Academic and Government Spending Concerns

In 2011, concerns about cuts to the NIH budget and European governments’ research spending kept instrument and lab product companies on edge, affecting sales growth and operations, especially at life science companies. Uncertainty about budget changes froze spending at some US labs, while cutbacks affected labs in certain European countries. The prevailing opinion from most instrument companies is slow government and academic spending in developed countries this year, but sustained strength in emerging markets, particularly in Asia. The slowdown in funding in part prompted cost reduction actions by Illumina (see IBO 10/31/11) and Life Technologies (see IBO 8/31/11).

Diagnostic Investments

Several instrument companies expanded investments in their diagnostic businesses last year. Although the clinical diagnostic market for sequencing is in its infancy, Illumina and Life Technologies invested in personnel, partnerships and operations to prepare to bring FDA-approved tests and instruments to market. Life Technologies also initiated other diagnostic partnerships and product introductions for PCR and capillary electrophoresis products, while Affymetrix, Agilent and Illumina prepared FDA submissions of microarray-based cytogenetic products. Luminex (see IBO 6/30/11), QIAGEN (see IBO 4/15/11, 6/15/11) and Thermo Fisher Scientific (see IBO 5/31/11) each upped their share of revenues from diagnostic sales through acquisitions. Meanwhile, Cepheid, Luminex and Sequenom reaped the benefits of their molecular diagnostic businesses. The opportunities in traditional clinical diagnostics were highlighted by Danaher’s purchase of Beckman Coulter (see IBO 2/15/11) as well as the investments by its AB SCIEX unit in mass spectrometry–based clinical applications.

Western European Uncertainty

Laboratory product and instrument sales growth in Western Europe trailed that of other regions last year, continuing a trend of slower growth for the region. Although major countries remain committed to scientific funding, macroeconomic uncertainty and austerity plans are expected to affect future domestic and foreign investments. Bio-Rad Laboratories and Life Technologies were among the companies affected by slower sales growth in Western Europe in 2011. However, several companies, such as Bruker, reported continued good growth in Europe. In the face of an accelerating shift in sales growth to other regions, European-based companies, such as Analytik Jena, Mettler-Toledo and QIAGEN, invested in operations abroad.

Diversification

Major instrument and lab product companies added new product lines in 2011, increasing their exposure to faster-growing markets and diversifying their customer bases. The acquisitions also reflected investments in line with long-range scientific trends that employ holistic and integrated approaches to scientific discovery. PerkinElmer’s acquisition of a string of informatics companies and its $640.0 million purchase of Caliper Life Sciences (see IBO 9/15/11) gave it a presence in markets such as next-generation sequencing, electronic lab notebooks and capillary electrophoresis. Danaher purchased Beckman Coulter, adding not only a diagnostic franchise but a host of new analytical and lab equipment product lines (see IBO 2/15/11). Danaher also noted the company’s strong diagnostic business in China. At year end, Affymetrix announced a move to shift its business into faster-growing markets, such as cell research, and to increase its consumables revenue with the purchase of eBioscience (see IBO 11/30/11). In addition, FEI moved into the optical microscopy market (see IBO 11/15/11), and Bruker added an HPLC product line (see IBO 2/28/11).

New Approaches to Innovation

Several developments in 2011 demonstrated how R&D in the analytical instrument industry is changing. More companies added to their R&D personnel in emerging markets, particularly for the development of instrumentation specifically for such countries. Also, companies increasingly partnered with universities, government labs and nonprofit institutes to develop new products and applications. Such partnerships take advantage of technical and regulatory expertise, as well as the input and influence of leading researchers. Open innovation was also evident, as Life Technologies announced challenges for DNA sequencing (see IBO 4/30/11). Sequencing was also the technology that set a record pace in product introductions. The rate of new product introductions increased in other markets as well, as companies benefited from new design and manufacturing expertise. These developments highlighted the importance of new products for sales and margin growth.