Strong Clinical Demand for Affymetrix

Affymetrix third quarter sales slipped 0.6% to $86.5 million but grew 3.4% excluding currency due to strong clinical demand, increased licensing revenue and further adoption in pharmaceutical markets. Overall, Consumables sales grew 2.7%, roughly 7% excluding currency, to account for 88% of revenues. Instrument sales declined 1.0% but grew in the low single digits on a currency neutral basis to make up 5%. Service and other revenue dropped 28.0% to account for 7% due to timing and completion of genotyping projects. Adjusted gross margin advanced 480 basis points to 65.6% of sales due to product mix, stronger utilization rates and a $1.0 million one-time licensing payment.

Affymetrix’s clinical sales grew more than 30% to account for roughly 22% of revenues. This growth was driven by continued strength in the partnering and licensing business, and more than 20% growth for Cytogenetics products, including solid demand for CytoScan and QuantiGene assays. Conversely, Genotyping revenue contracted roughly 26% to account for 16% of sales due to the completion of the UK Biobank project. In addition, agbio sales declined slightly due to timing of orders.

Life Science Reagents sales fell 4.1%, as higher sales of biochemical products was offset by lower demand for molecular biology products. Expression sales fell roughly 10% excluding currency due to lower in vitro transcription product sales and timing of an order, but revenue was in line with expectations. EBioscience sales grew 10.7%, the fastest growth since the acquisition over three years ago (see IBO 6/30/12). This growth was driven by strength in Asia Pacific and 20% revenue growth to pharmaceutical customers, led by demand for Procarta Plex and QuantiGene Plex assays. Higher core flow cytometry and immunoassay sales also contributed to eBioscience growth.

Affymetrix maintained its 2015 currency neutral mid-single digit revenue growth outlook. Genotyping sales are projected to climb sequentially in the fourth quarter and finish the year with modest year-over-year growth. Given the strong cost control measures, the company raised its full-year adjusted EBITDA range by 100 basis points to 18%–20%.

Research Sales Lift BD Bioscience Growth

Fiscal fourth quarter revenue for Becton, Dickinson BD Biosciences contracted 5.1% to $286 million to account for 9% of sales. Excluding currency, unit sales grew 2.2%, led by demand for research reagent and instruments in the US. US sales jumped 14.5% to make up 38% of Biosciences revenue. International revenue fell 14.3%, down 3.5% excluding currency, to account for 62% of segment sales as a result of delayed government funding in Japan.

Fiscal full-year BD Biosciences sales fell 2.4% to $1,132 million to make up 30% of revenues. Excluding currency, Biosciences sales improved 3.6%. US and International sales grew 9.7% and 0.8% excluding currency to account for 36% and 64% of Biosciences revenue, respectively.

Pharma and Applied Growth Lift Danaher

Third quarter sales for Danaher’s Life Sciences & Diagnostics segment grew 3.5% organically to account for 40% of revenues. The acquisition of Pall (see IBO 5/15/15), which experienced strong biopharmaceutical growth, contributed roughly 18.0% to segment growth. Organic Life Sciences sales grew in the mid-single digits, including high single-digit growth in the US, double-digit growth in Europe and declines in emerging markets. SCIEX sales rose in the mid-single digits organically, led by demand from pharmaceutical and clinical customers. Leica Microsystems organic sales were slightly higher, as demand in the US and Eastern Europe was mostly offset by sales declines in Western Europe, Latin America and the Middle East. However, orders for this business were up in the mid-single digits. Segment operating profit margin fell 490 basis points to 10.8% due to acquisitions, slower growth in emerging market and increased R&D investments.

Revenue for Danaher’s Environmental segment grew 6.0% organically to make up 18% of revenues. Organic sales for the segment’s water quality platforms grew in the mid-single digits. Hach sales grew at a similar pace, with growth across all major product lines and geographic regions, including China and Latin America. ChemTreat sales also grew in the mid-single digits organically, with broad geographic demand, including double-digit growth in Latin America. Segment operating profit margin advanced 160 basis points to 21.8%.

