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Bio-Rad Q1 Revenues up 3 Percent; Results Impacted by Soft Research Markets

NEW YORK (GenomeWeb News) – Bio-Rad Laboratories reported after the close of the market on Tuesday that its first-quarter revenues ramped up 3 percent year over year, as the company fell short of consensus analyst estimates on the top and bottom lines.

The Hercules, Calif.-based firm said that revenues for the three months ended March 31 totaled $499.7 million, up from $486.3 million a year ago, but below the average Wall Street estimate of $506.3 million.

The figure for the recently completed quarter includes $6.2 million in revenues from AbD Serotec, which Bio-Rad acquired in January for $70 million. On a currency-neutral basis, revenues were up almost 4 percent year over year, Bio-Rad said.

"The first quarter results are both disappointing and frustrating for us," Bio-Rad CFO Christine Tsingos said on a conference call following the release of the earnings results. "Despite an exciting lineup of new products, the challenging research funding environment in the US and Europe were presenting a mighty headwind to the top line."

She noted that that Europe declined 4 percent year over year on a currency-neutral basis, while sequestration led to a decline in the US.

The Life Science segment posted sales of $156.3 million, up almost 1 percent from a year ago. Sales of its Droplet Digital PCR products grew, Bio-Rad said, as did sales of the ProteOn XPR36 protein interaction array system and reagents. The company also benefitted from the sale of antibodies and reagents resulting from its buy of AbD Serotec.

Organically, however, the segment declined about 2 percent year over year, Tsingos said. Sequestration in the US negatively impacted US sales in the segment by an estimated $2 million during the quarter, and sales in Europe were off by more than 10 percent, she added.

Brad Crutchfield, president of the Life Science Group, added that in the quarter, the company saw "most grants" put on hold as customers decided "how to deal" with the funding pressures.

"We have seen in April, the grants are being released … so that is somewhat optimistic," he said, "but nobody believes that this is going to be a short-term thing. This is something that will probably go through 2014 as far as [a] somewhat across the board 6 to 8 percent cut. But deep down, the money's flowing back into the system."

Bio-Rad's other segment, Clinical Diagnostics, reached $339.9 million in sales, up 4 percent from a year ago. Growth in the segment reached across the entire product line, most notably from its quality controls and diabetes products, and placements of the BioPlex 2200 system, the company said.

Bio-Rad's net income in the first quarter slid to $19.5 million, or $.68 per share, compared to a net income of $31.0 million, or $1.09 per share, a year ago, and well short of the $1.06 that Wall Street expected on average.

Bio-Rad said lower gross profit, as well as higher SG&A costs led to the reduced net income. A decrease in other income due to higher realized gains on the sale of equity investments during the first quarter of 2012 also led to the lower profit figure for Q1 2013.

The firm's R&D spending narrowed 2 percent to $51.9 million from $52.9 million a year ago, while its SG&A costs ballooned 9 percent to $185.9 million from $171.3 million, resulting from employee costs associated with acquisitions and investments in new systems, Bio-Rad said.

Bio-Rad finished the quarter with $368.6 million in cash and cash equivalents, as well as short-term investments of $468.2 million.

Looking ahead, Tsingos said that the company is cautiously optimistic that sales will grow between 3 and 3.5 percent on a currency-neutral basis for the base business. Incorporating the addition of AbD Serotec, currency-neutral top line growth could be between 3.5 to 4 percent, she said.

In a statement, Bio-Rad President and CEO Norman Schwartz said, "We continued to see softness in the research markets, impacting our results in the first quarter. This softness, together with a number of operational factors, affected our profitability. While first-quarter sales growth was slow, our outlook for the remainder of the year is cautiously optimistic."

Bio-Rad's stock was up around 6 percent at $118 in Wednesday morning trade on the New York Stock Exchange. Its shares had closed down 8 percent on Thursday in advance of the release of its results.