Thermo Fisher Scientific Inc. (TMO) Earnings Call Transcript & Summary

Hello, everyone. Thank you for attending today's webinar, Transforming Medicine with Expertise, Flexibility and Scale, presented by Thermo Fisher Scientific. I'm Dania McDermott, and I'll be moderating this webinar. Our speaker today is Chris Murphy, Vice President and General Manager of Viral Vector Services at Thermo Fisher Scientific. You can read his full bio on the left side of your window by selecting the speaker's tab. Just a few technical notes before we begin. [Operator Instructions] This webinar is being recorded and will be available on demand within 24 hours after the event. Time permitting, we'll follow the presentation with a Q&A session. [Operator Instructions] Okay. Now let's begin. Chris, please go ahead.

Thank you, Dania. Again, this is Chris Murphy of Thermo Fisher Scientific. Mike Shafer wants to send along his apologies. He was pulled away for some urgent business. So I'm going to take a few minutes today to talk about our expertise and flexible scale-up of manufacturing. And just first to start a little bit with Thermo Fisher as a company and who we are. We are -- really, our mission is to enable our customers to make the world healthier, cleaner and safer. And we're doing this through a workforce of about 75,000 employees worldwide, comprised of 5,000 R&D scientists and engineers. We're investing about $1 billion each year into R&D, and we generated in the last year, about $25 billion in revenue. I think what's exciting as well is because of the breadth of the work we do across Thermo Fisher, both in services, reagents, instrumentation, technology, there's a tremendous synergy we have across the businesses with regard to advancing science and making the world again, healthier, cleaner and safer. Getting used to the -- okay. And then just to talk a little bit more then about this Pharma Services Group, which we started as Patheon, and Patheon joined Thermo Fisher in 2017. Really, our idea here is to leverage our expertise in drug development, clinical trial, logistics and commercial manufacturing and create this really integrated workflow. And this idea that as opposed to going to company A then company B, company C with regard to getting certain services done, we kind of create a package that allows for seamless integration across the workflow to bring these medicines to patients in need. So with that, we provide a number of flexible business models. And we start really with discovery through commercial supply. And I think what's important to point out there is simply, we offer anywhere from drug product to API manufacturing to viral vector, which I'll talk a bit about today, clinical trial, logistics and a number of areas. And of course, I'll also talk about is that we also are able to bridge across Thermo Fisher into the technologies that they develop and create and take advantage of those in our business as well in our service business. And really, with that, we have in the Pharma Services Group, about 800 customers, over 800 customers, and 78% of those clients are really emerging biotech clients. So this is a really important point. Because oftentimes, you'll think you want to go after the big 10 biopharma companies, but in fact, the majority of our clients are the new and emerging companies. And of course, all the big 10 or however you want to describe them, they all started as a small emerging company, and we really believe, first off, that those are the companies that are probably innovating and have the agility, flexibility to bring new technologies to market faster. And in addition, we know that they will become eventually the next big companies or become part of the bigger companies that exist. So we think it's really important to help advance science and help advance these medicines that we're engaging with them. And of course, we're also working with the top 20 pharma companies. We have almost 1,000 -- over 1,000 molecules developed. We have over 100 products launched in the past decade. And 6,000-plus clinical trials since -- just in 2019 alone. So again, there's about 1 million patients that are being served by us every day, whether it's in getting a clinical trial package or whether it's getting a commercial product we fill in one of our fill/finish sites and the like. So we're very proud of that. Our people have a very strong sense of purpose in the mission that we're on to, again, make the world healthier, cleaner and safer, but healthier in this point, and it's exciting to see what we can deliver for patients in need. And we have about 3,500. So you saw the 5,000 on -- across Thermo Fisher Scientific and about 3,500 scientists, engineers, technicians within Pharma Services. We're serving 80 countries -- over 80 countries, and we have over 55 locations globally. So we're all over the world. What's really exciting is despite being a very large business, which can sometimes feel like a bit of a drawback, it actually is -- we're incredibly agile. And I think this sort of speed at scale is one of the mindsets we have across Thermo Fisher, is that we try to cut out a lot of layers in that, and we really try to work very directly with each other as business leaders as well as site leaders and the like. So it's a really fluid process. And it really maximizes the technical capability we have and the expertise we have across our networks. And as it comes to COVID, and of course, we're all managing through the COVID crisis across the world. In addition to running our operations and keeping business continuity because we make medicines that need to be made, even despite the situation with COVID because people still have diabetes and still need other cancer treatments and the like. We also are doing a tremendous amount on the front for COVID. And just some examples here are listed. I think -- we have over 100 active programs whether it's treatments or vaccines for COVID, just some examples are, we're supporting clinical trials, in the production, distribution, logistics for both clinical use but also compassionate use of some treatments to treat COVID. We're scaling up large volume production of therapies and vaccines to support future potential vaccines and treatments for COVID. We're supporting the development of new vaccines and the production of monoclonal antibodies in our biologics division, and we're providing granulation, manufacturing and packaging of therapeutic treatments in our oral solid dose division as well. So we're really excited by the opportunity. And again, our people are very passionate about the opportunity to really play a role in this global pandemic and make a difference for folks that are suffering and prevent future suffering from this really terrible disease. And we're investing to deliver more medicines to patients. And by the end of this year, $800 million will be invested to expand our capabilities in development all the way from development to commercial manufacturing. And I'll get into a bit more on the gene therapy side. We've just done an expansion, our St. Louis operation, a collaboration center and the like to increase capacity there. And you may have seen we just announced an announcement with CSL Behring for some -- a partnership with them. And