By Bhanvi Satija
(Reuters) -Thermo Fisher Scientific on Wednesday signaled that a slump in demand from biotechs for its services used in making therapies and vaccines could extend into the next year, sending its shares tumbling more than 7% and weighing on the sector.
Biotechs, hit by a funding crunch due to higher interest rates, have reined in spending on drug development since the start of the year while slowing growth in China has also crimped demand for contract research services and lab equipment.
"Short term, if you're visiting a smaller biotech customer, what you're seeing is concerns about when the funding environment is going to improve. So, there's a level of caution," CEO Marc Casper said on an earnings call.
On the call, finance chief Stephen Williamson said core revenue growth and adjusted profit in 2024 will be similar to that in 2023.
The company cut its revenue expectations for this year to $42.7 billion, from $43.4 billion to $44 billion. It also forecast 2023 adjusted profit of $21.50 per share, below analysts' estimates of $22.28.
Thermo Fisher (NYSE:TMO)'s 2024 comments on potential rebound from current challenges were "little bit more bearish" than expected, said Raymond James analyst Andrew Cooper.
The medical equipment maker forecast adjusted earnings of $21.75 per share in 2024, short of analysts' estimates by $2.23.
Shares of rivals Agilent Technologies (NYSE:A) and Danaher (NYSE:DHR) declined between 2% and 3%.
Thermo Fisher, which has bet on deals to become a one-stop shop for its biotech and large pharmaceutical clients, said sales in its life sciences solution unit plunged about 18% to $2.43 billion, declining for all the three quarters this year.
Third-quarter revenue of $10.57 billion missed analysts' expectations of $10.60 billion while adjusted profit of $5.69 per share topped estimates of $5.61, according to LSEG data.