NEW YORK – Bio-Rad Laboratories lowered its full-year and longer-term guidance on Thursday on incremental impacts related to a funding pinch experienced by its biopharma customers coupled with increasing sanctions limiting its sales to Russia.
Bio-Rad lowered its full-year 2023 revenue growth guidance to 8.5 percent from prior guidance of 10 to 11 percent. It also lowered the long-term guidance for 2025 that the firm issued during its 2022 investor day. Having previously guided for an 8.9 percent compound annual growth rate through 2025 in its core business driven by an increased focus on biopharma and the Asia-Pacific market, Bio-Rad yesterday lowered this guidance to 8 percent.
In Friday morning trading on the Nasdaq, Bio-Rad stock was down 18 percent to $379.73.
On a conference call with investors to recap the firm's first quarter, Chief Operating Officer Andrew Last said the firm also continues to see operational challenges resulting from an inability to reduce an order backlog in line with its prior projections.
"Of the estimated $30 million we expected to recognize from elevated 2022 back orders, we achieved a reduction of approximately $5 million in the first quarter, and we expect a similar amount for the remaining three quarters of the year," Last said.
The firm attributed this to a slower-than-expected ramp-up of production in its new manufacturing facilities in Singapore, a higher-than-typical finished goods inventory as it made the transfer to the new facilities, a shift in sales mix, the placement of more clinical systems than expected at low margins, and cost inflation that was higher than its net price realization in the quarter.
Bio-Rad also saw a negative impact to its quarterly results of $17.5 million related to a change in fair market value of equity securities holdings related to its ownership of Sartorius shares.
Despite the challenges, Last said on the call that the firm had solid growth in its core business in the quarter and is seeing increasing demand in its clinical diagnostics business and for its new QX600 Droplet Digital PCR instrument.
The challenges
Nevertheless, pressure on its biopharma customers is contributing to slower growth in the firm's life science business, Last said. This was due to unexpected softness in smaller biopharma companies "where we have seen historically strong demand for our life science products," he said, adding that it correlates with funding constraints that the industry started to experience in the first quarter.
On the call, CFO Ilan Daskal specifically called out the funding environment for early-stage biotech companies as a pressure on biopharma that is impacting Bio-Rad's sales growth.
In addition, revenues from Russia have accounted for between 1 percent and 2 percent of revenue on an annual basis, Daskal said, but recent incremental sanctions put in place by Washington have reduced the firm's projected sales in Russia for the year by a third.
Overall, Daskal said the firm's outlook through 2025 remains strong, despite the unforeseen headwinds.
"It doesn't change our thinking in terms of the overall transformation that we are working on, everything that we still plan to achieve, and all the kind of new instruments that are in the pipeline," Daskal said.
The firm expects to launch a microsatellite instability kit this quarter as part of its expanding ddPCR oncology business. Meanwhile, the market launch of the QX Continuum — a more affordable digital PCR product — remains on track for year-end, Last said.
Q1 results
For the three months ended March 31, Bio-Rad reported revenues of $676.8 million compared to $700.1 million a year ago, below analysts' average expectation of $689.8 million. On a currency-neutral basis, Q1 revenues were down a fraction of 1 percent year over year, the company said.
COVID-related sales totaled $2.6 million in the first quarter of 2023 versus approximately $45 million in the year ago period. Excluding COVID-related sales, revenues increased 6 percent on a currency-neutral basis.
First quarter life science segment sales declined 7 percent year over year to $323.6 million from $347.2 million, or 4 percent on a currency-neutral basis. Excluding COVID-related sales, life science revenue grew 10 percent year over year, primarily driven by qPCR, western blotting, and droplet digital PCR products.
Clinical diagnostics segment sales were relatively flat at $352.1 million versus $351.8 million in Q1 2022, and up 3 percent on a currency-neutral basis. Excluding COVID-related sales, clinical diagnostics revenue increased 3 percent year over year on a currency-neutral basis.
Bio-Rad reported net income of $69 million, or $2.32 per share, in Q1 compared to a net loss of $3.37 billion, or $112.50 per share, in the year-ago period. On an adjusted basis, EPS was $3.34, below analysts' average EPS estimate of $3.54.
The company ended the quarter with $464.1 million in cash and cash equivalents and $1.39 billion in short-term investments.