Q2 Lab Instrument Sales Index Results Remain Strong

In the second quarter of 2010, revenues for IBO’s Laboratory Sales Index grew 9.5% to $5,198.02 million, including a loss of 3.9% from currency. Operating profit jumped 18.3% to $1,009.63 million, while operating margin improved 140 basis points to 19.4% of sales. For the three companies (Oxford Instruments, Shimadzu and Spectris) that did not report earnings before this issue’s publication, modest growth rates are included.

Affymetrix’s second-quarter revenues fell 12.1% to $71.7 million, including a loss of 1.2% from currency. Product revenue slipped 3.1% to account for 91% of sales, including a 2.4% and 10.7% decline in Consumables and Instrument revenues to $60.6 million and $4.5 million, respectively. Lower capital spending from academic customers in Europe suppressed Instrument sales and reduced Consumables pull-through orders. In addition, Consumables revenue was negatively impacted by the integration of Panomics’ distribution channel and the adoption of lower priced peg-based array plates, which accounted for roughly 25% of total Array shipments. Consequently, RNA sales declined 9.1% to $35.1 million, but increased in volume. DNA revenue improved 6.8% to $23.6 million due to increased genome-wide association studies. As projected, Service revenue dropped 61.2% to make up 7% of sales. Royalty and Other revenue declined 15.8% to account for 3% of sales. Overall, Asian sales improved, but sales to the US and Europe declined. Adjusted operating loss narrowed by 28.8% to $5.7 million. Gross profit margins improved 255 basis points to 56.6% of sales due to restructuring and lower manufacturing costs for the peg-array plate formats.

Analytik Jena AG’s fiscal third-quarter sales grew 1.2%, 2.1% organically, to €18.8 million ($23.8 million = €0.79 = $1) (see page 12). Analytical Solutions sales climbed 12.5% to represent 61% of sales, while Life Science and Optics revenues contracted 8.6% and 31.4% to account for 33% and 6% of sales, respectively. Operating profit declined 67.5% to €0.2 million ($0.3 million), while gross profit margins improved 429 basis points to 49.6% of sales due to the strengthening of the US dollar. Foreign sales grew 2.8% to account for 74% of revenues. Sales to Germany declined 3.3% to make up 26% of sales.

Harvard Bioscience’s second-quarter revenues soared 43.5% to $25.9 million, including 36.1% growth from the acquisition of Denville Scientific (see IBO 9/15/09). Currency reduced sales by 3.6%. Organic revenues grew 11.0%, driven by product development and increased marketing efforts, but were partially offset by weakness from Harvard Apparatus’s southern Europe subsidiaries. Adjusted operating income jumped 75.9% to $3.0 million as a result of the acquisition. However, gross profit margins declined 302 basis points to 46.5% of sales due to lower gross margins from Denville Scientific. The company lowered its full-year revenue guidance by roughly 3% to $106–$108 million due to lower European revenue. Third-quarter revenues are anticipated to grow 19%–29% to $25–$27 million.

For the second quarter, Horiba’s Analytical Instruments and Systems revenue slipped 1.5% to ¥7,283 million ($79.0 million = ¥92.18 = $1) (see page 12) to account for 26% of company sales. On a currency-neutral basis, revenues climbed roughly 2.5% due to increased domestic government spending, but were partially offset by lower stimulus funding in Europe and the US. Japanese sales grew 3.6% to represent 38% of segment sales. Sales to Asia, the Americas and Europe declined 7.9%, 4.5% and 1.0% to account for 19%, 18% and 25% of sales, respectively. Segment operating profit improved to ¥56 million ($0.6 million) from a loss of ¥115 million ($1.2 million = ¥97.40 = $1) a year ago. The company lowered its 2010 Analytical Instrument and Systems revenue forecast by 10% to ¥31,500 million ($342 million) for a 3% decline in sales. The segment operating income is forecast to fall 14% to ¥1,300 million ($14 million).

