Global equity markets slumped in 2011 with the exception of the US. The European sovereign debt crisis and natural disasters led the majority of Asia Pacific and European stock indexes down by double digits. US stock markets experienced similar volatility but ended the year with mixed results. Positive earnings reports lifted US equity prices in the first half of the year. However, momentum reversed due to political ineptness regarding the federal deficit and investors’ anxieties over the proliferation of debt in European countries. For the year, the Dow Jones Industrial Average advanced 5.5%, the S&P 500 was flat and the NASDAQ slipped 1.8%. In spite of ambiguous economic data and precarious investors’ sentiment, the year ended with improved manufacturing and housing data, as well as stronger consumer confidence. Investors should expect economic expansion in 2012 along with continued variable equity markets due to Europe’s ongoing challenges.

The IBO Stock Indexes combatted additional challenges in 2011, including weak academic and government funding, especially in the US and Europe. Following strong double-digit gains in 2010, three of the four Indexes contracted this year. The Laboratory Instrumentation Stock Index, which maintains the broadest exposure to research-related funding, declined 14.4% to 565.27. Fifteen of the 20 companies traded lower, led by Pacific Biosciences, which lost 82% of its value. Transgenomic climbed 95% to lead the Index.

The Lab Consumables/Equipment Stock Index contracted 9.0%, ending the year at 569.82, with five companies declining and two advancing. Enzo Biochem sustained the largest drop, falling 58%, while Pall grew 15%.

The Diversified Instrumentation Stock Index fell 5.5% to 126.71. Four companies declined in value, and three improved. Agilent Technologies endured the largest decline, sliding 16%, while Teledyne Technologies climbed 25%.

In contrast, the Process/Metrology/Motion Instrumentation Stock Index managed to gain 8.7% to 489.41, with five companies advancing and Veeco Instruments down 52%. FEI recorded the highest return, gaining 54%.

Index Changes

Several companies were removed from the IBO Stock Indexes this year due to consolidations. Caliper Life Sciences was acquired by PerkinElmer (see IBO 9/15/11), Beckman Coulter was purchased by Danaher (see IBO 2/15/11) and Dionex was bought out by Thermo Fisher Scientific (see IBO 12/15/10). RAE Systems was also removed following the purchase by private equity firm Vector Capital (see IBO 5/31/11). The additions to the Indexes were Illinois Tool Works (ITW), Fluidigm and Pacific Biosciences. Among European companies, Halma was added, while Biohit was removed this month after its Liquid Handling business was acquired by Sartorius (see IBO 10/31/11).

Gainers and Losers

This year’s list of the top five gainers and decliners was chosen from the 40 companies in the four IBO Stock Indexes. Three of the top five performers in 2011 were metrology instrumentation companies: FEI, Nanometrics and Zygo. Both FEI and Nanometrics exceeded analysts’ expectations in each of the first three quarters. FEI recorded 37% revenue growth for the first nine months due to strong sales of Dual Beam scanning electron microscopy systems and transmission electron microscopes to semiconductor and life science customers. Even with slower projected fourth-quarter revenue growth of 13%, FEI’s full-year adjusted EPS are expected to jump 96% to $2.43. Nanometrics recorded 30% revenue growth for the nine months due to strong demand for process control metrology systems and materials characterization products for LED and data storage devices. However, the company forecast a bleak fourth quarter as a result of weak semiconductor sales. Zygo experienced strong sales of advanced optics and metrology products, especially in Asia. The company’s fiscal first-quarter EPS ending September 30 soared 127% to $0.35.

Despite minimal impact on the Index, Transgenomic led all IBO Stock Indexes in 2011, gaining 95%. The company acquired several diagnostics tests for cardiac disorders, which helped expand sales, improve gross margin and narrow its operation loss for the first nine months of the year. Cepheid also made the list of top five performers due to robust demand for its portfolio of Xpert molecular diagnostic systems and tests. The company expects to report positive earnings for the first time, with full-year EPS of $0.08.

In 2011, the biggest decliners were mostly small firms and sequencing companies. The smaller companies, such as Helicos BioSciences and Pressure BioSciences, fell due to limited revenue growth and declining cash reserves. Enzo Biochem, which is also relatively small, missed fiscal full-year EPS expectations ending July 31. The firm also reported a wider-than-expected loss in the fiscal first quarter due to weak academic sales and higher operating expenses.

