Executive Summary / Key Takeaways

• Avantor (NYSE:AVTR) is embarking on a comprehensive "Avantor Revival" plan under new CEO Emmanuel Ligner, addressing self-inflicted operational complexities and competitive pressures to restore growth and shareholder value.
• The company reported a challenging Q3 2025 with a 4.7% organic sales decline and a $785 million goodwill impairment charge, reflecting ongoing softness in lab demand and operational headwinds in bioprocessing.
• Despite recent underperformance, Avantor possesses a solid portfolio of mission-critical products, strong brands like VWR and J.T.Baker, and an extensive global customer reach, serving over 300,000 locations across approximately 180 countries.
• Strategic initiatives focus on enhancing the go-to-market strategy, investing in manufacturing and supply chain, scrutinizing the portfolio, simplifying processes, and strengthening talent, supported by an expanded $400 million cost transformation program.
• Avantor is committed to deleveraging, having reduced net leverage to 3.1x adjusted EBITDA, and has authorized a $500 million share repurchase program, signaling confidence in its long-term value proposition despite near-term challenges.

The Foundation: A Global Partner in Life Sciences and Advanced Technologies

Avantor, Inc., founded in 1904, has established itself as a global manufacturer and distributor of mission-critical products and services across the biopharmaceutical, healthcare, education, government, and advanced technologies industries. The company's core business revolves around providing essential materials, consumables, equipment, and services that scientists rely on in their labs and production environments. This extensive reach, spanning over 300,000 customer locations in approximately 180 countries, underscores Avantor's foundational strength as a vital link in the scientific research and production ecosystem.

The company's strategic evolution, notably through the acquisition of VWR, has shaped its current operating model, which is structured into two complementary segments: Laboratory Solutions and Bioscience Production. This structure aims to align more closely with customer needs, leveraging a resilient supply chain and a diversified portfolio. Avantor's historical journey, marked by strategic acquisitions like Ritter, Masterflex, and RIM Bio, has expanded its capabilities, though some of these were made at peak market valuations, contributing to increased leverage.

The broader life sciences market, Avantor's primary arena, continues to benefit from strong secular tailwinds. Scientific collaboration is intensifying, and the adoption of advanced technologies like AI is accelerating discovery and development in pharma and biotech. This environment creates a persistent demand for Avantor's offerings, from high-purity chemicals to specialized equipment and integrated lab services. While the market backdrop in the lab segment is largely stable, customer activity has been tempered by uncertainty in basic research funding and a disciplined biopharma funding environment where early-stage capital remains under pressure.

Technological Differentiators and Innovation Roadmap

Avantor's competitive edge is significantly bolstered by its proprietary technologies and a robust innovation pipeline. The company offers a range of differentiated products, including proprietary formulated solutions for semiconductor manufacturing, specialized chemicals for healthcare and diagnostics, and ultra-high purity medical and aerospace-grade silicone formulations (NuSil). In bioprocessing, Avantor provides process ingredients and excipients, single-use systems, and integrated solutions, with brands like J.T.Baker and Masterflex being highly recognized in the industry.

A key technological differentiator lies in Avantor's ability to supply research-grade quantities of products from GMP-compliant lines. This "beaker-to-bulk" strategy offers a tangible benefit to biopharma clients by eliminating the need to requalify new production lines as programs scale from R&D to commercial manufacturing. This integrated approach enhances reliability and streamlines the development process, potentially leading to stronger customer loyalty and recurring revenue streams. Such capabilities can enable premium pricing in regulated markets, contributing to superior margins and robust growth.

Avantor is actively investing in new technologies and R&D. Recent initiatives include a partnership with BlueWhale Bio to accelerate CAR-T manufacturing through breakthrough cell activation and expansion technology. This collaboration aims to streamline manufacturing, reduce variability, and shorten time-to-patient for CAR-T therapies. Another strategic move is the partnership with p-Chip Corporation to develop "Smart Consumables" by embedding microtransponder technology into laboratory and clinical products. This initiative targets secure chain-of-identity, enhanced traceability, and digital process control in pharmaceutical and clinical workflows, addressing the growing demand for individualized therapies. These efforts demonstrate Avantor's commitment to advancing innovation in next-generation therapies and digital traceability, which are critical for future growth and competitive positioning.

The company is also enhancing its digital platform, including the rollout of an AI-enabled e-commerce platform and Avantor Navigator, an in-house AI application designed to help customers discover products and services matched to their research needs. These digital enhancements aim to empower self-service, simplify ordering, and provide greater visibility into order status, ultimately improving the customer journey and operational efficiency.

