Despite weak academic and government spending, third-quarter IBO Laboratory Sales Index grew 1.2%, 3.8% excluding currency, to $5,839 million. Operating profit improved 1.4% to $1,165 million. Based on continuing operations, operating margin was unchanged at 18.8% of sales. For the three companies that did not report earnings before this issue’s publication (Agilent Technologies, Spectris and Tecan), estimates were provided.

Affymetrix missed third-quarter revenue guidance due to weak Gene Expression array sales. Sales improved 24.4% to $79.6 million, but declined 2.0% organically (see page 12). The acquisition of eBioscience (see IBO 6/30/12) contributed 27.5% to revenue growth, while currency lowered sales growth by 1.0%. On a pro forma basis, Product sales contracted 3.3%, including a 4.3% decline in Consumables revenue. Instrument sales climbed 14.1% to make up 6%. Consumables and Instrument sales accounted for 85% and 6% of company sales, respectively. Service and Other sales slipped 0.7% to represent 9%.

Affymetrix’s Expression revenue slumped 11.1% to account for 34% of sales. Array sales fell 16% primarily due to weak demand for in vitro transcription arrays (IVT) and lower pricing of miRNA arrays. IVT sales accounted for roughly 70% of Expression sales. However, non-array Panomics product sales grew 5% to make up roughly 5% of sales. Genetic Analysis and Clinical Applications revenue grew 15.8% to make up 27% of sales. Combined revenue from cytogenetic and Axiom products grew $4.1 million, but was partially offset by a $2.6 million decline in sales of SNP 6.0 arrays. Sales of research-related cytogenetic products and the Axiom product line grew in double digits sequentially. The transition to a direct sales force continued to negatively impact the Life Science Reagents business, which contracted 3.1% to represent 10% of sales. EBioscience sales grew 1% in local currency to make up 22% of sales, including 3% and 8% sales growth for flow cytometry and immunoassays products, respectively. However, OEM sales dropped 60% to account for 2% of eBioscience sales primarily due to the loss of a customer. Sales from distributors and direct channels in North America and Europe grew 11% and 3% to account for roughly 20% and 70% of eBioscience sales, respectively. Adjusted operating profit climbed to $0.3 million from a loss of $4.3 million due to the acquisition and lower operating expenses. Adjusted gross profit margin improved 200 basis points to 60.0% of sales. For the fourth quarter, the company projected modest growth for the Life Science Reagents business and mid-single digit growth for the eBioscience business. Excluding the acquisition, full-year sales are projected to be flat or slightly lower.

Third-quarter sales for Harvard Bioscience decreased 1.0%, 1.2% organically, to $26.1 million (see page 12). The acquisition of AHN Biotechnologie (see IBO 4/30/12) added 1.6% to revenue growth, while currency lowered sales growth by 1.4%. The company reported slowing demand from academic and government research customers late in the third quarter due to funding uncertainties. Sales for the Harvard Apparatus US, Canada and Spain subsidiaries, and Hoefer business declined. However, sales grew for the Harvard Apparatus UK, Biochrom UK and Denville businesses. Adjusted operating income fell 56.8% to $0.6 million as a result of higher R&D expenses. Gross profit margin improved 90 basis points to 45.9% of sales due to favorable product mix. Operating profit for the Life Science Research Tools segment climbed 19.2% to $2.7 million. Operating loss for the Regenerative Medicine Device segment widened 80.0% to $1.6 million. The company lowered its full-year revenue forecast by 5% to $111–$113 million and projected fourth-quarter sales of $28–$30 million.

For the third quarter, HORIBA’s Process and Environmental Instruments & Systems (P&E) revenue fell 21.1%, 20% excluding currency, to ¥3,005 million ($38.2 million = ¥78.63= $1). Backlog fell 9.4% to ¥2,804 million ($35.7 million). Following strong sales of environmental radiation equipment a year ago due to the tsunami, Japanese sales fell 30.6% to account for 67% of P&E revenue. Sales to Asia, the Americas and Europe grew 13.0%, 9.6% and 5.5% to make up 15%, 7% and 11%, respectively. P&E operating income slumped 72.6% to ¥223 million ($2.8 million). The company maintained its full-year P&E revenue forecast of ¥13,500 million ($170 million = ¥79.20= $1) but lowered the segment operating income outlook by 12% to ¥1,500 million ($19 million).

HORIBA’s Scientific Instruments & Systems (SI) segment sales contracted 16.2%, 14% excluding currency, to ¥4,474 million ($56.9 million). Backlog declined 8.3% to ¥5,547 million ($70.5 million). Segment operating profit dropped 79.0% to ¥71 million ($0.9 million). Japanese sales, which fell 2.9% to account for 37% of SI sales, were partially offset by sales of new pH meters. Overseas sales were impaired by lower government funding as sales to the Americas and Europe each declined in double digits to represent 21% and 25%, respectively. Asian sales also declined in double digits to account for 16%. Full-year sales and operating income forecast for the SI segment was cut 2% and 38% to ¥20,000 million ($253 million) and ¥800 million ($10 million), respectively.