Pacific Biosciences endured the largest decline in 2011, slumping 82%. The company cut 28% of its workforce following slower-than-expected sales in the second quarter (see IBO 9/30/11). The company is trading at an 83% discount from its IPO on October 27, 2010 (see IBO 10/31/10). Another sequencing company that surprised investors with a significant slowdown was Illumina. The company was challenged by lower academic funding, excess sequencing capacity and an elevated stock valuation. In reaction, the company initiated a restructuring plan to reduce its workforce by 8% (see IBO 10/31/11).

Other life science companies feeling the pain were Affymetrix and Sequenom, which declined 19% and 45%, respectively. Affymetrix continues to deal with declining revenue growth and a widening EPS loss. Sequenom reported lower MassARRAY systems revenue and a wider operating loss due to increased R&D and sales expenses related to the launch of the Materni T21 test. Investors seemed skeptical about acceptance of the product and await sales updates.

Life Sciences Markets

A number of larger life sciences companies, such as Illumina, Bruker, QIAGEN, Life Technologies and PerkinElmer struggled in 2011, each falling by more than 20%. Both Thermo and Agilent faced similar macroeconomic adversities and ended the year down by double digits. These companies, which mostly experienced strong gains in 2010, were negatively impacted by reduced academic and government spending. The average adjusted full-year EPS growth for these seven companies is projected to be 18%, compared with 39% in 2010. Bruker missed adjusted EPS expectations in all three quarters, leading shares down 25% for the year. Despite solid revenue growth, earnings were negatively impacted by product mix and higher operating expenses, including increased investments in the Chemical & Applied Markets division. QIAGEN reported lower-than-expected EPS for the first two months. The company recorded negative 1% organic growth for the nine-month period due to the natural disasters and lower demand for molecular diagnostics assays. The company’s full-year adjusted EPS are projected to grow a modest 2%. Thermo expressed concerns over the funding environment and lowered its full-year organic revenue growth after the third quarter. Full-year adjusted EPS are expected to grow 16% to $4.13. Agilent shares declined 16% despite exceeding expectations in all four fiscal quarters and expanding full-year adjusted EPS by 48%.

Share Repurchase Plans

A number of companies in the IBO Stock Indexes initiated share buyback programs to boost investors’ confidence and shareholder value. In fiscal 2011 ending September 30, Becton Dickinson repurchased 18.4 million shares of common stock, or 8.3% of outstanding shares, for $1.5 billion. The company reported fiscal full-year EPS growth of 13%. Thermo spent nearly $1 billion to repurchase more than 17 million shares in the first nine months. Illumina spent $570 million during the same period to repurchase roughly 10 million shares.

Veeco Instruments recorded the largest stock repurchase measured as a percentage of shares outstanding. The company bought over 10% of its outstanding shares at an average price of $39. The company’s stock fell 52% for the year due to a competitive LED market and waning demand. Other companies taking advantage of suppressed prices or expecting to prop up EPS were Agilent, Roper Industries, FEI, PerkinElmer and Waters. All five companies acquired more than 3% of their outstanding shares.

International

Intentional equity markets were tormented by sovereign debt concerns this year. The India Sensex 30, China Shanghai Composite and Japan Nikkei 225 Indexes were down 24.6%, 20.3% and 17.3%, respectively. All major European indexes fell in double digits, with the exception of the UK and Switzerland benchmarks, which contracted in the mid to high single digits.

Most international stocks in IBO’s stock table declined or posted modest gains. For the year, three Pacific Rim companies decreased in value, led by JEOL, which fell 32%. Shimadzu improved 3%.

In 2011, eight European companies in the stock table contracted and five advanced. Oxford Instruments led all European firms, gaining 35%, while Scientific Digital Imaging fell 34%. The only other European company with double-digit gains was Analytik Jena. Despite slower life science sales, the company managed to increase earnings due to lower operating expenses.

