NEW YORK – Danaher on Thursday reported a 6 percent year-over-year increase in third quarter revenues as its subsidiaries see shifting demand for COVID-19-related products, such as diagnostic tests and pharmaceuticals.
For the three months ended Sept. 30, revenues reached $7.66 billion, up from $7.23 billion a year ago, beating the consensus Wall Street estimate of $7.16 billion. Core revenue growth was 10 percent.
Life sciences revenues grew 4 percent to $3.78 billion from $3.63 billion in Q3 2021. Core revenue growth was 8 percent for that segment.
On a conference call to discuss the financial results, Danaher CEO Rainer Blair said that the bioprocessing business, made up of Cytiva and Pall, saw more than 20 percent growth in non-COVID-19 revenues. He noted that customers have continued to move away from COVID-19-related vaccines and therapeutics programs and into other modalities as COVID-19 vaccine uptake has slowed. Danaher expects high-single-digit core revenue growth in bioprocessing for the full year, he said.
Cytiva and Pall will also be combined into one biotechnology group, he added.
The life sciences instrument segment saw double-digit core revenue growth during the third quarter, and the genomics segment also saw double-digit core revenue growth led by strong demand for plasmids, RNA, and next-generation sequencing solutions, Blair said. Aldevron, which Danaher acquired last year, has seen more than 30 percent revenue growth year over year since the deal closed, he added.
In diagnostics, revenues grew 10 percent to $2.68 billion from $2.45 billion a year ago. Core revenue growth was nearly 14 percent. Cepheid had nearly 30 percent core revenue growth and Leica Biosystems revenues grew in the mid-teens thanks to the core histology and advanced staining business. Beckman Coulter Diagnostics saw mid-single-digit core revenue growth despite COVID-19-related headwinds in China, Blair said.
Rolling lockdowns in China impacted patient volumes, but Danaher continues to see China as a "very strong market" with "robust demand," he said. "As patient volumes normalize, which we expect to happen in the next year, we're confident China will be a strong growth lever for us."
Cepheid's non-respiratory testing core revenues increased 10 percent, with double-digit growth in virology and infectious disease testing. The subsidiary's respiratory testing business brought in approximately $875 million during the quarter, significantly exceeding expectations of $325 million, Blair said. The increase was due to the higher prevalence of respiratory viruses than expected, as well as advanced purchases to prepare for the anticipated worse respiratory season in the Northern Hemisphere, he said. That expectation, in particular, led to higher instrument volumes and a general preference for Cepheid's 4-in-1 respiratory test to detect SARS-CoV-2, influenza A/B, and respiratory syncytial virus.
Although global PCR respiratory testing volumes have moderated, demand is still high at the point of care, he noted. Cepheid is starting to see customers consolidate their point-of-care PCR testing onto the firm's GeneXpert system and is seeing increased interest in broader utilization of the instrument outside of respiratory testing, Blair said. The non-respiratory testing funnel "increased significantly" this year, and the firm sees opportunities to continue gaining market share moving forward, he added.
Danaher is anticipating a step down in COVID-19 testing, particularly as the world likely moves to an endemic state by the end of 2023, expecting to provide about 30 million COVID-19 tests, compared to about 60 million tests currently, Blair said.
Revenues for environmental and applied solutions grew 5 percent to $1.21 billion from $1.15 billion in Q3 2021. Core revenue growth was nearly 11 percent. Last month Danaher announced that it would spin off its environmental and applied solutions business into a separate, publicly traded company. As a separate company, the new firm will "have greater opportunities to meaningfully deploy capital towards M&A," Blair said. Danaher will also be able to establish itself as a "more focused" science and technology business once the spinoff is completed, he added.
The firm posted a net profit of $1.57 billion, or $2.10 per share, in Q3 compared to a net profit of $1.16 billion, or $1.54 per share, in Q3 2021. Adjusted EPS was $2.56, coming in above analysts' average estimate of $2.26.
Danaher finished Q3 with approximately $5.2 billion in cash and cash equivalents. Blair noted that the firm is actively looking into potential mergers and acquisitions and that the lens is "broad" and not limited to cell and gene therapy businesses, which is where the majority of the company's acquisitions have been in the past couple of years. The funnel is "wide and deep and very active, as always," he said.
For the fourth quarter, Danaher expects core revenue growth will be in the high-single-digit percent range. Blair said that the firm is expecting a high-single- to low-double-digit headwind related to COVID-19 testing, leading to core revenue growth being flat to down low-single digits in the fourth quarter. For the full year, the company raised its guidance and anticipates that core revenue growth will be in the high-single-digit percent range thanks to stronger than expected COVID-19 testing demand in Q3, Blair said. Base business core revenue growth is expected to be in the high-single digits as well.
In early morning trading on the Nasdaq on Thursday, Danaher shares had dropped 4 percent to $248.30.