Slow Growth for Bruker

Despite higher-than-expected sales and sequential growth, Bruker’s Scientific Instruments (BSI) second quarter sales grew just 0.6% to $366.2 million to account for 92% of revenues (see page 12). Bruker BioSpin sales fell in the mid-single digits due to lower demand in Preclinical Imaging, which accounts for 20% of Group sales. The comparison was difficult because of a large FT-ICR magnet order in 2014 and lower NMR sales due to a reduced backlog. But NMR organic orders for the first half of the year rose in the low double digits. The BioSpin restructuring, which includes an 8% workforce reduction, is due to be completed by the first quarter of 2016.

Bruker CALID sales grew in the low single digits organically, led by double-digit sales growth for the MALDI Biotyper and higher demand for MALDI TOF and new products, all within the Daltonics division. The Detection business recorded strong organic revenue growth as the company delivered several larger orders from 2014. However, Optics sales were weak.

Bruker Nano sales also grew in the low single digits organically. Demand for Micro-XRF systems led the Nano Analytics division’s high performance. AXS sales also rose organically, including strong order growth. For Nano Surfaces, higher sales of fluorescence microscopy products offset weak demand for research and Auto AFMs from semiconductor, data storage and industrial markets.

BSI adjusted operating margin fell 18.0% to $39.7 million, mostly due to the large magnet order delivered in 2014. This drop was partially offset by higher margins in the CALID Group due to divestments and restructuring.

European and Chinese growth drove total second quarter Bruker organic sales. Chinese sales rose in the mid-to-high single digits, and North American sales grew excluding divestments. But sales dropped double digits in Japan and fell in the rest of Asia Pacific excluding China. The company maintained its 2015 organic revenue growth forecast of 1%. Currency headwinds were lowered by 100 basis points to 9%–10%.

Illumina Misses Revenue Guidance

Despite second quarter Illumina sales missing analysts’ consensus for the first time in nearly six years, the company reported a strong quarter, as sales rose 25% organically to $539.4 million. Noninvasive prenatal testing (NIPT) sales and shipments to oncology markets, which grew more than 50% and 35%, respectively, drove demand. Total sales to clinical and translational customers rose 45% to account for nearly 40% of shipments. Product revenue grew 18.4%, while Service and Other revenue rose 35.0% to make up 86% and 14% of sales, respectively.

Sequencing sales grew 28%, including a 36% increase in consumables revenue, which benefited from strong pull-through orders for HiSeq X and NextSeq, and v2 reagent kits. Sequencing instrument sales grew 13%, led by demand for MiSeq and NextSeq systems from customers new to NGS, who accounted for more than 45% of total instrument orders. NextSeq shipments rose 16% sequentially due to demand from clinical markets. MiSeq shipments benefited from a promotional bundle, which included consumables and services. Total HiSeq X shipments fell due to a reduced backlog and timing of deliveries. Demand for the HiSeq 4000 was strong, as a number of customers upgraded from the 2500. Sequencing service revenue remained robust, as the number of completed NIPT samples doubled. Sales to IVF labs grew 25%, led by demand for the VeriSeq PGS, which accounted for 20% of IVF revenue.

Microarray sales fell 11% due to pricing pressure, but sales volume increased, including 29% growth for Infinium arrays. Genotyping orders grew 16%, led by demand for bovine arrays. Despite projected stronger array demand in the second half of the year, microarray sales are expected to fall in the mid-to-high single digits for the year.

Including currency, Illumina shipments in the Americas, Europe and Asia Pacific grew 32%, 16% and 2%, respectively. The slower growth in Asia was due to currency and weak funding in Japan. Adjusted gross margin rose 150 basis points to 71.9% of sales because of higher manufacturing efficiencies. Despite a net addition of 315 hires, Illumina adjusted operating profit jumped 40.7% to $168.5 million, and it maintained its full-year guidance for 20% sales growth, or 23% organic growth. The company noted a lack of visibility for the delivery of certain orders, especially for the HiSeq X systems and projected an average order rate of 20–30 HiSeq X units per quarter.

