Q4 2020 Bio Rad Laboratories Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the Q4 and full year 2020, Bio Rad Laboratories, Inc. Earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session too.
To ask a question during the session you will need to press star one on your telephone.
Please be advised that today's conference maybe recorded.
If you require any further assistance please press star zero.
I would now like to hand, the conference well, but to your speaker today, Ron Hutton Sir. Please go ahead.
Thank you Latif and good afternoon, and thank you all for joining US today, we will review the fourth quarter and full year results from 'twenty to 'twenty.
With me on the phone today are Norman Schwartz, our Chief Executive Officer, Ilan, Daskal Executive Vice President and Chief Financial Officer, Andy last Executive Vice President and Chief Operating Officer, Annette Tumolo President of the life Science Group and Dara Wright President of the clinical diagnostics group.
Before we begin our review I would like to caution everyone that we will be making forward looking statements about managements goals plans and expectations, our future financial performance and other matters. These statements are based on assumptions and expectations of future events that are subject to risks and uncertainties.
Included in these forward looking statements are statements regarding the impact of the COVID-19 pandemic on bio Rad results and operations and steps bio Rad is taking in response to the pandemic.
Actual results may differ materially from these plans and expectations and the impact on duration of the COVID-19 pandemic is unknown.
We cannot be certain that bio rad responses to the pandemic will be successful that the demand for bio Rad as COVID-19 related products is sustainable or the bio Rad will be able to meet this demand.
You should not place undue reliance on these forward looking statements and I encourage you to review our filings with the SEC, where we discuss in detail the risk factors in our business.
The company does not intend to update any forward looking statements made during the call today.
Our remarks today will also include references to non-GAAP net income and non-GAAP diluted income per share, which are financial measures that are not defined under generally accepted accounting principles investors should review. The reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings release.
I will now turn the call over to rely on Das goal, our executive Vice President and Chief Financial Officer.
Thank you Ron and good afternoon, and thank you all for joining us and we hope that you and your families are well and staying healthy during these challenging times.
Now before I begin the detailed fourth quarter and full year of discussion I would like to ask Andy last our chief operating officer to provide an update on bio bio Rad operations in light of the current pandemic related environment. This will be on it.
If you haven't seen globally Andy.
Thank you rely on I'd, just like to take a few minutes.
Our current state of operations around the world.
As on opening comments I would like to recognize the tremendous contributions and flexibility of our employees around the world during 2020.
Their response to the shifting needs of operating in a pandemic have been truly exemplary.
So at the onset of the pandemic, we set ourselves three key areas of focus are to manage through this challenging period, which we continue with into 2021.
As a quick reminder, these all the ongoing safety of our employees.
<unk> manufacturing operations to ensure product supply on supports of our customers and making sure. We continue to make progress on our core strategies.
As we closed out 2020 and entered into 'twenty 'twenty one.
We've now achieved a steady state for operating in the pandemic, reflecting employee safety work from home and adoption of company on local policy and practices.
Overall, we have experienced minimal internal transmission of COVID-19 across the company.
And where do we have suspected cases have family internal testing of employees in the U S. Using our droplet digital PCR platform to be very valuable in maximizing productivity.
As we enter 2021, we are well positioned to meet market and customer demands driven by the pandemic and on manufacturing sites and R&D is operating effectively.
In addition, our commercial organization that has deployed digital tools, where appropriate to minimize on site visits to only the essentials required to keep customers up and running on our platform.
So with that brief overview I will pass it back to a line. Thank you. Thank you Andy and now I would like to review the fourth quarter and full year results for 'twenty and 'twenty.
Net sales for the fourth quarter of 2020 were $789 $8 million, which is at 26, 5% increase on a reported basis versus $624 4 million in Q4 of 2019.
On a currency neutral basis sales increased 24, 4%.
The fourth quarter sales included $32 million sales damages award related to intellectual property litigation week 10, ex genomics covering the period between 2015 and 2018.
