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Bio-Rad Laboratories Inc (NYSE:BIO)
Q4 2020 Earnings Call
Feb 11, 2021, 6:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 and Full Year 2020 Bio-Rad Laboratories Inc. Earnings Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ron Hutton. Sir, please go ahead.

Ronald W. Hutton -- Treasurer

Thank you, Latif. Good afternoon and thank you all for joining us. Today, we will review the fourth quarter and full year results of 2020. 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 management's 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's results and operations, and steps Bio-Rad is taking in response to the pandemic. Our actual results may differ materially from these plans and expectations and the impact and duration of the COVID-19 pandemic is unknown. We cannot be certain that Bio-Rad's responses to the pandemic will be successful, that the demand for Bio-Rad's COVID-19 related products is sustainable or that 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 Ilan Daskal, our Executive Vice President and Chief Financial Officer.

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Thank you, Ron. Good afternoon. 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 discussion, I would like to ask Andy Last, our Chief Operating Officer, to provide an update on Bio-Rad's operations in light of the current pandemic-related environment that we are experiencing globally.

Andy?

Andrew Last -- Executive Vice President, Chief Operating Officer

All right. Thank you, Ilan. I'd just like to take a few minutes to review our current state of operations around the world. As an opening comment, 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 to manage through this challenging period, which we continue with into 2021. As a quick reminder, these are; the ongoing safety of our employees, continuing manufacturing operations to ensure product supply and support of our customers, and making sure we continue to make progress on our cost strategies.

As we close out 2020 and entered into 2021, we've now achieved a steady state for operating in the pandemic reflecting employee safety, work from home and adoption of company and local policy and practices. Overall, we have experienced minimal internal transmission of COVID across the company and where we have suspected cases, have found the 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 our manufacturing sites, and R&D is operating effectively. In addition, our commercial organization has deployed digital tools where appropriate to minimize onsite visits to only the essentials required to keep customers up and running on our platforms.

So with that brief overview, I will pass it back to Ilan. Thank you.

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Thank you, Andy. And now would like to review the fourth quarter and full year results for 2020. Net sales for the fourth quarter of 2020 were $789.8 million, which is a 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 of damages award related to intellectual property litigation with 10x Genomics, covering the period between 2015 and 2018. Excluding the $32 million, the fourth quarter year-over-year currency neutral revenue growth was 19.4%. The fourth quarter year-over-year revenue growth also benefited from an easy compare of about $10 million revenue carryover to Q1 of 2020, related to the December 2019 cyberattack.

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 and diagnostic 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 were $428.5 million, compared to $242 million in Q4 of 2019, which is a 77.1% increase on a reported basis and a 73.9% increase on a currency neutral basis, and it was driven by our PCR product lines, as well as strong performance in the biopharma segment. The fourth quarter revenue also included a $32 million damages award related to intellectual property litigation. Excluding that $32 million damages award, the currency neutral revenue growth was 60.9%. 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-digit year-over-year growth in the quarter, over the same quarter last year. Excluding process media sales and the $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 labs 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 qPCR assay kit, which runs on Bio-Rad's existing CFX PCR platforms, as well as qPCR systems from other providers. The assay kit is 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 FluA and FluB qPCR syndromic multiplex test. These tests, which allows discrimination between each of these three different viruses, also runs on Bio-Rad's CFX PCR platforms, as well as qPCR systems from other providers.

Sales of Clinical Diagnostics products in the fourth quarter were $359.6 million compared to $379 million in Q4 of 2019, which is a 5.1% decline on a reported basis and a 6.6% decline on a currency neutral basis. During the fourth quarter strength in our quality controls products was offset by weakness across the rest of the diagnostics portfolio. Resurgence of COVID cases during the fourth quarter, the impact of the recovery of routine testing trends and the 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, as well as $23 million [Phonetic] gross margin benefit, associated with the 10X Genomics damages award.

Amortization related to prior acquisitions, recorded in cost of goods sold was $4.6 million 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 8.3% of sales compared to $57.1 million, or 9.1% of sales in Q4 of 2019. Q4 operating income was $175.2 million or 22.2% of sales, compared to $59.2 million or 9.5% of sales in Q4 of 2019.

Looking below the operating line, the change in fair market value of equity securities holdings added $904 million of income to the reported results and this is substantially related to holdings of the shares of Sartorius AG.

