Stronger 4Q Life Science Sales

Fourth-quarter 2012 IBO Life Science Index sales grew 6.4%, 6.7% organically, to $3,791 million. Operating profit improved 1.7% to $844 million. Based on continuing operations, operating margin fell 100 basis points to 21.3% of sales. For 2012, Life Science Index sales expanded 4.0%, 4.2% organically, to $13,534 million. Operating profit grew 1.6% to $2,870 million. Based on continuing operations, operating margin slipped 60 basis points to 20.9% of sales.

Fiscal first-quarter revenues for Becton Dickinson and Company BD Biosciences grew 1.7%, 3.3% excluding currency, to $264.9 million to represent 14% of company sales. Organic sales were driven by US research spending and placements of high-end instruments, including the Accuri and LSR II analyzers and the Aria cell sorter. US sales also benefited from increased pharmaceutical demand and a weak year-over-year comparison. US sales grew 5.3% to account for 32% of BD Biosciences’ revenues. International sales were flat, but grew 2.4% excluding currency to represent 68% of segment sales. Operating profit advanced 6.4% to $65.0 million due to currency and lower manufacturing costs. Fiscal 2013 sales are projected to grow 1%–2% on a currency-neutral basis.

Fourth-quarter 2012 sales for Biotage declined 1.8%, but grew 1.5% on a currency-neutral basis to SEK 113.9 million ($17.1 million = SEK 6.65 = $1) (see page 12). Sales were driven by demand for purification products and new consumables, as well as higher US sales. However, reluctance to lower prices negatively impacted revenue growth. Instrument sales to the US and India slowed compared with the third quarter. Overall, sales to the EU, US and Japan accounted for 39%, 37% and 15% of sales, respectively. Sales to China and Rest of World accounted for 4% and 5%, respectively. Adjusted operating profit grew 40.9% to SEK 13.7 million ($2.1 million), and gross margin expanded 480 basis points to 59.8% of sales due to product and geographic mix, as well as direct distribution of analytical chemistry products.

Biotage’s 2012 sales advanced 8.1%, 6% excluding currency, to SEK 462.9 million ($66.0 million = SEK 6.76 = $1). Demand for purification and peptide synthesis products was strong. However, overall sales of synthesis products declined due to lower instrument sales to pharmaceutical customers. Sales of consumables and aftermarket services grew by double digits to account for 59% of sales. In addition, sales of organic and analytical chemistry products were more balanced, helping to diversify the company’s end-markets. Sales of analytical chemistry products increased to account for 43% of sales due to demand from environmental and food customers. US and EU sales made up 38% and 34% of sales, respectively. Demand was strongest in China and Japan, accounting for 18% and 5%, respectively. Sales to Rest of World made up 5%. Adjusted operating profit grew 86.0% to SEK 45.3 million ($6.7 million). Gross margin improved 110 basis points to 58.6% of sales.

Fourth-quarter sales for Fluidigm grew 20.5% to $15.7 million (see page 12), including a 25.0% increase in Product revenue to account for 98% of sales. Grant and other revenue fell 57.9% to make up 2% of sales. Instrument revenue jumped 30.5% to account for 63% of Product sales, driven by strong demand for C1 Single-Cell Auto Prep and BioMark HD systems. Consumables revenue grew 16.8% to make up 37% of Product revenue due to a broader base of preparatory systems and increased demand for production genotyping chips. Roughly 40% of Product revenue was driven by single-cell genomics research use. Product sales to the US, Europe, Asia-Pacific and Japan accounted for 48%, 32%, 12% and 7%, of sales, respectively. Sales to Other made up 1%. Adjusted operating loss widened by 17.3% to $3.5 million. Product gross margin climbed 438 basis points to 71.8% of sales.

