Earnings Season for IVD: What Does it Say About 2017

Earnings Season for IVD: What Does it Say About 2017
Earnings season is here.  Many diagnostic companies are reporting their results for 2016, and some are providing guidance on what they expect for 2017.  As might be expected, results for the year 2016 vary greatly among different companies.

Many large companies have reported single digit revenue growth for 2016 compared to 2015.  For example, both Thermo Fisher Scientific and Illumina revenues increased 8%, while BioMérieux saw 7% growth, Roche Diagnostics' revenues increased 6%, QIAGEN's revenues increased 4%, and Abbott's diagnostics revenues increased 3.6% on a reported basis in 2016 compared to the previous year.  Many different factors can affect a company's revenue growth.  For example:

  • Thermo Fisher Scientific (with 8% revenue growth over 2015) reported that organic revenue growth was 4%; acquisitions increased revenue by 4% and currency translation reduced revenue by 1%. In 2017, Thermo Fisher Scientific expects revenues to increase between 6% and 7% over 2016 revenues.
  • Illumina also reported an 8% increase in revenue compared to 2015. Illumina also reported on the launch of a new sequencing platform (the NovaSeq System™), launch of the Illumina® Bio-Rad® Single-Cell Sequencing Solution, and other events. Illumina reported that it is projecting 10% to 12% revenue growth in fiscal 2017.
  • bioMérieux reported a sales growth of 7.1%. The company reported that growth was held back a negative currency effect and by the change in scope resulting primarily from the deconsolidation of bioTheranostics as of the beginning of 2016.  Organic sales growth at a constant exchange rate was 9.6%, and was led by an acceleration of FilmArray® sales
  • Roche has reported that its 2016 diagnostics revenues grew 6% in 2016 (7% at constant exchange rates). This growth was driven by sales of the company's immunodiagnostics and Point of Care Solutions businesses. Roche has also reported that its molecular diagnostics revenues (including sequencing) grew 7%, while tissue diagnostics revenues increased 15% in 2016.  Roche has not provided a guidance for diagnostics revenues in 2017.  In 2016, Group sales (including pharmaceutical sales) grew 5% (6% at constant exchange rates), and Roche's outlook for 2017 is that sales are expected to grow low- to mid-single digit, at constant exchange rates.
  • QIAGEN reported an increase in net sales of 4% in 2016 compared to 2015. Molecular diagnostics, which represented 50% of sales in 2016, increased 11%.  In February 2017, QIAGEN reaffirmed the company's initial guidance (provided in November 2016) for adjusted net sales growth of approximately 6% to 7% at constant exchange rates in 2017.
  • Abbott's worldwide sales in 2016 increased 2.2% on a reported basis and 4.8% on an operational basis. Diagnostics sales increased 3.6% on a reported basis and 5.5% on an operational basis.  Molecular Diagnostics sales decreased 7.6% on a reported basis for the fourth quarter of 2016, and decreased 2.3% on a reported basis for the year.  On an operational basis, Molecular Diagnostics decreased 0.8% in 2016.  Abbott reported that a planned scale down of the genetics business offset growth in the infectious disease testing business.

As would be expected, several somewhat smaller companies with emerging technologies and products (or services) saw larger growth in revenues in 2016.  For example:

  • Invitae reported revenues of $25.0 million for 2016, compared to $8.4 million for 2015. This is a 198% increase in revenue in 2016.  Invitae has projected revenue of between $55 million and $65 million in 2017.
  • Exact Sciences generated revenues of $99.4 million in 2016, which was a 152% increase over 2015 revenues. Exact Sciences also reported that the company completed approximately 244,000 Cologuard tests during 2016, which was a 135% increase over the number of tests completed in 2015.  Exact Science has reported that during 2017, the company anticipates revenue of $170-$180 million and Cologuard test volume of at least 415,000 completed tests.
  • NanoString Technologies has reported preliminary results for 2016. The company reported that total revenue for 2016 is expected to be in the range of $85.5 to $87.0 million, which would represent an increase of 36% to 39% over 2015.
  • Foundation Medicine has also reported preliminary results for 2016. The company announced preliminary unaudited revenue of approximately $116.9 million for 2016.  This is a 25% increase over the $93.2 million revenues for 2015.
  • Genomic Health reported total revenue of $327.9 million for 2016, a 14% increase over 2015. For 2017, Genomic Health has provided a guidance projecting total product revenue of between $355 and $370 million.  This would represent growth of between 9% and 13% compared to 2016.
  • Luminex has reported that revenues in 2016 were $270.6 million, a 14% increase over 2015. Luminex acquired Nanosphere during 2016.  During the fourth quarter of 2016. Nanosphere contributed revenue of $9.5 million, growth of 39% over year-ago period.  Luminex has provided a guidance range of guidance range of between $295 million and $305 million for 2017 revenues.

Unfortunately, not all companies achieved revenue growth in 2016.  Pacific Biosciences reported a 29% decrease in revenue for the fourth quarter of 2016, due to a one-time $20.0 million milestone payment that it received from Roche in the fourth quarter of 2015.  In December 2016, Pacific Biosciences announced that Roche had terminated its agreement with Pacific Biosciences.  For the entire 2016 year, Pacific Biosciences recognized total revenues of $90.7 million, which is slightly down from $92.8 million in 2015.

Another example, is Fluidigm, which reported total revenue of $104.4 million for 2016.  This was a 9% decrease from 2015 revenues.  During 2016, Fluidigm's instrument revenues decreased 20% over 2015.  Fluidigm reports that the company views 2017 as a transition year.  The company's guidance for the first quarter of 2017 is that revenue will be approximately flat compared to the fourth quarter of 2016.

 Companies discussed here represent only a partial list of diagnostic companies that reported financial results during January or February 2017.  For example, companies whose fiscal year does not end on December 31st are not included in this discussion.  Also, some companies whose fiscal year ended December 31, 2016, have not yet reported their 2016 financial results.