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Marc Casper

Thank you, Raf. Good morning, everyone, and thanks for joining us today for our first quarter call.
As you saw on our press release, we delivered very strong performance in the quarter. I'm proud of our team's ongoing focus to enable the success of our customers while demonstrating incredibly strong commercial execution and operational discipline. Our continued success is a result of our growth strategy, our PPI Business System, and our proven capital deployment approach.
And of course, all of this is against the backdrop of a more uncertain macro environment. So a big thanks to the team for their efforts.
In my remarks today, I'll first cover Q1, which was a strong quarter with clean execution across all dimensions. In the second part of my remarks, I will cover the expected impact of the uncertainty in the macro environment, and I'll provide a high-level view of our updated guidance for the year that incorporates the expected net impact of current tariffs and the changes driven by the current policy focus of the US administration.
So to turn into Q1, let me recap the financials. Our revenue in the quarter was $10.36 billion. Our adjusted operating income was $2.27 billion. Q1 adjusted operating margin was 21.9%, and we grew adjusted EPS by 1% to $5.15 per share.
Our team's excellent execution and strong focus on our customer success enables us to deliver revenue performance ahead of our expectations. And then we translated that revenue performance into earnings that were also ahead of expectations.
Turning to our performance by end market, as a reminder, there were two less days in the quarter than the same period last year. In Pharma and Biotech, we delivered low-single digit growth during the quarter, which included a 2-point headwind from the from the runoff of vaccine and therapy related revenue. Performance in this quarter was led by our Bioproduction and Pharma Services businesses, as well as our Research and Safety Market channel.
In Academic and Government, revenue declined low-single digits in the quarter, driven by the macro conditions in the US and China for this end market. In Industrial and Applied, we grew low-single digits during the quarter, highlighted by strong growth in our Electron Microscopy business.
Finally, in Diagnostics and Healthcare, we grew low-single digits during the quarter, reflecting strong performance in our Healthcare Market channel and in our Transplant Diagnostics and Immunodiagnostics businesses.
Wrapping up on our end markets while there was more uncertainty than originally expected, our team delivered on our financial commitments for the quarter.
In terms of our growth strategy, we made terrific progress in the quarter. As a reminder, our strategy consists of three pillars: high impact innovation, our trusted partner status with customers, and our unparalleled commercial engine.
So starting with the first pillar of our growth strategy: high impact innovation. We had an excellent start to the year, launching several outstanding new products that are strengthening our industry leadership by enabling customers to advance their important work.
Let me first highlight a couple of new products and analytical instruments that demonstrate our continued market leadership. In Electron Microscopy, we introduced the Thermo Scientific Vulcan Automated Lab, a fully integrated AI enabled solution that combines Robotics and Electron Microscopy, helping to advance process development and control in semiconductor manufacturing.
The Vulcan System speeds up Transmission, Electron Microscopy workflows, reduces labor, and delivers consistent high-quality data. This innovation improves manufacturing yields and enhances productivity and seamlessly connects lab and fabrication operations, a major step forward for our semiconductor customers.
In Chromatography and Mass Spectrometry, we introduced the next generation Thermo Scientific Transcend, a new ultra-high performance Liquid Chromatography platform helping high volume laboratories, simplify sample preparation and increase efficiency in clinical research, forensic toxicology, food safety, and environmental testing applications, including for PFAS.
Turning to our Genetic Sciences business, we introduced Olink Reveal Proteomics kits that enabled the identification of proteins related to inflammation and immune response, helping to advance precision medicine. It was a terrific quarter for innovation, and we're excited about the strong pipeline of launches slated for Q2, including those that will debut at ASMS. Our high-impact innovation is enabling an even brighter future for our company.
During the quarter, we also continued to strengthen our industry-leading commercial engine and deepen our trusted partner status with our customers to accelerate their innovation and enhance their productivity.
In our Clinical Research business, we continue to strengthen our leadership in real world evidence to help our customers gain insights about the safety and effectiveness of current and future treatments. We launched new CorEvitas patient registries in alopecia and lupus to enhance our customers' ability to inform treatment decisions and ultimately improve patient outcomes.
And in Electron Microscopy, we announced a new collaboration with the Chan Zuckerberg Institute for Advanced Biological Imaging. To advance the understanding of human cells by leveraging cutting edge cryo-electron tomography technologies, this effort supports the development of the Open Cell Atlas, a groundbreaking initiative aimed at creating high resolution 3D maps of human cells to drive biological discovery. It's another example of how Thermo Fisher is enabling large scale collaborative research efforts to push the boundary of science forward.
