No Signs of Slowing for Lab Instrument Sales Index Growth

In the first quarter of 2008, revenues for IBO’s Laboratory Instrument Sales Index grew 11.4% to $4,557 million. Operating profit jumped 14.3% to $758 million, and operating margin climbed 40 basis points to 16.6% of sales. Acquisitions and favorable currency effects continue to positively impact revenue growth and operating results, particularly for companies such as Harvard Biosciences and Luminex, while companies like Illumina benefited from strong organic growth. For the first quarter of 2008, 18 of the 22 companies in the Laboratory Instrument Sales Index reported earnings before this issue’s publication. For the remaining four companies in the Index (Horiba, Oxford Instruments, Shimadzu and Tecan), modest growth rates are included. Results for Index companies not reviewed here in will be reported in the next issue of IBO. Harvard Bioscience’s first-quarter sales grew 14.9% to $22.0 million (see page 12), including 2.1% growth from favorable exchange rates. The company’s UK subsidiary, Biochrom, contributed 10.0% to revenue growth, benefiting from strong sales of microliter spectrophotometers, while the acquisition of Panlab (see IBO 10/15/07) contributed $2.4 million to net sales. Organic revenues declined 9.5%, primarily due to a large one-time order in 2007. Adjusted operating income slipped 1.9% to $2.7 million, and operating profit margins fell 207 basis points to 12.1% of sales. Gross margins declined 223 basis points to 47.1% of sales, following a change in product mix. Going forward, the company anticipates sales of $23–$24 million in the second quarter and year-end revenues of $94–$96 million for annual growth of 12%–15%. Illumina reported first-quarter sales grew 68.9% to $121.9 million. Product revenue jumped 80.7% to $110.7 million due to strong revenue growth from sequencing instrumentation and genotyping consumables. Consumable sales grew 63.1% to $63.3 million, led by strong sales of Infinium products. Due to strong demand for the Genome Analyzer, Instrument revenue improved 127.0% to $44.5 million. The company also shipped four iScan Systems in the quarter. Service and other revenue improved 2.7% to $11.2 million, benefiting from increased genotyping services. Adjusted operating jumped 187.4% to $21.4 million, leading operating profit margins higher by 724 basis points to 17.6% of sales. However, gross profit margins fell 300 basis points to 62.2% of sales primarily due to a change in product mix towards instrumentation and, to a lesser extent, increased compensation charges. The company anticipates second-quarter revenues will grow of 50%–56% to $127–$132 million and that full-year revenue will increase 40%–46% to $515–$535 million. Invitrogen’s first-quarter sales grew 13.4% to $350.2 million, including 5.7% growth from favorable currency transactions and 1.0% growth from acquisitions. Adjusted operating profit soared 61.2% to $74.4 million, leading operating profit margins 625 basis points higher to 21.2% of sales. Favorable currency effects, as well as increased pricing and sales volume, also benefited gross margins, which climbed 700 basis points to 62.5% of sales. Regionally, revenues grew 6% in the Americas, 21% in Europe and 19% in Asia Pacific. Revenue for Invitrogen’s BioDiscovery business improved 12.4%, or 7% on a currency-neutral basis, to $247.3 million, led by strong sales of molecular biology, drug discovery services and labeling products, as well as new product introductions and price increases. BioDiscovery’s gross margins slipped 100 basis points to 73% of sales primarily due to increased product costs. Cell Culture Systems’ revenue grew 16.1% to $102.9 million, including 3.4% growth from acquisition and 5.6% growth from currency transactions. Organic growth benefited from sales of stem cell culture media, and sales of production media and sera increased in the low single digits. Cell Culture Systems’ gross margins jumped 800 basis points to 56% of sales due to increased pricing, improved productivity and a shift in product mix. Approximately half of the company’s sales are to customers outside the US. The company expects full-year revenues to grow in the high single digits Luminex reported a 38.6% growth in first-quarter sales to $23.0 million (see page 12), including 19.3% growth from acquisitions. However, operating loss widened to $1.3 million from a loss of $0.4 million in the previous first quarter. Technology segment sales rose 21.0% to $18.6 million, led by consumables and royalty revenues, which grew 8.3% and 36.0% to make up 33.0% and 35.1% of segment sales, respectively. Royalty revenue jumped 38.9% to account for 18.9% of segment sales, while service contracts and other revenues grew 2.1% to make up the remaining 13.0%. The Technology segment reported an operating profit of $0.9 million. Sales for the Assay segment, which predominantly sells kits, soared 265.4% to $4.4 million, including $3.2 million in revenue from the acquisition of Tm Bioscience (see IBO 12/15/06), now part of Luminex Molecular Devices. The Assay segment recorded an operating loss of $2.2 million. Luminex expects full-year revenues to grow 26%–40% to $95–$105 million. OI’s sales slipped 0.2% in the first quarter to $7.3 million (see page 12), including a 1.3% decline in product revenue to account for 87.4% of sales. Laboratory product sales grew 27.6%, led by strong domestic demand for GC from the petrochemical industry, as well as sales of TOC analyzers. Product revenues were offset by declining sales of MINICAMS air monitoring systems. Overall, product shipments were considerably higher compared to the previous year; however, some of these revenues were deferred to the next quarter. Had all shipments been accounted for, net revenues would have improved an additional 5%. Service revenues grew 8.4% to make up 12.6% of total sales. Operating profits improved to $0.2 million compared to a loss of $0.9 million in the previous year, while gross profits fell 380 basis points to 47.0% of sales due to the higher cost of sales. OI anticipates higher revenue growth for the second quarter. Strategic Diagnostics’ first-quarter revenues rose 7.7% to $7.2 million (see page 12), benefiting from higher sales of food pathogen products and antibody products, which grew 36.3% and 14.9%, respectively. Total sales of food safety products increased only 1.2% to $2.2 million due to a 26.0% decline in Ag-GMO product sales. Total Antibody revenues increased 14.9% to $3.8 million, while Water and Environmental product sales fell 4.4% to $1.1 million. The company reported an operating loss of $0.1 million compared to a profit of $0.7 million in the previous first quarter, primarily due to increased R&D spending, as well as higher manufacturing costs. Gross margins declined 480 basis points to 56.4% of sales due to lower manufacturing efficiencies.

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