Financial Performance and Operational Challenges

Avantor's recent financial performance reflects a period of significant operational and market challenges. For the third quarter ended September 30, 2025, the company reported net sales of $1,623.8 million, a 5.3% decrease year-over-year, with organic net sales declining by 4.7%. This underperformance was primarily driven by weaker demand in the Laboratory Solutions segment and operational headwinds in Bioscience Production.

The company recorded a net loss of $711.8 million for Q3 2025, significantly impacted by a non-cash goodwill impairment charge of $785 million related to its Distribution reporting unit within Laboratory Solutions. This charge was necessitated by sustained decreases in Avantor's share price, market capitalization, and changes in the operating results of that unit.

Gross profit for the quarter was $526.5 million, with an adjusted gross margin of 32.4%, a 100 basis point contraction year-over-year. This was mainly due to price actions in the lab segment to protect market share, coupled with inflationary pressures and unfavorable manufacturing variances. Despite top-line pressures, Avantor demonstrated solid cost control. Adjusted selling, general, and administrative (SGA) expenses were better than planned and the prior year, benefiting from reductions in incentive compensation accruals. Adjusted EBITDA for Q3 2025 was $267.9 million, representing a 16.5% margin, a decline from the prior year, primarily due to the Clinical Services divestiture and lower gross profit, partially offset by savings from the cost transformation initiative. Adjusted Operating Income for the quarter was $237.3 million, with a 14.6% margin.

Cash generation remained a strong point, with $172 million in free cash flow for Q3 2025, and an adjusted conversion rate of 124%. This robust cash flow has been critical for Avantor's deleveraging efforts. The company reduced its adjusted net leverage to 3.1x adjusted EBITDA by the end of Q3, down 0.1x from Q2, with a stated target of achieving sustainably below 3x.

Segment Performance and Outlook

Laboratory Solutions

The Laboratory Solutions segment, which accounts for approximately two-thirds of Avantor's revenue, experienced a 4.9% organic sales decline in Q3 2025. This was primarily driven by lower demand for consumables and equipment in the Total Science Solutions business, attributed to funding uncertainty and increased competitive intensity. Headwinds were also noted in lab services, higher education, and K-12 markets.

Management acknowledges past share losses in lab services but highlights that no new large key account contracts have been lost in the last 6-7 months, and opportunities exist to grow share of wallet. The segment is undergoing a strategic refocus under new leadership, aiming to empower sales teams and leverage strong brands like VWR. For the full year 2025, Laboratory Solutions revenue is expected to decline organically in the mid-single to low-single digits, with Q4 organic performance projected to be down mid-single digits. This outlook reflects continued softness in consumables and lab services, exacerbated by the U.S. federal government shutdown in October 2025.

Bioscience Production

The Bioscience Production segment saw a 4.3% organic sales decline in Q3 2025. This was mainly due to lower sales volume in Silicones, partially offset by higher demand for formulated offerings in the semiconductor industry. Bioprocessing, a key component, was down low single digits organically, impacted by operational headwinds such as raw material availability and equipment uptime, which led to missed shipments. Despite these challenges, order rates for process chemicals were up high single digits in Q3 and year-to-date, indicating solid underlying demand, though the order backlog remains high.

Emmanuel Ligner expressed confidence in the bioprocessing portfolio, particularly chemicals, and emphasized the need for strategic investments in manufacturing and supply chain to improve on-time delivery and address equipment upgrades. For the full year 2025, Bioscience Production's organic revenue growth is expected to be in the low single digits negative range, implying a Q4 organic performance of down mid-single to high-single digits. Bioprocessing is projected to be down low single digits organically for the full year, with Q4 organic performance expected to be down high single digits to low double digits. This reflects higher-than-expected backlogs in process chemicals and competitive pressures in controlled environment consumables.

The "Avantor Revival" Plan and Strategic Initiatives

Under the leadership of new CEO Emmanuel Ligner, Avantor has launched the "Avantor Revival" plan, a multi-faceted strategy to address the company's challenges and unlock its full potential. This plan is built on five key pillars:

