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

Okay. Thanks, everyone, for joining us this afternoon. Very pleased to have the CEO of Thermo Fisher Scientific, Marc Casper.

Marc, this is going to be an exciting call. Just given the 8-K, I've been trying to do some scrambling up, real-time math out here. I had my question list all set up. And so now I need to rejuggle them, but maybe let's start with the 8-K, Marc. I mean 40% organic Q4, that's really impressive, quite remarkable, in fact. Maybe perhaps talk about when I look at Q3 of 34%, Q4 coming in at 40%. What did the base business do? And how much of the speed was related to COVID tailwinds, if you will?

Yes. So Vijay, thanks for hosting today and having me with you. It's a pleasure. And yes, so we did release an 8-K just to update the financials outlook for the fourth quarter. And we're on track to have another exceptional quarter, our strongest yet in terms of performance. And as you highlighted, 40% growth and that compares to the 29% growth for the quarter that we had outlined back in the third week of October. So what's changed, right? And it starts with the base business. If you recall, back when we gave our guidance for the balance of the year in late October, we talked about low to mid-single-digit growth in the base business. And that's now tracking to be at least solidly in the mid-single-digit growth. So the activity is picking up in a way that mid-single-digit growth plus is really kind of normal, right? That's normally where we are, somewhere between mid and high single-digit growth, so that's great to see. The COVID response revenue, which was our guidance originally was $1.75 billion for the quarter, actually is going to come in around $2.4 billion for the quarter. So that increase in over $600 million in revenue is actually being driven by 2 different things. The first of which is increased demand for the role that we're playing in vaccine and therapy. So we're -- we've talked about a large opportunity. I'm sure we'll talk more about it, but we actually have seen the fourth quarter actual revenue building nicely there. And testing demand continues to be extremely robust, and I'm very encouraged about what the outlook is for that as well because customers are placing meaningful instrument orders as well, which means that they're preparing for a high level of PCR testing going forward. So the combination of strengthening of our base business, strong COVID vaccine and therapy revenue, strong testing demand is putting us on track for 40% growth in the quarter that will be about 22% growth roughly for the full year. And with all of that comes a strong increase in profitability versus our outlook that we talked about in late October. We've increased our earnings outlook by $0.90 per share to $19.17 a share or 55% organic growth. So I gave you a lot of numbers, we can delve into all of that. But obviously, you could tell, we're very excited about how the company is performing and what our outlook continues to be incredibly great.

Indeed. I mean 22% organic in a pandemic year markup, I'll call it the change of guard here at Evercore. So perhaps my predecessor would have enjoyed to see a 22% organic, but I'll take it, it's impressive. Well, maybe let's dig into some of these pieces, right? Starting with the base business, Marc, strong mid-single digits here for Q4. And I guess when you think about the second wave of the rising number of cases, why is the base business so strong? Is this perhaps some delayed catch up or what's going on in the base business?

Yes. When I think about the -- what's going on, demand from the pharma and biotech generally has been very strong throughout the year and funding environment is good there and activity continues to be strong. And you're seeing more labs opening, more activity picking up generally across the economy. And lockdowns are different than the lockdowns that we talked about in April and May, and I'm not talking about we, Thermo Fisher, but we societally. And if you think about it, what lockdowns really, at least in the U.S. are getting at, is limiting social gatherings. But it's much less about economic disruption to businesses and some of that, obviously. But it's been much more about controlling the size of the Thanksgiving crowd and those kinds of things. And therefore, economic activity continues to steadily pick up. I think those combination of events is what's been driving the improvement in both in our industry and certainly Thermo Fisher.

Understood. I guess when you think about the COVID-related tailwind, $2.4 billion 4Q, can we parse out what was vaccine perhaps versus diagnostics? I'm assuming the majority of this was diagnostics. Or is diagnostic revenues or did they accelerate sequentially? And perhaps talk about sustainability of diagnostics, if you will.

