Q3 2024 Danaher Corp Earnings Call

Rainer Blair

Well, thank you, John and good morning everyone. We appreciate you joining us on the call today. Our team delivered strong third quarter results with revenue, adjusted net earnings per share, and cash flow all coming in ahead of our expectations. We were especially pleased with the continued positive momentum in bioprocessing and another exceptional quarter at Cepheid and we enhanced our long term competitive advantage with the release of several impactful new innovations across our businesses.
Now we see a bright future ahead for Danaher, a transformation in our portfolio over the last several years has created a focused Life Sciences and diagnostics leader positioned for higher long term growth, expanded margins, and stronger cash flow. Danaher is purpose built to help customers solve some of the most important health challenges impacting patients around the world. Our proven ability to innovate is enabling faster, more accurate diagnoses, and helping customers reduce the time and cost needed to sustainably develop and deliver life changing therapies.
Now, the unique combination of our talented team, our differentiated science and technology portfolio, and the power of the Danaher business system positions as well as we seek to maximize value for our customers, our associates, and our shareholders.
So with that, let’s take a closer look at our third quarter-2024 results. Sales were $5.8 billion in the third quarter and we delivered 0.5% core revenue growth. Geographically, core revenues and developed markets increased low single digits with low single digit growth in North America and mid-single digit growth in Western Europe. High growth markets were down mid-single digits including a high single digit decline in China.
Our gross profit margin for the second quarter was 58.7% and our adjusted operating profit margin of 27.5% was down 10 basis points as accelerated investments and innovation offset the favorable impact of cost saving initiatives.
Adjusted diluted net earnings per common share of $1.71 were essentially flat year over year. And we generated $1.2 billion of free cash flow in the quarter and $3.8 billion year-to-date, resulting in a year-to-date free cash flow to net income conversion ratio of 135%.
Now, let’s take a closer look at our results across the portfolio and give you some color on what we’re seeing in our end markets today. Core revenue in our biotechnology segment was flat year over year with our bioprocessing business up low single digits and our discovery and medical business down high single digits.
In bioprocessing, we were encouraged with the continued positive momentum we saw in the quarter. Notably orders increased high single digits sequentially, which is the fifth consecutive quarter of sequential order improvement. And our book to bill ratio improved to approximately 1.0. Now, geographically, we saw improving order trends in developed markets as large customers are returning to more normal ordering patterns.
In China, orders and underlying activity levels remain weak particularly for equipment as customers continue to conserve their capital. Revenue growth in the quarter was driven by our larger pharma biopharma and CDMO customers. Production volumes at these customers who are primarily manufacturing monoclonal antibody therapies has continued to grow in line with historical averages. Now, we’ve seen demand that these customers steadily improve throughout the year as they’re moving past inventory destocking and anticipate this gradual recovery will continue over the coming quarters.
In contrast, we’re not seeing the same level of improvement in underlying performance from our smaller customers. Despite a modest improvement in the funding environment, they continue to rationalize their therapeutic programs and remain cautious with their investments.
Now, putting this all together, we continue to expect low single digit core revenue decline in our bioprocessing business for the full year 2024. And this includes an assumption of high single digit core revenue growth in the fourth quarter.
Now, as the stocking moves behind us, we’re increasingly excited about the long term opportunities ahead for Cytiva’s leading bioprocessing franchise. Monoclonal antibodies, which comprise the majority of our revenues remain the largest investment area for our customers.
We’re also seeing accelerated adoption of these therapies and 6 of the top 10 highest revenue generating drugs today are monoclonal antibodies. With our comprehensive portfolio, our best in class scientific services and innovation focused on increasing yields and enhancing manufacturing efficiencies, we believe we’re very well positioned to support our customers today and well into the future.
Now, turning to our Life Sciences segment. Core revenue decreased by 2% in line with our expectations. Core revenue in our Life Sciences instruments, businesses collectively declined mid-single digits with market conditions in the third quarter, largely consistent with what we saw in the first half of the year.
Ongoing research and lab activity is driving growth in consumables and service, which was more than offset by a decline in capital equipment, particularly in China. Announced stimulus measures in China have not yet translated into meaningful order activity as customers are still awaiting details on the implementation of these programs.
Now, in the meantime, many customers are delaying purchasing decisions. Outside of China, our end markets are relatively stable and we were encouraged to see early signs of improvement in demand among our pharma and biopharma customers particularly in North America.
Now, during the quarter, Beckman Coulter Life Sciences introduced the Cydem VT. Cydem VT is a fully automated high throughput cell culture system designed to simplify and accelerate the complex and lengthy process of clone screening and cell line development.
