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[Audio Gap] Medical Life Science Tools and Diagnostics team, and I'm very excited to be hosting Danaher. I'm joined by Rainer Blair, Chief Executive Officer.

Good day, everyone. Thanks for having us, Mike.

Always great to have you here. Really pleasure. We'll just do a fireside chat, but if there's any really burning questions, please throw up your hand. Maybe just to kick things off. Just a couple of weeks ago, you reported 1Q. You saw 50 bps operational core growth, but there was a respiratory dynamic there as well. Strong earnings growth despite that, and you provided an update for the full year guide. Maybe just talk through real quickly how the quarter played out relative to expectations? What was maybe a little bit stronger or was maybe a little bit more challenging? What surprised you?

Sure. It was a solid quarter. We saw our end markets as well as the momentum across the business to be actually a little bit better than we thought. If you take out respiratory, just as you mentioned, we had 300 basis points of growth, and we thought that was pretty solid. The ILI, of course, anticipated that respiratory would be a little bit softer. And as we think about the end markets there, we look at bioprocessing. Bioprocessing came in at high single digits driven by consumables. But I think a nice point of confirmation that the activity levels are getting better was the year-over-year orders growth in equipment, which was over 30%.

And the first time in nearly 2 years that we saw that type of year-over-year growth. Prior to that we've been talking about sequential improvement. So I think that's a data point that is noteworthy, along with the activity level that is confirmed by the consumables. And then as you go to Life Sciences, there also we saw pockets of better activity levels. Our Life Science consumables business grew as you think about Abcam and Aldevron. Those would be indicators for higher activity levels in the biotech space, especially with Aldevron and Abcam is a business that's skewed a little bit more towards academic and government. They also grew, which is a nice indicator that things are starting to move there. And again, these are consumables. So it really does speak to the activity level there.

And then as you think about diagnostics, here, we're looking for another quarter without respiratory and volume-based procurement to be at mid-single digits. And that's again, what we saw is the eighth quarter in a row. So solid activity levels there. I think one point that's noteworthy out of China was that, one, the volume-based procurement was as expected even with the medical services guideline changes we had anticipated and framed those correctly and so that frame holds. But we also see that the sequential improvement, so the comping out of that VBP dynamic occurred in the first quarter.

And I think somewhat surprising to us in a positive sense was that the patient volumes in China were higher. And that's important as we continue to comp out of volume-based procurement during the course of the year, we do see that the patient volumes are robust and growing. And of course, that's supportive here for the long term as well. So that's describing the activity levels. And as you think about our execution, like I said, without respiratory 300 basis points of growth, but also delivering 30% operating margins and nearly 10% EPS growth in the first quarter. All of that supports the guide that we've been talking about for the full year.

Okay. That's a great way to set the table. I want to double click on a bunch of those individual drivers you talked about. Maybe let's start with bioprocess. Strong consumables demand. You've seen pretty regular, pretty consistent, robust consumables growth in BP for a number of quarters now. Are we done with that? Are we done with the headwinds? Are we done with the fluctuations? Is consumables now rock steady back at normalized growth? Or is there still some uncertainty, some volatility? There's always some swings between high mid-single, low high single, where are we in that trajectory?

Well, I mean, the consumables business, I would say, has normalized here now for a number of quarters. The lead times are really at the pre-pandemic levels, if we can say it that way. And customers are ordering these products when they need them. Now sometimes these orders, even for consumables are very large, they can be lumpy and that explains some of that movement that you see there in high single digits. And as we then start to see higher activity levels with equipment orders ultimately turning into revenue, while equipment, of course, is lumpier almost by definition.

But what's really important to note is that the bioprocessing market is robust. The approval of new monoclonal antibodies as a proxy modality for biologics are strong. We see biosimilars coming to market, which will continue to drive volume. So just to say that the bioprocessing hypothesis that we have been talking about for some time of high single-digit growth for the long-term holds.

Okay. I mean on the equipment side, just as you were saying, greater than 30% year-over-year growth. You do have a little bit of an unusual comp dynamic. So it's not just that clear cut, but it's still clearly a positive indicator. Can you talk us through where the demand is coming from? Is it more greenfield? Is it more brownfield, replacement, new capacity, big pharma, CDMO? And also we'd love to hear sort of orders converting to revenues, when, how?

So there's a lot of different drivers here on the equipment side. I think the first one that I want to talk about is the fact that the -- the industry is under-invested in capacity for the last 2, 2.5 years, despite the fact that the activity level, so the prescription of these drugs, the manufacture of these drugs has continued to be robust, and that is manifested and the proof point for that is in the consumables. That is the activity level. So there is a need to invest in more capacity for drugs that are already on market and coming into new indications. And so we see some of that. And we see that around the world.

And then secondly, we're starting to see other companies making investments here in what we believe are the early phases of a multiyear CapEx tailwind related to, one, capacity expansion, but two, the reshoring here in the United States, and that's manifested itself with the acquisition of underutilized pharmaceutical plants by CDMOs. Many of those are public. If you think about Lonza, Samsung, you think about Celltrion and others, some are investing, of course, then to refurbish those or to make them more flexible for a greater variety of drugs that a CDMO would produce. And so we're seeing those kinds of orders as well.

And then what we're not yet seeing are the greenfield investments that you would associate with reshoring. Those are on the drawing books. We're starting to give quotations to the companies that ultimately construct those facilities. But that's early days, and that will continue to provide that tailwind for several years to come.

And in terms of the lag of orders converting to revenues, remind us sort of your lead times here? And where do you see the 30% growth? Where do you see the strongest growth in 1Q orders?

So we continue to see the majority of those orders in the brownfield area. And so those can range between 6 to 18 months in terms of their execution. Some of them are larger, some of them are smaller. And keep in mind, that timeline is not always determined by our lead time to manufacture these solutions. It's often a customer site readiness that determines when you ultimately supply that. And there's some variability and lumpiness in that over time.

So you haven't updated or changed any of your assumptions on equipment revenue growth for '27?

That's right. So I mean, we continue to think there's going to be a year-over-year improvement. Last year, our sales for equipment were down double digits. In the context of our guide, we've assumed that equipment sales would be flat this year. So certainly a year-over-year improvement. And then we'll have to see how the next quarters play out here in terms of customer readiness before we would make any changes to that guide.

And all told on BP. You had a couple of comments that you still think the bioprocess market is very robust. The long-term drivers are there. Once we get past some of these more near-term issues and the orders do fall into revenues, take it all together, is your view on bioprocess markets still the same still high single digits longer term?

Absolutely.

Easy. Let's pivot to Life Sciences and talk about that a little bit. You mentioned Aldevron and Abcam grew in the first quarter. That was a little bit of a positive surprise Anything you can say in terms of what drove that? Is that a little bit of a timing benefit? Or are you starting to turn a corner in those markets?

No. I mean this was, for us, a pleasant surprise. In the context of our guide, we had anticipated that those businesses would start growing in the second half, primarily driven by some tougher comps there. You'll recall we had a lot of changes in Life Sciences in the first half of last year with various policy changes, the administration change, of course, in tariffs and MFN. And so all of that sort of happened in the first half and played its way through there.

That being said, here, we saw more momentum, saw more life in biotech. And really, you see that with Aldevron returning to growth here. That was nice to see because that is a market that is more characterized by biotech demand and some of those really advanced therapeutics. So very nice to see. And then Abcam tends to be skewed more towards the academic market. And there, we also saw pockets of growth and Abcam returning to growth here. We've had 5 months in a row now of consecutive year-over-year growth, just under writing our acquisition hypothesis that this is an outstanding asset, now executing at the level that we expect of a Danaher operating company and driving real progress in science.

And so it's very good to see that. And while those businesses can also, from a quarter-to-quarter, be a little bit lumpy, we expect that to play through here for the year in a positive way and expect Life Sciences to be a little better for us.

Okay. That was on the consumable side. Maybe we can talk about LS instruments or equipment between SCIEX, Leica, Beckman, overall LS instruments declined low single digits. You called out a couple of different moving pieces there. Maybe you could run through what you saw across the various OpCos?

So just to level set here, as we think about our Life Science Instrument business, that's about $4 billion of the $25 billion, just to give a sense. And from a North American academic is low single digits of total Danaher sales. So just to range find a little bit as to the size of that business. And it's really the academic market that is still softer for Life Science instruments, although it has stabilized. And while we didn't see the level of sales, because you'll recall in my comment the prior year was still fairly normal prior to some of these policy changes. We did see our order book moved quite nicely here in the first quarter for Life Science instruments.

So sales down, yes, but our order book was a little bit stronger than anticipated. And we think that plays through positively here in Life Sciences, driven primarily by pharma and clinical and applied market applications, but also starting to see pockets of the academic and government market showing a little bit of life. So activity levels and the momentum in that end market and those end markets a little better.

And as you said, I mean, especially in U.S., A&G sort of the headlines last year hit in February, but you didn't really see the revenue impact until March or even April because there was a lag. So tough 1Q comp, maybe a little bit of an easier 2Q comp for the U.S. A&G...

Correct. Correct.

Okay. All right. Let's talk about -- there's other parts of LS that maybe are a little bit underappreciated or forgotten just because they don't come up on every call. We had some questions on Pall Industrial. That's still in the LS business. Remind us of some of the exposures there? Maybe you could size that business and how that's done recently?

So Pall is about 25% of Life Science segment sales is a great business. The largest business there is microelectronics, where we're a leader in providing filtration solutions to the manufacturer of memory chips and semiconductors and so forth. So very nice end market exposure there. The growth that we're seeing for Pall in its entirety, of course, for that particular end market is accretive to Life Sciences. We're -- we have invested and are validating new capacities that we built in Asia, so that's very exciting.

Then we have an aerospace business, also exposed to the expansion, not only of commercial but also military solutions, which are becoming more popular these days. And so we're seeing that business expand nicely as well. Then our energy business is one that is primarily associated not only with the manufacturer of fossil fuels and very specialized petrochemicals. Those are becoming more and more important and are also relevant to repairing gas and oil manufacturing sites. So that's an area of strength.

And then we have a food and beverage business, which is a GDP grower, a smaller part of that business. So in its entirety, Pall is an attractive business. It's exposed to attractive end markets. Technologically, it provides synergies with some of our other businesses in Life Sciences and is accretive, both from growth as well as a margin perspective.

I'm trying to remember from our Danaher initiation report from 2016, I think Pall Industrial at the time you bought it was maybe like $1.3 billion in revs something in that ballpark. What's the -- given some of the exposures to the finance microelectronics where there's a lot of investment opportunities now, what could that business grow over the sort of the medium, long term? I know you by OpCos, but just directionally, how does that go?

So we don't guide by OpCos, but I would tell you that in its current setup would be accretive to the Life Science segment.

Okay. I'll take that. Maybe while we're on the topic of LS, let me just make a quick side pivot. Let's talk about AI a little bit, comes up on and off. And I would think that would be where you'd be probably the most exposed would be within Life Sciences within pharma, biotech in terms of leveraging AI for R&D. Just what have you seen from your customers over the last 3, 6 months? Is this really kind of become mainstream? How broadly are they leveraging it? And how does Danaher fit into that hopefully is beneficiaries.

So when we think about our customers in AI, I think the place to start thinking about that, as you suggested, is in Life Science, Life Science research and in the Pharma segment. And there, our customers are very excited about what this means. And we believe rightly so. And we see that the application of AI for pharma will result in a multiyear secular growth acceleration because it ultimately increases the speed and the effectiveness of the pharma flywheel. So what does that mean?

As we think about the pharma drug development pipelines, we know that the yields of those pipelines are fairly low, and the investment intensity is fairly high, and that's very difficult to sustain over time. And now with AI, we have, as an industry, the opportunity with our customers in order to improve the yield of the development pipeline from 10% to 12% to something much higher over time. That doesn't happen overnight, but over time.

And of course, that will fund them -- and fundamentally accelerate the development of those therapeutics. So that will be a real shot in the arm in terms of the profitability of pharma companies on the one hand. On the other hand, the reinvestment profile. Imagine if you have a much higher yield in your drug development pipeline, what would you do then if you can bring markets -- better products to market more quickly, push you're going to reinvest a good amount of that back into the front of the flywheel.

And that's so important for the Life Science tools industry and, of course, for Danaher. So what role do we play there? Well, we are an automation provider. These models that are being built, one has to keep in mind that large language models really don't solve for the drug discovery and development topic certainly not entirely, biologic models are required. And those have to be built. And that will take some time, and it takes a great deal of testing and that testing increasingly will come through autonomous labs, some people call it lab in a loop, and we provide those kind of solutions.

And you've heard about our collaboration with Automata, that's a company that helps provide an intermediate layer there to allow the connectivity between the various instruments. And of course, those would be our instruments is our automation. These are our reagents and information systems, and that's a value proposition that we're proud to share and work with our pharma customers.

Okay. Good. Let's pivot to Diagnostics now. Maybe we'll start on the Cepheid respiratory side of things. You started the year guiding for $1.8 billion, which was prudent given what we saw over the last couple of years. You revised it on 1Q to $1.6 billion to $1.7 billion. So $150 million, I believe it's 50, 50-50 lower 1Q, 2Q, 3Q. Is that sufficiently conservative, you feel for 2Q, 3Q? How much visibility do you have into how that could play out the rest of the year? Just talk about sort of confidence in that new number.

Yes. I mean we think that we understand, based on the infection rates here in the first quarter, discussing with epidemiologists as well as with our customers, how they view the first 3 quarters of the year, as you just suggested. So we've adjusted that. The rest of the portfolio makes up for that adjustment. So that's not the concern. And then for the fourth quarter, we're assuming a normal respiratory season as well. And that's a reasonable assumption because hospital systems, in particular, try to get ahead of what might happen in a flu season.

And as you know, it straddles the fourth quarter of 1 year in the first quarter of the next. And so there is a stocking phenomenon there in the first quarter to ensure that during the peak of those seasons, they are appropriately stocked to meet the needs of their patients. So we feel comfortable with that assumption, and continue to see a share gain for Cepheid, even in respiratory as people just see the solution, the ease of use and the turnaround time of these solutions to be critical for their patients.

On the non-respiratory side, I think you saw mid-teens growth in Cepheid non-respiratory, if I recall. It's done really well for a number of quarters. You kind of talked about even going back to your Analyst Day, the non-respiratory getting bigger and bigger and bigger until it sort of starts to really show up in numbers. What's been driving that growth, menu expansion, installed base execution?

The non-respiratory business is about as large now as the respiratory business. So it's grown nicely. As you mentioned, mid-teens growth here for '26 and we believe in the long term. And what's been driving that is the thoughtfulness of the Cepheid strategy where during the pandemic, we really focus on placing our instruments in care settings that ultimately would be able to take advantage of our expanded menu. So what turned out -- started as a COVID test and then a 4-in-1 respiratory panel has been expanding, and we have over 40 now approved -- regulatory approved tests by far, the largest menu and now have taken the next step technologically by opening up the mid-plex segment.

So what that means is that we can test for more analytes. The 4-in-1 test in respiratory was the first example of that, the MVP test and now the gastrointestinal panel is the next test. And you can expect many more of those to come for the next 12 to 18. And that's exciting for us because really, there's the high plex segment and sort of the lower plex segment, but the sweet spot for clinicians is the mid-plex segment. They really don't like stacking all these codes in the high plex, because it tends to be more expensive and it's an overkill in terms of the type of data it provides. So we've opened up our addressable market significantly by now being able to handle these mid-plex tests, and we're super excited about that. And that's going to continue to drive mid-teens plus growth in the non-respiratory segment.

Okay. Okay. All right. Maybe kind of taking a step back and rolling it all together, when we think about the outlook for the rest of the year for fiscal year '26, you talked consistently about how you're not anticipating any end market improvement and that the ramp as you go through the year, it was 0.5% organic in the first quarter, you're guiding to 2% in the second quarter, sort of that mid-single digits in the second half. A lot of that or all of that comes from headwinds fading as you go through the year, taking that risk out of the model. And that seems prudent and appropriate.

But I think at the same time, we've had -- we got questions that headwinds are unanticipated, right? I mean if we go back 2 years, the headwind with Aldevron, that was unanticipated. The headwind with VBP was unanticipated. And this year, the headwind with respiratory is unanticipated. So while you're retiring risk and headwinds fade, is there how would you answer the question of what if there's new headwinds pop up, whether it's from Middle East conflict, anything in pharma end market specifically? Do you have a cushion or a buffer in the guide to absorb those if there are new headwinds? Or maybe what levers could you pull to sort of offset some of that?

So we provided this guide with the assumption as you just suggested that we're retiring some of these headwinds here in the second half. And that's real. That's over 300 basis points of headwind that we will have retired here in the first half to the second half. And that's what takes you then from the Q1 to Q2 acceleration takes you to that mid-single-digit exit rate as we then head into 2027. And so then the question arises, okay, if there is anything else that happens, where do we sit with that? And of course, when we build a guide, there's 2 things that we do. One, we ensure that not everything has to be perfect for us to be able to deliver on that. So we take the necessary measures in our guide to ensure that if unforeseen things occur that we can handle those, that's the first one.

But the second point is that this is the Danaher leadership team that I'm very proud of. And we have the levers and we demonstrate that we can take care of these issues should they arise, because our focus is on outcomes and results as opposed to activity. And that's part of our brand, and that's what our leadership team commits to.

And then the guide for the year is still, as you reiterate, 3% to 6% organic. We've been anchored to the low end. We continue to be anchored to the low end of that. But we do get questions as sort of what gets you to 4%, what gets you to 5%, what gets you higher as you go through the year. I think it was on the earnings call in the Q&A, you identified a couple of points in terms of end market improvements, whether it is biotech, pharma, China, et cetera.

Are there any -- are there a couple that you would say you could potentially be seeing green shoots already or where you're a little bit more optimistic about those to come through? We always see some as more likely to happen versus some being a little bit more aspirational or out of your control. Where do you see things being a little bit better already?

Well, at the top of our chat here, I talked about activity levels being better and the momentum being better across the portfolio. That said, if I had to pick 2 where I say, okay, this is probably the area to look for. I would say that the bioprocessing equipment area as well as in Life Sciences is the area that I would focus on.

Okay. Maybe just a couple of minutes left. Let's talk about capital deployment, another area where we've had a lot of interest. Traditionally, your preference is towards M&A for capital deployment. There's not often that we see buybacks from Danaher, but you have done a couple of times in prior years. You did a sizable buyback 2 years ago. I believe it was around $260 million. You did some more last year. I think the stock was around $200 million. Sitting where we are today, the stock is in the 160s, 170s. Does that factor into your appetite to maybe move away from M&A a little bit and deploy capital? So what's the thinking on that? And what would it take for you to do that?

So we don't think about it in terms of moving away from M&A to do something else. And we think of all of our capital deployment in the context of the return on invested capital that it will generate and the compounding effect that it can have over the long term. And that is why our bias tends to be towards M&A. And that continues to be the case as values pull in here across the industry that is the kind of time that we have made some of our best deals historically. That said, anything we do whether that's a buyback, whether that's M&A, whether that's CapEx, we're going to look at that return on invested capital and the compounding effect that it delivers for our shareholders.

And so that's where we sit today in terms of capital allocation. As you suggested, we've done share buybacks in the past, somewhat of a departure of the more distant past, and we maintain that flexibility. But the driving factor is what is that return on invested capital.

Maybe just last couple of minutes just on the topic of M&A and balance sheet. Recently announced Masimo. It's been a couple of months. Deals still not even closed yet, but balance sheet will still be in a good place beyond that. Any other particular areas where you think you can you can complement the portfolio? What's the market like out there? And just specifically on Masimo, any early feedback from customers?

Well, let's start with Masimo. And we're anxious to get the team on board here. We saw the shareholder vote, which, of course, went very, very well. And we're hopeful that we can close here in the second half of the year. And we're really excited to bring this really important strengthening of our acute care portfolio on board. You know how much we like that. A company, we've been following it for a long time. And this is really a company that is in mission-critical applications, really with proprietary set technology, and it is accretive at all levels for us.

And so that, together with the synergy that we see cost synergies important, but put those aside for a minute, the synergies that we've see in the acute care settings are exciting. They're important and we're looking forward to having them on board. And just to share an anecdote, we recently were with an IDN, a large IDN, our EVP of Diagnostics, Julie Sawyer Montgomery was speaking with them about our Danaher solutions, and they indicated that they only buy half of their pulse oximetry solutions from Masimo and they said, well, look, would you be interested in having the entire business. So that's kind of a nice situation to be in, does have somebody recognize that the leverage of the Danaher portfolio and our ability then to bring those kind of solutions to that IDN is actually proactive in the conversation rather than a push.

So we're excited about that. And as it relates to capital deployment for the rest of the portfolio, we have 3 segments that are very attractive. We're excited about their end markets and they compete for capital. And all 3 of them compete and we're happy to invest in any one of them always if they meet our 3-dimensional model, end market, company with value reserves and the financial model has got to make sense.

And even with Masimo, I think net book-to-bill -- not net book -- net debt to EBITDA, 2.5x...

Yes, 2.5x, that's right.

Great. With that, Rainer, thank you very much. Really appreciate it. Thanks, everyone, for listening.

Thanks, Mike.

My name is Chelsea, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Danaher Corporation's First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] I will now turn the call over to Ms. Rachel Vatnsdal, Vice President of Investor Relations. Ms. Vatnsdal, you may begin your conference.

Good morning, everyone, and thanks for joining us on the call. With us today are Rainer Blair, our President and Chief Executive Officer; and Matt Gugino, our Executive Vice President and Chief Financial Officer. I'd like to point out that our earnings release, quarterly report on Form 10-Q, the slide presentation supplementing today's call, the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call and a note containing details of historical and anticipated future financial performance are all available on the Investors section of our website, www.danaher.com, under the heading Quarterly Earnings.

The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. A replay of this call will be available until May 5, 2026.

During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Our Form 10-Q and the supplemental materials I referenced describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the first quarter of 2026, and all references to period-to-period increases or decreases in the financial metrics are year-over-year.

We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets.

During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results may differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. With that, I'd like to turn the call over to Rainer.

Thank you, Rachel, and good morning, everyone. We appreciate you joining us on the call today. We're off to a solid start to the year. Our team executed well in a dynamic environment, leveraging the Danaher Business System to accelerate innovation, drive productivity gains and deliver better-than-expected adjusted EPS growth. On the top line, continued strength in bioprocessing and better-than-expected performance in Life Sciences largely offset the impact of a lighter-than-normal Q1 respiratory season at Cepheid.

Now looking across the portfolio, trends in many of our end markets were modestly better than our expectations entering the year. In large pharma and biopharma, commercial monoclonal antibody production remained robust, and we continue to see gradual improvement in R&D spending. Trends at smaller biotech and academic and government customers were stable sequentially with some pockets of improved order and funnel activity. Meanwhile, clinical and applied end markets performed well, consistent with recent quarters.

Geographically, we saw an acceleration in our Life Sciences and Biotechnology businesses in China.

Now the global environment has become more dynamic since the start of the year, including the ongoing conflict in the Middle East. And while we have limited direct revenue or supply chain exposure to the region, we're mindful of potential pressures from a sustained conflict. That said, we remain focused on controlling what we can control, including leveraging the Danaher Business System to proactively manage our supply chain and mitigate inflationary pressures while continuing to invest for the long term. At the same time, we're enhancing our portfolio through strategic M&A, including the pending acquisition of Masimo, where we believe there are significant opportunities to improve performance over time through DBS and our global scale. With the strength of our balance sheet and robust free cash flow generation, we're well positioned for further capital deployment going forward.

So with that, let's take a closer look at our first quarter 2026 results. Sales were $6 billion in the first quarter, and core revenue was up 0.5% year-over-year with a 2.5% headwind from respiratory revenue, partially offsetting 3% core revenue growth in the rest of the business. Despite a lighter-than-typical Q1 respiratory season, underlying momentum across the portfolio improved as many end market headwinds began to moderate.

Geographically, core revenue in developed markets were down slightly with a mid-single-digit decline in North America and a mid-single-digit increase in Western Europe. High-growth markets were up low single digits with solid performance across most regions, including mid-single-digit growth in China. In China, better-than-expected growth in Biotechnology and Life Sciences more than offset the expected high single-digit decline in Diagnostics, which continued to be impacted by volume-based procurement and reimbursement policy changes.

Our gross profit margin for the first quarter was 60.3%, and our adjusted operating profit margin of 30.2% was up 60 basis points, reflecting the benefit of year-over-year cost savings, more than offsetting the negative impact from lower respiratory revenue year-over-year.

Adjusted diluted net earnings per common share of $2.06 were up 9.5% year-over-year. We generated $1.1 billion of free cash flow in the quarter, resulting in a free cash flow to net income conversion ratio of 105%.

Turning to capital deployment. In February, we announced our intention to acquire Masimo, a leading provider of mission-critical pulse oximetry and patient monitoring solutions in acute care settings. We followed Masimo for over a decade and believe the company is well positioned with its trusted brand, differentiated technology and attractive financial profile. Looking ahead, we believe there are clear opportunities to run the same playbook that has driven value creation across our portfolio for many years, leveraging DBS to drive growth and expand margins while further strengthening our value proposition with customers. We expect Masimo to be accretive to adjusted diluted net earnings per common share in the first full year post acquisition and to deliver high single-digit return on invested capital by the fifth full year of our ownership.

The transaction remains subject to customary closing conditions, including regulatory approvals, and we look forward to welcoming the talented Masimo team to Danaher later this year.

Now alongside M&A, we made significant progress on organic growth initiatives across Danaher, including new product introductions and strategic partnerships. These efforts are strengthening our competitive positioning while helping customers improve quality and yield, reduce costs and accelerate the delivery of life-changing therapies and diagnostics. So let me highlight a few examples.

In Biotechnology, Cytiva launched Fibro dT, a next-generation mRNA purification platform that improves manufacturing speed and efficiency. By eliminating diffusion limitations associated with traditional purification methods, Fibro dT reduces processing time, increases yield and lowers material usage, enabling more cost-effective higher throughput production of mRNA-based therapies. Additionally, Cytiva will showcase its next-generation automated perfusion system, or APS, at the INTERPHEX trade show this week. APS is a cutting-edge tangential flow filtration platform designed to address key challenges of currently available process intensification systems, including product loss, filter clogging and scalability.

In Life Sciences, Beckman Coulter Life Sciences announced a strategic partnership with Automata, combining its liquid handling genomic and cell analysis technologies with Automata's AI-ready automation platform. This partnership is positioned to empower scientists with AI-driven tools in an automated workflows to improve throughput, workflow reliability and data integrity and increasingly autonomous research environment.

Lastly, Beckman Coulter Diagnostics continued to make progress on menu expansion for the High Resolution DxI 9000 Immunoassay Analyzer with FDA clearance of the HBc IgM assay for acute hepatitis B. With this clearance, nearly all core blood virus assays for the DxI 9000 are now cleared in both the U.S. and the European Union. This closes a historical gap in Beckman's immunoassay test menu and positions Beckman to accelerate new placements, customer wins and growth as the DxI 9000 rollout continues.

So now let's take a closer look at our results across the portfolio and give you some color on what we saw in our end markets. Core revenue in our Biotechnology segment increased 7%. Core revenue in Discovery and Medical declined low single digits. Growth in medical filtration and research consumables was more than offset by declines in protein research instrumentation as academic customers continue to face funding constraints. Core revenue in bioprocessing grew high single digits in the first quarter. High single-digit growth in consumables was driven by robust demand for commercialized therapies globally with notable strength in China. Equipment declined modestly in Q1, but we were encouraged to see orders growth of more than 30%, marking the first quarter of year-over-year equipment order growth in nearly 2 years.

