The 2 Sides of Bio-Rad

Bio-Rad Laboratories' (AMEX: BIO) two businesses seem to be following the telltale color scheme its products use. The clinical diagnostics segment is green -- full steam ahead -- while growth in the life sciences segment is a more cautionary yellow.

Revenue from life sciences grew an unimpressive 4% for the third quarter because a decline in sales of BSE (bovine spongiform encephalopathy) tests bogged down the segment. Excluding the BSE testing from both quarters, the segment had decent 8% year-over-year growth in revenue. That's pretty impressive, given that spending by academic laboratories hasn't expanded much because of National Institutes of Health (NIH) budget issues.

The clinical diagnostics segment logged an impressive 17.6% year-over-year increase in revenue. During the quarter, Bio-Rad placed more than two dozen of its BioPlex 2200 instruments in Quest Diagnostics (NYSE: DGX) laboratories, which should drive reagent sales in future quarters as Quest begins to use the instruments.

Another area of potential sales growth is for Bio-Rad's recently approved test for methicillin-resistant staphylococcus aureus (MRSA). Part of the sales growth this quarter was due to sales of the MRSA test in Canada, so it will be interesting to see if Bio-Rad can penetrate the market stateside with tough competition from Becton, Dickinson's (NYSE: BDX) and Cepheid's (Nasdaq: CPHD) recently approved tests.

I think that this shift in growth, whether intended or not, is a good move for Bio-Rad. As baby boomers age, there will be increased spending on health care, and I'd rather be in the business of selling equipment to a growing market than one dependent on the government handing out grants.

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