Our trusted partner status and industry leading commercial capabilities enable our customers' success. They also provide us a unique opportunity for us to engage with our customers, helping them solve current challenges and plan for the future.
As always, our PPI Business System played a significant role in our success, enabling outstanding execution during the quarter. PPI engages and empowers all of our colleagues to find a better way every day. PPI is helping us to drive share gain and improve quality, productivity, and customer allegiance. It's a significant competitive advantage for Thermo Fisher as we navigate through the current macroeconomic uncertainty.
Let me now turn to capital deployment. We continue to successfully execute our proven capital deployment strategy, which is a combination of strategic M&A and returning capital to our shareholders. In February, we announced that we entered into a definitive agreement to acquire Solventum's Purification & Filtration business for $4.1 billion. The business is a leading provider of purification, filtration technologies used in the production of biologics, as well as in medical technologies and industrial applications.
So Ventum's innovative products are highly complementary to our leading cell culture media and single-use technologies, broadening our bioproduction capabilities to better serve the high growth bioprocessing market. The transaction is expected to be completed by the end of 2025 and is subject to customary closing conditions and regulatory approvals. We look forward to welcoming our new colleagues to Thermo Fisher.
In terms of return of capital during the quarter, we repurchased $2 billion of shares and increased our dividend by 10%.
Let me now turn to our guidance. We've all seen a tremendous pace of change in the world since we provided our guidance on January 30. The two main elements of the macro changes since then are tariffs and the changes driven by the current policy focus of the US administration.
As you would expect, we've been operating with agility to assess the changes as they come, and we're actively managing our business to mitigate the impact and capitalize on new opportunities. As a result, we're able to offset a large amount of the impact of the macro changes in 2025 and more fully offset them when the full impact of our mitigation actions is realized next year.
While these recent macro changes are causing uncertainty and remain fluid, we thought it would be most helpful to the investment community to offer our best estimate of the impact of the known changes as of today and embed them in our guidance.
Our updated guidance range for the year is revenue in the range of $43.3 billion to $44.2 billion and adjusted EPS in the range of $21.76 to $22.84. Stephen will take you through the details in his remarks.
While the guidance has changed for the expected impact of the macro factors and the mitigating actions, it's important to note that the rest of the guidance remains fully on track relative to what we shared on our last earnings call.
As you know, during periods of change, we define a clear set of guiding principles on how to successfully manage the company. These principles have three elements. First, everything we do starts with our customers and ensuring that we're enabling their success. Second, we inspire our colleagues to bring their best every day to fulfill our mission.
And third, we know we hold ourselves to an incredibly high standard to deliver differentiated short-term performance, all while identifying opportunities to enhance our long-term competitive position, which creates an even brighter future for our company.
To enable that differentiated short- and long-term performance in this environment, we're leveraging our PPI Business System to aggressively manage our supply chain, to counteract tariffs, and to appropriately manage our cost base. You've heard us talk about our commercial intensity, and we're pivoting our commercial teams to the areas with the best opportunities to accelerate our shared gain momentum.
We're ensuring that our trusted partner status is driving tangible benefits for our customers. And one way we're doing this is by continuing to invest further to strengthen our capabilities for our customers. This includes increasing our investment in US manufacturing, R&D in the range of about $2 billion.
As the largest Domestic Life Sciences player in every major market around the world, we're uniquely positioned to help customers navigate this environment. I'm encouraged by the fact that both our colleagues and our customers have never been more enthusiastic about our company. Our Customer Allegiance Score is at an all-time high, and colleague engagement and retention is incredibly strong.
So to summarize our key takeaways from the quarter, we delivered a very strong quarter driven by our proven growth strategy and PPI Business System. Our trusted partner status and proven ability to enable our customer success is a significant competitive advantage.
Looking ahead, we're acting with speed and agility to navigate the current environment, and we're incredibly well positioned to minimize the impact and maximize new opportunities, creating an even brighter future for our company. With that, I'll now hand the call over to our CFO, Stephen Williams. Stephen?

