Brea-based Beckman Coulter Inc. will be later than expected on a key part of efforts to get beyond a recall of a highly profitable heart test. But the move hasn’t shaken the conglomerate that’s lined up to buy the company for $6.8 billion.
Beckman said in a recent Securities and Exchange Commission filing that it expects to delay submitting notices to the Food and Drug Administration for its troponin blood tests on its DxI and Access machines until the third quarter.
The maker of instruments and chemicals used by hospitals, drug makers and researchers was expected to submit this month or in June, according to industry news website genomeweb.com.
Beckman said the delay is “based on the progress of the company’s clinical trial, its ongoing compliance and quality system improvement initiative, and its discussions with the (FDA).”
Problems with the troponin test likely played a role in Beckman’s pending sale to Washington, D.C.-based Danaher Corp.
Danaher’s broad holdings—which include locally based Sybron Dental Specialties Inc. and Craftsman tools sold at Sears—offer Beckman shelter from punishing turns such stumbles could take on its shares as a standalone company.
Danaher Chief Executive H. Lawrence Culp sounded unfazed by the delay on Beckman’s heart test.
“I think, given the work required, (Beckman) basically wanted to make sure investors and their customers understood that they were going to be submitting to the FDA later than they had initially flagged,” Culp said. “I don’t think we were wildly surprised by that. There is a lot of work to do in preparing for those submissions.”
Beckman recalled troponin in early 2010 after regulators said the company made undisclosed changes to the test that resulted in higher readings when run on its DxI machines.
Troponin is a small part of Beckman’s sales—making up about $60 million of about $3 billion in annual revenue—but is believed to be highly profitable.
Profit Revision
The company revised its 2010 profit projection downward and its share price saw a big drop in the recall’s wake. The recall also led to the September departure of former chief executive Scott Garrett, who recently joined Chicago private equity firm Water Street Healthcare Partners.
Beckman still saw a 2010 full-year profit that was up 57% to $230.7 million on a 12% revenue jump to $3.66 billion. Those figures fell short, however, of analysts’ estimates of a $275.6 million profit on $3.67 billion in revenue.
Earlier this year, Paul Glyer, the company’s senior vice president of strategy, business development and communications, said during an investor conference that Beckman’s “had to spend time holding customer hands—and appropriately so.”
Beckman needed to “get back to the business of having our salespeople focus primarily on winning new business and not defending. We like to play more offense than defense,” Glyer said.
Charges
Beckman broke down several charges related to troponin and other regulatory issues in its annual report.
The company said it charged $15.9 million based on quality and regulatory matters, including the troponin recall. It also said that it increased its cost of sales by $27 million and selling, general and administrative expenses by $12 million in order to boost quality and regulatory assurance, service and customer support.
Danaher has not yet detailed its plans for Beckman. Past acquisitions indicate it’s likely to keep Beckman’s name and a good deal of its local operations unchanged.
“We believe Beckman Coulter is an iconic company with a great brand,” Culp said earlier.
Danaher paid $2 billion in 2006 for Sybron, a maker of dental products that’s moving its base from Orange to Anaheim. Sybron has operated with a good deal of autonomy since then.