During the quarter, interest in other income resulted in a net expense of $1 million compared to $5.8 million of expense last year. Our GAAP effective tax rate for the fourth quarter of 2020 was 22.2% compared to 20.9% for the same period in 2019. Our GAAP tax rate in 2020 and 2019 were affected by the large unrealized gains in equity securities. In addition, the 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 is 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 the $32 million damages award. In cost of goods sold, we have excluded $8.7 million IP-license costs associated with the damages award. $4.6 million of amortization of purchased intangibles, and a small restructuring benefit. These exclusions moved the gross margin for the fourth quarter of 2020 to a 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 purchase intangibles of $2.4 million, legal related expenses of $6.3 million and restructuring and acquisition-related benefits of $3.1 million.

Non-GAAP R&D expense in the fourth quarter of 2020 was 8.7% versus 8.2% in Q4 of 2019. In R&D, on an 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 2019 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 the 10X 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 benefit, which enabled us to apply higher foreign tax credits. And finally, non-GAAP net income for the fourth quarter of 2020 was $121 million or $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 sales for the full year of 2020 were $2.546 billion on a reported basis, excluding the 10X damages award of $32 million, sales were $2.514 billion which is 8.9% growth on a currency neutral basis. We estimate that COVID-19 related sales were about $313 million.

Sales of Life Science group for 2020 were $1.23108 billion. Excluding the 10X 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 four PCR products, droplet digital PCR and process media. On a geographic basis, Life Science currency neutral full year-over-year sales grew across all three regions.

Sales of Clinical Diagnostics products for 2020 were $1.305 billion which is down 7.1% 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 manufacturing efficiencies, which was somewhat offset by higher logistics costs. Full year non-GAAP SG&A was 30.9% 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 9.1% versus 8.5% in 2019 and full year non-GAAP operating income was 17% compared to 12% 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 to $1.120 billion at the end of 2019 and $1.160 billion 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 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 have a total of $273 million available for potential share buybacks. Full year share buybacks was about 292,000 shares for $100 million. In 2019, we purchased about 88,000 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% of sales. The adjusted EBITDA in Q4 of 2019 was 18.7%. Full year adjusted EBITDA, included the Sartorius dividend, was $546.4 million or about 21.7% compared to 17.5% in 2019. Net capital expenditures for the fourth quarter of 2020 were $39.2 million and full year capex spend was $98.9 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 billion and $2.85 billion by the end of 2023. 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 this positive increase to come 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 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, approximately 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. As a result of this restructuring plan, we expect to incur between approximately $125 million and $130 million in total costs, 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 the restructuring plan, and about $20 million to $25 million in one-time transaction 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 2021 to be between 4.5% 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-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 million and $130 million and full year adjusted EBITDA margin of about 21%.

And now, I'll turn the call to Norman for a few comments.

Norman Schwartz -- Chairman of the Board, President and Chief Executive Officer

Okay, great. Thanks Ilan. I don't really have a lot to add. I do think companies would say that that 2020 is certainly one for the history books. 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.

I think as well -- as Ilan, pointed out, the COVID-related revenues are expected to moderate in 2021. But I do feel that there is still a big question of when the pandemic will come under control. So in the meantime, we'll continue to work on our core initiatives to allow us to make progress over the next few years and certainly we appreciate your continued interest in Bio-Rad. So thank you.

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Thank you, Norman. Operator, we will now open the line to take your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Dan Leonard of Wells Fargo. Your question please.

Dan Leonard -- Wells Fargo -- Analyst

Great. So my first question, can you help frame the restructuring announcement? What's the annual savings target you hope to achieve when the dust settles? 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 lifts coming from fixed cost leverage?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

I will start and Andy probably will chime in, Dan. Thanks for the question. Generally speaking, Dan, it's part of our three years trajectory that we have communicated back in December. This restructuring will go through the end of next year. So it's a two years initiative to complete it 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 goals. It's not necessarily a one big bang. I mean, there are different phases to this plan. And, again, it will take -- throughout the next two years. Andy, I don't know, if you have...

Andrew Last -- Executive Vice President, Chief Operating Officer

I don't have anything material to add to that. I mean, we're working on other things as well, of course, continually. But it is a major and material restructuring.

Dan Leonard -- Wells Fargo -- Analyst

Okay. And then, just my follow-up, could you elaborate on performance in your clinical segment? It does seem like the quarter-on-quarter weakening in the organic growth rate, seems a bit discordant with what some of the market are saying, some of your customers are saying, so could you elaborate further on what you think that the drivers of that were either from a product mix standpoint or a regional standpoint, any color would be helpful? And, of course, what would improve that?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Sure. Dara, do you want to take that one?