Stephen Williamson

Thanks, Marc, and good morning everyone. I'll take you through an overview of our first quarter results for the total company, then provide color on our four business segments, and I'll conclude by providing our updated 2025 guidance.
Before I get into the details about financial performance, let me provide you with a high-level view of how the first quarter played out versus our expectations at the time of our last earnings call.
In Q1, we had another quarter of excellent execution, and this enabled us to deliver Q1 financials ahead of what we'd assumed in our prior guidance. Organic revenue growth was approximately $100 million or 1% a head, and adjusted EPS was $0.04 a head. This was driven by $0.09 of very strong operational performance, partially offset by $0.05 of higher FX headwind, largely due to non-cash transactional FX. So a clean beat for the quarter.
The team's execution was excellent, and we delivered a strong start to the year.
Let me now provide you some additional details on our performance, starting with earnings per share. In the quarter, adjusted EPS grew 1% to $5.15. GAAP EPS in the quarter was $3.98, up 15% from Q1 last year.
On the top line, Q1 reported revenue was flat year-over-year. The components of our reported revenue included 1% organic revenue growth, a slight contribution from acquisitions, and a 1% headwind from foreign exchange. For context within our revenue growth for the quarter, we had a headwind of approximately 3% from the combined impact of two less selling days and the runoff of the pandemic-related revenue.
Turning to our organic revenue performance by geography in Q1, North America was flat year-over-year. Europe grew low-single digits, and Asia Pacific also grew low-single digits with China declining mid-single digits. With respect to our operational performance, we delivered $2.27 billion of adjusted operating income in the quarter and adjusted operating margin was 21.9%, 10 basis points lower than Q1 last year.
In the quarter, we delivered very strong productivity. This enabled us to fund strategic investments to further advance our industry leadership and largely offset the impact of unfavorable mix and a headwind from foreign exchange. Total company gross margin in the quarter was 41.7%.
Moving on to the details of the P&L, adjusted SG&A in the quarter was 16.5% of revenue. Total R&D expense was $342 million in Q1, reflecting our ongoing investments in high impact innovation. R&D as a percent of manufacturing revenue was 7.5% in the quarter.
Looking at our results below the line, our Q1 net interest expense was approximately $100 million. The adjusted tax rate was 10% and average diluted shares were $379 million, $5 million lower year-over-year, driven by share repurchases, net of option dilution.
Turning to free cash flow in the balance sheet, Q1 cash flow from operations was $720 million and free cash flow was $370 million after investing $350 million of net capital expenditures. During Q1, we deployed $2.1 billion of capital to shareholders through $2 billion of share buybacks, which were completed in January and approximately $150 million of dividends.
Also, during the quarter, as Marc mentioned, we announced the definitive agreement to acquire Solventum's Purification & Filtration business for approximately $4.1 billion in cash. We expect the transaction to be completed by the end of 2025, and the business will become part of our Life Science Solution segment upon close.
We entered the quarter with $5.9 billion in cash and short-term investments and $34.2 billion of total debt. Our leverage ratio at the end of the quarter was 3.2x gross debt to adjusted EBITDA and 2.6x on a net debt basis.
Concluding my comments on our total company performance suggested ROIC was 11.4%, reflecting the strong returns on investment that we're generating across the company.
Now provide some color on the performance of about four business segments. As a reminder in Q1, we had two less selling days than the prior year quarter. This impacted revenue growth in each segment by approximately 1 percentage points to 2 percentage points.
In Life Science Solutions, Q1 reported revenue in the segment increased 2% versus the prior year quarter, and organic revenue growth was also 2%. Growth in this segment was driven by our Bioproduction business. Q1 adjusted operating income for Life Science Solutions decreased 1% and adjusted operating margin was 35.6%, down 120 basis points versus the prior year quarter.
During Q1, we delivered very strong productivity, which is more than offset by the expected impact of the Olink acquisition, and favorable mix, and strategic investments. In the Analytical Instrument segment, reported revenue grew 2% year-over-year and organic revenue growth was 3%.
The growth in the quarter was led by Electron Microscopy business. In this segment, Q1 adjusted operating income was flat year-over-year, and adjusted operating margin was 23.2%, down 50 basis points versus the year ago quarter. In Q1, we delivered strong productivity and volume pull through, which is more than offset by strategic investments, foreign exchange headwinds, and unfavorable mix.
Turning Specialty Diagnostics. In Q1, reported revenue grew 3% year-over-year and organic revenue increased 4%. In Q1, growth in this segment was led by a healthcare market channel and our Immunodiagnostics and Transplant Diagnostics businesses. Q1 adjusted operating income for Specialty Diagnostics increased 3%, and adjusted operating margin was 26.5% flat year-over-year.
During the quarter, we delivered good productivity and a volume pull through, which was offset by foreign exchange headwinds and unfavorable mix.
And finally, in the Laboratory Products and Biopharma Services segment, both reported revenue and organic revenue decreased 1% versus the prior year quarter. The runoff of pandemic-related revenue had about a 2% impact on revenue growth in the segment in Q1. This was largely offset by good growth in our Pharma Services business and our Research and Safety Market channel.
In this segment, Q1 adjusted operating income decreased 2% and adjusted operating margin was 13%, which is flat to Q1 2024. In the quarter, we delivered very strong productivity, which is offset by unfavorable mix and strategic investments.
So turning to guidance. As Marc outlined, we're updating our 2025 full year guide to reflect the continued strength of the business, including the very strong start to the year in Q1. And to reflect the expected impact of recent changes in the macroeconomic environment.
While these recent macro changes are causing uncertainty and remaining fluid, we thought it would be most helpful to the investment community to offer our best estimates of the impact of the known changes as of today and embed them in our guide. Let me start with a high-level summary of the change to the midpoint of the guide. I'll then provide more detail around each one of the changes, so they have the right context.
Adjusted EPS is $1 lower at the midpoint than our previous guidance. $0.70 is driven by the tariffs between US and China. We expect this impact will reduce very rapidly next year when the full benefits of our mitigation actions are realized. Non-China-related tariffs are assumed to have no net impact to the adjusted EPS for the full year 2025.