Excluding this 32 million on the fourth quarter year over year currency neutral revenue growth was $19 four per cent.
The fourth quarter year over year revenue growth also benefited from an easy compare off about $10 million revenue carryover to Q1 of 2020 related to the December 2019 cyber attacks.
On a geographic basis, we experienced currency neutral growth across all three regions.
We saw strong demand for products associated with COVID-19 testing and related research.
Generally we are seeing most academic diagnostics labs now running between 70, and 90% capacity, which is similar to what we saw in Q3.
We estimate that COVID-19 related sales were about $132 million in the quarter.
Sales of life Science group in the fourth quarter of 2020.
$428 $5 million compared to $242 million in Q4 of 2019, which is 77, 1% increase on a reported basis and a 73, 9% increase on a currency neutral basis and it was driven by our <unk>.
See our product lines as well as strong performance in the Biopharma segment.
The fourth quarter revenue also included a $32 million of damages award related to intellectual property litigation.
Excluding the $32 million damages award the currency neutral revenue growth was 69%.
The year over year growth in the fourth quarter was across all of the life science key product areas.
Process media, which can fluctuate on a quarterly basis, so strong double digits year over year on growth in the quarter over the same quarter last year.
Excluding process media sales and a $32 million damages award the underlying life Science business grew 64, 6% on a currency neutral basis versus Q4 of 2019.
Growth in the overall life Science segment was offset by continued softness in academic research demand as these lives around the globe are still operating below capacity. However, we believe that some of the demand was associated with larger than normal end of year budget release.
On a geographic basis life science currency neutral year over year sales grew across all regions.
Last month, the FDA granted an EUA for our Covid <unk> assay kit, which runs on bio Rad existing see effects PCR platforms as well as Q PCR systems for other from other providers.
Hey, Keith He's a multiplex test that targets two separate regions in the viral genome to ensure greater sensitivity and tolerance to potential mutations.
In addition earlier today, we received an EUA approval from the FDA for Covid flu, a and flu B P. C are syndromic multiplex test.
These test, which allows discrimination between each of the three different viruses all suraj on bio Rad see effects PCR platforms as well as Q P. CRM systems from other providers.
Yeah.
Sales of clinical diagnostics products in the fourth quarter were $359 $6 million compared to $379 million in Q4 of 2019, which is at 5.1% decline on a reported basis and a six 6% decline on a car.
See neutral basis.
During the fourth quarter strength, and our quality controls products was offset by weakness across the rest of the diagnostics portfolio.
Resurgence of Covid cases during the fourth quarter did impact the recovery of routine testing trends and elective surgeries.
On a geographic basis, the diagnostics group was relatively flat in the Americas, but posted declines in the other regions.
The reported gross margin for the fourth quarter of 2020 was 58, 3% on a GAAP basis and compares to 52, 9% in Q4 of 2019.
The current quarter gross margin benefited mainly from better product mix lower service costs higher manufacturing utilization.
Well, it's $23 million gross margin benefit associated with a 10 ex genomics damages award.
Amortization related to prior acquisitions recorded in cost of goods sold was $4 6 million compared.
Compared to $4 5 million in Q4 of 2019.
SG&A expenses for Q4 of 2020 were $219 1 million or 27, 7% of sales compared to $214 2 million or 34, 3% in Q4 of 2019.
The year over year, SG&A expenses benefited from ongoing cost savings initiatives and lower discretionary expenses and was offset somewhat by higher employee related expenses.
Total amortization expense related to acquisitions recorded in SG&A for the quarter was $2 4 million versus $2 1 million in Q4 of 2019.
Research and development expense in Q4 was $65 $8 million or eight 3% of sales compared to $57 1 million or nine 1% of sales in Q4 of 2019.
Q4, operating income was $175 $2 million or 22, 2% of sales compared to $59 2 million or nine 5% of sales in Q4 of 2019.
