DHR
🔬 Danaher’s Bioprocessing segment, a key profit driver, supplies essential equipment and consumables for manufacturing complex biologic drugs, benefiting from the long-term shift towards these therapies.
🔄 The business boasts high resilience and recurring revenue, with consumables making up ~85% of sales, alongside strong regulatory barriers and switching costs for its customers.
📉 Current market uncertainty and post-COVID inventory destocking have created volatility and a potential entry point, supported by Danaher’s excellent capital allocation, founder alignment, and counter-cyclical potential through buybacks and M&A.
@adriarivero:
“Danaher has three segments, but I’ll focus on Bioprocessing (or Biotechnology), which is 30% of sales but more of profits due to high margins. Danaher makes equipment and consumables for bioprocessing, the manufacturing of biologic drugs, which are more complex molecules. This business is attractive due to recurrence and resilience. While they sell equipment, consumables are ~85% of the business, providing recurring income as long as biologic drugs are manufactured. There’s secular long-term growth beyond population aging; biologics are increasingly replacing non-biologics, filling the drug pipeline, which benefits Danaher’s strong competitive position. Regulatory barriers are high; changing the manufacturing process for an approved biologic requires re-approval, creating high switching costs. The industry is conservative and avoids changing suppliers for critical components. Danaher has an excellent capital allocation track record, having transitioned from an industrial company to a health-focused one over the last decade because management saw better long-term growth. They’ve sold non-core businesses, a good sign. Management is aligned, with the founding Rails brothers still holding 10% and involved on the board. Why invest now? General market uncertainty affects even defensive health stocks. More specifically, the COVID pandemic caused volatility. Companies overstocked supplies, leading to a boom for Danaher, followed by destocking as inventories were consumed. This destocking phase seems to be ending, based on recent results, creating an opportunity as numbers normalize. Danaher can also be counter-cyclical; they are currently doing share buybacks, suggesting they see value, and may acquire other companies during market downturns.”
Watch the exact part of the video where @adriarivero talks about Danaher Corporation here:
Watch the video on YouTube
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