Stepping back on bioprocessing, monoclonal antibody production remains robust and is expected to continue growing at historical or better rates, driven by new molecules, biosimilars and increased utilization of existing therapies. In fact, we saw a sustained pace of new biologic drug approvals in the first quarter of 2026, building on a robust level of approvals in 2025. At the same time, equipment investment has been relatively muted, which we believe creates a growing need for incremental capacity in the coming years. We're encouraged by improved trends in bioprocessing equipment and believe we're in the early stages of a multiyear investment cycle.

We see activity in brownfield projects today with larger greenfield investments expected to follow. Given Cytiva's expansive global footprint, broad portfolio and depth of technical expertise, we're well positioned to benefit from this capacity expansion across biologic drug production.

Turning to our Life Sciences segment. Core revenue increased by 0.5%. Core revenue in our Life Sciences Instruments businesses declined low single digits, primarily driven by weakness in North America academic research customers as we expected. While demand at academic research customers remain muted in the quarter, we saw early signs of momentum building in our order book. We continue to see a gradual improvement in large pharma and biopharma investment. Instrumentation demand at biotech customers remain muted but stable, but we were encouraged to see recovery in the funding environment drive improved funnel activity.

Core revenue in our Life Sciences consumables businesses collectively grew low single digits. Aldevron grew in the quarter, driven by solid commercial execution and an improved biotech funding environment. And we also saw early pockets of improvement in academic customers and research consumables, contributing to growth at Abcam. We're particularly pleased by Abcam's recent performance as DBS-driven commercial execution has gained traction and cost structure initiatives have driven meaningful margin expansion since acquisition. As end markets improve, we expect continued progress on both growth and margins at Abcam.

Moving to our Diagnostics segment. Core revenue declined 4%. Core revenue in our clinical diagnostics businesses grew low single digits, with mid-single-digit growth outside of China. In China, pricing headwinds in the quarter from volume-based procurement and reimbursement policies were consistent with our expectations and the anticipated impact from remaining policy changes remains consistent with our expectations from the start of the year. At the same time, volume growth in China was slightly better than our expectations, an encouraging indicator for future demand and growth as we move past the most significant year-over-year impacts from current policy headwinds.

Beckman Coulter Diagnostics delivered another strong quarter with mid-single-digit growth outside of China, led by immunoassay reagents and instrumentation. In Molecular Diagnostics, Cepheid's revenue declined in the quarter as respiratory revenue was down approximately 25% year-over-year, given lower than typical seasonal respiratory infection rates. Cepheid's core nonrespiratory test menu was up mid-teens, led by our 20% growth in sexual health and hospital-acquired infection assays.

Now we've seen strong early demand and several notable customer wins for Cepheid's recently cleared Xpert GI panel, a multiplex PCR test that quickly detects 11 common gastrointestinal pathogens from a single patient sample. This strong momentum supports Cepheid's broader multiplexing strategy, and we believe it provides a long runway for continued installed base growth and increased utilization.

Now let's briefly frame how we're thinking about the second quarter and the full year 2026. For the full year 2026, there is no change to our expectation of core revenue growth in the 3% to 6% range. This includes an assumption that a slightly lower respiratory revenue outlook of approximately $1.6 billion to $1.7 billion will be offset by modestly better core growth in the rest of the business. Additionally, given our strong Q1 performance, we're raising our full year adjusted diluted net EPS guidance to a range of $8.35 to $8.55 versus our previous range of $8.35 to $8.50.

In the second quarter, we expect core revenue to be up low single digits. Additionally, we expect the second quarter adjusted operating profit margin of approximately 26.5%.

So to wrap up, we're encouraged by the first quarter momentum across our portfolio and expect growth to accelerate throughout the year as we continue on the path towards consistent, higher core revenue growth. Cost and productivity execution translated into strong Q1 earnings growth, enabling us to raise our 2026 adjusted EPS expectations. During the quarter, we also announced the pending acquisition of Masimo. And with the strength of our balance sheet and more than $5 billion of expected 2026 free cash flow, we're well positioned for further capital deployment going forward.

Now we see a bright future ahead for Danaher. Across the portfolio, we're helping customers solve some of the world's most important health care challenges from enabling faster, more accurate diagnoses to accelerating the discovery, development and manufacture of therapies. Over time, we also believe the emerging opportunity in AI will further accelerate the pharma development and commercialization flywheel, improving success rates, lowering development costs and driving increased demand. This in turn is expected to drive incremental demand for our Life Science solutions as well as in bioprocessing as commercial drug production expands. So with the combination of our differentiated portfolio, our talented team and balance sheet optionality all powered by DBS, we're positioned to drive long-term shareholder value while making significant strides in applying science and technology to advance human health.

So with that, I'll turn the call back over to Rachel.

Thanks, Rainer. That concludes our formal comments. We're now ready for questions.

[Operator Instructions] And our first question will come from Michael Ryskin with Bank of America.

Great. Congrats on the results. Rainer, I want to ask a little bit on that progression through the year. As we look at 1Q, you guys did 0.5%. I'm backing into something like 2% core growth in the second quarter, given the various segments. I think that's what the low single-digit implies. So you've got a little bit of an acceleration in the second half of the year. Can you just talk to what's driving that across the segments? I think you're lapping, obviously, some of the respiratory headwinds in some of the Aldevron and VBP, but just confidence in the rest of the business to get that second half ramp and sort of the progression that's implied in the guide through the year?

Mike, good morning. Well, there's certainly a lot going on in the world today. But as we've said, we're focusing on controlling what we can control, and there's really no change to how we view the progression throughout the year that we laid out in January. In January, we said there are 3 things really needed to happen to support the ramp throughout the year. And all 3 of those things played out as we expected or actually even a touch better in Q1, and we feel good about the balance of the year and here's why.

In Diagnostics, the China diagnostic policy headwinds are playing out as we expected and actually patient volumes are higher. We also saw good momentum across the rest of Diagnostics, which showed another quarter of mid-single-digit growth without China and respiratory. And while respiratory was a touch softer, we continue to take share and our core molecular business grew mid-teens. So we expect our broader Danaher portfolio compensates for the touch of softness that we saw there in respiratory. But the quarter also demonstrated strong high single-digit EPS growth even if respiratory was a little bit softer. So those are some important proof points here around the resilience of our portfolio and the work that we're doing.

Now as you think about bioprocessing, here, we see strong underlying commercial biologic drug production continue and it drives strength in consumables, and notably, we are really encouraged to see improvement in our equipment order book with over 30% year-over-year growth.

Now turning to Life Sciences and the progression there, both China and Life Science consumables globally performed better than we expected. And that includes growth at Abcam and Aldevron, which is really encouraging. And we saw a broad stabilization in our life science end markets with pockets of improvement. So we're also seeing better funnel activity there as a result. So all in, look, we feel really good about how we started the year, and we believe this momentum continues.

And Mike, maybe just to give some details around the numbers and the specifics here on the progression. So the way we're thinking about it is core growth, low single digits in the first half of the year, sequential improvement from Q1 to Q2, you see this reflected in the Q2 guide. Together, the headwinds that we've talked about, China diagnostics, respiratory, some of the comps in Life Sciences, they're collectively about a 300 basis point, maybe a little bit higher impact in the first half of the year. These essentially go away by the end of the year and why we believe we'll exit Q4 in that mid-single-digit range. So for the purpose of the guide, the way we've laid it out is we're not really assuming any improvement in our end markets to exit the year at that mid-single digits, and that's why we feel comfortable about that progression through the year.

Okay. That's both those super helpful answers. And let me squeeze a follow-up on the bioprocess specifically. Like you talked about, Rainer, strength in consumables, the 30% or greater than 30% equipment order book. It doesn't sound like you're assuming any of that will come through later this year? Or could you see some benefit in the fourth quarter? Should that inform how we think about equipment growth next year? I mean just sort of how do we take those end points -- those data points of consistent high single-digit consumables and order book turning to think about [ BT ] later this year and into 2027?

Well, we continue to see that strength in consumables. And so we see that progressing through the year consistently. Equipment, what we're seeing there in the order book certainly underwrites and reaffirms the year-over-year improvement that we expected. Recall last year, we were down double digits. This year, the guide assumes that we're flat on equipment. But we do like the activity levels here in equipment, and that marker of 30% year-over-year growth is an important one that is certainly supportive of the out years, and we'll have to continue to see how customer readiness plays in here. Sometimes these equipment orders come and it gets to be a little bit lumpy as customer readiness is a real important factor here as to when you actually end up recognizing the revenue. So we certainly see the guide underwritten here going forward, and we think positively about what this means certainly for the out years.

Our next question will come from Vijay Kumar with Evercore ISI.

And want to pass along my congratulations to Matt Gugino and Rachel. Good to have you both on the call. Rainer, maybe my first one for you on your comment around Masi acquisition. I think initially, when people saw the deal, it was a little confusing. People thought this was a MedTech deal. But maybe just walk us through on this strategic rationale. I think you guys mentioned call point synergies between Radiometer and Masimo. My understanding is Masi, some of their tech board sales are perhaps tied to players like Philips, GE HealthCare. So how do you see the call point synergies and potential for DBS driving high single-digit ROI for the business?

Thanks, Vijay. Look, we see the Masimo transaction as a very typical Danaher deal. And by way of update, the process continues to progress well there, and we're excited to get the Masimo team on board. So all things are positive in that regard. And look, we've been following Masimo for over a decade based on the learnings that we had with Radiometer, which is really our Diagnostics acute care strategy, where we believe that Masimo is a mission-critical player, differentiated technology, all the things that we like to see when we talk about our 3 dimensional acquisition framework. This is a great end market with long-term secular growth drivers. Two, this is the premier asset in pulse oximetry and other applications in acute care diagnostics. It's supportive of what we're doing at Radiometer. In fact, there's geographic synergies as well as Masimo is a little stronger than Radiometer in the U.S., and that reverses as you think about Europe. So those are all very positive.

And really, these solutions sit next to each other here in these acute care settings. So to your call point synergies, they are significant, and they are direct synergies as well. And then I'll also add, from a financial profile, this is a transaction that's accretive at all levels, whether it's growth, whether it's gross margins or operating margins. And at the same time, we've been able to identify some pretty significant value reserves here to help us drive that return on invested capital to that high single-digit ROIC in year 5.

And Vijay, just to follow up, I mean Rainer talked about some of the synergies here, but what we outlined here a couple of months ago when we announced the deal was, we expect both cost and revenue synergies, $125 million of cost synergies realized by year 5, call it, $50 million of that is on the gross margin side, $50 million on the OpEx side and about $25 million of public company costs and then about $50 million of revenue synergies. Rainer outlined some of the opportunities there where we can probably help Masimo through our Danaher Diagnostics platform, get stronger in positioning around the IDNs or integrated delivery networks. And then there's probably some opportunity for Masimo to help us, including Radiometer, in the U.S. So really excited as Rainer said, to get the team on board here later this year.

That's fantastic. Matt, maybe my second one was on margins. I think typically, you guys have some seasonality Q1 to Q2 on respiratory, but I just feel like second quarter, maybe margins, the step down. It's a little bit more than what we saw in the last 2 years. Maybe just talk about sequential margins just given Q1 was such a good execution from a margin standpoint?

Yes. Sure, Vijay. I mean like you mentioned, I mean, we typically see a several hundred basis point step down in operating margins Q1 to Q2, that's driven by that typical step down -- seasonal step-down in respiratory. There's probably a little bit more FX impact here Q2 versus Q1, just given where the dollar has moved over the last couple of months. And then also, I think given the Q1 beat here, we wanted to take some of that beat, accelerate some growth investments from the second half of the year into Q2. So the way we're thinking about it is we just did -- we're expecting mid- to high single-digit earnings growth in the first half of the year, all in, and that puts us on the right path here for the rest of the year as we go forward.

Our next question will come from Scott Davis with Melius Research.

Congrats. Can you talk about raw materials, just resins, cost?

Sure. So with the spike in oil prices and the associated increases in petrochemical derivatives, we have our eyes firmly focused on what's going on there. And while we see some of that pressure out there, it hasn't been really meaningful yet as it relates to our own cost position. That said, we're incredibly vigilant there and leveraging the Danaher Business System as well as our contract positions to mitigate any pressures that are there. And I'll just say, as you would expect of us, Scott, here with the Danaher rigor, we -- every month, with every business, every operating company work through the entire P&L to understand what measures we're taking and how raw material volatility might affect the business. So we are all over that proactively, and to date, we haven't seen any meaningful pressure there.

And same with Middle East, Rainer?

Well, the Middle East is really driving a good part of that pressure, Scott, in the sense that the volatility in oil prices are driving that. In terms of supply from the Middle East, that really doesn't affect us. So our supply chain is not directly affected by the Middle East, but of course, the indirect effects that you're alluding to here are something that we have to address head on.

Our next question will come from Jack Meehan with Nephron Research.

One of the big topics in the market at the moment is AI, wanted to get your thoughts on that. The first question is, as you look across the business segments, how do you think AI is influencing customer spending behavior? Your referenced bioprocessing could be a beneficiary. I was curious what you also thought about Life Sciences and Diagnostics, any signs of increased or reduced spending in the business?

Sure. So let me get started here. You were a little bit in and out in terms of the volume on the question, but I think I've got it. Let me start with the conclusion here, which is we think AI is going to be a growth accelerator for the pharma and biotech industry, both in the near and in the long term. And the reason for that is we think that AI will accelerate the drug development and commercialization flywheel and result in better development pipeline yields. So as you know, the average yield in the drug development pipeline today is just above 10%. There's an enormous opportunity here to improve the yield of the pipeline and to accelerate the biopharma flywheel along with the flywheels of life science tool providers like ourselves.

And so this improved yield drives both growth and profitability and reinvestment in the pharma industry. And that, of course, in turn, drives more investment into discovery, including wet lab validation, development in the clinic as well as commercial drug manufacturing. So in the short term, what we're seeing actually is incremental more demand, which we expect to accelerate in the building of biologic models. Autonomous science is the current buzzword that refers to the building of biologic models, and of course, that requires automation, which we're very well represented in. It requires more analytical instruments and it requires more reagents as well. So that's the short-term impact as this practically new market segment of autonomous science starts to play out here, and that plays out first in discovery and then continues to accelerate through the development pipeline.

And of course, we're very well positioned here with our life science tools. I mentioned automation, analytical instruments that, of course, increasingly are AI-enabled reagents that support all of those models going forward. And that's a several year driver. These biologic models are in the single-digit percentage of information coverage required, very different than large language models. These biologic models require significantly more information in order to become general use type of model. So that's the short term.

And as I indicated then in the long term, what we're going to see is the cycle time of pharma development being compressed and the hit rate, i.e., the yield to be increased. And that flywheel is going to be very good for patients. It's going to be very good for the pharma industry and those partners like ourselves that support that industry.

Now as you think about that going through development, Jack, sorry, just to finish up, of course, these more commercialized drugs means more business for our bioprocessing business. We're the best positioned there with the broadest and deepest portfolio. I talked about the innovations that we're launching there. And then lastly, a lot of these drugs are going to be more sophisticated. They are going to require more sophisticated, more accurate diagnostics. If they're not personalized diagnostics, they will require near personalized diagnostics to come online. So again, I start with the conclusion, which is AI is a tailwind in the short and in the long term and is healthy for all market participants, and of course, we're very well positioned there.

Excellent. Yes, it's clear. There's a lot of exciting things across the business. Maybe for you, Rainer, or for Matt, just extending that from a DBS perspective, are you seeing any tangible signs of productivity benefits from AI in the business? Any cost savings or revenue targets that you'd be comfortable sharing at this point?

We are getting to the point, Jack, where DBS and AI are synonymous to us in terms of accelerating cycle times and driving efficiencies, and we bring those together. So we talk about AI-enabled DBS and DBS-enabled AI in one sentence, and that will continue to drive efficiencies. Let's just tee it up this way. As you think about the conversation I just had as it relates to the pharma development pipeline, think about Danaher's flywheel also being accelerated by AI-enabled DBS. That will result in more and better products that are AI-enabled, it's going to result in lower costs that we gained through efficiencies, and together, that's going to drive growth and earnings expansion going forward.

Our next question will come from Tycho Peterson with Jefferies.

Rainer, I want to go back to bioprocessing. I appreciate you touched on order trends and how that may translate to revenues. But wondering if you can unpack a little bit more what you're seeing pharma versus biotech versus CDMOs? Secondly, are you seeing any replacement cycle demand? We've heard about replacement cycle heating up a little bit as we've done some checks. And then how are you sizing the China opportunity in biotech? I think it was around $1 billion, $1.3 billion if you go back a couple of years, but how are you sizing that opportunity today?

Thanks, Tycho. Well, starting with China here where you ended up, China continues to be in recovery mode. We're very encouraged with what we saw in China here in the first quarter with double-digit growth in the bioprocessing business. The China biologics and -- driven by the biotech market that you referred to is accelerating. The monetization of the therapies being developed there has been resolved with both the license deals that you see with multinationals, but also the stock exchange and IPOs, once again, functioning properly. And so we expect that to continue to be a growth driver here as we get back to normality. So is the original $1.3 billion that we saw there at the peak in the cards? Well look, we're on the way to improved markets. We're happy to see that. We want to get through 2026 here to see that continued positive progression on China.

As it relates to the equipment orders that we saw there, we think that continues to be very constructive to our hypothesis around 2026 and beyond. Both the funnel activity is encouraging as well as you saw that year-over-year orders growth. As I said, that underwrites how we're thinking about the year here. And let's see how the next quarters progress to see whether that has any impact here in 2026, but certainly, it will as we go beyond 2026.

Okay. And then maybe just shifting over to Life Science. Encouraging to see the turn there. I think you talked about improved funnel activity, obviously, Aldevron. I think coming out of 4Q, you hadn't assumed Aldevron will grow in the first half of the year. So that's encouraging to see. And then A&G consumables a bit better for Abcam. I guess maybe just talk a little bit about where you're feeling better as we think about the remainder of the year for the Life Science business?

So in Life Sciences, and you just touched upon it in the consumables area, we expect it to be slightly down here in the year, albeit off of an improved second half of the year. I think as we go forward, we see positive growth for our Life Science consumables business here. For the full year, while that might be a little bit lumpy as we go through the next quarter or 2, we do expect that to go from slightly negative to slightly positive, and that's quite encouraging. And then we also saw China. China is continuing or, let's say, starting up and investing again also in Life Science instruments that was nice to see here in the quarter and the funnels there continue to be quite constructive. So all in all, we see some nice pockets of improvement there. Pharma was strong, continued to improve here quarter-over-quarter. Clinical was robust. The applied markets are playing out as we thought. Only academic remains a bit muted, albeit stable.

So we're encouraged here by what we saw in Life Sciences in the first quarter and expect that to play out positively for the rest of the year.

Our next question will come from Casey Woodring with JPMorgan.

So nice to see the greater than 30% bioprocessing equipment order growth in the quarter, but I assume that number is probably coming off of a lower base year-on-year. So can you just give us any sense of what orders grew sequentially in 4Q or what book-to-bill was in the quarter? Any sense of how those came in relative to your expectations? And then, I'd also be curious to hear more about the brownfield versus greenfield investment dynamic that you talked a little bit about? You highlighted brownfield investments are flowing through and said greenfield would be expected to follow. Just curious on your expectations of when we could potentially see those greenfield orders start to flow through? Is that something you wouldn't be surprised to see in the second half?

Yes. So Casey, the first quarter orders growth was the first positive year-over-year orders growth that we have seen in nearly 2 years. So by definition, then the comp is a little bit lighter. But if we look at the activity level here quarter-over-quarter, while the first quarter orders were actually down a little bit sequentially, that's absolutely expected as a result of the first quarter activity seasonality step down. So we always see that, and that's why that year-over-year comparator is so important. But at the same time, we see our funnel activity continue to be robust on the equipment side. So I wouldn't focus as much on that as a data point that we're seeing year-over-year growth now, whereas previously, it was sequential growth.

So very encouraged, as I mentioned earlier about what we're seeing in the equipment orders. Some of those orders are starting to get a little bit larger. And that dovetails into the second part of your question. So we see equipment orders growth and the funnel activity driven by 2 different dimensions. The first one is that we have seen underinvestment in the industry for the last 2 years as it relates to capacity. Despite the fact that we've seen very robust growth, our consumables business demonstrates that the activity level has been robust and strong here for the last couple of years now. And that means that capacities require expansion. We have biosimilars coming on the market. We have new compounds coming on to the market and, of course, a little bit of underinvestment. So that really explains what we're seeing there, both in terms of brownfield investments as well as the one or the other additional line or even greenfield investment.

The second vector is this reshoring dynamic. And here we see, again, increased dialogue, already some funnel activity, even the one or the other order here for brownfield expansions as it relates to reshoring. So we're really encouraged by what we're seeing here.

On the equipment side, as I say, it underwrites our hypothesis for the year, and it further supports how we think about the equipment progression and the bioprocessing strength beyond '26.

Great. That's helpful. If I can just squeeze one more in quickly. Rainer, you talked about solid growth across nonrespiratory within Diagnostics, and you held the guide for the year in Diagnostics, even with the lower respiratory number. So maybe can you just walk through what exactly is offsetting that lower respiratory number for the year? And what's getting better in that nonrespiratory piece that's enabling you to hold the guide?

Well, there's a couple of things going on there, Casey. The first one being that we continue to take share at Cepheid in the core business, which is very important, and our hypothesis around Cepheid continues to play out. We're launching new assays there. The gastrointestinal -- GI panel is doing very well. Our MVP panel is doing very well. So even within Cepheid, you see strength here that is playing out. And then in our nonrespiratory business and you take out China, we continue to see mid-single-digit growth there with our innovation strategy playing out. We've launched at Beckman Coulter an entire series of new instruments and equipment there, none more important than the high resolution DxI 9000, which opens up entirely new pieces of menu to us. We've closed that blood virus menu gap. And of course, we have that fast track device certification for Alzheimer's disease testing. So we continue to see positive momentum there. And then we haven't even talked yet about the implications of Masimo joining the portfolio.

So then the last point I would make, as it relates to China, VBP and the guideline discussions that we have, we're in a very strong dialogue with the China government here. And we've had visibility of what has been going on there for some time. So we feel good about our assumptions around the $75 million to $100 million headwind there in China, and that's only been validated by what we've seen in China here in the first quarter, even if the patient volumes were actually a little higher.

Our next question will come from Dan Brennan with TD Cowen.

Maybe just on M&A, the balance sheet is in good shape post Masi. Just wondering how you're prioritizing M&A today if you look at your 3 business segments? Where do you see the biggest opportunities? It's a question we get a lot from investors. And kind of what does the funnel look like? Do you think you could see another sizable deal this year?

We're very encouraged by what we're seeing in the funnel. As you know, multiples have come in and our 3 -- vector filter on M&A is becoming more and more relevant here. As we've talked about so often, one, our bias to capital deployment is M&A; two, we will not compromise on our discipline as it relates to being in the right end market with the secular growth drivers that we like to see, two, having a premier asset that has defensible positions or the opportunity with real value reserves. And then lastly, of course, the financial model has to work. And what we've been seeing in the current context is that the financial models are becoming more viable. So just to reiterate, one, the Masi deal for us was one that we have envisaged for a long time and the timing of that deal is defined ultimately by the processes that are run and we were ready with the balance sheet and the point of view to execute on that deal, and we're really excited about that. And that fits right into our acute care strategy.

Now what is not is a broader investment thesis around the broader MedTech market on the one hand. But on the other hand, it is also not indicative of our point of view as it relates to Life Sciences, Diagnostics and Bioprocessing. We see here plenty of opportunity to deploy capital and are fully prepared to do that as the opportunities arise.

And Dan, I mean, from a balance sheet perspective, post close of Masimo, we'll go to about 2.5x net debt EBITDA. Given our strong free cash flow of $5 billion plus per year as well as EBITDA generation, I mean, this leverage will come down fairly quickly. So it gives us the ability to remain active on the M&A front even in the near term. So feel good about how we're positioned from a balance sheet side of things.

Yes, that sounds great. And maybe back to a question, I think Mike started off the call with. Your core growth is anchored at 3% this year. I think consensus is around 5% next year. So assuming the consensus is in the right ZIP code, can you just walk through the key levers to generate 5% growth next year, including what could push down or higher up in your LRP towards the high single-digit level?

Yes, Dan, I mean it's April of 2026, I think we're a little bit too early to talk about '27, but I'll just kind of go back to what we talked about with Mike here at the beginning of the call, where we're talking about low single-digit core growth in the first half of this year. There's about 300 basis points or a little bit more of impact from the headwinds that we talked about. China Diagnostics, respiratory, the comps in Life Sciences, that's why we feel comfortable about exiting Q4 in that mid-single-digit range. And really getting through those headwinds enable us without really any improvement on the end market side to get comfortable into that mid-single-digit range.

And our last question will come from Doug Schenkel with Wolfe Research.

Matt, maybe a follow-up on your comments there at the end in response to Dan's question. What gets you to the high end of guidance for the year? Is it really just what you described there moving past the headwinds and maybe those actually reversing in a more robust way than we're seeing right now? And maybe related to that, as we sit here today, should -- would you recommend that we essentially stay at the lower end of the guidance range for the year until we see some improvement, both in terms of those headwinds abating and maybe some improvement in end markets. So that's the first topic.

And then another follow-up on M&A. Just to be clear there, from a readiness standpoint, could you do something in any segment as we sit here today, or given the pending Masimo deal, would it be less likely that you would do something in Diagnostics as you're in the process of integrating that business or getting ready to integrate that business?

Thanks, Doug. So look, we talked about in January, continue to anchor to that -- the low end of the 2026 core growth guide for planning purposes. In terms of what gets us to the higher end of the guide, I think you need to see a couple of things, Doug. First, you need to see some further improvement across the Life Sciences end markets. I think we're encouraged by what we saw here in Q1, but we need to see some of those policy headwinds further abate, especially in the U.S. and what we've seen there. I think China, good start to the year, but we need to see further growth acceleration as well. And then on the biotech funding side, again, starting to see some improvement, but we want to see that funding turn more quickly into orders.

I think the second thing, bioprocessing, we probably need to see it a little bit better than the high single-digit growth. We need to accelerate on the consumable side as well as get that equipment growth going here, again, encouraged by the order patterns, but probably need to see it move a little bit quicker. And then the other thing here that we talked about on the respiratory side, we probably need to see a little bit above normal respiratory season to finish the year here in Q4 back to that kind of endemic $1.8 billion rate that we see going forward. So I think all in all, we're encouraged by the start to the year. We're already at 3% ex respiratory today and encouraged to see some of the underlying trends improve as we talked about.

And Doug, as it relates to M&A, we have both the balance sheet capacity as well as the leadership bandwidth here to execute additional acquisitions in any of the 3 segments and feel very good about how we've positioned our talent and develop that talent in order to be able to do that.

We've now reached our allotted time for questions. So I'll turn the call back over to management for any additional or closing remarks.

No, perfect. That is all we have. You can reach us with questions today. Thank you so much for joining.

Thanks, everyone.

