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Bio-Rad Laboratories Q4 2021 Earnings Call Transcript


Listen to Conference Call View Latest SEC 10-K Filing

Participants

Corporate Executives

  • Edward Chung
    Vice President, Investor Relations
  • Ilan Daskal
    Executive Vice President, Chief Financial Officer
  • Andrew Last
    Executive Vice President, Chief Operating Officer
  • Norman Schwartz
    Chief Executive Officer
  • Simon May
    Executive Vice President, President, Life Science Group

Presentation

Operator

Good evening. Thank you for attending today's Bio Rad Laboratories Q4 and Full Year Financial Results Conference Call. My name is Tena, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to our host, Edward Chung, Head of Investor Relations with Bio Rad.

Please go ahead.

Edward Chung
Vice President, Investor Relations at Bio-Rad Laboratories

Thanks Tena. Good afternoon and thank you all for joining us. Today we will review the fourth quarter and full year 2021 financial results and provide an update on key business trends for Bio Rad. 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; Simon May, 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 commentary regarding the impact of the COVID-19 pandemic on Bio-Rad's results and operations and steps Bi- 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. 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. Finally, our remarks today will include references to non-GAAP net income and diluted earnings 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.

With that, 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 at Bio-Rad Laboratories

Thank you Ed. 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. 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 at Bio-Rad Laboratories

Right. Many thanks Ilan. So as an opening comments, I would like to once again recognize the tremendous contributions, resilience and responsiveness of all of our employees around the world as we closed out the second challenging year, for pandemic. As we entered 2021 we continue to maintain our focus on the three key areas we previously highlighted, the ongoing safety of our employees, continuing manufacturing operations to ensure product supply and support of our customers and making sure we continue to advance our core strategies. During Q4, we continued to experience solid recovery in most of our key global markets as well as an uptick in demand for COVID related products driven by the explosive spread of the new Omicron variant.

As indicated in Q3, we also experienced a growing increase in supply chain challenges driven by the inconsistency of supply for key components particularly electronic components and plastics. We also saw some logistics challenges at year-end. The organization responded well to the situation, although it did result in an inability to fulfill all our orders in Q4. In addition, for the first time we saw a greater impact of Omicron on our workforce while that we believe our mandatory vaccination program in the United States helped to avoid the worst of this situation.

Overall, despite these challenges, we finished the year strongly and I'm very encouraged by the progress and growth we delivered in 2021, and as we enter 2022 we continue to spend considerable effort on sourcing components and balancing our efforts to meet growing customer demands and expect that this situation will persist through Q1 and well into Q2. As a result of the COVID-19 Omicron variant, we also extended our work from home policy until March 15, at which point we will reassess the situation.

While we experienced an uptick in demand for our COVID products in Q4 as Omicron spread, we still expect COVID related demand for our products to be sequentially lower in 2022. We see that the majority of our end markets are well served and testing capacity -- with testing capacity. However, the nature of the COVID pandemic may well generate pockets of unexpected demand as hot spots of disease breakout across our global markets. Broadly, our end markets have now adapted well to operating in the pandemic environment and core product demand has generally recovered to close to normal levels.

So, thank you for your attention, and I'll pass it back to it Ilan.

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

Thank you Andy. Now, I would like to review the results of the fourth quarter and full year. Net sales for the fourth quarter of 2021 were $732.8 million, which is a 7.2% decrease on a reported basis versus $789.8 million in Q4 of 2020. On a currency neutral basis, sales decreased 6.9%. The decline in revenue was a result of $32 million related to the intellectual property litigation awarded included in Q4 of 2020 as well as lower COVID related sales this year. Excluding the $32 million damages award in 2020, the fourth quarter year-over-year, currency neutral revenue decline was 2.9%, again mainly related to lower COVID sales.

