Calendar-year third quarter ended with increased recessionary fears due to the lingering European sovereign debt crisis, a deteriorating US economic outlook by the US Federal Reserve and weak economic data from China. Investors’ anxieties were further heightened on September 20, when the International Monetary Fund lowered its growth forecasts for both the US and Europe. The US economic growth forecast was cut to 1.5% in 2011 and 1.8% in 2012, from previous growth estimates of 2.5% and 2.7%, respectively. European growth outlooks were lowered to 1.6% and 1.1% for 2011 and 2012, from 2.0% and 1.7%, respectively. For the month of September, the Dow Jones Industrial Average, S&P 500 and NASDAQ fell 6.0%, 7.2% and 6.4%, respectively. Year to date, the Dow, S&P 500 and NASDAQ are lower by 5.7 %, 10.0% and 9.0%, respectively.

The IBO Stock Indexes were similarly pressured by economic worries, including concerns over the NIH budget and slower academic and government spending. For the month, the Process/Metrology/Motion Instrumentation, Diversified Instrumentation, Laboratory Instrumentation and Lab Consumables/Equipment Stock Indexes slumped 15.7%, 11.1%, 9.1 and 9.0%, respectively.

Laboratory Instrumentation Stock Index

In September, the Laboratory Instrumentation Index declined 9.1% to close at 577.75. Sixteen companies decreased, and five improved. Caliper Life Sciences recorded the largest price increase, climbing 39%, while Pacific Biosciences fell 55% and 80% for the month and year, respectively. Year to date, the Index is down 12.5%, with 15 companies in negative territory and six with positive returns. Transgenomic has sustained the largest price increase, improving 95%.

Caliper Life Sciences jumped 41.1% on September 8 after PerkinElmer signed a definitive agreement to acquire the company (see IBO 9/15/11). On September 12, Jeffries increased its price target on Caliper by 5% to $10.50, but downgraded shares to “Hold” from “Buy.”

Pacific Biosciences suffered a tumultuous month as the company reported in an SEC filling on September 20 that it would eliminate 130 employees (see page 2). The company acknowledged a slower-than-expected acceptance of its new systems. Shares fell 23.6% the next day. Piper Jaffray downgraded the company on September 21 to “Neutral” from “Overweight” and cut its price target to $7 from $12. JPMorgan Chase also lowered its rating on the same day to “Underweight” from “Neutral” and cut its price target to $8 from $10 due to liquidity concerns.

Other rating changes included a downgrade of Illumina by Leerink Swann on September 15 to “Market Perform” from “Outperform,” citing impending NIH budget cuts and slower HiSeq revenue growth. On September 23, Goldman Sachs upgraded Cepheid to “Buy” from “Neutral.”

Process/Metrology/Motion Instrumentation Stock Index

The Process/Metrology/Motion Instrumentation Stock Index contracted 15.7% this month to 390.42. All six companies traded lower, led by Veeco Instruments, which declined 33% and 43% for the month and year, respectively. For the first nine months, the Index is down 13.3%, with four companies losing ground and both FEI Company and Nanometrics advancing by 13%.

During the month, analysts lowered earnings estimates and ratings on Veeco due to concerns over LED pricing and slower Asia demand. On September 15, Citigroup cut its 2012 EPS target on the company by 25% to $2.28 and lowered its price target to $40 from $45. On the same day, Lazard Capital downgraded the company to “Neutral” from “Buy.” Shares fell 4.3%. The following day, Bank of America Merrill Lynch downgraded Veeco to “Neutral” from “Buy” and cut its price target to $36 from $54. Deutsche Bank and KeyBanc Capital each initiated coverage of Veeco with “Hold” ratings on September 16 and 23, respectively. Ticonderoga started coverage of FEI on September 23 with a “Buy” recommendation.

Lab Consumables/Equipment Stock Index

The Laboratory Consumables/Equipment Stock Index dropped 9.0% in September to 525.00, with all seven companies trading lower. Pall recorded the largest decline, sliding 17%. Year to date, the Index has fallen 16.2%. Six companies are in negative territory, while Techne has advanced 4%. Enzo Biochem’s value has deteriorated the most, falling 51%.

Pall missed fiscal fourth-quarter EPS expectations on September 7 (see page 12), leading shares down 9.8%. The company projected fiscal 2012 pro forma EPS of $3.07–$3.32 during its conference call on September 14. Given the company’s earnings shortfall, Jeffries and Baird cut 2012 EPS estimates for Pall on September 8, and Barclays lowered its 2012 outlook on September 16. The average EPS estimate from the three investment companies was lowered by 5% to $3.14, and the average price target was cut by 10% to $54 a share.

