Bio-Rad Laboratories Annual Report 2001

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FY2001 Annual Report · Bio-Rad Laboratories

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financial

highlights

(in millions, except per share data)

1997

1998

1999

2000

2001

Net Sales

$432.1

$447.9

$ 555.4

$725.9

$817.5

Gross Profit

$242.7

$245.4

$ 300.2

$382.5

$461.2

Research Expenditures

46.1

41.4

66.7(1)

68.1

76.5

Net Income

16.4

24.3

11.7

31.1

44.2

Return On Sales

3.8%

5.4%

2.1%

4.3%

5.4%

Book Value Per Share(2)

$ 8.06

$ 8.84

$ 9.08

$10.00

$11.43

Basic Earnings Per Share(2)

$ 0.67

$ 0.99

$ 0.48

$ 1.27

$ 1.79

Cash Flow From Operations

$ 21.1

$ 27.3

$ 45.0

$ 24.2

$ 99.5

(1) Includes $15.5 of purchased R & D.

(2) Restated to give effect to a stock split in

the form of a 100% stock dividend in 2002.

2001 Sales By Region

Americas
42%

Pacific
Rim
16%

Europe
42%

to our

shareholders

The year 2001 was an exceptionally strong one for Bio-Rad Laboratories. Last year we reported that

In 2001 we strengthened our Board of Directors with the addition of Dr. Ruediger Naumann-Etienne

we had broken the $700 million mark in sales for the first time ever. Now we are pleased to report that

who brings with him a wealth of international experience.

in 2001 we exceeded $800 million in sales – yet another record. We were able to report these favorable

results even in the face of worldwide economic uncertainties.

On a sad note, the year 2001 brought with it the premature death of Dr. Burton Zabin, a longtime

employee and member of Bio-Rad’s Board of Directors. Dr. Zabin was a dear friend and esteemed

Net income was up 42 percent over the year 2000. This above-average

colleague who played an instrumental role in the early growth of the Company.

growth was fueled primarily by our Life Science business where sales

increased substantially due to the strong performance in our existing

product lines, such as DNA amplification and proteomics, augmented by

the sales of our test kits for Mad Cow Disease.

This has been a year of major accomplishment for Bio-Rad. We have successfully refocused on

biological science, increased our geographic reach and gained greater recognition in the financial

markets. Sales are strong, and in spite of the nation’s economic downturn, both the Life Science and

Clinical Diagnostics businesses continue to thrive. Our recent two-for-one stock split will result in the

The Clinical Diagnostics business also grew in 2001 and is well positioned

increased liquidity of our stock, and give us more flexibility to continue to grow the business.

for the future – especially in the areas of autoimmune testing and quality

control products. The acquisition of Helix Diagnostics has made Bio-Rad

the world’s leading provider of autoimmune diagnostic tests. Another

important milestone for this business in 2001 was the receipt of the single

David Schwartz and James J. Bennett

largest order for quality control products in its history.

Among our achievements this past year was the divestiture of the last major segment of our Analytical

Instruments Group – the spectroscopy division. This sale was part of an overall strategy to focus our

efforts on the Life Science and Clinical Diagnostic businesses.

In the coming year we expect that the changes in our roles in the Company will be completed with a

transition to the next generation of management. While both of us will continue to be actively involved

as members of the Board of Directors, we are turning the business over to a younger management

team who will lead the Company’s day-to-day operations. We are confident that they will carry on the

Company’s long tradition of integrity, quality service and scientific innovation.

David Schwartz

President

James J. Bennett

Chief Operating Officer

2001 Bio-Rad Laboratories A n n u a l R e p o r t

accelerating the pace
ofdiscovery

We live in the golden age of biology. Scientific discoveries throughout the foreseeable future

will improve our health and revolutionize the way we live.

