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Ortho Clinical Diagnostics Q1 Revenues Rise 24 Percent on Core Revenue Strength

NEW YORK – Ortho Clinical Diagnostics reported after the close of the market on Wednesday that its first quarter revenues rose 24 percent year over year.

For the three months ended April 4, the Raritan, New Jersey-based firm reported revenues of $506.8 million compared to $407.9 million in Q1 2020, beating analysts' average estimate of $477.5 million.

The firm's Q1 core revenues, which exclude contract manufacturing and other licensing revenues, rose 23 percent year over year to $499.3 million compared to $404.3 million a year ago.

"We started off the year strong with continued momentum in our base business that was supplemented by our COVID-19 testing solutions," Chris Smith, chairman and CEO of Ortho, said in a statement. "Our core revenue excluding our COVID-assay products was up 14 percent, as our commercial excellence programs continue to show strong returns and as many of our geographies are seeing an accelerating recovery from the impact of the global pandemic."

On a conference call to discuss the firm's financial results, Ortho CFO Joseph Busky noted that its core revenues consist of sales from its Clinical Labs and Transfusion Medicine segments. Its Clinical Labs segment posted Q1 revenues of $338 million, up 32 percent year over year from $256.4 million, and its Transfusion Medicine segment posted revenues of $161.4 million, up 9 percent from $147.9 million, Busky said.

The Clinical Lab business in which Ortho competes has an addressable market of about $26 billion per year, Smith said on the conference call, adding that in 2020, Ortho's clinical chemistry revenues accounted for 62 percent and its immunoassays revenues accounted for 38 percent of its Clinical Labs revenues.

Smith added that Ortho also has a strong focus on selling its integrated clinical chemistry and immunoassay analyzers. The company grew its installed base of those products by 14 percent in Q1. "With our increasing focus on lifetime customer value and expanding our installed base of integrated analyzers, we see strong uptake from labs with the ability to run an expanded menu on our devices," he said.

Additionally, Ortho is evaluating M&A opportunities following its IPO. "We have an increasing balance sheet that provides flexibility," Smith said. "We are targeting high-growth, high-margin products that we can sell through our existing global call points and distributors, including molecular, specialty [immunoassay], and point-of-care diagnostic systems."

Ortho went public at $17 per share in January, raising approximately $1.4 billion in net proceeds that were used primarily for debt reduction. In a statement, the firm added that it created additional financial flexibility by amending its revolving credit facility in February, increasing it to $500 million from $350 million, and extending the maturity date to 2026.

The company said it also received credit ratings upgrades by both Moody’s and S&P Global after reducing debt with the initial public offering proceeds.

The company posted a Q1 net loss of $39.1 million, or $.19 per share, compared to a net loss of $101.2 million, or $.69 per share, in Q1 2020. Ortho's adjusted earnings per share was $.26 and beat the analysts' average estimate of $.16.

Ortho's Q1 R&D expenses rose 22 percent year over year to $28.9 million from $23.6 million, and its selling, marketing, and administrative expenses rose 12 percent year over year to $131.5 million from $117.4 million.

For full-year 2021, Ortho raised its core revenue guidance to between $1.93 billion and $1.96 billion, up from a previously announced guidance of between $1.86 billion and $1.9 billion. It now anticipates constant currency core revenue growth of between 9 percent and 11 percent, compared to a previous range of 7 percent to 9 percent, and it expects adjusted EPS will be between $.64 and $.69, up from between $.57 and $.63.

Ortho expects its COVID-19 product sales to decrease in the second half of 2021. "However, if the pandemic continues to evolve worldwide with different rates of infection, we may see additional benefit from COVID-19 products, which are not reflected in our updated guidance," Smith said.

Ortho ended Q1 with $153.8 million in cash and cash equivalents.

Evercore ISI analyst Vijay Kumar said in a research note on Wednesday that the main question he and his colleagues have about Ortho is whether it can accelerate revenue growth to the mid-single-digit range, given its historical low single-digit growth and a tough competitive landscape that includes Roche Diagnostics, Abbott, Danaher, and Siemens Healthineers. Given the firm's first quarter revenue results, "we think it will be very hard for investors to ignore [Ortho] going forward," Kumar said.

In early Thursday morning trading on the Nasdaq, Ortho shares were up more than 5 percent to $19.78.