Sales growth for large publicly held instrument and lab product companies remained sturdy in calendar year third quarter, as end-market demand reflected a similar pattern compared to the second quarter. However, for a number of companies, sales in biopharmaceutical markets and China were ahead of expectations and grew at a faster pace sequentially. Also divergent from the previous quarter was academic and government demand, which subsided as a result of slower-than-anticipated spending in Europe. Life science-related sales remained strong, driven by demand from biopharmaceutical and food markets, especially in China, as well as continued adoption into clinical markets.

Combined calendar year third quarter sales for the 23 companies or business units in the Life Science and Analytical Instrument Indexes (LSA Indexes) grew 4.8% organically year-over-year, compared to 5.2% in the second quarter and 6.1% in the previous year. Market and sales growth rates are based on company data as well as IBO research estimates. Further financial reviews of the companies can be found in Third Quarter Financial Results and in the November 15 issue of IBO. All sales figures below are organic and are based on constant exchange rates for foreign companies when converted into US dollars.

Biopharmaceutical Markets

Sales for biopharmaceutical markets for the LSA Indexes grew nearly 11%, which was heavily weighted by larger companies such as Agilent Technologies, Waters and Thermo Fisher Scientific, for which total end-market sales climbed 16%, 13% and 11%, respectively. Biopharmaceutical sales also grew double digits for both Merck KGaA Life Science (Merck LS) and Bio-Techne. The two Japanese firms, HORIBA and Shimadzu, likewise reported strength in biopharmaceutical markets.

Biopharmaceutical demand continued to be driven by technology upgrades, new products, service solutions and single-use technologies. Within the large-molecule space, demand was robust for research, development and production. Meanwhile, continued strength in small-molecule applications expanded demand for new systems and services. Geographically, biopharmaceutical sales were particularly robust in China and India.

Applied Markets

Although fluctuating by demand and geographic region, applied markets for the LSA Indexes were healthy, with sales growing approximately mid-single digits. China was again a bright spot for most companies, as food testing sales for Agilent and PerkinElmer grew 10% each, and advanced 7% for Waters. Although at a slower pace, Thermo Fisher reported healthy food testing sales as well as higher environmental sales. Both Biotage and QIAGEN experienced strong demand from applied markets, led by clinical, food and forensic applications.

Overall, environmental sales grew at a slower pace than in the second quarter, with slower demand in the US and certain European regions. PerkinElmer reported a sharp decline in environmental sales, especially toward the end of the quarter. On the clinical side, Illumina reported strength in China, while Bruker was negatively impacted by slower MALDI BioTyper sales due to earlier distribution issues in China.

Academic and Government Markets

Academic and government sales, which were roughly flat for the LSA Indexes, experienced further spending constraints, especially in Europe. Funding delays and restricted spending in Western European regions surprised a number of companies during the quarter. In addition, US academic and government demand, while positive, decelerated sequentially for certain firms. However, academic and government sales in Asia outside of Japan were steady.

Waters experienced the sharpest decline in academic and government sales, which slumped 15% due to weakness in Europe, Japan and the US, but was also impacted by timing issues. Bruker and Oxford Instruments each recorded mid- to high-single digit declines in this market, with discernible weakness in Europe and the US. Agilent and PerkinElmer each reported low single digit sales declines in the academic and government markets. Thermo Fisher reported a modest 1% growth for this market with slightly higher demand in the US but lower sales in the rest of the world.

In contrast, academic and governments sales for Illumina jumped 16%, but benefited from delayed orders in the first half of the year. Bio-Rad Laboratories’ Life Science segment also defied the negative trend for these markets, as sales grew in the mid- to high single digits based on normalized orders in the previous year.

Industrial Markets

Similar to the first half of the year, industrial markets remained challenged, as sales to these markets in the LSA Indexes contracted roughly 4%. However, while weakness in the oil markets continues to constrain capital equipment purchases, several companies reported increased demand for aftermarket sales. Nevertheless, industrial sales for Agilent, Thermo Fisher and Waters each declined in the 3%–4% range, and dropped at a slightly higher rate for both Bruker and PerkinElmer.

Geographic Markets

Geographically, China was the strongest growth contributor to the LSA Indexes, as sales grew roughly 20%, including 85% and 30% growth for Illumina and Waters, respectively. Furthermore, sales in China grew more than 25% for Agilent, 23% for QIAGEN, 18% for Thermo Fisher and 14% for Bruker. Most companies experienced significant demand from biopharmaceutical and food markets. Sales in the Americas and Europe were constrained but managed to grow roughly in the single digits each, with slightly higher growth in the US. There was little improvement in Japan, as sales declined modestly.

Life Science Index Sales: Third quarter IBO Life Science Index sales advanced 7.1% organically to $3,662 million. Becton, Dickinson’s BD Biosciences was added to the Index with this issue. Demand from biopharmaceutical markets remained robust in the quarter for research, process and production applications. Clinical markets were also strong, while slowing sales to academic and government markets were less pronounced within the life science areas. NGS-related sales were again sturdy for most companies, especially for sample preparation and sequencing consumables. However, Illumina reported a significant sales decline for high-throughput systems due to a strong year-over-year comparison and a missed sales opportunity. Flow cytometry sales were also healthy as a result of greater adoption by biopharmaceutical customers. Sales of protein and cell analysis products also contributed to growth. Adjusted operating margin slipped 90 basis points to 23.0%.

Analytical Instrument Index Sales: Third quarter sales for the IBO Analytical Instrument Index grew 2.4% organically to $3,718 million. Similar to the second quarter, growth was driven by sales of MS, LC and lab automation products to biopharmaceutical and applied markets. Industrial markets remained challenged, and sales to academic and government customers slowed. Demand for spectroscopy and materials analysis products was solid, led by higher sales and pricing for NMR and electron microscopy. However, materials characterization sales were negatively impacted by weak oil markets. Adjusted operating margin expanded 120 basis points to 20.4% driven by restructuring activity and cost control measures.

Reported IBO Index sales growths exclude acquisitions and are based on constant exchange rates for international companies when converted into US dollars.

IBO Life Science Index businesses: Becton, Dickinson’s (BD Biosciences); Bio-Rad Laboratories (Life Science); Biotage; Bio-Techne (Biotechnology, ProteinSimple); Brooks Automation (Life Science Systems Products); Fluidigm (Product); Illumina; Merck (Life Science); NanoString Technologies; PerkinElmer (Human Health); Tecan (Life Sciences) and Thermo Fisher Scientific (Life Science Solutions).

IBO Analytical Instrument Index businesses: Agilent Technologies (Life Sciences and Applied Markets, Agilent Crosslab); Bruker (Scientific Instruments); Horiba (Process and Environmental Instruments & Systems, Scientific Instruments & Systems); Oxford Instruments; PerkinElmer (Environmental Health); Shimadzu (Analytical and Measuring Instruments); Spectris (Materials Analysis); Thermo Fisher Scientific (Analytical Technologies) and Waters.