Bio-Rad cited weak sales in its BSE tests and soft spending by researchers in the US and Japan for a slow growth rate in its life sciences segment during the second quarter.
In results for the three months ended June 30, Bio-Rad said revenues in its life sciences segment grew 1 percent, compared to an overall revenue growth rate of 9.1 percent company-wide.
Many of Bio-Rad’s proteomics-related instruments reside in the company’s life sciences unit and sales of products with proteomic applications sold well in the quarter, Bio-Rad said. However, sales of BSE testing products depressed the unit’s overall performance. Excluding BSE results, core life science revenues grew 6.5 percent, said Christine Tsingos, CFO of Bio-Rad in a conference call last week accompanying the earnings report.
During the call, CEO Norman Schwartz attributed the revenue increase partly to the company’s expansion of the proteomics platform.
“We’ve been investing more in the protein side of the business where we see opportunities and have been quite successful there,” Schwartz said. “A lot more of the focus is being turned toward the proteins,” he said.
Earlier this year, Bio-Rad, based in Hercules, Calif., expanded its proteomic platform by purchasing acquiring Haifa, Israel-based ProteOptics, moving Bio-Rad’s proteomic product range beyond protein discovery into functional analysis of proteins [see PM 03/02/06].
Prior to the purchase, Bio-Rad’s main proteomic product was its Bio-Plex system for quantitative peptide and protein analysis.
The company also said its Bio-Plex suspension array system continued to be strong for the quarter though they did not provide figures. Bio-Rad executives could not be reached for comment.
For the quarter, Bio-Rad’s life science segment revenues grew to $134.3 million from $133.1 million a year ago.
“We continued to have strong year over year growth in our process chromatography, electrophoresis and amplification product lines,” said Tsingos. However, that growth was “offset by a double-digit decline in our BSE business,” she said.
In addition to BSE sales, slowdowns in spending among research customers domestically and in Japan hurt revenues, the company said.
“We are in a climate where we can’t really rely upon the kinds of things that can drive new business – opening new labs, new buildings being funded then staffed, new positions being funded – those really do drive a lot of the ambient growth. And that’s essentially been flat.”
“Certainly the NIH budget in terms of the extramural and even their intramural-based research budget really has been essentially flat, so all of us are competing really for the same pool,” said Brad Crutchfield, vice president and group manager of life science for Bio-Rad.
“We are in a climate where we can’t really rely upon the kinds of things that can drive new business – opening new labs, new buildings being funded then staffed, new positions being funded – those really do drive a lot of the ambient growth. And that’s essentially been flat,” he added.
In Japan, Crutchfield said, changes in government-sponsored research have created a nervous ripple among researchers there.
“While the money is there, the customers are just very reluctant at this point because of the change. They’re being very conservative,” he said. He expressed optimism, however, that the spending slowdown in Japan is only temporary. The government remains Bullish in investing in biotech and life-science research, “so in the long term I’m really not worried about it.”
The company further said competition in the real-time instruments market slowed revenue growth.
“The real-time market in instrumentation as well as the reagents is very, very competitive,” Crutchfield said. “It really was largely a market that Bio-Rad and Applied Biosystems participated in but there have been multiple competitors that have come on the market—some licensed, some not.
“And really we’re kind in a position [to see] a bit of a shake-out as companies sort of establish pricing discipline and strategies in building market share,” he said.
In total, Bio-Rad’s revenues grew to $317.7 million from $291.3 million during the year-ago period with its clinical diagnostics division driving revenue growth. For the quarter, that division posted a 16.1-percent revenue increase to $180.2 million from $155.2 million a year ago.
Bio-Rad also included revenues of $11.7 million in its total sales resulting from a licensing agreement with bioMerieux. In July the two companies resolved licensing disputes. As part of the settlement, bioMerieux granted Bio-Rad a license under its Epstein-Barr virus patent rights.
Net income rose to $32.3 million, a 75.5-percent jump from $18.4 million a year ago. As of June 30, the company had $245.6 million in cash and cash equivalents. For the quarter the company spent $40 million in R&D.