US HPV Sales and Asia Hinder QIAGEN

QIAGEN third quarter sales contracted 6.5% to $314.6 million but were roughly flat organically. Currency headwinds reduced revenue growth by approximately 8.5%, while acquisitions contributed less than 2%. Excluding the continued decline in US HPV sales, which slumped 44% to account of 3% of revenues, total organic sales rose 3%. All figures below are on a currency-neutral basis. Instrument sales grew 4% to account for 13% of revenues. Consumables and related revenues increased 1% to make up 87%, benefiting from acquisitions as well as strong double-digit bioinformatics revenue growth, which accounted for roughly 4% of sales. Overall, sales in the Americas, which made up 48% of revenues, declined 1% but grew 5% excluding HPV sales. Sales in Europe/Middle East/Africa region expanded 6% to account for 32%, led by growth in Turkey, Switzerland and certain Nordic countries. Sales in Asia-Pacific/Japan improved 1% to account for 18%, as growth in Australia and South Korea was mostly offset by weakness in China and a double-digit decline in Japan. Sales in the company’s top-seven emerging markets grew 3% compared to 11% growth for the first nine months.

Excluding US HPV sales, Molecular Diagnostics sales grew 3%, led by roughly 20% sales growth for the QuantiFERON TB test and strong demand for the QIAsymphony. Personalized Healthcare sales were also healthy. Diagnostics sales were negatively impacted by timing of infectious disease tenders and weakness in Asia.

Sales for the life sciences businesses grew roughly 3% organically, led by demand in the US and Europe, while sales growth in China slowed and Japan declined. Applied Testing sales grew 6%, driven by consumables and related revenues for DNA forensic testing and veterinary diagnostics, as well as growth in all geographic regions. Pharma and Academia sales advanced 6% each, including acquisitions. The soft organic growth was attributed to lower sales in Asia-Pacific/Japan from biopharmaceutical markets and flat sales growth from research customers.

Adjusted gross margin contracted 175 basis points to 70.7% due to product mix and lower utilization rates. Adjusted operating income fell 7.7% to $78.3 million. The firm maintained its 2015 currency-neutral sales growth outlook of 4%, or roughly 2% excluding acquisitions. Fourth quarter sales are projected to grow 5% excluding currency and roughly 3% organically.

US Pharma Boosts VWR Q3 Organic Growth

VWR’s third quarter revenues fell 1.7% to $1.10 billion. Excluding currency headwinds of 7.6% and acquisition contributions of 2.1%, organic sales advanced 3.7%. Growth was driven by biopharmaceutical demand, increased procurement services as well as private label sales, which grew in line with the previous range of 8%-10%. Gross profit margin slipped 55 basis points to 27.3% of sales due to currency, product mix and supply chain disruptions. Adjusted operating profit improved 4.7% to $85.3 million. In spite of stronger-than-expected currency headwinds projected for the fourth quarter, the company reaffirmed its 2015 sales outlook of $4.24–$4.31 billion. This represents a year-over-year decline of 1%–3% but organic growth of 3%–4%.

Sales for VWR’s Americas segment advanced 4.4% organically, driven by double-digit growth from biopharmaceutical markets. The company highlighted strength from biotechnology markets, as well as from pharmaceutical production and CRO customers. Health care and government sales grew in the low single digits each, while education and industrial sales each declined in the low single digits. However, industrial demand showed improvements as higher sales to cosmetics, and paper and pulp markets were partially offset weakness in agriculture, petroleum and construction manufacturing sales. By product, chemicals sales jumped in the double digits, equipment and instrument sales grew in the mid-single digits, and sales of consumables grew in the low single digits. Americas’ adjusted operating profit climbed 23.6% to $48.2 million, including a gain of roughly seven percentage points from acquisitions.

VWR’s EMEA-APAC sales improved 2.8% organically but were partially hindered by a strong comparison and supply chain issues. Biopharmaceutical sales grew in the high single digits, driven by biotech markets and sales of production chemicals, as well as healthy demand from pharmaceutical customers. Health care sales grew in the low single digits, as double-digit sales growth to reference labs was partially offset by lower sales to hospitals. Education sales were flat because of a strong comparison and lower sales to schools. Industrial sales were modestly higher, as growth in food and beverage as well as natural resources was mostly offset by challenges from petrochemical markets. Government sales declined in the mid-single digits because of lower demand from state and municipal customers. By product, consumables sales advanced in the mid-single digits. Chemical sales grew in the low single digits. Equipment and instrument sales declined in the low single digits. EMEA-APAC adjusted operating profit fell 12.7% to $37.1 million due to currency and lower pricing terms with Merck KGaA.