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Bio-Rad Reports 2 Percent Lift in Q2 Sales

NEW YORK (GenomeWeb) — Bio-Rad reported after the close of the market on Tuesday a 2 percent increase in second quarter revenues despite essentially flat sales for its Life Science segment.

For the quarter ended June 30, the Hercules, Calif.-based firm reported revenues of $536.8 million compared to $525.3 million in Q2 2013 and falling short of the consensus analyst estimate of $537.6 million.

On a currency-neutral basis, quarterly revenues increased 1 percent year over year.

"During the quarter we had growth across many of our key diagnostic and life science markets, most notably in our digital PCR product line and sales of diagnostic products in the emerging markets," Bio-Rad CFO Christine Tsingos said during a conference call following release of the company's Q2 earnings. "Overall, the quarterly top line was negatively impacted by continued competitive challenges in our diagnostic products in Europe, as well as headwinds for life science products in the Asia-Pacific and China markets."

Bio-Rad's Life Science segment logged net sales of $170.3 million, essentially flat compared to the $170.4 million it reported in the year-ago period. On a currency-neutral basis, Life Science segment sales declined 1 percent year over year.

The company noted that its Life Science segment sales increased in both Europe and the US during Q2, but the timing of orders in Asia, most notably in China, had a negative impact on results compared to the year-ago period. This was somewhat offset by growth in the company's Droplet Digital PCR, process chromatography, and cell biology products.

"These quarterly results reflect strong growth in both process media and digital PCR products," Tsingos said. "However, sales growth during the quarter was negatively impacted by weakness in some of our more traditional product lines for academic research. On a geographic basis, European sales continue to rebound nicely, and the US market is showing some modest growth. Offsetting this performance were challenges in the Asia-Pacific and China markets related to some local spending constraints, as well as the timing of revenue recognition."

Meantime, Bio-Rad's Clinical Diagnostics division logged revenues of $362.9 million, up 3 percent compared to Q2 2013. On a currency-neutral basis, net sales for this segment increased 2 percent. The company said that sales in China and emerging markets increased during the quarter, but were partially offset by a decline in Europe.

In Q2 Bio-Rad posted net income of $31.6 million, or $1.09 per share, compared to $34.6 million, or $1.20 per share, in the year-ago period. On average, Wall Street had expected EPS of $0.95 per share.

Bio-Rad also reported lower net income for the first half, primarily driven by lower gross margins; higher SG&A expenses including a $9.8 million accrual in Q1 in connection with efforts to resolve a previously disclosed investigation of the company related to the United States Foreign Corrupt Practices Act; and an increase in R&D expense as a result of the company's acquisition of GnuBio in April.

For Q2, Bio-Rad spent $195.8 million on SG&A expenses, essentially flat compared to the same period last year. Meantime, R&D expenses rose nearly 8 percent to $55.7 million from $51.8 million in Q2 2013.

"The year-over-year increase in R&D spend is primarily related to our investment in new instruments for the diagnostic market, as well as Droplet Digital technology and products," Tsingos said. "This increase also includes the newly acquired GnuBio team. Going forward we expect R&D spend to be around 10 percent of sales." She noted that the firm's R&D expenses in Q2 were slightly above 10 percent.

Bio-Rad finished the quarter with $384.7 million in cash and cash equivalents, and $262.9 million in short-term investments.

Tsingos noted during the call that for full-year 2014 Bio-Rad remains "cautiously optimistic of achieving the currency-neutral sales growth guidance of 2.5 percent that we laid out at the beginning of the year."

In the first six months of 2014, the company's currency-neutral sales growth was 2 percent, she noted. "However, we are planning to launch more new products in the second half of the year, primarily for the life science market, which should help fuel growth," Tsingos said. "In addition, the headwinds we faced in the second quarter in the Asia-Pacific and China Life Science market appear to be more timing in nature, and hopefully we will return to growth in that part of the world in the second half of the year."

Last week PCR Insider reported that Bio-Rad has developed an automated droplet generator for its Droplet Digital PCR platform and plans to begin shipping the new product in September.

In Wednesday morning trade on the New York Stock exchange, shares of Bio-rad were up around 2 percent at $118.37.