Bio-Rad Sees Improved Research Spending

Fourth quarter 2015 sales for Bio-Rad Laboratories Life Science (LS) contracted 2.5% to $218.1 million to account for 38% of revenues. However, excluding currency, organic sales advanced 3.4%, led by demand for digital PCR, process media, cell biology and western blotting products. Geographically, organic growth was strongest in China, Europe and North America. The company also resolved most of its software implementation issues, which had negatively impacted third quarter 2015 results.

Full-year LS sales declined 4.6% to $695.0 million to represent 34% of revenues. Excluding currency, sales improved 2.5%, driven by demand for digital PCR products and higher sales of western systems, reagents, process media and cell biology products. Sales were driven by demand in China, Europe and North America. Asian sales outside of China were weak. LS gross margin improved 90 basis points as a result of product mix and closure of a manufacturing facility in 2014. Bio-Rad projected LS sales to grow 4%–5% this year.

Web Upgrades Boost Bio-Techne Sales

For the fiscal second quarter, revenue for Bio-Techne’s Biotechnology segment advanced 7% organically to $75.9 million. All sales figures below are organic. Growth was driven by demand in China, especially for the cytokine and protein business, for which sales grew more than 40%. Sales to biopharmaceutical markets grew in the high single digits, including increased demand for complex bioactive molecules. Academic and government sales grew in the low single digits. The company also benefited from enhancements to its online capabilities. As a result, sales for the Novus Biologicals brand, the first brand to launch on the improved website, grew in the high single digits.

Geographically, China sales jumped 30% but remain a small percentage of segment sales. Excluding Japan, Pacific Rim sales grew in the upper single digits. Spending in Japan remained constrained as sales in the region declined in the mid-teens. US sales grew in the upper single digits, including double-digit revenue growth from biopharmaceutical customers and roughly flat academic sales. European sales, which advanced in the mid-single digits, experienced biopharmaceutical sales growth in the mid-teens and low single-digit growth in academic markets. Segment operating margin expanded 157 basis points to 52.7% due to improved productivity. This segment is expected to grow in the mid-single digits organically in fiscal 2016.

Fiscal second quarter revenue for the Protein Platforms segment fell 3% organically to $19.3 million but grew 18% sequentially. The company reported positive adoption for its Simple Plex system, Ella, for which placements grew double digits. Consumables sales from existing Simple Western systems grew 20%. Given the company’s amplified sales force and strategy, sales for the Protein Platform segment are projected to grow at least double digits next quarter. Operating margin for the segment was cut by more than half to 7.9% as a result of product mix and increased investments.

Europe Lifts Merck KGaA Sales

Fourth quarter 2015 sales for Merck KGaA Life Science advanced 8.1% organically to €1.09 billion ($1.19 billion = €0.91 = $1) (see page 12) to make up 31% of revenues. All sales figures below are organic. Process Solutions (PS) sales jumped 16.0% to account for 34% of Life Science revenue, driven by robust sales of single-use and virus filtration products. Lab Solutions (LS) sales grew 2.6% to make up 29%, led by demand for biomonitoring and lab water consumables from US pharmaceutical customers. Bioscience sales grew 1.6% to make up 11%, as demand for cell analysis and protein detection systems was partially offset by lower sales of reagents and antibodies. The acquired Sigma-Aldrich business (see IBO 9/30/14) contributed €279.0 million ($306.6 million), or 26% of sales.

Life Science sales in North America, Asia Pacific and Europe grew 5.1%, 7.3% and 12.5% to account for 37%, 24% and 33% of segment sales, respectively. Sales in Latin America, and the Middle East and Africa region improved 2.5% and 0.1% to make up 5% and 1%, respectively. Life Science gross margin fell 325 basis points to 52.3% due to acquisition costs. Adjusted operating profit margin improved 245 basis points to 21.4%.

Full-year 2015 Life Science sales expanded 6.5% organically to $3.36 billion ($3.73 billion = €0.90 = $1) to make up 26% of revenues, driven by strong biopharmaceutical production activity in Europe and the US. PS sales climbed 11.6% to make up 43% of segment revenue. LS and Bioscience sales grew 3.1% and 0.7% to make up 36% and 13% of segment revenue, respectively. The Sigma-Aldrich business, which contributed 8% to revenues, performed as expected with achieved cost synergies. The company projected cost synergies of at least €90 million ($100 million) in 2016 primarily from administrative and infrastructure expenditures.

North America experienced the strongest growth, as sales for this region climbed 8.5% to account for 33% of Life Science revenue due to robust sales of bioproduction products. European and Asia Pacific sales grew 5.6% and 5.5% to represent 35% and 25%, respectively. Within Asia, sales were driven by demand in China, India, Singapore and South Korea. Led by sales of PS and LS products, Latin America sales expanded 7.8% to make up 6% of segment revenues. Accounting for 2% of revenues, sales to the Middle East and Africa region expanded 3.1%. Life Science profit margin slipped 62 basis points to 55.8%. However, operating margin expanded 133 basis points to 21.8%. For 2016, LS organic sales are expected to grow moderately, led by the PS business.

