Timing and Currency Slow First Quarter Growth
Currency and US Demand Drive Biotage Sales
First quarter sales for Biotage jumped 26.8%, 6.1% excluding currency, to SEK 144.2 million ($17.3 million = SEK 8.34 = $1). Sales were driven by double-digit growth for sample preparation products as the company introduced the Extrahera system. The new system is freely available to customers agreeing to purchase a minimum volume of consumables over a specified time period. Purification sales recorded good growth, as peptide synthesis sales, which have been challenged for some time, doubled, led by demand in the US and Japan. Industrial product sales were roughly flat. Geographically, US sales grew in the strong double digits excluding currency. A shift in customer strategy from contract research companies to academic markets resulted in strong growth in China. European sales grew in the lower single digits excluding currency. Japanese sales declined as a result of a strong year-over-year comparison. Gross profit margin expanded 120 basis points to 55.5% of revenues due to increased aftermarket sales. Adjusted operating profit jumped 57.9% to SEK 13.8 million ($1.7 million) as a result of higher sales volume and currency.
Timing Limits Bio-Techne’s Growth
For the fiscal third quarter ending March 31, revenue for Bio-Techne’s Biotechnology segment climbed 3.8%, 0.5% organically, to $83.2 million to account for 73% of company sales. Acquisitions added 7.7% to segment growth, while currency reduced sales by 4.5%. Sales fell below expectations due to currency, weak research demand and a reduction of inventory from Japanese distributors. North American sales grew in the low single digits organically, including double-digit sales growth in biopharmaceutical markets, but a low single-digit drop in academic and government revenues. In spite of the decline, academic sales improved thanks to the partnership agreement with Thermo Fisher Scientific (see IBO 2/28/14). European sales contracted in the low single digits despite healthy organic growth in most countries. The regression in Europe was attributed to a double-digit revenue decline in Germany due to timing of research projects and a strong year-over-year comparison. Germany accounted for more than 20% of European revenues. Sales in China advanced in the mid-teens organically and are projected to grow over 20% organically for the fiscal year. Pacific Rim sales declined in the mid-single digits, led by a double-digit decline in Japan. Biotechnology adjusted operating profit advanced a modest 0.1% to $46.2 million due to product mix following acquisitions.
Fiscal third quarter sales for Bio-Techne’s Protein Platforms segment amounted to $15.7 million to make up 14% of revenues. On a pro forma basis, Protein Platforms sales grew 23% organically, as the company shipped more than 200 systems in the quarter. Adjusted operating loss for the segment was $1.7 million. Segment pro forma organic sales are projected to grow roughly 25% in the fiscal fourth quarter.
Missed Contract Reduces Brooks’s Outlook
Fiscal second quarter sales for Brooks Automation’s Life Science Systems (LSS) segment climbed 38.9%, 12.7% organically to $17.5 million to account for 13% of company sales. The acquisition of FluidX (see IBO 10/15/14) added 30.1% to sales growth, while currency reduced growth by 4.0%. FluidX sales expanded roughly 4% sequentially. Organic LSS sales were driven by demand for consumables. Adjusted operating profit widened 35.5% to $4.2 million, as gross margins were negatively impacted by higher labor and shipping costs. Bookings were below expectations at $14 million, as the company missed a previously anticipated European contract due to competitive pricing. Segment backlog was at $47 million. The LSS segment implemented significant restructuring measures, including facility consolidations and outsourcing, to reduce expenditures. Savings from these measures are expected to reach $1.5 million by the end of the fiscal third quarter. Given the missed contract opportunity, the company lowered its full-year sales outlook by roughly $10 million to approximately $70 million. However, the company maintained its longer-term annual LSS revenue goal of $120 million by fiscal 2017.
Currency Limits Growth But Lifts Profits for FEI
FEI’s first quarter sales contracted 2.4% to $220.8 million. However, excluding currency headwinds of 6.8% and acquisition contributions of 0.4% growth, organic sales advanced 4.0%.
