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After a Series of Acquisitions, Fisher Expects 2006 Sales to Grow Around 10 Percent

Fisher Scientific officials said this week that they expect their recent string of acquisitions, among other initiatives, to help 2006 sales grow by between 9 percent and 11 percent.

Fisher has been aggressive in the M&A market so far this year, acquiring four firms for more than $400 million. Following a year in which the firm purchased a total of four companies, Paul Meister, vice chairman of Fisher, said during the firm's first-quarter conference call this week, "The pace [of acquisitions] has obviously picked up."

While the acquisitions are only a part of the company's overall efforts to drive growth in 2006, they have been targeted at what Fisher calls high-growth areas. Meister said that the new businesses provide the firm with "complementary and enhanced capabilities that will step up our revenue growth and increase our margins."

"This quarter was about acceleration, setting the stage for the balance of the year and beyond by accelerating revenue growth across all of our core markets, the introduction of new products and applications for life-science research, acquisition activity with the purchase of high-growth, high-margin businesses … and the execution of our international sourcing and manufacturing initiatives, as well as expansion of our sales and marketing capabilities," Meister said.


"The pace [of acquisitions] has obviously picked up."

Over the past two months Fisher has acquired four companies. The largest of these deals was the $283-million acquisition of Athena Diagnostics, a maker of molecular diagnostic and immunodiagnostic tests (see BioCommerce Week 3/22/2006). At the time, Fisher also announced an investment in Nanogen, which included a collaboration with the microarray and RT-PCR technology firm.

"The acquisition of Athena Diagnostics and the companion investment in Nanogen position us to capitalize on the explosive growth opportunities in molecular diagnostics, with Athena's extensive portfolio of proprietary biomarkers and tests to identify those markers," Meister said during the conference call. The acquisition "provides Fisher with an interesting position in personalized gene-based tests and positions us to benefit from advances in gene-based therapies that fuel demand for genetic testing."

The firm also closed the $125-million acquisition of Clintrak Pharmaceutical Services this week. Clintrak, which makes labels for clinical trials and offers supply chain management services, generated $31 million in revenue last year.

Fisher's other acquisitions included disposable, bioprocessing systems firm TC Tech for an undisclosed sum, and last week's announcement that it had acquired BioImage for an undisclosed amount in an effort to expand its high-content screening and analysis reagent portfolio.

BioImage plays in the high-content pathway-analysis market. Its Redistribution technology monitors protein translocation within a cell. Fisher said BioImage, based in Copenhagen, Denmark, complements its Cellomics business, which sells automated imaging instruments, BioApplication image-analysis software, high-content informatics software, and HitKit HCS reagent kits.

Though he wouldn't comment specifically on the firm's M&A plans going forward, Meister said prices for businesses that are on the block seem to be getting more reasonable.

"The one sort of underlying fundamental that does drive pricing is the ability of leveraged financial players to set floor prices, and that has certainly not increased over the last quarter or so," he said. "I think that, if anything, is slightly favorable. The overarching phenomenon though … is the consolidation in the market, which I believe will continue to provide opportunities to further that consolidation, albeit on a sporadic basis."

This is in stark contrast to comments Meister made three months ago, during the firm's fourth-quarter conference call, when he said he was "slightly less optimistic about near-term acquisition activity in light of some of the valuations we've seen. We are constantly in the mode of trading off internal development opportunities versus external acquisition opportunities, and it is tough to call when acquisitions will drop." (see BioCommerce Week 2/8/2006)

His comments also run counter to an assertion made last week by Invitrogen Chairman and CEO Greg Lucier, who said during a conference call, "I'm glad that we've done a lot of our industry consolidation in the years past, because we were able to do it at a far more economical rate than what others are having to do at this moment." (see article in this week's issue)

Q1 Sales Rise 7.6 Percent

Fisher's first-quarter sales increased 7.6 percent to $1.41 billion from $1.31 billion in the first quarter a year ago. Excluding the impact of foreign currency exchange, Fisher's first-quarter revenues would have totaled $1.43 billion, a 9.6-percent increase, with organic growth accounting for 8.3 percent of that growth.

First-quarter sales for Fisher's scientific products and services spiked 9.8 percent to $1.08 billion from $984 million one year ago. Excluding the impact of foreign currency exchange, revenues for this division would have increased 11.4 percent, with 7.1 percent organic growth.

Meister said sales growth was in the high teens to pharma and biotech customers, while sales to academic customers grew in the mid-single digits.

Fisher's healthcare products and services group generated sales of $354 million, up 5 percent from $337 million year over year. Excluding foreign currency impact, sales growth for this division was 5.5 percent, with 5 percent organic growth.

Fisher's profit for the first quarter increased 40 percent to $106.2 million, or $.85 per basic share, from $76 million, or $.63 per basic share year over year.

In March, Fisher said it would jettison its lab workstations business, and as such, the results of this business were presented as discontinued operations and excluded from reported sales and income figures.

Company officials predicted 2006 sales will grow between 9 percent and 11 percent range for all of 2006, with 6 to 8 points from organic growth. They also predicted earnings per share of $4.05 to $4.20 for the year.

Fisher is expecting strong growth in Asia as it expands its operations there this year. "We have completed construction of our second manufacturing facility in China, located in Shanghai, and have begun pilot production," Meister said. "We are rapidly enhancing our distribution capabilities in both [China and India], and we have completed plans for a clinical trials packaging and distribution facility in India."

As of March 31, the company had approximately $434 million in cash and cash equivalents on hand.

— Edward Winnick ([email protected])

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