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Despite Healthy Protein Product Revenues, Bio-Rad Life Science Sales Down 2.2 Percent

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Strong results in its protein research-related products could not bolster Bio-Rad Laboratories’ Life Science segment as sales in the division fell 2.2 percent to $141.6 million during the first quarter, compared to $144.8 million a year ago.
 
Profits in the division, which houses Bio-Rad’s proteomics business, plummeted 61 percent to $5.5 million from $14.1 million during the first quarter of 2006.
 
Last week, as it released its earnings results for the quarter ended March 31, the company said that a drop in sales of its bovine spongiform encephalopathy tests combined with a continuing weak academic market in the US and Asia, especially in Japan, led to the drop in its Life Science business.
 
The one healthy product area in the segment was its protein portfolio. “Products for protein expression analysis experienced material growth,” Bio-Rad said in quarterly earnings results documents filed with the US Securities Exchange Commission.
 
“We continued to have strong year-over-year growth in our protein-related product line, especially separation products,” Christina Tsingos, vice president and CFO at Bio-Rad, said during a conference call accompanying the earnings release. In particular, the ProteOn XPR36 protein interaction array system launched late last year and the Bio-Plex suspension array system for quantitative peptide and protein analysis proved to be revenue drivers during the quarter, the company said, though it did not provide specifics.
 
Messages left with the company seeking details were not returned.
 
New product releases in the first quarter included the next-generation Mini-Protean Tetra Cell 1D gel electrophoresis gel system [See PM 03/29/07] and the Profinia protein purification system [See PM 03/01/07]. In a press release, Norman Schwartz, president and CEO of Bio-Rad, said the company was “encouraged” that the introductions would continue to grow sales of its protein products.
 
In late 2006, Bio-Rad completed its purchase of the Surface Enhanced Laser Desorption/Ionization technology platform from Ciphergen, along with its ProteinChips and accompanying software. During the first quarter, continuing R&D expenses related to those technologies cut into Bio-Rad’s profitability, Tsingos said, though she did not provide specifics.
 
Total R&D spending rose to $32.8 million during the first quarter from $28.1 million during the year-ago period. R&D expenses were split evenly between the Life Sciences and Clinical Diagnostics divisions, Tsingos said.
 
Total revenues across the company rose 4.6 percent in the first quarter to $322.5 million from $308.3 million a year ago. Net income shrank to $27 million for the quarter compared to $31.2 million a year ago.
 
Testing for Mad Cow Down
 
Bio-Rad’s BSE product line was singled out by company officials as the main culprit for Life Sciences’ revenue slide as the company was forced to continue slicing the prices for the tests. Factoring out the BSE business, sales in Life Sciences would have grown 2.5 percent during the quarter, Tsingos said.
 

“We continued to have strong year-over-year growth in our protein-related product line, especially separation products.”

The decline in BSE sales was not unexpected, however, as weakness in that market forced Bio-Rad to cut its BSE prices starting as early as two years ago. Because of looser government mandates, fewer cows are being tested for mad cow disease, a company official said. In addition, a more competitive landscape for the tests has emerged.
 
“At some point the premium prices that we were able to enjoy back at the beginning have eroded as we’ve had to stay competitive,” said Brad Crutchfield, vice president and group manager of Life Sciences at Bio-Rad.
 
For full-year 2007, BSE sales could decline by between $20 million and $25 million, company officials said. They could not say when a turnaround in that business may occur.
 
Unexpected to company officials was the downturn in the academic market, especially in the US. While other life science firms that have already reported their first-quarter earnings have generally said that the academic market has remained largely unchanged, Crutchfield said that Bio-Rad is more vulnerable to cutbacks in academic and government spending because of its portfolio.
 
“In general, a lot of the product lines that we have are more susceptible to people who are guarding the budget, putting off spending,” he said. “We see that as something more transitory in nature.”
 
Bio-Rad’s other segment, Clinical Diagnostics, reported sales of $177.6 million, up 10.8 percent from $160.3 million during the year-ago period.
 
As of March 31, the company had $230.3 million in cash and cash equivalents.

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