Despite weakness in the oil and gas markets and a 10% decline in North American sales, Industry revenue climbed 7.5% organically to account for 51% of revenues. Segment sales were driven by strong demand from several large semiconductor customers in Asia. Bookings for the Industry segment jumped 13% organically to $137.1 million, led by demand from electronics customers and a major memory manufacturer in Japan.
For FEI’s Science segment, sales improved 0.8% organically to make up 49% of sales. Segment sales jumped 40% in North America, led by demand for higher-resolution systems, but were mostly offset by challenges in Europe and Asia. Science orders slumped 34% organically to $78.8 million due to purchasing delays in emerging markets as a result of currency delays, and weakness from materials science customers in Europe. Orders from life science markets in China improved. Science gross margin fell 60 basis points to 44.7% of sales.
Overall, FEI sales in the US/Canada and Europe fell 10.2% and 18.5% to make up 29% and 25% of revenues, respectively. Sales in Asia-Pacific/Rest of World climbed 16.4% to account for 46%. Total orders fell 10% organically to $215.9 million. With significant operations in Europe, currency favorably impacted margins and operating expenses. Gross margin advanced 120 basis points to 47.7% of sales. Adjusted operating profit, which also benefited from completed restructuring activities, expanded 12.1% to $36.1 million. Given the slow start to the year from materials science customers, FEI lowered its full-year 2015 organic revenue growth outlook from 5%–9% to 4%–7%. Second quarter sales are expected to be in the rage of $216–$226 million, for a decline of 6% or roughly flat organic growth.
Fluidigm Lowers Guidance
Fluidigm missed first quarter projections due to weaker-than-expected demand for CyTOF systems, Biomark systems and genomics analytical consumables. Total sales grew 3.9%, 9.7% excluding currency, to $26.7 million. Instruments sales expanded 10.0% excluding currency to make up 59% of sales, as acceptance of the new Juno systems was ahead of expectations, and demand for the EP1 and C1 systems were strong. Conversely, CyTOF sales were roughly $2 million below estimates primarily due to timing of orders and a change in delivery date for one customer. Despite the shortfall, the company remains confident about future growth prospects for CyTOF systems. BioMark sales missed company projections as a result of lower bundled sales and weak demand for single-cell applications. Consumables revenue climbed 11.4% to account for 41% of sales, led by demand for C1 Integrated Fluidic Circuits and antibody consumables for single-cell biology research. However, pull-through orders for genomics analytical consumables fell below historical averages due to timing of large purchases.
Including currency, sales in Europe, the US and Asia Pacific grew 8.4%, 22.0% and 59.3%, respectively. Japanese and Other sales fell 57.0% and 41.1%, respectively, as a result of currency and delayed orders in Japan. Product adjusted gross margin slumped 268 basis points to 71.5% of sales because of higher consumables manufacturing costs. Adjusted operating loss widened 174.2% to $11.0 million due to weaker margins and increased headcount. Given the BioMark challenges, the company lowered its 2015 revenue outlook from $142–$149 million to $133–$143 million for growth of 14%–23%, including currency headwinds of 4%–5%.
Despite Fast Growth, Pacific Biosciences Continues to Burn Cash
Pacific Biosciences reported mixed first quarter results in spite of revenue growth of 51.6% to $17.6 million. Revenues included higher milestone payments from Roche, which expanded 112.0% to $3.6 million. Excluding contractual revenue, sales advanced 41.3% to $14.0 million. Instrument and consumables sales climbed 31.5% and 69.3% to account for 62% and 38% of Product revenue, respectively. On the consumables side, pull-through revenue per system exceeded $130,000 on a trailing annual basis. In addition, increased maintenance agreements elevated service revenue. The concern for the company continues to be the cash burn rate, as cash and investments contracted by $22.2 million to $79.1 million. Operating loss widened 5.9% to $19.3 million due to expanded headcount, product development, regulatory measures for diagnostic applications and higher compensation expenses. However, the company raised its 2015 revenue growth outlook from a minimum of 20% to at least 25%, including contractual revenue of $10 million from Roche.