable U.S. manufacturing footprint, with 64 facilities in 37 states. Some sites focus on making analytical instruments, specialty diagnostics, and life sciences solutions, while others offer contract development and manufacturing organization (CDMO) services.
Last fall, Thermo Fisher launched a suite of expanded CDMO and clinical research organization (CRO) services. The company introduced to the market its Accelerator Drug Development, which Thermo Fisher promotes as “360°” CDMO and CRO drug development solutions under its own brand. The launch came more than three years after Thermo Fisher acquired the CRO PPD for $17.4 billion, and seven years after expanding into the CDMO market by purchasing Patheon for $7.2 billion.
Offsetting tariff headwinds
A day earlier, addressing analysts, Danaher CEO Blair said his company could surmount the challenge posed by revenue loss through tariffs, after acknowledging how macroeconomic conditions have become more challenging since the start of 2025, “with rising geopolitical and trade tensions contributing to greater uncertainty across global markets.”
“We’re really well-positioned to largely offset these headwinds,” Blair said. “Based on what is currently implemented, we believe we can largely offset the impact from these tariffs through a combination of supply chain adjustments, surcharges, manufacturing footprint changes, and other cost actions.”
For several years, Blair said, Danaher has worked to regionalize its manufacturing network of over 100 plants, so that, for example, goods produced in China are sold there. Since 2020, he continued, Danaher has invested approximately $2 billion to expand capacity and help ensure a more secure supply chain for itself and its customers.
These additions include new single-use technology facilities in South Carolina, filter capacity expansions in Florida. and a cell culture media expansion in Utah, all now online, as well as a resins manufacturing plant in Michigan that Blair said was nearing completion.
Danaher oversees a global family of more than 20 operating companies focused on biotech and life sciences, as well as diagnostics, water quality, and product identification. Those companies include Cytiva, which is based in Marlborough, MA, and was re-launched in 2020 after Danaher spent $21.4 billion for the former BioPharma business of GE Healthcare Life Sciences. Cytiva operates 36 manufacturing sites in 41 countries, including the United States, focused on the production of monoclonal antibodies, messenger RNA (mRNA), cell therapies, and viral vectors.
“Near term, this capacity is critical for supporting existing customer demand. But it’s equally important to support Cytiva’s robust long-term growth outlook and illustrates our in-region, for-region manufacturing strategy,” Blair added.
Cytiva is part of Danaher’s Life Sciences business, whose core revenue fell 4% year-over-year, while the instrument segment of that business declined by “low single digits,” according to the CEO.
Danaher maintained its earlier investor guidance of an approximately 3% year-over-year increase in non-GAAP core revenue. But the company began full year adjusted diluted net earnings per common share guidance in the range of $7.60 to $7.75. That’s 1.6% to 3.6% above the $7.48 in non-GAAP adjusted diluted net earnings per common share generated in 2024 (GAAP EPS was $5.29).
Leaders and laggards
- Ensysce Biosciences (ENSC) shares nearly doubled, zooming 96% from $1.87 to $3.67 Wednesday after the company said it received a Notice of Allowance from the U.S. Patent and Trademark Office for the issuance of a patent entitled “Enzyme-Cleavable Methadone Prodrugs and Methods of Use Thereof,” including both composition of matter and method of use claims. The patent covers PF9001, a methadone analogue which is designed to provide a safer treatment option for opioid use disorder (OUD) by using Ensysce’s Trypsin-Activated Abuse Protection (TAAPTM) and Multi-Pill Abuse Resistance (MPAR®) abuse deterrent and overdose protection technologies. Ensysce said data has shown PF9001 to have reduced potential for cardiotoxicity, validating MPAR overdose protection, and potential for delivering a prolonged and predictable effect following once daily dosing.
- Novavax (NVAX) shares climbed 19.5% from $6.25 to $7.47 Wednesday after the company said it had recently received formal communication from the FDA in the form of an information request for a postmarketing commitment to generate additional clinical data. “We look forward to engaging with the FDA expeditiously to address the PMC request and move to approval as soon as possible,” the company stated, adding: “We believe that our Biologics License Application (BLA) is approvable.” Novavax said its executives had spoken with FDA officials as of its Prescription Drug User Fee Act (PDUFA) date of April 1 through April 23. The company won FDA approval of its initial COVID-19 vaccine in 2022.
- Summit Therapeutics (NASDAQ: SMMT) shares nosedived 36% from $36.70 to $23.47 Friday, sparking a halt in trading, after a rival antibody drug developer Akeso (OTCPK: AKESF) won FDA approval for the PD-1 monoclonal antibody penpulimab-kcqx, in combination with cisplatin or carboplatin and gemcitabine for first-line treatment of adult recurrent or metastatic non-keratinizing nasopharyngeal carcinoma (NPC). FDA also approved penpulimab-kcqx as a single agent for adults with metastatic non-keratinizing NPC with disease progression on or after platinum-based chemotherapy and with at least one other prior line of therapy. According to some news reports, investors feared that penpulimab-kcqx may ultimately lose market share to another Akeso drug, which is partnered with Summit, the PD-1/VEGF bispecific antibody candidate Idafang® (ivonescimab), based on Akeso’s claims in a Chinese press release that Idafang reduced the risk of death by 22.3% vs. Keytruda in the Phase III AK112-303/HARMONi-2 trial (NCT05899608). China’s National Medical Products Administration cited the data in approving Idafang for a new indication of first-line treatment of PD-L1+ non-small cell lung cancer.
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