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Bio-Rad Doubles Q3 Digital PCR Sales Over Q2; Execs Project Strong Uptake in Future Quarters

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Bio-Rad Laboratories this week reported that it sold $5.2 million in digital PCR products in the third quarter, more than doubling digital PCR sales in the previous quarter and contributing to 3.6 percent overall Q3 growth at the company on a currency-neutral basis.

In addition, company executives said that they expected Bio-Rad to come close to meeting its fiscal year 2012 sales target of $20 million for its digital PCR platform, the QX100 Droplet Digital system, after previous concerns that a longer-than-expected sales cycle for the product might hinder market uptake in the near term.

Bio-Rad executives touched on these items and other matters during a conference call this week recapping the company's financial results for the third quarter ended Sept. 30.

The Hercules, Calif.-based company reported overall Q3 revenues of $498.7 million, a 3.5 percent drop-off from $516.5 million in Q3 2011 revenues.

On a currency-neutral basis, quarterly revenues increased 3.6 percent compared to the prior-year period. Third-quarter gross margin was 54.8 percent, compared to 57.3 percent in Q3 2011, and was impacted by approximately $2.2 million of amortization expense related to Bio-Rad's $162 million acquisition of QuantaLife and its digital PCR technology last October (PCR Insider, 10/6/2011), as well as a $3.8 million reserve associated with "certain environmental issues," the company said in a statement.

"Sales of our new QuantaLife digital PCR products more than doubled from the second quarter to $5.2 million," Tsingos said during this week's call. This growth, she noted, was "tempered by a continued decline in Europe and challenges in certain emerging markets, especially for the Life Science segment."

Excluding currency and the addition of QuantaLife, organic sales growth for the quarter was 2.5 percent, Tsingos said.

Third-quarter revenues for Bio-Rad's Life Science segment declined by 2.6 percent year-over-year to $167 million on a reported basis. On a currency-neutral basis, sales rose 2.2 percent compared to last year — again, growth that was primarily fueled by sales of the QX100 Droplet Digital system, Tsingos said.

Meantime, organic currency-neutral sales for Life Science declined 1 percent, "reflecting the continued challenges in the European market and increased price competition," Tsingos said. "Despite these challenges, we believe that our market share remains strong."

During the call, Tsingos and Brad Crutchfield, Bio-Rad's vice president and group manager for the Life Science group, noted that they expected continued sales growth for the QX100 system over the next several quarters.

"We certainly do see a ramp-up of this product line," Crutchfield said. "It took a little bit longer than we originally thought. Certainly, the budget restrictions made it a little bit harder for people to get a discretionary sort of $80,000 [or] $90,000 [to buy a QX100]. We see a real strong [uptake] in the US market, and our projections are that's going to continue."

Crutchfield added that the company is expecting this to be helped by several upcoming scientific papers vetting the QX100's performance and describing new applications for the system.

In March, during a conference call discussing Bio-Rad's Q4 2011 financial results and guidance for 2012, Tsingos said that the company was expecting QuantaLife's products to generate approximately $20 million this year (PCR Insider, 3/1/2012).

The company tempered that expectation a bit in August when it reported its Q2 2012 revenues, noting that sales of the QX100 were slower than anticipated (PCR Insider, 8/9/2012).

This week, however, Tsingos said the company "may be in the ballpark [or] perhaps just shy" of its initial guidance.

"We'll see how Q4 unfolds … The fact of the matter is that the pipeline is very strong, and we remain so encouraged by the prospects for this product," she said. "It's just the sales cycle is a little longer than we originally anticipated when we laid out our plans and our guidance. So [2012] could come in slightly shy of the original $20 million, but the momentum is pretty strong."

In other Q3 financial results, Bio-Rad's research and development expenses totaled $49 million compared to $45.4 million in Q3 2011, an increase that the company attributed to the acquisition of QuantaLife and "investments in new technology and platforms for the diagnostics market, including diabetes monitoring and blood typing."

Bio-Rad said that it expects R&D expense to be approximately 9 percent to 10 percent of sales moving forward.

Bio-Rad's Clinical Diagnostics business recorded sales of $328.4 million, down 4 percent year over year, but up almost 5 percent on a currency-neutral basis. The company reported net income of $42.4 million, or $1.48 per share, in Q3 compared to $45.9 million, or $1.61 per share, in the year-ago period. Net income was positively impacted by $8.5 million tied to a reduction in the valuation of contingent consideration associated with the QuantaLife acquisition, the company said.

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