We estimate that COVID related sales were about $46 million in the quarter, which was roughly double our forecast and reflected continued spikes in demand from geographies where new outbreaks have occurred. Despite the supply chain challenges, the fourth quarter currency-neutral or year-over-year revenue, which excludes COVID related sales increased 10.2%. In addition, supply chain constraints did impact the fourth quarter revenue by approximately $30 million of which we expect to recover about $20 million in 2022.

On a geographic basis, we experienced, currency neutral year-over-year core revenue growth across all three regions while COVID related year-over-year sales decline globally. As a reminder, our core revenue we define as currency neutral non-GAAP and excludes COVID results. Sales of the Life Science Group in the 4th quarter of 2021 were $326.6 million compared to $428.5 million in Q4 of 2020 which is a 23% decline on a reported basis and a 23.4% decline on a currency neutral basis. Excluding COVID related sales and at $32 million settlement for back royalties, the underlying Life Science business year over year currency neutral core revenue growth was 7.9%. The year-over-year growth was driven by Droplet Digital PCR as well as our qPCR business which is experiencing nice uptake from our new generation CFX Opus platform. On a geographic basis, Life Science experienced currency neutral year-over-year core revenue growth across all three regions while COVID related year-over-year sales declined globally.

Sales of the Clinical Diagnostics Group in the fourth quarter were $404.9 million compared to $359.6 million in Q4 of 2020 which is a 12.6% increase on a reported basis and a 12.8% increase on a currency neutral basis. Excluding COVID related sales, the clinical diagnostic business year over year currency neutral core revenue growth was 12.1%. During the fourth quarter, the Diagnostics Group posted growth across all of its product lines. The year-over-year growth was driven by a recovery of routine testing, which is now generally approaching pre-COVID levels.

On a geographic basis, the Diagnostics Group currency neutral year-over-year sales grew mid-single digits in the Americas and saw double-digit growth in the Europe and Asia regions. The reported gross margin for the fourth quarter of 2021 was 54.7% on a GAAP basis and compares to 58.3% in Q4 of 2020. The fourth quarter gross margin year-over-year decline was mainly due to the $32 million settlement payment in 2020 and to a lesser extent product mix, increased freight costs and normal factors and [Phonetic] utilization related to our overall supply chain challenges.

Amortization related to prior acquisitions recorded in cost of goods sold was $4.7 million as compared to $4.6 million in Q4 of 2020. SG&A expenses for Q4 2021 were $224.1 million or 30.6% of sales compared to $219.1 million or 27.7% in Q4 of 2020. Increases in SG&A spend was mainly the result of employee-related expenses and increased marketing activities. Total amortization expense related to acquisitions recorded in SG&A for the quarter was $1.8 million versus $2.4 million in Q4 of 2020.

Research and development expense in Q4 was $69.9 million or 9.5% of sales compared to $65.8 million or 8.3% of sales in Q4 of 2020. Q4 operating income was $107 million or 14.6% of sales compared to $175.2 million or 22.2% of sales in Q4 of 2020. The lower year-over-year operating income was driven by the significantly lower contribution from COVID related sales. The reduced COVID sales negatively impacted mix and along with supply chain constrain contributed to lower manufacturing utilization. In addition, Q4 of 2020 benefited from the $32 million intellectual property settlement.

Looking below the operating line. The change in fair market value of equity securities holdings, which are substantially related to buy rates ownership of Sartorius AG shares negatively impact the reported results by $2.153 billion. Also during the quarter interest and other income, resulted in a net benefit of $7.5 million primarily driven by the investment income and compared to $1 million of expense last year. The effective tax rate for the fourth quarter of 2021 was 22.8% compared to 22.2% for the same period in 2020.