Now, by harnessing the power of the Cydem VT, researchers can optimize workflows and reduce hands on time by up to 90%. Enabling them to efficiently identify the most promising clones and improve the success rate of their cell line development projects.
In July, we completed the acquisition of Genedata, a leading provider of enterprise and workflow software used in drug discovery and development. Genedata’s advanced software solutions automate complex R&D processes, enabling biopharma researchers to analyze and interpret samples more quickly. So we’re really excited to welcome this innovative team to our Life Science segment.
Now Beckman’s Item VT and the acquisition of Genedata are both great examples of how we’re strengthening our long term competitive advantage while helping our customers accelerate the drug discovery process. In our genomics consumable business, core revenue declined, low single digits continuing the trends we saw in the second quarter.
In August, IDT expanded its synthetic biology portfolio with the launch of rapid genes. These ready to use, NGS verified clonal genes are cost effective and offer fast turnaround, allowing pharmaceutical researchers to quickly pursue high throughput experiments such as antibody development. IDT’s long history of innovation is one of the key reasons. The research community turns the IDT to help advance drug discovery and accelerate the pace of genomic medicine development.
Now, moving to our diagnostics segment. Core revenue increased 5%. Our clinical diagnostics businesses collectively delivered low single digit core revenue growth. Beckman Coulter diagnostics was up low single digits with strong global demand, partially offset by the impact of volume based procurement in China. Outside of China, recurring revenue was up high single digits driven by recent new product introductions and installed base expansion.
The Beckman team continued their accelerated cadence of new product innovation this quarter with the release of the DxC 500i integrated chemistry and immunoassay analyser. Now, the DxC 500i is specifically designed to improve efficiency and meet the unique workflow needs of low volume laboratory customers such as community hospitals. So this highlights Beckman’s commitment to serving the entire health care network by providing a comprehensive portfolio of solutions for low, mid, and high throughput core labs.
In molecular diagnostics, Cepheid’s core revenue increased double digits with broad based strength across respiratory and non-respiratory assays. Cepheid’s respiratory revenue of approximately $425 million in a quarter exceeded our expectation of $200 million as we saw both higher volumes and a favorable mix of our four in one test for COVID-19, flu A, flu B, and RSV, favorable volume was driven in part by customers purchasing in preparation for the upcoming respiratory season.
Now, based on activity in the third quarter and our expectation of a respiratory season with normal severity, we expect respiratory revenue of approximately $1.7 billion for the full year of 2024. Outside of respiratory, increasing menu adoption and system utilization helped drive another quarter of mid-teens growth in Cepheid’s core non-respiratory reagent portfolio including more than 20% growth in group A strep, sexual health, and virology assays.
We also saw strong installed base growth particularly for our lower throughput systems as customers continued to add gene expert instruments in their clinics and alternate care sites. So this expansion out of the hospital allows our customers to improve financial and clinical outcomes by standardizing care across their networks.
I’d like to thank all of you who joined us last month for our Investor Day where we had the opportunity to showcase our differentiated diagnostics portfolio. During the event, we highlighted how DBS driven innovation and commercial execution have meaningfully improved the growth and margin profile of our diagnostics franchise over the last several years.
We also talked about how we are uniquely positioned for long term growth opportunities in high value, high need areas such as neurodegenerative diseases, infectious diseases, and oncology. And if you haven’t had the chance to see the replay, I’d encourage you to watch it on our investor relations website.
Now, let’s briefly look ahead at expectations for the fourth quarter and the full year 2024. For the full year 2024, there is no change to our previous guidance. And as a reminder, we anticipate a core revenue decline in low single digit percent range and a full year adjusted operating profit margin of approximately 29%.
In the fourth quarter, we expect core revenue to decline in the low single digit percent range. Additionally, we expect the fourth quarter adjusted operating profit margin of approximately 30%.
So to wrap up, we’re pleased with our better than expected third quarter performance and expect the trends we’re seeing today to continue into Q4. Our team’s commitment to executing and innovating with the Danaher Business System enabled us to deliver strong results while continuing to accelerate growth initiatives across the portfolio.
Our third quarter results also reflect the unique positioning of Danaher today. We have an outstanding group of businesses that serve attractive end markets with favorable long term secular growth drivers. We’re further enhancing our portfolio and competitive advantage with innovation that is helping customers solve some of the most important health challenges impacting patients around the world.
So looking ahead, we believe this powerful combination of our leading portfolio proven ability to innovate and our team’s commitment to executing with the Danaher business system provides a solid foundation for delivering differentiated, long term financial performance.
And so with that, I’ll turn the call back over to John.