Research Boosts PerkinElmer Sales

PerkinElmer posted stronger-than-expected second quarter organic revenue growth of 4% due to higher biopharmaceutical spending and newborn diagnostic screening tests in emerging markets. Chinese, Indian and Korean sales each grew double digits. US sales were also good, especially to pharmaceutical markets. European sales, which grew in the mid-single digits organically, were ahead of projections. Despite sales declines in both Japan and Brazil, the company reported mid-single-digit organic growth in all major geographic regions and end-markets.

Human Health (HH) revenue rose 5% organically. Diagnostics sales grew in the mid-single digits, including double-digit growth in China due to strong newborn and infectious disease screening services, and higher sales from the Haoyuan blood screening business. Medical Imaging sales fell in the low single digits due to order fluctuations and a strong comparison. New products, including the Opera Phenix and Labchip Touch for NGS sample preparation, drove high-single-digit Research sales growth. Demand for other instruments was also strong, including cellular imaging, microfluidics and automation systems. OneSource services revenue grew in the teens, partially offset by lower reagent sales. As for end-markets, Research sales to pharmaceutical and biotechnology customers were strong, as sales to the top 20 customers rose double digits. Academic and government markets grew, Japan excepted. Total Research sales in China grew in the mid-single digits. HH adjusted operating profit rose 2.3% to $78.0 million due to cost controls and productivity measures.

Environmental Health (EH) sales advanced 3% organically due to demand for inorganic and chromatography products for environmental and food testing. China was again highlighted, as sales for these applications grew in the mid-teens but were partially offset by weak industrial demand. ICP-MS sales also contributed to segment growth. Sales for the acquired Perten Instruments business (see IBO 11/30/14) were stable. In spite of increased R&D investments, EH adjusted operating profit expanded 5.1% to $28.9 million due to favorable product mix.

PerkinElmer adjusted gross profit margin rose 40 basis points to 47.3% of sales due to product mix, productivity gains and stronger sales volume. Adjusted operating income grew 2.8% to $95.8 million. The company raised its 2015 revenue outlook by $10 million to $2.25–$2.30 billion but maintained its organic growth forecast of 3%–5%. Certain growth forecasts were changed, as stronger demand from pharmaceutical markets are expected to offset weaker sales in Japan and Brazil. Full-year Research sales are projected to grow in the low single digits organically. Third quarter sales are expected to be $550–$560 million for growth of 2%, or 3%–5% organically.

Biopharma Leads Thermo Fisher’s Growth

Second quarter sales for Thermo Fisher Scientific rose 5.6%, despite currency headwinds and divestments. Robust spending from biotechnology customers, higher market share, demand in emerging markets and favorable pricing drove organic growth. Pharmaceutical and biotech sales grew in the mid-teens. Industrial and applied markets sales rose in the low single digits, as strong demand from applied customers was in part offset by weak core industrial businesses. The diagnostics and healthcare, and academic and government markets grew at a similar rate. Sales in China grew in the mid-teens. Overall, Asia Pacific sales rose in the high single digits, with low-single-digit growth in Japan due to budget approvals. North American and European sales each rose in the mid-single digits. Rest of World sales grew in the low single digits.

Life Science Solutions (LSS) sales jumped 7.4% organically, led by demand for bioprocess production and biosciences products. Bioprocess was the fastest growing business for the company as a whole. Revenue synergies contributed $20 million to sales growth for the quarter, and are expected to reach or exceed the projected $60 million for the year. LSS adjusted operating income grew 8.2% to $323.5 million due to strong sales volume, cost synergies and enhanced productivity.

Analytical Technologies (AT) sales expanded 4.1% organically, led by chromatography sales, especially for HPLC and GC products. Strength was recorded across instruments, consumables and service offerings. However, segment sales were partially offset by lower demand for chemical analysis products from certain commodity materials markets. AT adjusted operating profit expanded 7.1% to $139.6 million, as productivity improvements more than offset inflationary cost increases and currency.

Thermo adjusted gross margin fell 100 basis points to 48.0% due to product mix, currency and the acquisition of Advanced Scientifics (see IBO 2/15/15). But adjusted operating profit rose 2.9% $950.3 million due to productivity improvements and cost synergies. The company increased expected cost synergies by $5 million to $130 million for the year. Given a slightly favorable shift in currency, Thermo raised its 2015 revenue outlook from $16.67–$16.83 billion to $16.72–$16.86 billion, but its organic growth forecast of about 4% was unchanged.