Our mitigation actions offset the gross impact of the new costs within the year. And finally, the impact of changes driven by the current policy focus of the US administration as a $0.30 impact in 2025. Revenue dollars are unchanged at the midpoint. The volume-related impacts are offset by our mitigating price actions and more favorable FX. And we now expect organic revenue growth to be 2% at the midpoint of the range for the year.
The guidance is prepared using tariff rates that are in place today and assumes no change in the current US policy focus. So we're updating the guide to reflect the change in the macro environment and our highly impactful mitigation actions. It's important to note that all the rest of our guidance remains on track for the year.
Let me now give you the detailed context behind each of these macro change factors, starting with the US-China tariffs. The tariff rates here are so substantial that they're likely to significantly reduce the volume of trade between the two countries. We expect this will impact the sales of our products in China that are produced by our facilities in the US. In our guidance, we're assuming this is a $400 million revenue headwind for the year. These tariffs are also expected to increase the cost of China sourced parts and subassemblies.
The pull-through on the lower volumes and higher costs, net of the aggressive mitigation actions is assumed to be a headwind of adjusted operating income in 2025 of $375 million versus that prior guide. The mitigation actions take time to complete, so we don't get all the benefit from them in 2025. Once they are complete, we expect them to fully mitigate the impact of these tariffs.
Moving on now to non-China-related tariffs. These recently raised tariffs are increasing our costs and where we directly import items into the US, but also likely increase the cost of many items that we buy in the US that have an overseas content.
A partial offset to the impact of these tariffs is foreign exchange. The increase in tariffs records a significant weakening of the US dollar. And at current rates, this increases our revenue guide for the year by $600 million. The bottom-line benefit of the FX change is more muted given the mix of currencies and one-time transactional FX caused by the recent rapid change in the rates. We're driving offsetting mitigation actions here as well, a combination of supply chain changes, actively managing our cost base and appropriate pricing actions.
As a result, as I mentioned earlier, there's no net adjusted EPS impact for 2025 from the non-China-related tariffs. And in terms of the changes in US policy focus, the largest impact is likely to be on our US Academic and Government customers.
We now expect their purchases to be more muted in 2025, especially for instruments and equipment as they evaluate the impact of potential changes to government funding and work help access new funding sources to continue their critical work.
We're baking into our guidance a lower level of clinical trials work also related to vaccine studies. Net of appropriate cost management, these changes to US policy focus reduced our guidance midpoint by $500 million of revenue, $150 million of operating income and $0.30 of adjusted EPS.
The tariffs and policy changes are also creating some very relevant medium- and long-term opportunities, and we're working to maximize these upsides, including leveraging our extensive US manufacturing capabilities to help our customers navigate their own potential tariff impact. This will have minimal impact in 2025, but it's expected to be an important contributor going forward.
So bringing all this together, our updated guidance range for the year now reflects revenue in the range of $43.3 billion to $44.2 billion, organic growth in the range of 1% to 3%, and adjusted operating income margins in the range of 22% to 22.6%. It's worth noting that the tariff-related changes to the guide reduced our adjusted operating income margin by 120 basis points. This is driven by FX and also the tariff costs, partially offset by incremental pricing actions.
We're taking the right actions and protecting the profit dollars, but it has an impact on our reported margins. And then finally, adjusted EPS in the range of $21.76 to $22.84. This reflects excellent performance in the current conditions.
From a range standpoint, we've assumed a plus or minus 1% organic revenue growth range around the midpoint. This range is provided to give you a view on the potential outcomes based on the world as it is today and the current tariff levels and the current policy focus areas being unchanged.
There is scenario for 2025 that could be lower in this guidance range is the macroeconomic outlook meaningfully dampens, and there are scenarios that could play out above this range that would be largely in line with our original guidance.
As I think about the implications for beyond 2025, given the robust mitigation actions we're putting in place, I see that financial impact of these macro-driven changes to our guide reducing fairly rapidly. We'll quickly realize the full benefit of our supply chain actions, our Academic customers will adapt their funding sources and will capitalize on the new opportunities that the macro changes are creating.
So now I'll move on to an update of some of the modeling elements for the full year. So given the recent changes in rates, we now expect FX to be a year-over-year headwind to revenue of $50 million and $90 million headwind to adjusted operating income. This includes an estimated $60 million of one-time transactional FX.
In terms of adjusted EPS, we now expect FX to be a headwind of $0.19 for the year. Below the line, we now expect approximately $330 million of net interest expense in 2025. The adjusted tax rate assumption for the year is expected to be 10.5% versus our prior guide of 11.5%, reflecting the changes to our earnings guidance.
We continue to expect between $1.4 billion and $1.7 billion of net capital expenditures in 2025 and free cash flow in the range of $7 billion to $7.4 billion for the year.
In terms of capital deployment, we're assuming $2 billion of share buybacks, which were already completed in January. We continue to estimate the full year average diluted share count will be between 378 million shares and 379 million shares, and we'll return approximately $600 million of capital to shareholders this year through dividends.
And our guidance does not include any future acquisitions or divestitures, so it does not include any impact from the pending acquisition of Solventum's Purification & Filtration business.
And finally, I wanted to touch on phasing for Q2. We expect organic growth in Q2 to be similar to Q1 and adjusted EPS in Q2 to be approximately $0.05 to $0.10 higher than Q1.
So to conclude, in a more uncertain world, we delivered on our commitments in Q1. And while the world is more uncertain, what is unchanged is our approach. We're acting with agility and navigating appropriately, enabling the success of our customers, our colleagues and our shareholders.
With that, I'll turn the call back over to Raf.