Looking below the operating line the change in fair market value of equity Securities Holdings.
The $904 million of income to the reported results and is substantially related to holdings of the shares of Sartorius AG.
During the quarter interest and other income resulted in a net expense of $1 million compared to $5 8 million of expense last year.
I forget effective tax rate for the fourth quarter of 2020 was 22, 2% compared to 29% for the same period in Q in 2019.
Our GAAP tax rate in 2020 in 2019 were affected by the large unrealized gains in equity Securities. In addition to 2019 tax rate included a discrete benefit which allowed us to apply higher foreign tax credits.
Reported net income for the fourth quarter was $839 1 million and diluted earnings per share were $27 81.
This is an increase from last year and these again substantially related to changes in the valuation of the Sartorius holdings.
Moving on to the fourth quarter non-GAAP results.
Looking at the results on a non-GAAP basis, we have excluded certain atypical and unique items that impacted both the gross and operating margins as well as other income.
These items are detailed in the reconciliation table in the press release.
Looking at the non-GAAP results for the fourth quarter in sales, we have excluded a $32 million damages awards.
In cost of goods sold we have excluded $8 7 million IP.
<unk> costs associated with the damages award.
$4 6 million of amortization of purchased intangibles and small restructuring benefits.
These exclusions moved the gross margin for the fourth quarter of 2022 on non-GAAP gross margin of 58, 2% versus 54, 1% in Q4 of 2019.
Non-GAAP SG&A in the fourth quarter of 2020 was 28, 2% versus 31, 7% in Q4 of 2019.
In SG&A on a non-GAAP basis, we have excluded amortization of purchased intangibles of $2 4 million.
Legal related expenses of $6 $3 million and.
Fluctuations in acquisition related benefits of $3 $1 million.
Non-GAAP R&D expense in the fourth quarter of 2020 was eight 7% versus eight 2% in Q4 of 2019.
In R&D on a non-GAAP basis, we have excluded a small restructuring benefits.
The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 22, 2% on a GAAP basis to 21, 4% on a non-GAAP basis. These non-GAAP operating margin compares to a non-GAAP operating margin in Q4 of <unk>.
19 of 14, 3%.
We have also excluded certain items below the operating line, which are the increase in value of the sartorius equity holdings of $904 3 million $2 $1 million associated with venture investments.
And $3 million of interest income associated with a 10 ex damages award.
Our non-GAAP effective tax rate for the fourth quarter of 2020 was 24, 3% compared to 17, 7% in 2019.
The non-GAAP tax rate for the fourth quarter of 2019 was lower compared to 2020 due to a discrete benefits, which enabled us to apply higher foreign tax credits.
And finally non-GAAP net income for the fourth quarter of 2020 was $121 million.
Our $4.01 diluted earnings per share compared to $70 million and $2 32 per share in Q4 of 2019.
Moving on to the full year results net.
Net sales for the full year of 2020 were $2 billion and $546 million.
On a reported basis, excluding the 10 ex damages award of $32 million sales were $2 billion and $514 million, which is eight 9% growth on a currency neutral basis.
We estimate that COVID-19 related sales were about $313 million.
Sales of life Science group for 2020, we're $1 billion and $231 $8 million.
Excluding the 10 ex damages award of $32 million.
The year over year growth was 35% on a currency neutral basis.
The majority of the year over year growth was driven by our core PCR products droplet digital PCR and process media.
On a geographic basis life science currency neutral on full year over year sales grew across all three regions.
Sales of clinical diagnostics products for 2000, 21 billion and $305 million.
Which is down seven 1% on a currency neutral basis.
On a full year basis clinical labs have seen a significant negative impact of the pandemic, which was slightly offset by growth within quality controls.
On a geographic basis clinical diagnostics full year over year sales saw declines across all regions.
The full year non-GAAP gross margin was 56, 9% compared to 55% in 2019.
