Millipore Corp. (MIL) reported first-quarter earnings per share of $1.21, well above the Zacks Consensus Estimate of $1.09 and the year-ago earnings of $1.06.
Revenues for the first quarter grew 14% to $463 million. Excluding a 5% benefit from changes in foreign currency, Millipore generated organic revenue growth of 9%. While the Bioprocess division recorded a growth of 12% with sales coming in at $258.3 million, the Bioscience division grew 15% to $204.7 million.
New product sales and increased demand from biotech customers helped the Bioprocess division generate organic growth of 13% during the quarter. A major part of the growth was driven by biotech customers in North America and Asia.
Demand should remain strong with large pharma companies increasing their investment in biotech drugs. We believe Millipore will gain significantly with the number of monoclonal antibodies and bioengineered vaccines expected to grow substantially over the next five years.
Growth in the Bioscience division was driven primarily by strong laboratory instrumentation sales. Importantly, the company reported a rebound in spending by large pharma customers during the quarter. New product launches should help drive future growth.
On a geographic basis, the company witnessed 35% and 14% growth in Asia Pacific and the Americas, respectively, during the quarter. While China and Singapore showed strong growth, the company’s business in Japan also rebounded after having struggled through a major part of 2009.
However, a weaker economy and the timing of orders with many large biotech customers affected growth in Europe, which continued to decline (down 2%). We expect growth in the Asia Pacific region to remain strong given the increased investment in this region by multinational companies, governments and contract manufacturing organizations.
Millipore continues to increase its R&D spending as it invests in initiatives that will help drive long-term growth. SG&A costs increased 12% mainly due to increased sales and promotion activities, currency translation and higher employee compensation costs. Operating margins improved 40 basis points to 22.6%.
Millipore exited the quarter with $223 million in cash and equivalents. The company generated approximately $77 million of free cash flow, up 12% from the year-ago period.
Millipore announced that it is on track to close its transaction with Merck KGaA (MKGAF) in the second half of the year. Earlier this year, Millipore entered into a definitive agreement with Merck KGaA, the Germany-based pharmaceutical and chemicals company, under which Merck will acquire all outstanding shares of common stock of Millipore for $107 per share in cash, or a total transaction value, including net debt, of approximately 5.3 billion ($7.2 billion).
The deal should not only help the combined company expand its geographical presence, it should also help the company strengthen its position in high growth areas. We currently have a Neutral recommendation on Millipore.
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