CHICAGO (GenomeWeb News) – Agilent Technologies is looking to generate a greater return on its R&D investments in the life science space, according to a company official.
While the firm will continue to invest in developing new technologies for the life science market, R&D spending as a percentage of revenues will shrink from a current level of around 12 percent to the single-digit range, Nick Roelofs, vice president and general manager of Agilent's Life Sciences Solutions unit, told GenomeWeb Daily News sister publication ProteoMonitor here this week during Pittcon.
Roelofs said that after several years of building up its presence in the life-science space with new technology development, the firm now needs to create "a long-term sustainable model" for the business.
For the past several years, Agilent has expanded its presence in the life-science market amid a shift from the semiconductor business. That strategy originally meant building up its strengths in four areas: proteomics, DNA microarrays, informatics, and diagnostics.
With that has come relatively high R&D spending in order to create the necessary products to bring to market. According to Roelofs, 12 percent of Agilent's top line in its life-science business has been reinvested back into R&D while its competitors' R&D spending as a percentage of revenues has been typically in the single digits.
"In order to fund that kind of investment we have to have the rest of the corporation much more profitable to fund the high level of investment in a single sector," Roelofs said. And to take on such an investment strategy, "we have to have a light at the end of the tunnel where we say, 'OK, we will move the life science business toward the industry average.'"
Roelofs emphasized that the company is not backing off new product development, but will grow R&D spending at a slower pace compared to revenue growth — eventually bringing it into the high single digits as a percentage of revenues.
The company's life-science business is only now able to move in that direction because only now has that business achieved the level of "competency" to do so, he said.
Getting to that point involved honing its market focus as well as ramping up its technology. Life sciences is such a "broad and diffuse field of interest" that it's tempting for a large firm to chase all applications at once, he said.
As an example, Roelofs cited Agilent's microarray business, noting that for a decade, the firm was "very enamored" with the technology's "broad range of interesting applications" to the point that it was chasing after its competitors, especially Affymetrix, in supporting new applications for the technology.
But in doing so, that part of Agilent's business spread itself too thin. Today, the company is more focused on which applications are best suited for its microarrays — such as array-CGH, ChIP-chip, and microRNA analysis — "and that's burst that business into profitability because the ratio at what we're looking at to what the top line can afford has gotten much, much better," Roelofs said.
Indeed, Agilent cited microarrays as one of its strongest growth areas in its most recent financial statements. For its first fiscal quarter of 2009, the company reported double-digit growth in its array business, and for the fourth fiscal quarter of 2008, it posted 40 percent growth in arrays.
Beyond arrays, Roelofs said that all of Agilent's life science businesses have seen a turnaround during the past two years. In 2007, the company had five businesses in life sciences. Of that, only one, liquid chromatography, turned a profit. Today, Agilent has seven businesses in the segment, including the purchases of Stratagene and Velocity 11, and all are profitable, Roelofs said.
Between 2007 and 2009, the goal was to move all the businesses "out of the red ink," he said. Moving forward, by 2012, the goal will be to grow all the businesses within life sciences by double digits.
Roelofs also reiterated the company's goal of expanding its presence in the academic and government markets. That has, so far, entailed retraining and redeploying sales staff to specifically address the needs of researchers in those markets. Unlike industrial customers who are more "routine driven," academic/government scientists need platforms that will help them answer more pure research questions.
Despite the company's ongoing restructuring, which involves the layoff of at least 1,100 staffers, Agilent is actually hiring life science sales staff, Roelofs said.
A more comprehensive version of this article is available on GenomeWeb Daily News sister publication ProteoMonitor.