The effective tax rates were primarily affected by the change in value of the security holdings. Reported net loss for the fourth quarter was $1.574 billion and diluted loss per share were $52.59. This is a decrease from last year and is largely related to changes in valuation of the Sartorius Holdings. Moving on to the 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 cost of goods sold we have excluded $4.7 million of amortization of purchased intangibles, a small restructuring and non-recurring items. These exclusions moved the gross margin for the fourth quarter of 2021 to a non-GAAP gross margin of 55.4% versus 58.2% in Q4 of 2020. Non-GAAP SG&A in the fourth quarter of 2021 was 30.2% versus 28.2% in Q4 of 2020. In SG&A, on a non-GAAP basis, we have excluded amortization of purchased intangibles of $1.8 million, and in-vitro diagnostic registration fee in Europe for previously approved products of $1.6 million.

Legal related expenses of $900,000 and the restructuring related benefit of $1.4 million. Non-GAAP R&D expense in the fourth quarter of 2021 was 9.8% versus 8.7% in Q4 of 2020. In R&D, on a non-GAAP basis, we have excluded a $2 million restructuring benefit. The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 14.6% on a GAAP basis to 15.4% on a non-GAAP basis. These non-GAAP operating margin compares to a non-GAAP operating margin of 21.4% in Q4 of 2020.

We have also excluded certain items below the operating line which are the decrease in value of the Sartorius Equity Holdings of $2.153 billion and about $1.6 million loss associated with venture investments. The non-GAAP effective tax rate for the fourth quarter of 2021 was 20.3% compared to 24.3% for the same period in 2020. The lower rate in 2021 was driven by the geographic mix of earnings and finally, non-GAAP net income for the fourth quarter of 2021 was $97 million or $3.21 diluted earnings per share, compared to $121 million and $4.01 per share in Q4 of 2020.

Moving on to the full-year results. Net sales for the full year of 2021 were $2.923 billion on a reported basis excluding the settlement for back royalties of $32 million, 2021 sales reached $2.891 billion which is 12.8% non-GAAP revenue growth on a currency neutral basis. COVID related sales for the full year were about $266 million compared to $318 million in the year ago period on a currency neutral basis. Core year-over-year revenue growth, which we define as currency neutral non-GAAP and excludes COVID related sales was 17%.

Sales of the Life Science Group for 2021 were $1.401 billion excluding the settlement for back royalties of $32 million, the year-over-year growth was 12.3% on a currency neutral basis. When excluding COVID related sales, Life Science year-over-year currency-neutral growth was 23.6%. The majority of the year-over-year growth was driven by our core PCR products, Droplet Digital PCR, process media and Western Blot. On a geographic basis, Life Science currency-neutral full year-over-year sales grew across all three regions. Sales of Clinical Diagnostics products for 2021 were $1.516 billion which is growth of 13.6% on a currency neutral basis.

When excluding COVID related sales, Clinical Diagnostics year over year currency-neutral growth was 12.8%. The strong year-over-year growth was driven by the overall recovery of routine testing. On a geographic basis, clinical diagnostics full year-over-year sales grew across all regions. The full year non-GAAP gross margin was 57.3% compared to 56.9% in 2020. The year-over-year margin increase was driven mainly by improved manufacturing efficiencies as a result of our various initiatives.

Full year non-GAAP SG&A as a percentage of sales was 28.6% compared to 13.9% [Phonetic] in 2020 and benefited from higher revenue despite increased employee-related costs and discretionary expenses. Full year non-GAAP R&D was $258.6 million or 8.9% of sales versus $227.9 million or 9.1% in 2020 and full year non-GAAP operating income was 19.8% compared to 17% in 2020, representing significant year-over-year improvement in performance. Lastly, the non-GAAP effective tax rate for the full year of 2021 was 21.2%, which was consistent with our guidance range.

The 21.2% non-GAAP effective tax rate for 2021 was lower than the 24% non-GAAP rate for 2020 is the result of an increase in compensation related to tax deductions. Moving on to the balance sheet. Total cash and short-term investments at the end of 2021 was $875 million compared to $997 million at the end of 2020 and $1.343 billion at the end of the third quarter of 2021.

