TMOThermo Fisher Scientific Inc

Thermo Fisher sells laboratory instruments and consumables — it earns from research itself rather than from its outcome.

Customers are pharmaceutical companies, biotech start-ups, universities, government laboratories and hospitals. The company supplies instruments, reagents, consumables and contract manufacturing of medicines. It occupies the picks-and-shovels position: income does not depend on whose particular discovery succeeds.

A substantial share of revenue recurs: an instrument is bought once, its consumables continuously, and changing supplier after a method has been validated is expensive and slow. That makes the business steadier than one would expect from an equipment maker.

Cyclicality arrives from the customer side: reduced funding for biotech start-ups and trimmed research budgets at large pharma show up in instrument orders before they show up in consumables. The company grows partly by acquisition and pays a small dividend, directing most cash into development.