John Bedford

Thanks Reiner. That concludes our formal comments. Operator, we’re now ready for questions.

Operator

(Operator Instructions) Tycho Peterson, Jeffries.

Tycho Peterson

Hey, thanks. Want to probe into the instrument numbers a little bit wondering if you can give us instrument growth X China and then just maybe talk a little bit about where it’s worse and where it’s getting better, whether it’s flow mass spec, lab automation microscopy, and any leading indicators of funnel dynamics that make you feel better coming out of the quarter on the instrument side.

Matthew McGrew

Yeah, thanks. It’s Matt. I’ll give you the a number on what it is. It’s probably low to mid-single digit X China. And then Rainer, do you want to give color on the — what we’re seeing in the instruments side?

Rainer Blair

Sure. No, absolutely. So, and then, of course, in China, we would say that it’s down high single digits. But if you look at the developed markets, let’s start with those, the end markets were relatively stable sequentially, but we haven’t seen an inflection there yet. Although in pharma and in biotech, while it remains soft, we’re starting to see some early signs of improvement, especially in North America.
On the academic research side there, we see it stable in North America, with Europe modestly weaker. But coming back to China, we’re all aware of course of the announced stimulus, but that really hasn’t translated into meaningful orders for us as customers continue to wait for those details. So while they’re waiting for those details, they tend to also delay perhaps the normal purchasing habits that they might have had. So the stimulus funding has yet to pick up here in the third quarter.

Tycho Peterson

Okay. And then follow up, I know, you don’t want to talk about ’25 yet. But if we look at the run rate for guidance on Life Sciences that you’re giving us for the fourth quarter, the street is at 6% next year on Life Sciences. Is that realistic given the run rate you’re laying out for the fourth quarter. And then, anything you can say on trying to buy a process for next year. We’ve seen some of your peers talk down numbers as well.

Rainer Blair

Tycho, we’re still looking here to see how the fourth quarter plays out and see whether we can see a pickup in the stimulus, particularly in China, while we do expect the developed markets to be stable along the lines that I just discussed for Q3.
So we’re looking to see how China’s stimulus plays out here in Q4 before we can get to 2025 numbers. Now as it relates to bio processing, we continue to see there a low activity level, albeit stable, but at a lower level. And we expect that to take more time to play out here in the near term.

Matthew McGrew

Yeah. Maybe just to follow up. I think the comment on the China stimulus is for tools Tycho, right? Just what we’re seeing there. For ’25 overall. So that’s ’25 overall for Danaher for tools. But for bioprocessing for ’25 I think, we’ve talked about a gradual recovery here in ’24. And that’s pretty well played out like we thought.
Like Rainer Said, we do need to see how Q4 plays out. But before we give anything formal on ’25. But that said the Q4 exit rate of high single digits, an important building block for us as we build backlog and visibility heading into 2025. But given what we’ve seen here through Q3, I think we’re going to see a gradual recovery continue into ’25.

Tycho Peterson

Okay. And then on the Life Science, the guidance, fourth quarter down low single digit, but the street next year is up six. I was trying to also reconcile whether that step up is reasonable.

Matthew McGrew

Yeah, I mean, I think the biggest factor there for as we look to next year will be what happens with China stimulus for Life Sciences.

Operator

Michael Ryskin, Bank of America.

