Thermo Fisher invests $2B in US manufacturing and R&D, works to offset impacts of tariffs
Thermo Fisher Scientific is making a $2 billion commitment to U.S. manufacturing and R&D over the next four years, as the life sciences tools and services company looks to mitigate the effects of tariffs in a challenging macroeconomic environment.
Company executives addressed the “uncertainty” in the macro environment driven by the current U.S. policy focus of the Trump administration, including tariffs, during a Wednesday earnings call.
Thermo Fisher said U.S.-China tariffs are expected to cut 2025 revenue by $400 million and adjusted operating income by $375 million. CFO Stephen Williamson told analysts on Wednesday’s call that the tariff rates are “so substantial that they’re likely to significantly reduce the volume of trade between the two countries,” while increasing the cost of China sourced parts and subassemblies.
Leerink Partners analyst Puneet Souda in a note to investors wrote that Thermo Fisher management’s assumption is for existing tariff rates through the remainder of the year of “125% U.S. to China, although recent White House headlines suggests upside.”
Williamson said the tariffs will impact the sales of Thermo Fisher’s products in China that are produced by the company’s U.S. facilities. He added that non-China tariffs are “increasing our costs where we directly import items into the U. S.,” which will “also likely increase the cost of many items that we buy in the U. S. that have an overseas content.”
CEO Marc Casper said Thermo Fisher will be able to “offset a large amount of the impact of the macro changes in 2025 and more fully offset them when the full impact of our mitigation actions is realized next year.”
Souda in his note to investors called out specific Thermo Fisher mitigation efforts such as localizing region-for-region manufacturing, sourcing materials from local suppliers, and “cost-out” actions.
While Casper said a “small minority” of what Thermo Fisher manufactures for China is made in the U. S, he told analysts that “our assumption is effectively it goes to zero until we can mitigate supply chains — which we can do quite aggressively — but this takes some time to move production to other sites.”
When it comes to flexibility in relocating manufacturing, Casper touted Thermo Fisher’s global footprint.
“We have scale facilities in every major geography — they don’t do everything that we do, but the capabilities are robust,” he said. “We have a lot of twin factories where the factories do the same thing in different geographies, so our ability to move with speed here is enormous.”
$2B investment in US manufacturing, R&D
Thermo Fisher has 64 U.S. manufacturing operations in 37 states. Casper on Wednesday highlighted the company’s strength and positioning in the pharma services market, which he said is “seeing a lot of interest in leveraging our scale U. S. manufacturing capabilities.”
Of the $2 billion investment planned over the next four years, $1.5 billion is earmarked for capital expenditures to enhance and expand U.S. manufacturing operations, while $500 million is slated for R&D.
Thermo Fisher’s investment is meant to add capacity for its pharma services, analytical services or laboratories, and additional R&D in the U. S., according to Casper. “We just believe that there’s going to be more activity here, whether there’s tariffs or not.”
The company provides a range of pharma services including active pharmaceutical ingredients (APIs), biologics, viral vectors, cell therapies, formulation, clinical trial solutions, logistics services, commercial manufacturing, as well as packaging.
At last month’s DCAT Week in New York City, Jennifer Cannon, president of commercial operations for Thermo Fisher’s pharma services, acknowledged that it’s “an apprehensive time” from a geopolitical and funding perspective. However, Cannon said the company is making strategic investments in pharma services to “support growth in our capacity and capabilities across a really wide range of modalities and drug formats.”
Casper on Wednesday said the one of biggest areas of focus for Thermo Fisher’s pharma services business is on its fill-finish capabilities and ramping up production.
“We have new lines coming in. We’re going to have even more lines being added with the additional investments in the coming years,” he said. “So, it’s a pretty exciting time in pharma services.”
NIH funding challenges
Given the Trump administration’s recent federal funding cuts and freezes including the National Institutes of Health (NIH), Williamson on Wednesday said the largest impact is likely to be on Thermo Fisher’s academic and government customers in the U.S.
“We now expect that purchases to be more muted in 2025, especially for instruments and equipment, as we evaluate the impact of potential changes to government funding and work out how to access new funding sources to continue their critical work,” Williamson said. “We’re baking into our guidance a lower level of clinical trials work also related to vaccine studies.”
As a result of changes to U. S. policy from the Trump administration, which could postpone NIH-funded clinical trials, Thermo Fisher has reduced its 2025 guidance midpoint by $500 million of revenue and $150 million of operating income.
Within its clinical research business, Casper said the company has “seen $200 million of studies canceled or put on hold, specifically vaccine,” while noting that “about half of that is directly funded by the government through innovators, and about half of it is just from the innovators themselves.”
At the same time, Casper offered a measure of hope when it comes to NIH funding. “The next step,” he said, is what happens with congressional appropriations in the budget. “Congress has historically been strong supporters of NIH. We’ll see how that plays out.”
