Expanding Markets Lift Affymetrix Q1 Sales

Affymetrix first quarter sales grew 6.9%, 9% excluding currency, to $88.7 million. The negative impact from currency was partially reduced by hedging gains of $2.2 million. Product sales grew 7.7% to $79.4 million. Consumables sales grew 9.4%, and Instruments sales fell 23.5% to account for 86% and 3% of revenues, respectively. Service and Other revenue grew 0.8% to make up 11%. Adjusted gross margin advanced 200 basis points to 63.2% of sales due to manufacturing efficiency and product mix. Given the stronger margins and lower SG&A expenses, adjusted operating profit jumped 196.6% to $10.8 million.

Quarterly Affymetrix Genetic Analysis and Clinical Applications sales were led by genotyping revenue, which climbed 27% due to increased biobanking samples and agbio demand. Cytogenetic sales grew 13%, driven by demand for reproductive health products and increased partnering revenue for diagnostics tests based on DNA arrays. While Life Science Reagents sales declined as expected, Expression sales fell at a faster-than-projected rate due to timing of several large orders. However, IVT product sales were strong and maintained stable pricing. Currency-neutral eBioscience sales grew slightly better than expectations, as core flow cytometry and immunoassay sales rose 5.6% on a reported basis. Procarta Plex immunoassays revenue climbed more than 30%. Despite the strong quarter, Affymetrix maintained its 2015 currency-neutral mid-single-digit revenue growth outlook. Currency is expected to reduce sales growth by roughly 5% for the year before any offset from hedging. Second quarter currency headwinds including hedging are expected to be 3%–4%.

BD Bioscience Growth Impaired by Japan

Fiscal second quarter revenue for Becton, Dickinson BD Biosciences declined 4.5% to $289 million to make up 9% of sales. Excluding currency, segment sales rose 0.8%. US sales climbed 7.7% to account for 34% of Biosciences revenue, led by strong demand for research reagents and instruments. International revenue fell 9.7%, 2.1% excluding currency, to represent 66% of segment sales as a result of delayed government funding in Japan, partially offset by strong instrument sales in Western Europe. For Biosciences, the company projected improved growth for the remainder of the year based on funding approvals in Japan and new products, which included two new instruments focused on emerging markets, especially China.

New Products Elevate Danaher Q1 Sales

First quarter sales for Danaher’s Life Sciences & Diagnostics segment grew 5.0% organically to account for 35% of company revenues. Organic life science sales advanced in the mid-single digits, led by demand in the US and Europe. Sales in China grew in the mid-single digits following a decline in the fourth quarter of 2014. SCIEX sales grew double digits organically due to new products and demand from clinical and applied customers, especially in the US. Leica Microsystems sales declined in the mid-single digits organically because of Japanese sales, which were impacted by lower government funding and a strong year-over-year comparison. This decline was partially offset by demand for new microscope products, especially for industrial applications. Strong sales of cellular analysis and sample preparation products also boosted life science revenue.

Danaher’s Environmental segment sales grew 8.5% organically to make up 17% of revenues. Demand was driven by the its water quality platforms, for which sales climbed 10% organically, including strong growth within the analytical instrument, chemical treatment and ultraviolet-treatment businesses. Hach sales grew across most major product lines, benefiting from double-digit sales growth in the US and Europe. Demand in Europe was strong from both municipal and industrial customers.

HORIBA Q1 Shows Mixed Results

For the first quarter, HORIBA Process and Environmental Instruments & Systems (P&E) revenue declined 4.0% to ¥4.32 billion ($36.3 million = ¥119.16 = $1) to account for 10% of revenues. Excluding currency, P&E sales fell roughly 7% due to lower sales in the Americas and Europe, which declined 26.5% and 34.3%, respectively. US sales were negatively impacted by extreme weather conditions and port disruptions on the West Coast. Japanese sales also declined, sliding 2.1%. Conversely, sales in Asia jumped 32.7% due to private sector demand for stack gas and water quality analyzers. Orders declined 5.2% to ¥4.03 billion ($33.8 million). P&E operating income contracted 7.7% to ¥603 million ($5.1 million). While the company lowered its P&E revenue and operating income forecasts for the first half of the year, it maintained its full-year outlook of ¥18.50 billion ($154.2 million = ¥120.00 = $1) and ¥2.10 billion ($17.5 million), respectively.