Michael Ryskin

Hey, thanks. I actually wanted to just follow up on exactly your last point there on bioprocess exit rate and how to think about 2025. And just how are you feeling about that market developing the gradual recovery? You talked about, I think five consecutive quarters of order growth there in the last couple quarters, you’ve had high single digit order growth. Revenues for bioprocess have done well this year as well, but they’ve lagged the growth level.
So it seems like there’s a little bit of a lag in terms of the orders translating into revenue, which, you would expect, obviously. Do you think that lag is closing? Do you think that we’re getting closer as we hit 4Q? , you talked about high single division by process where you’re going to start to see some of that order growth we’ve seen over the last quarters, a couple quarters start to translate and again, translates into next year.

Matthew McGrew

Yeah, I mean, I think if you — I think it’s a perfect frame. I mean, you think about exiting the year at high single digits, but you take a step back and you look at from a core growth perspective in 2024 we’re going to be down low single digit. And so as you think about where we exit to the totality of ’24 with that gradual recovery in mind as we head to ’25. I think, that’s the way that we’re thinking about it from a perspective of what, what revenue will do next year based on the fact that the order trajectory has gotten better over the last five quarters.
But like I said, I mean it would be great for us to see Q4 here before we go but I do think going down low single digits this year in revenue we be positive next year we believe, but let’s see where the trajectory goes here, given the fact that I do believe this is going to be a continuation of what we saw in ’24 which is, , pretty gradual recovery, very encouraging though. So we’re very happy with where we are.

Michael Ryskin

Okay. Alright. And then follow up. I want to ask on Cepheid a couple of quick questions if I can. One is you talked about timing of some purchasing of the kits in the quarter. Any chance you could, quantify that? I know you did, 425 and respiratory versus the 200 guide. Do you think that 225 was timing or maybe it was some of that organic speed and some of it was time just trying to get a sense of how much pull forward there was from the fourth quarter.
And in the press release, you also specifically crawled out, set, gaining market share and molecular testing. If you could expand on that, where you gain share in terms of customer or, geographically, any specifics there. Thanks.

Matthew McGrew

Yeah, I mean, like it’s a little hard to parse out to the dollar how much of the beat was related to pull forward versus just better than we thought. And I think, probably anecdotally from what we heard from customers. I would say that we do believe that there was a good portion of that was probably due to wanting to make sure that they had the security of supply heading into the fourth quarter, which is not a huge surprise, I guess, but as we look forward to the fourth quarter, then, we do, we did take that into account as we thought about what we might see here in the fourth quarter. So, I’d say a significant portion of the beat was probably related to that.
As far as market shares go, I think, I’d probably put it in two categories. I’d probably say one, it’s largely in the US. So that’s not a — an absolute statement. I would say largely in the US as we are entirely in hospitals as well as is near point of care. We’ve been doing very, very well with IDN as we’ve expanded beyond their core hospitals into other point of care settings closer to the patient that has continued here in the quarter. And I expect that would continue as well. Again, with this, the install base that we’ve been able to drop.

Operator

Doug Schenkel, Wolfe Research.

Doug Schenkel

I guess a couple of quick follow ups. There’s been a lot of questions that dance around the 2025 question. I’m sure you appreciate.
When I look at the numbers, the streets looking for 8% core growth with bio processing growing double digits and Life Science is growing on 7%. You haven’t said anything about — anything resembling a snap back, respiratory comps are going to be tough. VBP seems to be picking up in China stimulus activity follow through, seems unclear and then, just knowing you guys, you tend to be conservative. So cutting to the chase, am I missing anything? And should the street be modelling things at these levels? Recognizing you still want to see another quarter. But as we sit here today, the numbers look a bit high to me. Am I missing anything?

Rainer Blair

Well, I don’t think you’re missing much here. If we just take a look real quick on how we’re thinking about 2025. It’s important to know that we need to see how Q4 plays out here. I’ll come back to that in a minute but there’s still a couple important variables in Q4 that’s going to shape the next year and those relate to really the trajectory of the order book in bioprocessing. It’s so important. So certainly the high single digit core growth that we expect in bioprocessing for the fourth quarter is fully supported by backlog and what we expect in orders. But we also want to see more deeply into 2025 by seeing that orders momentum here continue into Q4. So that’s going to be key here for understanding how, the second half of 2025 plays out in bioprocessing.
As it relates to respiratory for Cepheid and another key variable here as we just talked about, there’s been some purchasing ahead here in Q3. And based on what we saw in the southern hemisphere, we do expect the northern hemisphere to have a more normal respiratory season. And as that straddles the first respiratory season of the year straddles Q4 and Q1.
And then lastly, and this is important for Life Sciences, but also more generally, we need to see how this China stimulus plays out in 2025. And we’d like to see some indicators of that accelerating here in Q4 to date. We’ve not really seen anything meaningful in that regard. So we’re going to put numbers all around us here and then update you in January.

