In the third quarter of 2008, revenues for IBO’s Laboratory Instrument Sales Index slowed to a growth rate of 8.1%, reaching $4,576 million, while operating profits grew 15.1% to $778 million, and operating margin climbed 100 basis points to 17.0% of sales. Despite strong revenue growth from Illumina, Luminex and QIAGEN NV, other companies such as Harvard Bioscience, OI and Strategic Diagnostics reported either declining or slower sales in particular business segments. For the third quarter of 2008, 18 of the 22 companies in the Laboratory Instrument Sales Index reported earnings before this issue’s publication. For the other four companies (Analytik Jena AG, Oxford Instruments, Shimadzu and Tecan), modest growth rates are included.

Third-quarter sales for Harvard Bioscience grew 3.3% to $20.0 million (see page 12), including a 3.6% loss from foreign currency exchange as 56% of the company’s sales were in British pounds or euros. Revenue growth was primarily driven by sales at Panlab, which contributed $1.6 million to total sales. The Harvard Apparatus business unit reported flat organic growth, while Biochrom revenue declined $0.4 million. Orders for the third quarter were strong, exceeding revenue by $1.9 million, led by Panlab behavior products and Biochrom spectrophotometer products (outside of GE Healthcare), which increased 33% and 30%, respectively. The company’s manufacturing capacity was unable to meet current demand. Adjusted operating income slipped 1.6% to $2.4 million because of higher R&D spending, while gross profit margins fell 73 basis points to 47.2% of sales. Going forward, the company anticipates fourth-quarter revenues of $22–$23 million and full-year revenue of $91–$92 million, with orders exceeding revenues by $2–$3 million.

Illumina’s third-quarter revenues climbed 54.1% to $150.3 million, including product and service revenue growth of 55.9% and 32.7% to $140.3 million and $9.9 million, respectively. Consumables sales grew 71% to $90 million, led by strong demand for Infinium HD products, particularly the Human610-Quad BeadChip. Sales of sequencing consumables rose 28% sequentially. Instrument sales increased 37% to $47 million due to strong sales of Genome Analyzers, which gained 66% from the previous year. The company estimated that 90% of the systems shipped during the quarter went to non-genome centers. Adjusted operating profits soared 76.5% to $28.9 million, excluding acquisition costs of $24.7 million related to Avantome (see IBO 7/31/08), while gross profit margin improved 182 basis points to 63.8% of sales, benefiting from a shift in product mix. In its conference call, Illumina stated that 55% of sales were in North America, 35% were in Europe and 10% were in rest of world. The company anticipates fourth-quarter revenues to grow 35%–39% to $152–$156 million, and full-year revenues to grow 92%–94% to $564–$568 million, $11 million above the previous forecast’s average range.

Third-quarter revenues for Luminex jumped 49.3% to $28.9 million, while adjusted operating profit was $3.0 million compared to a loss of $2.5 million in the previous year (see page 12). Gross profit margins soared 558 basis points to 67.7% of sales. Revenue for the Technology segment grew 40.9% to account for 78% of total sales, including $8.3 million from consumables sales, $7.5 million from systems sales, $3.9 in royalties and $2.9 million in services and “other,” which improved 47.3%, 45.4%, 44.9% and 13.6%, respectively. The company shipped 239 systems in the quarter, resulting in a cumulative total of 5,641, up 19%. Gross margins for the Technology group improved 100 basis points to 64% of segment sales due to higher revenue from consumables and royalties. Assay group revenue climbed 89.9% to make up 22% of total sales. Gross profit margins soared 21 percentage points to 79% of segment sales because of improved manufacturing efficiency and price adjustments. The company increased its full-year revenue forecast to $102–$107 million from $95–$105 million for an average growth rate of 40%.

OI’s revenues grew 2.4% in the third quarter to $6.6 million (see page 12). Laboratory product sales grew 3.4% to $5.8 million, driven by sales of GC and total organic carbon (TOC) product lines, which increased 21.4% and over 20%, respectively. GC products recorded strong international sales, particularly in Europe, while domestic sales grew over 10%. Sales of TOC products recorded the largest growth in the Asia Pacific Rim region, while domestic sales grew 17%. Product revenue were offset by a 34.6% decline in sales of MINICAMS air-monitoring systems. At the end of the third quarter, the company discontinued production of the Beverage Analyzer product line due to low sales expectations. Service revenue declined 3.8% to make up 13.1% of total sales. Operating profits declined 24.1% to $0.3 million, and gross profit margins fell 280 basis points to 49.8% of sales.

QIAGEN’s third-quarter revenues climbed 30.7%, 14% organically, to $230.8 million (see page 12). Acquisitions and currency transactions accounted for 13% and 4% of revenue growth, respectively. Consumables revenue grew 26%, 23% on a currency-neutral basis, to account for 86% of total sales. Consumables sales were driven by a 38% climb in sales of molecular diagnostics products, which accounted for approximately 45% of total sales. The company also reported strong demand for women’s health assays, specifically for HPV testing, for which sales increased 20%. Instrument sales jumped 88%, 83% on a currency-neutral basis, to represent 13% of total sales, while other revenue fell 55%, 57% on a currency-neutral basis, to make up 1% of sales. The company recorded strong instrument sales for the new QIAsymphonySP and QIAxcel. Sales to North America, Europe and Asia climbed 28%, 14% and 20% at constant exchange rates to make up 51%, 34% and 15% of total sales, respectively. Adjusted operating profits grew 56.7% to $64.9 million, while gross margins improved 48 basis points to 66.3% of sales. The company forecasted fourth-quarter revenues to grow approximately 18% to $245–$250 million and raised its full-year adjusted EPS guidance by $0.01 to $0.79–$0.80.

Strategic Diagnostics’ third-quarter revenues rose 5.0% to $6.9 million, despite an 8% decline in Antibody sales to account for 48% of revenues. Food safety sales jumped 38% to $1.5 million to make up 22% of sales. Sales of Water and Environmental, and Ag-GMO products rose 8% and 3% to represent 21% and 9% of sales, respectively. The company recorded an adjusted operating loss of $1.1 million compared to a profit of $0.3 million a year ago due to increased R&D and SG&A expenses. Gross margins fell 10 percentage points to 49% of sales due to underutilized capacity.

Laboratory Instrument Index, Total % Change

2005 2006 2007 2008 04/05 05/06 06/07 07/08

Total Annual Revenues ($M) 13903 15002 17073 —- 11.3 7.9 13.8 —–

3rd Quarter Revenues ($M) 3410 3710 4231 4576 11.8 8.8 14.1 8.1

Annual Oper. Profits ($M) 2158 2306 2815 —- 22.5 6.9 22.1 —–

Annual Oper. Profits (%) 15.5 15.4 16.5 —- —– —– —– —–

3rd Quarter Oper. Profits ($M) 517 569 676 778 19.7 10.2 18.7 15.1

3rd Quarter Oper. Profits (%) 15.1 15.3 16.0 17.0 —– —– —– —–

Graph: Quarterly Sales Performance January 2005–June 2008

Year Q1 Q2 Q3 Q4

2005 3479 3363 3410 3652

2006 3638 3588 3710 4067

2007 4089 4066 4231 4687

2008 4536 4628

Graph: Quarterly Operating Profit Margins January 2005–June 2008

Year Q1 Q2 Q3 Q4

2005 15.2% 14.3% 15.1% 17.3%

2006 15.1% 13.6% 15.3% 17.2%

2007 16.2% 15.3% 16.0% 18.3%

2008 16.7% 16.3%