The change in cash and short-term investments from the third quarter was primarily due to the loan to the Sartorius-Herbst special purpose entity and the payments for the Dropworks acquisition, which was partially offset by cash flow generated from operations. During the fourth quarter, we did not purchase any shares of our stock and we had a total of $223 million available for potential share buybacks. Full year share buybacks was about 90,000 shares for $50 million. In 2020, we purchased about 292,000 shares of our stock for $100 million.

For the fourth quarter of 2021, net cash generated from operating activities was $157.9 million, which compares to $284.7 million in Q4 of 2020. This decrease mainly reflects change in working capital and lower operating profits. For the full year of 2021, net cash generated from operations was $656.5 million versus $575.3 million in 2020. This increase mainly reflects higher full-year operating profits. Adjusted EBITDA for the fourth quarter of 2021 was 19.1% of sales. The adjusted EBITDA in Q4 of 2020 was 25.2%. Full-year adjusted EBITDA including the Sartorius dividend was $696.4 million or about 24.1% compared to 21.7% in 2020.

Net capital expenditures for the fourth quarter of 2021 were $43.2 million and full year capex spend was $120.8 million. Depreciation and amortization for the fourth quarter was $33.7 million and $133.8 million for the full year. Moving on to the non-GAAP guidance for 2022, overall, we are pleased with the performance in 2021, as the global economy is adopting to operating with COVID. Going into 2022, we expect to continue the positive momentum that we established in 2021, however, we expect to see the ongoing supply chain constraints that we experienced in Q4 persist through the first half of 2022.

As a result, we anticipate a lower year-over-year growth in the first half of 2022 with higher growth in the back half of the year. As mentioned earlier, we expect to recover in 2022 about $20 million of revenue carry over from 2021 related to supply chain constraints. We are guiding the currency-neutral revenue growth in 2022 to be between 1% and 2%, which includes about $70 million of COVID related sales that are significantly subsiding from the prior two years. Excluding COVID related savings we estimate, currency neutral revenue growth in 2022 to be between 8.5% and 9.5%.

We estimate about 2% to 3% currency-neutral revenue growth for the Diagnostics Group. The Diagnostics Group year-over-year revenue growth, excluding COVID is expected to be between 3% and 4%. The Life Science group year-over-year currency-neutral revenue growth is expected to be between flat and 1.5% as we project the COVID related sales in 2022 to significantly decline. Excluding COVID related sales, the Life Science grew year-over-year currency-neutral revenue growth is expected to be between 16% and 18%.

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 to be about 57.5%. We plan to offset inflationary cost pressure with targeted price realization, particularly within the Life Science Group. Full year non-GAAP operating margin is projected to be approximately 19%. We estimate the non-GAAP full year tax rate to be between 22% and 23%. Capex is projected to be approximately $140 million and full-year adjusted EBITDA margin to be between 23.5% and 23.8%.

Lastly, I'd like to remind everyone that we will be holding an in-person Investor Day on February 25 at the New York Stock Exchange. This concludes our prepared remarks and we will now open the line to take your questions, operator?


Questions and Answers

Operator

[Operator Instructions] The first question is from the line of Brandon Couillard with Jefferies. You may proceed.

Brandon Couillard
Analyst at Jefferies Financial Group

Hi thanks. Good afternoon guys. Ilan, maybe just starting with the outlook on the top line. I mean 9% growth in the base business, including 16% to 18% Life Sciences is pretty punchy and well above kind of what we're I think accustomed to seeing out of Bio-Rad in a normal year. Can you just sort of elaborate on drivers of that strength, particularly in Life Sciences and your level of visibility hitting those targets and to what degree, if at all, you've kind of embedded some conservatism perhaps from ongoing component shortages and things like that?