1. Go-to-Market Strategy Evolution: Avantor aims to simplify its approach, empowering frontline staff and giving more prominence to key product and channel brands like VWR, J.T.Baker, Masterflex, and NuSil. The company will refocus on its distribution business and enhance its e-commerce platform to better serve customers.
2. Strategic Investment in Manufacturing and Supply Chain: Recognizing that some facilities require upgrades and processes need streamlining, Avantor plans targeted investments to improve on-time delivery and operational efficiency, particularly for bioprocessing chemicals where demand is strong but throughput is constrained.
3. Portfolio Scrutiny: Each business within the portfolio will be held accountable for delivering clear growth, profitability, and return on investment targets. Businesses unable to meet these targets within a reasonable timeframe will be evaluated for potential divestiture.
4. Driving Net Cost Savings and Simplifying Processes: The existing cost transformation program has been expanded to target approximately $400 million in run-rate gross cost savings by the end of 2027. The focus is on simplifying operating processes to remove complexity and improve efficiency, addressing issues like inventory and forecasting.
5. Strengthening Talent and Accountability: Avantor is bringing in new talent in key areas, including a Chief Operating Officer to reinforce manufacturing and supply chain excellence, an executive leadership position for quality and regulatory, and a Chief Digital Officer to enhance digital commerce capabilities.

These initiatives are designed to drive meaningful changes over the next several quarters, with a clear commitment to improving both top-line growth and bottom-line profitability.

Competitive Landscape and Positioning

Avantor operates in a highly competitive environment alongside industry giants like Thermo Fisher Scientific , Danaher Corporation , Agilent Technologies , and Bio-Rad Laboratories . While these competitors offer overlapping products and services, Avantor differentiates itself through its emphasis on customized solutions, specialty procurement, and an extensive global distribution network.

Compared to Thermo Fisher Scientific (TMO), Avantor's focus on tailored services for biopharma and advanced technologies provides a niche positioning, while TMO's broader scale and R&D capabilities offer greater market penetration. Avantor's strengths in customer-specific innovations and global supply chain expertise are competitive, but TMO often exhibits stronger cash flow generation and higher efficiency. Similarly, against Danaher (DHR), Avantor's historical expertise in materials science and flexible solutions provide an edge in customized needs, but DHR's cost leadership and lean manufacturing often result in superior efficiency and cash flow.

Avantor's extensive distribution networks are a competitive advantage, particularly in reaching diverse markets where competitors like Agilent (A) may have limited global reach. However, Avantor may lag in specialized instrument performance compared to Agilent's high-performance devices. In the diagnostics space, Bio-Rad Laboratories (BIO) specializes in niche areas, while Avantor offers a broader portfolio.

The competitive intensity in the lab segment has increased, leading to pricing pressures. However, Avantor has secured significant contract extensions with top global pharma accounts, expected to result in over $100 million in share gains. The extension of its contract with BIO Business Solutions, its largest customer, further solidifies its position despite the challenging environment.

Risks and Forward-Looking Considerations

Avantor faces several risks, including the potential for further goodwill impairment charges if market conditions or projected results deteriorate. Operational headwinds, such as raw material availability and equipment uptime, continue to impact throughput in the Bioscience Production segment. The company is also exposed to ongoing inflationary pressures across its cost categories and significant variability from foreign currency exchange rates. Geopolitical factors, including tariffs and trade restrictions, could adversely affect global economies and Avantor's business.

For the full year 2025, Avantor has revised its guidance, expecting organic revenue to decline between 3.5% and 2.5%, adjusted EBITDA margins in the mid-16s, and adjusted EPS between $0.88 and $0.92. Free cash flow is projected to be $550 million to $600 million. This outlook reflects the current challenging environment and the anticipated time required for the "Avantor Revival" plan to yield full results. While the new CEO is taking a fresh look at 2026 numbers, the immediate focus is on executing the current strategic actions.

Conclusion

Avantor stands at a pivotal juncture, confronting a challenging market and internal operational complexities with a decisive strategic overhaul. The "Avantor Revival" plan, spearheaded by new CEO Emmanuel Ligner, represents a critical commitment to operational excellence, portfolio optimization, and enhanced customer engagement. While the recent financial performance, particularly the Q3 2025 organic sales decline and goodwill impairment, underscores the urgency of these initiatives, the company's strong foundational assets—its diverse portfolio, established brands, and global reach—provide a robust platform for recovery.

The success of Avantor's investment thesis hinges on the effective execution of its strategic pillars, particularly in leveraging its technological differentiators and improving supply chain reliability to regain market share and expand margins. The authorized share repurchase program signals management's conviction in the long-term value of the platform, even as the company works to rebuild credibility and deliver on its revised guidance. Investors should closely monitor the progress of the "Avantor Revival" plan, focusing on tangible improvements in operational efficiency, sustained deleveraging, and the company's ability to translate its technological advantages into consistent financial performance in a competitive and evolving life sciences landscape.