Danaher Reports Strong $300M Respiratory Testing Revenue in Q2 Amid Portfolio Transition

New York — Danaher reported on Tuesday that its second-quarter revenue fell approximately 8% year over year, as demand for COVID-related products continued to decline and biotechnology business revenue dropped.

Revenue for the three months ended June 30 fell to $7.16 billion from $7.75 billion a year earlier, but was much higher than Wall Street's forecast of $6.39 billion.

During a call with investors reviewing the second-quarter earnings, Danaher CEO Rainer Blair said that the company's base business grew by 2%, but this was offset by approximately 9%COVID-19Offset by adverse impact on revenue.

Reiner said in the call: "In life sciences andDiagnosisIn the field, high single-digit core revenue growth in the base business, combined with better-than-expected respiratory testing revenue, helped offset soft demand in the bioprocessing base business.

He said that, geographically, core revenue in developed markets declined by a single digit, while high-growth markets also saw a single-digit decline. Reiner also mentioned that revenue in China dropped by approximately 10%.

By business segment, revenue from the Life Sciences segment increased 6% from $1.7 billion to $1.8 billion, while revenue from the Diagnostics segment decreased approximately 15% from $2.56 billion to $2.23 billion.

Revenue from biotechnology operations decreased 17% from $2.27 billion to $1.89 billion, while revenue from environmental and applied solutions operations fell more than 2% from $1.22 billion to $1.25 billion year-over-year.

Reiner said in the call that Danaher's biotechnology and diagnostics segments saw a decline in sales this quarter and adjusted their capacity and cost structure in response to the transition of COVID to an endemic state.

In the bioprocessing segment of the biotechnology business, Renner said that large customers are working through inventories built up during the pandemic, while emerging biotech customers continue to conserve capital. He added that the ongoing adjustment in China's biopharmaceutical market intensified as the second quarter progressed.

"In these dynamics, we have started to actively collaborate with our large customers to help them reduce their inventory to normal levels more quickly," said Rainer.

Moreover, in the biotechnology field, Danaher completed the merger of Cytiva and Pall Life Sciences in May, "creating a globally leading bioprocessing franchise," Rainer added, noting that the combined business will be listed under the name Cytiva.

Rainer stated that in the life sciences sector, core revenue grew by nearly 6%, including high single-digit growth in the base business. This was primarily driven by nearly 10% growth from Leica Microsystems and high single-digit growth from Sciex.

Renner said, "We have good demand in the life science research, academia, and applied markets, particularly for our more advanced instruments, which helps offset the softness from pharmaceutical and biopharmaceutical customers."

He also stated that Danaher's genomic consumables base business grew by a single-digit percentage this quarter, including strong growth in plasmids, proteins, and gene writing and editing solutions, which are mainly used in the commercial production or late-stage drug development pipeline. He added that this growth was partially offset by declines in next-generation sequencing and basic research.

In the diagnostics segment, core revenue decreased by approximately 12%, with high single-digit growth in the base business offset by a decline in COVID-related respiratory testing volumes at Cepheid.

"Our clinical diagnostics businesses overall delivered mid-single-digit core revenue growth," said Rainer, highlighting the growth of Leica Biosystems and Beckman Coulter Diagnostics.

Renner said that Beckman launched the DxI 9000 in May, which is a next-generationImmunityThe analyzer can automate up to 90% of standard daily maintenance procedures and features high throughput. The system will also enable Beckman to offer a full range of blood virus tests over time, "filling an important menu gap and further enhancing the breadth and clinical value of our test menu," he said.

In the molecular diagnostics field, Danaher achieved core revenue growth of over 30% in non-COVID respiratory testing, Renner said.

He said that customers of Cepheid GeneXpert, a platform mainly used for COVID-related testing, are increasingly adding other tests, particularly for Group A Streptococcus and hospital-acquired infections. The company is also seeing "strong momentum" for its multiplex vaginitis test panel, called GeneXpert Xpress MVP.

Rainer stated that Cepheid's respiratory testing revenue reached $300 million this quarter, surpassing Danaher's forecast of $175 million. This was due to both increased sales volume and customer preference for the four-in-one test used for COVID-19, Influenza A and B, and Respiratory Syncytial Virus (RSV).

He said, "We still expect full-year respiratory revenue to be approximately $1.2 billion."

Moreover, he stated: "With COVID now being endemic, we believe Cepheid is continuing to gain market share as many customers want to consolidate their point-to-point PCR testing platforms onto the GeneXpert for both respiratory and non-respiratory testing."

Danaher is continuing the previously announced scaling down of its Cepheid business related to the decline in COVID-19 product sales. At the same time, the company plans to spin off its environmental and applied solutions business into a new company named Veralto in the fourth quarter.

Danaher's Second-Quarter Net Income Drops from $1.66 Billion, or $2.25 Per Share, to $1.1 Billion, or $1.49 Per Share. On an Adjusted Basis, Danaher Reported Earnings of $2.05 Per Share, Beating Analysts' Average Estimate of $1.80.

The company's R&D costs for the second quarter decreased by 3% from $431 million in the same period last year, while sales, general, and administrative expenses increased by approximately 5% from $2.09 billion to $2.19 billion.

Danaher's cash and cash equivalents at the end of the second quarter were $8.6 billion.

For the third quarter, the company said it expects core revenue to decline by a single digit, while for the full year of 2023, core revenue is expected to grow by a single digit.

Danaher's stock rose more than 2% in early trading on the New York Stock Exchange, reaching $263.90.