Earlier in the month, on September 13, Barclays downgraded Life Technologies to “Equal Weight” from “Overweight” and cut its price target to $45 from $55 due to expected NIH budget cuts and concerns over the company’s sequencing portfolio. Leerink downgraded Life Technologies on September 15 to “Market Perform” from “Outperform.” On September 29, QIAGEN was downgraded at Mizuho from “Outperform” to “Neutral” but upgraded by Leerink to “Outperform” from “Market Perform.”

Diversified Instrumentation Stock Index

The Diversified Instrumentation Stock Index diminished 11.1% for the month to 112.01. All seven companies declined, led by AMETEK, which fell 16%. Year to date, the Index has tumbled 16.5%, with six companies trading lower and Teledyne Technologies up 11%. Agilent Technologies has sustained the largest decline, retreating 25%.

Danaher reaffirmed its third-quarter and full-year earnings outlook on September 9. The company acknowledged some very modest economic headwinds but confirmed strong growth in emerging markets. Shares slipped 3.0%. The next trading day, Janney Capital lowered its 2012 EPS target on Danaher by $0.15 to $3.20 due to lower organic growth estimates.

On September 21, Illinois Tool Works (ITW) preannounced fiscal third-quarter revenue growth of 16%, 6% organically, and maintained its quarterly EPS outlook from continuing operations of $0.95–$1.03. Shares slipped 3.0%. Barclays initiated coverage of ITW on September 28 with an “Equal Weight” position. On September 22, AMETEK closed a new five-year, $700 million revolving credit facility, which replaces an existing $450 million facility due to expire in 2012. Shares traded slightly lower.

International

For the month of September and year to date, three Pacific Region companies are trading higher, while two have negative returns. HORIBA recorded the largest decline in value for the month, down 5%, while JEOL has fallen 22% for the year. Shimadzu has the largest gains for both the month and year, rising 11% and 4%, respectively.

For September, nine European companies declined, four improved and Biotage was unchanged. Renishaw experienced the sharpest descent, falling 28%, while Cybio climbed 8% and 22% for the month and year, respectively. At the end of the third quarter, half the companies are trading higher, and the other half have fallen in value. Scientific Digital Imaging has lost the most ground, declining 26%.

On September 8, Oxford Instruments was promoted from the FTSE Small Cap Index to the FTSE 250 Index, leading shares up 2.2%.

 Line Graph: IBO Instrument Industry Stock Index

           Lab Instrument Stock Index         S&P 500

 Sep-09    543.19                             253.44

 Oct-09    535.42                             248.43

 Nov-09    548.41                             262.68

 Dec-09    565.94                             267.35

 Jan-10    546.93                             257.47

 Feb-10    566.22                             264.81

 Mar-10    585.87                             280.38

 Apr-10    596.47                             284.51

 May-10    557.61                             261.19

 Jun-10    531.11                             247.12

 Jul-10    513.20                             264.12

 Aug-10    499.94                             251.58

 Sep-10    556.95                             273.61

 Oct-10    579.40                             283.69

 Nov-10    589.00                             283.04

 Dec-10    660.07                             301.53

 Jan-11    657.02                             308.36

 Feb-11    661.02                             317.14

 Mar-11    661.90                             317.88

 Apr-11    703.32                             326.93

 May-11    721.22                             322.52

 Jun-11    712.55                             316.63

 Jul-11    676.63                             309.83

 Aug-11    635.47                             292.24

 Sep-11    577.75                             271.27

                                2011                                   2010

 Cos.      Date Rept.  FQ     Adj.EPS    Consensus   Vs.Est.  Grw.   Adj.EPS

 Lab Consumables/Equipment

 PLL       14-Sep      4Q     $0.76      $0.88       -$0.12   6%     $0.72

  

                             Market Value     52 Week       Price    Change  Change        EPS    EPS    LTD/     FY    R&D/

 Company:  Exchange          (US $000s)    Low      High  9/30/2011  1Month  YTD    P/E  12Month  FY     Equity   ROE   Sales

 Laboratory Instrumentation             

 Accelrys: o                    $339,663    5.80    8.95    $6.06     -7%    -27%   N/A   -0.48   -0.44    5%     N/A   28%

 Affymetrix: o                  $340,570    4.04    8.16    $4.90    -13%     -3%   245    0.02   -0.15   38%     N/A   22%

 Becton, Dickinson&Company:n $16,391,932   69.54   89.75   $73.32    -10%    -13%    14    5.38    4.94   69%     24%    6%

 Bio-Rad Laboratories: n      $2,586,491   85.88  126.98   $90.77    -10%    -13%    14    6.57    6.59   51%     12%    9%

 Bruker: o                    $2,250,039   12.28   21.65   $13.53     -5%    -18%    25    0.55    0.58   27%     23%   11%

