Third Quarter Results: Danaher, Illumina, Pacific Biosciences, PerkinElmer, Thermo Fisher Scientific and Waters
Danaher Environmental and Applied Solutions Segment Gets Boost from China
Danaher’s 7.0% revenue growth with core growth of 6.5%, for the third quarter, was led in part by 14.5% revenue growth for the Life Sciences business (see IBO 10/31/18). Recurring revenue represented 65% of Life Science sales. Environmental and Applied Solutions revenue increased by 8.2%, with recurring revenue representing 53%.
Within the Life Sciences segment, Beckman Life Sciences revenue rose high single digits due to growth across all major product lines and geographical areas, with notable growth in the biologics and genomics markets. SCIEX revenue grew high single digits due to the sales of the X500 MS platform, as well as growth in North America and China.
Also, within the Life Science segment, Leica Microsystems revenue was up high single digits, and Pall increased in the double digits. In addition, the recently acquired Integrated DNA Technologies (see IBO 03/15/18) produced mid-double digit revenue growth.
Within the Environmental and Applied Solutions segment, water quality sales grew double digits, including double-digit revenue growth for Hach. The company’s revenue growth was attributed to China’s prioritization of water quality, which drove sales 30.0% in the region. Danaher forecasted fourth quarter revenue to increase approximately 4%.
Illumina Strong Sequencing Consumables Leads Revenue Growth
Illumina third quarter revenues grew 20% and were led by growth in sequencing and an increase in microarray sales, respectively (see Bottom Line.).
Sales of sequencing consumables grew 23%, which included $14 million worth of orders from Chinese customers buying ahead of potential tariffs. Major contributors to this growth included the demand of consumables for the high-throughput sequencer NovaSeq, the adoption of consumables for the mid-throughput sequencer NextSeq for NIPT and oncology applications, and respectable sales of low-throughput consumables for both the MiSeq and MiniSeq sequencers. Overall, sequencing consumables represented 55% of total revenues for the quarter.
Sequencing systems sales were up, making it the highest revenue quarter since the fourth quarter of 2015. For the remainder of the year, the company still expects to ship 330–350 NovaSeqs systems, thanks to consistent pricing and the product’s upgrade cycle. Low-throughput systems, MiSeq and MiniSeq, were adopted by both new and existing customers across all regions and represented 50% of shipments in the third quarter.
Geographically, the US, Europe and Greater China all experienced double-digit growth. Specifically, the APJ had its strongest quarterly revenue since early 2014. Illumina declared its fourth quarter revenue guidance to be flat or slightly up sequentially because of expected declines of sequencing consumables, after $20 million of consumable revenue was shipped to Greater China in the second and third quarters.
Low Consumables Sales Slow Down Pacific Biosciences Revenue Growth
Third quarter revenue for Pacific Biosciences decreased 22.9% to $18.2 million due to lower instrument shipments and consumable sales (see Bottom Line). Lower consumables sales were attributed to the decreased demand of RS II consumables and an uneven customer ordering pattern. Though consumables sales were low, installed Sequel instruments increased. The company claimed that customer orders slowed because of anticipation of recently launched or announced products for early next year. Pacific Biosciences did not provide a forecast for the fourth quarter or the full year.
PerkinElmer Reports Strong Organic Growth Thanks to Diagnostic Division
PerkinElmer’s third quarter sales grew high single digits organically for the company as well as for each of its two divisions Product and Service revenues rose 33.7% and 0.17% to make up 70% and 30% of sales, respectively (see Bottom Line). All figures below are given on an organic basis.
Geographically, all major areas saw revenue growth with double-digit sales in Asia, high single-digit sales in the Americas and low single-digit sales in Europe. China and India both recorded double-digit sales. Europe was the weakest region due to soft sales in applied markets, specifically the industrial segment for which they decreased by 3%. Also, Europe experienced summer droughts, which led its sales in the food analysis segment to decrease significantly.
Discovery & Analytical Solutions (DAS) sales were led by high single digits in life sciences and mid-single digits growth in applied markets. Life sciences, which represented 35% of the company’s overall revenue, was driven by high demand in the pharmaceutical and biotech end-markets. Specifically, strong sales in the spectroscopy and chromatography product lines were factors for DAS’ overall revenue growth. In addition, PerkinElmer’s vivo imaging products were a key element for revenue growth for the DAS division.
