Danaher on Tuesday posted lower third-quarter sales and earnings, hurt by ongoing weak demand from bioprocessing customers, but said results were better than expected due to an uptick in respiratory testing revenue.
Revenue slightly exceeded analysts’ consensus forecast for $6.6 billion, according to Leerink Partners analyst Puneet Souda, who noted in a report that Danaher reduced its outlook for non-COVID bioprocessing last quarter due to sharply curtailed growth expectations for China.
Core revenue in bioprocessing, excluding currency translations, declined more than 20%, Danaher CEO Rainer Blair said on the company’s earnings call.
“Our customers are still working through inventory built up during the pandemic while also continuing to conserve capital as a result of funding pressures,” Blair said.
In China, which represents about 12% of Danaher’s total revenue, a pullback in funding for equipment purchases, coupled with excess capacity, resulted in a 45% drop in revenue. Anti-corruption initiatives in the healthcare sector also have slowed the tender process for purchases, but the company views the impact from those efforts as transitory, Blair added.
Danaher is in the process of acquring Abcam, a maker of antibodies, reagents, biomarkers and assays for life science companies, for $5.7 billion in a move to enter the protein consumables market.
Diagnostics core revenue declined more than 15% due to lower COVID-related respiratory testing volumes in the company’s Cepheid business. In non-respiratory testing, core revenue grew more than 20%, driven by group A strep and sexual health.
Cepheid revenue of about $350 million in the quarter exceeded the company’s expectation of $100 million, driven by both a higher prevalence of COVID-19 and demand for four-in-one tests covering COVID, RSV and influenza A and B, Blair said.
Danaher predicted full-year 2023 core revenue from continuing operations in its base businesses, excluding the Veralto environmental business spinoff, will be down slightly year over year. Company executives said they expect the bioprocessing and diagnostics businesses to perform similarly in the fourth quarter to the third.
“Q3 results were consistent with what we expected, but also have to be clear that we've not seen an inflection in orders,” Blair said. “I would have to say that we're sort of at the bottom here, bouncing along.”