just a little bit on that partnership. It's an opportunity to become a critical partner for CSL to meet their growing demand for biologics, accelerate their broader manufacturing objectives. It's a unique customer value proposition we can provide, and we can leverage our scale and depth of capabilities with them. And in this, CSL will transfer operations oversight of their state-of-the-art biologics facility in Lengnau, Switzerland, which will be complete later this year, and that facility will be a flexible bioproduction facility with single-use and stainless technology. And really, we'll be able to advance and expand our breadth of support for emerging or existing medicines to treat patients in need. So we're really excited about the announcement there with CSL Behring. So I'm going to transition over to Viral Vector Services. And just to start, a little bit on the industry, and I think many of you are aware of what's going on here, but I just think it's worth putting a few numbers up on the screen. I think one is 700-plus, and a lot of this data comes from the Alliance for Regenerative Medicine. If you get their reports, they're very informative, very detailed about what's going on, not only in gene therapy, gene-modified therapy -- cell therapies, but also cell therapy as well and regenerative medicines. So there's over 700 clinical -- new -- sorry, over 700 new gene therapies in development as evidenced by clinical studies that are underway. And what's exciting about the drivers for that, as you've seen and you've heard in the news, that these products are showing effectiveness. They're working. And whether it's a cancer treatment through a CAR T technology and gene-modified cell therapy, or whether it's in-vivo gene therapy, like the approval of Zolgensma last year to treat spinal muscular atrophy. These medicines are proving to be effective. And that's a huge win for patients, first and foremost, but also for an industry that's been going at it for more than 3 decades now. And just last year alone, 5 products were approved for this, and we'd expect a few more approvals this year. So what's happening, of course, is that the efficacy, particularly in unmet medical needs or untreatable cancers is such that our regulators are recognizing there's a huge value for people across the world with these medicines. And they've been very supportive and very collaborative in helping develop and try to, where we can, make, ensuring safety, of course, and efficacy is there, but helping really get us -- innovators get these products through the regulatory pathway. So what we're seeing now is a lot of guidances and regulations have come out or really more guidances versus regulations. But with regard to how to conduct these trials and really FDA, EMA, they're providing a lot of ideas on the roadmap to help innovate these drugs faster. So you've got a supportive regulatory environment. You've got drugs that are working. And then, of course, you've got a lot of investments. So last year alone, just in gene and in gene-modified cell therapies, you've had close to $8 billion invested. And the year before, I think it was even more. So the last few years, you've seen a tremendous amount of dollars invested here and of course tremendous growth in the industry as you're seeing. So really, we have all the right ingredients to bring these transformative medicines to people in need. And we're excited to be very involved in that process as part of Thermo Fisher. And this is just some graphs. I'm not going to spend too much time on this. This is probably just more to highlight some of the numbers here. And you can see that the predictions, and you may have heard, FDA made a comment a few years back. I think it was Scott Gottlieb or Peter Marks, with regard to the estimates and the number of INDs, for example, you'd see start being filed each year, starting, I think, this year, close to 200 a year. Never mind by 2025, the idea that possibly 5 to 10 of these drugs will be being approved each year. And you can see the pipeline right now, if you just look at 2020, again, there's about 600 on this chart, there's a couple of different data points for that. But you're going to see it rise to close to over 1,000 and 2,000 over the course of the decade. So a tremendous amount of growth expected. And you see here as well viral vaccines are included because, again, as you may have read that there are a number of COVID vaccine options now using gene therapy like technology, meaning adenoviruses that are replication incompetent to provide a gene of interest that can express a gene of the coronavirus to create an immune response. And then, of course, you see at the bottom, the number of trials in addition to the number of molecules. And to the right, look, it's a bit of an eye-chart graph. I think this is from an article in the BioProcess International journal. It just was to highlight the top graph just shows sort of a flat line, if we do nothing on build-out. And the bottom graph just shows in the blue line, if we keep building at the pace we're building capacity at. And the point is, when -- either way you slice it, when you look at the number of molecules, number of trials, really, we still have a challenge with capacity to meet what's expected in the coming decade. In the coming years. So it's really -- really kind of ties into Thermo Fisher's approach around capacity expansion. And you saw the $800 million, and a big portion of that will be towards viral vectors and gene therapy. But certainly, there's going to be an increasing need for capacity to support the manufacture of these very important drugs. And this is just, again, maybe to highlight, again, a pretty busy slide. On the left, I'm just trying to demonstrate that the platform of choice to make a viral vector, and this is presuming, for the most part, if you look at AAV, there's a number of platforms for AAV alone, but this is the other -- 4 other vectors that are commonly used. So rough estimate, 95% of gene therapy trials are using one of these 5 viral vectors. So there's a diverse number of vectors to be used depending on the size of the gene you want to insert, whether you want transient expression, whether you want it to be more integrated into the genome. So AAVs and Lenti, I'd say, are the most common ones. Lentivirus is typically being used for gene-modified cell therapies. But adenovirus for transient expression or as I shared for potential for providing a vaccine, that's still, of course, heavily used and then herpesvirus as well, particularly as an oncolytic vaccine for cancer. And then retroviruses are still finding a place as well. So the reds represent use of mammalian cells and transient transaction, the blues are producer cell line, the purples are sort of -- or the dark blues are really just using infection type processes, so like adenovirus, you can infect cells directly to make them. And the point really to make on the left is, there's not one platform for this. And it really still is, as much as we've been doing this, and I started doing this in the '90s, making adenoviruses and making retroviruses, the technology hasn't changed too much, and there really isn't a one technology fits all and depending on the dosing, which is kind of depicted