Yes. So when I think about the role we play in testing as a reminder, we have our PCR testing as well as the major role we play in specimen collection for all lab-based tests, what we call viral transport media. And if I take that one first, which the viral transport media, demand continues to be very robust. We have large contracts from governments, and our factories are performing at a great level. So Q4 is stronger than Q3 in that area and that bodes well. On PCR testing, yes, it is stronger. Our outlook is stronger in this quarter than the last as is vaccine therapies. And so what's going on there with the second wave, if you will, we've seen very robust demand for PCR testing. And as I mentioned earlier, we're seeing very strong demand for instrumentation, which I think gives you a sense of longevity because customers aren't going to be buying instruments and going through the installation process and all of those things, if they weren't expecting to be running tests for the foreseeable future. So we're seeing very strong demand there. And our new product, which is Amplitude, which is our highest throughput system, we've seen very, very strong demand for that platform. And those are customers that are saying, "I want to be able to run 6,000 to 8,000 tests per 24-hour period on an automated platform," which is a lot of PCR tests, if you will, in a lab. And we're seeing very strong demand for that. So you're seeing the signs that testing will have strong demand into '21. And if you think about it, Vijay, testing is going to be the complement to a world with vaccines, right? Vaccines are not going to be across the whole population rapidly. It's going to take a while. So controlling the pandemic is still going to be based on information and PCR is going to play a major role in that.

And on, I guess, when you think about the broader role of testing, Marc, and to be honest, I don't think The Street or even I appreciated how strong Thermo, as in, I think one of the comments you made on 3Q call was perhaps this opening up a new vertical for Thermo Fisher scientific, if you will. How should we think about the sustainability beyond COVID, right, now that this -- I guess, the genie is out at the bottle for Thermo?

Yes. So when I think about -- let's talk longer term when COVID was a memory, we all want to get there faster than longer. But we will have installed an enormous number of PCR instruments across the globe. To give you a sense, we're shipping in a quarter about what we would normally ship in a year, which means that we're likely to have shipped 6 years' worth of instruments, meaning even if you just take over like a 6 quarter view, which basically says that you're going to have this incredibly modern fleet of instruments that customers have invested in. And you will see us help our customers use those instruments for infectious disease diagnostics going forward, both with lab-developed tests because that is one of the methodologies of public health labs and the large reference lab use, but also with our own content as well with respiratory panels, things of that sort. So the role that we played in the pandemic opens up a huge new opportunity for us. What's really interesting is, if you think about some of the early reports written about the pandemic, and we were not listed as one of the companies that was going to be the major player in the COVID PCR response. And there are others that effectively were listed in that way. And the truth is that we've had the largest role. And it's been an intense focus on our customers, scaling up manufacturing and then really making it such that customers feel that they have the right partner. I think that creates an enormous opportunity for us going forward because we stepped up where others weren't able to do so. And I'm excited about what's going to happen in our genetic sciences platform going forward.

And then 2 perhaps related questions on diagnostics before we move on to my favorite topic, vaccines. One, I guess, let's start with PCR, Marc. When you say that testing will be strong into '21, what is the right base to think about 2021? Should 2020 be the base to think about '21? Or maybe give some context of how we should be thinking about 2021 PCR testing volumes.

Yes. I mean the way that I think about next year, and obviously, we'll have a refined view in January when we give our guidance, right, is we're going to think about our COVID response revenue, and we're going to think about our base business. And obviously, we're going to have really strong momentum on the base business entering the year. And you will have certainly easier comparisons on the base business in the first half of the year. So that actually bodes very well for that aspect of what we do. On the COVID response side of things, you will see vaccine and therapy demand increasing for sure, right? I think that's -- and then on the testing side of the equation, there's a wide range of outcomes, but testing is going to have very strong demand. And I see scenarios where actually you could see growth off of the 2020. So obviously, we see scenarios that it can be -- it can wane later in the year. From my advantage point, it doesn't matter. It's our job to support our customers. It's our job to play the most meaningful role in supporting the pandemic response around the world. And coming out of that, we're going to be a much stronger company. So...