Today, with increased knowledge of proteins, cell biology and advances in diagnostic medicine,

the biotechnology revolution has taken hold. Scientists are learning new ways to understand

the complex biochemistry of disease and enabling the biopharmaceutical industry to identify

specific targets for both diagnostics and therapeutics. Advances in biotechnology, drug

discovery and informatics will continue to expand the market for products and services in

both the research and clinical diagnostics areas.

Proteomics has and will continue to facilitate improved drug discovery and treatment,

advancements in stem cell research, and help identify cures for diseases like cancer,

Alzheimer’s, Parkinson’s and diabetes. Bio-Rad’s role in this scientific revolution is to both

facilitate research and accelerate the pace of discovery, innovation and the development

of improved methods of healthcare.

Bio-Rad’s direct sales force and technical staff are in constant contact with customers

worldwide, working closely with them to better understand their specific needs and require-

ments and to receive feedback on ideas for new technology. Often, this feedback results in

new and improved technologies for discovery, as well as new methods for diagnosing and

monitoring disease.

Bio-Rad’s Life Science business is focused on proteomics, genomics and cell biology, and

the Clinical Diagnostics business is one of the world’s leading providers of specialty products

and services used for medical screening and diagnosis. Together, these two businesses give

Bio-Rad a distinct advantage in the world of biological science and healthcare.

Electrophoresis

Chromatography

Multiplexing

Transfection

DNA
Hybridization

Microbiology

Imaging

Amplification

Clinical Informatics

Internet-Based
Services

Microplate
Automation

Immunoassays

Cell Biology

Immunofluorescence

Bioinformatics

2001 Bio-Rad Laboratories A n n u a l R e p o r t

life
science

focused on...

Performance

The Life Science Group experienced exceptional growth in 2001. Sales were up 43% to

$382 million and segment profit was up from the year 2000 to $74.2 million. This outstanding

performance was driven by increased sales in important product areas like proteomics,

amplification and food safety, and was also influenced by several other factors. First and foremost,

growth was influenced by the Company’s focus on its customers and their ever-changing

demands. It is also the result of a focus on developing new and innovative products to aid in

Meeting Market Challenges

One very important hallmark of Bio-Rad’s success is its responsiveness and ability

to meet customers’ immediate needs. During 2001 the Company had a significant

opportunity to demonstrate its agility in tackling an immediate challenge: To swiftly

respond to the urgent need for BSE (bovine spongiform encephalopathy) or Mad

Cow Disease testing in Europe, and more recently, in Asia.

As the European Union commenced mandatory beef testing, Bio-Rad quickly mobilized

efforts and became the leader in helping to safeguard the food supply. Beginning in

January 2001, the Company scaled-up manufacturing capabilities and since then, has

been fully able to supply Europe’s continuous demand for tests. In October, when Japan

commenced testing of all cattle, Bio-Rad was well positioned to meet the additional

demands. One of the Company’s most important achievements during this entire

experience has been its ability to meet the ongoing challenges of supplying, training

and supporting hundreds of laboratories performing the BSE test throughout the world.

Creating Tools For Discovery

Another important factor in Bio-Rad’s success is its ongoing development of new

products that have revolutionized life science research and discovery by improving

the effectiveness and efficiency of technology. The Company’s efforts are currently

focused on the growing markets of proteomics, cell biology, real time PCR (Polymerase

Chain Reaction), food testing, and developing technology that enables laboratory

the expanding areas of disease and drug discovery, a focus on specialized needs of worldwide

researchers to accomplish complex tasks faster and more easily.

markets, and finally, the desire to seed the next generation of participants in the biological

revolution. Overall, Bio-Rad’s growth has outpaced that of the life science market.

There is an ever-increasing need for comprehensive systems to improve the scientific

discovery process. One example of how Bio-Rad has fulfilled this need is the

ProteomeWorksTM System, which has successfully integrated the key tasks involved

in protein analysis for disease and drug discovery. This integrated package includes

sample preparation and analysis technology all the way through to the critical area

of bioinformatics, enabling laboratories to more effectively analyze the mass of data

generated by this new area of scientific exploration.