In 2012, Fluidigm’s sales grew 22.1% to $52.3 million. Product revenue jumped 26.9% to account for 98% of sales. Grant and other revenue fell 63.0%. Instruments and Consumables sales grew 15.7% and 45.1% to make up 57% and 43% of Product revenue, respectively. Instrument sales were led by the C1 systems and service and aftermarket revenues but were partially offset by lower placements of the Access Array. Cumulative shipments of instruments reached 670 units, of which 65% are analytical systems and 35% are preparatory systems. The company has shipped 36 C1 systems since the third-quarter 2012 launch. Consumables sales were driven by demand for genotyping and gene expression integrated fluidic circuits (IFCs) and Access Array IFCs and assays. Product sales to the US, Europe, Asia and Other grew 26.2%, 24.6%, 70.9% and 14.8% to account for 53%, 26%, 12% and 2% of sales, respectively. Product sales to Japan fell 2.6% to make up 7%. Adjusted operating loss widened by 16.1% to $18.1 million. Product gross margin grew 274 basis points to 70.2% of sales. Fluidigm projected 2013 Product sales to grow 22%–26%.

Fourth-quarter 2012 sales for Merck Millipore climbed 8.1%, 6.0% excluding currency, to €653.4 million ($848.6 million = €0.77 = $1) (see page 12). Organic sales were driven by strong demand from emerging markets and for biotechnology manufacturing products, as well as higher pricing. Process Solutions (PS) sales grew 13.8% to make up 39% of revenue. Lab Solutions and BioScience sales grew 4.8% and 4.6% to account for 43% and 18%, respectively. Overall, sales to Europe and North America grew 6% and 8% to represent 37% and 26% of Millipore sales, respectively. Sales to Emerging Markets and Rest of World climbed 11% and 12% to account for 25% and 12%, respectively. Adjusted operating profit fell 8.0% to €108.6 million ($141.0 million) due to R&D spending for single-use products within the PS business. Gross profit margin fell 220 basis points to 57.7% as a result of lower manufacturing utilization due to inventory reduction.

Merck Millipore’s 2012 sales grew 9.0%, 3.8% organically, to €2,598.2 million ($3,331.0 million = €0.78 = $1). Currency and acquisitions contributed 3.9% and 1.4% to revenue growth, respectively. All sales figures below are organic. LS sales climbed 3.1% to make up 42% of revenue due to higher sales of lab water products and biomonitoring solutions, and demand from emerging markets. PS sales grew 5.3% to account for 40% of revenue, driven by demand for biosafety solutions, process systems hardware and single-use manufacturing products, as well as double-digit growth in emerging markets. PS growth was offset roughly 2% by a discontinued insulin supply contract. Bioscience sales improved 2.0% to make up 17% of sales, including growth in Asia and Latin America, but declined in North America and Europe due to lower government and academic sales.

In 2012, organic Merck Millipore sales to Europe, Emerging Markets and Rest of World grew 3.1%, 6.8% and 8.5% to represent 37%, 24% and 12% of sales, respectively. North American sales were flat but grew in the low single digits excluding the canceled supply contract to make up 27%. Royalty, license and commission income, which were not included in the sales figures above, jumped 83.3% to €18.7 million ($24.0 million). Adjusted operating profit grew 5.6% to €490.7 million ($629.1 million) despite increased PS R&D expenses. Gross profit margin expanded 60 basis points to 58.9% of sales due to pricing. Merck Millipore’s organic annual sales are projected to grow moderately in 2013 and 2014, with the strongest growth coming from the PS business and emerging markets.

Sequenom’s fourth-quarter 2012 revenues grew 117.5% to $33.7 million. Molecular Diagnostics (MD) sales soared 643.6% to represent 63% of revenues due to timing of cash collections and higher volume of accessioned test samples. The number of tests samples accessioned climbed 27% from the third quarter to 33,000. Genetic Analysis (GA) sales slipped 0.4% to account for 37% of sales. Total operating loss widened by 34.4% to $29.5 million primarily due to increased personnel, litigation and manufacturing expenses. Gross profit margin fell 368 basis points to 36.6% of sales as a result of higher test volume. MD gross margin was positive for the first time since the introduction of the MaterniT21 test. GA gross margin declined 300 basis points to 67% of sales. The cash burn rate declined from previous quarters to $17 million.

Full-year 2012 revenues for Sequenom grew 60.4% to $89.7 million. MD revenue jumped 458.4% to represent 52% of sales. The company accessioned roughly 92,000 test samples, including over 61,000 MaterniT21 PLUS tests samples. GA sales fell 9.1%. Operating loss widened by 52.3% to $113.1 million, and gross profit margin fell more than 22 percentage points to 30.4%. For 2013, the company set a goal of at least 150,000 MaterniT21 accessioned test samples. GA sales are projected to grow modestly in 2013.