Rafael Tejada

Thank you, Stephen. Operator, we're ready for the Q&A portion of the call.

Question and Answer Session

Operator

Thank you. We will now begin today's question-and-answer session. (Operator Instructions)
Michael Ryskin, Bank of America.

Michael Ryskin

Thanks for the detailed comments, Marc and Stephen, that was really helpful. I want to start on something you both touched on sort of the approach to the guide methodology going forward given all the uncertainty in the broader market and especially on the policy side.
Just trying to think about -- obviously, things have changed a lot in the last three months. It feels like they're changing every day, every week. We noticed that for the guide, both for revenues and EPS, you're giving a wider range than you have in the past. But just could you talk a little bit about upside, downside sort of what the world looks like for the lower end versus what the world looks like for the higher end?
And just if things keep changing as they have been, levers you have to, the offset things if things deteriorate further? Or maybe just sort of what your actions would be if things improved a little bit? Just think about various scenarios going forward.

Marc Casper

Mike, thanks for the question. Super helpful question. So maybe I'll start with a little bit of framing and then think about some scenarios, right? So I think that -- you start with, we had a really good quarter to start the year, right? And it was clean across all dimensions, top line, bottom line, execution of the growth strategy was actually really excited about customer leads and things that we don't talk as much as the best ever turnover rate of colleagues, the lowest that we've recorded.
So things are good, right, and from that perspective, right? And the majority of our business actually are right on track in terms of what I would expect.
The macro is, as you said, is quite changing and dynamic. And if I think about how challenging it was to just go through and assess what would be the impact of us. So just what we have at this moment, we made the view that it's better to actually articulate that so that people can model it, right? And do we think that's going to be exactly right? Of course, not.
But do we think it's directionally correct? Yes, we do. And what's hard to visualize is we are fully mobilized on mitigation actions, navigating the environment that we see right now. And if you think about, really, most of these changes started around April 10. And we sit here less than two weeks later, and we're in full mobilization mode. If things change, we're going to capitalize on opportunities that we never saw coming.
We will navigate risks effectively. We'll roll back actions that are unnecessary as some of these things don't happen. So we'll be very agile. And I feel good about our ability to do that. Actually, I think we're incredibly differentiated based on our ability to do that.
So what are the broad scenarios? So the upside scenario is changes in the policies between US and China so that you don't have sort of this dramatic reduction of demand based in China for US-made products. It's a small minority of what we produce for China is actually made in the US, but our assumption is effectively, it goes to zero until we can mitigate supply chain, which we can do quite aggressively, but this takes some time to move production to other sites. So that's the most obvious scenario that would drive short-term actions.
There was actually a good sort of commentary from the FDA Commissioner about what he's trying to do and I know the biotech community has felt good about those changes. So you could envision a more robust biotech environment. Those are kind of both scenarios or probably some other ones I'm not thinking about.
The negative is, if tariff rates or other things like that or the macro gets affected by these things, that would be the negative scenario and many levers that we can pull. But it's hard to know exactly what the impact would be because we don't know the magnitude of the challenge that we face.
So hopefully, that helps you think about it. And the important reminder in a period of volatility, there's no place that's better to be than life science tools, right, in terms of -- if you think about this level of change and in the scheme of things, very small changes to our outlook. We're still growing nicely and our plan is to grow EPS. So it's a nice haven in a little bit of a challenging environment.

Michael Ryskin

Okay. That's really helpful. And then for my follow-up, I want to touch a little bit on sort of the long term beyond 2025. I think you guys addressed the tariff situation really well saying that you'll be able to mitigate things and it's really not going to be issued next year.
But thinking about NIH, US government funding, policies there. Obviously, that's an important market. So any thoughts -- I know it's really early, but any thoughts on what your view is of the underlying tools market growth rate at 4% to 6%. Is that still viable going forward in the future? Do you think that there will be enough offsets and ability to find new funding sources? Or does this sort of dampen that longer-term outlook for the market?

Marc Casper

Yes. So Mike, I think right now, we're focused on the super short term, right? Because obviously, we're addressing that. I'm super optimistic about the long-term health of our industry because if you go by what's driving it, right?
What's driving it is we're getting older. There's big demand for health care and the scientific breakthroughs, they're awesome, right? The pipelines in the pharmaceutical and biotech industry are compelling, right? And those things generate the fundamental underlying growth.
So when I think about the long term, I feel very good about the long-term growth, right? What underlies that is obviously GDP growth. So if the GDP growth in the world is better, that actually puts an upward pressure on growth in the long term. If GDP growth is depressed, that puts a downward pressure that would affect every part of the economy, but that's always a driver that we don't talk so much about.
On the academic funding, when I think about sort of US NIH, when you're thinking about a few points of our total revenue, you have a one-time reset if this never changes in policy. But ultimately, it grows from there. When I actually think about what is the practical aspects of the government, environment or the academic environment, I should say, the next step actually is what does the appropriations happen in the budget?
Congress has historically been strong supporters of NIH. We'll see how that plays out. And then from there, it will go going forward. So hopefully, that's helpful. I'm excited for what the future holds. And right now, we're just going to navigate the environment that we're in.

