Only half of the 21 companies in the IBO Laboratory Sales Index reported fourth-quarter earnings before the publication of this issue of IBO. For the 11 companies, revenues improved 1.0%, operating profits grew 3.5%, and operating margins improved 60 basis points to 21.9% of sales. Companies, such as Ilumina, Luminex and QIAGEN, sustained strong sales growth, but other companies, notably Affymetrix, were adversely affected by the economic downturn. In the fourth quarter, Applied Biosystems was acquired by Invitrogen, which now operates under the name Life Technologies. Financial results of additional companies will be published in the February 28 issue of IBO.

Fourth-quarter revenues for Affymetrix declined 27.0% to $78.6 million, including a negative currency effect of 2.7%. Product revenue fell 25.3% to $66.6 million, as consumable and instrument revenue declined 21.7% and 52.3% to $61.5 million and $5.1 million, respectively. Revenue from DNA and RNA accounted for 32% and 68% of total product sales, respectively. DNA revenue fell 35%, while RNA sales dropped 17%. Service revenue gained 32.2% to $8.5 million, while royalty and other revenues lost 70.3% to $3.4 million. The company shipped 23 GeneChip systems and scanners in the quarter. Adjusted operating income declined to a loss of $24.5 million, compared to a profit of $16.4 million a year ago. Gross profit margin fell 19.9 percentage points to 44.9% of sales due to restructuring-related charges and lower factory utilization, which accounted for a loss of 11.5 and 8.3 percentage points, respectively. Declining royalty revenue also contributed to lower gross margins. In the quarter, the company wrote-off $239 million in impairment charges, reducing stockholders’ equity by one-half.

For the year, Affymetrix’s revenues grew 10.4% to $410.2 million, but declined 13.8% to $320.2 million, excluding a one-time intellectual property payment. Product and service revenues declined 7.3% and 15.7% to $270.4 million and $32.1 million, respectively. Royalty and other revenues fell 57.1% to $17.8 million, excluding the one-time payment. Consumable revenue was down 1.7% to $248.9 million, with DNA and RNA accounting for 37% and 63% of sales, respectively. Excluding the one-time payment, adjusted operating income was a loss of $43.5 million, compared to a profit of $21.4 million a year ago. Adjusted gross profit margins fell 10 percentage points to 52.5% of sales. In 2008, the company completed the transfer of over 80% of its manufacturing of GeneChip arrays to its Singapore facility. The transfer is expected to be completed in the second half of 2009. As a result, operating expenses are projected to decline by $20–$25 million annually. For the first quarter, the company anticipates flat to slightly lower revenue growth to $72–$75 million.

Fiscal second-quarter sales for Dionex grew 5.1% to $103.0 million, despite a decline in sales growth of 4.2% from currency fluctuations. The company reported increased sales for environmental, life sciences, petrochemical and power markets, but lower revenue from the food and beverage and electronic industries. Demand for chemical/petrochemical products slowed to single-digit growth compared to 20% growth over the last three years, and is expected to further decline in the next quarter. Ion chromatography sales grew in the mid-single digits, benefiting from strong demand for IT systems and consumables, while HPLC sales reported similar growth due to increased demand for UltiMate 3000 products. North American and European sales slipped 1.9% and 2.7%, respectively, while Asia/Pacific sales jumped 26.0% due to strong demand in Japan, China, India and Australia. Excluding currency effects, sales to North America declined by 0.2%, while European and Asia/Pacific sales improved 4.7% and 27.1%, respectively. Operating profit improved 13.9% to $25.9 million because of lower SG&A and R&D expenses as a percentage of sales. Gross profit margin was unchanged at 67.5% of sales. The company maintained its full-year revenue growth forecast of 2%–4% to $385–$393 million, but expects fiscal third-quarter revenues to be modestly lower at $95–$98 million.

Illumina’s fourth-quarter revenues climbed 42.9% to $160.9 million (see page 12), led by sales of sequencing and microarray products, in particular the Infinium HD BeadChips and Human 610-Quad. Product revenue grew 51.2% to account for 95.0% of total sales, including consumable and instrument sales growth of 75.4% and 22.5% to $98.6 million and $51.2 million, respectively. Sequencing consumable sales grew over 200%. Thirty-eight BeadExpress systems were shipped during the quarter. Service revenue declined 29.6% to make up 5.0% of total sales. Adjusted operating profit climbed 72.6% to $38.7 million, while gross profit margin improved 165 basis points to 66.0% of sales.