Bless you. I guess on the second part of that related question, Marc, was, there's been some talks about efficacy of vaccines, how long will protection last? And could serology now make a comeback? Could antibody testing looking for quantitative antibody titer levels make a comeback? And I can't think of many companies having the scale that Thermo has. Is that an interesting opportunity for Thermo or perhaps some comments on serology markets?

Yes. So we launched 2 serology tests and got the regulatory clearance, both in the U.S. and for both of them actually with the CE-IVD. And when there is a need for understanding the immunity profile, which will become much more interesting when vaccines are more widely used and there's a better understanding of even for those people who have the pandemic going close to 2020, what is that profile of how long immunity last, serology should play a role. And we launched a product that is really used on the open system platforms that are found in every lab. So it's very scalable, very economic for labs to do that and not capacity constrained. So should there be demand for serological tests, and we're very well positioned to capitalize on that demand.

And at this stage of the game, when you think about serology market, is there any numbers around manufacturing capacity? Or sort of what's been the customer interest? Or is that too early, I guess, to comment?

I think it's too early. I think we have very substantial manufacturing capacity, but the excitement around that class of testing, which was super high in the industry and certainly from regulators in the May, June-ish from recollection time frame, there's been less utility information yet because people don't know what to do with the information, right? If you think about PCR, I have it or I don't have. I'm very actionable. The fact that confirmed that I had it in the past, if we don't understand the immunity profile, it becomes a little bit more interesting, but not relevant yet. It will be. So we have the offering should demand be there, and we can scale up, just like we scaled up PCR testing.

Understood. I mean it's been fascinating. I mean some of the data coming out of Pfizer, Moderna, Astra, it's interesting. It's a varying level of efficacy, and it depends on how you cut the data. There is something certainly going on. I think all of these are pointing, I guess, supporting the view that '21, at least on the molecular side, PCR should be really strong. And if anything, there is a role perhaps for serology. And just remind us, Marc, serology, if it does play a role next year, that will all be incremental, like Thermo did not have a whole lot of serology revenues in 2020?

That is correct.

Great. And I guess, the -- you mentioned vaccine contribution in Q4. I know back at the Analyst Day, you guys had spoken about $1 billion of order book. Any updates on either the order book or what the contribution from vaccine was in Q4?

Yes. So we continue to work on 250-plus projects on vaccines and therapies. We're generating meaningful demand, obviously, in the fourth quarter for us to raise our outlook. We feel that will be certainly north of the $1 billion total opportunity. And based on the data that you're starting to see, as you just referred to on some of the vaccines, it feels like there's going to be longevity of vaccine revenue as well, which -- the longer this goes out in terms of how many people are vaccinated, obviously, that's going to scale our opportunity. So we haven't changed the total opportunity other than it's greater than $1 billion, and it's accelerated quite quickly in the fourth quarter.

That's interesting. And when you talk about longevity of vaccine revenues, is that just perhaps based on some of the logistical challenges we're seeing in terms of refrigeration, et cetera? Is that what's causing you to make that common, Marc, or I'm curious on?

So I've had the opportunity to talk to many of the vaccine players across the world. So I'm not on any specific one. And they're all preparing for very substantial number of doses that are going to be needed, right? So they're thinking from their own discussions with governments, public health officials, what the global demand is going to be, it looks to be extraordinary, right? So most governments seem to be having vaccination as the major breakthrough in getting the virus behind us. So therefore, it's going to take a long time to vaccinate billions of people. I mean no matter how well you scale up across the globe, that is a long road, and we look forward to supporting our clients in that effort.

Absolutely. And when you think about the vaccine opportunity, Marc, maybe just remind us on, I think Thermo literally touches every part of that vaccine's landscape, upstream, downstream, full finish. Perhaps just remind us on what are the key areas that you touch play upon in that vaccine area?