on the right, which is just taken from a William Blair publication. If it's in the eye, you may need only 10 to the 13th vector genome or 10 to the 12th, but if it's a systemic treatment, you may need 10 to the 17th vector genome. So 1,000 fold, a 10,000 fold difference potential in the dosing requirements depending on the indication. So you've got this combination of different scales are going to be needed to supply markets, and the technologies are still quite varied. And many of the technologies on the left also still require animal derived components as well, particularly the adherent system. So there is definitely a need still at this point as this emerges more and more in terms of the production side, for deep technical expertise as well as flexible and scalable technology depending on the size of the market and the dosing. So that's kind of the point here. So a busy slide, but I think it tries to highlight that point. And then really, when we think about it, we're going to talk a little bit more about capacity here, and I know this slide at the beginning spoked capacity. But really, capacity alone is not going to deliver the promise of this. And we see it as really 3 other key elements, and these are sort of broad capturing of that, but you need people, they need to be very technical, or at least critical thinkers and problem solvers. And of course, there's a lot of drive and passion that comes with this industry, and I think that's an important ingredient as well as collaboration. On the technology side, it needs to be robust. It needs to demonstrate it can be reproducible. And it's got to be validatable and value added. So the point is technologies are emerging to support this, but there's a lot still to be learned on how to maximize yield and productivity from these processes that we develop. Quality is, of course, first and job one, along with safety, but it is something that has to be embedded in the culture. And we see that as a very big ingredient to complement capacity. And of course, capacity has to be flexible and adaptable. And frankly, it's got to be proximal to a workforce, which ties back to the people element. So we're going to talk about each of these sections for a few minutes because really, without the 4 together, it is hard to realize the promise of what these technologies can provide. So just to talk for a minute about people. I mean, when we think about our people and developing our people, it starts there and no matter how good your technology is, if you don't have good people, I think you're going to struggle probably a bit. And so we spend a lot of time thinking about our integrated talent management strategy. And really, it's about engagement of the employees along with a roadmap for their growth, particularly around making them feel a part of something in a winning culture, but also providing them with outstanding leadership. As they always say, basically, you don't leave jobs, you usually leave bosses and the like. And I think we really put a big emphasis on that. On the talent management side, we have a number of systems that go across Thermo Fisher that really enable us to develop our teams beyond just the work right in front of them. So beyond just being an SME and how to do triple plasma transfection, how do they learn more about quality? How do they learn about the technologies, reagents we use? And we have a great opportunity across Thermo Fisher to leverage that. So we think about data science on people and workforce. That's a key thing, and we've got to match our capabilities to the growth. So when you look at the growth of gene therapy, we're already thinking about what is it going to be like in 2025, when 5 to 10 products are being approved per year. And what does that workforce need to look like? Because, again, that's a massive growth in a short amount of time. We've got to develop these core competencies on technology that's still a bit of a moving target. The processes aren't quite defined yet, which is the winning process. It's likely to be figured out in the next 3 to 5 years, which is the most common process used. But right now, it's still a bit of a race and there's still multiple platforms. We've got to leverage technology in the training. We have infrastructure around alternate and virtual reality training, for example, that can teach people how to do transfection and things like that, and we're looking to leverage those technologies in our plans. And of course, onboarding is key. The hiring, when you look at the growth -- those charts about the growth of the industry, your workforce is going to follow that trend and that trajectory. And we spend a lot of time thinking on the onboarding. We call it the door-to-floor sort of mindset about how do we get folks in the door. They come with some experience, but many are coming from different technologies and don't necessarily know how to do viral vector manufacturing. So how do we improve our training so that we can get them to be effective in our operations quickly? And again, you're not going to realize capacity, and we've seen this in our own operations. You can build out large facilities. But it's -- your headwind will be potentially your workforce if you're not getting them trained and onboarded in a really effective way. This is meant to be a complex looking slide because it is -- these processes are relatively complex. I think each unit operation is not super complex because it's been used, most of these technologies have been used already for biologics, manufacturing, recombinant proteins and monoclonals. However, it's a bit harder to measure virus throughout the process. And the quantities you're generating are tend to be much smaller yields versus protein manufacturing. So when we look at the complexity of these processes and we think about things we'd want to have in a process, right? How do we make it standardized? How do we have well-characterized materials? And how do we make it as simple as possible? How do the analytics complement the process itself? And of course, does it align with expectations from our regulators? Cost effectiveness will continue to become a point of concern, given it needs to be giving yields that will be able to supply larger and larger markets as these medicines become -- start to show the potential in larger markets and the price tags you've heard for some of these medicines, $1 million, $2 million a dose, that will probably become untenable as you get into markets that are much larger, for example. So we think about the development of a turnkey platform that really can leverage our deep technical understanding of making viruses, which we've done in our Florida operations for close to 15 years now. And now I've been doing in the Massachusetts area for over 3 years now. The -- how do we take advantage of this unique value proposition of Thermo Fisher and develop some turnkey workflows that can really expedite folks getting to market. The one thing I'd point out that has been almost a nice challenge to have is because these medicines have been quite effective in early clinical studies. And because the regulators have provided guidance to innovators that, look, you may want to have your Phase I trial be ready to quickly go to a pivotal and potentially