QIAGEN Misses Expectations

QIAGEN’s fourth quarter 2015 adjusted sales contracted 3.4% to $348.5 million. Organic sales rose 1%, which was below the firm’s outlook, due to lower instrument revenue and timing of companion diagnostic projects. In addition, US HPV sales negatively impacted growth by 1%. All sales figures below exclude currency. Instrument sales declined 4% to account for 14% of revenues. Consumables and related revenues increased 5% to make up 86%, led by double-digit bioinformatics revenue growth and acquisitions. Geographically, sales in the Americas, which made up 45% of revenues, advanced 2%, or 4% excluding HPV sales. For the Europe/Middle East/Africa region, sales grew 7% to account for 33%, led by demand in Germany and Turkey as well as positive growth in the Nordic countries. Sales in Asia-Pacific/Japan improved 6% to account for 21%, as strong demand in South Korea and China more than offset weakness in Japan.

Molecular Diagnostics sales were flat, but grew a modest 2% excluding HPV sales as a result of the slower instrument revenues and timing of diagnostic services. Sales for the life sciences businesses grew roughly 3% organically. This growth was driven by a 7% increase in Applied Testing revenue due to new assays for forensic applications and increased reagent rental agreements. Organic Pharma and Academia sales advanced approximately 1% and 2%, respectively.

QIAGEN quarterly adjusted gross margin fell 415 basis points to 70.6% due to the timing of diagnostic service and lower US HPV sales. Adjusted operating margin declined 109 basis points to 25.8% because of increased investments in sales and marketing.

For 2015, adjusted QIAGEN sales fell 4.8% to $1.28 billion but grew 1% organically. Excluding currency, consumables (including related revenues) and instrument sales advanced 3% and 5% to make up 87% and 13% of revenues, respectively. Molecular Diagnostics sales grew 1%, or 7% excluding HPV sales, led by roughly 20% sales growth for the QuantiFERON TB test and double-digit revenue growth for QIAsymphony consumables. In addition, Personalized Healthcare sales grew in the high single digits. However, diagnostics sales were negatively impacted by the timing of infectious disease tenders and weakness in Asia.

Full-year 2015 sales for the life sciences businesses expanded roughly 2% organically. Applied Testing sales grew 7% organically, led by human identification and forensics applications. Pharma sales advanced approximately 1% organically, growing at a slower pace than the last several years. Academia sales were roughly flat organically but government funding improved in the US and Europe.

Excluding currency, sales to the Americas were flat, while sales to Europe/Middle East/Africa grew 6% to account for 47% and 32% of revenues, respectively. Despite a single-digit sales decline in Japan, combined currency-neutral revenue to Asia-Pacific and Rest of World advanced 7% to represent 21%. Sales in the company’s top seven emerging markets grew 8% to account for 15%, including strong growth in Turkey, China, South Korea and India, which helped offset weakness in Mexico and Russia. China now represents the third-largest country by sales. Adjusted gross margin contracted 165 basis points to 71.2%. Adjusted operating margin slipped 56 basis points to 24.5%.

For 2016, sales are projected to grow 3%, or 5% organically. This forecast includes 1% contribution from acquisitions, and headwinds of 3% and 1% from lower US HPV sales and currency, respectively. First quarter sales are expected to decline 2%, or grow roughly 1% organically.

VWR Posts Record Annual Organic Growth

VWR’s fourth quarter 2015 revenues grew 1.0% to $1.11 billion. Excluding currency headwinds of 6.1% and acquisition contributions of 1.5%, organic sales grew 5.6%, led by biopharmaceutical demand as well as procurement services and private label sales. Gross profit margin slipped 127 basis points to 26.9% of sales due to currency. Adjusted operating margin rose 14 basis points to 8.0%.

Sales for VWR Americas jumped 6.4% organically to make up 59% of revenues. Biopharmaceutical sales climbed double digits, including robust demand from biotech, medical device and CRO customers. Sales to government customers advanced mid-single digits due to strong consumables sales. Industrial sales grew in the low single digits, as strength in food, beverage, and pulp and paper were mostly offset by weakness in agriculture, petroleum and construction manufacturing. Despite higher sales to university customers, education sales were flat. Health care sales declined in mid-single digits, as higher sales to reference labs were offset by slower demand from hospitals. Chemicals, and equipment and instrument sales each grew double digits. Consumables sales improved low single digits. The Americas segment’s adjusted operating profit improved 1.5% to $39.4 million.

EMEA-APAC sales improved 4.5% organically, led by double-digit growth from biopharmaceutical customers. Health care and industrial sales each grew mid-single digits. Industrial sales were driven by food, beverage and chemicals markets, which offset lower demand from petrochemical and natural resource customers. Both education and government sales fell in the mid-single digits. Consumables sales grew in the high single digits. Chemicals sales improved in the low single digits. Given the strong demand for lab furniture last year, equipment and instrument sales were flat. EMEA-APAC adjusted operating profit expanded 3.8% to $49.3 million, as strong cost control measures more than offset currency headwinds.

Full-year 2015 sales declined 1.3% to $4.32 billion but included currency headwinds of 7.6%. Excluding currency and acquisition growth of 1.9%, organic sales rose a record 4.4%, driven by chemical sales, especially to US biopharmaceutical customers as well as favorable pricing. Combined revenues for value-added services and private label products grew 8%–10%, including particular strength for VWRCATALYST in Europe. Adjusted operating margin advanced roughly 10 basis points to 7.7%.

Accounting for 60% of revenues, organic sales for the Americas segment advanced 5.1%, with roughly equal contributions from volume and pricing. Demand was strong for equipment and instrumentation, as well as for chemicals, procurement services and private label products. Organic EMEA-APAC sales, which rose 3.5% organically to account for 40% of revenues, grew slightly slower than the Americas segment because of lower government spending. For 2016, VWR sales are estimated to grow 4%–6%, 3%–4% organically, to $4.49–$4.57 billion.