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Bio-Rad Q4 Revenues up 1 Percent, Miss Analysts' Estimates

NEW YORK – Bio-Rad Laboratories said after the close of the market on Thursday that its fourth quarter revenues rose approximately 1 percent year over year.

For the three months ended Dec. 31, 2019, the Hercules, California-based firm reported $624.4  million in revenues compared to $616.8 million in the year-ago period. On a currency-neutral basis, quarterly revenues increased approximately 2 percent year over year. On average, analysts had expected revenues of $642.0 million for the quarter.

Ilan Daskal, the firm's executive vice president and CFO, noted in a conference call with analysts that fourth quarter revenue fell short by about $20 million from the midpoint of its guidance, mainly due to a cyberattack reported in December.

"We expect to recover in Q1 of 2020 about $5 million of the Q4 revenue shortfall," Daskal said, noting also that the firm does not anticipate it will be able to recover the remaining $15 million. The impact of the attack on overall expenses was broad-based, he said, including disruption to manufacturing and operations in general.

The firm's life science segment sales were up 1 percent year over year to $242.0 million in Q4, and up 2 percent on a currency-neutral basis, which the company said reflected growth of process media, droplet digital PCR and food safety products, as well as growth in North America and Europe.

Bio-Rad's clinical diagnostics segment revenues were up approximately 2 percent year over year in the quarter to $379.0 million. On a currency-neutral basis, the segment grew 3 percent due to growth in diabetes, quality controls, autoimmune, and blood typing products, as well as growth in Asia and the Americas.

Bio-Rad's net income for the quarter was $553.5 million, or $18.31 per share, compared to a net loss of $828.5 million, or $27.73 per share, in the year-ago period. On a non-GAAP basis, EPS in Q4 2019 was $2.32 and below the analysts' average of $2.44

The company's R&D spending during the recently completed quarter was up 8 percent year over year to $57.1 million from $53.1 million, while its SG&A costs were essentially flat at $214.2 million from $214.0 million.

Additionally, the company had no goodwill and long-lived assets impairment charges in Q4 2019 compared to $292.5 million a year ago. It had a $646.0 million valuation gain on equity-owned securities in Q4 2019 compared to a loss of $814.1 million in Q4 2018.

A year ago Bio-Rad said that its Q4 net loss was significantly and negatively impacted by the recognition on the income statement of changes in the fair market value of equity securities reflecting a decrease in value of $814.1 million during the fourth quarter of 2018, primarily related to its holdings of Sartorius. Inclusion of these equity investment changes in valuation was the result of new accounting standards that became effective in 2018. Also included in Q4 net loss was an impairment of goodwill of $282 million as well as $18.5 million of other long-lived assets.

For full-year 2019, Bio-Rad's revenues were up 1 percent to $2.31 billion from $2.29 billion in 2018, below the consensus Wall Street estimate of $2.33 billion. On a currency-neutral basis, revenues grew 3 percent year over year, Bio-Rad said. 

Life science segment sales were $885.9 million in 2019, an increase of about 3 percent compared to 2018, and 5 percent on a currency-neutral basis. "Much of the full year-over-year growth was driven by double digit growth in droplet digital PCR, food safety, and process media," Daskal said, adding that life science sales in Asia were most impacted by the cyberattack in December.

Full-year clinical diagnostics revenues were $1.4 billion, flat compared to 2018, or up 3 percent on a currency-neutral basis. The growth was driven by quality control, blood typing, and autoimmune testing products, Daskal said.

Company highlights in 2019 included US Food and Drug Administration clearance of the QXDx AutoDG ddPCR System and QXDx BCR-ABL %IS Kit, which use Bio-Rad's Droplet Digital PCR (ddPCR) technology to monitor and quantitate the molecular response of chronic myeloid leukemia patients undergoing tyrosine kinase inhibitor therapy.

The firm also obtained FDA clearance and launched the BioPlex 2200 Lyme Total Assay and the IH-500 automated random access system for blood typing and screening. It also launched the scATAC-Seq solution, a single-cell assay for transposase-accessible chromatin using sequencing, offering high capture efficiency and sensitivity for profiling of gene regulation of individual human cells.

The firm acquired Exact Diagnostics, a leading provider of a broad range of molecular diagnostics controls.

Finally, the firm installed the QX ONE Droplet Digital PCR System at select customer labs prior to the official product launch. The system automates the company’s Droplet Digital technology into a single integrated instrument designed for drug development and manufacturing quality control as well as other highly critical testing environments.

On Wednesday, the US International Trade commission issued an import ban against Bio-Rad, saying the firm infringed three of 10X Genomics' patents. On the conference call, Annette Tumolo, Bio-Rad's executive vice president and president of life sciences said that the impact of the ban on the firm's revenues will not be material. The decision bans Bio-Rad from importing infringing microfluidic systems to the US.

"We have a vibrant and active R&D program to develop new products in this area … [and] we're in this market for the long run," Tumolo said. She added that the decision will not impact customers because the firm took steps to develop domestic manufacturing for all of the relevant products.

Bio-Rad's 2019 net income was $1.76 billion, or $58.27 per share, compared to $365.6 million, or $12.10 per share in 2018. Non-GAAP EPS was $7.06 and below the analysts' average estimate of $7.19 per share.

The company's R&D spending was up 2 percent year over year to $202.7 million from $199.2 million. It's SG&A was down 1 percent to $824.6 million from $834.8 million.

Bio-Rad took no charges on goodwill and long-lived assets impairment in 2019 compared to $292.5 million in 2018. It had a valuation gain on equity-owned securities of $2.03 billion in 2019 compared to $606.2 million in 2018.

Bio-Rad exited 2019 with $660.7 million in cash and cash equivalents and $459.5 million in short-term investments.

Norman Schwartz, Bio-Rad's president and CEO, said during the call that markets for Bio-Rad products continue to grow around the world, and the firm's outlook for 2020 is positive. "For me that outlook is driven by robust markets, but also by the planned introduction of new products and platforms across the business, and the full-year effect of products introduced in 2019, most notably the QX One droplet digital PCR system introduced late in the year," Schwartz said. 

The company anticipates currency neutral revenue growth of 4.5 to 5.25 percent for the full year 2020.