Yes. So play in actually many of the critical aspects, right? So if you think about it, our bioproduction business is used with the cell culture media as well as the single use technologies, which are super helpful in the rapid turnaround with development of new products. So you're seeing strong demand there in the traditional bioproduction business. As a reminder, that's a couple of billion-dollar business for us in terms of that portion of our business. Our biosciences business, our enzyme and nucleotide capabilities are very relevant as well. And that's a much bigger business. It's about a $4 billion business. We're seeing very strong demand for a portion of that portfolio that are used as ingredients in making the vaccine. And then when you move from there, you start to think about the purification process and our resins are involved and then you move to our pharma services business, where we actually manufacture the product. And in this case, sterile fill/finish, which is the packaging form of how a vaccine is administered. We do that in our factories, and we have substantial orders to reserve that capacity for the success of candidates. We have a very strong position across all of those lines of business, and we will benefit from that activity. And more importantly, we'll support the rapid ramp-up of vaccines and make a real contribution to the society.

Understood. And perhaps one of the more interesting, I shouldn't say interesting, maybe perhaps a debate on investor side has been, maybe Thermo does not benefit as much if it's an mRNA vaccine as against a traditional vaccine. And I think it's because of the upfront, the cell culture business that you spoke about on how you produce these vaccines. And on your 3Q call, like some of the comments you made were really fascinating. Increasing manufacturing capacity for enzymes and oligonucleotides for vaccines. I mean that sounds like mRNA. Maybe perhaps talk about how Thermo touches or placed in that mRNA vaccine landscape.

Yes. If you think about our capabilities, we're a extraordinarily well-respected biosciences supplier, both on the nucleotides as well as on the enzymes. And when companies are speccing a supplier, when they're under tight deadlines and want to leverage trusted suppliers, we come very high on that list. It's not, but we used to be top of that list. And therefore, we play a role in many promising therapies and vaccines. And therefore, I'm excited about how we're playing our part in all of that. And then obviously, with the mRNA ones beyond that view, you obviously have some cold chain requirements and unrelated to all of the raw material manufacturing, we're the largest manufacturer of ultra low-temperature freezers, which will be certainly used in certain aspects of this. So we're seeing demand errors.

That's great. And I guess, a couple of other data points that you guys have spoken about. I think the resin that you mentioned, Marc, POROS Oligo resin for mRNA purification, maybe in that landscape, like how big is Thermo? Maybe give us some context. And it just feels like there are so many aspects that Thermo touches. It's -- sometimes it's hard for us to get our arms around. All the different pieces that Thermo touches.

Yes. We have a very rapidly growing purification business. We have gained share for quite a number of years. It's still a small business. There's a clear market leader, and we are doing very well at winning new molecules, right? And that's where you see us continue to innovate. And so we're excited about the growth momentum we have in that purification capabilities. And no, Vijay, in a way it's good to do some of the bottoms-up analysis to make sure that the company is well positioned and doing or playing or the right role in serving our customer base. But as I step back and say, as I think a lot about the year as we get to the final month, right, and what I've always said long before this year is from the investor standpoint, you have a team that's focused on navigating whatever the environment is and holding ourselves to the highest standard of performance. And we have a great track record of delivering, and we have done that through recessions. We've done that through the weak dollar, the strong dollar, we've done that through all different environments. And when you think about the pandemic and you can use the PCR example, Thermo Fisher wasn't the company that you would have said tip of tongue would be the winner. And if you were to say, who would have the largest COVID response revenue, not just in terms of growth, but in terms of the magnitude, if you're making that bet early, you might not have selected us, but the truth is that we saw the need. We pivoted our resources. We did an amazing job of capitalizing on both the needs of testing and it's not one war. It's both testing and the vaccines and therapies. And taking the earnings that we've had, reinvesting it in the base business so that we exit the pandemic with a much faster-growing company than we came into it. And that's really what success is going to be. It's not about just playing the massive role in the response. It's about fundamentally changing our competitive position, coming out of it and that's what we're doing. All of the investments that I've talked about during the year and sustained value and those things, that's really the measure of what 2020 will be. I think it's going to be a watershed year for a company that's had an amazing history. I think it's really the launchpad for just incredible things to come.

