Skip to main content
Premium Trial:

Request an Annual Quote

Bio-Rad Again Lowers Guidance After Q3 Revenue Miss, Sharp Sales Decline in Life Science Segment


NEW YORK – After lowering its full-year 2023 guidance following the second quarter, Bio-Rad Laboratories undertook its third guidance reset of the year on Thursday after the close of the market, citing ongoing challenges to its biopharma customers and obstacles to sales in China.

Although earlier in the year Bio-Rad's business challenges impacted only the firm's Life Sciences unit, on a call with investors Thursday to recap the Q3 earnings, Chief Operating Officer Andrew Last said the firm's Clinical Diagnostics businesses is now also being affected.

Executives on the call also briefly discussed the imminent departure of its CFO of four years, Ilan Daskal, who will be leaving to pursue another opportunity.

The cadence of the guide adjustments has been steady of late. In May, Bio-Rad lowered its full-year currency-neutral guidance to 4.5 percent revenue growth compared to its previous estimate of 6 percent to 7 percent growth. In August, it lowered this expectation again to just under 1 percent revenue growth in 2023.

On Thursday, the firm said it is now forecasting a revenue decline of approximately 3.5 percent on a currency neutral basis. An anticipated decline of 12 percent in Bio-Rad's Life Science business, or a decline of 4 percent to 5 percent excluding COVID-related sales, is now expected to be offset by 4.5 percent growth in the Clinical Diagnostics business.

And, although Bio-Rad Laboratories reported an overall 7 percent revenue decline for Q3 its revenues of $632.1 million fell far short of analysts' average estimate of $689.6 million.

Specifically, the firm saw a Life Sciences business unit sales decline of 17 percent, or 18 percent on a currency neutral basis, to $263.5 million, that was partially offset by a 2 percent increase, or 1 percent increase on a currency neutral basis, in Clinical Diagnostics sales in the quarter to $368.1 million.

On the call, Bio-Rad officials said that the firm's COVID-related sales in Q3 were $300,000 compared to about $17.2 million in Q3 last year. Core revenue, which excludes COVID-related sales, decreased nearly 6 percent on a currency-neutral basis.

Bio-Rad reported net income of $106.3 million, or $3.64 per share, compared to a net loss and $162.8 million, or $5.48 per share a year ago, well above Wall Street's anticipated EPS of $2.78.  

However, Daskal noted on the call that earnings changes over last year could be largely attributed to changes in the value of investments Bio-Rad holds in Sartorius, which added $36.4 million of income to the reported results this quarter.

On the call, Brandon Couillard, a senior healthcare equity research analyst at Jeffries, queried the Bio-Rad team about the Life Science results specifically, noting that the magnitude of the guidance reset in this business unit was the most dramatic of any of Bio-Rad's peers. "Why does there seem to be such an inability to accurately forecast the business and demand trends?" Couillard asked.

In reply, Last described a complex and presumably transient set of circumstances.

Surprisingly, "We came out of 2022 with really good trajectory, and the effects that some companies had seen, particularly in bioprocessing, were not showing up for us," Last said. However, these market impacts began to roll out into the firm's sales funnel later in 2023.

Supplying the nascent biopharmaceutical industry with instruments and reagents has become an important part of Bio-Rad's business, and funding constraints in that space, particularly in venture capital for biopharma startups, as well as the unexpected collapse of Silicon Valley Bank, has led these customers to delay orders.

"We had significant trajectory in the smaller biotechs for, in particular, our Droplet Digital PCR platform, which also had some halo effect around it," Last said. "I think it took a couple of quarters for those effects to really materialize for us because our profile is a little different to some of the other players."  

Bio-Rad's executives also attributed the quarterly disappointment to China, stating that anticorruption policies, volume-based pricing, and "Made in China, for China" initiatives in that country have hurt its sales there in both the Life Sciences and Clinical Diagnostics segments.

"It's just been a really tough ride in China, and there's just no current clear reason to think that it's going to improve in Q4," Last said.

Losses in the Droplet Digital PCR business were primarily related to slowdowns, layoffs, and project deferrals in biopharma, said Simon May, president of Life Sciences. This has been coupled with an intensified competitive market in digital PCR, although May highlighted wins in wastewater for Verily using the Bio-Rad QX600, the selection of the QX One system for spinal muscular atrophy (SMA) screening in Hong Kong, and the publication of positive results from Geneoscopy's colorectal cancer clinical trial using the Bio-Rad QXDx system.

May further asserted that, at least for the biopharma business, the recent impacts do not seem to be signaling lost business.

"As we look at our funnels and we look at our win-loss ratios across the portfolio — whether you're talking about Western blot or gene expression or digital PCR or our bioprocess business — we really don't see any significant shifts there," May said. "The feedback that we consistently get from the field is that there's still a high level of interest in the products. … So, we really do believe that this is a bunch of transient effects that are compounding, and it's making for a very difficult year, but I don't think there are any macro shifts in our competitive positioning in Life Sciences."

Last added, "Despite the market challenges of this year, we view our strategy framework as being very solid and our platforms and market opportunities as providing sustainable long-term growth."

Bio-Rad CEO Norman Schwartz acknowledged on the call that 2023 has "not unfolded the way we or many of our peers first envisioned it." That said, he was similarly positive about the long-term outlook for Bio-Rad.

"It has been challenging to predict the pace of recovery or market normalization, really all exacerbated by inflation we've not seen in 20 years, geopolitical events, and, of course, the biopharma disruption," Schwartz said. However, "I think what we can be confident of is that our markets are buoyant, and I feel the outlook is positive."

Nevertheless, the long-term business transformation of the 71-year-old company — in the form of a plan to double down on biopharma and Asia/Pacific sales outlined by Bio-Rad execs in an investor day presentation in 2022 — has been spearheaded by Last and Daskal.

On the call, Last expressed his sadness at Daskal's departure and said the two had worked extremely closely together on the transformation plans. When asked by Couillard whether he is adequately incentivized or has an eye to retirement, Last replied by saying that the work is not done.

"My point of view right now is, we started this transition, it's not finished, and the focus really is on the transformation of the company and executing against the strategy framework, which I firmly believe has the potential to increase operating performance for the company moving forward," he said.