Thank you, ladies and gentlemen. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Terrific. Well, welcome. Day 2 of the TD Cowen Global Healthcare Conference. I'm Dan Brennan, I follow tools and diagnostics. Really pleased to be joined here with me on stage, Danaher management. We have President and CEO, Rainer Blair. So Rainer, once again, thank you very much for being here.

Dan, it's good to be here. Thanks for having us.

Awesome. So yes, I thought we'd kick it off, obviously shoot high level. The quarter wasn't too long ago. Yes, I'm just wondering, you guys got to set the guide framework with 3% to 6% this year. And maybe just speak to a little bit of kind of how you're thinking about the year and how you're thinking about the guidance, and then we can dig into some of the details.

Sounds great. Well, first of all, we were encouraged by our finish to the quarter, which was really a broad-based beat and showed some nice momentum here as we came into 2026. And it's really on that basis that we set the guide. And if you think about that, that guide is really led by our bioprocessing franchise, where we see high single-digit growth for the year, great activity levels there all around. Even there, we're assuming flat equipment growth, maybe we'll talk about that a little bit later.

In Life Sciences, we see end markets improving to some extent, also stabilizing. If you think about pharma, we saw several quarters of growth out of the pharma end markets there. Clinical was solid. And then academic and government, while that was down for obvious reasons, we saw that solidify. And then Biotech also is showing some improvement there as the funding flows improve.

And then as you think about Diagnostics, here outside of China and respiratory, we're already in our -- that was 8 quarters of mid-single-digit growth. And so we're really encouraged by that. And if you take those now abating headwinds, China in particular, we see nice growth there for Diagnostics in the low single-digit area. So that's how we started off the year. We like the set up.

Terrific. Yes. So maybe just as a follow-up to that, Rainer. So that's the guide. And I think myself and I think others are kind of anchored to that 3% right now. So if we think about starting at 3% and pushing into that midpoint or even the high end, what would need to happen? How realistic is that? Maybe just -- maybe a little more color on some of the drivers there?

Well, I mean, as we look at the first quarter here in particular, we do see that as the low watermark and see continued improvement here for the course of the year. And what would have to improve in our view is Life Science end markets. For example, we want to see continued improvement in the growth there, stability with some of the things, the noise that we had in the last year. And we do see that.

In Biotech, similarly, we want to see those funding -- improved funding flows now come through in order patterning and pattern, and we're encouraged by what we see there as well. So just to say we want to see Life Sciences continue to improve here through the course of the year. And then Biotechnology, bioprocessing in particular, that would be an area that if we see continued improvement even in the strength of consumables or equipment kick in a little bit stronger, those would be other opportunities for acceleration.

And maybe just kind of staying at the high level, but maybe thinking about -- your high incremental margins at Danaher has that 35% -- 35% to 40% drop-through. How do we think about that this year with that 3% to 6% in terms of the incrementals? Would you be able to achieve that across the whole range? Do you need to be in the midpoint of the range? I mean, you've done a nice job on earnings. But as we see this growth progress this year, just wondering how you might contemplate that?

Well, even at 3%, and it really shows you the power of the portfolio here. We -- with those -- with the fall through you talked about, 35%, 40%, we can deliver high single-digit earnings growth, 100 basis points operating margin expansion. So I think that's notable. And should the growth come in higher here beyond the 3% to 4% range, we see opportunity there for further EPS expansion.

Okay. We'll dig in to some of the segments in a minute, but just going to kind of keep high level here. I mean, the Masimo deal was just recently announced a few weeks ago. I think it was a deal that people -- not necessarily that deal, but certainly a deal, Danaher's balance sheet is in great shape. So -- and you guys are -- been really [ shoot the criers ] over time. It did raise more questions maybe that's typical for Danaher. I think because the headline was it's a MedTech company. So that was the first thing that maybe stuck out, probably less well known to folks like myself. Kind of what led you to the deal? What do you think the key selling points of the deal are?

Well, we've been looking at Masimo for 10 years, maybe more. We've admired the company for a long time as we encountered them in these acute care settings, particularly because of Radiometer. In fact, Radiometer was our first diagnostic acquisition back in the day, and we've learned a lot there and seen the value of these kinds of solutions and these high acuity settings, and Masimo is really a gold standard there.

So we view this as a specialty diagnostic company because doctors take that information and make absolutely critical therapeutic and clinical decisions right there in these very, very important applications. So we really like and understand that particular application and when the opportunity arose.

And you know the model that we always use is we like to -- we want to see the end market and the secular growth drivers that support that. And we see that here as pulse oximetry and some of the other advanced applications are absolutely critical and will only be more critical here going forward with an aging population, with the change in how anesthesiology works here, gaseous versus intravenous. Those are really important factors in supporting the growth here for the long term and are very, very positive.

Then as we think about the asset or the actual company, look, this is the gold standard in pulse oximetry and in some other advanced applications with an enormous intellectual property moat, a clinical data that is out there for over a decade that really differentiates the solution. So we like that aspect as well.

Now on the other hand, we also see a lot of value reserves. We like to see those because we can bring the Danaher Business System and our capability to the asset in order to make what is a good, very good company into a great company. And so that's really the opportunity here.

And then lastly, we like the financial model discussion. And here, we see a company that is accretive from a growth perspective, a gross margin perspective and operating margin perspective. And that will provide, with the synergies that we've talked about, a high single-digit return on invested capital by year 5, if not sooner. So this is really, from a Danaher perspective, a traditional, very normal kind of acquisition.

Okay. Yes, I was going to ask a question on synergies. Maybe I'll just kind of put a bow on the Masimo kind of conversation. So I think you've laid out $50 million of 5-year revenue synergies, $125 million of cost side. Yes, just kind of Danaher typically is conservative on these. I guess some questions we've gotten is on the cost side. There might have been a lot of margin that was already squeezed out of the business. I guess, what's supported those? Or how do you feel about those?

As you can imagine, through the years that we have known Masimo, we've seen a lot of opportunities there as well as through diligence, which was, of course, very extensive. So we see of the $125 million of cost synergies, $50 million in the cost of goods sold. So on the gross margin line, we see another $50 million in the operating expense line. And then there's $25 million of public company costs that won't be necessary in the future. So that's how you get to the $125 million, and we feel very comfortable about that.

Then the $50 million sales synergies, while we've talked about the same call point there between Radiometer and Masimo. Radiometer is a little stronger in Europe. Masimo, a little stronger in the U.S. They're about the same size, so we see a real opportunity to level each other up there. And of course, the Danaher Diagnostics platform. That franchise is a $10 billion before Masimo franchise. And increasingly, C-suites at IDN and other large players in the space want to talk to us about a much broader play. And we -- that's gaining traction, and this fits right in there.

Okay. Terrific. Thanks. So we move over to the businesses, starting with Life Sciences. It's been increased focus for investors trying to parse out kind of what's happening given the lack of recovery, not just Danaher, broadly in the space, right? Life Sciences, pharma spending, academic spending has been tough the last couple of years.

So here, I think you guys declined a couple of points last year. Consensus has you about flat this year. So a bit of improvement, but still probably well below what you would consider normal. Maybe just give some flavor on kind of what underpins even though it's -- flat might not be where you want to be, it's still an improvement. What underpins that improvement? How confident are you in that?

Well, first, we're very confident in that. We do see the pharma end market improving. You recall last year, after getting through some other types of headwinds, we had the MFN discussion, and pharma held back a little bit in terms of their investments. And as one deal after another was cut there between the administration and the pharma companies, we saw that investment confidence return. Certainly in Life Science research, for instance, in instruments as we saw there in the fourth quarter as well as in Biotechnologies. We'll come back to Biotechnologies.

That said, we also see improvement beyond pharma. Like I said, Biotech is showing more life with the improved funding flows. And we see that not just in the U.S., but also in China. And then we see other end markets maintaining sort of the level that they were at. Clinical, for example, which was pretty solid.

So all in, we see the Life Science end markets modestly improving here. And at the same time, we're going to start as a company to comp out of specific situations, whether in genomic consumables as an example, where 2 large customers in particular, it affected us. That's, as we move through the year, going to return to growth.

Well you mentioned the Biotech side -- and we'll get into bioprocess too, but just broadly in like Biopharma, we've heard a lot about even just on research spending. I mean, it's probably not that big a part of your business. But I mean, is that part of the calculus too, maybe a bit of improvement there with some of the funding that's occurred? Or just anything...

As we think about research funding, it certainly has stabilized. If you think about academic and government, U.S. academic and government is actually low single-digit percentage of our business, so it's fairly small. But that said, it has stabilized. These worst-case scenarios that were discussed last years have not come to pass. In fact, we've seen stability there in NIH funding, but also beyond, we're starting to see university funding come through at better levels than they had here in the middle of last year. So we're encouraged by what we see there. But I would say from today's perspective, it's stable.

Okay. Maybe just a question on AI and kind of the impact to your Life Science business. There's been debates on -- it's very early, obviously, clearly. But like, does AI make pharma more efficient and do they have more money to spend on the successful molecules? Do they actually do less wet lab work? So just very early on, but like how are you guys thinking about AI from like the Life Science part of your business? And what's the opportunity? What's the risk?

Well, we're very bullish about AI and the impact that it will have in Life Sciences and for the pharma industry more generally. In fact, we think it's a real growth accelerator here, not only short term, but definitely for the long term because it ultimately accelerates the pharma development and commercialization flywheel. As we all know, it takes billions of dollars and many years, up to 10 or 12 years, to successfully bring a new therapeutic to market. And we see that accelerating.

And so what that means for us, if we step back for a second. Over 25% of Danaher's revenue is in the production, so bioprocessing of therapeutics. Less than 5% is in the discovery and development of that. And I'll come back to that in a second. So if you look -- if you think about that in the future, we will have more drugs coming to market more quickly. That's a really significant opportunity for Danaher. That is, by quite a significant margin, the largest and broadest supplier to the bioproduction space. So we see that as very positive. And we also see, of course, the larger question of AI as a real shot in the arm for the profitability and the return on invested capital for pharma companies, which have been under pressure pretty significantly there.

So if we go upstream then to the discovery preclinical work, if you will, we see over time -- not overnight, but over time, that there'll be more in silico work there that is going to improve the number of successful candidates going into the clinic. Meaning the yield of the drug development pipeline will increase, which is another very significant positive and will improve the economics of the pharma flywheel quite significantly. And we know not only through discussions, but through the few examples that exist, that, that benefit is reinvested in more discovery and more development. So ultimately, we believe that this is going to elevate all boats, if you will, as the water line increases.

Okay. Maybe we'll maybe jump over to Biotech and bioprocess. You mentioned a few times here, the high single-digit bioprocess guide reflects an improvement in instruments flat versus down double last year and kind of consumables growth, I think, at the high end of high single digits. Maybe just -- you mentioned a few times, kind of -- but like this is such a critical business for Danaher, high margin, a lot of investor focus. Like maybe give a little color on how you frame the guide and how you're thinking about the puts and takes as we go through the year?

Well, first of all, consumables continue to lead the way. So commercialized drugs and drugs that are in Phase III and about to be commercialized are real. The prescriptions there are growing. Biosimilars coming to market are a clear benefit to patients, as well as therapeutic volumes, which is what our business depends on. And so this continues to be a strength that is unabated and will carry the consumables aspect.

At the same time, we do see equipment -- which is a smaller part of the business, I think around 15% of the business -- we do see that improving. We're encouraged by the fact that we've seen 3 quarters of sequential order growth. In the fourth quarter, we saw actual sales growth in equipment. And we're encouraged by that, and we want to see that trend continue. Our funnels are active. And so we're very focused on that aspect of the business as well, and we do see that improving.

Just maybe one more on kind of on the equipment side there. What do you think -- from your meetings with companies and maybe the salespeople's meeting with companies, so flat is a heck of a lot better than down double digits. But what do you think would get that to like up 5%, up 10%? I mean, there was a view a year or 2 ago, we all live in Excel and we could see how much things were down. Like, oh, there's going to be a recovery, it's going to go like this. And obviously, it's starting to recover now. But what do you think it would take to get that into decently positive territory?

Well, I mean I think that there's two factors here. The first one is that the lack of investment in new capacity over the last 24 months has resulted in improved utilization rates in the industry. And that's important because you really do need to get ahead in terms of investment in order to ensure that you can provide the therapeutics.

So we know from the prescription data and from the volumes that are being consumed by patients that the drug demand has grown unabated whilst there has been little capacity expansion. So it makes sense to us that the utilization rates are higher. And as a result of that, we are seeing our funnels improve. That's we believe why we're seeing the sequential improvement in our order book, as well as that growth. And so that trend to be sustained. And then later on, I'm sure we'll talk about reshoring. Those are all factors that can contribute to an even better result here.

Yes. That was the next question, was reshoring. So yes, it's -- obviously, it's a topic we're going to host tomorrow. We have a senior executive from a leading engineering and construction company to speak about what he's seeing in the field from facility build-out. So that will be interesting on kind of drug companies and biotech companies.

But yes. So maybe speak to a little bit about -- does reshoring help drive new incremental equipment demand? From what extent is it just a substitution, you're moving stuff from one area to the other? Just maybe give us a high-level view of reshoring, and then I can follow up with another question.

Our view here clearly is that we are in the early days of a years long CapEx cycle. And that, that is already underway. We see that -- as I mentioned in our order book, we see that primarily in brownfield investments, so investments in existing facilities. But we also see that with our CDMO customers who not only have increased demand for our solutions, but are acquiring, if you will, underutilized pharma manufacturing capacity to be able to put that to use in this reshoring effort.

And again, there's at least two things going on that support demand. One is the continued growth of the use of these therapeutics and their penetration in the market. These therapeutics work. And as they become more accessible to biosimilars and other reasons, that growth will continue. The lack of capacity investment that I talked about a minute ago requires that there will be more investment capacity.

When you look at Phase III drugs, there are many viable drugs there that are going to require further capacity increases. And now on top of that, you add the reshoring effort that is underway for also national security reasons. So this is not just an economic question in the United States. It is a national security question in the United States.

These investments are coming, and it's just a matter of time as they catch up. And so the brownfield investments that are starting to occur now will continue, and they will continue to accelerate. And then we will see these reshoring investments coming to us in the 18, 24 and 36 months, depending on how much of it is greenfield and otherwise. So a years long investment cycle ahead of us.

And you guys haven't framed at all, provided any color. Would you do that at some point in '26 in terms of -- as orders start to come through? [ You tote ] $400 billion of announcement from the big pharma companies, but it's not just all CapEx. It's -- there's a lot of things in those numbers, right?

That's right. And we want to provide that clarity, and that clarity will be based on the order book and actual data as opposed to -- and understandably, it's very difficult to parse through these investment announcements. The timing differs. And of course, the plans sometimes change, but it is coming nonetheless. And as we have greater visibility to that with more specificity, we'll provide that transparency.

And maybe just want to follow-up there. Obviously, the Supreme Court shot down Trump's tariffs, and he's going to work around that and try to figure out ways. I know our pharma analyst caught up with a couple of his companies, and there's no change in the reshoring, no change. Because if the tariffs go away -- I don't know, is there any early color your team has heard from any customers? Is that the message? Or is there no message?

In my discussions with pharma CEOs -- and they've been very frequent and very recent as -- last week included -- there's no change to these investment plans. These plans are driven as much by the tariff aspects that are maybe a bit in flux, but ultimately result in similar types of levels, as they are with the fact that there is an agreement with the U.S. government to do this in relation to most favored nation pricing and so forth. So there are deals in place here that will be respected.

Okay. Great. Maybe just on consumables for Danaher. You guys are the leading player in the market, certainly by size and across a lot of the continuum. How do you think -- as the biggest player gives you a lot of scale and benefit, but also subjects to you to maybe some share loss because there's a lot of smaller players coming up, how do you think you stack up on your bioprocessing consumables portfolio versus the market? Hold share, gain share, lose share?

Well, first of all, these share gains and losses, these would be things that take a lot of time. This is not an incredibly fluid market in terms of share changes. That's just not the case. When we look at our share position, we think that it's improved. Not by enormous magnitudes, but in some areas, quite significantly. Cell culture media or single-use technologies come to mind. Just as a data point, cell culture media grew over 20% here in the fourth quarter. So these are areas where we believe that we're gaining share. In other places, we're probably holding share.

An area that we view really as a great opportunity is the filtration area. So Pall, now part of Cytiva, is a powerhouse in material science and is now launching its next-generation filtration solutions. And we actually have a relatively small share in filtration. And so we really see this as a big opportunity to level up with our share position in other places in the bioprocess workflow, and we're looking forward to that.

Terrific. Maybe just one on China. Historically was a contributor to bioproduction growth, but given all the back and forth, what's happened there, it's hard to catch a trend, and there was certainly a contraction. But now with the research and biotech sector wondering what China is contributing to bioprocess these days.

So we're seeing growth in bioprocessing in China, and we expect that to continue to accelerate here in '26 off of what was previously contraction. And that's really driven by increased biotech activity there, where China has found new means of monetizing these drug developments primarily through licensing, but also increasingly through going public there in the Hong Kong Stock Exchange. And that really has added a significant amount of fuel to the China drug development flywheel. And we also see that in the number of clinical trials that are ongoing in China, quite significant increase here over the last years.

So we're the largest player in China. We increasingly manufacture our solutions there locally. We are highly competitive, not just with multinationals, but also with local players there. And our customers really enjoy working together with us to help them develop these molecules and ultimately bring them to market not just for China, but also to have that capability and the credibility to market those drugs outside of China.

Terrific. So we have about 5 minutes. We'll jump over to maybe Diagnostics. So you guys have sounded very confident on that China drag which you baked into your guide kind of being pretty visible. And you feel good about that eventually lapsing this year, $75 million to $100 million. Maybe just speak to a little bit, the visibility there? Because we've heard rumblings in the December time frame, there could be another round of VBP. So just -- what are you hearing on the Street there? And should this be hopefully, the $750 million will be the right number?

We're not hearing about another round of volume-based procurement or DRG changes. But what we do see is that very methodically, the provinces and the federal government are sort of cycling through the various diagnostic tests, just like they did when they started in pharma, then MedTech and then diagnostic tests. The great majority of our tests have already been part of that regimen, and we have the great majority of that behind us, and that's what gives us the confidence to limit the further impact to the $75 million to $100 million that you mentioned.

Now what kind of things are they working on now? Well, dry reagents, as an example. People talk about those. We do not have dry reagents in China, as an example. Or specific oncology tests, esoteric tests, we're really not involved and exposed to those. So there might be players out there that are still in that part of the regimen, cycling through the various tests, but that's not the case for us.

And so we're really looking forward to getting through the end of this year. We'll already see in the second half, the comps starting to improve. We already saw in the fourth quarter, that type of thing playing out with the comps. So we're quite confident that we have this dialed in properly. And we're seeing the patient volumes to be -- continue to be very strong. So there's a need for these diagnostics, and we're looking forward to continued progress here.

Great. Cepheid has been a tremendous deal for Danaher, right, taking it from where it was, the profitability improvement. And then the growth that you've had, not just COVID, but on the base business. Kind of sitting here today, kind of what excites you about Cepheid going forward? What type of growth do you think we can expect there?

Well, Cepheid, I would tell you, early days. We're just getting going. You saw the launches of our syndromic panels. We didn't really talk about it as much when we launched the foreign one because it was so much part of the pandemic discussion. Then we have the MVP syndromic panel, which is really moving in the market very well, introducing us to new care settings in women's health. And now we have the GI panel, another syndromic panel.

And so this is really exciting because now we're moving into the different plex market, and that's opening up a much larger addressable market for us. And this is an amazing part of the Cepheid strategy that we've executed. You know we're well over 60,000 installed base now. We -- already fully half of that installed base has the higher plex capability so that we can seamlessly implement these syndromic panels in the market. And the other half, we've been able to develop the system such that we just literally pull the module out, put in a new module. You don't have to make any other changes, and you have now enabled your installed base to take on this entire syndromic panel play.

And we're really in the sweet spot there. It turns out that as you speak with clinicians about high plex, so 50, 70, 100 different plex, that they're actually not so keen on moving forward with that. It's actually a little bit too much for what they need from a clinical value perspective. And so we've dialed into the sweet spot here with this plex of about 10, 12, and we expect a lot of growth to come out of that. So continued innovation at Cepheid. This nonrespiratory side of the portfolio is growing at double digits, and we expect that to continue in a really strong way.

How much could this new higher plex market add to the growth rate, assuming the base business keeps doing what it does?

Well, it's early days here. So let us get through more launches, but expect to see more and more launches from us. But there's no doubt that this fortifies our position, makes us more and more attractive on the clinician's benchtop. And that we will consolidate not just share, but really open up new applications for us.

Terrific. Maybe we'll try to sneak in one on the balance sheet. So you did the Masi deal, you're going to -- you're working through that. Is it fair to think you wouldn't undertake another deal while this one is in the midst of closing? I mean, you have the capacity, I think, to do another $20 billion plus, but how do we think about that?

Well, we're always in the market looking at the next transaction that fits our strategy and our 3-dimensional framework that I often speak to. With this Masimo transaction, we'll sneak over just 2 turns in terms of our EBITDA debt ratio. And we feel very comfortable that we would still be in a place where we can execute another deal.

Maybe I'll let you wrap it up then with a few seconds up here. Rainer, it's been a great discussion. What do you think -- what's the message you want to leave investors with today?

Well, I would tell you that Danaher is transformed in its portfolio. Our businesses are highly attractive. We're really in the most attractive end markets here in the health care sector. And you can see that by the kind of margins that we generate. That 35% to 40% fall-through is so incredibly important. And even at growth rates of 3%, so the low end of the guide, the power of that portfolio and our earnings capability and our cost discipline allows us to deliver high single-digit EPS growth and operating margin expansion of 100 basis points. So you combine that with our ability to acquire assets, Masimo just being the latest example. We really do see the LRP as well as double-digit earnings growth as a part of our future.

Terrific. Well, thank you very much for being here, and have a great rest of the conference.

Thank you. Thanks.

Good day, everyone. My name is Nikki, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Danaher Corporation's Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions].

I will now turn the call over to Mr. John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.

Good morning, everyone, and thanks for joining us on the call. With us today are Rainer Blair, our President and Chief Executive Officer; and Matt McGrew, our Executive Vice President and Chief Financial Officer.

I'd like to point out that our earnings release, the slide presentation supplementing today's call. The reconciliations and other information required by SEC Regulation G and not containing details of historical and anticipated future financial performance, are all available on the Investors section of our website, www.danaher.com, under the heading quarterly earnings. The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. A dial-in replay of this call will also be available until February 11, 2026.

During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. The supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to results from continuing operations and relate to the fourth quarter of 2025 and all references to period-to-period increases or decreases in financial metrics are year-over-year.

We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future.

These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law.

With that, I'd like to turn the call over to Rainer.

All right. John, thank you, and good morning, everyone. We appreciate you joining us on the call today. We delivered a strong finish to the year with better-than-expected performance across the portfolio. We were particularly encouraged by continued strength in our bioprocessing business, along with improving momentum in Diagnostics and Life Sciences. Our team's disciplined execution also enabled us to exceed our fourth quarter margin, earnings and cash flow expectations.

Now during the quarter, end market trends across our businesses were broadly consistent with what we saw through the first 3 quarters of the year. In Pharma, global monoclonal antibody production remained robust, and we were encouraged to see a modestly more favorable capital spending environment. We also continued to see a recovery in pharma R&D spending, while biotech demand remained stable. Academic and government demand remained muted but was stable sequentially, while clinical and applied end markets continued to perform well.

Now I'd like to take a moment to thank our associates for their efforts in 2025. They did a tremendous job leveraging the Danaher Business System to navigate a dynamic geopolitical and policy environment while continuing to deliver for our customers and drive productivity gains across our businesses. Their dedication and passion for serving our customers enabled the launch of innovative therapies and diagnostic solutions drove share gains in many of our businesses and reinforce Danaher's reputation as a trusted leader in life sciences and diagnostics.

Now looking ahead, we expect the gradual end market improvements we saw through 2025 to continue, and we believe the combination of our differentiated portfolio the power of the Danaher Business System and the strength of our balance sheet positions Danaher for long-term value creation as we move into 2026 and beyond.

So with that, let's take a closer look at our full year 2025 financial results. Sales were $24.6 billion, and core revenue increased 2%. Our adjusted operating profit margin was 28.2% and adjusted diluted net earnings per common share of $7.80 were up 4.5%. We also generated $5.3 billion of free cash flow, resulting in a free cash flow to net income conversion ratio of approximately 145%. Strong free cash flow generation is one of the most important metrics at Danaher and 2025 marks the 34th consecutive year our free cash flow to net income conversion ratio exceeded 100%.

Our earnings growth and strong free cash flow generation in the face of tariff-related cost pressures and significant productivity investments underscore the differentiated quality of our earnings and business models.

Now our continued investments in innovation drove an accelerated cadence of new product introductions across Danaher in 2025. These new technologies are helping customers develop and manufactured therapies and diagnostic tests faster and more efficiently, ultimately helping to improve health care outcomes. In biotechnology, Cytiva launched more than 20 new products across the biologics workflow upstream new 500 and 2,000 liter formats of the Xcellerex X-platform bioreactor are helping drive higher yields while reducing the time and cost of biologic drug manufacturing for our customers. Downstream, Cytiva strengthened its purification portfolio with the launch of 2 new Protein A resins. MabSelect UR7 and MabSelect PrismA X, delivering cost-effective solutions for preclinical and clinical production without compromising quality.

Now these launches reinforce Cytiva's commitment to helping customers improve yields and lower manufacturing costs while maintaining high performance across the drug development life cycle. In Life Sciences, SCIEX reinforced their leadership in mass spectrometry with the introduction of the ZenoTOF 8600. The 8600 delivers up to 30x increased sensitivity versus previous platforms, accelerating proteomic research and enabling faster identification of disease pathways to help accelerate drug development time lines.

Meanwhile, Beckman Culture Life Sciences expanded its flow cytometry portfolio with the Mosaic spectral detection module. Bringing spectral capabilities to the CytoFLEX platform that enable flexible, high-precision multiparameter characterization for pharmaceutical researchers.

In Diagnostics, Beckman Coulter Diagnostics expanded the DxI 9000 assay menu, highlighted by progress in neurodegenerative disease including the first-to-market automated, high-throughput BD tau research use-only immunoassay while continuing to expand cardiac and blood virus menus. These advances, combined with sensitivity up to 100x greater than traditional immunoassay systems enable faster, more accurate patient diagnosis and help pave the way for precision diagnostics.

Finally, last week, Cepheid received FDA clearance for its expert GI panel, a multiplex PCR test that quickly detects 11 common gastrointestinal pathogens from a single patient sample. Leveraging Cepheid's advanced 10-color multiplexing technology on its gene expert installed base, this test simplifies GI testing workflows helps guide appropriate treatment for high-risk patients and can aid in reducing the risk of outbreaks in health care and community settings.

This panel marks another step forward in Cepheid's multiplex testing strategy, building on momentum from the 41 respiratory panel, the MVP panel in women's health with further multiplex introductions planned over time. So these are just a few of the innovations from across banner that are delivering meaningful customer impact while also driving clear financial results, including approximately 25% year-over-year growth in new product revenue.

So with that, let's turn to our fourth quarter 2025 results in more detail. Sales were $6.8 billion in the fourth quarter, and we delivered 2.5% core revenue growth. Geographically, core revenues in developed markets increased low single digits, with North America essentially flat and Western Europe up mid-single digits. High-growth markets were up mid-single digits with solid growth outside of China more than offsetting a low single-digit decline in China.