$238

$267

$382

$17

$14

$74

Sales
(dollars in millions)

Segment Profit
(dollars in millions)

47%

Segment Sales

2001 Bio-Rad Laboratories A n n u a l R e p o r t

Top: The iCycler iQTM Real-Time PCR Detection
System is used for creating millions of copies of
DNA and providing quantitative information about
that DNA. By using this instrument researchers
can accelerate lead identification in drug discovery,
improve viral load assessment, increase reliability
of gene expression analyses and accelerate
throughput in screening applications including
food pathogen testing.

Bottom: Bio-Rad’s BSE, or Mad Cow Disease
test is the most widely used screening method
in the world. In 2002 the Company will intro-
duce a new series of automated BSE testing
instruments and kits to enable laboratories to
increase efficiency, produce faster results,
expand mass screening capabilities and reduce
the cost of testing.

Bio-Rad has a long history of innovation. It was the first company to commercialize

novel life science technology like multi-photon microscopy. Just recently, the

Company introduced a new pioneering product in this area, the ClonisTM Cellular

Laser Observation and Isolation System. This product allows researchers to isolate

live cells and tissues and gives them the ability to simplify what has been a difficult

and time-consuming process.

In addition to developing new technologies, Bio-Rad is continuously enhancing its

existing product lines to meet the changing needs of life science researchers. In the

early 1980s, for example, the Company pioneered one of the foremost separation

techniques known as electrophoresis. Throughout the years, Bio-Rad has introduced

a variety of enhanced products and accessories for this protein and nucleic acid

separation technique. The latest is the CriterionTM System which doubles the amount

of scientific data that can be produced in a single protein separation.

Opportunities For Growth

Bio-Rad’s primary mission in 2002 is to seize opportunities in the growing markets

of proteomics, DNA amplification, cell biology and food testing. Already, Bio-Rad

is the leading manufacturer of many products used in these areas of life science

research and discovery. While the Company’s products are now sold in more than

130 countries worldwide, geographic expansion opportunities still abound. There

are plans underway to extend the Company’s direct presence in both the Pacific Rim

and Latin America. This, together with the continuous development of new products,

should provide for continued growth.

Expanding Customer Reach

Developing and supporting a comprehensive customer-centric e-business channel is

an important objective for Bio-Rad Laboratories. This new channel has allowed the

Company to enhance its strong relationships with customers, to provide up-to-the-

minute sales and technical support, to offer expert advice and to create a forum

where customers can exchange ideas with one another. The demand for this channel

of communication is rapidly becoming global, and the Company is implementing a

multi-lingual, multi-currency system to better serve its customers around the world.

Seeding The Future

The biotech revolution needs people. Bio-Rad is helping to train the next generation

of scientists in the modern techniques of molecular biology with its Biotechnology

ExplorerTM program, specifically designed for teaching biological science at the junior

high and high school levels. The Company has developed kits for bacterial trans-

formation, protein chromatography, DNA and protein fingerprinting and genetic

screening. With these kits, Bio-Rad is working with educational institutions around

the world to implement these much-needed programs to train a new generation of

biological scientists.

Top: The new ClonisTM Cellular Laser Observation
and Isolation System is a pioneering product that
allows researchers to quickly and easily isolate live
cells and tissues.

Bottom: The CriterionTM System is the next genera-
tion of precast polycrylamide gels with dedicated
mini electrophoresis cells and blotters. The system
incorporates a series of innovative features specifically
designed to provide research laboratories with fast,
reproducible, high-resolution results.

Sample
Preparation

2-D Array
Generation

Image and
Image Analysis

WorksBaseTM

Information

Management

Software

Protein
Functional
Characterization

Automated
Spot Excision
and Protein
Digestion

Protein
Identification

Bio-Rad’s ProteomeWorksTM System is a fully integrated set

of tools and technologies used for protein function discovery,

incorporating sample preparation, 2-D electrophoresis, staining,

imaging and image analysis, spot excision, automated protein

digestion, mass spectrometry and bioinformatics to create a

seamless high-throughput proteomics platform.