Doug Schenkel

Okay. Super helpful, Rainer. And I guess another follow up on just I mean, essentially trying to get at the question of the utility of the book to bill metric. Like if we look at book to bill from Q3 of last year and this year and assume that bio processing accounts for roughly 85% of biotech sales. It seems like orders were up over 20% year over year. So I’m not sure if that math is right. That would be one question.
But if it is, I’m just wondering how important is that as we think about the outlook for return to robust bioprocessing growth because I think there’s some that are concluding that it’s taking longer to convert. I think there’s others that are assuming it’s converting much more quickly than it used to — I guess we’re just trying to get at how useful this metric is, especially keeping in mind this is largely a consumable business at this point.

Matthew McGrew

Yeah, I mean, I think we’ve talked in the past about book to bill being. It’s an interesting number and can be helpful in certain businesses. But traditionally, or historically, we have not really used book to bill to run this business for the exact reason that you said. Lots of consumables and the timing of when the shipments hit.
So I think from our perspective book to bill is not something we spend a lot of time thinking about, but we do think about the orders. And as you said, the orders here in the quarter were north of 20%. Now, that is off of a very easy comp. So I think we need to have a little bit of, of restraint on what that means. But five quarters of sequential order growth is important.
I think it’s also, what gave me a lot of encouragement in this order was typically we do see some seasonality where we go down from Q2 to Q3. We did not see that in this environment. I was encouraged by that we actually went up again sequentially. And so I look at everything and think about my order growth rate percentages, even though they’re off low numbers. That’s important.
The fact that we’ve had five sequential quarters in a row coming off of where we’ve been on the destocking. I think that’s an important factor. So, yeah, to your point, I’m not sure book to bill is super critical for us, but maybe triangulating that with those other two factors. I really do think we’re really happy with the trajectory of what we’ve seen in 2024, and what that means heading into 2025. But, again, I think we’re — we’ve seen a pretty gradual build up here in revenue and in orders and I suspect that continues.

Operator

Vijay Kumar, Evercore ISI.

Vijay Kumar

Good morning and thanks for taking my question. I guess one, I wanted to ask on that genomics here. Low singles, maybe in the past you spoke about sequencing versus gene editing, writing. What were trends between those two segments.
And I think this rapid gene that you mentioned, maybe you talk about what rapid gene is and would you expect some share gains here due to launch of this product?

Rainer Blair

Sure, Vijay. We on the gene reading side of the house, we do still see the market softer as particularly in the smaller customer. Emerging biotech segment we see less activity while the funding improved. Those customers are still prioritizing their project quite a bit. And so we’re seeing a bit less consumption in that area.
Now, in gene editing, of course, that’s a different story where we see a great deal of CRISPR and guide RNA and other types of solutions doing very well. Having said that and coming back to our new product launch here with rapid genes, we’re very excited about that. This will offer whole genes to our customers at a quality and a turnaround time, which is highly differentiated in the market. We expect that over time here to provide us some tailwind. So we’re very pleased here with how IDT is performing in this environment.

Vijay Kumar

And maybe Matt one for you. Your Q4 operating margin assumption, it came down to tad versus a prior. I think we’re looking at the low-30s exit rate. Is this some timing of expenses or anything change in margin assumption in — if it is any change in the investments and implications here as we look at the income on margins for fiscal ’25.

Matthew McGrew

Yeah, I mean, our full year margin didn’t change approximately 29% in Q4, approximately 30%. I mean, I think it’s probably a function of a couple of things. One, we’re going to have, we anticipate at least lower revenue in respiratory in Q4, obviously that has some margin implications to it. I think, we did have a little bit of timing, a little bit better bioprocessing in Q3 than we thought. And probably some of that might be a little bit of timing related as well, impacting Q4 margins.
And as you said, we’ve had a pretty good year here and as we head into the fourth quarter, we’re thinking about the cost structure thinking about the investments that we want to make in the business and we’re picking an opportunity to make sure that we do some of those smartly here in the quarter. And I think you add it all up and you come up with that adjusted operating margin in the 30s. So holding the full year here as we had in the end of the year.