Absolutely. I mean, I certainly -- if I had to go and look back at our notes from March, April, we did not put Thermo as the #1 player. It's amazing. It's amazing to have large contribution that Thermo has made in this market. Perhaps on that cold chain requirement, Marc, that seems to be incremental, that's a new data point. How big is that business? Or any way to think about what it means from a vaccine perspective?

Yes. What I would say is, if you think about our lab products business, it's a couple of billion-dollar business in aggregate. We have representation across all types of lab equipment and lab consumables, the pipettes, sort of those things and ultralow temperature freezers will be a part of it. That's a business historically, solidly mid-single-digit growth. and obviously, on track to have very strong growth this year. That entire business growing well above the average because it's basically playing a meaningful all-in supporting laboratory scale up for COVID.

Understood. Now if I had to sum all of this, Marc, I think The Street is -- and again, I understand there is a longer-term picture and a near-term picture. And I want to get to that longer-term picture. But when you think about '21, things right now Street's hyper-focused on COVID tailwinds where, I think, with the updated guidance, perhaps $5.5 billion-ish maybe this year. Should '21 KPI being cognizant of the fact that PCR testing could be at or about and vaccines are going to accelerate? I mean it doesn't feel like these tailwinds are abating anytime soon. Is that a fair statement?

Yes. I mean, when I think about the scale of the response, we've been transparent throughout, right? And we wind up with like a day like today where we're giving a mid-quarter update, which prior to '20, I don't think -- I've been here 19 years, hardly I ever gave a mid-quarter update on stuff, right? We're trying to be as transparent as possible, right, on what's going on. And our best view for next year is that testing demand is going to be significant. That our role in viral transport media is going to be significant. That therapies and vaccines are growing meaningfully and will be more meaningful next year. Will the net of that be similar level of revenue to this year, meaningfully higher or a bit lower? I don't know yet, right? We'll know a lot more based on it, but I feel like we're entering the year with a really good spot to be. And when you think about just the contribution to the company's firepower based on any levels of revenue in that ballpark, we're reinvesting at an incredible rate right in the future and returning great return to our shareholders, right? So it's a really very powerful combination.

It is compelling. And now when you think about those investments, Marc, I feel like there have been a few press releases, Thermo has spoken about investing in biopharma. Keeping aside COVID, the pandemic response, right, that base biopharma has accelerated and this is one of the things that keeps me up awake in the night is, are we at the peak for this industry? What's caused this acceleration in biopharma? How sustainable are these trends, Marc?

Yes. So when you think about the cycle that we've been in investment in biotech and pharma coming into '20, it's been quite strong, right? And why has it been strong? Because the science has been good, right? There's clearly a lot of progress, and that's been positive. When you think about how the industry's reputation has been enhanced by its response in 2020, the lessons learned about the speed of clinical trials that improve relationship with regulators, all these things are going to be tailwinds going forward. And there clearly have been certain trials that have been disrupted in other fields, and they will return to activity. And therefore, I see lots of strength in the pharma and biotech market. And most importantly, is how unique our position is in serving it, right? We have grown and gained share in that market for more than a decade. It represents over 40% of our revenue. We average in the last decade 9% organic growth. We're obviously growing far above that this year, and we're very well positioned going forward to serve that market.

The -- I think one of the elements that perhaps is not appreciated or at least I didn't appreciate was that the amount of time you spend with your key biopharma customers. Because if I had to go back and think about Patheon acquisition, I didn't understand, Marc, back then. And now it all in hindsight, it makes sense. And some would say that that's because of these constant dialogues you keep having with your core customers. Based on the dialogue you're having with your core customers on the biopharma side, what trends do you see? Is there anything else that we should be thinking about biopharma as you think about the next 3 to 5 years?