to PPQ quickly because the clinical indication could be -- you could be showing efficacy early. It puts a lot more pressure on the CMC. So we're finding it's almost inverse now from the old days where maybe clinical development was typically the longer road, and you had more time to get your CMC right and get your process developed and robust. It's a bit -- clinical development tends to seem to go a bit faster now, leaving a little less time to be able to develop the process and make it robust and get the analytics right. So we're thinking more and more about how do we enable innovators to be able to have a process that could be ready to go-to-market quickly with matching analytics and really reduce time and cost to bring these medicines to patients that need them. And this is, again, another somewhat complex slide to point out. If you look at the top, this is sort of a standard sort of workflow to make a virus. And again, it was depicted on the previous slide. The little posts here just reflect businesses, divisions within Thermo Fisher that are playing a part in these steps on the process. And already, we were formally Brammer Bio. We were acquired just over a year ago by Thermo Fisher Scientific, and we had deep expertise, and we had capacity but what we didn't have was access to the single-use technologies that Thermo Fisher has, the reagents, the services like clinical trial division that could really make integrated workflows plus take advantage of top-class reagents and instrumentation and process equipment. So we see this as a really unique proposition for innovators to leverage by working with us, so we can take advantage of. And again -- and frankly, even fill/finish is a simple one. It is more specialized at making virus. The fills are much smaller volume. You have to be very innovative in how you think about your release testing strategy. You've got to have BL2 type facilities for filling these products. That alone is something that needs expertise, but it's complemented by deep experience we have in parental drug manufacturer across our network. So that's just an example of that. So we again see these -- this as a great opportunity for us to help innovators realize the potential of these medicines. On the quality side, it's foundational. And really, we do focus on the culture. Culture tends to be an outcome of leadership and the leadership view on quality and the way we walk the walk as it were. In addition, it's driven by strong systems and processes. So on the left, you're looking at sort of this idea of how we think about our sort of infrastructure on quality, about phase appropriate GMPs, how we work with our customers on quality agreements and really are always, because we get inspected across our network anywhere from plus-30 to plus-50x a year by all sorts of regulatory authorities, we're able to leverage that knowledge that we get from those inspections, which are always value added. There's never a bad inspection because you always learn something from an inspector about your operation that you need -- you can improve on, and we're able to leverage that and keep up with the best practices, of course, and there's an underpinning of a quality infrastructure. But really, the mindset, as evident by -- the term we use is quantum quality. It's how do we get a 0 defect culture? How do we have a mindset -- it's not about being 0 defect, meaning you're going to have challenges, of course, that's the way this business works. But how do we go into every operation, thinking about have I made sure I've error-proofed this, have I made sure I've done all I can to prevent the error from occurring. So these are these things like medicinal minds, which is, again, safety and quality, first and always, with the procedures being simple and standardized. This idea of proactive preventative action. So this is sort of things like we do like pre job briefs and the like to help with staff. Your people on the floor that are turning valves or splitting cells, they -- how do you make them -- how you set them up for success every day? And how does every leader in the organization make it as simple as that, that they understand what they need to do that day. That's really important to us. And then the training, as I indicated before, on the people side, there's a nice integration of development of staff into future leaders, but also there just practical training on the floor. And again, we're leveraging new technologies as part of quantum quality to deliver on that. So then just a bit on capacity. And this is a quick look at our Viral Vector Services landscape of capacity. So in Florida, Alachua, which is just outside of Gainesville, Florida, we have what would be described as our center of excellence for process and analytical development as well as clinical manufacturing. So this facility was, of course, part of the Brammer network, but also prior to that, part of a company called Florida Biologix. It's been in operation over 14 years. It's done over 150 different projects. We generated hundreds of lots of clinical materials. We supported some late-stage trials and the like. And really, it is just part of our start here, stay here. We're bringing in companies and apologize if you hear sirens going. It's not for me. But the -- this is where a lot of companies start with us, and we help them develop their processes and robust analytics and of course generate first-in-human materials. Which then can be transferred to one of our commercial operations. So our Cambridge facility was the former Biogen -- I think it was their first commercial manufacturing facility, if I'm not mistaken, in Cambridge right in Kendall Square. We acquired that in 2017 as part of Brammer, and we converted that 5 by 2,000-liter stainless facility to a single-use technology facility with 10 drug substance suites and 2 fill/finish lines. So really excited by that operation. It's online. It's been producing clinical and validation batches for customers now for over a year. And we expect to have our first license in that facility late this year, early next. So really exciting. And what's been great about that as well, it's an exciting story in that if you know the address, 250 Binney Street, that had seen the launch of Avonex, I believe, and some early Biogen products. So we hope to see that see a new life, 20 years down the road, launching new gene therapies. So we're really excited to get that second life for the site. And some of the staff we have actually were there when Avonex was launched. So it's pretty cool. And there's also a -- Somerville, we have a -- which is next door to Cambridge there. We also have a nice state-of-the-art facility for warehousing. In Lexington, which is about 18 miles outside of Cambridge, we have another commercial site, another 9 drug substance suites. And again, similar technologies, but mostly focused on late-stage clinical and commercial manufacturing. And now we'll speak a bit more about our Plainville sites. So we would have announced last month the acquisition of a close to 300,000 square foot facility just outside of Boston, South of Boston, a place called Plainville. It's not far from where the Patriots play football and Wrentham, if you know the Wrentham area. And I'll talk a bit