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Beckman Coulter s Biomedical Research Unit Grows 5 Percent in Market It Calls Sluggish

Led by its robotic automation and genetic analysis products, Beckman Coulter’s biomedical research division contributed 5 percent growth toward the company’s total revenues of $581 million for the quarter ending Sept. 30.

Beckman’s overall sales grew 8.7 percent for the period, compared to the same quarter in 2003, boosted by 10-percent growth in sales of $420 million for its clinical diagnostics unit.

The biomedical unit contributed $161 million, with sales of $38.3 million from its robotic automation/genetic analysis product lines contributing 8 percent of growth. Additionally, the specialty testing unit contributed $57.2 million, with 8.3 percent growth.

“Biomedical research sales were a solid performance in a sluggish market,” Scott Garrett, president and COO of the Fullerton, Calif.-based company, told analysts on the company’s conference call Thursday.

John Wareham, Beckman’s chairman and CEO, said the overall economic environment for biomedical research is slow, with the exception of China, while the pharmaceutical and biotechnology markets are growing.

“Large pharma is starting to increase research and development spending, and more dollars are moving to early-stage drug research,” Wareham said. “On the other hand, while biotechnology funding has improved, it has not been as bullish as it appeared earlier in the year.”

Wareham said Beckman is continuing its focus on building “more complete” solutions for genomic, proteomic, and cell-based research.

“New systems aimed at faster growing markets, along with investment in specialized tests for HIV and BSE, put us in prime position as the biomedical research markets continue to rebound,” he said.

The company’s biomedical research unit includes robotics/genetic analysis products, centrifuge and analytical systems, and specialty testing.

In the robotics product lines, sales were driven by growth in liquid handling and DNA-sequencing technologies, the company said. In the quarter, Beckman had “record placements” of its Biomek 3000 and NX biorobotic workstations. Placements of the company’s GenomeLab SNPStream genotyping system, which was released in late 2003 and based on technology acquired from Orchid BioSciences in 2002, led to the group’s first quarter of growth “in a while,” Garrett said.

Additionally, the company recorded its first sales of ProteomeLab, a microarray system.

Growth in the specialty testing unit was driven by placements of the FC 500 flow cytometer, a product originally introduced in 2002.

Beckman is seeing competition in this field from Becton Dickinson, which released its FACSCanto flow cytometer in May.

“It’s becoming a little more competitive out there, but we have always had that competitive threat out there,” said Wareham.

“We have many new products coming out, most of which are going into applications that BD is currently not participating in. We expect to continue to have very good growth and we will be watching carefully the progress of some of BD’s new products.”

Overall, the company reported $148 million in SG&A expenses for the quarter, compared to $142.5 million in the year-ago quarter. Beckman spent $51.5 million on research and development in the period, compared to $46.5 for the same quarter in 2003.

As of Sept. 30, the company had $31 million in cash and cash equivalents on hand, after reporting $75 million on hand as of Dec. 31.

The company is seeing growth in its instrument sales and with it, a need to add to its services organization.

“As long as those new instruments are accelerating, we are going to have to continue to add to our service organization, as many of them are going to brand new customers,” Wareham said. “We expect to grow sales faster than we are growing our service costs and [will] probably turn that corner … next year. “

Going forward, Beckman Coulter expects overall sales to grow between 7 percent and 9 percent over 2005, driven by growth in the company’s clinical diagnostics business, with revenues in the biomedical research unit growing between 4 percent and 6 percent, Wareham said.

In the fourth quarter, the company expects revenues to grow 6 percent to 8 percent, including 2 percent currency benefit.

For the year, the company expects revenue growth of 9 percent to 10 percent, with clinical diagnostics sales growing 10 percent to 12 percent; and 4 percent to 6 percent growth for biomedical research.

Sales Initiatives

Beckman is trying to abrogate the traditional seasonality of its sales.

“We are trying to modulate the year-end fourth-quarter rush so typical in our industry,” said Wareham. “Through sales force direction and customer promotions, we have been working to level-load second-half sales to bring a bit more volume to the third quarter. Our tactics seem to be working.”

The company is developing a new sample-preparation technology for its specialty testing unit based on its in-house experience with capillary electrophoresis and DNA sequencing. Beckman will present a prototype of the technology at the American Association of Molecular Pathology meeting on Nov. 10 in Los Angeles, Wareham said.

— Mo Krochmal ([email protected])

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