March 15, 2023 - 12:56pm EST by
2023 2024
Price: 480.00 EPS 15.6 18.07
Shares Out. (in M): 30 P/E 030.7 36.5
Market Cap (in $M): 14 P/FCF 24 20.3
Net Debt (in $M): -0 EBIT 583 674
TEV (in $M): 14 TEV/EBIT 23.7 20.5

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Bio-Rad (“BIO”) is a leading provider of healthcare consumables and equipment used for research and medical testing. The business is 70% recurring revenue base and has #1/#2 market share positions in ~80% of its business. Additionally, BIO owns 1/3 of German listed bioprocessing company Sartorius (“SRT”). SRT is a leading provider a leading provider of consumables and equipment used for drug manufacturing with a 70% recurring revenue. BIO is a long because;

  • It trades at ~22x NTM P/E for a recession resilient business that will likely CAGR revenue at ~12% and EPS at ~20%.
  • Core revenue growth will likely accelerate over the next 1-3 years driven by their market leadership in the high growth digital PCR market.
  • An upgraded management team will likely unlock 300-400 bps of margin expansion from mainly from operational efficiencies.

At a 24x P/E exit multiple, which is arguably conservative vs. the comps on a growth adjusted basis, there’s 60% upside over the next two years.


BIO is a leading provider of healthcare consumables and equipment used for research and medical testing, with a 70%

recurring revenue base and a #1/#2 market share in 80% of its business. Their geographic sales mix is 42% Americas, 33% EMEA and 25% APAC. They have 15K customers with no customer representing more than 2% of revenue. Their customer end market mix is diversified with 34% hospital labs, 21% academic/government, 15% biopharma, 11% reference labs, 10% transfusion labs and 9% applied. BIO is predominantly comprised of two segments; 1) the Life Sciences segment, which represents ~47% of revenue (which, notably, is the faster growing segment and has the highest incremental margins within the company); 2) the Clinical Diagnostics segment, which represents ~53% of revenue.


SRT is a leading provider of healthcare consumables and equipment used for drug manufacturing and lab research. The company is split into two divisions; 1) BioProcess Solutions “BPS” (~80% of EBITDA) and 2) Lab Products & Services “LPS” (~20% of EBITDA). The larger BPS segment provides the equipment and single-use consumables used in drug production, and is a 75% recurring revenue business with a strong growth profile. The company is a top 3 provider, has been gaining share, and largely sells to pharma/outsourced manufacturing customers, with no single customer representing more than 5% of revenue. The smaller LPS segment sells premium high value added lab products used in clinical research, primarily across the life sciences (55%), chemicals (20%), food and beverage (15%) sectors. SRT is a recession resilient business that will grow revenues at 10-20% for the foreseeable future as a result of its end market exposure to the growth of life sciences R&D spend and its strong position in single-use pharma drug development  equipment. The adoption of single-use (SRT’s main product) is expected to go from 40% to 75+% over time due to significant cost and time-to-market advantages vs. legacy methods. Additionally, SRT is generally spec’d into manufacturing facilities for up to 10-20 years, which creates significant regulatory and financial switching costs, and results in highly visible growth.


Accelerating revenue growth.

  • BIO has accelerated from a MSD grower to a HSD  grower driven by a revenue mix shift to higher growth products. Their end markets continue to grow 5-6% driven by the growth of pharma R&D on life sciences (~6-8% market growth) and the spend of clinical diagnostics (~3-4% market growth).
  • Digital PCR is BIO's most important growth driver, and represents 15% of BIO sales and 3-4 percentage points of total BIO revenue growth at accretive gross margins. Our regular channel checks on digital PCR suggests that the multiyear growth outlook for the market remains robust and that BIO remains the strong #1 in the market.


Substantial margin expansion opportunity.

  • BIO is a company that historically has had great products and operated in attractive end markets, but that was undermanaged due to a lack of urgency to improve operations by the controlling family. A few years ago the son of the founder and current CEO started to focus on improving operations (global ERP system, new management team).
  • BIO has been on a multiyear journey to optimize their margin structure more in line with peers that dates back to the late 2010s. They've made substantial progress to date, but i believe that there is additional low-hanging fruit that will result in 300-400 bps of margin expansion through 2025. Note that margins were temporarily elevated in 2020-21 due to high margin Covid revenue.
  • Top-down cost analysis of BIO vs. the peer set suggests could eventually reach EBIT margins in the high 20s vs. our 2025 estimate of 23% once fully optimized.



  • Controlled business: Chairman / CEO Norman Schwartz controls BIO. He has a significant economic interest in BIO and has taken substantial steps to unlock shareholder value over the last few years.
  • Exposure to pharma R&D Spend: R&D spend is very resilient and the last area for cost cutting. Drastic drug
  • pricing regulation would likely slow pharma R&D spend.
  • SRT valuation: BIO owns 1/3 of SRT. Volatility in SRT’s stock price could lead to stock volatility in the BIO stock price.



  • Earnings beats
  • Mid-sized M&A



We and our affiliates are long Bio-Rad (BIO US) and may buy additional shares or sell some or all of our securities, at any time. We have no obligation to inform anybody of any changes in our views of BIO. This is not a recommendation to buy or sell securities. Our research should not be taken for certainty. Please conduct your own research and reach your own conclusion.



- Sales and earnings acceleration 

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