The year over year margin increase was driven mainly by product mix and the bundle fits shrink efficiencies.
Somewhat offset by higher logistics cost.
Full year, GAAP SG&A sort of full year non-GAAP SG&A was 39%.
Compared to 34, 4% in 2019.
The lower SG&A was driven by our ongoing cost savings initiatives and lower discretionary expenses offset somewhat by higher employee related expenses.
Full year non-GAAP R&D was nine 1% versus eight 5% in 2019 and.
Full year non-GAAP operating income was 17% compared to 12% in 'twenty in 2019.
Lastly, the non-GAAP effective tax rate for the full year of 2020 was 24% compared to 24, 1% in 2019.
The non-GAAP effective tax rate for 2020 was consistent with our guidance of 24%.
Moving on to the balance sheet.
Total cash and short term investments at the end of 2020 was $997 million compared.
Compared to 1 billion in $120 million at the end of 2019, and 1 billion in $160 million at the end of the third quarter of 2020.
In December we repaid the $425 million of outstanding senior notes.
Year end inventory decreased by about $18 million from the third quarter of 2020 the.
The decrease in inventory was driven by higher demand for COVID-19 related products.
During the fourth quarter, we did not purchase any shares of our stock.
We had a total of $273 million available for potential share buybacks.
Full year share buybacks was about 292000 shares for $100 million.
In 2019, we purchased about 88000 shares of our stock for $28 million.
For the fourth quarter of 2020 net cash generated from operating activities was $284 7 million, which compares to $159 $8 million in Q4 of 2019.
For the full year of 2020 net cash generated from operations was $575 $3 million versus $457 $9 million in 2019.
The adjusted EBITDA for the fourth quarter of 2020 was 25, 2% per sales day adjusted EBITDA in Q4 of 2019 was 18, 7%.
Full year, adjusted EBITDA, including the Sartorius dividend.
It was $546 4 million or about 21, 7% compared to 17, 5%.
In 2019.
Net capital expenditures for the fourth quarter of 2020 was $39 $2 million and full year Capex spend was 19 eight points to $9 million.
Depreciation and amortization for the fourth quarter was $36 $2 million and $138 $1 million for the full year.
In December we communicated our long range plan.
We project revenues to grow to an overall range of $2 75, and $2 $85 billion by the end of 'twenty and 'twenty three.
This growth will be driven by droplet digital PCR single cell applications clinical diagnostics bio production and increasing growth in biopharma customers.
We expect non-GAAP gross margin in 2023 to land in a range of 57 to 57, 5%.
We expect these positive increase to come from footprint from footprint optimization and better capacity utilization.
Adjusted EBITDA margin should be in the range of 23, and 24% based on top line growth productivity improvements and SG&A leverage.
Last week, we initiated a strategic strategy driven restructuring plan to improve operating performance as part of our 2023 goals.
The restructuring plan, primarily impacts our operations in Europe and includes the elimination of certain positions the consolidation of certain functions and the relocation of certain manufacturing operations from Europe to Asia.
The restructuring plan is expected to eliminate a total of approximately 530 positions.
Roxanne monthly 200 positions in manufacturing and 330 positions across our SG&A and R&D functions.
And subsequently creation of a total of about 325, new positions approximately 100, new positions in manufacturing and 225, new positions across SG&A and R&D functions.
The restructuring plan will be implemented in phases over the next two years.
Result of this restructuring plan, we expect to incur between approximately 125 and $130 million in total cost, which we anticipate will consist of approximately $86 million cash expenditures in the form of one time termination benefits to the affected employees.
Approximately $19 million in capital expenses associated with our restructuring plan and about $20 million to $25 million in one time transition cost.
We anticipate about $80 million to $90 million of restructuring charges related to this restructuring plan will be recorded in the first quarter of 2021 with the balance recorded by the end of 2022.
Moving on to the non-GAAP guidance for 2021.