Luminex’s third-quarter sales increased 9.9% to $50.0 million. Assay sales grew 22.5% to account for 33% of sales, led by strong demand for the gastrointestinal pathogen panel and newborn screening products. Consumables sales increased 7.8% to make up 26% of sales, benefiting from a large bulk order. Royalty, Service and Other revenue grew 3.2% 10.4% and 8.8% to represent 15%, 4% and 5% of revenues, respectively. Systems revenue slipped 1.0% to make up 17% due to higher sales of lower-priced MAGPIX systems, which more than doubled to 127 units. In addition, sales of automated punching systems fell 46.3% to 22 units due to strong Japanese sales following the tsunami in 2011. Overall, the number of multiplexing analyzers sold climbed 19.9% to 271 systems. Adjusted operating profit rose 18.2% to $6.1 million, and adjusted gross profit margin improved 325 basis points to 70.0% of sales. Technology and Strategic Partnerships segment revenue grew 5.6% to $31.6 million, but operating income fell 23.0% to $4.2 million. Revenues for the Assays and Related Products segment climbed 18.1% to $18.5 million, and adjusted operating loss narrowed by 68.8% to $0.8 million. The company cut its full-year revenue outlook by 4% to $200–$204 million.

For the fiscal half year ending September 30, 2011, Oxford Instruments’ sales rose 7.4%, 5.8% organically, to £170.8 million ($271.1 million = £0.63 = $1) (see page 12). Acquisitions contributed 2.3% to sales growth, while currency lowered revenue growth by 0.8%. Orders slipped 2.9% to £169.8 million ($269.5 million). Organic sales were driven by new products and significant growth in emerging markets. Asian sales jumped 23% to make up 38% of revenues. Sales to North America and Europe grew 3% and 1% to account for 27% and 33%, respectively. Adjusted operating income jumped 25.9% to £23.8 million ($37.8 million) as a result of product mix and improved efficiency. Acquisitions contributed an operating loss of £3 million ($4.8 million). Adjusted gross margin climbed 240 basis points to 44.5% of sales.

Sales for Oxford’s Nanotechnology Tools (NT) segment grew 14.9% to make up 47% of sales due to strong demand for new AZTEC material characterization systems. Sales were slightly offset by continued weak LED demand. NT operating profit advanced 42.5% to £10.4 million ($16.5 million). Industrial Products (IP) segment sales declined 4.9% to represent 36% of sales due to the discontinuation of a product line and a large one-time order in the previous year. Excluding these items, IP sales would have increased. Segment revenue benefited from strong demand for new portable and handheld analyzers, wider use of magnetic resonance analyzers and new medical applications for X-ray technology. Demand for next-generation MRI scanners was also strong. IP operating income increased 15.2% to £7.6 million ($12.1 million). Organic Service sales grew 17.7% to represent 17% of sales. Service operating profit climbed 16.0% to £5.8 million ($9.2 million).

In the third quarter, SDIX revenues fell 2.2% to $4.0 million, primarily due to lower demand from one in vitro diagnostic customer (see page 12). Pharmaceutical and biotechnology sales accounted for 40% of sales. The company ended the quarter with $7.0 million in cash and will receive additional net proceeds of $12.4 million following the completed sales of its Food Safety and GMO businesses (see IBO 10/15/12). Sales from discontinued products fell 20.0% to $0.7 million. Operating loss widened by 12.8% to $1.7 million due to increased R&D expenditures for the commercialization of its Genomic Antibody Technology. Gross margin fell 830 basis points to 47.8% as a result of lower polyclonal reagents revenue.

Fiscal second-quarter sales for Shimadzu’s Analytical and Measuring Instrument (AMI) division edged higher by 0.5% to ¥40,758 million ($518.4 million = ¥78.63 = $1) to represent 58% of company revenues (see page 12). AMI operating profit declined 17.4% to ¥3,946 million ($50.2 million). For the first half off of the year, Japanese sales were slightly lower due to weak LC sales, as capital spending by pharmaceutical manufacturing markets slowed. This decline was partially offset by sales of new high-end MS products to government and academic customers, and higher sales of food radiation inspection systems. European markets were significantly challenged. In contrast, North American sales expanded due to strong demand for MS from universities and higher sales of GCs to testing laboratory. Within China, MS and spectrophotometers sales were strong. For the near future, the company expects continued weakness in Europe and is cautious about China as a result of impaired relations with Japan.

 Column Chart: Quarterly Organic Sales Change

 January 2009–September 2012

          Q1     Q2     Q3    Q4

 2008   5.6%   8.2%   4.3%  1.1%

 2009  -2.2%  -5.7%  -4.5%  0.5%

 2010   8.0%   9.1%  10.5%  7.1%

 2011   7.1%   8.3%   5.7%  6.9%

 2012   4.2%   3.3%   3.8%

 Column Chart: Quarterly Operating Profit Margins

 January 2009–September 2012

          Q1     Q2     Q3     Q4

 2009  17.4%  17.9%  18.3%  19.9%

 2010  19.8%  18.9%  19.8%  19.9%

 2011  19.2%  18.9%  19.0%  20.6%

 2012  18.5%  17.7%  18.8%

 Laboratory Instrument Index                                              % Change    

                                   2009      2010      2011      2012     2009–10    2010–11     2011–12

 Total Annual Revenues ($M)     $19,756   $21,505   $23,429     -----        8.9%       8.9%       -----

 Annual Oper. Profits ($M)       $3,676    $4,308    $4,883     -----       17.2%      13.4%       -----

 3rd Quarter Revenues ($M)       $4,843    $5,308    $5,772    $5,839        9.6%       8.7%        1.2%

 3rd Quarter Oper. Profits ($M)    $873    $1,049    $1,149    $1,165       20.2%       9.5%        1.4%