Productivity growth for instrument and laboratory product companies decelerated in fiscal year 2014 (FY14) due to the negative currency impact on revenue growth for most US companies, varied market demand and increased investments in personnel. With half of the companies recording productivity gains, the average sales-per-employee ratio for the 20 companies in the table on page 6 improved 0.3% to $320,149. Excluding currency, average sales-per-employee ratio expanded 1.4%, with 70% of the companies recording productivity growth, compared with growth of 3.6% in FY13.

Given the slow start to the year, which saw mixed demand from pharmaceutical markets, and softness from academic and government as well as industrial customers, a number of companies implemented restructuring plans and productivity enhancements to expand profitability. Several other companies focused on cost saving measures such as low-cost and lean manufacturing, as well as supply chain improvements. However, as demand accelerated in the second half of the year, a number of companies focused on growth initiatives and increased hiring.

IBO’s calculations are based on FY14 employment and currency-neutral sales figures in US dollars. Sales for non-US companies are based on 2014 constant exchange rates.

Despite the overall modest productivity growth, fast-growing, younger companies, such as Pacific Biosciences and Fluidigm, recorded strong double-digit productivity gains in FY14. With revenue growth of 115.0%, driven by a product development agreement with Roche (see IBO 9/30/13) and strong instrument sales, productivity for Pacific Biosciences soared 98.8%. The collaborative agreement also provided additional capital to expand its operations. Overall the company’s headcount grew 8.2%, including an 11.7% increase in R&D personnel. Only a few years ago, in 2011, Pacific Bioscience cut its workforce by 28%, or 130 employees, due to slow adoption of its sequencing systems (see IBO 9/30/11).

Fluidigm increased productivity by 12.2% due to strong revenue growth for single-cell genomics products and the acquisition of DVS Sciences (see IBO 1/31/14). Total sales climbed 64.5% excluding currency. The company’s headcount also expanded quickly, rising 45.8%, including roughly 84 employees from DVS as well as sizeable additions in R&D, and sales and marketing. The company also expanded its facility in Singapore, which is used for manufacturing of all its instruments and its Integrated Fluidic Circuits, as well as for R&D.

Two other companies, Affymetrix and Illumina, which both similarly expanded operations in Singapore over the last several years, also produced healthy productivity growth. Illumina’s productivity expanded 4.9% in FY14 to $495,701, representing the highest sales-per-employee ratio among the companies in the table. Currency-neutral sales for the company climbed 31.3% due to robust sequencing revenue, while headcount increased 25.2%. The company continued to invest in R&D, as well as sales and marketing personnel to support strong revenue growth and its growing diagnostics business. In addition, it expanded its gene chip manufacturing base in Singapore, as regional activity for biopharmaceutical research and diagnostics continue to develop. Illumina also tripled the sized of its regulatory team via the acquisition of Myraqa (see IBO 7/31/14) to focus on the clinical market.

Productivity progress for Affymetrix mirrored its revenue growth of 5.6% as headcount was unchanged for the third consecutive year due to reorganization and cost control measures. The company realigned its resources to focus on reproductive health and oncology applications, and also benefited from insourcing R&D to the eBioscience business.

Major reorganizations, including divestments and facility consolidation, were implement by Agilent Technologies, Bruker, FEI, Oxford Instruments, PerkinElmer and Thermo Fisher Scientific in FY14. Thermo’s growth-through-acquisition strategy, which has effectively elevated its competitive position and provided revenue synergies, also resulted in continued reorganization and streamlining of operations in FY2014. Following the completed acquisition of Life Technologies (see IBO 4/15/13), Thermo divested its culture media and sera, and gene-modulation and magnetic-bead businesses (see IBO 11/30/14), and its Cole-Parmer business (see IBO 7/31/14). The company also expanded its global sourcing and low-cost manufacturing as it broadened production of reagents in Lithuania in 2014, which resulted in layoffs of 115 employees at its Austin, Texas, facility. Thermo further expanded its Singapore Center of Excellence to include GC/MS production. Overall, cost saving measures and facility consolidation the US, Europe and Asia resulted in a 3% workforce reduction and produced restructuring costs of roughly $160 million, a majority of which was recorded within the Life Sciences Solutions segment. Thermo also established additional productivity measures through its Practical Process Improvements program, including target price increases and leveraging its supplier base. On a pro forma basis, productivity for Thermo improved 1.2%.

