The Great Recession

The overall downturn in demand for laboratory instruments and other laboratory products continued into 2009, as the world economy was largely stagnant before a gradual recovery mid-year. Sales to industrial end-markets were the weakest, as companies slowed or shut down production lines and delayed new projects. New instrument sales suffered as customers canceled or delayed purchases, extended replacement and repair cycles, and de-stocked inventories. The hardest hit end-markets were the commodities industries, such as metals and petrochemicals, which had been at a high just a year before. However, no market was unaffected, with some companies reporting a recessionary impact on academic, biotech, government and pharmaceutical markets.

In response, instrument and lab product makers faced tough decisions. Discounting and special offers increased pricing competition in struggling markets, and faster-growing markets became more competitive as firms reallocated resources to them. To further increase revenue opportunities, partnerships, licensing and divestments were more apparent. New financing for companies also suffered, leading to company closures (see IBO 4/15/09, 7/15/09), acquisitions (see IBO 2/15/09) and the disposal of product lines (see IBO 10/15/09). Instrument and lab product makers also instituted widespread cost cutting, led by layoffs, salary reductions and expense management, affecting suppliers and trade shows.

Layoffs and Reductions

As with most companies, instrument and lab product firms undertook staff reductions to mitigate the effects of slower sales on profitability. Broad-ranging cuts by Mettler-Toledo (see IBO 2/28/09, 5/15/09) and Thermo Fisher Scientific (see IBO 5/15/09, 6/30/09, 12/15/09) affected multiple business lines. Other companies, such as Sartorius (see IBO 6/30/09) and Symyx Technologies (see IBO 6/30/09), targeted specific businesses. Manufacturing and administration appeared to be the prime areas for reductions. However, the extent of the downturn also affected R&D and sales in some cases. One area that was less impacted was expansion in Asia and developing countries. Several companies opened new facilities or acquired distributors in these markets (see IBO 8/31/09, 9/15/09, 12/15/09).

Genomics Advances

Advances in technologies for genomic analysis, including sequencing, sample preparation, microarrays and PCR, continued to progress in 2009, leading to breakthrough discoveries and a growing list of applications in the research, clinical and applied fields. Although the advancement of such techniques was not a new development last year, it was an important trend. Not only did the development and application of such technologies progress at a rapid pace, but the robust sales growth of such product lines provided much-needed growth in the otherwise dismal sales environment for lab instruments and products. Among the strongest revenue performers last year were genomic-analysis technology companies, such as Illumina (see IBO 8/15/09) and Life Technologies (see IBO 11/30/09). Although a handful of companies dominate certain market segments, the markets for assays, reagents, sample preparation systems and cell analysis support a range of companies, which attracted new investments and stimulated technology development and market growth. Government support for the development of genomic analysis techniques and funding for genomic studies also increased the stability and strength of genomic-analysis markets. In addition, the growing consumables markets and the application of such technologies from research through diagnostics and outside the lab insure long-term growth opportunities.

Going Green

So-called “green” techniques and end-markets gained momentum in 2009. Green chemistry techniques made inroads at major chemical and pharmaceutical makers, growing the market. Also, lab product makers sought to attract customers and differentiate their offerings with products using less hazardous solvents and reagents or that produce cleaner by-products. Among the techniques benefiting in 2009 were: supercritical fluid chromatography (see IBO 10/31/09), in which Waters invested (see IBO 2/15/09); UHPLC and UPLC systems; and micro-extraction techniques. As for end-markets, the materials-testing and product-safety markets continued to grow, driven by greater regulatory oversight and increased testing. End-markets for developing and producing green energy, specifically biofuel and photovoltaic applications, also remained promising, despite less financing for start-ups, due to stimulus funding.

Stimulus Funding Kicks In

The issue of stimulus funding loomed large throughout most of the year. Instrument and lab product companies indicated that China’s government stimulus had contributed to sales growth in the country, benefiting both industrial and life science product lines. In the US, instrument firms pursued government and academic researchers, targeting the inclusion of instrument requests in their grant proposals. Ironically, the promise of stimulus funds slowed sales in the second and third quarters (see IBO 8/31/09, 11/30/09), as researchers devoted energy to grant proposals and held off on purchases in hopes of securing funding for them. At year end, orders had begun to come in (see IBO 11/30/09, see page 2), raising hopes for sales gains in 2010.

Diversification

Last year’s recession only served to underline the advantages of diversification by region, technology and end-market. Instrument and lab product companies took note and intensified efforts to diversify in line with their strengths and growing segments. Agilent’s proposed acquisition of Varian was one example of such diversification (see IBO 7/31/09). Agilent’s research instrument business will gain new product lines that position it for greater growth in the pharmaceutical market, as well as more consumable sales. Life Technologies (see IBO 7/31/09), PerkinElmer (see IBO 9/15/09), QIAGEN (see IBO 9/30/09, 11/15/09) and Thermo Fisher Scientific (see IBO 9/15/09) each increased their diagnostic businesses through acquisitions to capitalize on growing health care requirements in emerging nations or changes in diagnostic capabilities. Danaher took a major step in diversifying its research instrument offerings with the acquisition of MS, cell analysis and lab automation technologies (see IBO 9/15/09, 12/31/09), while PerkinElmer also branched into MS (see IBO 5/15/09). Bruker diversified outside of the instrument business by expanding its superconductor technology businesses (see IBO 4/15/09).