Yes. No, I think one of the things that our customers are going through right now is reflecting on this year, right? And then thinking about which partners did a good job, right? Who do they want to rely on in the future? Who are they concerned about? And I think we're going to fare very well in that dynamic. I also think that externalization of activity and not relying 100% on in-house capabilities based on the experience of the pandemic and having more supply chain assurity is going to be a major trend. And I think we're very well positioned because of the strength of our capabilities of over 40 pharmaceutical manufacturing facilities around the world that we will play a major role in creating supply chain assuredness for the industry as well. So I think those trends bode well for Thermo Fisher.

Absolutely. I mean, I think that's an emerging theme. Perhaps not so relevant for tools, but I do think this theme of small companies gaining share versus larger companies. I think that trend could perhaps reverse in the next decade, I think, because of exactly the points that you mentioned. One, I guess, maybe switching gears to synthetic biology. When you think about mRNA vaccines or some of these RNA-based therapeutics coming in, that's one part where I think Thermo has a significant presence, but it's not been fleshed out or at least I haven't focused a lot. Maybe just touch upon how big is that business for Thermo. And how, I guess, there's been some competitive noise around pricing, like how are you guys positioned in that market?

Yes. It's a portion of our biosciences business. The biosciences business is a $4 billion business. It's grown substantially. And we have a good cost position and a great reputation, right? So we have large facilities in Lithuania. We also have domestic capacity as well. So we can both have redundancy, assurance of supply, but also a good cost position. So -- and we have really great capabilities. So I think we're well positioned to play. We've had played and we'll continue to play going forward.

And just when you think about the last 20 years, Marc, and this is perhaps I'm asking you to guess a little bit if that's the right term. I mean when we look at monoclonal antibodies, they went from sub-billion to now $150 billion category. When you think about this RNA, DNA-based drug category, right, that's an emerging area. Do you think like this could be the next major cycle here in biopharma? And how is Thermo positioned to play in that market?

Yes. So if I think about coming into the pandemic, where a lot of the real buzz was, was actually in the gene therapy and -- which is why we've expanded our viral vector capability so substantially and continue to invest there. I believe that, that trend is going to continue to be one of the big trends going forward, right? When I think about mRNA and the early read, obviously, there was really no products to the market until one of these vaccines is approved. What has been brilliant about it has been the speed, right, in terms of the speed to be able to bring it to market. And then the question will be, how is the cost position long term relative to those that follow. So I think it's a little bit early to say what the longevity is of this class. But certainly, it seems like there's going to be interesting follow-ons coming out of the mRNA successes.

Yes, absolutely. The -- I guess, a couple of other topics, Marc. I think based on the base business doing solid mid singles here in Q4, are we now at a point where academic lab reopenings were at a point where in 80%, perhaps 90% of customers are back? I think the number was maybe 70% activity level in 3Q? Maybe comment on that segment of the market.

Yes. It varies by geography. If you go to -- you take China, it's returning to the normalcy. If you take the western world, activities clearly continuing to build, but it's certainly not at a 100% normal level of activity yet, right? There's still a certain model of disruptions, not that the labs are close, but people -- some of the university budgets are pressured, even if NIH is good. Certain students are back. You have these significant inconveniences that put some level of pressure. But nonetheless, it's encouraging. Just if you think about our academic and government business, it was good in Q3, we returned to growth, right, which was great. It wasn't strong growth. But after one tough quarter, we already bounced back. So I'm encouraged by what I'm seeing.

Understood. And I guess on the topic on China, most of your peers are seeing similar trends. Is China back for good? Or I mean, China is always -- that's an animal on its own. So perhaps talk about China.

Yes. So we had a very strong third quarter. We did 18% growth in the quarter. Our expectations for the fourth quarter was to continue to build on that trend and end the year with really strong momentum. And at least through November, that's how things are playing out. So very positive. And having spent time with our leadership and customers recently via Zoom or Webex, I wish I was there in person. But in China, there's a lot of excitement around the 14th 5-year plan. That bodes well for investment priorities. We feel that China is going to continue to be a market with excellent growth prospects for the company. So that's how we see it strengthening, returning more to normal. And the next 5-year plan should bode well for our industry.