Revenue growth for applied markets was led by PerkinElmer’s sales in spectroscopy and LC/MS, as well as Perten sales. Overall, the company’s food analysis segment experienced a 10% increase. Combined, the environmental and industrial segments delivered solid revenue growth of 6%. Geographically, the applied markets experienced high demand in Asia and the Americas.
In the Diagnostic division, sales were led by double-digit growth for the immunodiagnostics and applied genomics businesses. Strong sales for Tulip Diagnostics and Haoyuan Biotech contributed to the immunodiagnostics segment’s high-teens revenue growth. Applied genomics’ robust sales were attributed to the segment’s front-end sample preparation systems.
Since being acquired late last year (see IBO 06/30/17), EUROIMMUN’s performance has shown consistent sales growth with an increase of 11% this quarter. The subsidiary’s autoimmune modalities made up approximately 60% of its sales and accounted for 16% of its revenue growth. In addition, the combined sales of infectious disease, allergy and instrument sales for antigen detection spurred double-digit revenue growth. Geographically, EUROIMMUN recorded robust sales in China and Germany. PerkinElmer forecasted EUROIMMUN’s fourth quarter revenue to increase 15%.
The company raised its full-year revenue growth guidance from 6% to 6.5%. Fourth quarter sales are forecasted to rise 5% organically or 16% including acquisitions.
Life Sciences Solutions Leads Broad-based Growth for Thermo Fisher Scientific
Reported double-digit third quarter revenue growth for Thermo Fisher Scientific included 7% growth from acquisitions and a 1% decrease from currency. (See IBO 10/31/18.) The company reported broad-based growth, including strength in all four business segments.
Revenue growth in the Life Sciences Solutions segment was led by bioproduction, biosciences and clinical NGS. The Specialty Diagnostics segment was driven by the health care market, and transplant and clinical diagnostics business, while the Laboratory Products and Services saw strong growth in the clinical trial logistics business, and research and safety market.
Sales to the biotech and pharmaceutical end-markets increased in the high teens, while sales to the industrial and applied end-markets delivered high single digits growth due to strong sales for the Analytical Instruments business. Sales to the academic and government end-market as well as diagnostics and healthcare both grew mid-single digits.
North America, Europe and Rest of World led regional growth, with sales for each increasing in high-single digits. Asia-Pacific sales rose in the low teens. Within Asia-Pacific sales, Chinese sales rose more than 20% to $629 million. Within North America, US sales grew 19% to $2.9 billion.
The company narrowed its full-year revenue guidance to 15% growth, including 7% organic growth. The company attributed the increase to strong operational performance, offset by a 1% tailwind from currency.
Soft TA Instrument Product Sales Impact Waters
Waters third quarter revenues grew 3.0% in constant currency, as constant currency sales for the Waters Division and TA Instruments increased 3.0% and 1.0%, respectively (see IBO 10/31/18). All figures below are in constant currency. Both instrument and chemistry sales led growth with both rising 6.0% in the third quarter, followed by service sales, with a 4.0% increase.
Waters saw unexpected weakness in two key areas: slow sales of its TA Instruments product line and low demand in the European pharmaceutical market. TA instruments revenue only grew 1.0% due to the timing of certain shipments to the US, Europe and China. The company attributed the low sales in the European pharma market to uncertain political dynamics, such as the ongoing Brexit situation.
Academic and government sales were strong in both the environmental research and pharmaceutical discovery sectors, which offset weak sales in the biomedical research sector.
On a geographical basis, Chinese demand rose 14.1% to make up 19% of total Waters sales. India’s sales remained modest due to country-specific political uncertainty, such as a weak rupee and upcoming elections. Despite strong sales in Canada and Latin America, Americas revenue experienced a slight decline, due to weak sales of the TA Instruments product line in the US.
By product line, global pharma sales grew thanks to the high demand for service application kits, UPLC columns and bioseparation columns. Thermal analyzers experienced soft sales, but this was offset by the strong sales of the company’s rheology, microcalorimetry and ElectroForce product lines.
Waters forecasted fourth quarter organic sales to increase 3%–4%, with currency subtracting 1%–2% growth. The company decreased its annual sales guidance to 3%–4% growth from 4%–6%, excluding currency effects.