Bio-Rad Laboratories Bets on Digital PCR, Margins and Smarter M&A Growth

Digital PCR is Bio-Rad’s main growth opportunity: The company is expanding its droplet-based PCR portfolio through the Stilla acquisition, which has delivered double-digit growth, while pursuing longer-term diagnostic applications.

Demand remains uneven across life-science markets: Later-stage biopharma and Asia-Pacific markets excluding China are improving, but early-stage biotech, cell and gene therapy, academic funding and European research spending remain pressured.

Bio-Rad is tightening its strategy to improve profitability: Management is shifting M&A toward commercially established companies with differentiated technology and synergies, while restructuring operations to target a mid-teens operating margin within the next few years.

Bio-Rad Laboratories NYSE: BIO is pursuing a multi-year effort to improve growth, expand margins and strengthen free cash flow, with management emphasizing portfolio focus, operating discipline and a more selective approach to acquisitions. Speaking at a Bernstein conference, Chief Financial Officer Roop Lakkaraju said the company’s relatively new executive team has been assessing its businesses from the ground up, including where Bio-Rad has a competitive advantage and where it may need to change its technology or portfolio.

“We are operators,” Lakkaraju said, describing a leadership group that has experience evolving businesses in difficult markets. The company is focused on identifying markets where it has a “right to win,” using M&A as a potential supplement to growth, and improving margins and cash generation.

Digital PCR Remains a Central Growth Area Lakkaraju highlighted Bio-Rad’s Droplet Digital PCR business as a key opportunity. Digital PCR enables absolute quantitation and is particularly applicable to rare-event detection, he said, citing oncology, minimal residual disease and wastewater management as examples. Bio-Rad’s droplet-based approach, assay library of more than 400,000 assays and more than 12,000 technical publications using its digital PCR technology support its market position, according to Lakkaraju.

He said next-generation sequencing and PCR are generally complementary rather than directly substitutive technologies. Sequencing can identify what researchers are looking at, while PCR can be used for absolute or approximate quantitation, he said. Research labs commonly use multiple technologies, including real-time PCR, qPCR, digital PCR and sequencing, depending on the application.

The company’s acquisition of Stilla Technologies, which closed June 30 of the prior year, broadened its digital PCR lineup to include entry-level instruments. Lakkaraju said Bio-Rad had previously been concentrated in mid- to high-end applications and lacked an entry-level product as instrument price points declined. Stilla’s QX700 products have supported double-digit growth over the past three quarters, ranging from low double-digit growth to more than 20%, Lakkaraju said. He also described the products’ modular architecture as a potential source of future research-and-development leverage.

Bio-Rad currently uses partnerships with companies including Biodesix, Gencove and Insight Molecular to apply its digital PCR technology in diagnostic settings. Lakkaraju said the company sees a longer-term opportunity to expand digital PCR further into diagnostics.

Uneven Research Markets Continue to Affect Demand Lakkaraju said market conditions remain challenging across life-science tools and diagnostics. Bio-Rad has historically had meaningful exposure to academic and government customers as well as early-stage biopharma...