Biotech companies spend billions trying to develop the next breakthrough drug, but the businesses supplying their laboratories may offer a more predictable way to benefit.
Equipment orders, research spending, and drug manufacturing activity are showing signs of improvement. Thermo Fisher and Danaher report Wednesday morning, giving you a fresh test of whether the recovery is gaining momentum.
Five Stocks Screened (Sponsored)
After analyzing thousands of companies, our analysts pinpointed the 5 Stocks Set to Double based on accelerating performance, improving fundamentals, and strong technical signals.
This newly released report explains why these five could be positioned for major moves in the year ahead.
While results aren’t guaranteed, previous reports uncovered gains as high as +175%, +498%, and +673%.
Access the free report before midnight.
See the 5 Stocks Set to Double
*This free resource is being sent by Zacks. We identify investment resources you may choose to use in making your own decisions. Use of this resource is subject to the Zacks Terms of Service.
*Past performance is no guarantee of future results. Investing involves risk. This material does not constitute investment, legal, accounting, or tax advice. Zacks Investment Research is not a licensed dealer, broker, or investment adviser.
Theme: Laboratory Equipment, Bioprocessing, Drug Research, Diagnostics, and Scientific Instrumentation
You Don't Have to Pick the Winning Drug
Drug development is notoriously unpredictable. A promising treatment can fail clinical trials after years of spending, leaving shareholders with little to show for it.
Laboratory suppliers operate differently. They sell instruments, testing systems, filtration equipment, and consumables to pharmaceutical companies, universities, and research facilities.
These products are needed across thousands of research programs, regardless of which individual drugs succeed.
The opportunity becomes particularly attractive when research budgets recover. More experiments mean greater demand for equipment and supplies, while successful drugs eventually require manufacturing infrastructure.
What's Driving It
Wednesday Brings Two Major Catalysts
Thermo Fisher reports Wednesday before the market opens, with its conference call at 7:00 a.m. ET. Danaher follows at 8:00 a.m. ET.
Thermo Fisher's Q2 revenue increased 10% to $11.99 billion, including 5% organic growth. Adjusted earnings per share rose 13%, while adjusted operating margin improved to 22.8%.
Management said customer activity strengthened across pharmaceutical, biotechnology, academic, and industrial markets. Its Laboratory Products and Biopharma Services division was among the leading contributors to organic growth.
Danaher reported a similar improvement, although at a slower pace. Q2 revenue increased 5.5% to $6.3 billion, with core revenue rising 3%. Excluding respiratory testing, core growth reached 4.5%.
More importantly, Danaher's bioprocessing orders increased at a mid-teens percentage rate despite project timing delaying some revenue recognition.
That creates an interesting setup for Wednesday. If orders continue improving, revenue growth could accelerate as customers move projects forward.
Smaller Suppliers Are Already Seeing Stronger Demand
Repligen reported 13% organic revenue growth in Q2, while adjusted operating income increased 55%. Management raised its full-year organic growth forecast to 10.5%–13.5%.
Waters also reported encouraging results. Its existing business grew 9% in constant currency, supported by stronger demand for analytical instruments and chemistry consumables.
These numbers suggest the recovery is spreading beyond the largest suppliers, although conditions remain uneven across research markets.
The Chain Reaction
Research funding improves → laboratories order more equipment → drug development activity expands → manufacturing projects advance → demand for filtration, testing, and consumables increases → suppliers gain operating leverage
The risk is that tighter funding or delayed pharmaceutical projects interrupt the recovery.
What's Working
Recurring Revenue Makes the Business Attractive
A laboratory instrument might be purchased once, but many experiments require consumables, replacement components, reagents, and ongoing services.
That creates recurring revenue opportunities after the initial equipment sale.
Repligen is expanding this model. Earlier this month, it completed its acquisition of BioLife Solutions, adding specialized preservation products used in cell and gene therapy manufacturing.
The transaction strengthens its exposure to a market where customers often require highly specialized materials throughout production.
Demand Is Improving Across Several Markets
Illumina provides another useful signal. Its Q2 revenue increased 9.5% to $1.16 billion, supported by demand for genetic sequencing technology. Management raised its full-year revenue guidance to $4.60 billion–$4.64 billion.
Meanwhile, Waters reported double-digit growth in chemistry consumables, while Danaher's life sciences division generated 5.5% core revenue growth.
The recovery is not limited to one technology or customer group.
What to Watch
Wednesday's reports should focus on organic revenue growth, bioprocessing orders, instrument demand, pharmaceutical budgets, China sales, operating margins, and 2027 expectations.
The strongest confirmation would be accelerating orders accompanied by improving organic sales, showing that customers are committing to new research and manufacturing projects rather than simply restocking existing laboratories.