Our fourth quarter adjusted gross profit margin of 58.2% and our adjusted operating profit margin of 28.3% and were both down 130 basis points as the impact of cost savings initiatives more than offset the positive impact of volume leverage. Adjusted diluted net earnings per common share of $2.23 were up 4% year-over-year, and we generated $1.8 billion of free cash flow in the quarter.

So now let's take a closer look at our fourth quarter results across the portfolio and give you some color on our end markets today. Core revenue in our Biotechnology segment increased 6%. Core revenue in Discovery and Medical declined at a high single-digit rate in the quarter, driven by a difficult prior year comparison in our medical filtration business and by declines in protein research instrumentation as academic research customers continue to face funding constraints.

Core revenue in bioprocessing grew high single digits with high single-digit growth in consumables and mid-single-digit growth in equipment. Consumables growth was supported by continued robust demand for commercialized therapies, particularly monoclonal antibodies. And we were also encouraged by the return to equipment revenue growth in the quarter and by a third consecutive quarter of sequential equipment order growth, though orders remain below historical levels.

Current momentum in our equipment order book and funnels is concentrated around shorter cycle projects such as line additions and brownfield expansions, with U.S. reshoring-related greenfield investments expected to provide incremental upside over time. Now given the sustained and substantial activity levels at our customers over the last year, we anticipate high single-digit core revenue growth in bioprocessing for the full year 2026.

Growth is expected to be led by consumables with our current backlog and order trajectory supporting equipment revenue improving to approximately flat for the year. So we see a bright future ahead for Cytiva, underlying biologic demand which is the primary growth driver of our business has grown at double-digit rates annually for more than a decade, and we expect strong demand growth to continue into 2026 and beyond. This outlook is supported by another year of robust FDA approvals for biologic medicines in 2025 and increased uptake of existing therapies during this year which taken together drove global biologic revenues to surpass small molecule drugs for the first time.

The development pipeline also remains strong with biologics expected to represent more than 2/3 of the top 100 drugs by 2030. For these positive trends reinforce our confidence and the durability of long-term growth in the bioprocessing market and for Cytiva's leading franchise.

Turning to our Life Sciences segment. Core revenue increased 0.5% and Core revenue in our life sciences instrument businesses was essentially flat in the quarter. Looking across end markets, we continue to see a modest recovery in pharma, particularly in Europe, while biotech demand remained stable. Academic and research demand was muted, especially in the U.S. and China, but was generally stable on a sequential basis, and clinical and applied markets remained healthy.

Core revenue in our Life Sciences consumables businesses declined in the quarter primarily due to lower demand for plasmids and mRNA from 2 of our larger customers as well as continued funding pressure across early-stage biotech and academic research. We were encouraged to see another quarter of sequential improvement at Abcam as key commercial initiatives in pharma and recombinant proteins delivered solid growth partially offsetting ongoing softness in academic research.

Moving to our Diagnostics segment. Core revenue increased 2%. Core revenue in our clinical diagnostics businesses grew mid-single digits with high single-digit growth outside of China. Notably, Leica Biosystems and Radiometer were each up nearly 10%. And with broad-based strength across both instruments and consumables. Beckman Coulter Diagnostics also delivered another strong quarter with mid-single-digit growth globally led by high single-digit growth in immunoassay. This is Beckman's sixth consecutive quarter of mid-single-digit or better core growth outside of China and caps off a year of sustained momentum across its innovation and commercial engines. In Molecular Diagnostics, respiratory revenue of approximately $500 million exceeded our expectation as customers purchased in anticipation of an active respiratory season given the high prevalence of currently circulating respiratory viruses.

Over the past several weeks, we worked closely with the team to better understand seasonal trends and revisit our assumption for respiratory revenue in a typical year. And as a result, we expect respiratory revenue of approximately $1.8 billion for the full year 2026. This assumes a normal respiratory season and that testing protocols that our customers remain broadly consistent with what we've seen the last few years.

Low double-digit growth across Cepheid's core nonrespiratory test menu was highlighted by nearly 30% growth in sexual health and mid-teens growth in hospital-acquired infection assays. This strong performance reflects continued traction in Cepheid's growth strategy, including new menu additions such as the MVP panel in Women's Health enabling entry into new care settings and existing customers continuing to add both menu and instruments across their health care networks.

So looking ahead, we're excited about the long runway for durable growth at Cepheid, supported by a robust pipeline for future menu additions and anticipated continued expansion of our leading global installed base.

Now let's briefly look ahead as expectations for the first quarter and the full year 2026. Looking across the portfolio, we're assuming bioprocessing growth will be similar to 2025, including continued strength in consumables, driven by healthy growth in monoclonal antibody demand and our strong positioning across the biologics workflow. In Life Sciences, we're assuming a modest improvement in end markets, but assume growth will remain below historical levels given the current macro environment.

And in Diagnostics, we're assuming higher growth in 2026 due to moving past the peak of headwinds from policy changes in China and our expectation that we will continue to execute well globally. For the full year 2026, we anticipate core revenue growth in the 3% to 6% range. Additionally, we are initiating full year adjusted diluted EPS guidance in the range of $8.35 to $8.50. In the first quarter, we expect core revenue to be up low single digits. And additionally, we expect the first quarter adjusted operating profit margin of approximately 28.5%.

So to wrap up, we're pleased with our solid finish to the year and proud of the work our teams did in 2025 to reliably support our customers through a dynamic macro environment. They did a tremendous job staying focused on what we can control. running the Danaher Business System playbook to offset cost pressures and deliver productivity gains while continuing to invest in innovation for the long term. So looking ahead, we're encouraged by the momentum building across our portfolio and expect growth to accelerate as end markets continue to improve. Our strong positioning in attractive end markets and high recurring revenue business models support our long-term expectation for high single-digit core growth with a differentiated margin and cash flow profile.

So with the powerful combination of our differentiated portfolio, talented team and strong balance sheet, all powered by the Danaher Business System, we feel well positioned to create long-term shareholder value while making a meaningful positive impact on human health.

So with that, I'll turn the call back over to John.

Thank you, Rainer. That concludes our formal comments. We're now ready for questions.

[Operator Instructions]. Our first question comes from Michael Ryskin with Bank of America.

Congrats on a -- maybe just to kick things off, you're going -- you're opening with a 3% to 6% core revenue guide that's consistent with kind of the framework you laid out on the 3Q call. But if you look at the various segment details you provided, it looks like the segment levels, if you kind of do the sum of the parts, it gets you closer to that 3%, which you hinted in the past. I'm just curious if you could talk about how much conservatism is embedded in that? Or maybe what are the levers? Or what are the drivers you could see getting you closer to that 6%, where you see a potential for upside as you go through the year? If there's one segment or another kind of...

Sure, Mike. Well, how about a level set first on the guide and then I can talk to those upside levers. So first of all, we had a good finish to 2025 with the business performing better across the board in Q4 that really reinforced that 3% to 6% core growth outlook that we talked about in October. And now we've converted that into our core growth guide, which is based on the expectation of continued recovery in our end markets.

And to your point, let me give you a little color on those. First of all, we expect bioprocessing to remain strong at high single digits had an excellent finish to the year. In fact, I've just spent time out with customers and with our teams and things are going really well for us there in terms of spec wins and orders and of course, sales as well. And this should -- this momentum should lead to continued strength in consumables.

And for equipment, we were encouraged by that momentum that we saw in the fourth quarter but we're assuming that equipment is flat for 2026, which is off of a mid-teens decline in '25, but that is supported by our current backlog. Now as we think about Life Sciences and our Discovery and Medical businesses, we expect those to be flat. And we're assuming some modest improvement in our end markets there. And that said, we do expect growth will improve through the year as our own comps ease, particularly in our life science consumables businesses.

And then lastly, we expect Diagnostics to grow in the low single digits. We're assuming consistent mid-single-digit growth outside of respiratory in China. And with China, we think the volume-based procurement headwinds will moderate as we move through the year.

In Respiratory, we've taken a look at that number again here in terms of the endemic level, and we think that's probably fairly consistent with 2025. So this is how we're setting up the year. Based on these improving end markets and some of the momentum that we saw coming out of Q4.

Now Mike, to your point, as to upside levers, there's probably larger drivers that are most relevant there. One is to see continued improvement across our life science end markets. We're seeing some of that. We want to see more of that, especially some of those policy headwinds that we're seeing here in the U.S. in particular. We'd like to see that improved biotech funding environment fall through now to an increasing order book in that particular segment. So encouraged, but we don't see that yet.

And then, of course, China continuing an acceleration in life science research would be helpful in those life science end markets as well. And then the other level is bioprocessing where seeing better than high single-digit growth for the year. with equipment potentially accelerating or even consumables accelerating more as we see more biosimilars and mat production increasing those would be 2 areas that could produce additional upside to the guide.

Okay. That's helpful. And if I could follow up just on that point on the bioprocessing outlook for 2026. Can you talk a little bit about the order book, maybe book-to-bill, how that shaped up in the fourth quarter for consumables and for equipment? Just give us a little bit more clarity on the confidence that's driving that; '26 outlook. You've got -- you still have easy comps and equipment, but a little bit tougher comps in consumables. So just for both the equipment and the consumable side, what the orders look like exiting the year and how that supports next year's outlook.

Sure. The order book fully supports the high single-digit growth that we've been talking about for 2026. As you know, the lead times have gotten much shorter on the consumable side. So having a book-to-bill there of around one is exactly where it needs to be. So we feel very good about that. We've talked about equipment orders increasing sequentially here the last 3 quarters in a row, and then, of course, we grew revenue in the fourth quarter. So we feel comfortable that we're starting to head in the right direction there in equipment as well. But 1 quarter of growth, we're not ready to call that a trend yet, but the orders coming out of the last 3 quarters are encouraging.

We will move next to Tycho Peterson with Jefferies.

Rainer, I would love to just hear a little bit more about the strength on SCIEX and how much of that is the new product versus maybe end market recovery? And where specifically are you seeing kind of end markets turn for the better there?

The SCIEX did nicely with single-digit growth here in the fourth quarter, and we're seeing a number of factors contribute to that. Certainly, innovation with the ZenoTOF 8600 getting some nice traction. But we also see continued improvement in the pharma end market there. It's the third quarter in a row that we saw in life sciences, the pharma end market being a growth. The clinical and applied markets were robust as well. As you know, SCIEX is the gold standard there and PFAS testing as just one example.

And then lastly, I would say in the academic and government segment, that continued to be muted. So it's stable, but not growing in the last quarter. So generally speaking, we see the end markets continuing to improve, and that also contributed to sizes in the Instruments group performance there in the fourth quarter.

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Okay. And then maybe one for Matt on margins. We got the first quarter operating margin guide, obviously, but how should we think about kind of the flow-through of incrementals. You didn't really touch on the incremental cost out initiatives on the call. But how should we think about kind of a full year margin target and progression throughout the year?

Yes. I think the way I sort of think about it is kind of very similar to core growth, right? So I think we're kind of starting out the year at low single-digit core growth and very similar to what we saw here in Q4, and that is going to sort of accelerate through the year. So you'll see kind of a little easier comps here in Life Science consumables in the second half, some modest end market improvements in Life Sciences that Rainer just alluded to, put in easier comps in China DX and respiratory. I think what we'll see is sort of that low single-digit growth kind of build through the year and earnings is going to follow that. I think you'll see that follow the trajectory of the core growth with certainly the second half and the fourth quarter probably being the biggest beneficiary of the 2025 cost actions. And so if you kind of go through that, I think you'll see the second half is certainly building up, but that's largely almost all the benefit from the cost actions in the fourth quarter.

Okay. And then just lastly, quickly on bioproduction. I appreciate all the incremental color. Any commentary specifically on China. There were some mixed data points earlier this week from one of the companies that reported on China bioprocess. So curious if you're seeing anything abnormal there in terms of trend?

We're not -- our fourth quarter bioprocessing business in China coming off of a large comp. But the underlying activity level continues to strengthen there. You know that the biotech market there, in particular, is it's found some new momentum here as they are able to monetize some of those molecules that they're developing there, some new to the world through licenses through going public and other types of monetization opportunities. So for us, bioprocessing should continue to have a positive development. And certainly, we expect China bioprocessing to grow in 2026.

Our next question comes from Scott Davis with Melius Research.

Seems a pretty encouraging commentary, particularly around bioprocess. But guys, I want to back up a little bit, like you did a fair amount of restructuring and such, and that can be defined in a lot of different ways. But is the -- can you help us understand a little bit of the postmortem other than just the margin impact kind of what did you actually do as it relates to kind of either rooftops or headcount? Is there a tangible change in fixed assets or anything that you can kind of talk about publicly here?

Scott, I mean, this is a traditional Danaher business system type of productivity improvement where we're certainly consolidating rooftop but also driving process efficiencies. And yes, that has resulted in reducing associates as well. So we expect the cost savings that we've generated there to sustain here for the long term. And as we noted in previous calls, those are pretty significant.

That's a good nonanswer, Rainer. I get it. Understood. The flu season has been pretty nasty, I knows it's called up here, colder at, too. But is there -- are you seeing a big pickup in orders here in January, kind of -- I know that you had a strong probably preorder season in 4Q and such. But have you seen a pretty sizable reload as you -- as the cases have picked up?

Well, we certainly at the second half of the fourth quarter, saw the cases pick up quite significantly. And you probably noted that the IOI being as high as it's nearly ever been. And that was manifested then also in the respiratory beat that we showed in the fourth quarter. Now since then, we've seen that IOI come down, but testing continues to be robust, and we put out the perspective that we expect our first quarter respiratory to be around $500 million of revenue.

We will move next with Doug Schenkel with Wolfe Research.

Starting on bioprocessing. Given the strength of equipment growth in the fourth quarter and favorable comparisons for really at least the first 3 quarters of 2026, it's a smidge surprising you didn't guide for maybe a little more growth at that line. Was there any pull forward of demand into Q4 and/or is this just maybe some extra prudence as we sit here in January and what's been a tough environment and an unpredictable environment over the last few years?

Yes, Doug, maybe I'll take that. I think not too dissimilar to what we saw sort of on the consumable side, maybe 6 or 8 quarters ago. It's encouraging to see some growth in mid-single-digit growth out of the equipment, but it's just 1 quarter. And so 1 quarter a trend does not make. I think we still are in that environment, a similar environment like you talked about to where we've been. So while encouraging in the fourth quarter, I just think it's -- until we have a little bit more, a few more data points to point to on the equipment side. I think it's, again, kind of demonstrated ability over the past year that we're just going to go ahead and guide to flat. I think it's a good place to start. Let's see how the year progresses, and we'll go from there.

Okay. That is helpful, Matt. And pivoting to capital deployment, the business is clearly stabilizing. You got solid free cash flow, as always, debt-to-EBITDA is below 2, can you just describe the M&A environment and your readiness and your priorities to potentially get a little more aggressive than you've been recently? I guess I'm trying to get at whether or not you feel that you're in a better spot now than maybe you were a couple of quarters ago to move on something potentially more sizable and more aggressive if the opportunity were to present itself.

So Doug, I would say the M&A environment is more constructive. We saw -- we've seen some valuations moving in the right direction. Interest rates have moderated a little bit. And our cultivation and our bias towards M&A and our cultivation of those M&A targets remain as strong as ever. And as you point out, our cash flow generation not only is differentiated, but it puts our balance sheet in a place where we're able to act on opportunities. And we're going to stick with our discipline of looking at end markets that we believe have long-term tailwinds and attractive assets within that market that have defensible value or value creation opportunities that we can compound over time.

And then, of course, the financial model has to work as well. And we do see that, that continues to progress in the right direction. So we like to set up. We see improving end markets. Our team is executing well as manifested by the fall-through that you see on the business and the cash flow. And of course, the balance sheet is prime.

We will move next with Jack Meehan with Nephron Research.

I want to push on a couple of the guidance assumptions a little bit. The first is in life sciences. So 2025 was obviously an unusual year in terms of customer spending patterns. I was curious about your thoughts on 4Q as a jumping off point for 2026 and so much that -- is it possible there were some pushouts from earlier in the year that might have come in around year-end. So like what can you build off of in 4Q versus what might be like an elevated base? Any thoughts on that?

So Jack, I think we continue to see an improvement in the pharma end market. That would be the third quarter in a row that we have seen that improvement, and we would expect that to continue here going forward. The clinical and the applied markets have been solid and stable for several quarters, and we would expect that to be the same. I think in academic and government, that's where the activity level has been muted we could still have a bit of choppiness ahead of us with the discussions that we hear currently in the market. But over time, we also expect that to moderate. So generally speaking, we would expect the life science end markets to continue their gradual improvement here through 2026.

Sounds good. Okay. And then, Matt, I wanted to push a little bit more on the margin puts and takes for 2026. So you talked about the $250 million cost actions. You also have the Biotechnology segment, your highest margin segment, growing the fastest. There's the -- is there anything else that stands out? I'm just trying to think about the 100 bps or more for the year.

Yes. No, maybe let me give you just a little color on how we constructed the EPS guide of [ $8.35 to $8.50 ] just to give you a simple frame of kind of what that is. I think that might be helpful. So we're assuming the low end of the core growth like we've talked about, so I think 3% to 4%, assuming 35% to 40% fall through. We're going to -- we've got a $0.30 benefit from the 2025 cost actions. So that's in that 100 basis points of margin expansion, it is inclusive of this $0.30 benefit. And that, as you remember, was the Q4 actions plus the savings, so it's $250 million. So that benefit is about $0.30 and then there's kind of some below-the-line stuff in FX, which obviously could go either way. So I just assume all that stuff kind of nets to 0. If you do that math, you get kind of $8.35 to $8.50. And so if we do better from a core growth perspective than 3% to 4%, there's probably likely some upside here to EPS. But if we're just going to kind of start the year with what I laid out, see how the year progresses, and then we'll go from there.

Our next question comes from Patrick Donnelly with Citi.

Maybe a follow-up on Jack there on the Life Sci business. Rainer, it sounds like things are improving across the board, Abcam, Aldevron, SCIEX. Can you just run through what you saw into year-end on that front? Was there a good budget flush? And then similarly, as we look at '26, it seems like that's still flattish for the year. It feels like there's some upside there. Can you just talk through what you need to see to get that number go into a few percent growth? And again, I would love the month to dig into some of those verticals, Abcam, aldevron in particular?

Sure. I mean, let's start with the fourth quarter. Like we said, the Life Science business was a little bit ahead of our expectations there, and that was led by SCIEX and tech and life sciences. And so where we saw the pharma end market, in particular, do a little bit better than anticipated. I was -- there's probably a little bit of a budget flush. We saw that, especially in Europe, so not enormous, but we did see a little bit of a flush. We're not a great read-through read across for that with the size of our instrument business there. But nonetheless, we did see some.

Now as we think about we expect that end markets such as pharma, will continue to improve that clinical and applied markets will stay stable. And I think the upside that we're looking for in Life Science is some sort of out of 2 categories, one being in the academic and government area, we need to see more stabilization there around the spending discussions and the budgetary discussions. So that would be one point.

And then we'd like to see biotech in particular, take advantage of the improved funding environment that we've seen here over the last 2, 3 quarters. and start seeing that fall through into the order book. So that, I think, would be what we'd like to see to think about upside in the life sciences.

Yes. And then maybe just the Abcam, Rainer, you talked about seeing improvement throughout the quarter. It seems like that was firming up a little bit. I just wanted to dig in there.

I mean we're really. Encouraged by what we're seeing here at Abcam. The business continued to improve here in the fourth quarter. In fact, we've seen now 3 months of growth, particularly driven by the recombinant protein and the farm segment that we've been talking about -- and of course, the team has been working very hard on rightsizing the cost picture there. to the business and to our earnings expectations going forward. And we see that. In fact, the operating margins are 500 basis points higher than when we acquired the business. And so we like what we see here for Abcam and expect to continue to see that trend here in 2026 as well.

Understood. And then maybe a little bit of a longer-term one. I think as you build this year, it seems like, again, in line, I think you touched on the gradual recovery a few times as we exit this year and move forward, it seem feels like we're approaching more level of normalcy. What is the path back to the LRP that you guys have out there? And that's on the table as we look ahead, I know it's January '26. But as we look ahead with the future years, what is the path there? And what do you need to see to believe that that's on the table next year?

Well, I mean, I would say it's too early to comment on 2027 and beyond to the point you just made. But here's how we're thinking about it. I mean, fundamentally, our businesses are an excellent end market. And those growth drivers that we've talked about are very much intact. And we expect those growth drivers to continue to recover here? And what are some of those? Well, the proliferation of biologics, some of the advancements that we see in life science research. And then, of course, the diagnostics area, bringing those diagnostics much closer to the patient. So we don't see any change to our long-term framework. And as these end markets continue to recover, we'll get back to that high single-digit growth over time.

We will move next with Dan Leonard with UBS.

You've talked a couple of times about the importance of an improving biotech funding environment on your Life Sciences business. Can you remind us how sensitive would the biotech business segment be to an improvement in biotech funding?

So that emerging biotech sector for us has traditionally been in the sort of 15% of the business overall...

Probably more like 5% of overall an 15% of bioprocessing 10%, 15%. So I mean it's not -- there is some level of exposure, but it's not the majority of what we do of.

Dan, just to reaffirm, most of our business in bioprocessing is driven by commercial volume, 75%, we talk about that. And then you have a mix of clinical and biotech in the remaining 25%. So let's say, 10% to 15% is probably in the biotech area. And we have been seeing some improved orders there and bioprocessing out of that space, but early days.

Understood. And a quick follow-up, Rainer, you mentioned the reshoring topic as a longer-term theme in bioprocessing. Can you update us on how any of those conversations with customers have been trending over the past 3 months?

Sure. I mean as I mentioned earlier, I've been out in the market a great deal with our teams and meeting with our customers, pharma customers CDO, CEO, as you name it, to get a real sense of what's going on here as it relates to the demand picture and the restoring question. And I think the takeaway here is that, one, equipment investment has been muted here for the last couple of years despite the fact that demand has been fairly strong as we see in the consumables demand.

We have this aspect of the fact that there's probably some catch-up required here over time just to meet the existing demand. And then you add on top of that the reshoring topic, which continues to advance. There's no question that, that is going to happen. It's just a matter now of bringing that timing together. And so again, it's a little difficult to pinpoint the timing, but we've been encouraged certainly on the former aspect, so the need to keep up with demand in our order book here for equipment. And we want to see how this now plays out going forward. But we really believe we could be in the early innings of a long-term investment cycle. And as you know, we're really quite well positioned to support those investments going forward.

And we have time for one more question. That question comes from Dan Brennan with TD Cowen.

Maybe to start just back to bioprocess, if you don't mind. With the biotech guide at 6% for the year, and I think you guys talked about Discovery Medical flat. So that gets us to bioprocess growth, I think, around 6%, which is a bit lower than what I think you guys did in '25. So is that math correct? And I'm just wondering, would that imply like a bit of a slowdown that you're starting the year at for consumables given equipment is stronger. I know Matt, you talked about conservatism, but it's such a focus. I just want to kind of flesh out how you're thinking about the starting point for the '26 guide.

Yes. Very clear here. bioprocessing on the consumable side for the year and for Q1, our assumption is that we'll grow high single digits. And it's probably going to be at the upper end of high single digits. We are assuming equipment is going to be flat for the year and that bioprocessing will be all up all in high single digits for the year. I think what we're -- what you're probably referring to is if you look at bioprocessing, the segment, you've got Discovery and medical in there as well.

And so I think Discovery & Medical for Q1, we've kind of said it's going to be flat. It might be up a bit. I think the rest of the year for Discovery and Medical is going to be flat, maybe down a little. And so to kind of balance that out, you're going to have high single digits out of consumables -- or sorry, out of bioprocessing and consumables. No change whatsoever to what we've seen in the end markets and no change to what we have been talking about for a while now. So I think really the wildcard is what does D&M do for the segment. But just to be perfectly clear, we are not seeing any sort of change or slowdown in bioprocess.

Okay. Great. And then maybe just a final question just to Life Sciences. I know, Rainer, you gave a lot of color so far on the kind of moving pieces there, but academic, I don't know maybe it's like 15% to 20% of Life Sciences, I'm guessing, so that remains muted. And I know in your guide, you kind of mentioned ongoing macro pressure. But I would think pharma is a big part of Life Sciences. And I would think with MFN and tariffs kind of behind us, hopefully, you could see a really nice coming on easy comps from pharma. So could you just unpack a little bit like on the pharma piece kind of what you're seeing in life sciences and kind of how you kind of guided -- and is there the chance to get better in '26?

So our Life Science end markets in order of priority and size are pharma, clinical, applied, academic and government. Pharma has shown growth here for 3 quarters in a row in our business, and that's the recovery in investment that we've seen out of pharma once the most favorite nation deals have come to fruition and more confidence has returned to that market. And when we say we expect end markets in life sciences to continue to improve, we're referring specifically to the pharma end market. We expect the clinical, so think of research use only testing, that sort of thing. We expect that to remain stable. As do we expect the applied market to remain stable. So no significant change there. Those are robust. They're doing fine.

And then you have academic and government that's muted, softer. There's still some noise there. and that represents another potential upside as the policy situation stabilizes and finds its momentum again.

Great. Thank you.

Thank you we have reached our allotted time for questions. I will now turn the call back to John Bedford for closing remarks.

Thank you, and everybody. We're around for conference out today. Thank you.

Thank you. This brings us to the end of Danaher Corporation's Fourth Quarter 2025 Earnings Results Conference Call. We appreciate your time and participation. You may now disconnect.

All right. Great. Thank you, everybody, for joining me today. I'm Casey Woodring from the Life Science Tools and Diagnostics team. Welcome to our JPMorgan Healthcare Conference. Pleased to be joined by Danaher's CEO, Rainer Blair. Rainer is going to go through the corporate presentation for Danaher, and then we'll do a Q&A session afterwards. Rainer, all you.

Thank you, Casey, and thanks to JPMorgan for having us this morning, and good day to everybody here in San Francisco as well as those of you who are here on the webcast. So before I jump in, please have a look at our forward-looking statements advisory as well as our GAAP reconciliation here, take the time to peruse those at another time. And so let's get started. And before I do so, let me quickly outline what I'd like to talk about.

Today, you probably saw our press release in the sense that we anticipate fourth quarter 2025 results to be ahead of our expectations. I'll talk about why we have differentiated positions in attractive areas of biotechnology, life sciences and diagnostics as well as how we are well positioned to generate sustainable long-term shareholder value through innovation, through execution, capital deployment and, of course, all driven by the Danaher Business System. So let me provide a little more color here than on the fourth quarter.

As I said, we anticipate that the quarter will come in slightly ahead of our expectations, and we expect our Q4 core growth to be towards the high end of our low single-digit percentage guidance. And that's driven really across the portfolio, starting with bioprocessing consumables, which grew at the high end of high single digits as well as equipment notably growing at mid-single digits after 3 quarters of sequential orders growth.

So we think that's notable. We've also had good momentum across diagnostics with strength in the respiratory markets as well as Life Sciences outperformed, driven by improved instrument performance on the back of a little more strength in the pharma end market, including mid-single-digit growth at SCIEX.

