Beckman Coulter (BEC) reported an EPS of 95 cents in the third quarter of fiscal 2010, compared with 2 cents in the year-ago period. However, adjusting for certain special items, restructuring and the acquisition of Olympus Diagnostic, the company’s EPS came in at $1.00, surpassing both the Zacks Consensus Estimate of 88 cents and 89 cents in the year-ago quarter.
Beckman reported revenues of $893.8 million, up 8.6% (up 9.8% at constant exchange rates or CER) from the year-ago quarter and exceeded the Zacks Consensus Estimate of $884 million. Olympus contributed $112.2 million to total revenues. Although recurring revenues increased 6.9% annually (8.3% at CER) it would have grown 4.2% excluding the impact of Olympus.
Beckman’s two segments, Clinical Diagnostics and Life Sciences, recorded revenues of $787.6 million (up 10.8% annually or 11.9% at CER) and $106.1 million (down 5.1% or down 4.1% at CER), respectively.
Within Clinical Diagnostics, the highest growth was recorded by Chemistry and Clinical automation (14.3% to $323.2 million), followed by Immunoassay and Molecular Diagnostics (up 10.5% to $220.2 million), and Cellular Analysis (up 6.7% to $244.2 million). Strong growth recorded by chemistry and automation is primarily due to the acquisition of Olympus Diagnostics in August 2009.
On a geographic basis, all the markets recorded robust growth (at CER). The highest was Emerging Markets with an annualized growth rate of 23.7% to reach $80.3 million.
While Beckman derived 47% of its revenues from the US market ($423.2 million), its growth was lowest at 5.2%. Europe with revenues of $178.7 million and Asia Pacific with $155.5 million of revenues recorded growth rates of 6.5% and 22.2%, respectively. Revenues derived from the Other region (Canada and Latin America) increased 9.3% to $56.2 million.
Although Beckman recorded robust growth in Asia-Pacific and emerging markets, revenues derived from the developed countries were lower due to soft demand. Revenues from the US market will continue to see pressure until the quality challenges are resolved. The company is currently focused on increasing customer satisfaction, which is expected to drive revenue growth in future.
On June 21, 2010, Beckman received a warning letter from the US Food and Drug Administration (FDA) regarding troponin test kits. The agency claimed that the company has made certain modifications to its AccuTnI troponin test kits as used on UniCel DxI Immunoassay systems and Access Immunoassay systems without obtaining appropriate product clearances from the FDA. The company also provided an update regarding its studies to resolve the issue.
In agreement with the FDA, Beckman is conducting the troponin clinical study and has already completed Stage One (study design) of the troponin clinical trial, which has been reviewed by the agency in May 2010. In Stage Two (study set-up) and Stage Three (study execution) of the study, the company has identified sites that meet the requirements for patient recruitment and are collecting samples from the intended population.
We note that the company expects completing the clinical study in time so that two separate 510(k) submissions for the troponin test can be submitted in the first half of 2011 – one for Access instruments and the other for DxI instruments.
Beckman exited the quarter with cash and cash equivalents of $284.6 million, marginally down from $288.8 million at the end of December 2009. The company has increased its quarterly cash dividend by 5.6% to 19 cents per share.
Outlook
Beckman reaffirmed its guidance for fiscal 2010, which was provided along with second quarter results. The company expects revenues and adjusted EPS in the range of $3.65–$3.70 billion and $3.90–$4.00, respectively with $480-$500 million of contribution from Olympus products.
Moreover, recurring revenue growth, (excluding Olympus acquisition) in CER is expected at 5% comprising of 1% growth in the US and 9% in the international market.
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