With 15 of the 23 Laboratory Instrument Sales Index companies reporting calendar year-end results, fourth quarter 2006 revenues grew an estimated 10.5% to $4,131 million. Fourth quarter operating profit growth rebounded from a year ago, improving 8.0% to $707 million. However, operating margin dropped 40 basis points to 17.1% of sales. The five largest instrument manufacturers each reported double-digit fourth quarter revenue growth.

For the year, Laboratory Instrument Index sales gained 8.9% to $15,454 million, and operating profit increased 7.3% to $2,377 million, which led year-end operating margin to slip 20 basis points to 15.4% of sales. Eight companies have yet to report calendar year-end financials. As a result, estimates are used for these companies’ financial results based on company forecasts and conservative growth rates. Financial results for these companies will appear in the February 28 issue of IBO.

Fourth quarter revenues for Affymetrix dropped 6.5% to $104.2 million, leading year-end revenues to slip 3.3% to $355.3 million (see page 12). During the fourth quarter, adjusted operating income returned to profit, but still tumbled 55% to $14.0 million. Full-year operating income fell to a loss of $4.2 million from a profit of $65.9 million in 2005 due to lower sales, as well as higher cost of sales and higher SG&A expenses. Fourth quarter product and product-related revenue fell 10.1% to $95.0 million. Instrument and Gene Chip array revenues fell 23% and 17% to $15.0 million and $49.6 million, respectively. However, reagent sales gained 7.4% to $13.0 million. For the year, product and product-related revenue dropped 7.5% to $323.8 million, with the shipment of approximately 170 systems compared to 210 last year, bringing the installed base to 1,550 systems. The completion of upgrades and reduced focus on automation hurt instrument sales.

Consumables sales were flat compared to the previous year. US sales accounted for 48% of total 2006 revenues, Europe made up 33%, Japan represented 12% and the rest of the world accounted for 7%. Affymetrix no longer provides quarterly guidance, but endorsed analysts’ expectations of $382.6 million in 2007 total revenues as “reasonable,” representing annual growth of 7.7%.

Dionex reported a 12.3% gain in fiscal second quarter sales to a record $83.5 million, including 3% of beneficial currency effects, leading operating profit to climb 15.8% to $19.2 million. Ion chromatography sales were up in the mid-teens with strong demand in Japan, while HPLC sales grew in the high single digits, with particularly strong growth in Europe. North American sales slipped 2% due to continued weakness among large pharmaceutical companies. However, European sales improved 15%, or 7% excluding beneficial currency effects, due to strong demand from the life science market, and Asia/Pacific sales jumped 27% due to strong growth in China and Japan. The life science, chemical/petrochemical and electric/power markets exhibited strong growth. However, environmental sales increased only incrementally, while food/beverage sales fell slightly. Dionex forecasts that fiscal third quarter sales will grow approximately 8% to $78–$81 million and year-end revenues to increase around 8% to $312–$320 million.

Illumina reported a 163% jump in fourth quarter sales to $60.4 million, which led adjusted operating profit to soar to $16.6 million from $0.1 million a year ago (see page 12). Product revenue rose 195% to $49.2 million, and while service revenue nearly doubled to $11.0 million, research revenue tumbled 63% to $0.2 million. Year-end sales jumped 151% to $184.6 million, which allowed the company to report adjusted annual operating profit of $40.9 million from an operating loss of $5.5 million in 2005. Product revenue climbed 170% and service revenue nearly doubled to account for 84% and 15% of total sales, respectively, offsetting the 29% drop in research revenue. A shipment of 36 BeadArrays during the fourth quarter brought the installed base to 246. Illumina completed its acquisition of Solexa in early February and anticipates 2007 revenue growth around 65% to $295–$315 million. First quarter sales are expected to grow nearly 127% to $64–$68 million.

Luminex’s fourth quarter revenues grew 23% to a record $14.2 million, leading the company to virtually break even after generating an operating loss of $1.7 million a year ago (see page 12). Year-end revenues climbed 25% to $53.0 million and operating loss improved nearly $3 million to $0.6 million. Forty-two percent of fourth quarter revenues were from the sale of 206 Luminex Systems, while consumables accounted for 26% of sales, royalties for 15% and “Other” revenue for 17%. The company shipped approximately 700 Luminex Systems in 2006 for an installed base of over 4,117. In 2006, consumables sales and royalties revenue grew 20% and 57%, respectively, which in turn led gross margin to jump over 11 points to 60.2% of sales. Consumables and royalties accounted for a combined 45% of revenues. Life science research accounted for 54% of annual revenues and clinical diagnostics for 46%. The company was also able to maintain growth in operating expenses at 16%, well below top-line growth, which led to the improvement in operating income.

Molecular Devices announced virtually flat fourth quarter sales of $52.8 million and year-end revenue growth of 2.5% to $186.4 million (see page 12). Adjusted operating income fell 29% for the quarter and 15.4% for the year to $7.5 million and $22.4 million, respectively. A 22% jump in fourth quarter SG&A expenses led operating margin to tumble nearly eight full points to 14.2% of sales, while a 20% increase in full-year SG&A expenses led operating margin to slip 260 basis points to 12.0% of sales. MDS recently agreed to purchase Molecular Devices (see IBO 1/31/07); the deal is expected to close during the second quarter.

QIAGEN NV’s fourth quarter revenues jumped 20.6% to $125.9 million, leading adjusted operating income to improve 11.7% to $33.0 million (see page 12). Year-end sales gained 16.9%, including 11% organic growth, to $465.8 million, while adjusted operating income increased 15.8% to $119.0 million. Consumables sales accounted for 89% of year-end revenues and grew 17%, while instrument sales represented 10%, and increased 19%. These gains more than offset a 16% drop in “Other” revenue, which accounted for just 1% of sales. North America and Europe each accounted for 44% of total sales and grew 12% and 17% on a constant currency basis, respectively. Asia and the rest of the world represented the other 12% of revenue, with Asian sales jumping 45% (on a constant currency basis), driven by strong demand in China. Acquisitions contributed 6% to revenue growth for the year. QIAGEN anticipates 2007 revenue to grow 11%–15% to $518–$535 million.