While we are pleased with the overall performance in 2020, we continue to be uncertain about the duration and impact of the COVID-19 pandemic, although we assume a gradual return to pre pandemic activity levels and normalized business mix.
We are guiding a currency neutral revenue growth in 'twenty 'twenty, one to be between four five and 5%.
We estimate about 10% to 11% revenue growth for the diagnostics group.
The life Science group year over year revenue is expected to be about flat as we projected COVID-19 related sales in 2021 to be about half versus 2020.
We continue to assume that we will experience quarterly revenue fluctuations for process media, although we estimate an overall double digit growth for the full year.
Full year non-GAAP gross margin is projected between 56, 2% and 56, 5% and.
Full year non-GAAP operating margin to be between 16% and 16, 5%.
We estimate the non-GAAP full year tax rate to be between 24 and 25%.
Capex is projected between 120 and $130 million in.
Full year, adjusted EBITDA margin of about 21%.
And now I'll turn the call to Norman for a few comments.
Okay, great. Thanks, Ilan I don't really have a lot to add.
I do think companies would say that 2020 is certainly one for the history books.
I think as I think back on the year and I think as Andy alluded to in the beginning it was certainly an all out effort. This last year to manage a myriad of challenges.
And not to lose sight of where we're headed in the longer term.
Yeah, I think as well as heal on pointed out.
Yeah. The Covid related revenues are expected to moderate in 'twenty, one from 'twenty 'twenty, one but I.
I do feel that there is still a big question of when the pandemic will come under control. So in the meantime, we will continue to work on our core initiatives to allow us to make progress.
Over the next few years and certainly we continue your continued interest.
We appreciate your continued interest in bio Rad. So thank you.
Thank you norm on operating we will now open the line to take your questions.
Yes, Sir as a reminder to ask a question you will need to press star one on your telephone again Thats Star one on your touched on telephone to ask a question to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Dan Leonard of Wells Fargo. Your question. Please.
Great. So my first question can you help us frame frame the restructuring announcement, what's the annual savings target you hope to achieve when the dust settles in and how would you characterize the efforts is it part of an ongoing journey or is this the big Bang on the path to 2023 with the balance of the margin lift is coming from.
Fixed cost leverage.
I'll start on Andy probably will chime in on that Dan. Thank you for the question.
Generally speaking then it's part of our you know three years trajectory that we had communicated back in December.
This restructuring will go through the end of next year. So it's a two years initiative to complete.
And basically.
Everything is kind of baked in in all the three years kind of projections that we provided in order to achieve our 2023 goes it's not necessarily a one big Bang on me and there are different phases to these plan and and again it will take throughout the next two years.
Yeah, I don't have anything material threat. So that I mean, we were working on other things as well costs continuing weighted but it is a major on materials.
Our restructuring.
Okay, and then just my follow up I mean could you elaborate on performance in your clinical segment. It does seem like the quarter on quarter weakening in the organic growth rate. It seems a bit this gordon with what some of the markets are saying some of your customers are saying so could you elaborate further on what you think the drivers of that were either from.
A product mix standpoint, or a regional standpoint, and any color would be helpful. And then of course, what would what would improve that sure.
Sure Dara do you want to take that one.
Sure.
So really it is a story.
On a mix and region so at a macro level we're at.
80% to 90%.
Pre COVID-19 levels and in North America, we're very close to pre Covid performance that the real material dynamic is related to your Ami.
The step up in in restrictions and Lockdowns that we saw in Q4 had a pretty.
No big impact on elective surgeries, so I would say blood typing you know is a real story there in Europe as an area that still is kind of getting back to pre COVID-19 kind of routine level and then in China as well, we saw a shift a little bit of a shift from typical wellness program.
Covid related.
These programs that moderated a bit the diabetes.
So it kind of puts and takes regionally puts and takes within different product lines.
Certainly things continue to move in the right direction with North America being kind of a bright spot there.
Okay. Thanks for the color.
