CDMO executives were among the companies that made presentations this week at the annual J.P. Morgan Healthcare Conference in San Francisco. While some CEOs were decidedly positive about their respective outlooks for 2025, others see this as a rebuilding year. Here are some of the takeaways from the conference.
The good: Thermo Fisher Scientific
In a Tuesday presentation at the J.P. Morgan Healthcare Conference, CEO Marc Casper presented a positive outlook for Thermo Fisher, which he said is poised for recovery and growth in 2025 as a well-positioned industry leader in biopharma services, among other markets.
Thermo Fisher has set a “high bar” for its financial performance this year, Casper told the conference. While the company will provide its 2025 guidance on Jan. 30, when it releases its financial results for the fourth quarter and full year 2024, Casper reiterated his expectation that Thermo Fisher will return to growth in Q4 of 2024 “and deliver a strong year that sets us up for great momentum as we enter 2025.”
In 2025, Casper expects Thermo Fisher to benefit from Novo Holdings’ recently completed $16.5 billion acquisition of CDMO Catalent, which he said has taken sterile fill-finish capacity out of the market. “From our lens, as the market leader in sterile fill-finish, which is our competitive position, it takes an option off the table, which I think is ultimately very positive for us — and we’ve seen strong demand for that set of capabilities,” Casper said.
Asked about the potential policy implications of the incoming Trump administration, Casper said he expects a “better business environment” including less stringent regulatory oversight of M&A and a “pro-growth environment from a taxation perspective.” In terms of tariffs on China and other countries, he said “which ever tariffs happen, we will be well-positioned — given our global footprint — to navigate that as effectively or more effectively than anybody.”
Thermo Fisher’s second largest market is China, which accounts for 8% of the company’s revenue, according to Casper. “We’re the largest player in China but we actually have half the exposure of the industry,” he said.
When it comes to the BIOSECURE Act, Casper said that regardless of whether the proposed legislation becomes law in the U.S., it is leading to a shift in focus to more of the CDMO work “moving to Western-based facilities” as well as some Indian sites. He called it a “slight tailwind” for Thermo Fisher but added that it can be “disruptive to the customer base, which is never a good thing.”
The bad: WuXi Biologics
CEO Chris Chen in a presentation on Wednesday at JPM25 in San Francisco said the Chinese-based CRDMO expects to see an acceleration in revenue growth in 2025, despite the looming BIOSECURE Act. WuXi Biologics is among five China-based biotechnology companies named in the bill, which seeks to prevent U.S. federal funds from supporting certain Chinese biotech “companies of concern.”
Asked during his JPM25 presentation about the looming BIOSECURE Act, which has stalled in Congress, Chen acknowledged that the proposed legislation has negatively impacted business for WuXi Biologics, but it has also served to make the company more resilient.
“I’m glad that the BIOSECURE Act didn't pass last year. As I said earlier, we cannot change the dynamics outside … the geopolitics is another risk factor,” Chen told the conference. The U.S. continues to be the company’s largest market, according to Chen, who said WuXi Biologics is increasing its investment in the country.
However, the bottom line for WuXi Biologics is it has near-term geopolitical risks. While it is one of the biggest biologics CRDMOs with one of the largest bioreactor capacities, and has been growing at a compound annual growth rate of more than 50% for the past eight years, WuXi Biologics might not be poised for the accelerated growth that Chen envisions.
Going forward, Morningstar analysts forecast that WuXi Biologics’ revenue growth will be slower than that of other established peers. “The risk is high that the U.S. BIOSECURE Act will become law, and we expect global pharmaceutical or biotechnology companies to be more cautious when signing new long-term contracts with Chinese players,” Yurou Zheng, an equity research analyst at Morningstar, wrote in a Jan. 10 note to investors.
While the BIOSECURE Act has yet to become law, Zheng contends that clients are aware of the potential geopolitical risks in working with WuXi Biologics. “The risk of a similar act being introduced under the Trump administration is weighing on investor confidence,” Zheng warned. “We cannot rule out the possibility of an extreme case where U.S. biotech companies are prevented from contracting with WuXi, which would severely dampen WuXi’s future revenue.”
The ugly: Charles River Laboratories
CDMO challenges will impact Charles River’s revenue in 2025, as a cell therapy client terminated their agreement and the company also expects lower commercial revenue from another cell therapy customer.
In a Tuesday SEC filing, Charles River said that lower commercial CDMO revenue is expected to reduce consolidated revenue growth by approximately 1% in 2025.
“Charles River’s initial guide suggests that 2025 will be another rebuilding year for the company, with the potential rebound in demand previously expected in the second half of the year being pushed out to 2026,” Max Smock, equity research analyst at William Blair, wrote in a Jan. 14 note to investors.
In 2021, Charles River acquired cell and gene therapy CDMO Cognate BioServices for approximately $875 million in cash. However, Tuesday’s SEC filing disclosed that overall cell and gene therapy customer demand “is not as robust as at the time of acquisition.”
Charles River CEO James Foster gave a presentation at the JPM25 conference in San Francisco on Tuesday with a preliminary outlook for the year, and said the company plans to issue full 2025 guidance with its fourth-quarter 2024 financial results in February.
“The CDMO business has been a complicated one for us” from a technology and manufacturing point of view, Foster acknowledged. “We’ve had to sort of retool the companies that we bought.”
Foster said Charles River is “taking decisive action” — including right-sizing infrastructure — to manage through the challenging business environment. The company has implemented a multi-year restructuring program that is expected to generate $150 million in cost savings in 2025 and approximately $200 million by 2026. Charles River is consolidating more than 20 smaller facilities that came from acquisitions, with most already in process, and is also cutting 6% of its headcount.
