Robust 4Q 2014 Life Science Sales Index Growth

Fourth quarter 2014 IBO Life Science Index sales grew 7.3%, 9.0% organically, to $4,317 million, marking its strongest organic growth since the first quarter of 2010. Growth was driven by demand from US pharmaceutical and biotechnology customers, increased research spending in Europe and positive demand in China. However, delayed spending in Japan and weak academic sales in Europe negatively impacted other companies. Adjusted operating profit climbed 9.0% to $1,058 million due to strong results from Illumina. Operating margin expanded 50 basis points to 21.3% of sales. Excluding Illumina, Index sales grew 5.8% organically and adjusted operating profit was flat.

Full-year 2014 Life Science Index sales improved 6.1%, 7.3% organically, to $14,846 million. Adjusted operating profit expanded 10.9% to $3,319 million. Operating margin improved 80 basis points to 20.2% of sales. Excluding Illumina, Index sales climbed 4.2% organically, and adjusted operating profit grew 3.4%.

Fiscal first quarter sales ending December 31, 2014, for Becton, Dickinson’s BD Biosciences unit grew 3.3%, 6.7% excluding currency, to $288 million to represent 14% of company revenues. BD Biosciences revenue was driven by strong International sales, which improved 1.8%, 6.8% excluding currency, to make up 68% of segment sales. A highlight was demand in China, while weak research spending negatively impacted Japanese sales. US sales grew 6.5% to account for 32% of BD Biosciences’ revenue, led by demand for research and clinical systems. The company maintained its fiscal 2015 BD Biosciences’ currency-neutral sales-growth outlook of 4.5%–5.0%, flat growth on a reported basis.

Fourth quarter 2014 revenue for Bio-Rad Laboratories’ Life Science (LS) segment grew 1.5%, 6.3% excluding currency, to $223.7 million to account for 37% of revenues. Sales were driven by demand for digital-PCR consumables and systems as well as cell-biology products. Geographically, currency-neutral sales were strong in North America, China and Europe. Full-year 2014 LS sales grew 2.6%, 4.0% excluding currency, to $728.3 million to account for 33% of revenues. Product and geographic demand were similar to the fourth quarter 2014, but also included higher sales of process-media products. Conversely, demand for protein-separation products declined, and sales in Asia outside of China contracted. Total 2015 company sales are projected to grow 3% on a currency-neutral basis, including higher organic growth for the LS segment. However, currency headwinds could impact sales by roughly 8%.

Biotage fourth quarter 2014 sales grew 13.2%, 3.2% excluding currency, to SEK 137.8 million ($18.5 million = SEK 7.44 = $1) (see page 12). Sales were driven by demand for purification systems from pharmaceutical companies. US sales were strong, benefiting from currency, and accounted for 42% of revenues. Chinese sales improved to represent 6%. European and Japanese sales were challenged due to academic funding and accounted for 36% and 10% of sales, respectively. Gross margin fell 60 basis points to 54.4% of sales due to increased system sales, which carry lower margins. Adjusted operating profit fell 8.4% to SEK 12.1 million ($1.6 million) as a result of increased sales personnel in the US and higher variable compensation.

Full-year 2014 Biotage sales grew 10.3%, 5.5% excluding currency, to SEK 490.4 million ($71.4 million = SEK 6.87 = $1). Combined sales of sample preparation and purification products grew 8% excluding currency to make up 70% of sales. However, growth was partially offset by lower sales of peptide-synthesis products and weak distribution sales. Sales in the US and China grew to represent 41% and 5% of revenues, respectively. European sales were slower than expected, making up 35%. Despite a strong first quarter, Japanese sales declined slightly to account for 13% of sales. Sales to Rest of World represented 6%. Gross margin declined 170 basis points to 54.4% of sales due to currency and product mix. Adjusted operating profit grew 7.5% to SEK 41.6 million ($6.1 million).

Fourth quarter 2014 Fluidigm sales jumped 60.4%, 24% organically, to $33.5 million (see page 12). The acquisition of DVS Sciences (see IBO 1/31/14) contributed 20.6% to sales growth, while currency headwinds were 3%. Single-cell products accounted for roughly 65% of sales. Sales to academic and government customers made up roughly 65% of revenues, biotech and pharmaceutical markets accounted for 12%, and commercial labs and agbio customers combined represented 17%. Instrument sales climbed 71.6%, 17% excluding the acquisition, to account for 62% of revenues. The company logged record shipments for the C1 Single-Cell Auto Prep system, of which 25% of units were combined with a Biomark HD system. Consumables sales climbed 48.3%, 28% excluding the acquisition, to make up 38% of revenues. Organic sales to the US, Europe and Asia Pacific climbed 35%, 24% and 26% to make up 51%, 33% and 10% of sales, respectively. Japanese sales slumped 41% to make up 4% due to delayed government funding. Sales to Other regions improved 6% to represent 2% of revenues. Adjusted product gross margin slipped 100 basis points to 71.2% of sales due to product mix. Total adjusted operating loss widened 61.1% to $2.3 million due to increased product development and the acquisition.

