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Danaher Q1 Revenues Up 3 Percent; Joyce Retiring as CEO

NEW YORK – Danaher reported Wednesday a 3 percent year over year increase in total revenues driven by strength in its Diagnostics segment.

The Washington, DC-based conglomerate also announced Thomas Joyce is retiring as its president and CEO in September.

For the three months ending April 3, total revenues were $4.34 billion compared to $4.22 billion in the year-ago period. It beat the analysts' average estimate of $4.29 billion and was in line with the company's preliminary results released last month.

Core revenue growth was 4.5 percent year over year, and currency effects decreased revenues by almost 2 percent, the firm said.

Revenue growth in Danaher's Life Sciences segment, the largest of its three segments, inched up 1 percent to $1.65 billion in Q1 2020 from $1.63 billion in Q1 2019, according to the company's Form 10-Q filed with the US Securities and Exchange Commission. Meanwhile, the Diagnostics business increased 6 percent year over year to $1.63 billion from $1.54 billion.

In Life Sciences, Pall, Integrated DNA Technologies (IDT), and Beckman Coulter Life Sciences had high single-digit or better core revenue growth, Joyce said on a conference call. Demand for COVID-19 testing and increases in COVID-19 R&D development drove demand for bioprocessing, genomic, and automation solutions, he added. IDT shipped kits to enable more than 30 million diagnostic tests, Joyce noted.

The increase was offset by a decline in the Life Sciences' more instrument-oriented businesses, Joyce said. Sciex, which houses the mass spectrometry business, and Leica Microsystems were negatively impacted by deferrals of large capital equipment purchases, especially at academic research laboratories, while lab closures led to installation delays for existing instrument orders, he noted.

Cytiva, formerly General Electric's biopharma business, which Danaher acquired in March, doubled the firm's annual revenue in the "highly attractive biopharmaceutical end market" to more than $5 billion, representing approximately 50 percent of the life science platform's annual revenue, Joyce said.

Revenues grew 10 percent in the first quarter, and Joyce said Cytiva's performance will be included in Danaher's overall core revenue growth metric beginning in the second quarter of 2020.

In Diagnostics, there were very strong results from Danaher's point-of-care businesses at Cepheid and Radiometer, Joyce said. Cepheid's core revenue growth increased more than 40 percent, with broad based strength across all major product lines and geographies.

Strength in Cepheid's flu assay was driven by "the combination of a more severe flu season and increased testing" during the SARS-CoV-2 outbreak, Joyce said. The company also saw early strong demand for Cepheid's SARS-CoV-2 test, which received Emergency Use Authorization from the US Food and Drug Administration at the end of March. The test returns results in 45 minutes and can run on the global installed base of 23,000 instruments, including 5,000 in the US. Joyce said the firm has shipped 2 million test cartridges so far and expects to ship 6 million per quarter.

"We are continuing to expand our capacity, but every test that we produce every single day gets shipped, and demand is continuing to build," Joyce said of Cepheid.

The increased demand for molecular point-of-care tests drove increased instrument placements globally, Joyce said. But hospital and reference labs had lower activity due to declines in wellness checks, elective procedures, ER visits, which negatively impacted test volumes.

Radiometer achieved high teens core revenue growth, due to surges in hospitalized patients being treated for COVID-19 and demand for the business' blood gas instruments and tests to monitor critically ill patients, Joyce noted.

In contrast, Beckman Coulter Diagnostics' core revenue was down mid-single digits, largely due to significant declines in China resulting from the extensive shutdowns resulting from the COVID-19 pandemic. With fewer patients going to hospitals for non-COVID-19 related treatments or procedures, core lab testing volumes were greatly reduced. However, Joyce said Beckman Coulter has plans for multiple antibody tests, including a high-sensitivity automated IgG serology test expected to launch shortly. He said the company expects to ship 2 million serology tests in May, and 30 million per month by the end of June. The test will run on the global installed base of 16,000 immunoassay analyzers, he said.

Revenues for Danaher's third segment, Environmental & Applied Solutions, ticked up 1 percent to $1.07 billion from $1.06 billion.

In Q1, Danaher's R&D spending grew 7 percent to $287 million from $267.5 million. Its SG&A costs also grew approximately 7 percent to $1.46 billion from $1.37 billion.

The company posted net earnings of $595.1 million, or $.81 per share, in the recently completed quarter compared to net earnings of $332.3 million, or $.45 per share, in Q1 2019.

On a non-GAAP basis, EPS for Q1 2020 was $1.05 and beat the consensus Wall Street estimate of $1.01.

The firm finished the quarter with $4.37 billion in cash and cash equivalents.

In April, Danaher withdrew its full year 2020 guidance due to uncertainty from the pandemic, but Joyce said the firm expected second quarter core revenue growth, including Cytiva, to be flat to down 10 percent.

Along with its financial results, Danaher also announced Joyce will retire in September as president and CEO. Rainer Blair will take over for both positions Joyce remains in an advisory role until February 2021. Bank is currently executive VP of the life sciences division.

Thursday morning, the company also announced concurrent offerings of $1.25 billion of shares of its common stock and of shares of Series B Mandatory Convertible Preferred Stock. Danaher said it expects to grant the underwriters separate 30-day options to purchase an additional $187.5 million of both common stock and mandatory convertible preferred stock.

The firm said it expects to use the funds for general corporate purposes, including funding potential acquisitions and investments, dividends, and capital expenditures. Goldman Sachs, JP Morgan, Citigroup, and Evercore are joint book-running managers for the offerings.