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

So Brandon hi, actually this is Andy. I think the guidance reflects basically the execution of the core strategies that we've been pursuing for the Life Science business and the growth drivers in biopharma, the ongoing growth in our Digital PCR business process chrom et cetera. So, it certainly is an improvement in growth rate. As to the component supply so we're seeing a challenge in -- certainly in the first quarter and we see that expanding a bit into the second quarter, but we do see line of sight to the end of those supply constraints and all being well, we'll see a good acceleration in the second half. So, I would say, the performance is driven by the execution of our core strategies, which are playing out nicely in our various end markets.

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

And Brandon I will highlight what I mentioned earlier, the first half we anticipate that the year-over-year growth is going to be lower than the back half of the year. I mean, that's exactly what will drive us to the guided range.

Brandon Couillard
Analyst at Jefferies Financial Group

Okay. And maybe just on that Ilan, any kind of color you can kind of share with us and sort of how we should think about top line growth in the first half versus second half, and first half maybe low singles and then in the back half north of the top end of the range for the full year? Any kind of thoughts on..

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

Yes. There is a process Brandon Low single in the first half and then accelerating in the second half. Overall in the midpoint for the full year, it's about 9%.

Brandon Couillard
Analyst at Jefferies Financial Group

Okay, got you. And then in terms of the margin outlook, I mean the 19% operating margin for the year, a bit better than we expected. Are you able to quantify the impact of the lower COVID revenues compared to what you're sort of comparing for base business margin expansion and secondly are you -- do you expect to capture any benefit from the European restructuring in the second half at all?

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

So, it's a great question Brandon. We did not break down specifically the COVID related kind of impact on the bottom line. However, the guidance does bake in the virus initiatives that we started last year. We do plan to have some realization of the benefits in the back half of this year so that's definitely a contributor. The mix this year and the fall through from higher top line and high utilization that we expect in the manufacturing footprint also contributed to the overall gross margin. On the other hand, on the operating expenses, we do plan on incremental discretionary cost return to the office and increased employee related costs. So that's the overall dynamic but I think I've captured your most of the kind of levers that led us to the guidance.

Brandon Couillard
Analyst at Jefferies Financial Group

Great. And then lastly, can you give us a sense to kind of what you're embedding for net pricing for the year? Thanks.

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

Can you say the question again, please Brandon?

Brandon Couillard
Analyst at Jefferies Financial Group

Pricing for the full year.

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

Yeah. We're certainly looking to take pricing through where we can, but it largely is an offset to basically cost inflation, raw material inflation that we're experiencing. So, I think pretty much consistent with the rest of the industry right now which is on the Life Science side, we do see opportunity to essentially offset the cost and the cost drivers that are coming at us with some price improvement.

Brandon Couillard
Analyst at Jefferies Financial Group

Got you. I'll hop back in the queue, thanks.

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

Thank you.

Operator

Thank you, Mr. Couillard. The next question is from the line of Patrick Donnelly with Citi. You may proceed.

Patrick Donnelly
Analyst at Smith Barney Citigroup

Hey guys, thanks for taking the questions. Maybe, one on the supply chain it might be for you Andy, can you just talk about where the pressure points are? I mean, I know last quarter you kind of talked about it, being a little bit of everywhere and a kind of new issue every week that you guys were able to handle. Is it still a little bit of that and then again encouraging to hear the last site that you guys feel this will alleviate around the middle of the year -- I guess just talk about that confidence level? And are you expecting to continue to get pushed out, it was nice to see only a little bit of sales lost versus captured in 1Q, should we expect that trend to continue?

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

Yeah, so the supply constraints to the first part of your question, there is a bit of randomness to it. We have a very nice portfolio as you know and they're mostly electronic components of different forms. It can be as simple as a power supply, but a lot of it is chip related, which is a broad global problem right now. And it's just very inconsistent and you believe you're going to get a certain component and then it doesn't arrive and you have to scramble. So it's very challenging, the organization has done extremely well to cope with it.