Thank you Dan.
Thank you. Our next question comes from the line of Brandon Couillard.
Jeffrey Your line is open.
Hey, Thanks, good afternoon.
Hum on in terms of the 'twenty one top line outlook.
Pretty encouraging given some of the comps you're lapping and kind of the roll off of these COVID-19 tailwind.
Can you help us understand some of the upside and downside variables.
That youre thinking about as far as the recovery in diagnostics should we anticipate that to mostly come in the back half of the year any color you can help us with in terms of the phasing of organic growth on.
Overall sort of moving through the year.
Yeah, Brian I'll try and put a bit more color around that so yeah, obviously, a big step back on the Covid sales anticipated.
As we indicated what clinical cold clinical diagnostics.
Continuing the recovery trend that Dara talked about but not until second half do we get back to.
Full normal consumption in our view.
The first half on stroke about some COVID-19 effect for guidance you're roughly half.
All of last year, the Covid sales.
And we expect the majority of that to be in the first half of the year.
But you know it's.
A lot of that recovery in the call.
Research Life Science research products and you know on a good recovery in our clinical diagnostics franchises progress.
Progresses.
In terms of your new Covid Pcr tests.
To what extent if at all have you baked in any incremental contribution from those tests.
Could you talk about your manufacturing capacity on a on a month.
<unk> basis.
And remind us approximately how big is your.
Global PCR installed base.
So I kind of asked and answered she'd like to comment and then on my bad on that.
Sure.
We spent a lot.
A lot of the year scaling manufacturer to meet demand both for our platforms and other reagents and consumables and I think we're in a pretty good place right now to meet our customer demand across all of our PCR products.
So that's good.
Good news for us on our customers.
We are we have been selling them Q PCR product for <unk>.
Yeah, well over a decade, and there are thousands and thousands and thousands of products out there and we certainly sold an awful lot this year Brandon so.
You know, where we're going to be a as you might imagine making sure we approach those customers are.
With.
Our new test options.
They may need to scale or have need for reliable second sources.
Thanks for that and I'd say, Brian thinking about the numbers.
We've baked in a modest contribution within all covered related sales since we now will light a strategy as you know.
Generally second source.
To the installed base and so so it's a modest contribution as we look at all yet.
Got you on maybe a follow up for you on that.
On the DD Pcr business.
Can you give us a sense of just how fast overall.
Overall that business is growing maybe including or or or ex COVID-19 and are you pushing hard enough into diagnostics, specifically I mean, you've got one FDA approved test on the platform or any other kits in development that could help accelerate uptake.
Net setting.
Well that's a that's a great question. So you probably know that we talked about strong double digit growth pretty much in every earnings release from that.
Alex area, and we continue to anticipate that in the future.
The.
Market in.
The research market is still growing strongly the book.
Pharma discovery and production markets are growing strongly and we certainly do.
You can imagine that.
We are investing.
Right.
Significantly I think in moving into diagnostics with our partitioning platforms. So I think you know stay tuned for what's to come there.
Yeah.
Okay.
Maybe one more.
Norman.
The start towards your stake is worth about 12 billion now give or take that's about 65% of your equity value implied valuation on your stock stripping that out still pretty low.
Is there any sense of urgency at the board level to monetize the stake is the board considering any strategic alternatives such as a tax free spin.
If not why not and.
Any update to share in terms of.
What you referred to on the third quarter call as far as potentially being deemed on investment entity.
Sure.
Planning strategies as opposed to address that thank you.
So we certainly havent at the board level talked about a tax free spin.
As we said in the past, we continue to see that as a.
As a long term investment and and.
I think we've got seven or eight years to go on the trust.
Yeah.
Obviously, they continue to do very well and Uh huh.
So.
That's kind of where we are today.
As you know, we we've always considered to be a strategic investment, but you know obviously, if something more strategic comes along.
There is the possibility to liquidate that position.