Operator

Matt Sykes, Goldman Sachs.

Matthew Sykes

I really do appreciate all the detail you've given so far. I guess for my first question, just given how close you are to your customers, as we think about the large biopharma end market, could you maybe talk about any changes in order behavior or patterns where there's been a pull forward of inventories just to get ahead of tariffs?
And if you haven't seen that yet, do you expect that to happen? And how do you work with your customers to ensure not a significant amount of supply chain disruption in that event?

Marc Casper

Yes. So Matt, it's a great question, and thanks for it. Given how short the announcement implementation of the tariffs, I don't really believe customers had any opportunity to pull forward, right? It would have been -- we didn't see something like funky in the first quarter in terms of some bolus of things happening later in the quarter. We sort of going into the normal process.
And the tariffs are in a fact. So I don't see really any meaningful changes in the patterns that we're expecting. And so hopefully, that's helpful.

Matthew Sykes

Great. And then just for my follow-up, when you talk about manufacturing flexibility and the ability to mitigate, could you maybe at a high level, just kind of talk about how flexible different types of products are, meaning like is it easier to flex in instrument manufacturing facility versus, say, consumables and reagents?
And how do you think about sort of the order of priorities in terms of flexing that manufacturing? I just think we all want to get a sense for timing of truly how flexible you can be given the diverse set of products that you offer?

Stephen Williamson

Yes. Matt, when you think about what we said in our guide and how fast we're able to mobilize, you can see the short time duration it takes to actually get the full impact of that. And it's complex. It takes a lot of hard work. The team is doing an awesome job of thinking about the implications and then b, putting the right actions in place and you have the executing, whether they were at the stage and executing.
And it's different by different businesses, by different product types, and they have flexibility in our system that you see the net impact is that. So I think that's the best way to put it. And the team is just working with the benefit of the PPI businesses and execute on that.

Marc Casper

So the other one thing that will be challenging, I think, for the analysis of the industry is scale is just an enormous advantage here, right? Because if you're narrow, and you ship from the world, from a single site for your products, you might be massively disadvantaged.
You might be advantaged. You may change your ability to be flexible, incredibly hard. we have scale facilities in every major geography. They don't do everything that we do, but the capabilities are robust. We have a lot of twin factories where the factories do the same thing in different geographies.
So our ability to move with speed here is [enormous], and that actually is a great share gain opportunity for us as well, right? I feel very good about our competitive position, especially how strong the PPI Business System is on our operational execution. Hopefully, that's helpful.

Operator

Jack Meehan, Nephron Research.

Jack Meehan

First appreciate very comprehensive guidance update that you guys provided. Marc, one follow-up, one to ask on the policy side is related to pharmaceutical tariffs. Just curious what you're hearing from customers? And then just talk about the risks and opportunities there for Thermo Fisher. I'll leave it open ended, but then I have a follow-up.

Marc Casper

Jack, thanks for the question. So we interact, obviously with our pharmaceutical and biotech customers continually. Obviously, there's nothing been formalized on the tariffs at this point. I think there's both advocacy that those customers are doing and planning as well. One of the things that we're doing is we're seeing a lot of interest in leveraging our scale US manufacturing capabilities within our Pharma Services business. So there's quite a bit of demand for our footprint here.
And part of the reason that I talked about the investment which is a $2 billion investment over the full-year period ahead of us is really to actually have added capacity for pharma services, for analytical services or our laboratories and additional R&D done in the US. And I think it's -- we just believe that there's going to be more activity here, whether there's tariffs or not, and that's the direction of travel.
And we're going to enable our customer success. And once again, we'll be able to capitalize on that opportunity to help our customers be extraordinarily successful.

Jack Meehan

Great. And you kind of walked me to where I wanted to go, which is on the Pharma Services business. So that got a few call outs in the script, I would just like to get your thoughts on what inning you think this business is now in kind of in the post-COVID recovery, confidence that continues? And when you have these discussions with customers, any -- is it more API related or Fill Finish, just like where you're seeing the demand for help?

Marc Casper

Yes. So it's the biggest area -- it's across the board, but the biggest areas really is in Fill Finish, right, as well as interestingly enough drug product on the tableting side of the things as well because there's an interest in having more done in the US. So I say drug product is seeing the fastest thing because it takes a long time to move drug substance, actually, in terms of that happening. So I think that's where we'll see it first. And in terms of the COVID thoughts, we've won significant business to backfill the old Cole-related capacity.
So that's pretty much all -- that is actually all signed up. And then we're just ramping up production, right? And we have new lines coming in. We're going to have even more lines being added with the additional investments in the coming years. So from that perspective, the focus in the rearview mirror and now you're starting to see the ramp of the activity on what we backfill there is. So it's a pretty exciting time in Pharma Services.

Operator

Rachel Vatnsdal, JPMorgan.

Rachel Vatnsdal

I wanted to dig into the policy changes that drove a portion of the updated guide. You highlighted that $500 million of that guidance reduction was related to those policy changes. You specifically called out the weakness in Academic and Government, but then you also highlighted some of the clinical trial weakness in light of lower expectations related to vaccines.
So could you break down for us what percent of that $500 million update was related to A&G versus the CRO. And then alongside the Academic and Government, what are your updated expectations for how that market should perform for the full year?