more about that facility, but that will come online in 2022. So really, our focus has been on, as I said, we need to build the capacity because capacity will become limiting if you don't have it. We've been always pretty much ahead of that curve. But what we've really been focusing on is maintaining and building on our expertise and the quality of our leaders and our people because those are the folks that will realize the promise of capacity and of course, these medicines. And of course, that also creates a lot of flexibility and agility in your operation when you have the best people. So just a bit on Plainville. Again, 300,000 square foot manufacturing facility. We're going to build it out in phases. First phase, we'll have 10 drug substance suites, plus a couple of fill/finish lines, including commercial scale, BSL-2 fill/finish capability. One of the things I'm super excited about is a large engineering lab we'll have there, where we can run -- we'll be able to run at scale, so up to 2,000-liter scale, engineering pilot batches with our customers versus doing them in GMP suites and eating up GMP capacity for more development type work. We think that's going to be a critical need for our customers, given that the yields I already spoke about earlier are going to continue to probably increase as we find these indications that have such systemic administration. And of course, these are proven to be -- these gene therapies are looking to be effective. So we're excited by that and the ability to help clients develop and fine-tune their process in a non GMP environment will be really exciting. It'll also help with training and also help with collaborating on new technologies and also bringing our turnkey workflows to life at scale. So when we look to the feeder system coming out of Florida on the turnkey platforms, we go into this engineering lab. We're going to equip it with digital technology. We're already looking at using -- for some of our more standardized processes, manufacturing execution systems, electronic batch records, and we expect to have those type of systems, along with top-class quality enterprise systems like Documentum and TrackWise, they'll all be integrated and incorporated into this facility. And of course, the location is an important thing to point out, we weren't fixed on staying in Massachusetts, but we did do a scan of all North America when we thought about this third commercial facility and the #1 thing for us was access to a workforce was a big part of our thinking. And really -- and of course, there's a number of other factors in that analysis. But I do think one of the important elements there simply was, we knew that if we were close to our existing commercial footprint, we could be seeding this facility with leaders from those facilities to help start it up plus Massachusetts, of course, has a great history of biotechnology. It's the leader in biotech, in my view, sorry, Bay Area folks. But either way, there's a lot -- there's a really strong workforce there that we can leverage. So it doesn't mean it was the only answer. There's a lot of great regions, including the Bay Area that we could have considered, but there was a strategy behind locating it here so that every one of our commercial sites is within an hour's drive of each other. Plus very close to Thermo Fisher world headquarters, which is really exciting. So again, capacity is available, and that's something that we know we don't want to have to tell clients, you might have to wait 12 or 18 months. We have it ready now, and we're here to support the innovators. And look, just to summarize, and mindful of -- got about a few more minutes here. I've talked about these areas. There's just some numbers here underneath each of these sections are more specific kind of to avoid a little bit too much of a marketing campaign here. I just want -- I'll take a few minutes to just reflect on this. I think that what's exciting is, I was working on gene therapy back in the '90s and incredibly brilliant people have been working on gene therapy since the late '80s even. And Richard Snyder, who was the former CSO of Brammer and Dr. Rich Snyder, who's now heading up our Science and Technology Group at Thermo Fisher, he's one of those scientists. And what's exciting is that there have been folks working on this for decades now that really understand the science and deeply understand the molecular biology aspects of it. And I think what's been great is that we've had that capability in our Florida operation through projects listed above -- or sorry, on the slide. What we're doing now is really complementing that with the commercialization capabilities we've developed from folks that we hired into our organization from big companies like Genzyme and Biogen here in Massachusetts, along with Thermo Fisher and Patheon's expertise across this. So what's really great is that we're kind of converging on the ingredients you need to really be able to commercialize these drugs. And that is our focus. We're happy to support and will always be supportive of clinical studies, and we know that's an incredibly important first step. But the ultimate goal is to get these medicines to people that need them because they're working. And that is our focus. Our belief is we have to get these to patients. We're not innovators. We are just service providers, but we partner with our customers to help them realize the benefits of these drugs for the patients they serve. And of course, we feel a strong responsibility for that. And through this as well, we see an opportunity through our scale and through our integrated offerings as well as our just unique proposition of all these technologies across Thermo Fisher, we should be able to help in the fight to reduce the cost of these medicines as well through improving on yield and improving on the scaling factors for these technologies. So we're really excited to be part of this mission to transform medicine across the world. And then just with that, just to kind of end on this last slide, and that's the [ tube saying ] Chris and Lauren, [ tube saying, ] whose daughter's in that picture suffer from CF. And I've met Lauren, she's an amazing person and amazingly strong. And I just am always happy to see those smiling faces because they really are incredibly happy and they benefited enormously from the technology that our companies develop for whether it's treatment of CF or other unmet needs. So we take pride in our mission, and we enable our customers to make the world healthier, cleaner and safer. And I'm excited to say that we partnered with Girls Inc. to provide mentoring and STEM education, leadership activities, for school-aged girls. And for everyone who attends, who signs up, we're happy to report that we're donating funds to help provide valuable programs and services through Girls Inc. So I want to thank you for your attendance and participation in this, simply for that. But also for your continued commitment to serving the patients that you're developing your medicines for, because you're doing a really, really important thing and is particularly accentuated in this challenging time of COVID. So with that, I think I'll stop there and I'd be happy to take any questions folks may have.