Thermo Fisher Scientific (TMO)
What it does: Supplies laboratory instruments, chemicals, research services, and biopharmaceutical manufacturing capabilities.
Why it fits: Its broad customer base provides exposure to pharmaceutical research, diagnostics, and laboratory spending.
What stands out: Q2 revenue grew 10%, including 5% organically, while adjusted EPS increased 13%.
The Takeaway: Buy this if you want diversified exposure to recovering scientific research spending.
The risk is slower pharmaceutical investment or weaker laboratory budgets.
Danaher (DHR)
What it does: Operates life sciences, biotechnology, and diagnostics businesses, including Cytiva and Beckman Coulter.
Why it fits: Its bioprocessing operations directly benefit when pharmaceutical companies expand drug manufacturing.
What stands out: Q2 bioprocessing orders grew at a mid-teens rate, even as overall core revenue increased just 3%.
The Takeaway: Buy this if you want exposure to improving biotechnology manufacturing demand.
The risk is customers delaying major capital projects.
Elite Picks (Sponsored)
This report focuses on a narrow group of stocks identified through a detailed screening process.
Analysts apply a combination of metrics to narrow down potential opportunities.
Past selections have shown strong momentum, but no outcomes are guaranteed.
The newest edition is now open for access.
Get the report now.
*This free resource is being sent by Zacks. We identify investment resources you may choose to use in making your own decisions. Use of this resource is subject to the Zacks Terms of Service.
*Past performance is no guarantee of future results. Investing involves risk. This material does not constitute investment, legal, accounting, or tax advice. Zacks Investment Research is not a licensed dealer, broker, or investment adviser.
Waters Corporation (WAT)
What it does: Provides analytical instruments, chemistry consumables, and laboratory diagnostics technologies.
Why it fits: Drug development and quality control require increasingly sophisticated analytical testing.
What stands out: Q2 organic revenue grew 9% in constant currency, while the recently acquired Biosciences and Diagnostic Solutions businesses contributed $817 million in revenue.
The Takeaway: Buy this if you want laboratory instrumentation exposure with opportunities from its expanded portfolio.
The risk is acquisition integration and uneven research spending.
Repligen Corporation (RGEN)
What it does: Supplies filtration, chromatography, and other technologies used to manufacture biological medicines.
Why it fits: Its products benefit as biotechnology treatments move from development toward commercial production.
What stands out: Q2 organic revenue increased 13%, and its completed BioLife acquisition expands its presence in cell therapy.
The Takeaway: Buy this if you want a more focused, higher-growth bioprocessing supplier.
The risk is project delays and acquisition integration.
The Tape Knows (Sponsored)
Layoffs and belt-tightening usually register in share prices well ahead of the evening news.
I want the 10 names.
That's one of three 2027 risks Good Morning Alerts flags in a free report. The others: the AI trade turning, and a dollar that buys less each year.
Show me every ticker.
10 stocks picked for that setup. No charge, delivered instantly.
Give me the 2027 Outlook.
*This ad is sent on behalf of Guardian Financial Publishing LLC, doing business as Stable Financial Publishing, 1013 Centre Road Suite 403-D, Wilmington, DE 19805. Nothing here is investment, financial, legal, or tax advice, and it is not a recommendation or solicitation to buy or sell any security. Investing involves substantial risk, including loss of principal; past performance does not guarantee future results. Stable Financial Publishing, its owners, employees and contributors may hold positions in securities mentioned and may trade them at any time. If you no longer wish to receive these offers. Privacy: https://guardian.pub/privacy-policy/ · Terms: https://guardian.pub/terms-of-service/
Would you rather small modular nuclear reactors become commercially viable within 10 years, or stay perpetually 'a decade away'?
Illumina (ILMN)
What it does: Develops DNA sequencing systems and related consumables used in research and clinical applications.
Why it fits: Growing use of genomic information creates demand for instruments and recurring sequencing supplies.
What stands out: Q2 revenue increased 9.5%, supported by continued demand for NovaSeq X systems.
The Takeaway: Buy this if you want direct exposure to expanding genomic testing and research.
The risk is competition, pricing pressure, and slower research funding.
Follow the Spending Behind the Science
The biotechnology recovery does not have to begin with blockbuster drug approvals. It can start with laboratories ordering instruments, pharmaceutical companies increasing research budgets, and manufacturers expanding production.
Thermo Fisher and Danaher provide the next major test Wednesday.
Are laboratory suppliers entering a sustained growth cycle, or is the industry simply enjoying a temporary rebound in spending?
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
Click here to get our daily newsletter straight to your cell for free.
P.S. Just like this newsletter, it's 100% free*, and you can stop at any time by replying STOP.
