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Danaher Q3 Revenues Up 35 Percent

NEW YORK – Danaher on Thursday reported a 35 percent year-over-year increase in its third quarter revenues, which included a 72 percent rise in life sciences segment revenues and an increase in its diagnostics segment of 18 percent.

For the three months ended Oct. 2, total revenues reached $5.88 billion, up from $4.38 billion a year ago. It beat the consensus Wall Street estimate of $5.51 billion. Core revenue growth was 14 percent, including Cytiva, formerly known as the biopharma business of General Electric, the Washington, DC-based conglomerate said. Cytiva was acquired in March and is included in the life sciences segment.

According to the firm's Form 10-Q for the third quarter of 2020, filed with the US Securities and Exchange Commission, life sciences revenues grew to $2.92 billion from $1.70 billion in Q3 2019. Core revenue growth was nearly 19 percent. Subsidiaries Cytiva and Pall, which make up most of Danaher's bioprocessing business, are both involved "in one capacity or another" in the majority of SARS-CoV-2 vaccines and therapeutics in the global pipeline, and in every vaccine in development in the US, President and CEO Rainer Blair said on a conference call to discuss the financial results.

The bioprocessing division increased orders by more than 60 percent, with well over $1 billion in COVID-19 orders from Cytiva and Pall combined.

Declines in instrument-oriented businesses were moderated as academic and research laboratories continue to reopen across the world, Blair said. Sciex, meanwhile, experienced low single-digit revenue growth, driven by two new mass spectrometry instruments. Leica Biosystems experienced mid-single-digit growth, he said.

In diagnostics, revenues grew to $1.89 billion from $1.60 billion a year ago. Core revenues were up nearly 18 percent. Demand for COVID-19 testing from subsidiaries Cepheid and Beckman Coulter drove increases in diagnostic revenues, with Blair noting that Cepheid experienced 100 percent core growth. That growth was the result of record GeneXpert placements, as the global installed base has expanded by 35 percent in 2020, he added.

Cepheid has also increased its production capacity, shipping 7 million molecular tests in the third quarter, with Blair expecting to ship closer to 8 million in Q4. The company will continue adding capacity throughout 2021, and Blair said to expect more tests per quarter as 2021 continues.

Patient volumes increased throughout the third quarter, as wellness checks and elective testing have bounced back after global lockdowns, Blair said.

"Since the onset of the COVID-19 pandemic, our team has turned unprecedented challenges into impactful opportunities to support our customers and the global community, and we're proud to play a pivotal role in tackling COVID-19 head-on," Blair said in a statement.

On the call, Blair emphasized the addition of new diagnostic tests, including Cepheid's 4-in-1 multiplex combination test, which was launched in September and detects influenza A and B, respiratory syncytial virus, and SARS-CoV-2 from one patient sample in 35 minutes. The test is priced between $55 and $60 dollars, depending on the type of customer, compared to the firm's $20 to $40 COVD-19-only test.

Blair also mentioned new tests from Beckman Coulter's diagnostics division, such as its SARS-CoV-2 IgM serology antibody test and its IL-6 test that can help determine severe inflammatory response in COVID-19 patients. However, he noted that so far there has been relatively limited use of antibody testing – although he did say antibody testing could play a larger role as a vaccine is rolled out. 

The return of patient volumes for Beckman's diagnostics business exceeded expectations, Blair said. Capital equipment placements haven't quite returned to pre-pandemic levels, but are better than the second and early third quarters.

Among Danaher's other segments, revenues in environmental and applied solutions declined slightly to $1.07 billion from $1.08 billion in Q3 2019.

In an analyst note, Doug Schenkel from Cowen said the revenue update "should build confidence in the longer-term outlook/durability" because all key revenue growth drivers exceeded expectations, even when COVID-19 tailwinds are excluded.

In Q3 2020, Danaher's R&D costs grew 7 percent year over year to $342.6 million from $282.6 million, while its SG&A spending rose 8 percent to $1.80 billion from $1.38 billion.

The firm posted a profit of $883.5 million, or $1.16 per share in the recently completed quarter compared to a profit of $668 million, or $.84 per share, in Q3 2019. Adjusted EPS was $1.72, coming in above analysts' average estimate of $1.36.

Danaher finished Q3 2020 with $5.69 billion in cash and cash equivalents.

For the fourth quarter, Danaher expects core revenue growth including Cytiva will be in the low double-digit range.

In early morning trading on the New York Stock Exchange, Danaher's shares were up 2 percent to $231.17.