Agilent and Bruker implemented restructuring efforts due to declining NMR sales, negative currency impacts and waning profitability. Bruker divested its ICP-MS product line (see IBO 8/15/14) and a GC and GC/MS business (see IBO 10/15/14) within the former Chemical and Applied Markets (CAM) division and transferred the remaining CAM product lines to the Daltonics division. These divestments, including the closure of the CAM manufacturing facility in Fremont, California, resulted in layoffs of 180 employees, a majority of whom were involved with R&D in the US. All other divisions implemented outsourcing and lean manufacturing operations, including outsourcing the assembly for some of the MALDI-TOF product line. Total FY14 restructuring charges for severance and facility exit costs amounted to $24.3 million. Bruker was the only company in the table to report a net reduction in total headcount, which declined 1.6%, or by 100 employees. However, the company offset some of the personnel reductions with increased investments in its services business and in the Preclinical Imaging division. Despite lower revenues of 0.3% excluding currency, productivity improved 1.4% due to the restructuring actions.

Also looking to improve its top line growth and profitability, Agilent discontinued its NMR business in FY14 (see IBO 10/15/14). This action, which resulted in restructuring charges of $68 million, is estimated to reduce its workforce by roughly 300 employees, mostly by fiscal 2015. Productivity for the company was unchanged due to the timing of the layoffs.

FEI and Oxford also implemented restructuring measures due to disappointing revenue growth. Excluding the acquisition of Andor Technology (see IBO 12/15/13), Oxford Instruments endured a challenging fiscal year, which resulted in an accelerated restructuring plan to close six facilities and reduce its headcount by 7%. The company’s Plasma Technology business also exited the high-volume production semiconductor market. Restructuring costs amounted to £9.9 million ($16.0 million) in FY14 but are projected to reduce expenses by £8 million ($13 million) beginning in fiscal 2015. In FY14, the average number of employees climbed 18.0% due to the acquisition, while revenues grew 10.0% excluding currency. As a result, productivity fell 6.8%.

Finally, PerkinElmer implemented several restructuring efforts on account of divestments and acquisitions, growth initiatives and productivity improvements. The company closed its Signature Genomics laboratory testing business in Spokane, Washington, and let go roughly all of the 80 employees (see IBO 4/30/14) due to reimbursement challenges and increased adoption of noninvasive prenatal testing. Productivity also benefited from consolidation of R&D at PerkinElmer’s Center for Innovation in Hopkinton, Massachusetts. In spite of the layoffs of 191 employees from reorganization efforts, the company’s headcount expanded by 100 employees, or 1.3% of its workforce, in FY14 due to investments in a new clinical testing lab in Suzhou, China, informatics development and acquisitions. With revenue growth of 3.8% excluding currency, productivity improved 2.5%.

Aside from Oxford, productivity declined for several other companies in FY14 due to increased personnel from acquisitions and investment in future growth initiatives. Productivity for Harvard Bioscience slumped 15.7%, as the company’s headcount jumped 21.5% due to acquisitions and expansion of its commercial team in Asia. QIAGEN also recorded a notable decline in productivity, at 3.5%. The company’s headcount expanded 8.1%, which included roughly 100 employees from the acquisition of BIOBASE (see IBO 5/31/14).

NanoString Technologies grew its headcount by 58.6% to 276 employees, representing the largest percentage change among companies in the table. Its sales, marketing and business development personnel nearly doubled, and the R&D division expanded 59.2% due to new product launches, entry into the companion diagnostics market, and added personnel for clinical and regulatory affairs. The number of employees outside the US jumped 79.0% to account for 9% of its workforce. Despite strong revenue growth of 51.6%, productivity fell 4.5%.

In contrast, Eppendorf elevated productivity despite increased investment in production for its new cell culture consumables offering, and expansion of its logistics and services offerings. In FY14, the company opened a distribution center in Australia and a logistics facility in Japan, yet productivity improved 2.8%.