If we look into Q1 and through Q1 to Q2 we do feel where we're kind of in the thick of it and that we see -- we see Q2 will be kind of supply catching up with demand and that's our current line of sight. We're generally getting signed, the component supply will come back more completely in Q2, so that's why we're guiding second half is a major acceleration. The big challenge of course is to retain the orders through that period and then some parts of the portfolio, we can definitely do that in other areas -- it's much harder and we had considered that in our guidance.

Patrick Donnelly
Analyst at Smith Barney Citigroup

That's helpful. And then a need to circle back on the topline again Life Science growth really strong and good to see, can you talk about where we are in digital PCR. Obviously, I'm sure we'll hear more about it in a couple of weeks, but just in terms of the growth outlook, clearly big driver this year feels like we're still early innings, but would love your perspective on what applications we're seeing kind of take off here and then again growth outlook -- the sustainability of this type of growth as a big driver?

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

Yeah. Look, we remain very, very confident about the growth potential of Digital Droplet/Digital PCR had another good year. Another good year is anticipated in our guidance -- strong double-digit and I would say our strategy and focus areas remain consistent, strong biopharma performance and just general end markets adoption as they better and better understand the value proposition of high sensitivity, easy to use Digital PCR so there is nothing to suggest a slowdown in our view right now.

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

And kind of related obviously this month in the Investor Day we plan to..

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

Yes. We'll elaborate more and talk maybe a bit more about the product portfolio that we're working on for the future.

Patrick Donnelly
Analyst at Smith Barney Citigroup

Yeah, look forward to that. Ilan, maybe one for you on the cap deployment side, you mentioned you didn't buy back any stock in 4Q, given the market pullback in January should we expect you guys are typically pretty opportunistic. Were you active on that front to start the year and then secondarily kind of just your appetite. I know you guys talked a little bit about your appetite for bolt-ons norm, if you have any perspective as well that'd be great,

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

Yes. So, Patrick, obviously we were and still are in a quiet period, so we were not able to trade, but we will definitely continue to be opportunistic. We had $423 million in our plan and we'll find the right timing to step in as similar to the past. If we -- we won't hesitate to be aggressive in case we find those opportunities.

Norman Schwartz
Chief Executive Officer at Bio-Rad Laboratories

Yeah. And certainly in the fourth quarter, you may remember, we did manage to complete the acquisition to Dropworks on ourselves kind of a platform and development for what I'll call the entry level in Droplet Digital PCR really adds to our portfolio, continue to have a number of opportunities in the queue and we're working through them.

Patrick Donnelly
Analyst at Smith Barney Citigroup

Great, thanks Norm.

Operator

Thank you, Mr. Donnelly. Next question is from the line of Dan Leonard with Wells Fargo. You may proceed.

Dan Leonard
Analyst at Wells Fargo & Company

Thank you for taking the question. So, I want to circle back to your question Brandon asked earlier on the margin side, your EBITDA margin guidance for 2022 puts you well in the range of what was your prior 2023 target without meaningful COVID revenue to contribute. So, what's trending better than your initial plan, what would you point to?

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

In terms of the -- it's probably a combination of top line growth mix that we do benefit from the overall mix through to the gross margin and the products initiatives. I mean the restructuring that we communicated early last year, there are additional initiatives that are ongoing in our kind of operations in other areas. So, it's probably throughout -- kind of the different line items of the P&L that gives us -- that gets us there.

Dan Leonard
Analyst at Wells Fargo & Company

And you mentioned a couple of times biopharma, the last time you offered at your Analyst Day, 5 years ago a proportion of revenue and Life Science coming from biopharma it was pretty low -- I think two-thirds of that Life Science segment was academic actually. Has that mix meaningfully changed? Can you update us on what the proportion between academic and biopharma looks like in that business today?

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

So then we do -- we do plan to provide an update on that in the Investor Day, I mean we're going to elaborate and you will see the analysis there. I don't know Andy, today..

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

I think we're fine tuning that set of numbers, I'd hate to communicate the numbers now that we are not changing as we've made sure that fully [Indecipherable]. Stay tuned.