Bio-Rad’s ProteomeWorksTM System
incorporates a variety of tools and
technologies like the Protean IEF
System and accessories (top), the
spot cutter (middle) and WorksBaseTM
software (bottom) for protein focusing,
image analysis, spot cutting and
data management.

2001 Bio-Rad Laboratories A n n u a l R e p o r t

clinical

diagnostics

focused on...

Meeting The Special Needs Of The Healthcare Market

Meeting Worldwide Needs

Through its network of subsidiaries, Bio-Rad works cooperatively with local

government and private healthcare institutions to provide quick response to medical

laboratory challenges. This is especially true in developing nations where expansion

in healthcare delivery requires creative solutions.

In 2001, for example, Bio-Rad collaborated with Brazil’s public and private healthcare

organizations to implement programs for screening newborns for genetic disorders.

Bio-Rad placed VariantTM systems throughout the country to test for sickle cell anemia –

a common disorder in this part of South America.

Bio-Rad also worked with the Malaysian government in 2001 to create the first diabetes

monitoring program in this region. This initiative will improve diabetes management,

reduce the disease’s devastating complications and prevent the unnecessary health-

care costs associated with poor diabetic control – a problem that is increasing rapidly

throughout Southeast Asia.

Bio-Rad’s Clinical Diagnostics Group is one of the world’s leading providers of specialized

Bio-Rad has also invested in new operations in Eastern Europe and Russia, and is

tests, equipment and software for the clinical laboratory. The Company’s products and services

now the leading supplier of HIV screening tests in this region. Recently, the Company

help physicians diagnose genetic disorders, detect viral strains, identify antibiotic treatments,

confirm the quality of test results, and more.

assisted the newly established Blood Transfusion Organization in Bulgaria in con-

solidating its HIV screening from 28 different laboratories into five testing locations.

Bio-Rad provided enough tests, customized equipment and software to fulfill 100%

The Clinical Diagnostics business showed growth in both sales and profits in 2001. Segment

of the country’s needs for HIV and hepatitis testing.

profit increased nearly eight percent over 2000, and after adjusting for a divested product

line, revenue increased nearly seven percent – almost twice the industry average. Growth in

Maximizing Laboratory Efficiency

2001 was spread across the core businesses of blood virus testing, quality control systems,

diabetes monitoring, autoimmune testing and genetic disorders.

More and more, customers are looking to Bio-Rad for innovative solutions to

improve their laboratory’s efficiency and effectiveness. Last year in Europe, the Clinical

Diagnostics Group introduced a new and completely automated, high-throughput

system for blood virus microplate testing, the EvolisTM. This product was quickly

recognized as a convenient alternative for laboratories performing large volumes of

HIV, HCV and other Hepatitis tests, and in 2002, it will be enhanced to include

serology tests for infectious disease and autoimmune disorders. Shipment of the

EvolisTM product to the U.S. is also anticipated sometime this year.

$252 $409

$418

$19

$25

$27

Sales
(dollars in millions)

Segment Profit
(dollars in millions)

51%

Segment Sales

2001 Bio-Rad Laboratories A n n u a l R e p o r t

Top: The 2001 acquisition of Helix Diagnostics
established Bio-Rad as the leader in the
autoimmune testing market. The Company offers
an extensive range of test kits, software and
instrumentation like the PhDTM Workstation and
the ANA test kit used to identify and monitor a
variety of autoimmune diseases.

Bottom: Bio-Rad has developed innovative
internet technology that has helped expand the
Company's leadership position in markets like
quality controls and diabetes monitoring. Some
of the most popular products include QCNetTM
software and CSNTM (Clinical Systems Network)
used for laboratory information management,
communication and support.