So when you bring all that together for the full year, our 2025 adjusted EPS is expected to be towards the high end of our guidance, which was between $7.70 and $7.80. And of course, that also provides additional proof points here for our initial 2026 expectations, which we shared earlier with core revenue growth being between 3% and 6%, adjusted operating profit margin expansion of over 100 basis points as well as adjusted earnings per share growth of high single digits for 2026.

So solid execution here by the team in 2025 on the back of improving end markets, providing some momentum here and setting up the year nicely for 2026. So let's shift gears here and talk about Danaher a little bit. We're roughly a $25 billion company. We go to market with 3 operating segments: biotechnology, life sciences and diagnostics.

And those are comprised of over 15 operating companies, which are the leaders and the leading brands in their respective end markets with great business models, large installed base with Spec’d in consumables. So as we sit here today, we're a life science and technology and diagnostics innovator with a very attractive financial profile.

Have a look here at the bottom left, our gross margins are nearly 60%. Our operating margins are approaching 30%. Our operating cash flow is over $6 billion. So that differentiated positioning with very, very strong end markets and business models also delivers a very attractive financial profile. So this is a powerful portfolio. And why is it powerful? Because we have high-quality businesses in these attractive end markets.

And on the left, you see these attractive end markets which are underpinned by important long-term secular growth drivers, which I'll talk about in a little bit more detail in just a second, but you see these end markets of pharma, biopharma, molecular diagnostics, specialty diagnostics as well as clinical diagnostics with just the right exposure in attractive applied markets as well.

At the same time, our businesses are united by a common business model, razor blade businesses that are on high-value, mission-critical applications that have a steady stream of consumables that are spec-ed in off of a very, very large installed base. In fact, at this point, we have about 80% recurring revenue in the portfolio.

So when you bring together this end market positioning, along with these differentiated business models and the power of the Danaher Business System, you bring lasting leverage to your growth and earnings trajectory, and that's where we're positioned. So very differentiated positioning in the marketplace with really differentiated financials.

So now let's spend a couple of minutes on the topic of the secular growth drivers, which support our end markets. the global population continues to age. We'll have over 1.5 billion people over the age of 65 by 2050. That's 2x what we have today.

And as you all know, the health care intensity and the provisioning of health care for older people is much greater. And as a result, you not only have the growth of the population, you have the growing health care intensity, which amplifies the demand for the products and services in health care.

We see a shift in medicine to biologics. Over 20,000 biologics are in the pipeline currently with 650 approved by the FDA. So you can see what's ahead. There's an enormous amount of opportunity still ahead of us, a decades-long opportunity. If you think of small molecules that have been around for over 100 years and you think about biologics that have been around for 3 decades now, we still have plenty of room for growth there.

We see the proliferation of monoclonal antibodies, an incredibly important and effective therapy modality that continues to grow. In fact, it's been growing double digits since 2019, and we continue to see that growth here today.

The adoption of new technologies is also very important. If you think about molecular diagnostics, the molecular diagnostic market today is 2.5x what it was just in 2019 and continues to expand. It's such an effective means of diagnosing and identifying disease and many, many other things. And then lastly, science continues to advance. Life science research is bringing to 4 new therapy classes such as cell and gene therapy, antibody drug conjugates, bispecifics, multispecifics, all of this continues to drive not just innovation, but also our business.

And so you can imagine, we've dialed in our portfolio into these secular growth drivers as they are also represented ultimately in our end markets. So important part of how we think about our strategy.

So now let's have a look at our 3 franchises. Here, I'll start with the bioprocessing franchise, which is by far the largest part of the Biotechnologies segment. over $6 billion of revenue here, 80% of that comes from this important drug class, fast-growing drug class of monoclonal antibodies, and we're Spec’d in into over 90% of monoclonal antibodies that are being commercialized today. So we're a real powerhouse in that area.

And you can see by the illustration here that we really are able to offer end-to-end solutions. So we have by far the widest portfolio in the market, but it's also important to note that we have the deepest. So certainly, here, you see protein-based monoclonal antibody type processes, but the same holds for nucleic acid-based processes, cell therapy and so forth. It's also the deepest, along with the requisite consumables that are differentiated and the IT wrapper that allows our customers to port the important data into their respective systems.

So we're competitive -- we are competitively advantaged here as you think about the fourth quarter instrument growth that I talked about, we see this long-term growth of equipment coming our way as it relates to the reshoring of manufacturing here in the U.S., plus the fact that the market is growing at double digits.

You can see how we're advantaged in playing that out. And we have over 200 Flex factories, so full line installations around the world, the only player that's able to pull that off. So we really like the fact and how well we are positioned here for high single-digit core revenue growth in 2026 and for the long term.

So now let's move over to our Life Science franchise, $7.3 billion. This is a differentiated portfolio of analytical instrument and life science consumables and we have strategically diversified the end markets in which we play here, pharma, biopharma, genomics, clinical and again, attractive applied end markets are very important to this business. We have very attractive razor-razor blade business models here with over 60% of recurring revenue with plenty of margin expansion opportunities ahead in this part of our business. And lastly, breakthrough innovation. I'll show you some of that in just a minute is what we do here.

Every year, you'll hear us talking about it. Super proud of the team protecting during the choppiness of the last several years in the marketplace. Our R&D investment and the launches that we've been doing have been highly effective in terms of accelerating proteomic and genomic research and accelerating new therapies to market.

So high single-digit long-term core revenue growth with the opportunity for further margin expansion here in our Life Science segment. Now let's have a look at our Diagnostics segment. This is a $10 billion scaled franchise that is dialed into the most attractive end markets in diagnostics. We have the best-in-class molecular diagnostics business with Cepheid. This is the best workflow, easiest, fastest time to market, right results every time. Largest installed base, broadest by far, testing menu in the world, and we expect that business over the long term to grow double digits.

We have scaled specialty businesses that are each well over $1 billion, Leica Biosystems and anatomical pathology is pushing forward.

Cancer diagnosis with digital capabilities, radiometer, blood gas, so important in the acute care setting, saving lives every day, high single digit on each of these today, high single-digit core growth. And if we think about Beckman Coulter, we have a comprehensive portfolio here with strong footholds in the core lab. Already outside of China, this portfolio is growing at mid-single digits based on innovation and commercial execution. And as China -- as China normalizes, which we see happening here and also saw in the fourth quarter, we expect this portfolio to be a high single digit going forward. You can see why we're excited about this.

So now let's talk a little bit about innovation. I've taken 3 of many examples here across the portfolio. And it shows you that our innovation is helping to solve some of health care's biggest challenges. So not innovation for innovation's sake, but really targeted at solving some of the vexing issues across our industry.

If we start on the left with SCIEX, you can see there, we're accelerating drug discovery. We've just launched ZenoTOF 8600 mass spectrometer. This mass spec really combines the power of two mass spectrometers into one in the sense that it's a high resolution with a strong dynamic range solution that allows you to not only identify compounds such as proteins, but it also allows you to quantify them.

And doing that at high-resolution capability with 30x the sensitivity is unique in the marketplace. We've just launched that here in the last couple of quarters, and that is going extremely well.

Very pleased, and that's going to help researchers not only define disease pathways more quickly, but to get those drugs to market more quickly as well. In Cytiva, it was hard to pick an innovation because we launched 20 new products in the last 12 months. And so we've picked this one here, increasing biologic manufacturing yields.

Our new bioreactor X platform is out in the market. It brings over 3x more oxygen mass transfer to the cells that makes those cells more productive. It helps them live longer. And what that does is it improves your manufacturing yields and it reduces your manufacturing costs.

Very important next-generation bioreactor line that is just hitting the market now. We're very excited about that. And then, of course, improving patient diagnoses. The DxI-9000 immunoanalyzer is over 100x, 2 orders of magnitude more sensitive than traditional immunoassay analyzers. That opens up a whole new world of diseases that you can now diagnose in a more standard hospital setting.

This is incredibly important for many diseases but specifically, Alzheimer's disease, which I will talk about in just a minute. But this instrument has the capability to diagnose early-stage Alzheimer's disease off of a blood draw. Many of you will know that the current standard of care for Alzheimer's diagnosis is either a PET scan or a spinal tap, which typically is far more expensive and tends to be done later in the disease progression.

And most of the therapeutics that are available today are best applied early in the disease progression. And so this really changes the game and the future availability of Alzheimer's treatment to patients around the world.

I think we all know somebody who might be suffering from this disease. This is something that we, as a society, have to solve for. And as Danaher, we're at the forefront of that, 100x more sensitive, bringing diagnostics for the most vexing diseases right to the hospital off of a blood draw.

So this is good for patients. This is good for payers. This is good for providers, but it's also good for Danaher. These innovations have increased our new product revenue by 25% just over the last year.

So now let's take a step back from our portfolio for a minute. I was just inside the individual segments, talking to you about some of the innovations there. And now I'd like to talk to you about the power of the -- across the portfolio. So let's take a step back and talk about neurodegenerative diseases, their detection and their treatment.

And on the left side, you see how Danaher with Abcam, SCIEX and Cytiva helps define the disease pathway, identify and validate the biomarkers, absolutely critical if you're thinking about drug development. Why is that critical? Well, at least in 2 ways.

One, having the biomarkers validated allows clinicians and pharma companies to define the right endpoints during clinical trials. And at the same time, for diagnostic companies such as Beckman Coulter, it allows us to develop the diagnostic in the form of a companion diagnostic with the right biomarkers as well. And we have some examples here.

We have the first automated high-throughput BD tau research use-only immunoassay test on the market. You can get this test today in a research use-only setting off of a blood draw to see if you're a candidate for early-stage Alzheimer's treatment.

And at the same time, as I've talked about, we're able to scale up quality and lower cost, your biomanufacturing of monoclonal antibodies because the indicated treatment for Alzheimer's disease today is based on monoclonal antibodies. And it shows you the kind of potential as the standard of care continues to change in this direction that we're talking about here uniquely across our portfolio.

We're working very closely together with our pharma partners who also like the fact that we don't compete against them. We are essentially a tools provider to them to help solve some of these most vexing problems in disease treatment. So I talked about the differentiated financials, the great end markets, the differentiated business models and of course, that generates a lot of cash flow. So how do we think about capital allocation?

Well, our bias in capital allocation is towards M&A, where we have a tested, tried and trued means across 3 dimensions to drive how we think about that M&A. First, we analyze the market, and you know what we're looking for. We're looking for secular growth drivers that we can believe in, not for a couple of years, but for the long term.

Two, we look for companies. We're thoughtful about the type of companies that we're thinking about. We like them to be leaders in their markets, of course, but also to have defensible positions that are future-oriented and importantly, to have value reserves.

Whether that's our ability to accelerate growth through innovation and commercial execution, whether it's our ability to run the Danaher Business System playbook to drive higher productivity to be able to reinvest that in the business once again in order to be able to accelerate growth and share gain. And then lastly and importantly, the financial model has to work.

All 3 of those dimensions have to be on green, so to speak, have to work in order for us to execute on our acquisition strategy. And we focus on the return on invested capital for the long term. So we're not acquiring companies to fill an EPS hole for a year or 2.

We are investing for the long term. Return on invested capital is important to us in the assets that we acquire. And then we layer on top of each other these assets in order to ensure that we have really a potentiation of the growth of the earnings over time.

So lots of cash flow. You see on the right here, our balance sheet. We're well positioned here with the 2 have a lot of optionality to deploy capital in a thoughtful means in order to drive growth, earnings and strengthening our positioning in the marketplace.

So I'm asked all the time. So Rainer, great end markets, great franchises, innovation is working, but how do you run the businesses? And at Danaher, foundational to how we run the business, how we execute is the Danaher Business System. It is our competitive advantage.

It differentiates us. It's on the e basis of our core values that DBS is our system of continuous improvement and the culture, importantly, the culture that makes it work. And it's really much more than a collection of processes or tools.

It's what has allowed us to execute at scale for over 40 years. So let's put it all together. On the left, you see how we're thinking about growth. We're coming out of the market reset here post the pandemic. We see growth improving here.

We've talked about our initial thoughts between 3% and 6% core growth. And we see ourselves in a long-term improving end market situation and are convinced that we have the power to grow high single digits here in the long term. And so that ports over then into our earnings algorithm, which you see on the right, high single-digit growth with really, really strong incrementals of 35% to 40%.

You've seen our cash generation efficiency with our strong free cash flow conversion. And of course, we bring that right back to acquisitions, which then ultimately drives double-digit plus earnings per share growth.

So as we said, we expect this gradual improvement towards high single-digit long-term core revenue growth to continue in the fourth quarter just gives us another data point along that journey. So in summary then, this is what you've heard. We have differentiated positions in the attractive areas of biotechnology, life sciences and diagnostics.

You saw some of the innovations that help customers improve quality and yields, reduce costs, bring new therapies and diagnostics to the market much more efficiently. And we're very well positioned to generate sustainable long-term shareholder value driven by the Danaher Business System. So thank you very much, and I look forward to our Q&A. Thank you.

All right. Great. Thanks, Rainer, for that. Maybe taking a step back before we dig into the pronouncements a little bit. So 2025 was a volatile year for the industry, right, marked by a number of policy-driven disruptions.

When you think about the end markets that Danaher plays in, what's your conviction in the underlying health of each of those moving forward and the confidence level that the growth drivers that underpin those long-term targets for each of your businesses remain intact.

Well, we're just talking about that. I mean, as we look at the secular growth drivers, really, those have not changed. In fact, if anything, they have strengthened. You saw the discussion of aging populations, the biologic drug pipeline is chock full. There are many unsolved problems as it relates to the disease states that we want to get after.

I mentioned Alzheimer's. There are so many other disease states that are out there for us to do, and society is willing to invest in those. And we've seen a gradual improvement here in the pharma end markets as risks have been retired, whether it's most favored nations, understanding the tariff situation, the question on reshoring, all of these headline risks have been either retired or essentially being phased out.

And that all lends itself to really a more positive momentum. We say biotech funding improving here. The biotech M&A market is working again. So these are all indicators that the market is starting to find its legs again. And we think we're well positioned in that context for 2026 and beyond.

Yes. I guess along those lines, right, the tools recovery has been pushed out for several years now in a row. Like you said, there seems to be a reason to be optimistic that 2026 could finally be the year where the industry really begins to see some normalization.

How are you thinking about the near-term hurdles that we still need to clear as an industry before we get back to a more normalized environment?

Well, I mean, I think there's a couple of them. And in each one of them, I would say we see things improving. Like I said, if we think about the pharma end market, that's important. Some of these headline risks are being retired every day, even as we're at the conference, we see more agreements being made with the administration around MFN, reducing tariffs, improving pricing, agreeing to reshoring.

These are all very important. As we think about China and the diagnostics business, here, we see the volume-based procurement and some of the reimbursement headwinds that we have perceived we're moving out of those and beyond those.

As an example, in the fourth quarter, our China diagnostics business was just down low single digits. That's very much improved from what it was just a couple of quarters back, and we expect that to continue to normalize.

So we see that as a very positive point as well. And then lastly, as we think about the life science end markets, here, we also are starting to see stabilization in the biotech market and to a lesser degree, but still some stability in academic and government end markets as well.

And then earlier in 2025, you gave color on '26 earlier than usual, point the Street to 3% to 6% top line growth. It seems like the Street is anchoring towards the lower end of that right now. I guess what specifically would you call out as upside drivers to 2026 numbers? And do you expect to exit the year kind of in a more normalized environment as we head into '27? I know it's a little early to...

That's right. I mean we think that the fourth quarter was a good quarter. It was a good quarter in terms of seeing a little bit of end market recovery and the continued reduction of these risks. We also executed well. So we think that's important. And as we look forward to 2026, some of the levers that would take you from the lower end of that 3% to 6% that we provided would be the life science markets, for instance, right?

We would expect to see not just stability there, but more growth coming out of certainly the pharma end markets, academic and government, and the potential is there, but we think at this point, we want to continue -- we want to be able to see that. Another thing I would mention is we saw mid-single-digit growth in bioprocessing equipment. That's important after 3 quarters of sequential orders growth. That's an important data point. We want to see more data points of that nature as well.

But of course, a more dynamic bioprocessing equipment environment, which we think would be the beginning of a longer-term trend, a year's long trend of getting after some capacity shortages as well as the reshoring that we see and expect to take us path. That, I think, would be helpful.

And then as I said, as we get past some of the headwinds there in China in terms of the reimbursement and volume-based procurement changes, all that would contribute some upside.

That's helpful. Yes. Let's dig into the pre-announcement a little bit. So core revenue growth projected to be at the high end of the low single-digit guidance range you gave, beat expectations. Can you just unpack what you saw throughout the quarter across the business lines, how conditions played out relative to 3Q?

Okay. Well, let's start with bioprocessing. Our consumables growth there at the high end of high single digits was a little bit better than expected, actually had a harder comp in the prior year.

So that shows high activity levels here in what is a normalized demand environment for consumables. And now we're starting to see this growth in biopharma -- bioprocessing equipment. I think that's an important data point. We're starting to see that the sequential orders growth is now pushing the business into positive growth territory in terms of sales.

We'd like to see that continue. One data point a trend does not make, but it's certainly an encouraging one because we haven't seen that in a while. And I think there's 2 things going on there. The first thing is that because equipment investment has been muted for some time despite a relatively high activity level in consumables, so showing that the activity level in production is actually very high.

It's time to start debottlenecking plants out there to make up for that period where investment was more muted. I think that's one driver, and we certainly see that in our funnels. And secondly, we're starting to see more activity around the reshoring question.

Some of the shorter-term actions there are the debottlenecking of existing lines, adding new lines in existing facilities. And there are discussions also about the greenfield investment. So that's all very encouraging. We expect to see that longer term. And that's why I say in this area, we expect this to be a year's long sort of constructive and positive growth vector going forward.

And then lastly, I would say in China, we saw a normalization there in the fourth quarter. Like I said, diagnostics was only down low single digits. That's an indicator coming from quarters where we were down as much as 20% with the volume-based procurement. That's an indicator that we're starting to move past those kind of headwinds. You'll recall for 2026, we've defined what we think any tail risk could be there of $75 million to $100 million. And we think that's the appropriate way to think of it based on what we're seeing today.

And then the other markets in China, this life science market is robust. The biotech market in China has come to life again with new innovations. So me too, me better, but also new-to-the world innovation that multinational companies are now licensing.

Other companies are going to the Hong Kong Stock Exchange. So what that shows you now is that money is flowing back into the biotech market through various monetization alternatives, and that is increasing the demand for our products and services there. So all encouraging signs that we see the end markets improving.

Yes. Maybe just a follow-up on the bioprocessing equipment piece, obviously, a focal point for investor focus here. Maybe just any more color you can give on the order book, sequential growth heading into 2026 from 3Q?

And then how should we think about pharma reshoring and when we can expect kind of orders to start flowing through and potential upside opportunity, maybe not in '26, but further out?

So let's start with the sequential orders. So 3 quarters of sequential order growth. That's important. That sequential order growth ultimately is not yet at what we would call a normalized growth rate. But what we see is a trend towards that normalized growth rate. So that's the first point.

The second point is, again, there are sort of two forces driving that growth rate. One is the need to make up for capacity in the shorter term because of the underinvestment of perhaps prior quarters or even years. The second one is now the reshoring effect, where that is also on a continuum of projects.

And the reshoring, what we see is the shorter-term projects that are easier to do. So debottlenecking an existing line, building a new line in an existing facility, so-called brownfield investments is what we're seeing more of in the funnel and in the discussions.

And then the greenfields, those are further out. And that's why I say this is something that could take several years sort of in a positive sense and that we are looking at a secular growth driver here that could last for several years in a very positive way.

And I think Danaher is uniquely positioned with our portfolio. You saw the illustration that I showed earlier with the breadth and the depth of our portfolio, not just as it relates to the equipment, but of course, the consumables that pulls through.

And as I mentioned, the digital layer that's so important to tie into our customers. So we have a unique positioning here. We view this as potential building momentum here. Like I said, we want to see more than one quarter data point, but we're encouraged.

And maybe touching on Life Sciences. You highlighted mid-single-digit growth in SCIEX. Curious to hear about what drove the strength there. I know that you had baked in some cushion for the government shutdown in 4Q. Any sort of dynamics around budget flush?

And then just kind of stepping back, as you think about life sciences into 2026, you're calling for flat growth. There's a bunch of different businesses within Life Science. If you can give any color on expectations for Aldevron and some of these other companies within that.

So Life Sciences in the fourth quarter sort of continued the dynamic that we saw also in the third quarter, where we saw an improved pharma market. So the pharma recovery in line with some of the headline risks being retired is starting to take shape.

And that's why our instrument businesses are really what led this beat. And that starts with SCIEX. You saw the ZenoTOF innovation that I showed you there. That is taking share in its market. And these are solutions that are in discovery and development.

So not related with production, but in discovery and development, which is a good sign that investment is occurring upstream in research and development. So that's an important point to make, and we're well positioned there, and that is encouraging.

As it relates to geography, we did see a little bit of a budget flush in the fourth quarter, more so in Europe actually than in the U.S., but a budget flush nonetheless, which once again, we haven't seen in a number of years. So that is also encouraging. And so as we think about 2026, we believe that this environment has to continue to improve.

We're encouraged that it will. Academic and government continues to be a bit of a growth drag. We saw in the fourth quarter that, that market surprisingly was stable despite the government shutdown. But nonetheless, we want to see university funding through extra mural funding and the other funding mechanisms that exist to continue to stabilize and turn to growth.

Now as it relates to our other businesses, as you know, Aldevron, IDT, these businesses have a fair amount of academic exposure as well. We expect those to turn during the course of 2026 into positive territory after having digested some of the comp issues that we saw in prior quarters.

So encouraged but prudent around where we see life sciences going. We'd like to see more data points, especially out of academic and government in that area.

With the time we have left, I just want to touch on capital allocation, right? You mentioned it in your presentation. Following some of the recent larger deals in the space, investor focus has been on what is Danaher going to buy next and when.

You guys have been pretty quiet on that front the last couple of years. So maybe talk a little bit about how you're thinking about M&A. Which segment do you see as having the most inorganic opportunities that you see in the market?

What size deal would be an ideal acquisition target? How are you thinking about public versus private? Any sort of information you can give us?

Well, as I demonstrated earlier, the kind of cash flow and balance sheet positioning that we have. So we're well positioned, and we continue to cultivate targets as much as we ever have.

And our priority in capital allocation remains M&A. So that said, we maintain our discipline. You heard me talk about the 3 dimensions that have to fall in place. And when those fall in place, that's when we act. And I would tell you that the environment has become a little more constructive in the sense that some of the headline risks have stabilized and are heading in the right direction.

We see some choppiness in valuations, which is -- brings those in a little bit more and makes the valuations perhaps a little bit more reasonable. We've seen a slight reduction in interest rates and all those things, I would say, are constructive to M&A, and we take note of that. And like I said, when we have the intersection of our 3 dimensions, that's when we'll act.

Okay. Maybe circling back to Diagnostics quickly. Just can you unpack the performance maybe between respiratory and non-respiratory in diagnostics in 4Q? And then you kind of talked a little bit about China. So maybe just on the performance in 4Q.

So we had broad strength across the Diagnostics portfolio in the fourth quarter. Just as an example, our -- outside of China, our portfolio grew mid-single digits at something like the eighth or ninth quarter in a row. We're very proud of the work that's being done at Beckman Coulter Diagnostics with the innovations going into play.

And again, outside of China, they're growing in the mid-single digits already. Patient volumes are strong. We don't see any reduction there. So we're very pleased with what we saw and, if you will, our clinical diagnostics.

And if we think of point of care, so Cepheid, in particular, we saw strength in respiratory. The flu season is quite strong, and we're seeing -- we saw that in the fourth quarter. And then as it relates to the nonrespiratory business there, we continue to see the kind of strength that we have seen throughout 2025 and prior to that.

So the diagnostics portfolio beyond the topic of China is performing better than we anticipated.

Okay. Maybe last question here as we wrap up. Rainer, what are you most excited for, for 2026 for Danaher?

Well, I mean, we're going to be accelerating our growth in 2026. We've talked about that. That's evident in our initial guide and our initial thoughts around guidance. And we've taken the necessary steps, controlling what we can control to ensure that even at the low end of that range, we can deliver high single-digit earnings growth, adjusted earnings growth along with over 100 basis points of adjusted operating margin expansion.

So we're excited about that. We've worked hard for it, and we're planning on delivering it.

All right. We'll leave it at that. Thank you, everybody, for joining us today. Thank you, Rainer and the Danaher team. Enjoy the rest of the conference, everybody.

I think we'll kick it off. Welcome, everybody. I'm Tycho Peterson from the Life Science Tools at Jefferies. I am pleased to have Rainer Blair with me from Danaher.

Maybe Rainer, to kick it off, if we could just start talking a little bit about '26, coming out of 3Q, and you laid out initial framework, 3% to 6% range for core. Maybe just talk about some of the gives and takes we should be thinking about as we think about the setup for '26.

Sure. So Tycho, I mean, let's start with the third quarter, which I think bears some important information. You know we beat the third quarter on the top, the bottom line as well as in cash flow. And with that, ended up a little bit ahead of where we thought year-to-date and have taken really those beats, and are reinvesting those in additional productivity investments here in the fourth quarter to set us up nicely for 2026.

I think the other point that's important here is that when you look at our third quarter, with a core growth of 3%, we delivered 10%-plus of earnings per share growth, which gives you a sense of the earnings power of the portfolio, the discipline of the Danaher Business System that even at growth rates of 3%, we can deliver that kind of earnings expansion. So I think that's an important message.

Now having said that, if we back off and look at the markets here for a minute, we are in an improving but not yet normal operating environment. And it's in that context that we have ring-fenced the growth expectations for '26 in the 3% to 6% that you mentioned, and I'll talk about the individual markets in just a minute. But it's also important to note that we're talking about high single digits plus EPS growth even at the low end of that range. And I think that marks the third quarter is the beginning of that marker for '26.

And maybe just thinking about some of the variables, I think there's China, there's bioprocess equipment, there's obviously academic and government. Can you maybe just talk through each of those.

So as we look at then that growth rate, 3% to 6% for next year, how do we need to think about that in terms of our segments. If we look at bioprocessing, for example, we see that to be high single digits, that is, again, driven primarily by consumables growth that we have seen here throughout 2025 and continuing.

And that's supported by commercial drug volumes that have continued to show very nice growth. And of course, our very strong position in those. As a reminder, 90% of monoclonal antibodies are supplied by Danaher, 75% of Cytiva's bioprocessing business is tied to monoclonal antibodies. And so that's really what drives the train there. We have also included an assumption that our equipment sales -- and keep in mind, we're the largest equipment player in the market, will be flat in that 2026 bioprocessing assumption for a total of high single-digit growth.

If we look at the Life Sciences, here, we've really not assumed a significant end market improvement. As you know, there's a fair amount of noise going on here even in the fourth quarter. with the U.S. government shutdown, which thankfully is now behind us. And then as we look at other markets, we expect those to essentially remain the way they have in 2025. For us, we expect a bit of an improvement as we comp out of some of the headwinds we had in our Life Sciences consumables businesses.

And then lastly, if we think about Diagnostics, Diagnostics in 2025 was quite impacted by volume-based procurement, reimbursement changes. We'll start getting to less of an impact here in 2026. We've talked about $75 million to $100 million of impact through, as that continues to play out in 2026, but put that into proportion of a $24 billion, $25 billion roughly revenue company, so you can see the impact of that starts to wane. And then lastly, for Diagnostics, I think it's important to know that for the respiratory market, we're assuming essentially the same endemic rate of testing that we expect here in 2025.