Luminex’s quarterly revenues grew 19.6% to $33.2 million (see page 12) due to strong Consumables and Systems revenues, which climbed 45.1% and 29.2% to account for 29% and 24% of total sales, respectively. Total systems sold during the quarter increased 39% to 219, including six FLEXMAP 3D systems. Consumables revenue benefited from increased bulk purchases and a weak year-over-year comparison. Royalty revenue grew 13.1% to make up 15% of sales. Service contracts and other revenue grew 13.8% to account for 10% of revenue. Assay revenue contracted 4.2% to make up 22% of revenues due to strong H1N1-related revenue in 2009. Sales of Cystic Fibrosis and Respiratory Viral Panel product lines accounted for 86% of Assay revenue. Overall, sales to the diagnostic and research markets accounted for 61% and 39% of company revenue, respectively. Operating profit grew 120.1% to $2.3 million, while gross profit margins improved 25 basis points to 69.7% of sales. Technology and Strategic Partnerships segment revenue grew 29.6% to $25.2 million, while operating income soared 160.9% to $3.6 million. Revenue for the Assays and Related Products segment slipped 3.8% to $8.0 million and operating loss widened by roughly $1 million to $1.4 million. The company reported strong revenue growth in China. For 2010, the company reaffirmed its revenue outlook of $138–$148 million for growth of 14%–23%.

QIAGEN NV’s second-quarter revenues grew 9.4%, 5.3% organically, to $262.7 million (see page 12). Acquisitions accounted for 6.7% growth, while currency and divestments reduced revenues by 1.2% and 1.4%, respectively. Excluding H1N1-related sales, adjusted organic revenues climbed 10%, including 5%, 4% and 1% growth from new products, volume and pricing, respectively. On a currency-neutral basis, consumables and instrument sales each climbed 10% to account for 85% and 14% of sales, respectively. Molecular diagnostic and academic revenues grew 12% and 7% to account for 47% and 24% of sales, respectively, while applied market sales increased 15% to make up 7% of sales due to strong food-testing and forensics revenues. Sales to the pharmaceutical industry grew 11% to represent 22% of sales due to strong demand for clinical development products, but were partially offset by lower sales for discovery products. Excluding H1N1-related revenue, sales to the Americas, Europe and Asia grew 10%, 26% and 19% on a currency-neutral basis to account for 49%, 38% and 11% of total sales, respectively. Other geographic revenue declined 20% to represent 2% of sales. Adjusted operating profits improved 0.6% to $69.4 million. Adjusted gross profit margins slipped 39 basis points to 71.7% of sales. The company reiterated that it expects full-year revenue to grow 11%–16% to $1,120–$1,170 million and projected third-quarter revenue to grow 4%–10% to $270–$285 million.

Title: Quarterly Sales Performance

January 2007–June 2010

Quarterly Sales

Year Q1 Q2 Q3 Q4

2007 3823 3804 4096 4812

2008 5204 5280 5149 5365

2009 4821 4747 4954 5619

2010 5428 5198

Title: Quarterly Operating Profit Margins

January 2007–June 2010

OP Margins

Year Q1 Q2 Q3 Q4

2007 16.6% 15.7% 16.9% 18.5%

2008 17.4% 17.1% 18.5% 18.8%

2009 17.5% 18.0% 18.6% 20.1%

2010 19.8% 19.4%

Laboratory Instrument Index, Total % Change

2007 07/08 08/09 2010 07/08 08/09 09/10

Total Annual Revenues ($M) 16536 20959 20141 —- 26.7 -3.9 —-

2nd Quarter Revenues ($M) 3804 5280 4747 5198 38.8 -10.1 9.5

Annual Oper. Profits ($M) 2812 3777 3744 —- 34.3 -0.9 —-

Annual Oper. Profits (%) 17.0 18.0 18.6 —- —- —- —-

2nd Quarter Oper. Profits ($M) 596 904 853 1010 51.7 -5.6 18.3

2nd Quarter Oper. Profits (%) 15.7 17.1 18.0 19.4 —- —- —-

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