Goldman Sachs has initiated coverage of large-cap life sciences tools companies, naming Agilent (A), Danaher (DHR), and Thermo Fisher Scientific (TMO) as buys.
The investment bank set a price target for Agilent of $170 (~19% upside based on Dec. 8 close), $265 (~18% upside), and $685 (~21% upside) for Thermo Fisher.
While the industry in recent years has faced setbacks to growth due to headwinds such as COVID-related revenue runoff, biopharma R&D pipeline reprioritization, and a poor biotech funding environment, analyst Evie Koslosky, she sees her recommended companies returning to historic growth of ~5%.
Koslosky said Agilent is buoyed by “the combination of an ongoing Biopharma instrument replacement cycle with underappreciated industrial exposure entering a cyclical recovery… [that] enables a differentiated growth profile vs. peers.
She added that the launch in the second half of 2024 of the Infinity III HPLC (high performance liquid chromatographer) will also contribute to growth.
With overhangs on equipment demand letting up as the pharmaceutical industry has more clarity on pricing due to deals with the Trump administration, along with a trend towards contract development and manufacturing organizations outsourcing “could lead to improved Bioprocessing equipment placements in the” near term. A US CDMO survey Goldman Sachs conducted found that 68% said they would be purchasing more equipment than last year.
Thermo Fisher should also benefit from CDMO outsourcing, Koslosky noted, adding that the company has diversified revenue streams in high growth end markets, and is in a good position to use M&A to expand markets.