And maybe just thinking about bioprocess for a minute. Just curious about kind of order trends, visibility, where you're seeing a little bit better or worse on the consumables. Obviously, you've got cell-culture media, single-use chromatography, all doing well. I know you're a little bit still cautious on equipment and what would it take to call a turn there, too?

So as we think about consumables, let's start with that. We're growing at mid-teens. We're very happy with our growth there. We're clearly taking share in certain categories. Single-use technologies comes to mind, cell-culture media comes to mind. We're also growing very nicely in resins. And what we see in filtration really where is there a real opportunity or there is a real opportunity to increase our share over time. In fact, that's one of the areas we have a lower share, and we see an opportunity to level up there on the consumable side on filtration.

Now as we think about equipment, as I said, for '26, we're assuming flat growth, and that's after a year of decline here in 2025. So we expect that to level out. We have seen in the third quarter sequential orders growth in equipment. We anticipate that Q4, as we said previously, would likely be similar. But yet we've been somewhat conservative here as it relates to the next year on the equipment returning.

So we believe that equipment will return, and it's a matter of the timing. The reasons for those are twofold: One, there has been a slowdown in equipment investment here over the last 2 years, while the underlying market has grown quite significantly as evidenced by the consumables growth; and two, we see and believe that the reshoring efforts will happen and continue to gain speed over time.

And I guess, how much of the view on equipment is waiting to see how the fourth quarter shapes up versus maybe the first half of next year? And then also maybe just remind us how much of that's replacement versus greenfield?

So let's start with the second part of that question first. So while there are replacement investments, as you would expect in any sort of production environment, for bioprocessing, replacement investments are not really the main driver of equipment orders. It really is capacity expansions that drive the equipment order book and that's important because as we're the largest and broadest supplier of bioprocessing equipment as we see that secular growth start to reaccelerate here over time, we feel that we're very well positioned.

And I have a handful of questions on reshoring. But before we jump into those, I guess, is there anything on the bioprocess equipment side that would indicate maybe a little bit of a slowdown as pharma is kind of rethinking where they want their footprints?

So at this point and having traveled extensively as so often and really engaging with our customers at the highest levels. Our belief is that our customers have accepted and are starting to move on the fact that most favorite nations is playing its way out, that there are workable solutions here. And with those solutions and those deals also come these commitments to make reshoring investments. And we believe that those are happening slowly, but surely smaller investments first and that's probably a little bit what we see in the order book. And then over time, these larger investments, they just take longer to plan and to execute will come into play into years '27 and beyond.

And another question we tend to get pretty often is just, how much is incremental? What's your take on that from talking to pharma execs?

So our belief is that the investment in reshoring is incremental. What at this point is unknown is to what degree it is incremental. And the reason for that is simply that we have had a slowdown in equipment investment here over the last several years while the activity levels have remained to be high, and it's just a matter of time until the demand requires additional capacity. So there might be a little bit of catch-up in that on top of the reshoring activity.

I think you noted on the 3Q call that the pharma tone has improved globally, right? It's not just U.S. and just onshoring. Maybe just talk a little bit about the global footprint and how much is CapEx versus R&D? Just talk about the different buckets for you guys.

Sure. We do see that the environment in pharma and the investment environment is improving. In fact, we've talked all along, whether it's in Life Sciences or in bioprocessing that our pharma business is growing. Couple of things of note here. We see in China a great deal of innovation going on. So not me-too, not me-better, but new-to-the-world compounds and many more licensing deals happening with the pharma industry, providing biotechs and pharma companies their monetization avenue in addition to going public there in the Hong Kong Stock Exchange.

And that's developed into a new dynamic there in China. And as a result, we've seen some of that benefit by returning to growth here in bioprocessing in China. As we think of then the investment book in other parts of the world, we see a clear trend towards investing in advanced technologies here, advanced therapies, and those will likely continue here. So we expect that the pharma investment environment will be supportive here over the next several years.

And I guess kind of given some of the gives and takes here, you've got VBP, you've quantified the headwind, obviously, for '26 less than this year. You've got maybe some stimulus flows. Talk a little bit about what we should think about for China -- underlying China growth for the next couple of years for you guys.

So for China, I would characterize it the following way. If we talk about life sciences, our Life Sciences business there has been solid. It's not at previous activity levels, but it is solid and moving forward. And we do feel and see some of the stimulus investments occurring and playing out there. As we think about bioprocessing, I just spoke of how the bioprocessing has picked up and returned to growth here in 2025 on the basis of a better biotech environment with the monetization opportunities.

And then there's diagnostics. And Diagnostics, of course, has, in 2025, offset some of the growth of the other two segments. And that's been related to the volume-based procurement playing out quite significantly along with the reimbursement changes, and we expect that to be quite a bit lower. Recall, $75 million to $100 million is how we've characterized that headwind, on the one hand. On the other hand, we do see volume starting to solidify. So patient volumes, testing volumes are starting to stabilizing, and we would expect those to return to growth.

As the demand for health care not only remains unchanged, but continues to increase in China, part of the reason why China has been so aggressive in addressing the economics there. So over time, we would expect China in diagnostics to return to growth, probably not the type of growth that we saw in the last 30 years, but still growth that contributes to the fleet average.

And there are changes you're making proactively to the business in China. I think Beckman would be making all equipment and reagents in China at the end of the year. Are there other things you would kind of point to?

Well, we are very clearly ensuring that we not only remain, but advance our competitiveness in China. Beckman Coulter, Tycho, as you just mentioned, will be fully localized both in hardware as well as reagent manufacturing, so the supply chain will be local and secure in China for the Diagnostics business, the majority of that Diagnostics business. And in addition, of course, we're very focused on the pharma companies and biotech companies in China as they are not only innovating for China, but they're innovating for the world, and that's an important part to play that we have there.

Maybe we can shift over to Life Sciences and just thinking a little bit about the flattish outlook you laid out on the call. You've got OMX, you've got Pall, you've got instruments. Talk about the various gives and takes for that business?

So essentially, we've not really assumed a significant end market improvement for Life Sciences in 2026. What we've seen, of course, is particularly the academic and government business was down here in 2025. And as a reminder, for Danaher overall, academic and government is less than 5% of the business. But nonetheless, in our Life Sciences tools area, there, about 20% is exposed to academic and government. And as such, that particular segment is down. We expect that to at least be stable here in 2026.

As we then look to our other businesses and other end markets, pharma has been growing for us in 2025, and we expect that to continue in the Life Sciences tools area. The clinical business, where we support LET customers and CLIA labs, we expect that to continue to be solid. And then lastly, the applied markets are also doing well. I want to call out our leading position in PFAS there where we are a standard and our methods are very important to the overall testing industry.

Can you maybe just touch on innovation here, too? I know you don't tend to get a lot of questions on it, but just talk a little bit about what you're most excited about on the Life Sciences side?

Well, we have continued to invest very significantly in innovation. And every quarter, when I'm on the call, you've seen me talk about those innovations, as you mentioned, not as many questions on those. But nonetheless, we have launched here the 8600 ZenoTOF, a very important mass spectrometer that really gets you more proteins, quantifies those proteins at a much better price-value relationship.

And we see in our funnel interest picking up in that particular launch quite significantly. And as the investment environment improves, we would expect that to accelerate. We also have our Mosaic spectral solution, that's first flow cytometry. That's a great innovation because you can now have spectral flow cytometry. Without having to buy a new flow cytometer, you can attach this to an existing installed base. And once again, as the investment picks up, spectral is used more in the research side, we'll expect that to take hold.

And then Cydem VT, that is a cell colony picking solution, which uses AI-enabled algorithms to accelerate the picking of the all-important cell lines that ultimately produce high productivity, high yield therapeutics.

And then maybe just to close out on Life Sciences on the OMX business. Just touch on Aldevron because I think the business outside of the two customers that get the most attention, Moderna and Sarepta, is actually starting to recover. So talk a little bit about that.

That's right. So we continue to work on Aldevron. As you've said, we've been lapping now the reduction in demand from 2 customers. But in the rest of our book, we're starting to see growth, and we would expect, as we comp out in the first half of next year, to continue to see improvement in the Aldevron business here in 2026 and beyond.

And obviously, a long history of M&A at Danaher. Talk a little bit about what that framework looks like today. Any lessons learned from recent deals? And it's been a little while since you've been active, Abcam was 2 years ago. So talk a little bit about current environment.

To start with, our capital allocation bias remains M&A. We view that as a means of creating outsized shareholder value as well as to strengthen competitive positions and as we define our strategy. And so that continues to be our bias. It's also clear that we are going to stick with our framework, which is, we have to like the end market and it has to be a key part of our strategy; two, we want to see an asset there that has value reserves where we can add value and make a good company, a great company or a great company and an even better company. That's a key element of our playbook.

And then lastly, of course, the financial model has to work, and the hurdle rates are higher in the current interest environment, and that's why we make sure that we stay within that framework. Now that said, we've also done some share buybacks, and that's very clearly -- evidence is our discipline and looking at the relative ROIC of an investment. If buying our own shares and our own great company, which we have a ton of confidence in, and we know very well, returns a better ROIC, then we'll do that. But that's not a programmatic approach, that is merely an approach to take when other alternatives are not as attractive.

Lastly, I'll say, look for us to do more transactions, such as Pall or the GE Biopharma business or Cepheid, IDT, and I'd also put Abcam in that camp. These are all companies where we saw value reserves, and we can apply the Danaher Business System to in order to ensure that there are several levers that we can move to create long-term value. We expect that at Abcam as well, and we're making great progress there.

How about on the services side? Has your view of kind of doing more on the server side changed over the years? And as we think about onshoring, obviously, there's an opportunity in the CDMO space. How do you think about being more of a full-fledged service provider?

I mean from our perspective, we really like product-related businesses. We know them very well. We're very strong on the innovation side, as I just recounted, and we like creating proprietary positions with our innovation and ultimately, to drive value down that path. We are not focusing on pure-play services businesses because we just like our margin profile, our growth rates and we like also running businesses that we're very familiar with.

You Mentioned Abcam a minute ago. Maybe just talk about -- I mean, you've obviously got the pharma piece and academic piece there. Talk a little bit about how you think about the growth rate for that business. Where do margins stand today? And obviously, one of your competitors is changing hands there. Does that change the end market at all, Abcam?

So in Abcam, we couldn't be more pleased. It's clear that we have to start with Abcam 60% exposed to academic and government. So there's a little bit of a headwind on that side of the portfolio, but what we see is nice growth in pharma. We've seen nice growth in recombinant protein. We are fixing the topics, the task list that we developed in due diligence and making real progress on that. In fact, our operating margins are up 500 basis points since the time of acquisition. And we're very confident that that's an asset that over time and as some of these academic and government headwinds weighing returns to a high single-digit kind of growth.

Maybe we could just spend a minute on Diagnostics. We touched on kind of the China dynamic. Maybe just talk ex China and maybe ex respiratory, just how you're thinking about where you could see an improvement on the Diagnostics side.

We're very happy with the prospects of our diagnostic businesses. So if you take out China, we have been growing in the mid- to high single digits the last 6 quarters. So that's important. So if you look at Danaher overall, about 90% of our business is outside of China. If you look at Diagnostics, that ratio roughly holds the same. And so what we see then is that our strategy at Cepheid to drive the nonrespiratory business is really taking hold. We see low double-digit growth there in the future.

And as the respiratory business becomes a smaller part of that mix, the Cepheid overall growth rate, of course, improves. If we think of Beckman Coulter Diagnostics there, we're just at the beginning of an innovation cycle. We've just launched the DxI 9000. That's a differentiated high-resolution immunoanalyzer that allows us to do assays, which previously were not available on immunoassay analyzers.

So for example, if you think of the Fast Track designation we received for our early-stage Alzheimer's assays, that's possible because of the high resolution capability. And as that assay comes through, that will be incredibly important to pharma companies who are now developing treatments for early stage. So that's important to us. And we're just in the early innings of that particular platform taking hold and it's going very well along with several other innovations at Beckman Coulter.

And then as I think about Leica Biosystems, we're leading the charge there in anatomic pathology that is AI-enabled with digital pathology. Here you see AI-enabled algorithms, helping pathologists to make even more accurate diagnosis. That's required because the new generation of therapeutics, if you think of antibody drug conjugates, for example, require a different level of diagnosis than heretofore. And so that technology driver is pushing through the AI-enabled digital pathology where we're a leader, and there's a number of press releases out there where we are collaborating with the largest pharma companies in order to bring that to reality and to patients.

And then I'll mention radiometer blood gas is such an important thing in the emergency department, that's a company that continues to grow in the mid, more like -- more high single digits here, and we continue to see that occurring in the future. So you can see I'm pretty excited about the Diagnostics side here as that comes together, that's a $10 billion franchise, which we believe over the long term is differentiated.

Lastly, I'll say, we are really transforming our diagnostic business from a company that focused on lab efficiency to one that provides important clinical content and lab efficiency. And so you'll continue to see us accelerating the launch of new assays going forward.

Is it fair to say the focus still remains on distributed content though, as opposed to CLIA centralized testing?

Correct. So what I've been speaking of right now are really the assays that hospital or at the point of care you would run on our instrument solutions.

Maybe just one last one on closing. You've talked on the 3Q call about kind of driving more leverage across the portfolio. I think you've now got a key account sales force going to market as Danaher. Maybe just talk a little bit about that strategy and how much of a focus that is.

We do. So we're finding again and again that customers really appreciate when we show up in a coordinated fashion at the right point of sale, if you will, with our customers. That's the case in Life Sciences. That's certainly the case in bioprocessing, where integrated solutions are so important. And increasingly, that's also important in Diagnostics where large customers and hospital chains really appreciate that Danaher has a not only full, but differentiated portfolio of solutions.

Great. Thank you.

Thank you, Tycho. Thank you all.

My name is David, and I'll be your conference facilitator this morning. At this time, I'd like to welcome everyone to Danaher Corporation's Third Quarter 2025 Earnings Results Conference Call. [Operator Instructions] I would now like to turn the call over to John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.

Good morning, everyone, and thanks for joining us on the call. With us today are Rainer Blair, our President and Chief Executive Officer; and Matt McGrew, our Executive Vice President and Chief Financial Officer. I'd like to point out that our earnings release, quarterly report on Form 10-Q, the slide presentation supplementing today's call the reconciliations and other information required by SEC Regulation G relating to any non-GAAP financial measures provided during the call and a note containing details of historical and anticipated future financial performance are all available on the Investors section of our website, www.danaher.com, under the heading Quarterly Earnings.

The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. A dial-in replay of this call will also be available until November 4, 2025. During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Our Form 10-Q and the supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the third quarter of 2025 and all references to period-to-period increases or decreases in financial metrics are year-over-year.

We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets. During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. And with that, I'd like to turn the call over to Rainer.

All right. Thank you, John, and good morning, everyone. We appreciate you joining us on the call today. We're encouraged by our strong third quarter results. Our team's DBS-driven execution paired with continued momentum in our bioprocessing business and better-than-expected respiratory revenue at Cepheid enabled us to exceed our revenue, earnings and cash flow expectations. Across our end markets, underlying conditions in the third quarter were generally consistent with what we saw in the first half of the year. In pharma, global production of monoclonal antibodies, where the majority of our exposure lies, remained robust.

We continue to see a modest recovery in pharma R&D spending, though it remains below historical levels. In academic and government, demand was stable sequentially but remained soft amid ongoing uncertainty around research funding despite some encouraging headlines late in the quarter. Clinical diagnostics and applied markets held up well. Now we remain intensely focused on what we can control to continue delivering for our customers, associates and shareholders. Our team is leveraging the Danaher Business System to mitigate ongoing geopolitical and policy-related pressures and drive meaningful productivity gains across our businesses. At the same time, we're continuing to invest in innovation to strengthen our long-term competitive position, including accelerating digital and artificial intelligence initiatives.

We're accustomed to tackling challenges head on and turning them into opportunities, and we expect that mindset and momentum to continue as we move forward into 2026 and beyond. So with that, let's take a closer look at our third quarter 2025 results. Sales were $6.1 billion in the third quarter, and we delivered 3% core revenue growth. Geographically, core revenues in developed markets were up mid-single digits with North America up mid-single digits and Western Europe approximately flat. Core revenues in high-growth markets were up low single digits as solid performance outside of China was offset by a mid-single-digit decline in China. Growth in our Biotechnology and Life Sciences businesses in China was more than offset by declines in Diagnostics due to volume-based procurement and reimbursement policy changes implemented in the last 12 months.

Our gross profit margin for the third quarter was 58.2%, and our adjusted operating profit margin of 27.9% was up 40 basis points year-over-year as the favorable impact of higher volume leverage and disciplined cost management more than offset the impact of productivity investments. Adjusted diluted net earnings per common share of $1.89 were up approximately 10% year-over-year. We generated $1.4 billion of free cash flow in the quarter and $3.5 billion in the first 3 quarters of the year, resulting in a year-to-date free cash flow to net income conversion ratio of 146%.

Now during the quarter, we deployed approximately $2 billion of capital towards the repurchase of 10 million shares of Danaher common stock. Additionally, our Board of Directors approved a new share repurchase program authorizing the purchase of up to 35 million additional shares of Danaher common stock. Our substantial investments in innovation over the last several years led to the launch of several leading-edge products and technologies this quarter. Each one of these new solutions is designed to enhance our competitive positioning while enabling customers to improve quality and yield, lower costs and accelerate the delivery of life-changing therapies and diagnostics. So let me highlight a few examples and the tangible value they're creating for our customers.

In biotechnology, Cytiva launched the ÄKTA readyflux TFF system 500, a fully automated benchtop tangential flow filtration system. Developed to meet growing demand for efficient low-volume processing, the readyflux TFF system 500 minimizes product loss, improves yields and enables effective process development with limited material. Importantly, the readyflux platform is now scalable from process development to commercial production, enabling customers to quickly and smoothly transition across different stages of drug development. This system is one of several planned launches, including the new TFF filter cartridges and our next-generation perfusion system.

Together with our new Xcellerex X-platform platform bioreactors and differentiated filtration and cell culture media offerings, these solutions provide a powerful upstream package that helps customers improve yields and efficiency in the intensified biologic drug manufacturing process. It also underscores the breadth and the depth of Cytiva's leading portfolio and our ability to support customers across the bioprocessing workflow from early-stage process development through to commercial manufacturing. In Life Sciences, IDT announced a strategic expansion of its end-to-end translational gene editing portfolio with the launch of high-purity customizable guide RNAs.

As scientists move from early research towards clinical applications, the need for greater purity and flexibility in CRISPR tools increases. These new guide RNAs, key components that direct CRISPR systems to specific genes give researchers more control over sequence design, length and modifications to meet their precise needs. These capabilities are especially valuable for scientists in preclinical testing who require high-quality materials for studies like toxicology ahead of clinical trials. In diagnostics, Beckman Coulter launched the Access and BD-tau assay. This is the industry's first fully automated research use-only immunoassay for brain-derived tau protein, a promising blood-based biomarker for researching neurodegenerative diseases such as Alzheimer's.

This assay leverages the high-resolution DxI 9000 analyzer to bring automation and scalability to tau protein quantification. Ultimately, this powerful technology combination can help improve research efficiency, enhance consistency in long-term clinical trials and support accelerated regulatory pathways through stronger real-world evidence. Now let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today. Core revenue in our Biotechnology segment increased 6.5%. Core revenue in Discovery and Medical grew low single digits in the quarter. Growth in medical and lab filtration was partially offset by declines in protein research instrumentation, where academic research customers continue to face funding constraints.

Core revenue in bioprocessing grew high single digits with double-digit growth in consumables, partially offset by declines in equipment. Consumables growth was driven by robust demand for commercialized therapies at our large pharma and CDMO customers. Equipment revenue grew sequentially, but declined in the high teens versus prior year as expected. Now while we're seeing strong funnels and customers have a healthy pipeline of planned projects, this hasn't translated into equipment order growth as customers are awaiting additional clarity on the policy environment before finalizing their investment decisions. Based on what we're seeing today, we expect cautious equipment spending through the remainder of the year.

Now that said, with several billions of dollars invested to expand capacity at Cytiva since 2020, including meaningful additions at our facilities in Florida, South Carolina, Utah and Michigan, we believe we are very well positioned to help customers execute in-region, for-region manufacturing strategies. Now the long-term outlook for the biologics market remains very healthy. The primary growth driver of Cytiva's bioprocessing business is the increasing global production of biological medicines, particularly monoclonal antibodies. Underlying biologic demand has grown double digits annually over the last 10-plus years, and we expect strong demand growth to continue in 2025 and beyond. This growth has been supported by a steady pace of new FDA drug approvals, building on several consecutive years with record-setting FDA approvals as well as a continued shift in pharmaceutical pipelines towards biologics. In fact, more than 2/3 of the world's top 100 drugs are projected to be biologics by 2030.

At the same time, we've seen increased development of biosimilars and expanded indications for existing therapies both of which are expected to drive production volume growth. The substantial and sustained level of activity we have seen reinforces our conviction in the significant opportunity ahead in this market and supports the long-term core revenue growth trajectory for our leading bioprocessing franchise. Now turning to our Life Sciences segment. Core revenue decreased by 1%. Core revenue in our Life Sciences instrument businesses was up slightly in the quarter. By end market, clinical and applied markets held up well globally. Demand from academic and government customers remained soft but was stable sequentially. And as I mentioned earlier, we continue to see modest recovery in pharma spending with revenue from these customers growing in the quarter.

In China, moderate improvements in the funding environment led to increased activity levels, which contributed to revenue growth in the quarter. Core revenue in our Life Sciences consumables businesses, which include IDT, Aldevron, Abcam and Phenomenex declined in the quarter, primarily due to lower demand for plasmids and mRNA from 2 of our larger customers as well as continued funding pressure across early-stage biotech and academic research. Declines related to these funding pressures were partially offset by growth in next-generation sequencing products at IDT and recombinant proteins at Abcam.

Moving to our Diagnostics segment. Core revenue increased 3.5%. Core revenue in our clinical diagnostics businesses was up low single digits with high single-digit growth outside of China. Leica Biosystems delivered over 10% core growth with broad-based strength across core histology, advanced staining and digital pathology. Beckman Coulter Diagnostics also had another solid quarter with mid-single-digit growth outside of China. This marks Beckman's fifth consecutive quarter of mid-single-digit or better core growth outside of China, driven by continued uptake of recent innovations such as the DxI 9000 and strong momentum in commercial execution.

In Molecular Diagnostics, Cepheid's core revenue was up mid-single digits in the quarter. High single-digit growth across Cepheid's core nonrespiratory test menu was led by approximately 20% growth in sexual health. Respiratory revenue exceeded expectations as customers began purchasing earlier than typical in preparation for the upcoming respiratory season. Cepheid continued to expand its global installed base in the third quarter. The sustained growth in Cepheid's installed base is driven in part by health care system and IDN customers adding new instruments at sites further out in their networks and closer to patients in order to provide faster diagnostic and treatment decisions. We believe this ongoing installed base expansion, combined with a leading test menu and workflow advantages provides a long runway ahead for durable long-term growth at Cepheid.

Now let's frame how we're thinking about the fourth quarter and the full year 2025. For the full year 2025, we're maintaining our full year adjusted diluted net EPS guidance range of $7.70 to $7.80. In the fourth quarter, we expect core revenue to grow in the low single-digit percent range as we expect market conditions to be largely consistent with what we saw in Q3. Additionally, we expect the fourth quarter adjusted operating profit margin of approximately 27%, which importantly includes the impact of anticipated productivity investments aimed at further improving our cost structure.

Now before we wrap up, I'd like to share our initial thoughts on next year. For the full year 2026, we expect core revenue growth in the 3% to 6% range as we are assuming modest recovery across our end markets. Looking across the portfolio, we're assuming bioprocessing growth trends remain at levels consistent with 2025, including continued strength in consumables driven by healthy growth in monoclonal antibody demand and our strong positioning across the biologics workflow. In Life Sciences, we're assuming a modest improvement in end markets, but assume growth will remain below historical levels given the current geopolitical and policy environment. And in Diagnostics, we're assuming higher growth in 2026 due to moving past headwinds from policy changes in China and our expectation that we will continue to execute well globally. Additionally, we anticipate respiratory revenue at Cepheid will be approximately $1.7 billion in 2026, consistent with our expectations for 2025.

Turning to 2026 earnings. We expect the operating leverage on anticipated core revenue growth and the benefit of our 2025 productivity initiatives to drive more than 100 basis points of adjusted operating profit margin expansion, which would result in high single-digit adjusted earnings per share growth before any benefit from capital allocation. As always, we will provide more color and a formal guide with our Q4 earnings in January. So to wrap up, we're encouraged to deliver third quarter results ahead of expectations in what remains a dynamic operating environment. Our team's commitment to innovating and executing with DBS has driven meaningful improvements in our businesses and enabled us to deliver more breakthrough solutions to our customers.

Now looking ahead, we remain focused on the areas we can control to drive results for our stakeholders. We're taking thoughtful actions to reduce structural costs, supporting earnings growth and margin expansion in 2026, while maintaining the right foundation to continue investing in opportunities that strengthen our long-term competitive advantages. We believe Danaher is well positioned for sustainable long-term value creation.

Our businesses are well positioned in attractive end markets, supported by long-term secular growth drivers and share a common set of relatively durable, high recurring revenue business models. And on top of that, our strong balance sheet and free cash flow generation positions us well to strategically deploy capital going forward. So with that, I'll turn the call back over to John.

Thank you, Rainer. Operator, that concludes our formal comments. We're now ready for questions.

[Operator Instructions] We'll take our first question from Michael Ryskin with Bank of America.

Maybe just start where you left off, Rainer, on fiscal year '26. The 3% to 6% range, I think it's roughly where people were expecting, but it is a little bit of a wider range. I realize we're still in October, so still very, very early, a lot of uncertainty. But maybe you could just talk to the high points of what gets you there? And then maybe what the world looks like for a 3% versus a 6%, where do you need to see more improvement relative to this year to get there? I guess sort of like what's still up in the air to figure out if you come to the 3% or the 6%?

Thanks, Mike, and good morning, everyone. Let me just dive right in. But before I get started, let me provide a little bit of context to this. We've come off a strong quarter with beats on the top and bottom lines and cash flow. I think it's important to see the -- how Q3 demonstrates the earnings power of our portfolio and the execution of the team even at a relatively modest growth rate. And we're taking that Q3 beat to really proactively invest in further meaningful cost measures in Q4 to set up 2026, Mike. So that's an important factor here in how we're thinking about '26.

Now the market and the policy environment, whilst improving, is still fairly dynamic. And so we could see a range of outcomes in 2026, which we're ring-fencing between 3% to 6% top line growth and high single-digit earnings growth. So for planning purposes, we think it's prudent to assume modest recovery in our end markets. And let me talk about some of those. In biotechnology, we expect high single-digit core growth in bioprocessing and that's similar to what we've seen in 2025. We expect bioprocessing consumables to remain strong given the monoclonal antibody pipeline, the on-market momentum of those commercialized drugs as well as our leading position.