And Brendan regarding your question about the investment.
We continue to work to resolve it and as we mentioned in the last quarter on its probably would take.
A few more quarters for us too.
Resolve this these items.
Great I'll hop back in the queue. Thank you thanks Brandon.
Thank you. Our next question comes from the line of Patrick Donnelly of Citi. Your line is open.
Hey, thanks for taking the questions guys.
Nor on maybe what we got you on staying on that topic, there with sartorius from the past quarters in past meetings, we've had with you.
There has been some willingness to kind of address larger deals and then you felt like maybe you were kind of wanting to do something larger.
Sounds like now.
Correct me, if I'm wrong, maybe softening a little bit on that and kind of happy with where sartorius is can you just talk about I guess the M&A landscape.
How you guys are feeling on the capital deployment side.
Yes, it would just be curious to hear your perspective on the opportunities out there, yes. So I think like many of our peers. You know we do continue to look for those products and technologies to add to our portfolio.
I think as you know and we've said more recently.
We are especially interested in the idea of doing something larger and maybe even transformational.
But of course as you know these these larger transformational opportunities are few and far between.
But we we continue to pursue the opportunities that.
They come our way.
Understood Okay.
And then a lot maybe for you just on the Covid expectations for 'twenty, one and certainly appreciate the I'll call. It half of what it was in 'twenty.
At the same time norm kind of touched on at the end of the prepared remarks, there. It's very uncertain. How this whole thing will play out the pandemic doesn't seem to be going anywhere. Unfortunately.
So can you just talk about I guess the conservatism layered in here, obviously <unk> came in well above what you guys are expecting on Covid.
So maybe just talk through I guess, how you guys planned out that number and then the pacing throughout the year, you kind of projecting a big tail off in the back half as the pandemic hopefully subsides, just just wanted to get a full understanding sure. Thank you Patrick Jenna.
Generally speaking you are right I mean, we we took into account or what we project on what we believe that.
The second half of the year will kind of normalize.
And we will see the gradual improvement in diagnostics and the tailwind from the Covid related sales will start to tail off so.
The way that if you think about kind of calendar rising.
First half in our projection we will benefit.
One more from the Covid related from relative to the second half that's just the way we think about it.
And we will have to see how everything will shape up but.
Hopefully with the vaccines et cetera, the second half will normalize.
Yes sure.
And then one for Matt just on the wastewater opportunity certainly is getting a little more attention to feel like momentum is picking up there do you have any better sense of how big this market could be for you guys in the near term and then maybe just talk about the uptake you saw on <unk>, and then kind of expectations here in the near term.
Sure.
This is this is brand new market, obviously and kind of rapidly developing and emerging.
Think that our best estimates are probably somewhere up to $200 million over the next several years day 45 years.
We're looking closely at it right now most of the demand is.
North America and U S based but we are certainly working outside the U S to try and get attention to the utility of that kind of surveillance.
We are about to launch.
And application kit that will support.
The surveillance and will add variance to that.
As we can so.
We're taking a good good run it making sure that we can supply the market with products that will help.
Okay, Great and then just a quick housekeeping one for you Andy I. Appreciate you, saying the PCR test is a modest benefit just got a couple a couple of investor questions in terms of what modest means we should we think about 10 to 20 million or just any any ballpark would really help in terms of a dollar amount, yes, I think I think it should be roughly.
In that range.
Hum.
As I said.
Our upside was driven predominantly by the instrument placements and so we recognize we want in the molecular diagnostics segment.
This is this is coffee line and saw where to go work on the market.
Well reasoned aspirations on that on those products.
Understood I appreciate all the color guys. Thank you. Thank you Patrick.
Thank you once again to ask a question. Please press star one on your touch tone telephone again star one on your Touchtone telephone to ask a question. Our next question comes from the line of Jack Meehan net.
From research your question please.
Thanks, Good afternoon.