Dara Wright -- Executive Vice President, President, Clinical Diagnostics Group

Sure. So really, it is a story of product mix and region. So at a macro level, we're about 80% to 90% pre-COVID levels. And in North America, we're very close to pre-COVID performance. The real material dynamic is related to Europe and the step up in restrictions and lockdowns that we saw in Q4, had a pretty big impact on elective surgeries. So I would say blood typing, is a real story there in Europe, that's an area that still is kind of getting back to pre-COVID kind of routine levels. And then in China as well, we saw a shift -- a little bit of a shift from typical wellness program to COVID-related, infectious disease program that moderated a bit the diabetes business. So kind of puts and takes regionally, puts and takes within different product lines. But certainly things continue to move in the right direction, with North America being kind of the bright spot there.

Dan Leonard -- Wells Fargo -- Analyst

Okay. Thanks for the color.

Ronald W. Hutton -- Treasurer

Thank you, Dan.

Operator

Thank you. Our next question comes from the line of Brandon Couillard of Jefferies. Your line is open.

Brandon Couillard -- Jefferies -- Analyst

Hey thanks. Good afternoon One, in terms of the '21 top-line outlook, pretty encouraging, given some of the comps you're lapping and kind of the roll-off of these COVID tailwinds. Can you help us understand some of the upside and downside variables that that you're thinking about? And 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 overall sort of moving through the year?

Norman Schwartz -- Chairman of the Board, President and Chief Executive Officer

Yeah. Brandon, I'll try and put a bit more color around that. So yes, obviously, a big step back on the COVID sales anticipated as we indicated. Core Clinical Diagnostics, continuing the recovery trend that Dara talked about, but not until second half after do we get back to full normal consumption in our view. The first half, we still got some COVID effects, we're guided to roughly half of last year for COVID sales, and we expect the majority of that to be in the first half of the year. But below that recovery in the core research, Life Science research products and on a good recovery in Clinical Diagnostics franchises, as the year progresses.

Brandon Couillard -- Jefferies -- Analyst

In terms of your new COVID PCR tests, to what extent if at all, have you baked in any incremental contribution from those tests? Can you talk about your manufacturing capacity on a monthly basis, and remind us approximately how big is your global PCR installed base?

Norman Schwartz -- Chairman of the Board, President and Chief Executive Officer

So, I'm going to ask Annette, she would like to comment and then I might add on that?

Annette Tumolo -- Executive Vice President, President, Life Science Group

Sure. We spent a lot of the years scaling manufacture, to meet demand both for our platforms and other regions and consumables. And I think we're in a pretty good place right now to meet customer demand across all of our PCR products. So that's good news for us and our customers. We have been selling qPCR products for 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 we're going to be, as you might imagine, making sure we approach those customers with our new test options, certainly, as they may need to scale or have need for reliable second sources.

Norman Schwartz -- Chairman of the Board, President and Chief Executive Officer

Thanks Annette. And I'd say, Brandon, thinking about the numbers. we've baked in a modest contribution within our COVID-related sales, since we know we're late. Our strategy is generally second source to the install base and so, it's a modest contribution as we look at our year.

Brandon Couillard -- Jefferies -- Analyst

Got you. Maybe a follow up for you, Annette; on the DD-PCR business, can you give us a sense of just how fast overall that business is growing, maybe including -- or ex-COVID? And are you pushing hard enough into diagnostics specifically? I mean, I know you've got one FDA approved test on the platform. Are any other kits in development that could help accelerate uptake in that setting?

Annette Tumolo -- Executive Vice President, President, Life Science Group

That's a great question. So you probably know that we talked about strong double-digit growth, pretty much at every earnings release from that product area, and we continue to anticipate that in the future. The research market is still growing strongly, the biopharma discovery and production markets are growing strongly. And we certainly, you can imagine that, we are investing quite significantly I think, in moving into diagnostics with our partitioning platforms. So I think, stay tuned for what's to come there.

Brandon Couillard -- Jefferies -- Analyst

Okay. Maybe one more for Norman. The Sartorius 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, is 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 refer to on the third quarter call, as far as potentially being deemed an investment entity in your planning strategies, I suppose, to address that? Thank you.

