Bioprocessing blighted by ‘deteriorating funding,’ China, and post-COVID, say Danaher and Thermo

A dry up of biotech funding and a slowdown in China are among the macroeconomic issues affecting growth in the bioprocessing space, say both Thermo Fisher and Danaher.

With reporting season underway, Danaher Corporation described a “softer demand in bioprocessing” affecting Q2 numbers. The firm owns Cytiva, which recently absorbed fellow bioprocess vendor Pall, and reported a 17% decline in sales for the quarter compared to last year. Danaher does not disclose the monetary amounts across its divisions.

“Larger customers are still working through inventory they built during the pandemic, and emerging biotech customers, which we define as customers without a commercialized therapy, continued their efforts to conserve capital,” Danaher CEO Rainer Blair said on a call last week.

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Furthermore, “a significant deterioration in the funding environment during the quarter led to project delays and an increase in order cancellations,” he said, before adding business was being affected by “the ongoing biopharma market correction in China intensify[ing] as the second quarter progressed.”

Thus for the full year, Danaher is now anticipating low single-digit core revenue growthdue to “the near-term challenges within bioprocessing.”

It was a similar story over at Thermo Fisher, which reported sales of $2.46 billion in the second quarter for its Life Sciences Solutions unit (essentially its bioprocessing business), down 25% on the same period 2022.

While much of the decrease was attributed to the moderation in COVID-related revenue – a post-pandemic ‘normalization’ in demand also seen at fellow vendor Sartorius – the firm also noted similar macroeconomic factors playing out and affecting business.

Again, funding issues in the industry were cited. While “Pharma is doing fine,” CEO Marc Casper told stakeholders the problem lies with biotech. “Every quarter that funding has been a little bit more challenged, or not as strong as the past. Companies get more conservative because they think about what’s their runway on spending, and that really picked up in terms of the headwinds in Q2 against an incredibly difficult comparison in the prior year period.”

And, like Danaher, Casper said “economic activity in China slowed and across the economy more broadly, businesses became more cautious in their spend.”

Reasons to be cheerful…

But despite the post-COVID slowdown and the host of macroeconomic factors, Casper remained positive the industry would bounce back.

“There are some green shoots starting to happen in biotech,” he said, with Q2 seeing a trickle of funding and several new companies forming. “Obviously that takes a while to flow through the numbers, but actually that’s an encouraging data point.”

Moreover, within biotech and pharma “the science can be explosive,” he said. “There’ll be great new discoveries. All of that will attract funding. It’s just a question of, is this a kind of a stabilization year for the economy and then it balances? That’s the bull case. Or is this a more prolonged period? And then that obviously is more of the bearish case on sort of what the macro is. While we won’t have a perfect crystal ball as we get into our guidance in ’24, we’ll have a much better sense of what the conditions are we are navigating.”