[Operator Instructions] We have a lot of great questions already, and we'll try to get to as many as possible. All right. So here's question one. "What emerging trends or applications do you see in the coming -- do you see coming ahead for gene therapy?"

Yes. I mean, I think maybe just on the more, I'd say, clinical side. I think you're seeing a lot of great data coming out of gene editing. And as a way to correct once and for all the mutation or mystery that's in the genome of the patient itself. So I think just from a -- it's not so much a trend per say because that work's been going on for a while. But I do think as opposed to providing a therapeutic gene that could be expressed to compensate for the incorrect version of the gene in a person's body, you will see probably more and more work towards this gene editing approach, which kind of fixes the -- or corrects the mutation once and for all. So I think that's really critical and there's some really exciting work going on by many companies on that front. I think on the technology side, clearly, there's going to be -- that money I spoke about earlier and the amount of investment and the number of big companies that have already have tremendous maturity with things like monoclonal antibodies, recombinant protein production at scale. I do think you're going to see a lot more engineering put into these processes to increase scalability and yield and efficiency. It's sort of akin, in my mind, to where monoclonals might have been at from a yield perspective in the late '80s, early '90s. So I do think you're going to see a lot of push towards the scaling and the increased yields from the process intensification of the processes through technology and through more engineering approaches, I think. And I do think you'll also see more and more companies moving away from animal derived components for 2 reasons: of course, one is, there's a safety element to that -- or safety concern with that with potentially bringing other viruses into your process; but also just from a cost and process robustness perspective. There's a lot of variability in those poorly characterized reagents. So I do think you'll see a move away from animal-derived components.