Vijay Kumar

I’m sorry. The incremental margin implications for fiscal ’25 should defaults would be in the 35% to 40% range?

Matthew McGrew

Well, I mean, it’s going to depend on volume, I think Vijay. But, like we’ve talked about from a margin perspective that, this is this business when it is operating in the normal environment. The low 30s are where it should be. So, I mean, 25 we know we’ll update you that in January when we get there. But that’ll be a function of volume and mix, depending on where it comes from it’ll be different. So we’ll have to wait until we get a little bit further to give you that. But that’s how I’m thinking about ’25

Operator

Scott Davis, Melius Research.

Scott Davis

You guys mentioned again this quarter that the smaller customers and bioprocessing not coming back as fast. At what point is it become such a small piece of the business that maybe we stop having that color or it’s less material or maybe a different way to ask the question is, what percent of revenues is it now where it’s large versus small customers?

Matthew McGrew

Yeah. I mean, the larger versus small, roughly Scott is 75% or larger and 25% are smaller. And I think, we give the color primarily because those smaller customers have a little bit of a different dynamic than the larger customers, larger customers typically have on market, or later Phase 3 trial, exposures, whereas the smaller customers tend to be. Earlier stage, probably a little bit more related to in some instances, the cell and gene therapies of the world.
So a little bit different. They act differently in the funding environment as well. So I think it’s — we’re just trying to give color as to what we’re seeing there, where we are seeing an improvement in the funding environment. It’s not necessarily working its way through into orders and revenue at this point.
And so just give a little bit of color, but to your point, I think is, most of our customers are the larger customers with stuff that is on market. When I look back at what has caused all the pain of the last, two years in this business. It was the stocking at those customers. And I believe that is largely behind us. And so that’s why I think it’s really encouraging as we stand here and look forward though the recovery has been gradual, it has happened — it’s happened at the largest customers. Gives me a lot of faith that the long term outlook of this business still is the high single digits when we get there a little bit of a TVD but I think that’s the reason we want to give a little bit of color on both of them.

Scott Davis

And guys, we didn’t talk about the buyback or M&A or your funnel or nothing mentioned prepared marks any update there as it relates to your confidence or size or any metrics around the funnel be helpful.

Matthew McGrew

Yeah. I’ll just touch real quick on the buyback and maybe Rainer can give some color on the funnel, the M&A funnel, but I mean the buyback we — I think if you see and we did complete it technically that buyback straddled both Q2 and Q3. So if you see something in the queue, that’s what it was related to. Just so everybody’s clear, it was not a new issue and it was the final, pieces if you will of the buyback that we talked about in Q2.

Rainer Blair

Thanks Matt. And as it relates to the M&A environment Scott, as we do every day, we we’re out there, cultivating across all of our segments and we’re fairly active there. Our funnels are pretty dynamic. It’s fair to say that while the environment though is improving, valuations are still elevated. And so we feel great about our positioning both in terms of the assets that are attractive out there and of course, our balance sheet, but we’re going to maintain our discipline with our deals, needing to meet our trifecta of attractive end market, attractive company. And then of course, the valuation framework, the model has to work as well. So active, but we still see that the valuations are elevated.

Operator

Puneet Souda, Leerink Partners.

Puneet Souda

Thanks for taking my question. So, specifically on China just following up on a few things. What’s the right jump off point for China for as we think about 2025 just given the uncertainties here in the market and the backdrop of the stimulus? And also wondering if you can elaborate a bit on the China value based pricing. How much of an impact are you making there?
And just lastly on China, how much is local bioprocess competition important in this market? And does that change your view for the long term growth of the worldwide bioprocess or biotech segment. Long term growth just now that local competition has immersed and is being utilized more in some of those local maps.

Matthew McGrew

It may be the start because I think your first question, your third question wrapped around China for next year and bioprocessing, maybe I’ll let Rainer take that. But just VBP, just to remind everybody, we assume that it was going to be $150 million impact over three years really starting this year.
As we ramp up,, our assumptions initially were that, that would be linear over the next three years. We are starting to see a little bit more activity in China around the VBP here at the end of this year. So I think we’ll have a better sense of what that linearity looks like after we get through the next couple of months, where it does look like the activity is ramping up. So I still think the number is a good number, but how that rolls out and plays out will be determined the next couple of weeks.