Hoping you could give a little bit more color on the bioprocess business than year sounds like from the commentary you ended on a pretty strong note.
Was there anything you could call out in terms of demand and maybe did any of the COVID-19 vaccines help contribute to that.
On the answer you want to take this one sure.
Well certainly we all of the the vaccine developers or are already our customers in this area.
But we this is a business that whilst there are some fluctuations quarter over quarter overall has been delivering strong double digit growth and primarily it's because of the markets that we address with lift these products the biologic drug development and now vaccine development.
On production so.
I can't say that that the result was primarily because of uptake from from a vaccine manufacturers, although where there are in all of those accounts.
On the business is strong and growing.
Great and then on the Litigation award that you recognized in the quarter that covered the period 2015 through 2018.
What about 2019 through 2020, and how are you going to account for this kind of on a go forward basis.
Yes.
But.
I was just going to say you know we really.
We still have open litigation and we don't really.
<unk> discussed that in advance, but perhaps you know Elon has something to add about how we're going to treat it.
No youre absolutely right so.
We don't anticipate to book anything additional.
So long as the litigation is still on.
Got it.
I know when you laid out the new target.
On the growth drivers you talked about a single cell.
Andy or a net I was wondering if you could just give us an update on some of the work Youre doing there and.
Any updates we can maybe expect in terms of products from Chelsea This year.
Sure.
You know we it is still early we haven't even had a year yet post acquisition.
Certainly it was an unusual time to acquire a start up.
We are investing.
I think significantly in in that area in our our healthy acquisition and.
Our goal is to put compelling tools for single cell analysis that really provide best in class biological insights.
And.
We think towards the latter part of this year youre going to start seeing some of those products roll out the door.
Great.
Maybe just one clean up can you just confirm.
In terms of the Covid testing tailwind.
Are you going to be booking that entirely on the life science side or one of the test kits be reported in diagnostics from 'twenty one.
I mean, it's predominantly still life science right.
If there's any pick up on.
The serology test on that.
Hmm diagnostics five is very very small.
We've got some some antigen price sales but.
They'll get reported in clinical efficacy.
Are you now become material contributors.
Thank you.
Thank you Jay.
Okay.
Thank you. Our next question is a follow up from Brandon Couillard of Jefferies. Your line is open.
Great. Thanks.
In terms of the maybe a lot or or not in terms of the COVID-19.
The benefit in the fourth quarter.
Was all of that PCR instrumentation and was DD PCR a big part of the sequential uptick.
Brandon most of it was associated with our Q PCR products certainly there was some upside from wastewater in.
In Q4, but mostly.
We were getting kind of organic.
Gross out of the droplet digital Pcr business.
And by the fourth quarter, we had really.
Completed scale up of all of our.
Manufacturing for the for the platform so.
That helped on line.
Okay, and then Oh on the FX rate is obvious.
Obviously moved more favorably recently do you have a general sense of.
What currency should add to the top line in 'twenty, one and then maybe a sense of how accretive but it might be to the year over year margin expansion.
It's a great question.
Friends on you know it was probably about 2% for 2020, so when you think about 2021.
The projection that the dollar will continue to weaken so obviously you know it does contribute to the to the top line.
There is obviously some negative impact on the operating expenses.
As well as on the.
The manufacturing right I mean.
Net net.
There is still some force rule, but.
I don't have here kind of specific number to call out but.
For sure you know on the top line.
Our country dinner.
Got you and then the last one from me or are you still planning to host them type of analyst day event in the first half of the year. We do have we do plan to hosted sometime later this year, we had to kind of find the right timing I mean, hopefully again.
Vaccines.
You know everything will normalize so this would be a great opportunity.
Very good thank you. Thanks.
Thank you at this time I would like to turn the call back over to Ilan Daskal for closing remarks, Sir.
Thank you. Okay. So we appreciate you joining the call today and your interest in bio Rad and we look forward to connecting soon thank you everyone.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Yes.
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