First-Quarter Life Science Sales Index: Growth Slows

First-quarter Life Science Index sales grew 3.1%, 2.5% on a currency-neutral basis, to $3,163 million. Revenue growth for several companies was negatively impacted by lower research funding in the US. Operating profit improved 5.2% to $700 million, and operating margin was unchanged at 22.1% of sales. Of the 13 Index companies, Tecan was the only company for which first-quarter estimates have been used. QIAGEN was removed from the Index due to the size of the company’s molecular diagnostics business. Fluidigm, which provides microfluidic systems, was added.

Fiscal second-quarter revenue for Becton Dickinson’s BD Biosciences unit improved 1.3%, 1.7% excluding currency, to $339.6 million to make up 17% of company sales. Revenue growth was driven by strong Japanese sales, which were negatively impacted in the previous year by the earthquake, and good demand in emerging markets. However, this growth was partially offset by lower demand for high-end instruments for Cell Analysis in the US and growing competition for life science research reagents. Declines in both pricing and market share contributed to lower revenues for research reagents. All figures below are expressed at constant exchange rates. Sales to the US fell 8.0% to account for 33% of segment revenue, but International sales climbed 7.0% to make up 67%. BD Biosciences operating income declined 0.9% to $94.4 million, and operating margin dropped 60 basis points to 27.8% of sales due to amortized acquisition expenses. Cell Analysis sales grew 2.8% to $261.5 million, including International sales growth of 6.6%, to make up 70% of segment sales. US sales fell 5.0% to account for 30%. Discovery Labware revenue declined 2.1% on a currency-neutral basis to $78.1 million, including a 14.6% decline in US sales to represent 41% of segment sales. International Discovery Labware sales rose 8.7% to account for 59% of segment revenue. The company lowered its full-year currency-neutral Biosciences sales outlook from growth of 2%–4% to flat growth.

First-quarter sales for Biotage grew 11.5%, 8% on a currency-neutral basis, to SEK 119.6 million ($17.7 million = SEK 6.76 = $1). Revenue growth benefited from strong demand for sample preparation products and a good recovery in purification sales. Demand for new instruments and organic chemistry consumables also boosted quarterly sales. Overall, consumables and service revenues accounted for 58% of sales, compared with 57% a year ago. Sales to the EU increased to account for 32% of sales, driven by higher demand for analytical chemistry products. US sales improved slightly to account for 35% of sales, led by higher sales of purification and sample preparation products. Sales to Japan were strong and made up 21% of sales. Sales to China and Rest of the World each accounted for 6%. Despite negative currency contribution, operating profit jumped 230.3% to SEK 8.6 million ($1.3 million). Gross profit margin declined 160 basis points to 57.1% of sales, primarily due to a reclassification of expenses from R&D to production. On a sequential basis, gross profit margin increased 210 basis points due to favorable product mix.

Fluidigm’s first-quarter sales climbed 25.8% to $10.8 million (see page 12). Product sales grew 27.9% to account for 98% of revenues. Grant revenue was up slightly higher to make up 2% of sales. Consumables revenues jumped 40.6% to $4.9 million due to a wider installed instrument base and higher assay sales. Despite a 7% decline in unit sales, Instruments sales climbed 19.0% to $5.9 million, driven by increased shipments of the higher-priced BioMark HD system. A majority of these systems sold during the quarter are being used for single-cell genomic research. Instruments sales also benefited from service revenue and sales of aftermarket instruments. Sales to the US, Europe, Asia Pacific and Japan grew 40.3%, 19.6%, 21.7% and 10.1% to account for 54%, 24%, 11% and 9% of Product sales, respectively. Adjusted operating loss widened by 28.8% due to higher operating expenses. Full-year Product revenue is projected to grow 25%–30% to $51–$53 million. Grant revenue is expected to total $0.6 million.

First-quarter sales for Merck Millipore improved 7.3%, 2.7% organically, to €652.6 million ($858.7 million = €0.76 = $1). Acquisitions and currency contributed 2.5% and 2.0% to revenue growth, respectively. Sales to Europe, Emerging Markets and Rest of the World grew 5.2%, 6.7% and 7.2% organically to account for 39%, 21% and 13% of segment sales, respectively. North America sales declined 5.6% organically to make up 27%. Adjusted EBITDA only grew 1.7% to €161.0 million ($211.8 million) due to increased R&D and sales expenses in the Process Solutions business. Adjusted gross profit margin improved 110 basis points to 59.7% of segment sales. Lab Solutions sales grew 3.3% organically, driven by higher demand for environmental, drug and food quality testing products and increased sales of consumables and instruments. Sales for the Process Solutions business improved 2.7% organically, led by higher demand from biotech customers. Process Solutions sales were negatively impacted by a discontinued contract for insulin sales. Bioscience business sales grew 1.3% organically but were affected by lower academic funding and weaker demand from pharmaceutical customers. Full-year Merck Millipore sales are projected to grow 4%–6%.

Sequenom’s first-quarter revenues climbed 10.4% to $14.9 million. Domestic sales jumped 43.1% to make up 62% of sales, while sales outside the US declined 20.0%. Adjusted operating loss widened by 85.4% to $24.3 million due to increased sales and marketing expenses. Given the delay in revenue recognition for the new laboratory developed tests and high sample testing, gross profit margin was cut by 42% to 36.5% of sales. Molecular Diagnostics (MD) revenue jumped 186.9% to account for 32% of sales primarily due to increased testing services for cystic fibrosis and, to a lesser degree, higher MaterniT21 PLUS testing. The company received over 4,900 MaterniT21 PLUS LDT samples during the quarter. MD operating loss widened by 133.3% to $17.2 million due to increased sales, marketing and R&D personnel related to the launch of the Materni T21 test. Sales for the Genetic Analysis (GA) segment fell 14.4% to represent 68% of revenues due to lower sales of MassARRAY systems. Product sales fell 14.7% to $8.5 million. Maintenance services revenue was unchanged at $1.2 million. Contract research sales fell 35.5% to $0.5 million. GA operating profit slumped 30.9% to $2.7 million. GA gross margin climbed 300 basis points to 74% of segment sales.



Column Chart: Quarterly Organic Sales Change January 2009–March 2012

Q1 Q2 Q3 Q4

2009 3.6% 0.9% 1.9% 5.8%

2010 9.4% 8.6% 8.8% 6.3%

2011 5.7% 6.7% 4.6% 4.0%

2012 2.5%


Column Chart: Quarterly Operating Profit Margins January 2009–March 2012

Q1 Q2 Q3 Q4

2009 19.1% 20.2% 21.4% 22.9%

2010 22.1% 22.6% 22.3% 23.0%

2011 22.1% 21.1% 21.4% 22.9%

2012 22.1%


Life Science Index % Change

2009 2010 2011 2012 2009–10 2010–11 2011–12

Total Annual Revenues ($M) $11,268 $12,189 $13,009.2 ----- 8.2% 6.7% -----

Annual Oper. Profits ($M) $2,321 $2,673 $2,820.5 ----- 15.1% 5.5% -----

1st Quarter Revenues ($M) $2,565 $2,876 $3,067 $3,163 12.1% 6.6% 3.1%

1st Quarter Oper. Profits ($M) $478 $609 $666 $700 27.4% 9.4% 5.2%
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