Among the 18 international companies in the stock table, 13 companies recorded annual average share gains from 2009 to 2011. Oxford Instruments, Sartorius and Spectris shares increased by an average of 180%, 56% and 47%, respectively, from 2009 to 2011. All three companies reported significantly higher revenue growth and EPS results over the three-year period. Based on a three-year average, Exiqon, Alpha MOS and JEOL lost the most value among non-US companies in the table, declining by negative average returns of 17%, 11% and 10%, respectively.

December

In December, US equity markets were mixed as the economic showed signs of improvement and progress was made with the European sovereign debt. The Dow advanced 1.4% for the month to end at 12,217.56, the S&P 500 improved 0.9% to 1,257.60 and the NASDAQ slipped 0.6% to 2,605.15.

All four IBO Stock Indexes declined in December, led by the Diversified Instrumentation Stock Index, which fell 2.1%. The Laboratory Instrumentation and Process/Metrology/Motion Instrumentation Stock Indexes both declined 0.8%, and the Lab Consumables/Equipment Index slipped 0.4%.

Laboratory Instrumentation Stock Index

In December, the Laboratory Instrumentation Stock Index declined 0.8%. Eleven companies traded lower, and nine improved. Helicos BioSciences contracted the most, falling 43%, while Illumina climbed 10%.

Illumina jumped 6.0% on December 5 due to takeover speculation. On December 19, Pressure BioSciences signed a distribution agreement with IUL Instruments, which is expected to positively impact first-quarter sales. Shares jumped 8.9%. On December 28, a class action lawsuit was filed against Pacific Biosciences for misleading investors on the accuracy of its technology. Shares contracted 2.6%. Affymetrix was sued on December 30 by one of its major debt holders (see page 2), leading shares down 2.6%.

On December 15, Goldman Sachs upgraded Affymetrix to “Neutral” from “Sell” and PerkinElmer to “Buy” from “Neutral.” On the same day, the investment bank downgraded Thermo to “Neutral” from “Buy.”

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index fell 0.8% in December, with five companies improving and Veeco Instruments down 16%. Nanometrics gained the most ground, rising 12%.

On December 22, SDIX published a favorable study on its genomic antibody technology, leading shares up 4.2%. Maxim initiated coverage of Veeco on December 15 with a “Sell” recommendation, while Needham started coverage on December 21 with a “Hold” rating.

Laboratory Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index slipped 0.4% in December. Four firms contracted, and three improved. Kewaunee Scientific slid 14%. Pall rose 5%.

Following a disappointing fiscal second-quarter EPS report, Kewaunee Scientific dropped 12.4% on December 1. Pall jumped 7.9% on December 9 following a better-than-expected fiscal first-quarter EPS report. The company projected full-year 2012 pro forma EPS of $3.07–$3.32. On December 12, Enzo Biochem reported a wider-than-expected fiscal first-quarter EPS loss due to increased operating expenditures. Shares slumped 11.8% the following day. Life Technologies fell 2.9% on December 28 following reports of the filing of a patent infringement complaint by Illumina (see page 2). Earlier in the month, on December 20, Life Technologies was upgraded by Maxim from “Hold” to “Buy.”

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index fell 2.1% for the month. Five companies were in negative territory, and two improved. Mettler-Toledo recorded the largest decline, down 8%, while ITW gained 3%.

On December 14, Danaher maintained its fourth-quarter EPS guidance of $0.74–$0.79 based on continuing operations. Shares rose 1.3%. The company projected 2012 EPS from continued operations to grow in the mid to high teens. GAAP earnings are expected to be $3.20–$3.35 per share. ITW reaffirmed its fourth-quarter EPS from continuing operations of $0.86–$0.94 on December 19. Shares traded marginally lower.

International Shares

Three Pacific Rim companies declined and two traded higher in December. Shimadzu led all companies, gaining 5%, while JEOL fell 5%.

This month, nine European companies were in positive territory, three declined and one was unchanged. Tecan recorded the largest increase, rising 9%, while Sartorius fell 5%.

Scientific Digital Imaging announced on December 15 that half-year EPS loss ending October 31 narrowed by 10% to £0.01 ($0.01). Shares were unchanged. On the same day, Cybio announced full-year EPS growth ending September 30 of 21% to €0.17 ($0.24). Shares climbed 1.0%.

