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Bio-Rad Q1 Revenues Up 2 Percent; Will Pay Up to $110M for GnuBio

NEW YORK (GenomeWeb) — Bio-Rad said after the close of the market on Tuesday that its first quarter revenues increased 2 percent as its Life Science sales spiked 3 percent year over year.

The company also disclosed that its acquisition of sequencing technology developer GnuBio, announced earlier this year, is worth up to $110 million.

The Hercules, Calif.-based life science research products and clinical diagnostics firm reported revenues of $509.3 million for the quarter ended March 31, up from $499.7 million in Q1 2013 but falling short of the consensus analyst estimate of $515 million.

On a currency-neutral basis, quarterly revenues increased about 3 percent compared to the same quarter last year.

"During the quarter we had good growth across many of our key markets and product areas in our life science segment, as well as certain diagnostic products," CFO Christine Tsingos said during a conference call this week recapping the company's earnings.

"Sales growth in the quarter was partially offset by continued weakness in the European diagnostics market, which posted a decline in currency-neutral sales versus last year, as well as continued challenges in the North American research market, [which] was essentially flat versus last year," Tsingos said. "Offsetting these tepid regions was solid growth in the emerging markets, most notably China and Latin America."

Bio-Rad's Life Science segment recorded net sales of $161.5 million in Q1, up 3 percent compared to the year-ago period. On a currency-neutral basis, Life Science segment sales increased nearly 5 percent.

First quarter Life Sciences results benefitted from increased sales of Droplet Digital PCR, food science, and process chromatography products, as well as strength in the European and Chinese markets, Bio-Rad said. Growth in this segment, however, was offset by continued challenges in the research spending environment, particularly in the US, the company noted.

Bio-Rad's Clinical Diagnostics segment logged $344.3 million in sales in Q1, up 1 percent year over year. On a currency neutral basis, revenues for this segment increased 2 percent. Bio-Rad said that this segment's performance reflects modest growth across most product lines, as well as strength in the Asia Pacific and Latin America markets.

During the quarter Bio-Rad acquired next-generation sequencing technology firm GnuBio for an undisclosed price. However, Tsingos said during the Q1 call that terms of the acquisition included a payment of $40 million at the April 10 closing date, as well as contingent consideration for a potential incremental $70 million related to several development and sales milestones over the next three years.

"We recently announced the acquisition of GnuBio, an exciting new droplet-based technology for targeted sequencing in the clinical diagnostics market," Tsingos said. "GnuBio has developed an innovative desktop platform that incorporates all of the functions of DNA sequencing into a single integrated workflow. This new technology will leverage the tremendous knowledge base we are growing in droplet digital PCR. While it will likely take a few years to bring this product to market, we are excited about the prospects for this potentially game-changing technology."

The firm's net income in the first quarter was $6.7 million, or $.23 per share, compared to $20.2 million, or $.70 per share, during the same quarter last year. On average, Wall Street had expected earnings per share of $.80 per share. Bio-Rad didn't provide an adjusted EPS figure for the quarter.

Bio-Rad said that the lower net income in Q1 2014 versus the comparable quarter last year was due to higher relative SG&A expenses, particularly an accrued expense of $9.8 million in Q1 in connection with efforts to resolve a previously disclosed investigation of the company related to the United States Foreign Corrupt Practices Act, as well as higher information technology and employee-related expenses.

The company spent $202.3 million on SG&A expenses, a 9 percent increase from $185.9 million in Q1 2013. Meantime, R&D expenses inched up 4 percent to $52.5 million from $50.3 million in the year-ago period. The increase in R&D expenses was primarily related to continued investment in cell biology and digital PCR products as well as new instrumentation for the diagnostic market, Tisngos said during the call.

Bio-Rad finished the quarter with $364.5 million in cash and cash equivalents, and $276.8 million in short-term investments.

Bio-Rad's shares slipped nearly 3 percent to $121.07 in Wednesday morning trade on the New York Stock Exchange.