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Waters Sees Comeback in Mass Spec Fueled by UPLC, and Premier Intro

Has Waters turned the corner on its mass spectrometry product line?

The Milford, Mass.-based molecular-biology tools company on Tuesday reported third-quarter sales of $265 million, an increase of 15 percent over the third quarter of 2003.

Waters had gross profit of $154 million for the quarter, compared to $135 million for the year-ago quarter despite increases in selling and administrative expenses, and in research and development. SGA costs for the quarter were $72 million, compared to $67 million for the year-ago quarter, while R&D was $17 million, compared to $15 million for the same quarter in 2003. Results for the quarter included $158,000 in restructuring costs from a reorganization of Waters’ HPLC and mass spectrometry businesses.

Waters reported cash and cash equivalents of $471 million on hand as of Oct. 2, compared to $357 million as of Dec. 31, 2003.

Exports account for nearly two-thirds of Waters’ sales, and the company’s top-line performance was buoyed by a 4 percent benefit from foreign exchange rates. Doug Berthiaume, Waters’ chairman and chief executive officer, said in a conference call with analysts that overall sales results benefited from the introduction of the new Acquity UPLC system, which began shipping in August.

“Shipments of Acquity were on our expectations and Acquity will continue to positively improve our sales trends as demand accelerates,” Berthiaume said.

Waters is marketing the Acquity UPLC (Ultra Performance Liquid Chromatography) system as a complement to mass spectrometry instrumentation, to be used to separate constituents in a liquid sample prior to analysis.

The company recorded some $12 million in sales for the system during the quarter, Berthiaume said, and expects some $12 million to $14 million in sales for the fourth quarter, doubling the company’s installed base by the end of the year.

Berthiaume announced that the company will begin delivery of its Premier mass spectrometer in November, a much-anticipated rollout at the high end of the company’s QTOF product line.

“We have ramped up manufacturing and we have materials in hand for production and orders for the instrument have been very brisk,” said Berthiuaume. “This bodes well for our mass spectrometry revenue performance.”

The company is seeking to recover market share that has eroded since March 2003, when Waters lost an appeal of a jury’s finding of patent infringement that enjoined the firm from selling its Quattro Ultima triple quadrupole mass spectrometer in the US, and assessed damages and interest of some $53 million.

The launch of the Premier line should produce some $5 million to $6 million, or a 20 percent increase over the sequential quarter, in revenue for the fourth quarter, John Ornell, Water’s chief financial officer, said in the conference call. Mass spectrometry accounts for about 20 percent of the company’s revenues, weighted to the QTOF, tandem quadropoles, and the LC Premier product lines, he said.

The downside of the rollout of the Premier product line showed up in a slowdown in orders for the existing product, said Berthiaume.

“Shipments for the QTOF line that is being phased out dropped off faster than we had expected; we are down actually about 50 percent,” he said. “But orders for the product family were up pretty significantly. Growth was very good in the quarter, even though [customers] can’t get delivery.”

Waters will roll out a protein expression product line that combines the QTOF Premier and the Acquity UPLC instruments, and new proteomics software, in the first half of the year, Berthiaume said.


Waters acquired NuGenesis Technologies for $43 million in January, and Creon Lab Control for $16 million in July 2003.

Revenues from informatics, said Berthiaume, were “disappointing.”

“We spent more time than expected operationally absorbing the NuGenesis business into the Waters infrastructure,” said Berthiaume. “As a result, we lost some sales momentum.”

Additionally, he said the third-quarter launch of the company’s eLab notebook software was delayed until the fourth quarter. He did not give a target date for launch.

Ornell said the company expects informatics revenues, including NuGenesis and Creon, to range from $8 million to $10 million for the fourth quarter, up from approximately $5 million in the third quarter, Arnell said.

International Markets

Overall, Waters’ European sales growth was in the “high single digits” in the quarter, said Ornell.

“Europe is starting out on a strong note in the fourth quarter,” he added. “But over the next year or two, Europe is going to be slower growth than the US and Asia.”

Demand in Europe, he said, was fueled by industrial and government spending in food safety and environmental testing.

He also said that China, Korea, and India, in particular, are fueling strong growth, focusing on the company’s HPLC product lines.

“In the last year or so, we have substantially restructured and invested in mass spectrometry in those areas,” he said. “Asia, including Japan, will be the fastest growing areas of the business over the next five years. We are very encouraged by the long-term opportunities across the broad product line.”

Overall, Berthiaume said the company expects to be “a double-digit, 10-ish type of growth company.

“Without the benefit of foreign exchange, and with the new products we have introduced lately, organic growth could move into that region in 2005,” he said.

— Mo Krochmal ([email protected])


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