Bio-Rad's recovery comes with a $49.8 million retreat
Diagnostics sales are improving, but Bio-Rad is cutting investment in acquired Celsee technology. Lower research spending helps profit as cash flow falls.
Bio-Rad's sales are growing again after adjusting for currency movements. But the laboratory supplier's latest results also show a retreat from technology it bought six years ago.
The company wrote off the remaining $49.8 million carrying value of developed technology acquired with Celsee in 2020. It is reducing research, development and marketing for that technology and closing the related facility. A modest recovery elsewhere is arriving alongside a harder choice about where to keep spending.
A technology bet loses its remaining book value
Celsee developed tools for studying individual cells, a way for researchers to examine differences that can disappear when many cells are analyzed together. Bio-Rad's quarterly report says the reduced investment and facility closure left the acquired technology with no remaining fair value. The impairment was recorded in July.
The $49.8 million charge writes down an existing asset; it is not a cash payment this quarter. It comes alongside the broader global restructuring that Bio-Rad announced in August, involving job cuts, consolidation and facility closures.
That previously announced plan is expected to cost $80 million to $90 million and be substantially complete by the end of 2027. Bio-Rad expects annual operating-expense savings of $30 million to $35 million once it is fully implemented. Of the $72.7 million in employee-termination costs recorded under the plan during Q3, $8.6 million had been paid by September 30.
The recovery is stronger in diagnostics
Third-quarter revenue was $656.4 million, up 0.5% from a year earlier. Excluding exchange-rate effects, growth was 0.7%, improving from a 1.9% year-over-year decline in Q2.
Clinical Diagnostics, which supplies products used in medical testing, led the improvement. Its currency-neutral sales rose 2.8%, compared with 0.3% growth in the previous quarter, helped by quality-control, diabetes and blood-typing products.
Life Science remained weaker, with currency-neutral sales down 2.4%. Academic research customers remain under pressure, while lower process-chromatography sales, used in separating and purifying biological materials, weighed on results.
There are brighter pockets. Excluding process chromatography, Life Science sales rose 2.5% on the same currency-neutral basis. The droplet digital PCR franchise, used to measure genetic material, grew 7%, with instrument sales up more than 20%, both currency-neutral. Those gains sit alongside the cutback at Celsee, rather than signaling a withdrawal from the wider research-tools business.
Lower research spending helps adjusted profit
Adjusted operating income rose to $83.7 million from $77 million. Adjusted research and development spending fell to $60 million from $70.2 million, helping offset higher selling and administrative costs.
Reported operating results tell a different story: a $49.7 million loss, including the technology impairment and $77.2 million of total restructuring expense. Reported net income nevertheless reached $458.6 million, lifted heavily by investment gains, mainly on Bio-Rad's Sartorius stake.
Adjusted earnings strip out those investment swings and specified charges. They rose to $2.65 per share from $2.26, also helped by a lower adjusted tax rate. The large reported profit therefore says more about the investment portfolio than the improvement in laboratory-product earnings.
The annual outlook stays put
Bio-Rad kept the annual targets it had given in August: currency-neutral sales ranging from a 3% decline to 0.5% growth, an adjusted operating margin of 10% to 12%, and free cash flow of $290 million to $340 million.
Cash generation has lagged last year. Nine-month operating cash flow fell to $303.2 million from $367.3 million, while free cash flow after capital spending fell to $210 million from $255.5 million. Reaching the unchanged annual cash target requires another $80 million to $130 million in the final quarter.
The Bio-Rad company profile tracks its cash, debt, restructuring and completed Stilla acquisition. The question now is how much of the earnings recovery can come from broader demand, as Bio-Rad cuts its research cost base and winds down investment in an earlier technology bet.