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Life Sciences and Diagnostics Business Help Drive up Danaher Q2 Sales 15 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Growth in its Life Sciences and Diagnostics segment helped Danaher's second-quarter sales expand 15 percent year over year, the company reported today.

Overall, sales increased to $3.71 billion for the three months ended July 1, compared to $3.22 billion a year ago, helped along by a 31 percent increase in its Life Sciences and Diagnostics business, which spiked to $704.8 million from $540.1 million a year ago.

The results beat consensus Wall Street estimates of $3.53 billion.

Acquisitions added 3 percentage points to the company's total sales growth, while currency translation added 5 percentage points. Core revenues rose 7.5 percent year over year.

In Life Sciences and Diagnostics, core revenues rose 8 percent year over year, while acquisitions contributed 15 percentage points and currency translation added 7.5 percentage points.

Within the segment, AB Sciex saw mid-teens growth, with broad-based demand as sales to the research, applied markets, and pharma each grew more than 10 percent compared to a year ago, Larry Culp, president and CEO of Danaher, said during a conference call after the release of the company's results.

Among its other segments, Test & Measurement rose about 25 percent year over year to $848.2 million, Environment increased 5 percent to $730.6 million, Dental bounced 18 percent to $504.7 million, and Industrial Technologies jumped 32 percent to $923.4 million.

Danaher's emerging markets business grew in the mid-teens year over year, Culp said, and China grew by more than 20 percent. Sales to developed nations were up in the mid-single digits, with the US "a bit stronger" than Europe.

For the quarter, net earnings rose 74 percent to $648.8 million, or $.94 per share, from $372.5 million, or $.55 per share, a year ago. On a non-GAAP basis, which excludes the impact of the acquisition of Beckman Coulter completed in late June, EPS was $.69, exceeding analyst forecasts for $.67 per share.

Its R&D spending for the quarter jumped to $235.8 million, up 23 percent from $191.2 million for the second quarter of 2010, while SG&A expenses also rose 23 percent to $1.10 billion from $896.6 million a year ago.

As of July 1, Danaher reported $551.6 million in cash and cash equivalents.

During the conference call, Culp said that he has been pleased by feedback from customers and associates on the Beckman Coulter purchase, and by the progress that has been made regarding issues Beckman Coulter has with the US Food and Drug Administration related to its submission to the agency for its troponin test on the DxI and Access instruments. He acknowledged, however, that there "is plenty of work ahead of us."

"I would just remind the broader group the regulatory challenge at Beckman Coulter is not strictly one borne of three specific assays where they've had issues historically," he said. "It also incorporates a broader quality system effort that has been well documented. And that's going to be, that is, a [substantial] undertaking."

He added that tackling the quality issue is the top priority at Danaher in connection with the Beckman Coulter integration.

A team of about 25 people are "spending virtually all of their time at Beckman," during the transition, and organizational changes have been implemented, including the splitting of Beckman Coulter into a Life Science business and a Diagnostics business "to provide appropriate focus around each of those businesses," Culp said.

Through the balance of 2011 as well as 2012, the Beckman Coulter business is anticipated to be flat. The "hope and intent" is that by 2013, Danaher and the Danaher Business System — a companywide process and philosophy of waste-cutting and productivity improvement — will result in Beckman Coulter's core growth, he said.

For the third quarter, Culp said that adjusted EPS is expected to be in the range of $.66 to $.71. For full-year 2011, EPS guidance was raised to a range of between $2.75 and $2.82 from an earlier guidance of $2.65 to $2.75. The new full-year range includes about $.05 in accretion related to the Beckman Coulter deal.

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