Total R&D spending for 22 leading publicly held instrument and lab product companies (see table, page 6) increased at a tepid pace in FY15 and declined as a percentage of sales due to restructuring initiatives, cost saving measures as well as sturdier top line growth. Several companies’ R&D expenditures benefited from currency effects, improved product development efficiencies and collaborations. For the companies in the table, FY15 R&D spending grew 0.5%, while sales advanced 3.5%. As such, R&D spending as a percentage of sales declined 20 basis points to 6.9%. Fourteen of the 22 firms recorded lower R&D spending as a percentage of sales.

IBO’s annual survey of R&D expenditures is based on FY15 results, with the exception of Agilent Technologies (FY ending October 31, 2015) and Oxford Instruments (fiscal year ending March 31) (see page 8). Financial results for European companies are calculated at 2015 constant exchange rates.

The slower R&D spend in FY15 was mainly attributed to a handful of companies, whose R&D budgets along with revenue growth declined primarily due to restructuring measures, including facility consolidation and divestments. Among these firms, Agilent Technologies, Bruker, QIAGEN and Oxford Instruments recorded the largest declines in R&D spending.

PerkinElmer and Waters were the only two companies in the table with sales of more than $500 million to increase spending as a percentage of sales. Waters’ R&D expenditures climbed 10.0%, or grew in the mid-teens excluding currency, to account for 5.8% of sales, their highest level since 2006.

Agilent’s decision to discontinue its NMR business (see IBO 3/31/15) due to underperforming growth and profitability lowered its R&D expenditures including related personnel. Agilent’s total R&D expenditures, which further benefited by currency and streamlined operations, declined 7.8% in FY15. As a percentage of sales, R&D expenses declined below the 8% level for the first time since 2010.

Bruker similarly reduced its R&D costs in FY15, as they declined 16.4% due to currency, restructuring initiatives and the divestment of nonprofitable businesses over the last couple years. R&D expenses also benefited from product development efficiencies and reduced R&D headcount, which contracted 1.0%.

Oxford Instruments recorded the largest percentage change in R&D spending among companies in the table, which fell 19.3% as the company consolidated six of its smaller facilities and divested its Omicron business into a joint venture (see IBO 5/31/15).

QIAGEN’s R&D disbursements declined 10.1% in FY15 as the company divested its diagnostic kits operations in Marseille, France, to HalioDx, accounting for roughly 3% of the R&D decline. Efficiency improvements and currency accounted for the remaining reduction.

Fluidigm also recorded a sharp drop in R&D costs, which fell 9.5%, but this was primarily attributed to one-time acquisition-related stock-based compensation expenses in the previous year and lower consulting services.

Notwithstanding these restructuring activities, most firms in the table maintained steady R&D investments in FY15, especially in higher growth life science, analytical instrumentation and diagnostic markets. Product enhancements and workflow solutions in NGS were a significant focus for Illumina, Pacific Biosciences, QIAGEN and Thermo Fisher Scientific.

Illumina invested in the smaller benchtop MiniSeq system, which is expected to attract new customers including clinical researchers and smaller laboratories. QIAGEN completed development of its GeneReader workflow solutions, including bioinformatics portfolio updates, to target clinical research and diagnostic customers. Pacific Biosciences, whose R&D expenditures jumped 25.3% in FY15, experienced higher compensation-related expenses as well as increased consulting fees, product development and regulatory costs associated with the development of its new Sequel system. Thermo Fisher invested in the commercialization of its new Ion Torrent S5 and S5 XL sequencers in FY15, as well as NGS sample preparation and bioinformatics. Despite significant delays, the company is also developing a new chip to boost throughput for whole-genome sequencing. Roughly 46% of Thermo Fisher’s R&D budget was devoted to the Life Sciences Solutions segment.

Agilent commercialized its automated 4200 TapeStation sample preparation system, which is also geared towards microarray and qPCR workflows. Fluidigm continued to develop target-enrichment systems and library preparation chips for use with NGS. PerkinElmer introduced its LabChip NGS 3K assay for validation and library preparation in genomics research.

Many of the above companies in the NGS space were equally dedicated to R&D for diagnostic applications. Agilent, Illumina and Thermo Fisher each entered agreements with pharmaceutical companies to produce companion diagnostics. Illumina also invested in its new start-up, GRAIL, to develop early-stage cancer screening tests (see IBO 1/15/16). QIAGEN expanded its molecular diagnostic tests based on the QIAsymphony platform.

Other significant R&D investments in FY15 were directed towards oncology and omics applications. NanoString Technologies invested in the development of its nCounter Vantage portfolio of assays as well as a new version of its nSolver data analysis software. The company also launched the new lower-priced nCounter SPRINT Profiler. PerkinElmer advanced development of two new research imaging platforms, the Operetta CLS cell imaging system and Phenoptics quantitative pathology system. FEI dedicated significant assets to workflow solutions primarily surrounding its cryo-EM solutions for structural biology.

R&D resources were also dedicated to new and enhanced chromatography and MS products in FY15. Within the LC market, Agilent upgraded its Infinity UHPLC system with the 1290. Thermo Fisher commercialized the brand-new Vanquish platform. Waters commercialized its ACQUITY Arc System. Higher-performance capabilities, resolution and sensitivity propelled R&D for new MS systems in FY15. Waters introduced its Rapid Evaporative Ionization MS system, which functions without sample preparation or chromatography. Thermo Fisher presented the Orbitrap Fusion Lumos system. Agilent dedicated resources to its new 8900 Triple Quadrupole ICP-MS system.