HORIBA Scientific Instruments & Systems (SI) segment sales climbed 15.5%, roughly 5% organically, to ¥6.51 billion ($54.6 million) to account for 16% of company revenues. Acquisitions and currency each contributed roughly mid-single-digit growth. Sales were driven by private sector demand in the Americas and Asia, for which sales expanded 52.4% and 21.1%, respectively, including contributions from acquisitions and currency. European sales advanced 19.9%, while domestic sales in Japan fell 11.3%. Orders improved 3.1% to ¥5.74 billion ($48.2 million). Segment operating profit was ¥290 million ($2.4 million), compared to a loss of ¥260 million ($2.5 million). SI’s full-year sales and operating income forecasts of ¥28.00 billion ($233.3 million) and ¥1.30 billion ($10.8 million), respectively, were unchanged.

Rough Fiscal Year For Oxford

For the fiscal year ending March 31, Oxford Instruments sales expanded 7.1% to £385.5 million ($621.8 million = £0.62 = $1) (see page 12). However, excluding acquisition contributions of 15.2% and currency headwinds of 3.0%, organic sales fell 5.2% due to weaker-than-expected demand in Japan and trade sanctions in Russia. In addition, the completed International Thermonuclear Experimental Reactor (ITER) and Siemens MRI contracts reduced sales growth by 1.3%. Orders grew 13.0% but were flat organically. Overall, sales in North America and Asia each accounted for 34% of revenues. Sales in Europe and Rest of World made up 30% and 2%, respectively. Adjusted gross margin declined 100 basis points to 44.4% of sales as a result of currency and lower sales volume. Adjusted operating income fell 15.1% to £42.7 million ($68.9 million).

Given the company’s sales shortfall, Oxford accelerated its restructuring plan and increased its estimated cost saving by more than 30% to roughly £8 million ($13 million) beginning in fiscal 2016. The restructuring plan resulted in a 7% headcount reduction and involves the closure of six smaller facilities to be completed by the first half of the fiscal year. To further accelerate growth, the company expanded R&D investments by 140 basis points to 9.1% of sales. While the company indicated a slow start for the first two months of the year, it expects to achieve organic growth for the remainder of the fiscal year, led by new products and expanding markets.

Oxford’s Nanotechnology Tools segment (NT) sales declined 7.7% organically to account for 55% of revenues. This decline was primarily attributed to challenging sales in the Plasma Technology business due to the trade restrictions with Russia and weak demand for high-brightness LEDs. Despite record orders in the US and improvements in Europe, NanoAnalysis sales declined due to feeble Japanese demand. Conversely, the NanoScience and Asylum businesses performed well. NT adjusted operating profit declined 2.4% to £20.7 million ($33.4 million).

Organic sales for Oxford’s Industrial Products segment (IP) contracted 6.4% to account for 27% of sales. The completed ITER contract negatively impacted revenue growth by 2.6%. Industrial Analysis sales fell below expectations due to increased competition for XRF systems coupled with the delayed launch of the X-MET8000 handheld analyzer. IP adjusted operating profit fell 59.6% to £6.3 million ($10.2 million). Service revenue grew 3.6% organically to make up 18% of sales. Excluding the completed Siemens MRI product, organic Service revenue climbed 7.1%, including positive growth in all territories. Service adjusted operating profit advanced 16.3% to £15.7 million ($25.3 million).

