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 third quarter. Net sales for the third quarter of 2021 were $747 million, which is a 15.4% increase on a reported basis versus the $647.3 million in Q3 of 2020. On a currency-neutral basis, sales increased 13.8%. The third quarter sales include a $32 million settlement for back royalties from 10 times. Excluding the back royalties, the Q3 year-over-year currency-neutral revenue growth was 9%. On a geographic basis, we experienced strong currency-neutral growth in the Americas and in Asia, while growth in Europe declined slightly due to a tough year-over-year compare of COVID-related sales.
We estimate that COVID-19-related sales were about $57 million in the quarter as we continue to benefit from spikes in demand in geographies where new outbreaks have occurred. Sales of the Life Science Group in the third quarter of 2021 were $373.5 million compared to $324 million in Q3 of 2020, which is a 15.3% increase on a reported basis and a 13.9% increase on a currency-neutral basis. Excluding the $32 million settlement for back royalties, the underlying Life Science business grew 4.1% on a currency-neutral basis versus Q3 of 2020. The year-over-year sales growth in the third quarter was driven mainly by increases in Droplet Digital PCR products and excluding COVID-related sales, our core qPCR business also experienced nice growth driven by strong uptake of our newer generation CFX Opus platform.
Process Media, which can fluctuate on a quarterly basis, saw strong year-over-year double-digit growth versus the same quarter last year. Excluding Process Media sales and the $32 million settlement for back royalties, the underlying Life Science business declined 2% on a currency-neutral basis versus Q3 of 2020 due to lower COVID-related sales. When also excluding COVID-related sales, Life Science year-over-year currency-neutral revenue growth was 21.8%. Overall, we have seen strong growth in the biopharma market for our Droplet Digital PCR platform.
We also continue to see steady adoption of ddPCR in wastewater solutions, supported by government funding towards public health labs. On a geographic basis, Life Science currency-neutral year-over-year sales grew across the Americas and Asia but declined in Europe. When excluding COVID-related sales, European region revenue posted a double-digit increase from the year-ago period. Sales of the Clinical Diagnostics Group in the third quarter were $372.2 million compared to $322.2 million in Q3 of 2020, which is a 15.5% increase on a reported basis and a 13.7% increase on a currency-neutral basis. During the third 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 appears to be approaching normal levels, with the exception of blood typing, which is progressing at a slower pace. On a geographic basis, the Diagnostics Group currency-neutral year-over-year sales grew double digits across all regions. The reported gross margin for the third quarter of 2021 was 58.6% on a GAAP basis and compares to 56.7% in Q3 of 2020. The Q3 2021 gross margin improvement was mainly driven by the settlement payments as well as our productivity and efficiency initiatives.
Amortization related to prior acquisitions recorded in cost of goods sold was $4.7 million as compared to $4.8 million in Q3 of 2020. SG&A expenses for Q3 of 2021 were $216.2 million or 28.9% of sales compared to $198.2 million or 30.6% in Q3 of 2020. Increases in SG&A spend was mainly the result of employee-related expense. Total amortization expense related to acquisitions recorded in SG&A for the quarter was $2.4 million versus $2.3 million in Q3 of 2020. Research and development expense in Q3 was $64.5 million or 8.6% of sales compared to $59.5 million or 9.2% of sales in Q3 of 2020. Q3 operating income was $156.8 million or 21% of sales compared to $109.6 million or 16.9% of sales in Q3 of 2020. Looking below the operating line, the change in fair market value of equity securities holdings added $4.869 billion of income to the reported results and is substantially related to holdings of the shares of Sartorius AG.
Also during the quarter, interest and other income resulted in a net expense of $3.2 million, primarily due to foreign exchange losses and compared to $5.5 million of expense last year. The effective tax rate for the third quarter of 2021 was 21.8% compared to 21.9% for the same period in 2020. The tax rate for both periods were driven by the large unrealized gain in equity securities. Reported net income for the third quarter was $3.928 billion, and diluted earnings per share were $129.96. This is an increase 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 margin 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 third quarter, in sales, we have excluded $32 million related to 10 times legal settlement. In cost of goods sold, we have excluded $4.7 million of amortization of purchased intangibles, $4.1 million in IP license costs associated with the debt royalty payment and a small restructuring cost. These exclusions moved the gross margin for the third quarter of 2021 to a non-GAAP gross margin of 57.9% versus 57.5% in Q3 of 2020.
