July 24 (Reuters) - Thermo Fisher on Wednesday

raised its annual profit outlook and posted a

better-than-expected second-quarter profit, banking on improved

demand for its tools and services used in clinical trials.

Contract drug manufacturers witnessed cut back on spending

by their biotech clients in 2023 amid rising interest rates.

The public funding environment for early-stage biotechs is

expected to improve in the second half of this year, on hopes of

interest rate cuts from the Federal Reserves in September. Some

analysts have noted that funding for biotechs could stabilize

due to a strong 2023 for regulatory approvals in the United

States.

The forecast raise from Thermo comes a day after rival

Danaher ( DHR ) said that it witnessed "positive momentum" for

its products and services used to develop biological drugs. Yet,

it reaffirmed that core revenue is expected to be down

low-single digits this year.

Thermo Fisher now expects annual profit in a range of $21.29

to $22.07 per share, compared with previous forecast of $21.14

to $22.02 per share.

Yet, shares of the medical equipment maker fell 3% to $535

in premarket trading as the raised forecast came in below

analysts' expectations of $21.70 per share for the year,

according to LSEG data.

On an adjusted basis, the Waltham, Massachusetts-based

company earned $5.37 per share for the quarter ended June 29,

compared with analysts' expectations of $5.12 per share.

Sales in its laboratory and biopharma services segment,

which provides products used in clinical trials, came in at

$5.76 billion, above analysts' expectations of $5.48 billion.

Revenue from that segment makes up more than half of Thermo

Fisher's total sales, which were $10.54 billion for the quarter,

slightly beating estimates of $10.51 billion.