Rainer Blair: Sure, Scott, and thanks for the question. So just to the materiality of China here post Veralto, I think 12% is a good number to think about as a total revenue. And now to your point, let me take you through what we saw across the portfolio here in the third quarter. So, let’s start with bioprocessing. There, we did not see a change in market demand, which has been here now for several quarters impacted by a weaker funding environment and excess capacity, and that was down 45%, as mentioned previously. Life Sciences was worse than expected on a weaker macro as well as at the margin, not to overread this, but at the margin, some of the anti-corruption initiatives in the country, which slowed down some equipment tenders, some installation of equipment at the margin.
And in Diagnostics, we’re seeing consistent patient volumes, and it’s largely back to normal. So, we expect — we don’t expect this to change here going forward in Q4, and also expect that this is going to continue into 2024. So, we haven’t seen a change in bioprocessing, Life Sciences, the worse at the margin here in Diagnostics as expected and largely back to normal.
Scott Davis: Okay. Very helpful. And just to switch gears, there’s talk about M&A multiples. In this type of rate environment, you would expect at least some moderation. I didn’t feel like Abcam was necessarily cheap despite some of the drama that is out there. It certainly seems fully priced even at higher rates. But as you look at the rest of your pipeline, is there some relief in multiples that kind of reflect the reality of the higher rate environment?
Rainer Blair: Scott, I would tell you that we take it, as we always do, based on the end market, the asset and the financial model individually. And as we look at our funnel, which is very active, there’s no doubt that some valuations still do not reflect what is a higher and likely for some time, sustained interest rate environment. When it comes down to the individual deal, we bring all aspects together and ensure that the deal model meets our expectations as well. And then, we — as I’ve always said, we’ll pull the trigger if all those lights flip green on end market, the actual target company, as well as the financial market — financial model, excuse me. And then, lastly, to reiterate, we do think valuations still have some ways to go here on average in order to reflect the interest rate environment.
Scott Davis: Helpful, Rainer. Best of luck. See you guys. See you, Matt and John. Thanks.
Rainer Blair: Thank you, Scott.
Operator: Thank you. Our next question comes from Michael Ryskin with Bank of America.
Rainer Blair: Good morning, Michael.
Michael Ryskin: Good morning, Rainer, Matt, thanks for taking the questions. Let me follow up a little bit on the Life Science weakness. It sounds like you guys are pretty clear that in 3Q, that was the biggest step down sequentially versus 2Q and versus your expectations. We have it in our notes that LS instruments grew mid-single digit 2Q and now declined mid-single digit 3Q. So, could you parse that out a little bit SCIEX versus Beckman by geographies, by customer? Where you’re seeing the slowdown? Do you think it’s tied to some of the broader weakness you’re seeing in pharma biotech? And just any thoughts on — you already provided some commentary on 4Q, but any thoughts longer term on when that could return to growth? Just because you think that LS instruments would have a slightly longer order books, you get — you have a little bit more visibility there. So, some forward commentary would be helpful. Thanks.
Rainer Blair: Thanks, Mike. So, let’s level set on the numbers here. Our instrument portion of our Life Science tools is less than 10% of Danaher revenue, just to put that in context properly. And as we mentioned, our Q3 performance was modestly below our expectations, with higher-end instrumentation holding up better than the less specialized solutions. Now, if you think about this by end market, academic and life science research have held up well along with the service business that’s associated with these instruments. Applied markets were also resilient, led by food and environmental. And within environmental, you are aware of the PFAS testing volumes out there. But pharma and biotech took a modest step down, and that was particularly the case in the U.S. In China, we see large pharma customers also tightening their belts as it relates to capital expenditures.
We were just talking about the interest rate environment, and that’s playing out here as well. And in China, what we’re seeing there is just the sunsetting of the subsidized loan program of the first half of the year and very high comps, as well as the lower funding that’s available in the marketplace today in China. So, just to wrap in geographically, our developed markets were down largely due to the softness in pharma and biotech. And China, as we just talked about, was really related to the weaker macro, and, like I said earlier, on the margin only some anti-corruption initiatives there. So, as we wrap up there, I think we remain cautious on LS tools and expect Q4 to be down in the high singles versus — but still at the low singles for the full year.
Now, as it relates to ’24, like I said, I think Q4 is a very important quarter here for all kinds of reasons. As you know, in the Life Science business, a lot happens in Q4, and it’s also going to tell us a lot as we dialogue with our customers about how to view 2024, which as I mentioned, we’ll talk about in January. But I do think it’s fair to say that we expect a weaker pharma and biopharma end market here going into 2024.
Michael Ryskin: Great, thanks. That’s really helpful. And then maybe as a quick follow up, I just want to touch on China a little bit. I’m not going to ask about ’24 outlook, because I think you made it clear you’re not going to address that. But just longer term, structurally, China has been a major part of the growth for tools as an industry and for Danaher over the last five, 10 years. Given everything that’s happened over the last year, what’s your view on China going forward on a multi-year basis? Will it still be accretive to total company, meaning above total company growth? Or do you think China, sort of, is really taking a step back here and it’s going to be a multi-year process for it to return to that level? Thanks.
Rainer Blair: We think China long-term continues to accrete to the fleet average from a growth perspective, Mike. The demand in China, we’re just at the tip of the iceberg of the demand in China for biologic drugs. And there’s no question that we’re currently going through a reset that’s based on many of the things that occurred during the pandemic, if you think about the funds that were spent in the Zero COVID effort over several years, if you look at how the pharmaceutical industry is playing out in China. But all those things over time moderate, and you come back to an end market which has an enormous demand of a population which has already a large and increasing middle class and is really demanding access to the most advanced medications in the world.