Non-GAAP SG&A in the third quarter of 2021 was 29.6% versus 29.4% in Q3 of 2020. In SG&A, on a non-GAAP basis, we have excluded amortization of purchased intangibles of $2.4 million, legal-related expenses of $2.3 million and a small restructuring and acquisition-related benefit. Non-GAAP R&D expense in the third quarter of 2021 was 9% versus 9.2% in Q3 of 2020. In R&D, on a non-GAAP basis, we have excluded a small restructuring cost. The cumulative sum of these non-GAAP adjustments result in moving the quarterly operating margin from 21% on a GAAP basis to 19.4% on a non-GAAP basis. This non-GAAP operating margin compares to a non-GAAP operating margin of 18.8% in Q3 of 2020.
We have also excluded certain items below the operating line, which are the increase in value of the Sartorius equity holdings of $4.869 billion and about a $2 million loss associated with venture investments. The non-GAAP effective tax rate for the third quarter of 2021 was 18% compared to 22.5% for the same period in 2020. The low rate in 2021 was driven by the geographic mix of earnings. In addition, the effective tax rate was lower as a result of an increase in compensation-related tax deductions. And finally, non-GAAP net income for the third quarter of 2021 was $112.2 million or $3.71 diluted earnings per share, and that compares to $90.3 million and $3 per share in Q3 of 2020.
Moving on to the balance sheet. Total cash and short-term investments at the end of Q3 were $1.343 billion compared to $1.167 billion at the end of Q2 of 2021. During the third quarter, we did not purchase any shares of our stock. For the third quarter of 2021, net cash generated from operating activities was $230.4 million, which compares to $135.7 million in Q3 of 2020. This increase mainly reflects higher operating profits. Following the end of the quarter, we completed the acquisition of Dropworks for approximately $125 million in cash. Dropworks is developing a droplet-based digital PCR system that could provide a more cost-effective solution to streamline the digital PCR workflow for life science research and diagnostic applications.
We see Dropworks as accelerating Bio-Rad's entry into the lower-end segment of the digital PCR business and allow for expansion in the $2.5 billion to $3 billion qPCR segment, thereby significantly increasing the opportunity for our ddPCR platforms. The adjusted EBITDA for the third quarter of 2021 was 23.1% of sales. The adjusted EBITDA in Q3 of 2020 was 22.9%. Net capital expenditures for the third quarter of 2021 were $34.6 million, and depreciation and amortization for the third quarter was $33.7 million. Moving on to the guidance. Overall, we expect a continued trend to a more normalized growth rate.
However, we are seeing increased supply chain constraints that creates an elevated level of uncertainty around timing of customer deliveries. We are now guiding full year 2021 non-GAAP currency-neutral revenue growth to be between 12% and 13% versus our prior guidance of 10% to 10.5%. This updated outlook reflects a wider revenue range due to the supply challenges, which we are experiencing. Full year COVID-related sales are now expected in the range of $240 million and $245 million versus our prior guidance of $200 million to $210 million. Full year non-GAAP gross margin is now projected to be between 57.5% and 57.8% versus prior guidance of 57% and 57.5%.
Full year non-GAAP operating margin is forecasted to be about 19.5% versus prior guidance of 19%. Our updated guidance assumes higher operating expenses in Q4 as we continue to anticipate a gradual return to more normal activity levels. Our updated annual non-GAAP effective tax rate is projected to be between 21% and 22%. The lower rate versus our prior guidance is mainly due to an increase in compensation-related tax deductions. Full year adjusted EBITDA margin is now forecasted to be between 23.5% and 24% versus prior guidance of 23% and 23.5%. Lastly, with the uncertainties surrounding COVID, we are now planning to hold our Investor Day in February due to our preference to host an in-person event. That concludes our prepared remarks, and we will now open the line to take your questions. Operator?