Marc Casper

Which market Rachel, I didn't understand. Which market should perform?

Rachel Vatnsdal

For Academic and Government.

Marc Casper

Yes. I just want to make sure I answer the right question. So thanks for the question. So the split is really quite straightforward on the policy changes. Within the Clinical Research business, we've seen $200 million of studies canceled or put on hold, specifically vaccine, about half of that is directly funded by the government through innovators and about half of it is just from the innovators themselves.
Every other aspect of clinical trial-related activity seems to be normal. So that's been fine. Actually, there's a lot of interesting strength in the biotech authorization. There's a lot of good things going on there. But we have seen very specific actions, and I suspect that others that do that particular activity in the short term will figure that out.
I also believe that ultimately, as the policy people get in place, it's actually good medicine that's actually on some of those studies. So it's just a question of, do they come back? And if so, when? So that's how I think about that as kind of a one-off.
In terms of the Academic and Government will be the balance of that. In terms of the facing, obviously, we don't guide by end market or that. The way I would just think about it is customers are putting in their mitigation actions.
We would expect that US Academic would be relatively soft of the balance of the year. That's what we imbedded in our guidance going forward and that it could improve based on the appropriations on dynamics this summer. We haven't assumed that, that creates a tailwind. But I would say we just effect -- to put it in effect, right throughout the balance of the year, pretty much pro rata in terms of the impact.

Rachel Vatnsdal

Great. And then for my follow-up, I just wanted to push on pricing assumptions. So you called out just in line of tariffs that you can see some potential pricing offsets there. So can you walk us through your broad pricing assumptions, expectations for this year? How much do you really think you will be able to mitigate? How conservative are you being on those assumptions as well?
And then what businesses are you expecting more pricing power and ability to pass that on through tariffs versus other areas where you maybe take less price in this environment?

Stephen Williamson

Yes. I think it's important to note that we're taking appropriate pricing actions. We're not trying to take advantage of the situation. And this is exactly what we've done in prior times and appropriately passing price on. And when thinking about for the year, we were assuming this year, we badged over a percentage point of price.
This is kind of getting to that to close to 2%. So it's not a significant price change. It's just appropriate given we're in an inflationary environment, given by the -- what's happening in the change of the world in terms of tariffs. So the approach we're taking. We'll do that appropriately across the portfolio. So there's no area of concentration when I think about that pricing implication.

Operator

Doug Schenkel, Wolfe Research.

Doug Schenkel

Marc, I appreciate your answers to Mike's questions and a few others along the way earlier on essentially the LRP. And listen, I think a lot of us on the line know the history here of biopharma innovation and steady academic funding. That said, this seems different. Thus far, assuming that the White House doesn't really mean it, has not been a good policy. It's clearly not a business-friendly environment right now.
Major pharmaceutical companies such as Lilly are publicly talking about reducing the trajectory of R&D and CapEx investment. And then even beyond these recent developments, the reality is it's been a tough five years for the Group. You and I have been doing this for a long time, Marc, and I think we believe in the greatness of this industry and the greatness of Thermo.
But I'll tell you a lot of the investors I speak with, if you're newer to the industry, but I don't mean just last year, I mean, over the last five years, you've never seen tools be a good group. So with all that in mind, I would think you have to at least contemplate a scenario where the market growth rate is structurally lower. And while what we're doing now isn't normal, it may be normal-ish.
In that scenario, what do you change? If the growth rate is lower, do you actually pick up more share than 3 points? Do you think about altering the portfolio? And how does that impact M&A? So I want to start there and then I actually want to come back to maybe a more positive question and my follow-up.

Marc Casper

So Doug, I'm smiling. What I would say is if I look at the last five years, there have been aspects of the greatest that this industry has ever been in terms of enabling a global response to the most challenging pandemic that any of us have lived through and certainly since 1918. And that was only really regional between US and Europe in terms of the impact. And this industry enabled amazing things.
So there are some great things that have happened. And in the five years, there's been some of the greatest innovations that have come out of our industry let alone. So -- and there's been incredible overhang from the pandemic that has been extraordinarily painful, right? So I'm very realistic about the ups and downs.
But if I look back at the last five years, it basically says the relevance of this industry to have a very bright future and have really quite small movements up or down on the volumes. And I think that shouldn't be lost.
And when you think about in a period of really since January 30, lots of new uncertainty. And in the scheme of life, very small changes to the top line. It talks about the resiliency of our company and actually attractiveness of the industry, right? And I think that gets lost when there's not been a lot of headlines that are positive right now on some of these dimensions.
But as the largest US player and the largest player in the field with a policy set of actions that want to make the US stronger, we're going to benefit from that disproportionately, and that's a good thing, right? And so I'd see all of that.
When I think about the long term, I know what the drivers are. If GDP grows, right, if you take the views that you have or others are saying, that the world's GDP growth is less going forward on a structural basis because of the changes, then the market growth likely will be somewhat less.
It will be much less affected than other parts of the economy. But yes, if you believe that the world is just fundamentally going to grow less, you can see that less business policies, whatever it is. And yes, there will be some change in growth rates. But if you also say that the US economy is ultimately going to be better positioned, I have no idea whether we're along if you take that bull case, then you could actually articulate that. It could actually get better over time.
What I do know is Stephen and I have lived our careers through transparency. If our views change on the long-term growth of the markets based on the facts as we see them, we will be the first to say it. We're not hanging on to a number, right? We're just literally putting the numbers that we think are best at this moment in time. We don't look at them every day in terms of the long term, but we look at them periodically.
And if our views change, our investors will understand that because we'll being candid. So hopefully, that helpful. And I've spent 30 years in this industry, lived through every environment. I'm pump for the future, knowing that a lot of the short term is challenging, and we'll get through that just fine.