Yes, absolutely. And I guess, one on cap deployment, Marc, given where asset price valuation levels are in this market, and I mean Thermo has done a phenomenal job in creating shareholder value via cap deployment. How is that funnel looking? I know you sounded positive on the call on the funnel pipeline. But perhaps are we now at a point where we could see something or asset level prices or perhaps still a barrier to something large?

Yes. So our pipeline is quite active. We're busy. And we're looking at interesting deals where the economics are interesting to us. And what we always want to do is get the risk reward profile right. That's one of the things that we manage to understand the downside cases in an acquisition to make sure that we're going to generate acceptable returns for our shareholders. And if things don't go smoothly, and it's in our job to deliver much better than that, but that's a lot about how we think about the world. And I feel really good about what the pipeline is and we, obviously, are in a position with a very strong balance sheet, incredibly strong cash flow generation. And excitingly, a very fragmented industry. So many opportunities for us to consider. And you'll see us be disciplined, but I also think you'll see us be active.

Indeed. And I guess, when you think about the medium-term profile, it's amazing. I feel like we had the vaccine data, and you had some volatility in stock prices. The markets can't seem to make up its mind. But ex the short-term noise, right? There is a substantial EPS contribution in fiscal 2021 from tailwind. I think you've touched upon this, reinvesting some of those to strengthen Thermo Fisher. Maybe talk about sustainability of earnings because at some point, these are going to be headwinds on a reported basis. But when you look at ex those tailwinds on an underlying basis, it feels like that is going to emerge a lot stronger when you think of that medium term. Does that comment makes sense to you? And perhaps, if it does, what should we be looking at as the underlying profile going forward?

Yes. So when we laid out our guiding principles in March, we said we would focus on 3 things this year: keep our colleagues safe, ensure that we could support our customers' activity and manage the company in a way that we exit this period as stronger industry leader. And we've done a good job of that. And when I think about that third aspect about exiting a stronger industry leader, we made substantial investments. Starting with our team, right, investments in our colleagues, being able to keep our colleagues fully engaged, recognizing them. When we just got back our employee involvement survey, that's our feedback record high scores, incredibly constructive feedback about how do we get even better, that bodes well. We came into this with a great team. They're super energized about what the company is doing in their part, and that's the first foundation. And then you say, what do we do from there? There's 2 things we've done, right? Capital, we've invested in our facilities to expand our capacity. Sterile fill/finish facilities in our pharma services business, new viral vector facility, again, in our home services business, expand their lab plastics capabilities, our specimen collection capabilities. These investments will all be repurposed for non-COVID-related activities and we'll move from the COVID revenue to non-COVID revenue and allow us to gain market share. We've also invested in research and development. Third quarter was up, I think, about 20%, and we're continuing to invest very substantially there. So we have an incredible suite of products that we'll be launching that will help customers solve their most challenge -- their biggest challenges and put us in a great position. So those investments in R&D, commercial resources, facilities and team that puts us in a very enviable position when we think about the midterm.

And just maybe one last one for you, Marc. When you think about those investments and exciting opportunities, liquid biopsy, it's adjacent. You guys touch upon diagnostics. You do have a presence in NGS. Is that an interesting market for Thermo? Or how does that Thermo participate in that market going forward?

Yes. So our clinical sequencing business is performing quite nicely in a challenging environment this year. And when I look at many customers prefer to use our technology for their liquid biopsy work because they have great faith in our capability to support them. And so I think we're very well positioned to play a role in supporting our customers' oncology. Genexus, which is our new platform we launched about a year ago, has been well received in the market. Customers want that very rapid turnaround time to get results so that they can guide therapies for their patients. So it's been a business that we're committed to and doing a good job with.

Fantastic. I think with that, we're at the end of the time, Marc. Thank you for the time this afternoon. Exciting updates from you guys. And I'll look forward to that update come Q4 on how '21 shapes up.

Vijay, thanks again for having us today.

Thank you. Bye.