In November, Bio-Rad entered into an exclusive agreement with the largest laboratory

provider in the U.S., Quest Diagnostics, to automate their autoimmune testing processes.

Bio-Rad will provide an array of tests, instrumentation and services to more than 20 of

Quest’s laboratories across the United States. This includes the PhDTM system, a new

instrument specifically designed for the autoimmune laboratory that is rapidly becoming

the new standard for serology laboratories looking for cost-effective automation.

Prevention And Early Detection

Hemochromatosis, or iron overload, is one of the most common human genetic

disorders. Experts agree that the best way to accelerate treatment and reduce

associated healthcare costs is to detect the disorder before symptoms and compli-

cations appear. Bio-Rad’s advancements in gene-based technology are now providing

clinicians with a powerful new tool for use in the monitoring and prevention of this

disorder. In 2001, Bio-Rad established partnerships with America’s leading clinical

laboratories to meet the increasing demand for DNA-based testing for hemochromatosis

and introduced the only FDA approved commercial DNA-based application for this

common affliction.

The MicromatTM II, Bio-Rad’s point-of-care device for diabetes testing, provides

physicians with another powerful tool to more rapidly identify the need for patient

therapy and prevent the development of further complications. The hand-held device

is also becoming popular in developing countries seeking simple, cost-effective

solutions for diabetes screening and monitoring.

Quality And Effectiveness

The core of Bio-Rad’s quality policy is simple: Complete Customer Satisfaction. By

focusing initiatives on enhancing automation, information technology, employee training,

quality assurance and process validation, Bio-Rad has leveraged its strengths in the

design, manufacture and delivery of products and services. The Company has also

invested substantial efforts and funding to prepare for emerging healthcare regulations

throughout the world. Bio-Rad’s goal is to be an industry leader in compliance and

maintenance of the highest quality standards possible.

Bio-Rad is also committed to providing tools and services to assure quality testing

in the clinical laboratory. In September, the company secured the single largest order

for quality control systems in its history by establishing an exclusive partnership with

HealthTrust Purchasing Group. Bio-Rad now has the rights to sell to a network of

healthcare providers that includes more than 700 facilities worldwide.

Building Partnerships

Throughout its history, Bio-Rad has established significant strategic partnerships

with a variety of diagnostics and healthcare businesses. In March, Bio-Rad and the

Institute Pasteur of Paris extended their collaboration agreement that gives Bio-Rad

exclusive commercialization rights to Pasteur’s research developments in the areas

of virology, microbiology, physiology, biochemistry, parasitology and mycology.

In August, the Company expanded its Hepatitis C Virus (HCV) license with Ortho-Clinical

Diagnostics and the Chiron Corporation, broadening Bio-Rad’s ability to develop,

manufacture and sell HCV tests to diagnostic and blood-screening laboratories in

parts of Asia, South America and Central America.

Top: It takes highly sensitive analytical tools to
accurately identify the growing number of unusual
and drug-resistant infections that endanger public
health. Bio-Rad’s OSIRIS ® microbiological imaging
system is designed for the surveillance of infectious
agents and resistance trends and enables health-
care agencies to identify and help prevent the further
spread of infection.

Bottom: The EvolisTM, Bio-Rad’s new and completely
automated system for blood virus microplate testing
has become popular among European laboratories
performing large volumes of HIV, HCV and other
Hepatitis tests. The product will soon be available
in the U.S.

Every region throughout the world has unique public health concerns. To better serve

the individualized needs of varying populations, Bio-Rad’s Clinical Diagnostics Group

diversifies its manufacturing and development efforts. In 2001, the Company opened a

new plant in Mexico City where the business is focused primarily on microbiology and

blood virus products. The group also maintains other manufacturing and/or development

operations in various regions in the U.S., Europe, Asia and the Middle East.

2001 Bio-Rad Laboratories A n n u a l R e p o r t

sales

history

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2001 Bio-Rad Laboratories A n n u a l R e p o r t