Now we're assuming for planning purposes that equipment is flat next year, given that the order trajectory through Q3 has continued as it has in the first half. So the planning assumption is that, that remains flat. Now in Life Sciences, we're not planning for meaningful improvement in our end markets. In Q3, Life Sciences performed as expected and the activity levels were fairly positive, but we just didn't see that convert to orders that would provide an inflection. So we're assuming here that our growth would improve modestly as we work through some of the headwinds in our Life Science consumables business.

And as we think about Diagnostics, here, we're assuming growth accelerates as we move past China policy headwinds, where we've taken a conservative view and continue to execute well globally. And then lastly, importantly, we need to think about respiratory for '26. And here, we believe that it's going to be similar to 2025 at sort of that endemic rate that we've talked about of $1.7 billion. So of course, we're going to provide more quantitative view to all of this in January when we provide our guide. But hopefully, this gives you a sense of how we're thinking about 2026 directionally. And maybe Matt can comment here a little bit more on the EPS side of it.

Sure. Like Rainer said, we're kind of expecting 3% to 6% core growth here next year. I would anchor at the low end of that range to begin with, and we'll kind of see how the year plays out as we go and we kind of provide some updates as we go. But I would anchor at the low end to start. And then from the math on the EPS perspective, I'd assume 35% to 40% fall-through on the volume plus the impact of the cost actions, and that is going to equal 100 basis points -- north of 100 basis points of margin expansion like Rainer talked about in the prepared remarks. And so it gives you the high single-digit EPS growth even at the low end of the range. And then maybe just to give you a little bit of color around sort of the cost actions we talked about we're doing $150 million in the fourth quarter, but we're going to do $175 million in total here in 2025. And we do not expect these cost actions to repeat in '26, these are sort of onetime items. And we do expect the cost actions that $175 million to generate a net $75 million in savings.

So all up, all in, you're talking about a $250 million type savings number in 2026 that gives you, call it, $0.30 of EPS tailwind as we head into the year. So I mean, as I think about 2025 and I think about what we're doing here in the fourth quarter to set ourselves up, I think we're going to be in a really good position to deliver high single-digit EPS growth even if we end up at the low end of that range, and we might do better in '26. And again, as Rainer said in the prepared remarks, all before we have any capital deployment either.

Okay. That's all really, really helpful. I appreciate the bridge. Maybe a quick follow-up, if I can. Rainer, you touched a little bit on China diagnostics and VBP. A lot of concern on that. So you just talked about as you move past the headwind, but you're still taking a conservative view. So just expand on what you're seeing in VBP. I think you're lapping the comps as you get into the fourth quarter, but there's concern of another wave down the road, maybe oncology and thyroid was called out by another player in the market. Just sort of how derisked is China diagnostics from a VBP perspective for 2022?

Yes, Mike. I mean, I think we sort of have seen -- like you said, we are getting to the other side of the wave here that started in Q4 with the first reimbursement in China. So we will anniversary that. I think as we sort of have dealt with what has come VBP, the reimbursements, the various policy sort of changes during the year, I think we're pretty well dialed in. I mean I would say that for next year, our assumption is that we probably have maybe $75 million to $100 million of headwind here, which on a Danaher level is fairly modest and manageable. And so I think that's kind of where we were or where we are from a planning perspective.

And I think that's a pretty good place to be given what we know today and have got visibility to some of the things that are coming and certainly have visibility to everything has already been announced.

We'll take our next question from Tycho Peterson with Jefferies.

I want to probe on the biotech comments here a little bit. Just maybe talk about some of the puts and takes in the guide for the fourth quarter. And then I guess, what does it take for you to call an equipment recovery here? Can you just maybe talk about the order book, how the funnel is building and the odds that you could actually see an equipment pick up next year on the biotech side?

Yes, Tycho, let me just give you -- for the fourth quarter, I can give you a little color on the numbers to make sure everybody's got those, and then Rainer can comment a little bit more on the equipment side and what it would take. So it is for modeling purposes, just so as everybody is on the same page here, biotechnology in the fourth quarter, we are going to be high single digits in bioprocessing, and we are seeing D&M down mid-single digits. And so Discovery and Medical, a lot of that has to do with a prior year comp, remember, they were up low double digits. And frankly, they continue to see softness. Remember, we've got the kind of a protein discovery business in there that acts a lot like a Life Science tool business. And so they're sort of seeing the same end market pressures as we see in Life Sciences there. And so hence, the reason they're down mid-single digits. But just to be very clear, bioprocessing in the fourth quarter is high single digits.

Tycho, as it relates to the equipment question, I've been spending a fair amount of time with pharma customers here. I do that generally, but even more so here in the last several weeks to understand how they're thinking about reshoring and generally speaking, equipment investments. And first of all, the activity level in the end markets, so the manufacturing volumes continue to increase. So there is a need more generally to continue to invest in equipment, and that's probably been held up a little bit here due to some of the policy discussions that have been ongoing. And what I've noted here in these discussions with some of the senior pharma leaders is that there's more confidence now in making these investment decisions as some of these most favored nation negotiations are becoming to workable solutions and the tariffs are starting to dial in and remain somewhat consistent.

So generally speaking, what we're seeing here is more activity, more discussions. While some of those -- that planning is still fairly high level, certainly for greenfield investments, what we're seeing is activity and quotations and so forth around more brownfield investments. We just haven't seen those turn into orders yet. But having said that, we're fairly constructive on equipment. But from a planning perspective, we thought it was prudent here to continue with what we've seen here up and through the third quarter.

Okay. That's helpful. And then maybe just flipping over to Diagnostics. I appreciate the China VBP commentary. Maybe just can you talk about what's baked in for next year for Beckman ex-VBP? Is that mid-single-digit plus? Is anything kicking in from Alzheimer's? Or is that too early? And then similarly for Cepheid away from respiratory, how do you think about the base business there next year?

Yes. I mean I think it's too early for Alzheimer's, I think. I mean that's probably a longer-term play for us. I don't think we've got anything kind of built in or baked in for that. I would expect that for Beckman for next year, I mean, we can kind of get into a little bit more details when we give the formal numbers, if you will, in January, but they've been executing very well. They've got a good new product launch in the DxI 9000. They've been outside of China, that's been a mid-single-digit growth plus -- mid-single-digit growth business. And I would expect that, that would continue as we move into next year. And as far as Cepheid, again, outside of respiratory, our assumptions there will be essentially flat at $1.7 billion. And then outside of that, that's been a business that has done sort of high single, low double digits on a pretty consistent basis on nonrespiratory. I think with the installed base continuing to sort of expand and as we start to add more menu on to existing customers, I suspect that those levels are a good place to start as well.

We'll take our next question from Scott Davis with Melius Research.

Things seem to be more stable in the last couple of quarters. It's nice to see that. But anyways. I was curious just on the mix between kind of respiratory and sexual health and Cepheid because you quoted some pretty strong growth numbers on the sexual health side, but then also kind of guiding to more flattish in 2026 versus '25 totally for Cepheid. So perhaps a little bit more granularity on that would be helpful.

Yes. I mean I think we're sort of guiding to the respiratory to be flat year-over-year, which would not have sexual health in it. I think kind of we talked a little bit earlier on the question with Tycho that the outside of respiratory, which is where sexual health would reside, that we would expect -- we've seen that business kind of be low single -- or sorry, high single, low double digits and I would expect that, that would continue into next year. So sexual health will be a part of the growth there for sure, has been, and I suspect that it will be for a while as we go forward and expand that menu and drive penetration.

So to be clear, then Cepheid should grow in '26 versus '25. That's what you're expecting?

I think so.

Okay. All right. Fair enough. And then the -- just a little bit of question, I guess, is on the contract structures that you have. Have they changed over the last few years, just given the tariff and cost inflation dynamics we've had supply chain, et cetera, and all kinds of headaches that many companies have had. But have your contract structures adapted in a way and clearly, this is more equipment and consumables, but is it adapted in a way that allows you to adjust pricing a little bit easier for core potential headwinds that could arise?

Scott, over the years, we have brought more flexibility into that. Of course, each contract is specific to a given customer's needs, and we try to be responsive to those. But generally speaking, as you think about bioprocessing, for instance, we have a fair amount of both flexibility and to some degree, leverage there in order to drive differentiated pricing for differentiated solutions.

Our next question from Douglas Schenkel with Wolfe Research.

One quick one on recent events. Have you seen any change in activity over the last few weeks or even just -- even in the tone of discussions with biotech and pharmaceutical customers since the Pfizer MFN announcement came out. I'm guessing you didn't reflect anything in guidance based on the way you talked about your framework if things are improving, but I'm curious if you've seen any changes.

Doug, I think I would say, yes. We -- and also correct that we have not reflected that in our guidance here neither for the fourth quarter nor for our initial thoughts on '26 because we like to see the shift in tone turn into demonstrated order patterns so that we actually see the trend. But having said that, and as I mentioned earlier, I've been out in the market a fair amount all over the globe here talking to various pharma executives. And there is more confidence that the policy environment is finding more balance and that some of these overhangs, whether that's the most favored nations discussions where, like I say, some of those are not always great, but they are workable and remove an overhang for our pharma customers on the one hand.

And on the other hand, we do see the tariff situation stabilizing and becoming plannable. And in that context, we're starting to see more confidence regarding capital investment decisions and the location of those investments going forward. And so we're looking for that, of course, to now translate from activity and quotations into stronger order patterns, but we haven't seen that yet. And as a result of that, we're not reflecting that yet in any of our guide.

Okay. Super helpful. And then thank you for the framework for 2026. I have a question on margins. So I think with this morning's announcement, by the end of this year, you will have invested, I think it's about $300 million in productivity enhancements in 2025. And unlike a lot of your peers, you don't onetime those out. So that actually depressed margin this year by over 100 basis points.

So as we think about next year and the benefits of those initiatives rolling through, is there an argument that even though you talked about 100 basis points of margin expansion potential next year, if we think about kind of adjusting the base up this year and you guys getting maybe low single digits to even mid-single-digit top line growth that all in all, the error bar is probably skewed to the upside as we think about margins for next year, again, just rolling through the benefits of all the productivity enhancements that you're putting into place as we speak.

Yes. I mean, well, first, I would just kind of anchor on this is -- I believe that a 35% to 45% fall-through and the impact of just the 250 I talked about, that's north of 100 basis points. Just want to -- because I think when you go to do your math, it's not going to be 100. So I think you're right on that point. As far as is there more than what we have sort of offered up here, this is a net number so that we can continue to invest in the business. We think this is the right balance of investing in the business, making sure that we're also delivering high single-digit or better EPS growth as we head into 2026, but we do want to leave ourselves some room for that investment.

But as the year plays out, we can always kind of -- we always tweak and work with that. So -- but I think the frame that you've laid out of north of 100 basis points of margin expansion is very fair. And like I said, that $250 million of net savings gets us that $0.30 tailwind. And I feel pretty comfortable about high single-digit EPS even if we're at the low end of the guide of the range.

We'll take our next question from Vijay Kumar with Evercore ISI.

My first one on -- if I wanted to touch on the fourth quarter Diagnostics assumptions. I think ex-respiratory and ex China, it looks like the business has done around mid-singles for the past 2 quarters. I think your guide implies for Q4 double digits. So maybe talk about what changes sequentially from 3Q to 4Q and what drives the optimism for Diagnostics ex China, ex respiratory?

I think the uptick is VBP lapses. That's the delta. I don't think anything changes with the rest of the core business. I think that's mid-single digits, that base business, if you will. But remember, we took the first hit in respiratory in China with VBP and reimbursement in Q4. So I think it's the VBP that gets better, not the base business.

Sorry, Matt, I think -- am I correct in assuming ex respiratory and ex China, the business was mid-singles in 3Q?

Yes.

And that assumption doesn't change for Q4, mid-singles? Or does it change ex respiratory ex China?

Again, I think your ex China is the piece, Vijay. That is going to -- that China number is going to get better in the fourth quarter because we are lapsing reimbursement. Happy to kind of follow up with you on some numbers offline.

Understood. And then maybe, Rainer, one for you on capital deployment. A pretty big share repo in 3Q. With the new $35 million authorization, how are you thinking of M&A versus share repurchases, right, when you look at assets available in the deal pipeline?

So Vijay, we maintain a strong bias towards M&A, and we continue to be very active on the M&A front. We're cultivating every day, and we continue to think about M&A in the context of our framework of attractive end market, attractive company with value reserves. And importantly, the valuation framework, the model has to work. And we're going to stick with that discipline.

Now that said, and as we've demonstrated here, we're not opposed to buybacks. At current levels, the relative value of a buyback generates attractive financial returns, and we will continue to evaluate all our capital allocation using the same ROIC lens. So bias to M&A, clearly, but we're going to maintain the discipline because we want to see the returns.

We'll take our next question from Dan Brennan with TD Cowen.

Maybe just going back to bioprocess and the equipment side. I know you talked about in the prepared remarks how Cytiva has built up a lot of capacity. You're ready for any demand that comes from this onshoring. Can you just kind of zoom out a little bit and give us a flavor how we might think about this? I know there's been hundreds of billions of announcements, but it's hard for us to parse what's really incremental, what's just shifting from one region to the other and kind of how it might impact you. So if we look out, like what should we be looking for? And could this actually drive some potential real demand benefit for you, whether it be in exiting '26 into '27, anything like that?

Sure, Dan. I mean the investment announcements that we've heard from pharma differ in terms of what they include and exclude depending on which pharma company you're talking about. And then, of course, many times, the time lines were 5 and 10 years. So those numbers grow pretty quickly, especially if the research and development investments were considered in those investment numbers as well. But if we put that aside for a minute, there's 2 factors here that drive equipment demand. First, the manufacturing growth that is required to meet the market demand. And we have seen over the last quarters that the equipment investments have been fairly slow. While they've improved slightly, they've been below historical trends. While the end market and the production requirements have continued to be strong. So there is a general need around the world to start investing in equipment. That's sort of one factor.

And then you add this trend of regionalization of manufacturing capacity. And of course, we think about that in terms of the reshoring discussions here in the United States, but other regions think about regionalizing their manufacturing network as well. And so that speaks positively to the general environment and the requirement for equipment investments going forward. And what has held that up here is the dynamic of policy changes, certainly in the U.S. but elsewhere in the world as well, as well as how do we need to think about tariffs and most favored nations pricing.

And there, I've tried to provide a little bit of color that we see those overhangs starting to dissipate as, one, the tariffs have become more plannable and predictable; and two, the most favored nation pricing, which is a key factor when you're making these investment decisions as well, is starting to dissipate, as I said, with some workable deals being made. And generally speaking, that's provided more confidence to the most senior decision-makers here in the pharma industry.

Great. And then maybe just as a follow-up, just on the '26 guide, I think you discussed a lot about China and bioprocess. But just on the Life Science piece, it sounds like you're thinking about maybe starting that if Matt talked about 0 -- excuse me, 3% as the good starting point for the company. So Life Science is probably, I guess, 0. Could you unpack a little bit? I know you talked about you're not baking in any improvement just between instruments and genomics, like what would have to happen to get to 0? Do you think that's going to prove to be kind of a conservative number?

Yes. No, I think you're right, spot on, on that being flat. And again, sort of -- that's where we've been now. I think part of the reason that we have the same thing, same dynamic in Q4 that we do in Life Sciences as for all of '26, it's been where we've been. It's been fairly flat as we have not seen that inflection in the market like Rainer has talked about. Maybe you want to talk about what might happen to get better?

Sure. So I mean, let's start with the fact that the clinical and applied markets have remained fairly solid, and we don't expect that to change. And we've also seen a modest recovery in pharma research spending. It's below historical trends, but we've started to see a recovery there, and that was reflected in Q3 as well. It's really academic and government, which you know on a global basis is low single-digit exposure for Danaher overall that is anchoring and holding back some of the growth there and that's the market. Now if you think about our own business, we're performing well in these segments. We're less exposed to the academic and government side. And as it relates to the Life Science consumables businesses, that I talked to earlier, we also think that we're lapping some of those headwinds.

You recall those 2 large customers that have come off their peak demand pretty significantly, and we've been working through that. And we would expect that then also to be reflected in a little bit more supportive and modest growth next year. But for planning assumptions, we think where we sit today, that it's best to consider flat growth for Life Sciences in the context of that 2026 guide that we gave you. And if they're upside, there is, but we want to see some of that playing through here in orders before we call that trend.

We'll take our next question from Jack Meehan with Nephron Research.

I want to focus on the Diagnostics business. The first question, in the quarter, the sales were about $60 million higher than what consensus was looking for. There was about $200 million of upside from respiratory. Everything sounds great in Beckman ex China and Leica. So it just wasn't obvious to me what might have fallen short at least versus what the Street was thinking. Is there anything that you would call out?

No, I would say it was all respiratory kind of, if you will, a little bit earlier than we expected. I think customers were just kind of -- again, kind of coming earlier than we thought. I would say it was probably $125 million of pull forward, if you want to call it that, but it was nothing else to call out Diagnostics.

Okay. Got it. Actually, I'll pivot to the biotechnology business just as a follow-up. Can you talk about the dialogue you're having in terms of reshoring? I know you mentioned kind of like the billions of dollars being talked about in manufacturing here in the U.S. How do you think this is going to play out over the next few years? Just any color around what that can mean for both capital demand and recurring for that business, that would be great.

It's hard to put specific numbers around this, but we would expect that this reshoring in the U.S. particularly, but the regionalization of supply chains is going to result in continued investment in capital equipment. And we think the way that starts is with brownfield investments where customers are taking advantage of existing facilities in order to get those capacities in place more quickly and also demonstrate that they are investing in the respective regions, including the U.S., while in parallel planning sort of those larger greenfield investments that take a little bit more time. That is a different time line, which takes certainly a couple of years in the best of cases and can take a little bit longer.

So once that gets rolling, we might see an extended capital cycle here over a number of years. But we haven't seen that flow through in orders yet, lots of discussions, some of them more near term, i.e., those brownfield investments, others at a higher level because those are larger investments that just take more time, not only to plan but to execute.

And we'll take our last question today from Puneet Souda with Leerink Partners.

So my first question is, I appreciate your qualitative comments on the mAbs and biologics growth and bioprocessing being high single digit. But just wondering if you could provide any color on the order growth or book-to-bill in the quarter. I believe it was about 1 last quarter.

And we have seen weakness in the AAV segment and some of the innovative modalities. So just wondering what's your level of confidence on monoclonal antibody growth offsetting some of that to still deliver high single-digit growth? And I have a follow-up on China.

Yes. I mean the book-to-bill was pretty similar to what we've seen all year around 1. So maybe, Rainer, you want to comment on that?

Sure. Well, I mean, we continue to see monoclonal antibodies growth as strong, not only because the commercial volumes on existing indications are growing more quickly, but also because we see new applications of existing on-market drugs being approved. And then we also see biosimilars here that are pretty close to the launch as well. So we do think that, that very, very large part of our business, 75% of our business is in those monoclonal antibodies and the growth that's associated with that takes care of some of the volatility that we have seen here in some of the AAV business. Some of which has been around for some time, so it's also lapping.

But just to say that it's really driven by protein and these nucleic acid therapies, while they are interesting and efficacious, they will continue to take time to find it into the first line of standard of care. And while we're very well positioned there, what's driving the growth here is really protein monoclonal antibodies going forward.

Okay. That's helpful. And then just a brief question on localization policy in China that has emerged over the last few weeks. There is a 20% pricing rebate for those manufacturing locally. This is beyond the VBP and the DRG headwinds we have been hearing about. So maybe could you just remind us how much of your production and sales in China are manufactured locally and maybe both reagents and on the instrumentation side. Where do you have defensiveness? And where do you need to expand manufacturing if this was to spread broadly to other government agencies, including academics?

So Puneet, that 20% that you heard about benefit for local manufacturers is actually not the newest of news. It's been out there informally, which is often how it works in China for some time. In fact, I was just in China for a couple of weeks here, taking a close look at what's happening and of course, talking to customers and government officials and, of course, our teams. And we think that we're very well positioned here as it relates to localization.

By the end of the year, much of our diagnostic businesses, whether that's equipment or reagents will be localized. And that degree of localization plays well across the portfolio. So while we don't talk about percentages of localization, we think that we're very well positioned here and view this actually as advantageous as opposed to a short-term headwind.

And with that, we'll turn the call back to John Bedford for any additional or closing remarks.

Thank you, David, and thank you, everybody. We'll be around all day and the rest of the week for follow-ups. Have a good rest of your Tuesday here.

This does conclude today's program. Thank you for your participation, and you may now disconnect.

Please stand by. Your program is about to begin. [Operator Instructions]. My name is Margo, and I'll be your conference facilitator this morning. At this time, I'd like to welcome everyone to Danaher Corporation's Second Quarter 2025 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions]. I will now turn the call over to John Bedford, Vice President of Investor Relations. Mr. Bedford, you may begin your conference.

[Audio Gap] and required by SEC Regulation G relating to any non-GAAP financial measures provided during the call and a note containing details of historical and anticipated future financial performance are all available on the Investors section of our website, www.danaher.com, under the heading Quarterly Earnings.

The audio portion of this call will be archived on the Investors section of our website later today under the heading Events and Presentations and will remain archived until our next quarterly call. A replay of this call will also be available until August 5, 2025.

During the presentation, we will describe certain of the more significant factors that impacted year-over-year performance. Our Form 10-Q and the supplemental materials describe additional factors that impacted year-over-year performance. Unless otherwise noted, all references in these remarks and supplemental materials to company-specific financial metrics relate to the second quarter of 2025 and all references to period-to-period increases or decreases in financial metrics are year-over-year.

We may also describe certain products and devices which have applications submitted and pending for certain regulatory approvals or are available only in certain markets.

During the call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we believe or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings, and actual results might differ materially from any forward-looking statements that we make today. These forward-looking statements speak only as of the date that they are made, and we do not assume any obligation to update any forward-looking statements, except as required by law. And with that, I'd like to turn the call over to Rainer.

Thank you, John, and good morning, everyone. We appreciate you joining us on the call today. Now before we get into the details of the quarter, I'd like to touch briefly on the announcement we made this morning regarding our CFO succession plan. As I'm sure many of you saw, we announced that [ Matt Gugino ], the current group CFO of our Life Sciences Innovation Group and Vice President of Corporate FP&A will succeed Matt McGrew as Chief Financial Officer of Danaher at the end of February 2026.

As we've done with past transitions, Matt McGrew will continue on as an Executive Vice President as he begins his gradual path to retirement. Matt, it's been a privilege working with you for more than 2 decades, we've all benefited from your outstanding financial leadership, your thoughtful guidance and trusted partnership. Since stepping into the CFO role in 2019, you've helped guide Danaher through pivotal moments, including launching [ Envista ] and [ Ruralco ] as public companies. The acquisition of Cytiva and the challenges of the pandemic, all while developing an exceptional internal finance talent pipeline. [ Matt ] Danaher simply would not be the company it is today without your leadership, strategic vision and humility. Thanks, buddy, for everything.

Now many of you know [ Matt Gugino ] from his time as Vice President of Investor Relations, Matt has had a number of important roles during his past 12 years with Danaher. And throughout Matt's time at Danaher, he has gained extensive experience in several key areas, including Investor Relations, FP&A mergers and acquisitions, talent development and most recently, operational experience as Group CFO. He has consistently demonstrated exceptional leadership and has played a central role in shaping our financial strategy and portfolio evolution. I know he'll be an outstanding CFO as we continue to grow Danaher into one of the most respected science and technology leaders. We look forward to helping him transition to his important role at the end of February 2026.

So with that, let's get to our results. Our team's strong execution with the Danaher Business System drove solid second quarter results in what remains a dynamic operating environment. Strong growth in our bioprocessing business, paired with disciplined cost management, enabled us to exceed both our adjusted operating profit margin and cash flow expectations for the quarter. While global trade tensions have led to some uncertainty, market conditions in the second quarter were generally consistent with what we saw in the first quarter.

In Pharma, global production of monoclonal antibodies where the majority of our exposure lives remains robust, and we continue to see a modest recovery in Pharma R&D spending. Academic and government demand remains soft as expected with ongoing uncertainty around research funding. Clinical diagnostics and applied markets, meanwhile, remained stable.

Now while the macro environment remains fluid, we're intensely focused on what we can control, and that's to continue delivering for our customers, associates and shareholders. Now our team has done a nice job running the DBS playbook to offset cost pressures from tariffs, deliver meaningful productivity gains and turn challenges into opportunities. At the same time, we're taking thoughtful actions to protect our financial and competitive positioning, including addressing structural costs while continuing to invest in innovation for the long term.

Our second quarter results also highlight the strength and resilience of our portfolio. We're well positioned in attractive end markets, driven largely by nondiscretionary health care needs and supported by strong secular growth drivers. Our businesses share a common set of relatively durable, high recurring revenue business models with the majority of our revenues being consumables that are specified into regulated manufacturing processes or specific to the equipment that we supply.

On top of this, our strong balance sheet and free cash flow generation positions us well to further enhance our portfolio going forward.

So with that, let's take a closer look at our second quarter 2025 results. Sales were $5.9 billion in the second quarter, and we delivered 1.5% core revenue growth. Geographically, core revenues in developed markets were up low single digits, with North America up slightly and a high single-digit increase in Western Europe. Core revenues in high-growth markets were flat overall as solid performance outside of China was offset by a mid-single-digit decline in China.

Growth in our biotechnology and life sciences businesses in China was more than offset by declines in Diagnostics due to volume-based procurement and reimbursement changes implemented in late 2024. Our gross profit margin for the second quarter was 59.3%. Our adjusted operating profit margin of 27.3% was flat year-over-year as the favorable impact of higher volume leverage, product mix and disciplined cost management were offset by productivity investments to reduce our structural costs. Adjusted diluted net earnings per common share of $1.80 were up approximately 5% year-over-year. We generated $1.1 billion of free cash flow in the quarter and $2.2 billion in the first half of the year, resulting in a year-to-date free cash flow to net income conversion ratio of 143%.

Now as I mentioned earlier, we're continuing to make significant investments in long-term growth initiatives across Danaher. In the second quarter alone, those investments translated into several important new product and technology launches, each reinforcing our long-term competitive position while delivering meaningful benefits to our customers. Let me highlight a few of these key introductions and how they're designed to help customers improve quality and yields, reduce costs and bring new therapies and diagnostic tests to market more efficiently.

In biotechnology, Cytiva expanded its comprehensive purification portfolio with the launch of two new Protein A resins. MabSelect Sure 70 and MabSelect PrismA X. Each stage of drug development presents unique purification needs. And these resins are designed to offer cost-effective solutions for preclinical and clinical production without compromising on quality. They also underscore Cytiva's commitment to delivering innovative solutions to help customers reduce manufacturing costs, increased flexibility and maintain the high performance standards they expect to cross all stages of the drug development process.

Now life sciences, SCIEX reinforced their leadership position in mass spectrometry with the introduction of the ZenoTOF 8600 at June's American Society of Mass Spectrometry Meeting. The XenoTOF 8600 expands SCIEX's high-resolution mass spectrometry footprint and delivers tangible performance improvements across proteomics, lipidomics, metabolomics and small molecule workflows. The 8600 offers competitive molecular identification and superior quantification compared to other leading high-end platforms, helping scientists better understand molecular structures and measure more targets in complex samples with greater speed and confidence with the ultimate goal of accelerating drug development times.

And in Diagnostics, we announced a new partnership with AstraZeneca to develop diagnostic tools that help clinicians identify which patients are most likely to benefit from precision medicine treatments. This collaboration is leveraging the newly launched Danaher Centers for enabling precision medicine to support a more streamlined end-to-end development process. The first product in development uses technologies from Leica Biosystems with a focus on digital and computational pathology, including AI-assisted algorithms to improve diagnosis and enable more targeted therapy decisions.