 Line Graph: IBO Instrument Industry Stock Index

           Lab Instrument Stock Index      S&P 500

 Dec-09    565.94                          267.35

 Jan-10    546.93                          257.47

 Feb-10    566.22                          264.81

 Mar-10    585.87                          280.38

 Apr-10    596.47                          284.51

 May-10    557.61                          261.19

 Jun-10    531.11                          247.12

 Jul-10    513.20                          264.12

 Aug-10    499.94                          251.58

 Sep-10    556.95                          273.61

 Oct-10    579.40                          283.69

 Nov-10    589.00                          283.04

 Dec-10    660.07                          301.53

 Jan-11    657.02                          308.36

 Feb-11    661.02                          317.14

 Mar-11    661.90                          317.88

 Apr-11    703.32                          326.93

 May-11    721.22                          322.52

 Jun-11    712.55                          316.63

 Jul-11    676.63                          309.83

 Aug-11    635.47                          292.24

 Sep-11    577.75                          271.27

 Oct-11    602.13                          300.49

 Nov-11    569.85                          298.97

 Dec-11    565.27                          301.52

 2011       2010

 Cos.   Date Rept.   FQ    Adj.EPS   Consensus      Vs.Est.     Grw.    Adj.EPS

 Lab Consumables/Equipment   

 ENZ      12-Dec     1Q    ($0.12)      N/A            N/A    -300%     ($0.03)

 PLL       8-Dec     1Q     $0.74     $0.65          $0.09      19%      $0.62

 Market Value        52 Week     Price   Change  Change     EPS      EPS     LTD/   FY    R&D/

 Company:                 Exchange(US $000s)    Low   High 12/30/2011 1Month   YTD  P/E 12Month   FY    Equity   ROE  Sales

 Laboratory Instrumentation            

 Accelrys: o                        $372,107   5.68   8.90    $6.72    -6%    -19%  N/A   -0.46  -0.44    5%     N/A    28%

 Affymetrix: o                      $285,151   3.68   8.16    $4.09   -10%    -19%  N/A   -0.13  -0.15   39%     N/A    22%

 Becton, Dickinson and Company:n $16,502,584  69.59  89.75   $74.72     1%    -12%   13    5.59   5.59   78%     26%     6%

 Bio-Rad Laboratories: n          $2,732,914  84.02 126.98   $96.04     2%     -8%   15    6.59   6.59   51%     12%     9%

 Bruker: o                        $2,072,898  11.48  21.65   $12.42    -1%    -25%   25    0.50   0.58   25%     23%    11%

 Cepheid: o                       $2,319,819  22.70  42.65   $34.41     0%     51%  430    0.08  -0.10    3%     N/A    20%

 Fluidigm: o                        $264,279  11.64  20.20   $13.16    -2%     -3%  N/A   -3.27  -8.94    6%     N/A    39%

 Harvard Bioscience: o              $115,698   3.81   6.26    $3.87   -12%     -5%   22    0.18   0.65   22%     21%     4%

 Helicos BioSciences: o               $3,417   0.03   0.23    $0.04   -43%    -67%    0    0.78   0.87   78%     10%    20%

 Illumina: o                      $4,144,244  25.57  79.40   $30.48    10%    -52%   39    0.78   0.87   78%     10%    20%

 Luminex: o                         $904,632  16.78  24.70   $21.23     2%     16%   64    0.33   0.12    4%      2%    17%

 MOCON: o                            $90,057  11.97  17.67   $16.00    -3%     24%   16    1.00   0.84    1%     16%     7%

 Pacific Biosciences: o             $151,993   2.25  17.00    $2.80    -2%    -82%  N/A  -13.78 -14.10    3%     N/A    N/A

 PerkinElmer: n                   $2,268,500  17.45  28.75   $20.00     6%    -23%   18    1.11   1.15   30%      7%     6%

 Pressure BioSciences: o              $3,752   0.51   1.53    $0.60     7%    -57%  N/A   -0.84  -1.35    6%     N/A    92%

 Sequenom: o                        $441,529   3.57   8.71    $4.45     6%    -45%  N/A   -0.77  -1.69   13%     N/A    92%

 Thermo Fisher Scientific: n     $17,210,019  43.06  65.86   $44.97    -5%    -19%   13    3.42   2.53   59%      7%     3%