Our next question, "how would we go about reducing the complexity around realizing new medicines, especially for vaccines due to mutations such as COVID-19."

Well it's a great question. Yes. Well look, and I'm only -- I'm certainly not an expert in that answer for sure, but I'll just give you maybe an opinion or review. I think we have to acknowledge first off that the value of biologics is that they are close -- as close to being made by your own body as anything. And because of that, they have been proven to be, I think, really effective, right? And then by design, they are really complex. So I do think that there will be a limitation to how simple we can make these processes just given the nature of -- they tend to be more effective and more specific the more we kind of design them in a way to do that, and that often requires a cell to manufacture your own cell often in a way that gives it the right modifications and the right packaging that your body would normally expect. I do think that, as I just described in the last answer, as we put more engineering to this and focus on things like the mixing and all that, we may find we can get more bang for our buck and reduce the amount of labor to get a certain number of doses from a process. So the processes will probably continue to look a lot like recombinant protein or monoclonal antibody processes. Quite honestly, they don't look that different. I do think, though, the key for me and the complexity of these is more getting more yield from the process, and that will actually make it more accessible and of course drop the cost. So I think the complexity will never get any better than you'd see for monoclonal or recombinant protein, but I think we're a few years away from that.

Our next questions asks, how would you recommend scaling testing with limiting factors like reagents and lab staff capable of tech?

Okay. Let me see if I can understand the question. So sorry, the scaling up of the testing? Is that the question? I'm sorry, I'm a little...

Yes. How would you recommend scaling testing with limiting factors like reagents and..

Well here I can see it now. I can read it now -- I'm sorry about that. I finally figured it out. All right. Yes. I mean, I think this is a challenge, right? And I know the trick -- the things I've seen in the past are more batch in the testing per as usual, right? So meaning if you can -- if your process can allow you to kind of combine multiple samples at once, you can certainly reduce some by depleting your standards, which can often be very valuable. And the reagents, because you're only running the standard curve once. So I don't think there's sort of a batch in testing. The staff, that's a different question. And I think, of course, as we talked about, I think the training, of course, is essential and people are #1, particularly in anything you do but [ analytics ] in particular. I think you've got to maximize the training opportunities every time you run the test. And that would be my view. So you've got to try to batch as much as you can and then maximize the training every time somebody tests to make sure more and more people are getting a more hands on, real life training. And I know that's a little hard right now given social distancing and the like.