For 2014, Fluidigm sales grew 63.6%, 34% organically, to $116.5 million. The acquisition added 29% to revenue growth, while currency reduced sales by roughly 1%. Sales of single-cell genomics products grew roughly 50%. Total single-cell products, including the acquired proteomics products, accounted for roughly 60% of revenues. Instrument sales climbed 68.2%, 30% excluding the acquisition, to make up 59% of revenues. The cumulative installed instrument base grew 44% to 1,325 units, including 645 genomics analytical systems, 584 genomics-preparatory systems and 94 proteomics-analytical systems. Consumables sales grew 60.7%, 44% excluding the acquisition, to account for 44% of revenues, driven primarily by demand for Integrated Fluidic Circuits from production-genomics customers. Reported sales to the US, Europe, Asia-Pacific and Other climbed 62.9%, 78.9%, 96.2% and 77.3% to account for 51%, 29%, 11% and 3% of sales, respectively. Japanese sales grew 4.4% to account for 6%. Adjusted product gross margin expanded 70 basis points to 73.1% of sales. Total adjusted operating loss widened 73.5% to $30.0 million due to the acquisition and increased headcount. Fluidigm projected 2015 sales to grow 22%–28% to $142–$149 million, including currency headwind of 3%–4%. According to the company, the single-cell biology market is expected to grow by an average of 30% a year to $1 billion in 2017.

Excluding royalty payments, fourth quarter 2014 sales for Merck KGaA’s Life Science division (formerly Merck Millipore) grew 8.1%, 5.9% organically, to €706.5 million ($883.1 million = €0.80 = $1) (see page 12) to make up 24% of company sales. Currency contributed 3.4% to revenue growth, while the divested Discovery and Development Solutions business (see IBO 1/15/14) lowered sales by 1.2%. All sales figures below are organic. Process Solutions (PS) sales grew 10.4% to make up 43% of Life Science revenues due to demand from biopharmaceutical customers for single-use systems and purification consumables. Lab Solutions sales grew 4.1% to make up 42% of sales, led by improved pricing and higher sales of lab-water consumables. Bioscience sales slipped 1.1% to make up 15% of sales as demand for separation and preparation products was offset by lower antibody sales. Life Science sales in North America and Europe advanced 13.3% and 1.9% to account for 27% and 37% of sales, respectively. Sales to Emerging Markets, which include Latin America and Asia (excluding Japan), grew 7.6% to account for 26%. Sales to Rest of World declined 0.7% to make up 9%. Royalty income from the PS and Bioscience businesses grew 20.1% to €3.7 million ($4.6 million). Adjusted Life Science gross profit margin slipped 45 basis points to 57.8% excluding royalty income. Adjusted operating profit declined 4.2% to €133.7 million ($167.1 million) because of higher marketing and selling expenses.

Excluding royalties, full-year 2014 Merck Life Science sales grew 2.1%, 4.5% organically, to €2.68 billion ($3.57 billion = €0.75 = $1) to account for 24% of revenues. The divestment and currency reduced sales growth by 0.8% and 1.7%, respectively. All sales figures below are organic. PS sales grew 8.9% to account for 44% of Life Science revenue due to demand for filtration and single-use products. LS revenue improved 1.9% to make up 41% of segment sales, driven by demand for consumables and water-purification solutions in Emerging Markets. Bioscience sales declined 0.5% to represent 15% as demand for cell-analysis products from diagnostic labs was offset by lower sales of antibodies. Life Science sales to Europe, the US and Emerging Markets grew 2.7%, 3.7% and 9.1% to account for 39%, 27% and 25% of sales, respectively. Rest of World sales grew 2.5% to account for 9%. Royalty income, which was excluded from the sales figures above, contracted 21.4% to €14.0 million ($18.7 million). Adjusted gross profit margin was roughly flat at 58.7% of segment sales. Adjusted operating profit improved 3.0% to €548.3 million ($731.1 million). For 2015, Life Science organic sales are projected to grow moderately, including stronger growth for PS.

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