 Transgenomic: o                     $63,633   0.61   1.85    $1.29     3%     95%  N/A   -0.21  -0.04-1301%     N/A    11%

 Waters: n                        $6,817,043  70.88 100.00   $74.05    -7%     -5%   16    4.53   4.06   75%     36%     5%

 X-Rite: o                          $402,395   3.26   5.08    $4.64    -3%      2%   52    0.09   0.04   72%      2%    11%

 Process/Metrology/Motion Instrumentation           

 FEI Company: o                   $1,713,983  25.75  43.00   $40.78     1%     54%   18    2.32   1.34   20%      8%    10%

 MTS Systems: o                     $643,932  28.00  48.72   $40.75     1%      9%   13    3.24   3.24   10%     24%     3%

 Nanometrics: o                     $433,349  11.89  21.56   $18.42    12%     44%    8    2.37   2.43    9%     33%    10%

 SDIX: o                             $37,660   1.51   3.13    $1.84     8%      5%  N/A   -0.12  -0.05   N/A     N/A    11%

 Veeco Instruments: o               $833,435  20.35  57.67   $20.80   -16%    -52%    3    5.99   6.13    0%     34%     1%

 Zygo: o                            $323,930   9.40  18.65   $17.65     8%     44%   14    1.25   1.05    3%     15%    10%

 Lab Consumables/Equipment            

 Enzo Biochem: n                     $86,457   1.98   5.80    $2.24    -9%    -58%  N/A   -0.43  -0.34    0%     N/A     8%

 Kewaunee Scientific: o             $233,213   7.90  14.25    $8.16   -14%    -40%   91    0.09   0.72   29%      6%     0%

 Life Technologies: o             $7,268,855  35.30  57.25   $38.91     0%    -30%   20    1.91   1.99   67%      9%    10%

 Pall: n                          $6,699,352  39.81  59.50   $57.15     5%     15%   22    2.65   2.67   63%     21%     3%

 QIAGEN: o                        $3,289,915  12.47  22.20   $13.81    -7%    -29%   25    0.55   0.60   28%      6%    12%

 Sigma-Aldrich: o                 $7,682,580  56.18  76.16   $62.46    -4%     -6%   17    3.60   3.12   23%     19%     3%

 Techne: o                        $2,537,224  62.04  86.43   $68.26     1%      4%   22    3.05   3.02    2%     19%     9%

 Diversified Instrumentation            

 Agilent Technologies: n         $12,260,430  28.67  55.33   $34.93    -7%    -16%   12    2.85   2.85   67%     23%    10%

 AMETEK: n                        $6,841,839  30.87  47.00   $42.10    -2%      7%   19    2.24   1.76   76%     16%     2%

 Danaher: n                      $33,417,357  39.34  56.09   $47.04    -3%      0%   16    2.99   2.64   60%     13%     5%

 Illinois Tool Works: n          $22,830,727  39.12  59.27   $46.71     3%    -13%   12    3.99   3.03   49%     16%     1%

 Mettler-Toledo Int'l: n          $4,824,871 126.10 193.56  $147.71    -8%     -2%   19    7.70   6.80  105%     30%     5%

 Roper Industries: n              $8,540,016  64.90  88.92   $86.87     2%     14%   21    4.22   3.34   54%     12%     4%

 Teledyne Technologies: n         $2,051,390  43.56  60.91   $54.85    -3%     25%    8    6.84   3.27   40%     15%     3%

 Laboratory Instrumentation Stock Index                      565.27  -0.8%  -14.4%   19                  56%     10%     7%

 Process/Metrology/Motion Instrumentation                    489.41  -0.8%    8.7%    9                   9%     23%     5%

 Lab Consumables/Equipment Stock Index                       569.82  -0.4%   -9.0%   21                  48%     12%     7%

 Diversified Instrumentation Stock Index                     126.71  -2.1%   -5.5%   15                  59%     16%     4%

 Dow Jones Industrial Average                             12,217.56   1.4%    5.5%      

 S&P 500                                                   1,257.60   0.9%    0.0%      

 NASDAQ Composite                                          2,605.15  -0.6%   -1.8%      

