Earnings season has begun with good results. Keep in mind the following trends: technology convergence, molecular diagnostics and M&A. The backdrop for the tools market is proposed government cuts in government scientific spending especially NIH. Leerink Swann data from the Dept. of Health and Human services projects NIH funding cutbacks in 2011 and 2012 of 1.2 and 1.4% respectively including stimulus outlays from the 2010 $34B level.
GenProbe (GPRO $81.52) continued its run from yesterday up 2.4% after earnings and after announcing that it hired Morgan Stanley to seek a buyer. Names thrown out that offer a strategic fit for this leading blood screening Company are Novartis (NVS) already a partner and JNJ a diversified healthcare player with a major position in diagnostics.Q1 Revenues for GenProbe were $143M up 6% over prior with EPS of $0.54 better than prior year quarter of $0.48 by 13%.Clinical diagnostics products grew by 15% compared to flat sales of blood screening. Financial guidance was reiterated
Illumina (ILMN $71.47) announced Tuesday April 26 with Q1 Revenues up 47% to $282.5M and EPS of $0.35 beating by 4 cents. Sequencing products (HiSeq) sales were strong. The stock dipped to $68 on high volume wednesday but has recovered and up for the week. Revenue estimates are $1.14B for the year with an EPS of $1.48. Market cap is a hefty $9B or a P/S of about 9. The balance sheet was strong at $822M.
Quidel (QDEL $13.55) soared 9% after reporting revenue growth of 110% to $59.6M in Q1 compared to $28.4M in prior year quarter and net income of $11.4(EPS $0.35) compared to a loss of $2.5(EPS loss of $0.09) in prior year. A major molecular diagnostics acquisition helped the top line.The Company raised $57.2M in a secondary offering. Stockholder equity improved to $183M. The stock was downgraded by Wedbush on March 3 but is starting to recover. Insiders and Oracle Investment Management hold over 20% of the stock. Quidel was added to the Rayno Life Science Portfolio at a price of $12.4 as a turnaround play.