For the second half of 2012, Tecan’s revenues grew 7.1%, 3.3% in local currency, to CHF 208.9 million ($220.8 million = CHF 0.95 = $1) (see page 12). Orders improved 4.1% organically to CHF 202.7 million ($213.4 million). All sales figures below are in local currency. Sales to North America, Asia and Others climbed 2.4%, 14.2% and 46.8% to make up 40%, 15% and 4% of revenues, respectively. Operating profit slipped 0.9% to CHF 30.2 million ($31.8 million). Gross profit margin fell 10 basis points to 51.6% of sales. Life Sciences (LS) sales fell 1.1% to make up 64% of revenues. LS operating profit grew 13.7% to CHF 24.4 million ($25.7 million). Partnering Business sales grew 12.1% to make up 36% of sales, and operating profit fell 24.1% to CHF 9.3 million ($9.8 million).

Tecan’s 2012 sales grew 3.8%, 1.9% in local currency, to CHF 391.1 million ($416.1 million = CHF 0.94 = $1). Orders declined 2.2% in local currency to CHF 382.3 million ($431.3 million). All sales figures below are in local currency. Consumables revenue grew 15.4% to account for 9% of sales. Services revenue was roughly flat to make up 22%. Sales to North America grew 5.4% to represent 41% of sales due to strong demand for components. European sales fell 7.2% to make up 42% due to lower engineering revenue and slower LS demand. Sales to Asia and Others grew 20.2% and 23.1% to represent 14% and 3% of sales, respectively. Operating profit grew 2.0% to CHF 52.3 million ($55.6 million) due to lower general and administrative expenses, but was partially offset by development costs for an OEM customer and currency. Excluding currency, operating profit margin expanded 50 basis points to 13.4% of sales. Gross profit margin declined 20 basis points to 50.7% of sales due to product mix and development costs.

Tecan’s 2012 LS sales slipped 1.1% to make up 60% of sales due to lower demand for detection systems and flat to slightly lower sales of liquid handling products. Chinese sales grew 25% to more than CHF 20 million ($21 million). LS operating profit grew 21.8% to CHF 29.0 million ($30.9 million), benefiting from gross margin and currency. Revenue for the Partnering Business grew 6.7% to make up 40% of sales, led by double-digit revenue growth for both components, and services and consumables. Segment operating profit fell 14.1% to CHF 30.6 million ($32.6 million) due to OEM development costs and revenue mix. For 2013, revenues are projected to grow in the mid-single digits in local currency, including moderate growth for the LS Business and good growth for the Partnering Business. Operating profit margin is expected to expand 50 basis points. The company’s revenue goal for 2015 is roughly CHF 500 million ($538 million).



Column Chart: Quarterly Organic Sales Change

January 2009–December 2012

Year Q1 Q2 Q3 Q4

2009 3.6% 0.9% 1.9% 5.8%

2010 9.4% 8.6% 8.8% 6.3%

2011 5.7% 6.7% 4.6% 4.0%

2012 2.2% 3.0% 4.8% 6.7%


Column Chart: Quarterly Operating Profit Margins

January 2009–December 2012

Year Q1 Q2 Q3 Q4

2009 19.1% 20.2% 21.4% 22.9%

2010 22.1% 22.6% 22.3% 23.0%

2011 22.1% 21.1% 21.3% 22.9%

2012 21.3% 20.4% 20.6% 21.3%


. Life Science Index % Change

2009 2010 2011 2012 2009–10 2010–11 2011–12

Total Annual Revenues ($M) $11,268 $12,189 $13,009 $13,534 8.2% 6.7% 4.0%

Annual Oper. Profits ($M) $2,321 $2,673 $2,825 $2,870 15.1% 5.5% 1.6%

4th Quarter Revenues ($M) $3,243 $3,422 $3,565 $3,791 5.5% 4.2% 6.4%

4th Quarter Oper. Profits ($M) $749 $795 $830 $844 6.2% 4.4% 1.7%
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