QIAGEN Q1 Falls Flat on US HPV Sales

QIAGEN first quarter sales fell 5.9% to $298.7 million but were flat organically. Currency suppressed revenue growth by 8%, while acquisitions contributed 2% to sales growth. Organic sales were negatively impacted by US HPV sales, which slumped 54% to account for 4% of revenues. Excluding HPV sales, organic sales grew 6%, led by strong demand from emerging markets. All figures below are on a currency-neutral basis. Consumables and other related revenue grew 2% to account for 88% of revenues. Instruments sales advanced 9% to make up 12%. Sales from the top seven emerging markets, which accounted for 12% of sales, jumped 22%, including more than 20% sales growth in both China and Turkey. This growth was partially offset by challenges in Russia and Mexico. Overall, sales in the Americas, which made up 47% of revenues, declined 4% but grew 8% excluding HPV sales. Sales in Europe/the Middle East/Africa and Asia-Pacific/Japan grew 9% and 7% to account for 33% and 19% of revenues, respectively. Within Asia, demand was stable in Japan and strong in China.

Molecular Diagnostics sales climbed 14% excluding US HPV sales, driven by double-digit revenue growth for the QuantiFERON TB test and strong sales of consumables used for infectious disease testing on the QIAsymphony system. Within the life sciences businesses, Applied Testing sales were led by strong QIAsymphony instrument and consumables sales for human identification and forensics testing across all regions. Pharma sales were led by demand in the US and Asia-Pacific, partially offset by lower instrument sales in Europe and a strong year-over-year comparison. Academia sales were driven by US and European markets but experienced weakness in Asia-Pacific.

Total adjusted gross margin advanced 62 basis points to 73.0% of sales because of product mix and manufacturing efficiencies. However, adjusted operating income fell 9.9% to $67.4 million primarily due to increased investments for the commercialization of NGS and bioinformatics products. Currency had a slight positive impact on operating profits. The company reaffirmed its 2015 currency-neutral sales growth outlook of 4%, which includes headwinds of 3%–4% from US HPV sales and 1.5% growth from acquisitions. Second quarter revenues are projected to fall 6% but grow 4% excluding currency.

VWR Q1 Sales Beat Expectations

VWR first quarter revenues fell 2.6% to $1.03 billion but climbed 3.6% organically. Currency reduced revenue growth by 8.3% but was partially offset by acquisition contributions of 2.1%. Sales were driven by strong biopharmaceutical demand, higher educational sales in the US, and 7% organic sales growth of private label products and services, which accounted for 20% of sales. Gross profit margin fell 130 basis points to 28.3% of sales due to currency and lower pricing terms with Merck KGaA. Given these factors, adjusted operating profit fell 4.2% to $73.8 million. The company reaffirmed its 2015 sales outlook of $4.24–$4.31 billion, representing a reported decline of 1%–3% but organic growth of 3%–4%.

VWR’s Americas segment revenue was driven by low double-digit biopharmaceutical sales growth, including strong demand for procurement services and private label products from large pharmaceutical companies. With a greater focus on universities, education sales grew in the mid-single digits, while government sales were flat. Health care sales grew in the low single digits. Conversely, industrial sales fell in the mid-single digits due to lower demand from a large microelectronic customer. By product, chemicals sales rose in the double digits, including strong growth for both production and laboratory chemicals. Equipment and instrument sales improved in the mid-single digits, and sales of consumables grew in the low single digits. Americas operating profit jumped 20.6% to $35.7 million.

While VWR’s EMEA-APAC sales expanded on an organic basis, growth was hampered by the Easter holiday and supply chain disruptions. All figures below are organic. Biopharmaceutical and health care sales each grew in the mid-single digits. Education and industrial sales were each flat. Currency and a roughly $6 million loss from pricing terms with Merck KGaA negatively impacted EMEA-APAC operating profit, which fell 19.6% to $38.1 million. Excluding these factors, segment operating income would have improved.