So now let's take a closer look at our results across the portfolio and give you some color on what we're seeing in our end markets today. Core revenue in our Biotechnology segment increased 6% with file processing up high single digits and Discovery and Medical down low single digits. In bioprocessing, we were pleased to see the positive trends in our order book continue through the second quarter. Revenue growth was led by low double-digit growth in consumables with particularly robust demand for commercialized therapies. Equipment declined as expected as customers continue to absorb capacity added over the past several years and global trade uncertainty contributed to delays in some larger capital investment decisions.

In addition to strong demand for commercial production, the number of therapies in development and clinical trials remains robust. Monoclonal antibodies, which comprise more than 75% of our bioprocessing revenues remain the largest investment area for our customers and there is a healthy pipeline of new molecules in development.

At the same time, biosimilar development in production and demand for our solutions are increasing as patents on high-volume therapies expire, making life-saving treatments more accessible and driving broader adoption. With our comprehensive portfolio and an innovation engine geared towards increasing yields and enhancing manufacturing efficiencies, we're well positioned to support our customers as they advance these therapies through development and into commercial production. The strength of the development pipeline paired with consistent growth in commercial production also reinforces our conviction in the high single-digit long-term growth outlook for our leading bioprocessing franchise.

Now turning to our Life Sciences segment. Core revenue decreased by 2.5%. The Core revenue in our life sciences instrument businesses collectively declined low single digits in the quarter. Looking across our end markets, clinical and applied markets held up well globally while demand from academic and government customers remained weak. As I mentioned earlier, we continued to see modest recovery in Pharma spending with revenue from these customers growing in the quarter.

In China, we saw an improvement in demand at stimulus-related funding translated into new customer orders and revenue. Core revenue in our genomics consumables business declined in the quarter, driven by lower demand for plasmids and mRNA from two of our larger customers, along with funding pressure across early-stage biotech and academic research customers.

Now you likely saw IDT and Aldevron in the headlines this quarter for their groundbreaking role in helping develop the world's first on-demand mRNA-based personalized in vivo CRISPR therapy. This achievement marks a major milestone for in vivo CRISPR-based therapies and serves as a powerful example of how our genomics businesses are helping advance the future of personalized medicine.

Now moving to our Diagnostics segment. Core revenue increased 2%. The Core revenue in our clinical diagnostics businesses was up low single digits, with mid-single-digit growth outside of China. Beckman Coulter Diagnostics led the way with high single-digit growth outside of China and notable strength in instrumentation. This marks Beckman's fourth consecutive quarter of mid-single-digit or better core growth outside of China. And is a direct result of good traction from recent innovations such as the DxC 500 integrated clinical chemistry and immunoassay analyzer and the DxI 9000 high-resolution immunoassay analyzer and continued momentum in commercial execution.

In Molecular Diagnostics, Cepheid's respiratory revenue was modestly better than expected, though slightly below prior year levels. Cepheid's core nonrespiratory revenue grew double digits, including double-digit or better growth in sexual health, urology and hospital-acquired infections. This sustained growth in nonrespiratory revenue reflects increasing menu adoption and system utilization across our installed base, along with continued strength from newer assays, such as the multiplex vaginitis panel, which grew over 75% in the U.S. this quarter.

Now Cepheid continues to expand its global installed base of more than 60,000 instruments. This expansion has been driven by notable wins across large health care systems and integrated delivery networks that are standardizing testing on the gene expert platform. As these customers look to allocate resources more efficiently, Cepheid's point-of-care molecular testing is proving increasingly valuable, helping deliver greater efficiency through fewer total tests higher rates of correct treatment and ultimately, lower overall treatment cost compared to other testing strategies.

So with that, now let's frame how we're thinking about the third quarter and the full year 2025. For the full year 2025, we continue to expect core revenue growth of approximately 3%. We Additionally, we're raising our full year adjusted diluted net EPS guidance to a range of $7.70 to $7.80 versus our previous range of $7.60 to $7.75. In the third quarter, we expect core revenue to grow in the low single-digit percent range. And additionally, we expect the third quarter adjusted operating profit margin of approximately 25.5%.

So to wrap up, we're encouraged by the momentum we've generated in the first half of the year, particularly in our bioprocessing business. Our team's focused execution and a dynamic operating environment enabled us to deliver financial results ahead of our expectations while advancing solutions that are at the forefront of improving patient and health care outcomes.

Our solid second quarter results also underscore the unique positioning of our portfolio. Our businesses are well positioned in end markets with long-term secular growth drivers and our business models are resilient with more than 80% of our sales today comprised of consumables and service revenue, which is typically highly recurring. At the same time, the strength of our balance sheet and financial position allows us to invest for the future, both organically and through strategic capital deployment to further enhance our long-term competitive advantages. So looking ahead, we remain focused on what we can control in what has become a more complex macro environment since the start of the year. We believe the combination of our talented team, the differentiation of our portfolio and our strong financial profile, all powered by the Danaher Business System, will enable us to continue delivering strong results for the remainder of 2025 and beyond. So with that, I'll turn the call back over to John.

Thank you, Rainer. Operator, that concludes our formal comments. We're now ready for questions. .

[Operator Instructions]. We'll take our first question from Michael Ryskin with Bank of America.

I want to be the first to congratulate both Mats on current and future roles. [indiscernible] be great working with both of you and look forward to it. Ryan, I want to start on just -- I want to start on the order trends commentary real quick on bioprocess. You had some really positive commentary in terms of positive trends in the order book continuing, especially in the consumables. I was wondering if you could dive into that a little bit more in terms of what the book-to-bill was, whether you saw orders accelerate from the first quarter, just sort of expectations for order trends in the third quarter. Or any color you can provide maybe by biotech versus Pharma? Just any additional color you can provide on bioprocess trends?

Thanks, Mike. And let me put the order trend right into the context here of some of our comments. I think, first, it's important to note that our Biotechnology segment consists of two businesses. One is the bioprocessing business, which is the $6 billion annual revenue business that you were just asking about. And then the other is the Discovery and Medical business, which is a $1 billion basis. And that business, the Discovery in Medical behaves a lot more like a life science tools business.

Now to your point here, let's talk about bioprocessing and work through to the orders development here. So first of all, the performance and trends in Q2 were very consistent with what we saw in Q1. Consumables continued to lead the way globally with low double-digit growth in consumables really driven by commercial demand and large Pharma CDMO customers.

Smaller customers, while they were stable, are still below historical trends or historical levels. Now equipment remains below those historical trends with improving. So we're seeing better funnel activity, but we continue to see order delays with trade policy, creating some incremental noise here and probably slowing some decision-making. Now overall, our book-to-bill was consistent with prior quarters and around one, with some lumpiness in equipment orders. And overall order activity in the first half and second quarter are fully supportive of a high single-digit core growth in the second half.

So if you put all that together here, and I think it's important to also comment on the top line performance here, which continues to drive strong profitability with fall-through of over 50% and in bioprocessing in the first half. So when you put all that together, we're really encouraged by the strong first half. We expect high single-digit growth in the second half of the year. And all of this reaffirms our belief that bioprocessing is a high single-digit grower, both in 2025 and the long term.

Okay. And I want to touch on something you also brought up a couple of times. You mentioned global trade tensions a few times in the prepared remarks. You just touched on it in your prior answer. If you could expand on that, where you're seeing it? Is it sort of what regions geographically and also what customer segments, whether it's Pharma or some of the more industrial or applied markets. Is it pausing of orders? Is it cancellations of orders? Is it delays of new orders? Just sort of how are you seeing those dynamics play out? And do you expect a recovery in that or improvement in that as we go through the rest of the year and we have sort of continued discussion on the tariff front?

So Mike, I mean I think there's a general overlay here of trade uncertainty as it relates to how the tariffs will play out. If we think about the different end markets. In Pharma, certainly, as we pointed out, this market continues to grow over time. There is going to be a need for capacity expansions and now Pharma companies have to ask themselves the critical question as to where they're going to build that new capacity. And of course, that's hard to do if you don't know yet what the tariff situation ultimately plays out to be. But we would expect that, that overhang here clears here certainly in the next 6 to 12 months, that's certainly our planning assumption. So that isn't overly on Pharma.

As it relates to the applied and clinical markets, I think that's less of a factor. So clinical markets, we see volumes remaining fairly consistent capacity increases are more incremental in that regard. And as it relates to Applied markets, I would say the same thing.

We'll next go to Doug Scheknel with Wolfe Research.

Matt and Matt, congrats and thanks for all the help, and thanks to the broader team for giving us some time this morning. So I just want to talk about bioprocessing a little bit more and I really just want to clarify your bioprocessing assumptions that are embedded into guidance.

So first, you had previously told us to expect high single-digit bioprocessing revenue growth for the year. Is that still the case?

Second, you got 2.5 points of price in the biotech segment in Q2. What is your assumption for pricing for the second half within the segment? And what does that imply regarding volume pacing? And then third, really more to the point, it seems like you may have increased bioprocessing guidance while reducing D&M assumptions? And you kind of referenced this in your response to Mike, I just want to see if that's the case.

Yes, Doug. Maybe I'll take a first stab at it. So kind of to your first part of the question on bioprocessing. I think the simple answer is yes, high single digits is still our guide for the year for the bioprocessing piece. Again, just for folks, that's that $6 billion of the $7 billion in the segment. So that -- we are still expecting to see high single digits. I think your second question was around price and what we saw here. So I think we saw about -- call it the first half, 1.5%, 2% kind of price is what we saw in the segment. I think we're probably going to do roughly the same, maybe a little bit better here in the second half from a price perspective in the segment. And so from a volume pacing perspective, which I believe you asked about as well, we really -- we will see Q2 kind of step down in Q3, very traditional for us to have a kind of a volume step-down we do some work on some of our plants, and we typically, Q3 is our lowest volume quarter. And you see that both in -- you see it really in the margins to in bioprocess in Q2 to Q3. But then you separate back up, Q4 is our best quarter in bioprocessing. So I would expect to see the same kind of cadence on that.

And then lastly, I think it was on just sort of maintaining the full margin -- the full guide for the year on the segment. I think that's right. I think on the margin, you're probably a little bit lower at D&M, but we're probably a little bit better here in bioprocessing in that $6 billion piece. So again, it's on the margin. It's not huge, but we are -- we would maintain the guide for the full year for the segment. little better in bioprocessing, maybe a touch worse in D&M. And as Rainer said, that D&M piece is very different than bioprocessing. It kind of acts almost like a life science tools business to some degree.

And next, we'll go to Scott Davis with Melius Research.

I'll echo my congrats. Rainer, you're lucky to have two rock stars with you there three, including John sorry, John.

I totally agree. Thanks, Scott.

Just first just to clarify something. Is the structural cost out part of the story, is that behind us now?

Yes. I mean I think it's -- we feel very comfortable and confident that we are going to get all of that $150 million. I think we've probably got about half already, Scott, and the other half will come as we work through the second half. It's -- but I feel very comfortable.

Okay. And I'm actually just kind of curious of your view here. I mean early-stage biotech. I'm just trying to get a sense of what you think the -- this is going to -- how this is going to play out in the next couple of years. But is this a case of where kind of AI spend is crowding out perhaps some of the opportunities? Is there pent-up demand here? I mean just kind of -- are we still going to be talking about this in 12 months, I guess, is my question. I'm just kind of curious how you guys view the market.

I would say that if we just look where we are today, biotech is at lower activity levels, but stable. The investment environment has been tough here with the amount of venture capital that goes into these biotechs flowing and those that are already out there, really needing to focus on those therapeutic programs that show the best data. And I think that is representative of what has been going on here more generally in the sector that the enormous wave of investment that we saw during and just after the pandemic has waned. And the market is now finding its footing.

Now as it relates to AI, we really see that ultimately as a tailwind because we see them less money being spent on getting to compound ideas, if you will, and more money being spent taking great ideas, which have been validated in silico as they say, through the development pipeline, ultimately driving more manufactured and commercialized therapies. And of course, that's where our business is. where we have the most volume, of course, the most share. And so we view this really positively. But we have to say that we're at a low activity level currently in the discovery phase of the biotech market.

Okay. Good color. All right. I'll pass it on. Congrats again, Matt and Matt.

Next, we'll go to Tycho Peterson with Jefferies. .

I want to probe a little bit on the guide. You're not flowing through the entire EPS beat. I'm just curious if there are areas of maybe incremental caution in the back half of the year.

And then on 4Q specifically, you've got a step-up in Life Sciences, I think kind of ramping to mid- to high single digits and the comps there are more difficult. So, just curious if you can get us more comfortable with that in particular. Is that contribution from the new SCIEX launches at ASMS.

Yes, that's a piece of it. And maybe I'll let Rainer kind of take the second half piece because you can talk about some of -- like you said, some of the new stuff that's out there, but maybe I'll take the first question, which is sort of on the guide and the flow-through.

So maybe I'm kind of sort of thinking about the guide like this. So we got off to a pretty good start in the first half, both on the cost actions, like I said to Scott earlier, I feel very comfortable where we are on those. We had a little bit better FX as well. Probably FX was maybe a $0.05 better for us. And like I said, I think we get the full cost actions, which is probably $0.15 or so. And so I kind of look at that, say, $0.20, and that's what we flowed through to the full year. So all the cost actions and the better first half FX. So we started in January, we call it, [ 760 ] as sort of the range, put the $0.20 on top of that, and that's how you get to kind of the high end of the range now at [ 780 ].

So but there are two other things here that I think you're right, we have not flowed through fully. And I think maybe the easiest way to think about it is, one, we had a good start in respiratory in Q1 and Q2. And two, FX. In the second half, that's going to be much more favorable than we thought in January. And so I think the combination of those two maybe probably other $0.15, $0.20, that has not flowed through. And the reason we haven't flowed it through is one, we're going to maintain the full year respiratory guide at $1.7 billion to see how that plays out in Q3 to Q4, that is a variable number. And that FX is the same, right? That could fluctuate and come back. That has made a significant movement since January, and could very well come back. And so we've decided now to hold back on respiratory, hold back on the second half FX and just kind of see what happens, especially in a pretty dynamic policy and operating environment just felt like we'll sit and see how things play out before we commit to that final $0.15, $0.20.

And to the second part, Tycho, I mean, what we're really saying is the first half in the Life Science segment was down low singles. We expect the full year to be flat. So the second half needs to be up positive low singles. And what we're really seeing there is the impact of three factors. The first is -- and we're actually not assuming a significantly improved activity level. So in genomics, we expect to see better comps as an example. So in China, we're seeing -- it's incrementally firmer with some stimulus following through. And then as you suggested, we have a number of new product introductions that are gaining traction in our funnels here in the first half, including SCIEX and Beckman Coulter Life Sciences, and some others. And so we expect those to gain traction here in the second half.

Maybe to put some numbers around to [ 40 ], Tycho, your sort of best step up from 12 to 22 to go from down low single to up low single life sciences. Call it, the $150 million roughly. And I think if you are kind of trying to bridge that, I would say that genomics, again, remember the first half, we had those two large customers really fall off. I think that's probably 1/3 of it. I would say that we are assuming China -- especially China tools with some comps -- easier comps and a better funding environment. There's another 1/3 of it. And then lastly, new products and kind of other things is the final 1/3. So 1/3, 1/3, 1/3 between China, genomics, new products, other. That's sort of what we're assuming and are baked into the model from step-up from 1/2 to [ 2/2 ] of roughly $150 million.

Okay. That's helpful. And then one quick follow-up. It sounds like you're not flagging any incremental headwinds on volume-based procurement. Obviously, one of your peers did last week. Maybe just get us comfortable that, that's not a lingering issue that could get worse.

In China, volume-based procurement and the reimbursement changes was essentially what we thought in Q2 and for the first half of the year. In fact, volume was consistent with Q1 and our expectations. So there's really no change to our expectations of $150 million adverse impact from volume-based procurement in 2025.

Now under the hood there, there's been some recent policy changes, which largely did not affect us because they're really geared to different aspects of the testing menu which we actually don't have. So it's possible that different companies experience different things here. But for us, we saw the quarter develop as expected. Volumes were consistent with Q1, and we don't have a different perspective on the $150 million here for the year on volume-based procurement.

Next, we'll go to Vijay Kumar with Evercore.

Congrats to both Gugino and McGrew. Maybe one on biotech for you, Rainer, guidance, 7% was maintained. You look at your second quarter and third quarter assumptions here for 6% implied growth for Q4 should accelerate to high singles, maybe 8% to 9% ish. What is the guide assuming for Q4 acceleration in biotech? Is that maybe China coming back small biopharma coming back or maybe exiting turning around?

No. I would -- I think I would say that we've got high single-digit core for both Q3 and Q4. I don't know if there's any real material changes that we have tried to bake in a certain geography or in equipment or anything like that. I would say it's -- we're just assuming a fairly steady environment, which is -- we've seen really good double-digit type growth out of s equipment has been pretty muted, and we expect that to continue here throughout the back half of the year as we work through. So I don't think it's a massive change for us.

Yes. This is not about a step-up in activity level. This is just the normal seasonality, Vijay, that you see with Q3 being sort of the lowest level of activity in bioprocessing and some other markets as well. And then as the fourth quarter kicks in, that's always been and continues to be the largest quarter for us from an activity level.

Understood. Then maybe my follow-up sort of related question here. Was there any pull forward either in academic channels or biopharma channels, I think that question comes up because of tariffs. Was there any customer of change in customer behavior. And I think given all of these macro situations, right, is this bioprocessing sort of high single sites now a sustainable number? Or this macro dose or sort of overhang when you think about '26?

So Vijay, we haven't seen any meaningful pull forward. We just haven't -- we're often asked and our numbers and our surveys and our customer conversations don't indicate that. We think the bioprocessing market at for years and the activity levels continue to confirm that this is a high single-digit growth market and that will continue now. As it relates to 2026, we obviously have still half a year ahead of us in what is a pretty dynamic operating environment with some questions that still need to be answered as I spoke to earlier, but it is our plan to provide some preliminary thoughts on 2026 for Danaher overall during our October earnings call. So we just want to see here how the third quarter plays out. And then in October, October will give you our preliminary thoughts on '26.

Next, we'll go to Puneet Soudo with Leerink Partners.

Just wondering, I know you talked about tariffs, but just I wanted to clarify, you previously sized at about $350 million in tariff costs with room to mitigate is supply chain and optimization. Can you talk to us about the updated number there? And just given the intra-quarter changes with U.S.-China trade policy and the $145 million tariffs going to now 30%.

Yes. I would say that from a number perspective, we're still at kind of a couple of hundred million dollars of exposure right now today. That's what we would think of -- as far as -- versus the $350 million, I mean, that obviously could change in very short order. As far as kind of China and the tariff there, we've got a lot of different things that we can do, both internally that we have control over and also other levers that were available to us within the quarter that we were able to use to effectively not have to charge our customers and tariff. And so we took advantage of those levers. And so therefore, from our perspective, as we've always said, we plan on offsetting all the tariffs and we only plan on offsetting them. if we have to pay it, we will try and pass that along somehow some way. But if we don't pay it, we're not going to try and pass. So that was a net neutral event for us in China.

Got it. And then just briefly on a question that is on minds of investors, just given the impact that has happened in the gene therapy market. One of your customers have seen suspension of their therapies from FDA on safety concerns. The question is how broad is the exposure to gene therapies. And I totally recognize that innovation doesn't come with risk without risk. So just how are you thinking about this risk overall and the exposure that you have with respect to Aldevron and also your -- the Cytiva segment as well?

Gene therapy, so AAV-based gene therapy, as you were just suggesting is really in the early innings, Puneet. And this is going to have its vacillations, two steps forward, one step back. Of course, what we just saw here in the news is a step back. But it's not to say that, that therapy is not a very interesting and important alternative here for all kinds of different disease forms that are out there. So specifically some genetic diseases. So I think as we think of the broader picture genomics is in the early innings and has the potential to be an exciting and effective treatment regimen.

Now as we think about our own exposure here across Danaher, we're not talking about more than a couple of hundred dollars. Keep in mind, we're a protein house here with really 85% of what we do focused on proteins. And of course, that's a well-established market, and that's what drives our business and our earnings. Now we typically talk about these things more narrowly. But if we think about our guidance, and you mentioned Sarepta here in Aldevron. Our guidance in the market is essentially playing out as we expected, but the Aldevron Sarepta revenue, we expect to be $30 million for the full year with a minimal contribution here in the second half. So our guide contemplated and did not expect significant revenue contribution from that particular therapy.

Next, we'll go to Dan Leonard with UBS.

I was hoping, Rainer, that you could elaborate on trends in China outside of diagnostics. It is that business turning a corner? And if you could elaborate further because you touched on it briefly a few times in the prepared remarks.

So our China business outside of diagnostics has been firming up the bioprocessing business has shown a slight growth here in the quarter. And we see the biotech and Pharma market there showing some more solid activity levels. So we do see that in bioprocessing. As we think of life science tools, we did see more stimulus activity and that's flowing through, not just to orders and revenues. It's still not at normal activity levels, but we do see it firming up. So we're encouraged by what we see here for those two businesses, and that's reflected here in our second half view. You'll recall Tycho's question here, the firming up of China in life science tools. is a part of that.

And just a clarification question for Matthew McGrew. Matt, did I hear you correctly that at current foreign exchange rates that your guide would be $0.15 higher?

With both the respiratory and the current FX, probably $0.15, $0.20. I'm not sure I'd say the guidance higher, but that's what the math would imply that we have not, if you would, not flowed through. between those two $0.15 to $0.20, and we haven't flowed that.

Next, we'll go to Dan Brennan with TD Cowen.

Ryan, I wanted to just go back to bioprocess orders, if you don't mind. I just wanted to confirm sort of Mike's earlier question, I think you said the book-to-bill was around 1 equipment more lumpy? Because I mean if I look back at the first quarter trends, I think you talked about the seventh consecutive quarter of a book-to-bill that was solidly over [ 1% ]. I'm not trying to nitpick just trying to clarify maybe that was related to consumables. Just maybe if you can expand upon that a bit.

This is -- so the trends are really very comparable here. I would tell you that this book-to-bill is not a perfect measure. And that lumpiness, especially with larger orders, sometimes does not play through. So what we see here is consistent with what we've seen in prior quarters. It's around [ 1 ]. And yes, we saw some lumpiness here in equipment and some larger orders. the activity level will be very comp.

Okay. And then maybe moving over to Cepheid. I know you had a nice quarter I think it was low double digits, ex COVID. Could you just speak to kind of what's baked in for the '25 guide? How we think about that low double digits continuing or changing as we get into the back half of the year? I know you gave some color in the prepared remarks, but any further color there would be great. Sure.

Well, as you said, overall, Cepheid had exceeded our expectations on a little bit better respiratory and double-digit nonrespiratory growth. And in fact, the nonrespiratory reagents grew low double digits in the quarter, second quarter. And we did see strength across the test menu with double-digit or better to say, or better growth in sexual health urology and hospital-acquired infections. And we actually expect that strong nonrespiratory demand to continue in the low to mid-teens for the full year. And the reason is we continue to expand that installed base, particularly at large IDNs that are standardizing across their network as they go a little bit closer to patients in their satellite settings.

And it just shows how Cepheid's strategy is playing out. I mean we see increasing menu adoption and utilization of the existing installed base, and we continue to expand that. And then with that, we see the pull-through of assays such as the hospital-acquired infections and urology.

And then lastly, this recent menu expansion around our MVP, so that's the multiple vaginitis test. That's up over 75% in the U.S. So we feel very good about the nonrespiratory portfolio continuing to track at higher growth levels, mid-teens.

Next, we'll go to Rachel Vatnsdal with JPMorgan for our last question.

I wanted to echo everyone's earlier comments and congratulations to both of the maps here. So my first question, I just wanted to dig on to some of the trends on bioprocessing equipment. You've highlighted that revenues were weak and orders were lumpy in the quarter, given some of that global trade uncertainty. But you said that the funnel remains strong as well. So if we look at some of these press releases on companies building on additional capacity, I just wanted to get your thoughts on how are you thinking about the timing of recovery in bioprocessing equipment given those dynamics? Are you assuming recovery in equipment in the back half of the year, on a revenue basis? And then how are you thinking about the opportunity for onshoring and reinsuring longer term?

Thanks, Rachel. Well, it is, as you suggested here that larger projects are in discussion. And there -- the decisions are being delayed certainly for the reason I talked earlier, trade policy, tariffs, a couple of other points. What's also important to note is that the reality of this is that it takes a number of years to build new Pharma manufacturing plants. And that building that capacity is going to take some time. So it's really too early to determine what all these large announcements will -- how they play out and when that money flows.

Now that said, I mean, Cytiva is very well positioned here to capitalize as these decisions start being taken and moved through their CapEx processes because of the breadth of our portfolio our scale and, of course, the global footprint, we can do this anywhere in the world. Now to your point earlier about what -- how do we think about the guide for '25 here. We expect 2025 is going to be a down year for equipment. And so we do not expect and our guide a significant step-up here. When I talk about the improved funnel activity, what we do expect here is the continued small capacity expansions that you see where the decisions are much easier to make an existing plant footprint. And we'll see, as we get to October here, we'll talk a little bit more about how we're thinking about 2026.

Great. And then for my follow-up, I wanted to dig on respiratory a little bit more. Do you raise the endemic rate on respiratory to $1.7 billion earlier this year. You typically see that split roughly 50-50 between the first half and back half. So just given you're tracking to $900 million at this point, that's slightly ahead of expectations relative to the $1.7 billion assumption for the year.

Now I know it's too early, and you guys are kind of pushing towards that 3Q call in terms of how you're thinking about respiratory assumptions. But just can you walk us through, would you consider revisiting that endemic rate as we get towards year-end would you potentially revisit it for a fifth time? And then can you remind us what are you currently assuming on that $1.7 billion number in terms of the mix on 4 and 1 versus COVID-only tests.

Yes. I mean I think the way to think about respiratory is, we've got a guide that is $1.7 billion that we've been kind of guiding to that really for the last probably 3 years, and it's been a little bit better than the last couple of years. And we are not -- that is not a number that we are completely sold to. I think if we start to feel as though that number is a little bit higher, we would sign up to that. And so I think we've had those conversations. I think I'd like to see how this year goes this year started in January that felt much more like a typical sort of typical respiratory season. Got to get a little higher for a peak higher there, but it followed a more similar pattern than we had seen before. And so I think if we can get another year behind us, we'd be open to revisiting that number for sure. And as far as the $1.7 billion, like you said, we're a little north of $900 million. We'll see how Q4 plays out. That's usually the big quarter, Q4 and Q1, as you know, and see also a difficulty with respiratory straddling sort of 2 years, does make it a little bit difficult. But, so that's kind of where we're at in 4 and 1, I think we're at this point, probably 75%, 80% 4 and 1. We do some regular COVID only typically mostly -- I shouldn't say No, a lot of it is in Europe, but there is some in the U.S., too, that we'll do that. But I mean, that's basically been our mix for the last couple of years.

Thank you. And I would like to turn the call over to John Bedford for any closing remarks.

Thank you, Margo, and everybody. We'll be around all day for questions.

Thank you. And ladies and gentlemen, that does conclude today's program. We thank you for your participation. You may disconnect at any time.