     Price          

 Region                         Market Value  Market Value  12/30/2011  Change Change        EPS       EPS    LTD/   FY  R&D/

 Company                          (US $000s)  (Local 000s)   (Local)    1Month  YTD  P/E   12Month     FY    Equity ROE Sales

 Pacific Shares             

 Hitachi High-Technologies: t     $2,970,336  ¥230,023,679       ¥1670    0%   -12%   14   ¥115.34   ¥129.07  11%   7%   3%

 HORIBA: t                        $1,267,038   ¥98,119,799       ¥2320   -3%     1%   11   ¥207.95   ¥187.11  17%   9%   8%

 JEOL: t                            $197,798   ¥15,317,561        ¥193   -5%   -32%  288     ¥0.67     ¥0.67 100%   0%   6%

 Shimadzu: t                      $2,490,043  ¥192,829,652        ¥652    5%     3%   19    ¥33.81    ¥36.00  25%   6%   3%

 Techcomp: si                        $72,440    SGD 94,163    SGD 0.41    1%    -4%    8     $0.04     $0.04   9%  18%   0%

 European Shares             

 Halma: l                         $1,926,985    £1,244,000       £3.30   -4%    -8%   17     £0.19     £0.19  46%  20%   5%

 Oxford Instruments: l              $812,308      £524,400       £9.50   -2%    35%   16     £0.58     £0.64  39%  34%   7%

 Renishaw: l                      $1,133,149      £731,525      £10.05    9%   -18%   11     £0.90     £0.90  35%  33%  10%

 Scientific Digital Imaging: l        $2,747        £1,774       £0.10    0%   -34%    8     £0.01     £0.01   0%  N/A   5%

 Spectris: l                         $23,214    £1,498,591      £12.89    3%    -2%   13     £0.99     £0.82  32%  19%   8%

 Alpha MOS: c                        $11,369       € 8,787      € 2.25    5%   -15%  N/A   -€ 0.05   -€ 0.14  15%  N/A  16%

 Analytik Jena: g                    $71,983      € 55,633     € 10.70    0%    27%  N/A   -€ 0.03   -€ 0.03  55%  N/A  15%

 CyBio: g                            $10,155       € 7,848      € 1.09    2%     7%    6    € 0.17    € 0.17   1%  33%  10%

 Sartorius: g                       $735,132     € 568,152     € 30.35   -5%     8%   10    € 2.95    € 2.29  85%  12%   6%

 Tecan: s                           $771,379   CHF 724,699    CHF 63.5    9%   -19%   12  CHF 5.10  CHF 4.43   5%   7%  10%

 Datacolor: s                        $63,589    CHF 59,741   CHF 395.0    2%    -9%   18 CHF 21.48 CHF 21.48   8%   0%  12%

 Biotage: st                            $601     SEK 4,141     SEK 5.2    2%   -22%  N/A -SEK 4.82 -SEK 4.91   6%  N/A   9%

 Exiqon:  no                         $56,637   DKK 325,411     DKK 9.6    8%     1%  N/A -DKK 0.93 -DKK 1.28   3%  N/A  32%

 Bar Graph: IBO Stock Indexes’ Top Five Gainers and Losers of 2011

 Transgenomic          95%

 FEI                   54%

 Cepheid               51%

 Zygo                  44%

 Nanometrics           44%

 Illumina             -52%

 Pressure BioSciences -57%

 Enzo Biochem         -58%

 Helicos BioSciences  -67%

 Pacific Biosciences  -82%

 Bar Graph: IBO Stock Indexes’ Top Five Gainers and Losers, Three-Year Avg. Annual Growth

 Nanometrics          505%

 Cepheid               77%

 Veeco Instruments     76%

 X-Rite                70%

 Bruker                69%

 Danaher               -6%

 QIAGEN                -7%

 Enzo Biochem         -18%

 Sequenom             -26%

 Helicos BioSciences  -30%

 Bar Graph: IBO Stock Indexes’ Three-Year Avg. Annual Growth

 DJAI                         13.1%

 S&P 500                      13.1%

 Lab Instrumentation          14.9%

 Lab Equip./Consumables       18.8%

 NASDAQ                       21.7%

 Diversified Instrumentation  26.6%

 Process/Metrology/Motion     34.1%