 Caliper Life Sciences: o       $548,806    3.90   10.56   $10.47     39%     65%   N/A   -0.17    0.08   13%      5%   15%

 Cepheid: o                   $2,577,924   17.45   40.98   $38.83      7%     71%   971    0.04   -0.10    6%     N/A   20%

 Fluidigm: o                    $278,252   11.64   20.20   $13.93      3%     -1%   N/A   -4.91   -8.94    9%     N/A   39%

 Harvard Bioscience: o          $127,389    3.71    6.26    $4.22     -3%      3%     7    0.61    0.65   23%     21%    4%

 Helicos BioSciences: o           $8,962    0.06    0.58    $0.11    -32%    -13%     0    0.87    0.87   69%     10%   20%

 Illumina: o                  $5,801,024   39.82   79.40   $40.92    -21%    -35%    47    0.87    0.87   69%     10%   20%

 Luminex: o                     $941,028   15.65   24.70   $22.17     -4%     21%    85    0.26    0.12    4%      2%   17%

 MOCON: o                        $87,903   11.85   17.67   $15.74      7%     22%    17    0.92    0.84    1%     16%    7%

 Pacific Biosciences: o         $171,458    3.19   17.47    $3.21    -55%    -80%   N/A  -13.98  -14.10    3%     N/A   N/A

 PerkinElmer: n               $2,182,698   19.21   28.75   $19.21    -16%    -26%    21    0.92    1.15   55%      7%    6%

 Pressure BioSciences: o          $2,525    0.62    2.29    $0.88     -1%    -37%   N/A   -1.30   -1.35    2%     N/A   92%

 Sequenom: o                    $505,323    5.01    8.71    $5.10    -17%    -36%   N/A   -0.86   -1.69    6%     N/A   92%

 Thermo Fisher Scientific: n $19,764,792   44.41   65.86   $50.64     -8%     -9%    19    2.63    2.53   42%      7%    3%

 Transgenomic: o                 $63,597    0.32    1.85    $1.29    -11%     95%   N/A   -0.20   -0.04   62%     N/A   11%

 Waters: n                    $7,040,952   64.13  100.00   $75.49     -5%     -3%    17    4.46    4.06   47%     36%    5%

 X-Rite: o                      $320,835    3.26    5.08    $3.73      2%    -18%   533    0.01    0.04   79%      2%   11%

 Process/Metrology/Motion Instrumentation           

 FEI Company: o               $1,275,277   18.98   41.56   $29.96     -6%     13%    15    1.99    1.34   18%      8%   10%

 MTS Systems: o                 $483,775   28.00   48.72   $30.64    -15%    -18%    11    2.82    1.14   10%     11%    4%

 Nanometrics: o                 $339,909   10.92   21.56   $14.50     -9%     13%     6    2.58    2.43   10%     33%   10%

 SDIX: o                         $35,528    1.54    3.13    $1.74    -10%     -1%   N/A   -0.08   -0.05    1%     N/A   11%

 Veeco Instruments: o         $1,049,249   24.39   57.67   $24.40    -33%    -43%     4    5.93    6.13    0%     34%    1%

 Zygo: o                        $212,739    9.33   16.51   $11.56    -12%     -6%    11    1.05    1.05    3%     15%   10%

 Lab Consumables/Equipment            

 Enzo Biochem: n                 $98,888    2.31    5.83    $2.57    -12%    -51%   N/A   -0.38   -0.59    0%     N/A   10%

 Kewaunee Scientific: o          $22,704    8.01   14.25    $8.80     -5%    -36%    18    0.48    0.72   29%      6%    0%

 Life Technologies: o         $7,129,265   35.30   57.25   $38.43     -9%    -31%    20    1.95    1.99   68%      9%   10%

 Pall: n                      $5,013,758   36.66   59.50   $42.40    -17%    -14%    16    2.67    2.67   65%     21%    3%

 QIAGEN: o                    $3,332,809   13.05   22.20   $13.83    -10%    -29%    25    0.55    0.60   40%      6%   12%

 Sigma-Aldrich: o             $7,661,960   56.18   76.16   $61.79     -4%     -7%    18    3.39    3.12   23%     19%    3%

 Techne: o                    $2,532,012   58.60   86.43   $68.01     -6%      4%    23    3.02    3.02    2%     19%    9%

 Diversified Instrumentation            

 Agilent Technologies: n     $11,156,250   28.65   55.33   $31.25    -15%    -25%    11    2.87    1.94   73%     20%   11%

 AMETEK: n                    $5,348,229   31.55   47.00   $32.97    -16%    -16%    16    2.12    1.76   79%     16%    2%