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

Stay tuned, it's something that we plan to discuss during the Investor Day.

Dan Leonard
Analyst at Wells Fargo & Company

I look forward. And then final question, what's your outlook for demand in China in 2022?

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

I think our outlook in China is consistent with recent history. We're largely under-penetrated in China, so for us we see China, in particular in the whole Asia-Pac region as an upside opportunity as we penetrate those markets in particular biopharma and we're investing in the region, so we're investing in our channel. So for us it's a growth driver.

Dan Leonard
Analyst at Wells Fargo & Company

Understood. I'll leave it there. Thanks for the time

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

Thank you Dan.

Operator

Thank you, Mr. Leonard. The next question is from the line of Jack Meehan with Nephron Research. You may proceed.

Jack Meehan
Analyst at Nephron Research

Thank you and good afternoon, wanted to go back just to clarify on the supply chain impact. Just, is it possible to give a little bit more granularity on which products were impacted or break out that $30 million impact by division? And when do you expect the $20 million to hit? Do you expect that to come back more later in 2022?

Andrew Last
Executive Vice President, Chief Operating Officer at Bio-Rad Laboratories

So, it was predominantly on the Life Science side, very large there on the Life Science side of the business, smaller and smaller impacts from the clinical side. And we don't see it coming back in one bolus [Phonetic] I mean it's going to be spread towards the latter part of Q2 and into the second half of the year.

Jack Meehan
Analyst at Nephron Research

Okay. And then another question on Digital PCR. So, I was hoping you could just give a mark-to-market, what is the mix of this business now between recurring, and capital if you look at the sales in 2021 and on the capital side was curious just with the introduction of QX ONE a couple of years ago and then some of the innovation you're working on now, just the expectations for how is the capital piece been growing?

Simon May
Executive Vice President, President, Life Science Group at Bio-Rad Laboratories

This is Simon. Obviously over time, we're seeing a healthy migration where that mix is concerned, I'd say the present sign is around 50-50 and we'd expect to see that continue to evolve in a positive direction.

Jack Meehan
Analyst at Nephron Research

And the capital piece, how have the new launches been going?

Simon May
Executive Vice President, President, Life Science Group at Bio-Rad Laboratories

Yes, QX ONE has been very well accepted in the market. We've been happy with the upside there.

Jack Meehan
Analyst at Nephron Research

Okay, great. And then had one on Sartorius. So, just looking at the balance sheet, so the stake came down to $14.4 billion in the quarter, so just was hoping you could help me with the math because Sartorius' share price actually was up almost 10% in the fourth quarter -- I know it's come in to start the year, but just help -- just better understand why the value actually came down sequentially?

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

Sure. So Jack, we hold two different shares. So you have the ordinary shares of Sartorius and the preference shares, they are also traded separately and carry different values every day. And so we have two different stakes and probably just for the difference that you see.

Jack Meehan
Analyst at Nephron Research

Okay. And last question, I think earlier today Sartorius talked about a higher dividend rate to start the year, just was hoping you could quantify what that means for Bio-Rad and what I should be penciling in here in the first quarter?

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

So, we generally don't guide by quarter, but our current assumption is about -- because we didn't know about the dividends that they're going to announce, so our assumption was a flat dividend from last year, so we will have to bake if there is any difference there.

Jack Meehan
Analyst at Nephron Research

Okay, sounds good. Thanks Ilan.

Ilan Daskal
Executive Vice President, Chief Financial Officer at Bio-Rad Laboratories

Thank you.

Operator

Thank you, Mr. Meehan. There are no additional questions waiting in queue at this time. So, I'll pass the call back to Ed Chung for any closing remarks.

Edward Chung
Vice President, Investor Relations at Bio-Rad Laboratories

Thank you for joining today's call. We appreciate your interest and we look forward to connecting soon. Goodbye.

Operator

[Operator Closing Remarks]

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