That is true. Are you able to hear me okay, Chris, because there's a little interference on the line there when you were answering the last question.

I can hear you fine. So maybe I'll just adjust my volume, see if that helps.

Okay.

Can you -- you can hear me better now?

Yes. Now you sound crystal clear, so that's wonderful. Here's our next question. How are partnerships evolving between sponsors and contract service providers like Thermo Fisher?

Yes, it's a great question. I can tell you that it's not one size fits all. I think what we've learned is -- when we were Brammer, I think we kind of had a couple of buckets. It's sort of the pay-as-you-play sort of thing. We'll make -- you give us your molecule, we'll make you a clinical batch, and you use that. If you want more, you come back. Or you kind of take capacity and we sort of reserve capacity for you and you pay for that capacity to be available and it's always available. What we're finding is, each has its own merit, but it really depends on a number of key factors. It sort of depends on the volumes you're going to need, it depends on if -- what stage of development you're at and the like. So I would say the best way to describe it is, the flexible ones are more and more in play for us. So meaning, it's not like you're locking in that you have to -- we're going to hold capacity for you for 10 years, and it's always there for you, but you're going to have to pay for it, whether you use it or not versus more flexible structures, right, that reflect where are you really at on your clinical development timeline. And how do we complement that? So it's kind of becoming more and more complementary because, frankly, we're not interested in being landlords. We don't want to just have somebody give us dollars for a suite. Because we want that suite to be maximizing potential to advance these medicines. And of course, our customers don't want to just pay for a suite they don't use. So I think we're finding the flexible structure is -- and that can vary in a number of flavors. This is probably the way we're going to see more and more of our contracts going towards.

Cool. Let's see what we've got here. We also got a thank you for your response to the question about reagents. So it seems like that was -- yes, that was great. Okay. Could you share a bit more about your global COVID-19 response and its impact to your operations over the past few months?

Yes. So -- and I think the question -- I'm going to focus this question more on just how we've managed it in our operations. I mean, I think I already shared a bit detail on the ways we're working with innovators and companies, both whether it's on testing kits or 5 million kits a week or different projects we're doing. But more on the business continuity side. One of the things across Thermo Fisher, there was a task force formed in January on COVID because we had an early read, of course, because we have operations in China. And of course, China was hit first and so immediately, we mobilized as a corporation. And there was a North American task force and a number of -- regional sort of task force. And what was really great about it was the level of control and I guess, the sort of dynamic nature of it. So what I'm getting at here is simply we knew every one of our plants had critical operations that needed to keep running. We knew safety of our staff and colleagues were -- was job one, right? So we needed to do that first, but we also knew we had to try to keep things running. And so we focused in on what a lot of companies have, which was simply things that really have proven to work, things like social distancing, getting people to work from home, only critical staff on site. We had to cut out visitors. We moved quickly to technologies that support people being in our plants, and many of you on the phone, I know have done this as well. Pretty impressive. We've hosted regulatory inspections with these technologies, had many customer virtual tours. And they work really well. But I will say, we were able to maintain our operations pretty much seamlessly. But still a large percentage of our workforce is working from home. And in fact, I'm sitting in my office here, and I'm probably the only one on the floor right now, particularly on a Friday. But I do think that -- and with many companies, our focus was on making sure we had, across our network, the PSG network, sufficient PPE to keep operations and keep our staff safe. And we keep -- and it evolves. I think for everybody, this has been evolving. There's temperature testing. There's a number of things. But we're pretty -- as I shared before, there's just sort of a speed at scale. Really impressed at how Thermo Fisher was able to mobilize across 75,000 colleagues and in 55 countries with a response that's been relatively consistent. Of course, we have operations in some areas that have been harder hit than Massachusetts for sure, and we've learned a bit from those operations as well.

Thanks so much for sharing that with us, Chris. So that was actually our final question. We've had a lot of great questions today. We couldn't get to them all. But we'll definitely do our best to get back to everyone who submitted, personally, after the webinar. Just as a reminder, this webinar has been recorded, and you will be able to access the recording within 24 hours using the same audience link that was sent to you earlier. Thank you for attending this FiercePharma webinar, and submitting so many great questions. I'd like to thank our speaker, Chris, for participating and Thermo Fisher Scientific for presenting today's webinar. Thank you all again for joining, and we look forward to seeing you at future events.

Thank you.