(Reuters) - Thermo Fisher Scientific on Wednesday raised the lower end of its annual profit forecast, tweaking it for the third time this year, betting on improved demand for its tools and services used in drug development.

Contract drug manufacturers witnessed reduced spending from biotech clients last year, but recent interest cuts could improve the funding environment for biotechs as borrowing costs might ease.

Thermo, which had raised its profit forecast range twice earlier this year, now expects annual profit between $21.35 and $22.07 per share, compared with previous forecast of $21.29 to $22.07 per share.

On Tuesday, rival Danaher beat Wall Street estimates for profit and revenue, but said that it is not seeing large improvement in demand from smaller biotechs and flagged weakness in China.

Thermo Fisher retained its annual revenue forecast in the range of $42.4 billion to $43.3 billion.

Analysts are expecting a profit of $21.72 per share and revenue of $42.91 billion for this year, according to LSEG data.

For the third quarter, sales in the company's laboratory products segment that provides products and services used in clinical trials and drug development came in at $5.74 billion, above analysts' expectations of $5.45 billion.

Revenue from that segment makes up more than half of Thermo Fisher's total sales.

European peer Sartorius last week reported better-than-expected bioprocessing order intake in its nine-month results, lifting shares of life sciences firms like Thermo Fisher, Danaher and Waters. Citi analysts had said the results were "a clear positive data point for bioprocessing players".

On an adjusted basis, Waltham, Massachussets-based Thermo earned $5.28 per share for the quarter ended Sept. 28, compared with analysts' expectations of $5.25 per share.

However, its third-quarter revenue of $10.60 billion fell short of estimates of $10.64 billion.

(Reporting by Christy Santhosh in Bengaluru; Editing by Shailesh Kuber)