Norman Schwartz -- Chairman of the Board, President and Chief Executive Officer

So we certainly haven't, at the Board level, talked about a tax free spin. As we've said in the past, we continue to see that as a long-term investment, and I think we've got seven or eight years to go on the trust. Obviously, they continue to do very well, and so that's kind of where we are today. As you know, we've always considered to be a strategic investment. But obviously, if something more strategic comes along, there is the possibility to liquidate that position.

Ilan Daskal -- Executive Vice President, Chief Financial Officer

And Brandon, regarding the question about the investment. We continue to work to resolve it. And as we mentioned in the last quarter, it probably would take a few more quarters for us to resolve this hurdle [Phonetic].

Brandon Couillard -- Jefferies -- Analyst

Great. I will hop back in the queue. Thank you.

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Thank you, Brandon.

Operator

Thank you. Our next question comes from the line of Patrick Donnelly of Citi. Your line is open.

Patrick Donnelly -- Citigroup -- Analyst

Hey, thanks for taking the questions guys. Norm, maybe while we got you, I'd stay on that topic there with Sartorius. In the past quarters and the past meetings we've had with you, there has been some willingness to kind of address larger deals, and it felt like maybe you were kind of wanting to do something larger. It 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? And I would just be curious to hear your perspective on the opportunities out there?

Norman Schwartz -- Chairman of the Board, President and Chief Executive Officer

Yeah. So I think like many of our peers, 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're especially interested in the idea of doing something larger and maybe even transformational. But of course as you know, these larger transformational opportunities are few and far between. But we continue to pursue the opportunities that come our way.

Patrick Donnelly -- Citigroup -- Analyst

Understood. Okay. And then Ilan, maybe for you just on the COVID expectations for '21, certainly appreciate the -- call it, half of what it was in '20. 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 4Q came in well above what you guys were expecting on COVID. So maybe just talk to I guess, how you guys planned out that number? And then, the pacing throughout the year, you kind of projecting a big tailoff in the back half, as the pandemic, hopefully subsides? Just wanted to get full understanding there?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Sure. Thank you, Patrick. Generally speaking, you're right. I mean, we took into account or what we project and 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 calendarizing the first half in our projection, we will benefit way more from the COVID-related from -- relative to the second half. That's the way we think about it. And we'll have to see how everything will shape up. But hopefully, with the vaccines etc, the second half will normalize.

Patrick Donnelly -- Citigroup -- Analyst

Yes, sure. And then one for Annette, just on the wastewater opportunity. Certainly is getting a little more attention, it feels 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 in 4Q and then kind of expectations here in the near term?

Annette Tumolo -- Executive Vice President, President, Life Science Group

Sure. This is brand new market, obviously, and kind of rapidly developing and emerging. I think that our best estimates are probably somewhere up to $200 million, over the next several years, say four to five years. We're looking closely at it right now. Most of the demand is North American 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're about to launch an application kit that will support the surveillance, and we'll add variants to that as we can. So, we're taking a good run at making sure that we can supply the market with products that will help.

Patrick Donnelly -- Citigroup -- Analyst

Okay, great. And just a quick housekeeping one for you, Andy, appreciate you saying the PCR test is a modest benefit. Just got a couple investor questions in terms of what modest means? Should we think about $10 million, $20 million or just any ballpark would really help in terms of the dollar amount?

Andrew Last -- Executive Vice President, Chief Operating Officer

Yeah. I think you should be roughly in that range. As I said, our upside was driven predominantly by the instrument placements. And so, we recognized -- we went into molecular diagnostics segment. And this is coming late and we've got -- I think, well-reasoned aspiration on those products.

Patrick Donnelly -- Citigroup -- Analyst

Understood. Appreciate al the color guys. Thank you.

Ronald W. Hutton -- Treasurer

Thank you, Patrick.

Operator

[Operator Instructions] Our next question comes from the line of Jack Meehan of Nephron Research. Your question please?

Jack Meehan -- Nephron Research -- Analyst

Thanks. Good afternoon. I was hoping you could give a little bit more color on the bioprocessing business, [Indecipherable]. 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 do you think the COVID vaccines help contribute to that?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Annette, you want to take that one?

Annette Tumolo -- Executive Vice President, President, Life Science Group

Sure. Well, certainly, all of the vaccine developers are already our customers in this area. We this is a business that, while 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 these products, the biologic drug development, and now, vaccine development and production. So I can't say that that the result was primarily because of uptake from vaccine manufacturers, although we're there in all those accounts, the business is strong and growing.

