Bio-Rad (BIO) Hurt by Softness in BioPharma and Competition

Bio-Rad BIO has been facing the impact of funding issues in the biopharmaceutical or BioPharma space, macroeconomic headwinds and competitive pressure. The stock carries a Zacks Rank #4 (Sell) currently.

Since the beginning of 2023, Bio-Rad has been witnessing softness in smaller BioPharma companies, where historically, demand for life science products has been strong. This directly correlates with the funding constraints the broader pharmaceutical industry has started to experience. Management stated that BioPharma’s softness has resulted in the Life Science Segment’s growth at a slower pace. Going by our model, we expect Bio-Rad's Life Science arm to register a decline of 1% in 2024.

In the fourth quarter of 2023, negative BioPharma macro trends persisted. Bio-Rad experienced reduced demand from biopharma customers for its process chromatography resins and from both biopharma and smaller biotech customers for the Life Science research projects – products. Bio-Rad experienced weaker demand in China due to softening macroeconomic conditions.

In recent times, Bio-Rad’s margin performance has been affected by the inflationary trend of elevated raw material costs, increased logistics costs and higher employee-related expenses. In the third quarter, the company’s gross margin was additionally impacted by an unfavorable product mix, with a higher-than-anticipated percentage of instrument sales versus reagents, as well as lower-than-projected revenues in the Life Science Group.

These macroeconomic factors, particularly the ongoing labor unrest, rising wages and raw material costs, along with ongoing geopolitical unrest, resulted in a significant escalation in the company’s operating expenses. Bio-Rad posted a 19.7% year-over-year decline in operating profit in the fourth quarter.

Bio-Rad Laboratories, Inc. Price

Bio-Rad Laboratories, Inc. Price

Bio-Rad Laboratories, Inc. price | Bio-Rad Laboratories, Inc. Quote

 

Bio-Rad operates in a highly competitive environment dominated by firms varying from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the markets where the company operates limit Bio-Rad’s ability to switch to strategies like price increases and other drivers of cost increases.

Further, the extension of the public tender commitments to multiple years by the government, resulting in a reduced number of annual tenders, has led to aggressive tender pricing by Bio-Rad’s competitors. Thus, Bio-Rad faces pricing pressure resulting from increased competition, which makes it difficult for the company to manage its operational, financial and business conditions efficiently.

In the Life Science segment, Bio-Rad primarily competes with Becton Dickinson, GE Biosciences, Merck Millipore and Thermo Fisher Scientific. Some prominent competitors in the Clinical Diagnostics segment are Roche, Abbott Laboratories, Siemens, Danaher, Thermo Fisher, Becton Dickinson and DiaSorin.

On a positive note, within the Clinical Diagnostics business, the company’s diabetes franchise is seeing elevated growth and a substantial improvement in the immunohematology and quality control businesses. Bio-Rad recently launched the IH-500 next instrument, designed to enhance the functionality of the system along with increased security from potential cyberattacks. The platform update, which includes updated software, increases the competitiveness of the company’s transfusion medicine portfolio. With production ramping up in Singapore following the manufacturing transition, management has better visibility on future Diagnostics output and, therefore, backlog reduction.

In the fourth quarter of 2023, despite a decline in infectious disease products, the Clinical Diagnostics year-over-year currency-neutral core revenue growth was 3.4%, driven by diabetes, quality control and blood typing products. Management was encouraged by the growth of the Clinical Diagnostics business, especially in Asia-Pacific, where the company prioritized placements to capture some strong growth trends, particularly in the diabetes testing franchise. Going by our model, we expect Bio-Rad’s Clinical Diagnostics arm to grow 1.1% in 2024.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita DVA, Stryker Corporation SYK, and Cardinal Health CAH. While DaVita sports a Zacks Rank #1 (Strong Buy), Stryker and Cardinal Health carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s stock has surged 55.7% in the past year. Earnings estimates for DaVita have risen from $8.97 to $9.23 in 2024 and from $9.77 to $10.01 in 2025 in the past 30 days.

DVA’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. In the last reported quarter, it posted an earnings surprise of 22.2%.

Stryker reported fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%.

Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.

Estimates for Cardinal Health’s 2024 earnings per share have remained constant at $7.28 in the past 30 days. Shares of the company have surged 31.8% in the past year compared with the industry’s 9.7% rise.

CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. In the last reported quarter, it delivered an average earnings surprise of 16.7%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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