For the year, Illumina’s revenues grew 56.3% to $573.2 million, including product and service revenue growth of 63.0% and 1.8% to account for 92.9% and 7.1% of total revenues, respectively. The company shipped over 200 Genome Analyzers, while revenue for expression arrays climbed 40%. Adjusted operating profit more than doubled to $119.6 million, while gross profit margin improved 24 basis points to 64.1% of sales. Going forward, the company anticipates a sizable revenue contribution from its new BeadChips for agricultural biotech, which recorded roughly $54 million in orders for 2008. For the first quarter, revenues are expected to grow 30%–35% to $158–$164 million. Full-year revenues are projected to increase 20%–26% to $690–$720 million.

Luminex’s fourth-quarter sales climbed 31.1% to $28.2 million (see page 12), including Technology and Assay segment growth of 26.6% and 50.4% to account for 78.3% and 21.7% of total sales, respectively. Consumable, royalty and reagent revenues jumped 53%, 44%, and 55% to $8.2 million, $4.0 million and $5.4 million, respectively, while system and all other revenues were $7.4 million and $3 million, respectively. Operating profits reached $2.2 million compared to a loss of $2.9 million a year ago. The Technology Group recorded an operating profit of $2.4 million, while the Assay Group lost $0.3 million. Gross profit margins soared 751 basis points to 69.4% due to higher royalty consumable and assay revenues.

Full-year revenues for Luminex grew 39.2% to $104.4 million, including a gain of 33.8% and 66.1% for the Technology and Assay Groups, to account for 80.0% and 20.0% of total revenues, respectively. Consumables, royalty and reagents revenues jumped 65%, 45%, and 65% to $31.7 million, $14.9 million and $18.7 million, while service and all other revenues were $5.4 million and $5.6 million, respectively. The company shipped a total of 915 instruments, including 250 in the fourth quarter. Operating profit was $3.4 million, compared to an adjusted loss of $10.0 million last year, including a profit of $9.0 million for the Technology Group and a loss of $5.7 million for the Assay Group. Gross profit margins improved 648 basis points to 67.9% of sales. The company improved its balance sheet through a secondary offering of approximately $75 million, ending the year with $122 million in cash and short-term investments compared to $34 million in the previous year. For 2009, revenues are expected to grow 25%–34% to $130–$140 million.

QIAGEN NV’s fourth-quarter revenues grew 12.8% to $237.2 million (see page 12). Adjusted operating profits climbed 28.4% to $63.5 million, and adjusted gross profit margins improved 25 basis points to 72.4% of sales. For the year, revenues jumped 37.4% to $893.0 million, including approximately 22% growth from acquisitions and 2% growth from currency transactions. Organically, sales increased 13%, including 5% growth from new products. Consumable revenue climbed 36% to account for 88% of sales due to demand for molecular diagnostic products. Instrument sales jumped 51% to make up 11% of sales. Other revenue declined 20% to make up 1% of sales. On a constant-currency basis, consumable and instrument revenue grew 34% and 52%, respectively, while Other revenue declined 22%. In 2008, sales to North America, Europe and Asia climbed 49%, 21% and 24% to make up 50%, 37% and 13% of revenues, respectively. At constant-exchange rates, sales to Europe and Asia increased 17% and 16%, respectively. Full-year adjusted operating profits climbed 53.5% to $243.3 million, and adjusted profit margins improved 248 basis points to 72.8% of sales. For 2009, the company expects revenue to grow 3%–9% to $920–$970 million, including a loss of 7% growth from currency transactions.

Chart: Quarterly Sales Performance January 2004—December 2008

Year Q1 Q2 Q3 Q4

2005 3479 3363 3410 3652

2006 3638 3588 3710 4067

2007 4073 4064 4229 4654

2008 4530 4631 4536 4705

Chart: Quarterly Operating Profit Margins January 2004—December 2008

Year Q1 Q2 Q3 Q4

2005 15.2% 14.3% 15.1% 17.3%

2006 15.1% 13.6% 15.3% 17.2%

2007 16.2% 15.2% 15.9% 18.1%

2008 16.6% 16.3% 17.3% 18.3%

Laboratory Instrument Index, Total % Change

2005 2006 2007 2008 05/06 06/07 07/08

Total Annual Revenues ($M) 13903 15002 17020 18403 7.9 13.5 8.1

4th Quarter Revenues ($M) 3652 4067 4654 4705 11.4 14.5 1.1

Annual Oper. Profits ($M) 2158 2306 2792 3150 6.9 21.1 12.9

Annual Oper. Profits (%) 15.5 15.4 16.4 17.1 —– —– —–

4th Quarter Oper. Profits ($M) 633 699 841 860 10.5 20.2 2.3

4th Quarter Oper. Profits (%) 17.3 17.2 18.1 18.3 —– —– —–