PerkinElmer has laid off an undisclosed number of employees as it looks to shift its sales focus from Europe to the Asian market, particularly China and India, company officials told BioCommerce Week.
The firm disclosed the layoffs this week in an 8-K filing with the US Securities and Exchange Commission. According to that filing, PerkinElmer expects to record a pre-tax restructuring charge of approximately $9 million associated with termination costs in its fiscal second quarter, which ended July 3.
Dan Sutherby, a PE spokesman, told BioCommerce Week the firm is not yet disclosing the number of positions that have been eliminated. "We're going to be taking some people out. It is predominantly in Europe. [But] we're also going to use the cost savings realized from the take-outs … and reinvest them back into life and analytical sciences, predominantly in Asia," he said.
"If you consider the take-outs and the add-ons we're going to do, on a net basis we believe it will be less than 50 salaried people" who will be cut from the payroll, he said. PerkinElmer currently employs around 10,000 people globally.
"You can think about it as remixing the talent within life and analytical sciences for the company. Europe is doing OK for us, but it's slowing," said Sutherby.
"If you consider the take-outs and the add-ons we're going to do, on a net basis we believe it will be less than 50 salaried people."
The company plans to increase investment in its genetic screening, biomarkers, and service businesses in Asia, with a focus on expanding in China and India, the spokesman said. Those businesses are growing at a 10-percent clip annually, he noted, and merit additional investment.
The firm's service business includes contracts with large pharmaceutical companies that outsource certain lab activities to PerkinElmer, Sutherby said. The $220-million-a-year business also provides validation, compliance, and training services and employs about a thousand people around the world, he said.
"Right now our service business has plenty of people, but in six, nine, or 12 months, as we continue to grow," the company may need more people, he said.
PerkinElmer is one of several companies covered by BioCommerce Week that have stated their intention to either expand or set up operations in India and China, which are viewed as high-growth opportunities (see BioCommerce Week 5/26/2005). At the Banc of America Securities Health Care Conference in May, PerkinElmer CEO Greg Summe said the firm intended to strengthen its marketing and research and development efforts in the Asia-Pacific region.
PerkinElmer already has sales operations in China, and it currently conducts some R&D in Singapore.
Technology Acquisitions On the Horizon?
Summe said at the conference that the firm was shifting its portfolio to higher-growth applications, such as reagents, services, and software. While PerkinElmer has not been nearly as aggressive as some of its competitors in the molecular biology tools space in acquiring companies as a means to broaden its portfolio and grow revenue, Summe said that part of the shift in focus would include selective technology acquisitions and partnerships.
"We're not looking to do a big capacity deal. Just small technology tuck-ins," Sutherby said this week. He said acquisitions would likely be in the areas of biomarkers, genetic screening products, and medical imaging. The company currently supplies GE with digital medical imaging components under a five-year, $250 million pact.
Earlier this year PerkinElmer purchased Elcos, a German-based manufacturer of custom light-emitting diode-based products for biomedical and industrial applications, for $15 million in cash. The acquisition was PerkinElmer's first since 2001, when it purchased Packard Bioscience in an all-stock deal valued at approximately $650 million.
The primary reason for PerkinElmer's decision not to make any acquisitions between the purchases of Packard and Elcos was its mountain of debt. The company spent $175 million in FY '04 — $100 million of that in the fourth quarter alone — to reduce its long-term debt to $365 million. That amount remained nearly unchanged at the end of the company's first quarter on April 3.
"You can think about it as remixing the talent within life and analytical sciences for the company. Europe is doing OK for us, but it's slowing."
"We have done many, many licensing and [technology] acquisitions over the past couple of years, but we haven't done any outright acquisitions literally since the end of '01," Summe said at the time of the Elcos acquisition (see BioCommerce Week 2/17/2005). "We are not in the market to do large, consolidating acquisitions partly because when you look at the applications that have the most attractive growth for us, there aren't a lot of large players in there," he said. "They are small companies in new emerging markets."
PerkinElmer is scheduled to release its second-quarter financial results on July 26. The firm reported overall first-quarter revenue of $416.3 million compared with $392.6 million in the first quarter of 2004. Revenue for its Life and Analytical Sciences unit grew 6 percent year-over-year to $264.8 million.
According to this week's 8-K filing, "a soft sublease market" will require the firm to increase its reserves for financial obligations under several leases associated with previous restructurings in 2001 and 2002, and that it will therefore incur an additional pre-tax restructuring charge of around $6 million. Approximately $9 million of the $15 million total restructuring charge is expected to be paid over the next 12 months, and the remaining $6 million is expected to be paid before 2014, PerkinElmer said.
The company also said that it is "nearing resolution of audits of certain prior year tax returns," which should result in a tax benefit of at least $15 million in its second fiscal quarter.
— Edward Winnick ([email protected])