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Bio-Rad (BIO) Banks on Blood Typing Market Amid Margin Woes

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Bio-Rad (BIO) Banks on Blood Typing Market Amid Margin Woes

Bio-Rad (BIO) actively expands portfolio for blood typing market; declining gross margin a concern.

On Aug 13, we issued an updated research report on Bio-Rad Laboratories, Inc. BIO. We are upbeat about the company gaining from solid prospects in the blood typing market, while declining gross margin is a concern. The stock carries a Zacks Rank #3 (Hold).

This California-based manufacturer and global supplier of clinical diagnostics and life science research products has been outperforming its industry over the past year. The stock has gained 49.3% versus the industry’s 15.3% rise. 

Bio-Rad exited second-quarter 2018 on a solid note, with year-over-year growth in earnings and revenues. The company offers a broad range of platforms, reagents, data management and connectivity solutions to cater to blood typing demand, offering efficient and reliable results for blood grouping, phenotyping, crossmatching, antibody screening and identification, direct antiglobulin tests, and single antigen typing.

We are encouraged by the company’s active portfolio expansion for the blood typing market. In January, Bio-Rad announced the receipt of 510(k) clearance from the FDA for the IH-Incubator L and IH-Centrifuge L instruments to be used with the complete range of Bio-Rad’s IH-System Gel Reagents for manual blood typing methods.

Per management, in second-quarter 2018, the impressive performance by the Clinical Diagnostics business was led by a considerable rise in instrument placements for the blood typing market, with unit volume more than doubling both sequentially and year over year.

We are also upbeat about Bio-Rad witnessing sales growth across all channels in the second quarter. Sales at the Life Science segment were driven by higher sales of cell biology, Digital PCR and food safety product lines. Further, net sales at Clinical Diagnostics were led by growth in immunology, blood typing, quality control product lines.

Meanwhile, the changing trends in the healthcare industry have affected the gross margin at the Clinical Diagnostics segment. In second-quarter 2018, the company’s gross margin contracted 180 basis points. Per the company, changes in product mix toward higher instrument placements and costs related to the ongoing transition of European operations led to the decline in gross margin.

Further, Bio-Rad is exposed to risks associated with a weaker global economy and lower reimbursement rates.

Key Picks

A few better-ranked stocks in the broader medical space are Intuitive Surgical ISRG, Inogen, Inc. INGN and Align Technology, Inc. ALGN.

Intuitive Surgical’s expected long-term earnings growth rate is 14.7%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen’s long-term expected earnings growth rate is 24.5%. The stock carries a Zacks Rank #2 (Buy).

Align Technology’s long-term expected earnings growth rate is 30.1%. The stock carries a Zacks Rank #2.

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