Rainer Blair

As it relates to the jop, Puneet. Really, I think we need to view China as stable and bumping along the bottom and we don’t expect to change in that in the short term, as we go through and think about 2025 unless we see a material change in the execution and rollout of the stimulus program in China. So we expect China to continue to develop as it has been here for most of the year in 2024.
Now to relate to your question on local competition, certainly there’s local competition out there. But we have to be clear that particularly in biotech, there are many companies simply struggling to survive and they’re buying essentially the least expensive solution that they can to make it to the end of the month. And it’s just going to have to be good enough.
So that’s one section of the market. Then there’s another segment that really is targeting the international sale of their therapeutic molecules. And they tend to want to have solutions from multi-national companies, first and foremost, from ourselves here and Cytiva. In order to ensure that regulators around the world are comfortable with the inputs that are required to make these incredibly effective drugs. So yes, there’s local competition. We would see it more on the margin especially as it relates to local molecules.

Operator

Dan Leonard, UBS.

Dan Leonard

Thank you. I wanted to circle back to the trends in Life Sciences instruments and equipment specifically because I think you do have some consumables in that instrument reporting. Can you elaborate a bit further on what the equipment trends were in the quarter from a growth perspective?
So just to talk about the quarter, more generally, the market conditions in the third quarter were essentially consistent with what we saw in the first half of ’24. And capital equipment spending continued to be constrained and to the last question, particularly in China.

Rainer Blair

Now, in contrast to the equipment, constrained environment, consumables and service grew in the quarter as lab and research facilities and institutions activity has started to stabilize. So we do see equipment being constrained but consumables are starting to move.

Dan Leonard

And then a quick follow up Rainer, could you comment on the performance at Abcam it seems like versus our numbers, the run rate there is improving. I’m unsure if that’s the correct read or if it’s just rounding or if there’s other M&A into that revenue mix.

Rainer Blair

There’s no other M&A in that revenue mix. But of course, we’re working very hard to drive our hypothesis around Abcam. And right now, the focus is on transitioning into — of course, and the team is making great progress with that. They’re implementing, actually pulling on our DBS capabilities to drive those growth accelerators and of course, improve the cost positioning that we’ve talked about. So we feel very good about where we are with Abcam and long term we absolutely believe that this meets our expectations both in terms of growth and the bottom line.

Operator

Jack Meehan, Nephron Research.

Jack Meehan

I wanted to ask about diagnostics in the China region. To start for Matt. Can you just check my math is — can you remind me, is this like 15% of diagnostic sales? And I was trying to back into how Beckman might have done in the quarter in the region. It could have been to the tune of down 20% or so. And then for Rainer would just be great to hear about your thoughts on regional dynamics and diagnostics. Is this all price impact or any change and share shift? Thank you.

Matthew McGrew

Yeah. So diagnostics, the total revenue for China diagnostics. I think you’re in the ballpark on that as far as what China was — from China diagnostic perspective in the quarter. I don’t think it would have been down that high jack, probably it was down in overall diagnostics, which is most of that’s going to be Beckman. It was down low double digits. So I think that’s probably a more a better place to anchor, but I think your total number is probably pretty close to, right. It was as far as percentage said.

Rainer Blair

We saw across the world here really with one exception, strong performance in all of our clinical diagnostic businesses. And of course, you heard from Matt around Cepheid that we believe to be taking share there at really at all levels. But coming back to our clinical diagnostic businesses, we saw a high single digit recurring revenue growth in North America and in Europe.
On the other hand, we come back to China. In China, we see the impact of the volume based procurement, which is what brings us down. We also had in Beckman Colter, in particular, a high hardware sellout comp last year as we were burning down some backlog, but we’re very pleased with how our clinical diagnostics businesses continue to develop, continue to take share. And volume based procurement is the topic right now for diagnostics in China.

Operator

Thank you. And this will conclude our Q&A session. I’ll turn the call for John for closing remarks.

John Bedford

Thank you everybody for joining today. We’ll be around for follow ups all day, that’s the way. Thank you.

Operator

Thank you. And this does conclude today’s program. Thank you for your participation. You may disconnect at any time.