 Danaher: n                  $29,131,482   39.53   56.09   $41.94     -8%    -11%    13    3.20    2.64   64%     13%    5%

 Illinois Tool Works: n      $20,877,418   40.82   59.27   $41.60    -11%    -22%    11    3.79    3.03   39%     16%    1%

 Mettler-Toledo Int'l: n      $4,620,624  122.52  193.56  $139.96    -12%     -7%    19    7.44    6.80  112%     30%    5%

 Roper Industries: n          $6,781,571   64.67   88.76   $68.91    -10%    -10%    17    3.97    3.34   58%     12%    4%

 Teledyne Technologies: n     $1,822,478   38.83   55.46   $48.86    -10%     11%     7    6.75    3.27   45%     15%    3%

 Laboratory Instrumentation Stock Index                    577.75   -9.1%  -12.5%    19                   47%     10%    7%

 Process/Metrology/Motion Instrumentation                  390.42  -15.7%  -13.3%     8                    8%     22%    5%

 Lab Consumables/Equipment Stock Index                     525.00   -9.0%  -16.2%    19                   50%     12%    7%

 Diversified Instrumentation Stock Index                   112.01  -11.1%  -16.5%    13                   59%     15%    4%

 Dow Jones Industrial Average                           10,913.38   -6.0%   -5.7%      

 S&P 500                                                 1,131.42   -7.2%  -10.0%      

 NASDAQ Composite                                        2,415.40   -6.4%   -9.0%   

    

                                                       Price         

                            Market Value   Market Value   9/30/2011  Change  Change       EPS       EPS    LTD/   FY    R&D/

 Company                    (US $000s)     (Local 000s)   (Local)    1Month  YTD    P/E   12Month   FY     Equity ROE   Sales

 Pacific Shares             

 Hitachi High-Technologies: t $2,803,999  ¥215,527,684      ¥1567      8%    -17%   13   ¥118.20   ¥129.07  11%    7%    3%

 HORIBA: t                    $1,302,366  ¥100,105,585      ¥2367     -5%      3%   12   ¥205.36   ¥187.11  17%    9%    8%

 JEOL: t                        $229,224   ¥17,619,163       ¥222     -1%    -22%   63     ¥3.51     ¥3.51  93%    1%    5%

 Shimadzu: t                  $2,535,633  ¥194,899,909       ¥659     11%      4%   19    ¥35.00    ¥36.00   0%    6%    3%

 Techcomp: si                    $61,579    SGD 80,213   SGD 0.35     -4%    -18%    7     $0.04     $0.04   9%   18%    0%

 European Shares              

 Halma: l                     $1,851,416    £1,188,276      £3.16     -9%    -12%   16     £0.19     £0.19  46%   20%    5%

 Oxford Instruments: l          $694,924      £446,016      £8.08     -1%     15%   13     £0.64     £0.64  28%   34%    7%

 Renishaw: l                  $1,156,778      £742,443     £10.20    -28%    -17%   11     £0.90     £0.90  35%   33%   10%

 Scientific Digital Imaging: l    $3,101        £1,990      £0.12    -18%    -26%   10     £0.01     £0.01   0%   N/A    5%

 Spectris: l                     $21,157    £1,357,917     £11.68    -19%    -11%   12     £0.99     £0.82  32%   19%    8%

 Alpha MOS: c                    $14,027      € 10,388     € 2.66      0%      0%  N/A   -€ 0.05   -€ 0.14  15%   N/A   16%

 Analytik Jena: g                $65,039      € 48,166     € 9.20      6%      9%  N/A   -€ 0.04    € 0.34  55%    5%   10%

 Biohit: h                       $41,734      € 30,907     € 2.27      0%      8%  N/A   -€ 0.01    € 0.00  69%    2%    6%

 CyBio: g                        $12,143       € 8,993     € 1.25      8%     22%    9    € 0.14    € 0.14   2%   13%    6%

 Sartorius: g                   $732,545     € 542,506    € 28.98     -3%      3%   11    € 2.67    € 2.29  93%   12%    6%

 Tecan: s                       $826,237   CHF 744,671   CHF 65.3     -4%    -16%   13  CHF 5.10  CHF 4.43   5%    7%   10%

 Datacolor: s                    $72,855    CHF 65,663  CHF 390.8      1%    -10%   13 CHF 31.05 CHF 29.26   5%    0%    9%

 Biotage: st                        $627     SEK 4,300    SEK 5.4      0%    -19%  N/A -SEK 5.19 -SEK 4.91   6%   N/A    9%

 Exiqon:  no                     $65,931   DKK 363,354   DKK 10.9     -8%     15%  N/A -DKK 1.30 -DKK 1.28   4%   N/A   32%