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Bio-Rad Revenue Growth 'Back to Normal' as Firm Postpones Integrated Digital PCR Launch Indefinitely

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NEW YORK – Bio-Rad Laboratories announced Wednesday that it will indefinitely pause the launch of its integrated digital PCR system, the QX Continuum. The firm also reported that its third quarter revenues rose approximately 3 percent year over year, buoyed by rebounding sales.

"It was nice to see our clinical diagnostics business back to normal, delivering stronger-than-expected year-over-year growth in the quarter," Bio-Rad CEO Norman Schwartz said on a call to discuss the results. The firm's life science business is also experiencing a modest pace of recovery, Schwartz said.

However, on the call Schwartz announced that after review by its new executive team, Bio-Rad will postpone the introduction of the QX Continuum and did not provide an updated launch date.

The QX Continuum is an "all-in-one" digital PCR platform developed with technologies acquired with digital PCR instrument developer, Dropworks. As described during an investor event in 2022, it is intended to be a fully integrated, "plate in, answer out" system with 30 minutes to first results.

At the time of the acquisition, Bio-Rad executives said the Dropworks technology could more cost-effectively streamline the digital PCR workflow for life science research and diagnostic applications while accelerating Bio-Rad's entry into the lower-end segment of the digital PCR market and enabling its expansion in the $2.5 billion to $3 billion PCR segment.

The system was initially forecast to launch in 2023.

However, on Wednesday's call, Chief Operating Officer Jon DiVincenzo said that he began portfolio reviews when he started with the firm last month — along with Schwartz and Roop Lakkaraju, who joined Bio-Rad as CFO in April.

"We still believe in the platform very much at this point," DiVincenzo said regarding the QX Continuum.

However, he added, "a little bit of refinement … in the performance of the platform" is needed. "As market leader, we want to make sure that we hit our high product standards," DiVincenzo said.

Lakkaraju also added, "At the end of the day, Bio-Rad is known to put high-quality products out there … and we thought it didn't meet up to the standards at this point in time, and therefore we thought it was more prudent to delay the launch."

Regarding the lack of a new projected launch date, Lakkaraju added that this strategy seemed more practical than the prior one. "We've given numerous dates, and those dates haven't come to fruition," he said. "At this point, we think it's more reasonable to say, let us work through it, this is an important area of the market, and we will bring the product out at the appropriate time."

For the quarter ending Sept. 30, Bio-Rad reported revenues of $649.7 million compared to $632.1 million in Q3 2023 and well above analysts' average estimate of $628.2 million.

Life sciences business sales were down 1 percent at $260.9 million, driven by ongoing weakness in biotech and biopharma end markets and offset by mid-single-digit growth in the Droplet Digital PCR franchise bolstered by IP-related royalties.

"We're continuing to see strong interest in our recently launched ddPCR assays targeted at the oncology and cell and gene therapy markets, and continue to maintain a strong win-loss ratio for our digital PCR platforms in our current market segments," Schwartz noted on the call.

That said, "we increasingly believe that the gradual pace of recovery likely continues into 2025 and weighs on the uptake of life science instrumentation over the coming quarters," Schwartz added.

Clinical diagnostics sales in the quarter rose approximately 6 percent to $388.8 million. Bio-Rad attributed the increase to demand for quality control products and a favorable compare for its immunology products that had been impacted by supply constraints in the third quarter of 2023.

In the quarter, Bio-Rad made an additional equity investment in Oncocyte focused on transplant rejection monitoring, launched the next in a series of Vericheck assays to support cell and gene therapy production, and completed the acquisition of Saber Bio, a novel platform utilizing the firm's core droplet technology for antibody and T-cell receptor discovery.

Bio-Rad reported net income of $653.2 million, or $23.34 per share, compared to a net income of $106.3 million, or $3.64 per share a year ago. The company said non-GAAP diluted EPS was $2.01, well above Wall Street's anticipated EPS of $1.16. A change in the fair market value of its investment in Sartorius AG substantially contributed to net income, Bio-Rad said.

Bio-Rad's R&D spending nearly doubled in the quarter to $91.0 million from $43.5 million a year ago, while its SG&A expenses were essentially flat at $200.4 million.

On the call, Lakkaraju attributed the R&D increase to a one-time acquired in-process R&D expense of approximately $30 million and a one-time decrease in the fair value of contingent consideration of approximately $15 million in Q3 2023.

The firm exited the quarter with $410.4 million in cash and cash equivalents and $1.22 billion in short-term investments.

After lowering its full-year revenue guidance in August following its second quarter earnings release, Bio-Rad said it continues to expect its non-GAAP full-year 2024 revenue to decline by approximately 2.5 to 4.0 percent on a currency-neutral basis, reflecting the gradual slower pace of biopharma end market recovery and growth for the clinical diagnostics group. The company cited anticipated headwinds including the exit of its partner, QuidelOrtho, from the donor screening business as well as macro trends in China, balanced by a gradual recovery in biopharma and flat academic funding.

In Thursday morning trading on the Nasdaq, shares of Bio-Rad were up approximately 8 percent to $355.59.