Matt McGrew: Yes, I’ll comment on the bioprocessing broadly speaking, and maybe let Rainer talk about what we’re seeing in tools. The answer is yes. We’re seeing it in both. I would say that we have definitely seen the emerging biotech funding pressures here in the bioprocessing area. I would say we’re seeing it in the tool space or in life sciences as well. I would say that is a lesser portion, obviously, of our revenue. So it’s not quite as big of an impact. But are we seeing – yes, I would say we are seeing customers in those spaces conserving cash on both CapEx and OpEx.
Michael Ryskin: Okay, thanks.
Rainer Blair: So Michael, more generally on the Life Sciences here to your first question. So if we look at Q1, the life sciences based business finished as we thought at high single digits after low double-digit average growth over the last 3 years. And we’ve talked previously about the expected normalization of those growth rates here after having seen that elevated growth for the last 3 years. So that’s right within our expectations. If you look at that geographically, we saw strength in Western Europe and China, in fact, was up double digits on the back of some stimulus there. and North America was a little bit softer. And if you look at Life Sciences, from an end market perspective, large pharma R&D spending levels are still very quite healthy but they are starting to moderate just given the higher comps.
And now just connecting the dots to Matt’s commentary here, emerging biotech is impacted by the current funding environment, and we see smaller purchases, if you will, so rather than buying six, four instruments and in other places, really impacted in the less differentiated segments, let’s say. So we are seeing in our own business is not as exposed to that segment in life sciences but we do see it at the margin. And then life science research and academic is holding up well globally for life sciences. So we continue to believe our growth rates moderate to the historical levels in ‘23, and that’s what our value reflects. And that’s not a change to any previous expectations.
Michael Ryskin: Okay, thanks. I will get back in the queue.
Rainer Blair: Thank you.
Operator: Thank you. We will take our next question from Vijay Kumar with Evercore ISI. Please go ahead.
Vijay Kumar: Hey, guys. Thanks for taking my question. And congrats on…
Rainer Blair: Hi, Vijay.
Vijay Kumar: Hi, Rainer. And congrats on a good start to the year. I guess, just a high-level question on the guidance here, Rainer. All of us are looking at – if I go back 2 months ago, we were assuming back half – perhaps normalization in the industry. And given your comments here on emerging small biotech, that’s where it changes. Is this guidance now be risk because we’re assuming bioprocessing in line with Q1. Are we confident that Q1 was a low point for the year? So just give us some color on the thought process behind the guidance here? I mean, is this now dearest from a back half perspective?
Rainer Blair: So Vijay, I mean, we’re basing our view on the second half. Also based on what we’re seeing in the current market environment, which we just talked about as well as our order book. And like I said a minute ago, in order to support a higher guide for the second half, we need to see different activity levels here in Q1 and Q2. And that’s not the case for two reasons. One, the emerging biotech is quite significantly softer, down mid-teens as we just talked about. And then I would say on the margin, larger accounts are taking a little bit more time to burn through inventory, although they are doing that nicely. And those factors together have us believe unless there is any other sort of significant market disruption that the year will play out much as the first quarter has.
Vijay Kumar: Understood. And then just one on – Cepheid was a bright spot here, 30% growth. I think you made some comments about infectious disease, different testing test being really strong. Can you give us some color on the customers are seeing this ramp? Are these new customers that bought a Cepheid system during the pandemic, I am just trying to think how sustainable is that 30% growth in sort of related one here on M&A, some chatter about Danaher on the M&A side. Would Danaher be interested in getting into services? Or how should – maybe just remind us on the M&A lens and criteria that Danaher processes that pipeline?
Rainer Blair: Sure. So Vijay, on the Cepheid question, we’re really seeing a broad-based usage of the infectious disease menu. In fact, our broader menu in general, both at our existing installed base that’s been there for some time as well as with our newer customers as they start transitioning that COVID testing capacity that they have to take full advantage of that menu. So we see that 30% here as a good marker of how people appreciate the workflow advantages, the ease of use and the accuracy of the platform. Remember, we’re seeing two factors here. One, we see test transitioning from high throughput environment into the point of care on the one hand. And on the other hand, we see expanded usage of our testing menu.
Matt McGrew: Yes, Vijay, maybe just to kind of – to put a real-life example to that, I think. So if you think about what we’re seeing, we’ve got customers – existing customers today, we kind of goes both ways, right? So we’ve got existing customers today that, for example, will use Group A Strep. And those customers now sort of are also moving everything over to the four to one or to COVID as well. And then you’ve got the other way, which is that sort of installed base going from kind of 2x growth here over the last 3 years. You have got people who have used these systems now for many, many years. And what they are doing is they are starting to bring in new menu and that new menu has been around infectious disease first, which is primarily right now, were largely Group A Strep.
So, you are kind of having somebody who used the box throughout COVID testing, using it on for COVID four-and-one, and stand-alone. And now they are bringing on Group A Strep as well. And so that’s what we always kind of talked about with COVID being an anchor assay as we go forward, larger installed base, anchor assay, now you move into infectious disease, there will be other opportunities to pull in sort of other menu as we go forward. But that’s exactly the type of thing we are seeing play out here. And that’s – it is encouraging. Early days yet, I mean and also still some lower base these are off of lower numbers. But as we go forward, we have sort of talked about next year and the longer term. That’s why I think that installed base growth was so important because we have got the menu, be able to pull through and then the additions of the new menu are going to be only helpful on that larger installed base.
Rainer Blair: So, on M&A, Vijay, obviously we don’t comment on chatter. But what I would tell you is we really like the way we are positioned. Our balance sheet is in great shape. Valuations continue to moderate, perhaps the one or the other Board is not quite there yet, but we do see more realism in the many discussions that we have across the board as always. And specifically, as we have said in the past should our customers tag on this and on our help and services, that’s not something that we are going to ignore. But once again, that’s just one of several opportunities. I think the most important thing to remember is that we are not going to deviate from our disciplined approach. It’s got to be the right end market. It’s got to be the right target and the model has to work. And it’s when those three lights flip green that we execute.
Matt McGrew: Yes. I think Vijay, too, I mean I think as we sit here, I think it’s – not saying this is ‘08, ‘09, but having a balance sheet that we have got right now and being able to kind of be flexible, I think is important in times like these because as Rainer said, when the market company valuation all line up, we are ready to go. But we do need to see all three of those. And as things get a little choppier here as they might get a little job here, I think I really like how we are kind of set up here from a balance sheet perspective as well.
Vijay Kumar: Thanks Matt.
Rainer Blair: Thanks Vijay.
Operator: We will take our next question from Scott Davis with Melius Research. Please go ahead.
Rainer Blair: Good morning Scott.
