NEW YORK – Trends from Q1 2023 continued into Bio-Rad Laboratories' second quarter, as softness in the biopharmaceutical market accompanied by concerns about China's macroeconomic environment led the firm to further lower its full-year 2023 guidance on Thursday.
The lowered guidance follows a similar step in May, when the firm lowered its full-year guidance to 8.5 percent growth excluding COVID-19-related sales from 10 to 11 percent. On Thursday it lowered its guidance again as it reported total sales for the second quarter was down about 1 percent year over year, or up almost 5 percent excluding COVID-19-related sales. For 2023, Bio-Rad is now forecasting revenues to be up 4.5 percent compared to 2022, excluding COVID-19 sales.
The biopharmaceutical softness is due to a reduction in inventory levels among the Hercules, California-based company's customers in bioprocessing, as well as a tighter funding environment across the market, Bio-Rad Chief Operating Officer Andrew Last said on a conference call to discuss the firm's financial results. As a result, the firm now anticipates a "larger impact to our biopharma business from the downturn we previously communicated." This impact has affected the Life Sciences segment, in particular, with a decline in demand for its process chromatography media – a trend that will likely be transient but is expected to last through 2023, Last said.
Bio-Rad CFO Ilan Daskal said that the company expects life sciences revenues to decline about 4 percent in 2023 compared to 2022, although excluding COVID-19-related sales the segment's revenues are expected to grow about 4 percent.
Sales from emerging biotechnology companies were soft in previous quarters, but in the second quarter the company also saw increased headwinds from larger biopharmaceutical customers as those companies have delayed capital investments and reduced bioprocessing inventory, Daksal said.
Demand from China has also remained weak, and the expected rebound in the second half of 2023 is "now in question against the backdrop of a slow economic recovery," Last said.
However, he noted that the Life Sciences segment has seen continued demand in academic markets and that the Droplet Digital PCR business grew in the double-digits. Despite the biopharmaceutical downturn, the core life sciences business grew in the mid-single digit percent range and the company achieved its backlog reduction targets, he said.
In contrast, Bio-Rad has seen demand for its Clinical Diagnostics segment continue to recover, with core revenues for the diagnostics segment rising as "routine testing continues to normalize to pre-pandemic levels," Daksal said. Growth was particularly strong in Asia, but the company is remaining cautious and monitoring the Chinese macroeconomic market, he noted.
The firm remains encouraged by "the demand of our clinical diagnostics business, with the increased placement of diagnostics systems supporting future growth and reagent pull-through," Last said. However, he noted that the growth in the segment will not offset the continuing negative trends of the life sciences segment in 2023.
Bio-Rad forecasts core revenue growth in the diagnostics segment of about 5.5 percent, Daksal said.
As for the company overall, its second quarter revenues were up nearly 5 percent year over year, excluding COVID-19-related revenues and on a currency-neutral basis.
For the three months ended June 30, Bio-Rad reported total revenues of $681.1 million, down 1 percent compared to $691.1 million a year ago and missing analysts' average estimate of $698.0 million. On a currency-neutral basis, Q2 revenues were essentially flat, the firm said. The total revenue decline was mainly the result of significantly lower COVID-19-related sales, Daksal said.
COVID-19-related revenue during the quarter was approximately $400,000 in Q2 2023 compared to $33 million in Q2 2022.
Life Science segment revenues were $300.2 million, down 7 percent compared to $322.4 million in Q2 2021. On a currency-neutral basis, they were down 6 percent compared to the year-ago period. Excluding COVID-19-related sales, revenue growth was nearly 5 percent, driven primarily by ddPCR and qPCR products, the company said in a statement.
The process chromatography business saw a decline in revenues in the mid-teens percent range, and the firm now anticipates a decline in the mid- to high-single digit percent range compared to its prior expectation of double-digit growth for the full year, Daksal said.
Excluding both COVID-19-related sales and the process chromatography business, the life science segment's revenues grew nearly 9 percent on a currency-neutral basis during the recently completed quarter, Daksal said.
Simon May, president of the life sciences group, said that the company had seen "some potential signals of improvement" in the process chromatography business but that it was "too early to call."
May also noted that the introduction of the QX600 Droplet Digital PCR instrument had offset some of the softness of the biopharmaceutical market, with a "good number of customers … upgrading from existing systems." The firm has been "pleasantly surprised" at the instrument's uptake in the biopharmaceutical business, and it has also seen uptake in oncology research and clinical development.
Core revenues for the segment grew in the Americas and Europe but declined in Asia, Daksal noted.
Clinical Diagnostics segment revenues, meanwhile, rose 3 percent to $380.1 million from $367.8 million in the year-ago quarter and rose 5 percent on a currency-neutral basis. Excluding COVID-19-related sales, currency-neutral core revenues grew by 5 percent as a result of strong demand for diagnostic testing systems and quality control products.
The diabetes, immunohematology, and quality controls businesses all saw strong growth during Q2, Last said. The business saw strong double-digit currency-neutral revenue growth in Asia but was largely flat in the Americas and Europe, Daksal said.
The firm anticipates working through more of its back orders during the rest of 2023 and expects about a $5 million reduction in backlog for each of the remaining quarters, he said.
Bio-Rad's net loss in Q2 was $1.16 billion, or $39.59 per share, compared to a net loss of $925.1 million, or $31.05 per share, a year ago. On an adjusted basis, EPS for Q2 2023 was $3.00 per share, beating analysts' average estimate of $2.68. The company's bottom lines for Q2 2023 and Q2 2022 were primarily affected by the recognition of changes in the fair market value of equity securities related to the holdings of the company's investment in Sartorius, the firm said. The changes negatively impacted Bio-Rad's reported results by nearly $1.60 billion, Daksal said.
The company ended the recently completed quarter with $390.0 million in cash and cash equivalents and $1.34 billion in short-term investments.