Continued demand for drug research and development tools has likely translated into strong second-quarter profit for life-sciences companies, which begin reporting financial results next week.
Life-sciences firms make a range of testing and diagnostic products used by companies to research and develop medical treatments. Several of the largest industry players include Madison, N.J.-based Quest Diagnostics Inc. and Milford, Mass.-based Waters Corp.
Overall, the industry's quarterly profits will meet or beat Wall Street expectations, says Leerink Swann & Co. analyst Isaac Ro.
"The second quarter is typically a seasonally strong period for life science tools spending and we saw no major disruptive forces during the quarter," he wrote in a note to clients.
Thomas Weisel Partners analyst Peter Lawson expects a weak dollar and more business in emerging markets like China and India to help boost the sector's results.
Palo Alto, Calif.-based Varian Inc. opens earnings season for the sector on Monday and Leerink's Ro expects the company to meet the consensus forecast of 67 cents per share. The company will likely continue benefiting from broader global demand, he said.
Varian shares rose 94 cents, or 2 percent, to $50.28 in afternoon trading.
Waters Corp. also is expected to meet analysts' average forecast for profit of 71 cents per share when it reports results July 22, Ro said, based on the strength of its diagnostic tools.
Waters shares fell $1.40, or 2.2 percent, to $63.46.
Carlsbad, Calif.-based Invitrogen Corp., which makes molecular testing tools used in biotech drug development, among other products, reports results July 24 and could top Wall Street's 56 cents-per-share forecast by 3 cents. The company is in the midst of buying Foster City, Calif.-based Applied Biosystems for $6.4 billion in a move to combine the companies' variety of medical research tools.
Also poised to top expectations, Ro said, is Wilmington, Mass.-based Charles River Laboratories International Inc. He expects the company to beat forecasts of 73 cents by a penny.
"We came away from Charles River's June 4 investor meeting with a positive impression of (the company's) new capacity in Massachusetts, Nevada and Canada," Ro said. "The company is well-positioned to capture the long-term outsourcing opportunities from the drug industry."
Invitrogen shares rose 93 cents, or 2.2 percent, to $41, while Charles River shares rose 42 cents to $64.71 in afternoon trading.
Looking ahead, Thomas Weisel's Lawson said the Asian markets, including China and India, will continue to represent a larger portion of revenue for life sciences companies along with clinical research organizations.
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