Jack Meehan -- Nephron Research -- Analyst

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?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Go ahead Annette.

Annette Tumolo -- Executive Vice President, President, Life Science Group

I was just going to say, we really -- we still have open litigation and we don't really discuss that in advance. But perhaps Ilan has something to add about how we're going to treat it.

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Yeah, you're absolutely right. So we don't anticipate to book anything additional, so long the litigation is still on.

Jack Meehan -- Nephron Research -- Analyst

Got it. I know, when you laid out the new targets, one of the growth drivers you've talked about is single cell. Andy or Annette, I was wondering if you just give us an update on some of the work you're doing there, and any updates we can maybe expect in terms of products and from Celsee this year?

Annette Tumolo -- Executive Vice President, President, Life Science Group

Sure. It's still early, we haven't even had a year yet post acquisition, and certainly, it was an unusual time to acquire a start-up. We are investing, I think significantly in that area in our Celsee acquisition and our goal is to put compelling tools for single cell analysis that really provide best-in-class biological insights. And we think, toward the latter part of this year, you're going to start seeing some of those products roll out the door.

Jack Meehan -- Nephron Research -- Analyst

Great. And maybe just one cleanup. Can you just confirm in terms of the COVID testing tailwinds, are you going to be booking that entirely on the Life Science side or will any the test kits be reported in diagnostics in '21?

Andrew Last -- Executive Vice President, Chief Operating Officer

I mean, it's predominantly still Life Science based. If there's any pick up on, we've got serology tests on the diagnostic side. It's very, very small. We've got some antigen based sales, but they'll get reported in clinical, if they become material contributors.

Jack Meehan -- Nephron Research -- Analyst

Thank you.

Ronald W. Hutton -- Treasurer

Thank you, Jack.

Operator

Thank you. Our next question is a follow up from Brandon Couillard of Jefferies. Your line is open.

Brandon Couillard -- Jefferies -- Analyst

Great, thanks. In terms of the -- maybe Ilan or Annette, in terms of the COVID benefit in the fourth quarter, was all of that PCR instrumentation and was DD-PCR a big part of the sequential uptick?

Annette Tumolo -- Executive Vice President, President, Life Science Group

Brandon, most of it was associated with our qPCR products. Certainly, there was some upside from wastewater in Q4, but mostly we were getting kind of organic growth 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 platforms, so that helped a lot.

Brandon Couillard -- Jefferies -- Analyst

Okay. And then, Ilan FX rates have obviously moved more favorably recently. Do you have a general sense of, what currency should add to the top-line in '21? And then, maybe a sense of how accretive that might be to the year-over-year margin expansion?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Yeah, it's a great question, Brandon. It was probably about 2% for 2020, so when you think about 2021, I mean, with the projection that the dollar will continue to weaken. So obviously, it does contribute to the top line. There is, obviously some negative impact on the operating expenses, as well as on the manufacturing, right? I mean net-net, there is still some fall through but, I don't have here kind of specific number to call out. But for sure, on the top-line, it is a contributor.

Brandon Couillard -- Jefferies -- Analyst

Got it. And last one for me, are you still planning to host some type of Analyst Day event in the first half of the year?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

We do. We do plan to host it sometime later this year. Again, we have to kind of find the right timing. I mean, hopefully, again, with vaccines, everything will normalize, so that would be a great opportunity.

Brandon Couillard -- Jefferies -- Analyst

Very good. Thank you.

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Thanks.

Operator

Thank you. At this time, I'd like to turn the call back over to Ilan Daskal for closing remarks. Sir?

Ilan Daskal -- Executive Vice President, Chief Financial Officer

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.

Operator

[Operator Closing Remarks].

Duration: 52 minutes

Call participants:

Ronald W. Hutton -- Treasurer

Ilan Daskal -- Executive Vice President, Chief Financial Officer

Andrew Last -- Executive Vice President, Chief Operating Officer

Norman Schwartz -- Chairman of the Board, President and Chief Executive Officer

Dara Wright -- Executive Vice President, President, Clinical Diagnostics Group

Annette Tumolo -- Executive Vice President, President, Life Science Group

Dan Leonard -- Wells Fargo -- Analyst

Brandon Couillard -- Jefferies -- Analyst

Patrick Donnelly -- Citigroup -- Analyst

Jack Meehan -- Nephron Research -- Analyst

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