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Industrial Markets Boost PerkinElmer’s Q2 Revenue Growth; Friel to Succeed Summe

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Demand from customers in the environmental and food safety industries helped PerkinElmer’s Life and Analytical Sciences unit post 17 percent second-quarter revenue growth.
 
The firm posted overall revenues of $437.3 million, up 16 percent over last year’s Q2 revenues of $377 million. Although acquisitions and currency exchange contributed 7 percent of overall revenue growth, the quarter marked PerkinElmer’s highest organic growth rate since 2000, said Chairman and CEO Greg Summe during the firm’s conference call last week.
 
PerkinElmer posted a profit of $33.7 million, or $.28 per share, for the quarter — a 37.6 percent increase from $24.5 million, or $.19 per share, in the second quarter last year.
 
R&D spending in the quarter increased to $27.3 million from $25 million year over year.
 
The company also said that Rob Friel, president of the LAS business, will succeed Summe as CEO in February.
 
Initially, Friel will become president and chief operating officer of PerkinElmer on Aug. 1, and the firm expects him to be elected CEO six months later. At that time, Summe will become executive chairman of the board, a title he will retain through the annual shareholders meeting in April 2009, PerkinElmer said.
 
Friel joined the company in 1999 as chief financial officer and was appointed vice chairman, director, and president of the LAS business in 2006. In his new role, Friel will be responsible for both LAS and the Optoelectronics business.
 
John Roush will continue to lead the Optoelectronics business as president. The company does not intend to fill the LAS president position.
 
Diagnostics and Industrial Drivers
 
Over the past couple of years, PerkinElmer has transformed itself from a diversified industrial conglomerate with interests in the health care, aerospace, and semiconductor industries to a company with a much sharper focus on the health industry. In 1998, the health sciences accounted for 10 percent of PerkinElmer’s revenues. It now provides the firm with 85 percent of its revenues.
 
Summe said during the call that from a growth standpoint, the firm’s diagnostics business, which consists of its medical imaging and genetic screening businesses, have been “the best growers for a consistent period of time,” and the second quarter was no exception. Summe said that, in particular, there has been growing interest in the firm’s genetic screening business around the world, particularly in Russia and the Asia-Pacific region.
 
While PerkinElmer has placed an emphasis on rapidly growing its cell analysis business through a series of acquisitions over the first half of this year (see BioCommerce Week 4/4/2007), company officials cited demand from environmental and food safety customers as key growth drivers for the LAS business, which brought in revenues of $326.3 million for the quarter. This compares to the firm’s Optoelectronics unit, which had second-quarter revenue growth of 13 percent to $111 million year over year.
 
Three global trends impacted the LAS business favorably on a global basis during the quarter, Friel said during the call. First, he said increased media attention and consumer awareness of food safety and quality issues is driving demand for PerkinElmer’s analytical instruments in these markets.
 
Friel said the second area is a continued emphasis in both developed and developing markets on environmental issues. Finally, he said that there is a growing demand for better metals analysis.
 
He highlighted the firm’s Clarus GC-MS and Spectrum 400 as products that are selling well due to these trends.
 

“We do think increasingly the high-content area will be an area of some focus from the pharmas. Having said that, we’re seeing a good growth from a relatively low base for us right now.”

However, Friel noted that the firm’s recent emphasis on the cell analysis and pharma services markets is gaining customer interest. He also noted that kinase and GPCRs still account for roughly 75 percent of the drug-discovery targets, which benefits the firm due to the instruments and reagents it gained through the acquisitions of firms such as Evotec Technologies and Euroscreen.
 
“We recently consolidated our offerings in this area with a broad range of assay technology platforms, and in the case of GPCRs, a deep portfolio in terms of content,” he said.
 
“We do think increasingly the high-content area will be an area of some focus from the pharmas,” said Friel. “Having said that, we’re seeing a good growth from a relatively low base for us right now.”
 
PerkinElmer also is one of a handful of BCW Index companies, such as Thermo Fisher Scientific, Agilent Technologies, and Beckman Coulter, that has introduced a comprehensive services offering aimed at pharmaceutical customers.
 
Friel noted that 10 of the top 20 pharmaceutical firms have contracts with PerkinElmer to provide services, with some choosing the firm’s OneSource comprehensive asset-management program. He noted that firms outside of pharma in industries such as food and beverage and consumer products have also expressed an interest in the services.
 
“The outsourcing trend on the service side is still fairly early,” added Summe. He said the firm also sees a trend in expanding the range of services it can offer pharma customers, such as lab design and multivendor validation.

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