Doug Schenkel

All right. Fantastic perspective, Marc. And maybe to kind of build into something that might be a little more positive relative to the question I asked. Some larger pharmaceutical companies and biotech, I think most recently this week, Roche, but there have been others. They've started to talk about major build-out of infrastructure in the US.
You guys are as close as anybody to your customers. I'm curious what you're seeing in terms of movement towards reshoring in the US and for that matter, elsewhere in the world, and what form do you think this takes for Thermo? If you're starting to hear more about this, where do you think you're going to benefit most? How quickly can this happen? And is there any chance that you'd be willing to size up this opportunity for you?
I know it doesn't happen tomorrow, but it could be a really important growth driver moving forward.

Marc Casper

I just think your first question, it was an important question. The second one is as well. So when I actually think of a new facility gets announced, let's forget about the last couple of months. A new manufacturing facility gets announced. It is a meaningful revenue for us in terms of helping many, many millions of dollars of equipment, the lab infrastructure, the new consumable supplies, the inventories, but it really is great.
I was thinking about a customer last year, big new facility came online, huge order, right, in terms of what they do broad-based across bioproduction, bioscience for agents and so on and so forth. So really, quite meaningful.
In the dialogue we've had with our customers about new facilities that are being discussed, that is really a nice tailwind. We're in the conversation and will certainly help our customers ramp up their capacity. So I think it's a nice tailwind.
We don't know how many plants are ultimately going to be built yet, so we'll kind of go one at a time and incorporate it into our guidance as we know it. Just given how long it takes to break ground, is really a '26 and beyond, but super exciting.

Operator

Tycho Peterson, Jefferies.

Tycho Peterson

Marc, I want to probe into Pharma Services a little bit more. Setting aside the $200 million vaccine cancellations you flagged for PPD, you talked about activity remaining normal, good strength in biotech authorizations. Can you maybe give a little bit more color there? I mean, anything around order growth?
Is this mostly share gains from your perspective? How much of this is bundling with Patheon in the combined offering? And then, it sounds like you don't really have concerns over pharma cuts in response to tariffs and in particular around R&D. I just want to make sure that's the case. And then I have one follow-up for Stephen.

Marc Casper

So Tycho, given the hour, we'll probably just get to the first one today. But in terms of what's going on in clinical research and sort of how it's performing, actually, the biotech part of the business, quite robust, accelerated drug development, which we announced started to really go -- announced it late last year and into this year, incredibly compelling.
And what does it really mean? I was thinking about trying to -- how do I visualize this, right? Our biotech customers outsource this work, right? Because they are doing one or two studies, whatever it is or one medicine, right? So you're working with CROs. The capabilities and insights we get from our combined suite of capabilities is truly differentiated, which means that we can be faster and more cost effective.
Whether that's letting a customer know that this trial is not going to work out, or letting the customer know more quickly that there is going to work out in maximizing their length of exclusivity. These are super compelling things.
And the interest level and the wins here are meaningful, and we're very well positioned in terms of the outlook on clinical research. I feel very good about what the outlook is there. And the vaccine one was just the kind of one-off on the policy changes.
What I would also say is that on some of the direction of travel, with the FDA on experimenting with less animal studies around monoclonal. That would be -- if you wanted to try that out, that's the area where animal models are less relevant. They're trying to modernize, and which means anything that the industry has less cost on low value-added activity means that they'll put money where it's going to make a difference. So where we play in the human part of the trials, I feel we're very well positioned.
On pharmaceutical companies, how they respond to tariffs? They're planning, but I don't know ultimately how they're ultimately going to respond because they're not sure what is going to get implemented. So as we know that, we're going to help them navigate it, and we'll figure out ultimately, what does it mean for us. So thank you for the question.
Let me wrap up with just a quick comment. First, thanks to everyone for joining us. We're pleased to deliver a strong first quarter. and we're very well positioned to deliver differentiated performance as we continue to create value for all of our stakeholders build and even brighter future for our company, and I hope that you value the transparency that we embedded into our guidance, and we look forward to updating you on our second quarter results in July.
And as always, thank you for the support of Thermo Fisher Scientific. Thanks, everyone.

Operator

Thank you, everyone, for joining us today. This concludes today's call, and you may now disconnect your lines.