This article has been updated from a previous version to correct the amount that PerkinElmer expects from the divestiture of its semiconductor and fluid sciences businesses.
PerkinElmer's recently announced plan to divest its aerospace, semiconductor, and fluid-testing businesses should benefit its DNA array and proteomic product lines, according to company officials.
The company said last week that the divestitures will allow it to shift its strategic focus to the health sciences and photonic markets, and company representatives are not being coy about how PerkinElmer's core product lines will benefit.
"In 1998, PE's total revenue was less than 10 percent health sciences-related. [When] we entered '05, the company's health sciences revenue was about 70 percent and then following this transaction, the revenue from health sciences will be between 80 and 85 percent," Daniel Sutherby, PE's vice president of investor relations, told BioArray News this week.
"So, within the health sciences, will [PE] continue to change investments? The answer is 'yes'," said Sutherby.
"We like to think of ourselves as an open platform for not only academic researchers but also for the small biotechs and the pharmas coming out that are interested in the content."
According to Sutherby, PE will have more cash next year to funnel into its life and analytical science businesses. This includes its DNA array and proteomic businesses, based around its ProScanArray biochip readers and its ProteinArray Workstation, with sales of additional reagents, slides, and spotting equipment.
PE has not given guidance on what percentage of its life science business these specific tools account for. However in its 2004 annual report, "chemical and biological reagents" topped its list of principal products. The ProScanArray and ScanArray GX were both released in 2004.
The company has already signed an agreement to sell its aerospace business to Eaton for approximately $333 million, and is in discussions to sell its semiconductor and fluid-testing businesses by the end of the year. PerkinElmer said it expects to gain approximately $77 million from the sale of the semiconductor and fluid sciences businesses.
The proceeds from the divestitures will give the company "a very strong balance sheet to continue building [its] growth platforms, particularly in genetic screening, molecular medicine, medical imaging and service," Sutherby said in a statement. As of July 3, PerkinElmer had $158.7 million in cash and cash equivalents.
"When we divest from the fluid sciences there are a lot of investments … that are no longer required to be invested in fluid sciences, and we will continue to redirect those monies and increase the investments in the health science businesses," Sutherby explained this week.
He said that the capital obtained through the divestments would primarily flow into R&D, but that it would also be allotted for business development and building PE's sales and service force.
"Last year we spent $85 million in R&D. In our guidance for '05 we said we'd increase R&D 15 percent, so almost up to $100 million," Sutherby said.
"In our forecast for business in '05, what was said at the beginning of the year is that most of those monies would go into our life science business. Prior to this announcement we have planned on and increased our R&D investments and sales and service investments as well," Sutherby said.
How will Array and Proteomics Businesses Benefit?
PE has broadly discussed those segments of its business that will benefit from the sale of its semiconductor, aerospace, and fluid-testing businesses, but it is providing little guidance on specific product lines.
Peter Banks, PE's proteomic business leader, declined to comment specifically on how the strengthened investments will directly benefit the firm's proteomics products, while Santosh Arcot, who handles its DNA array product lines, did not respond to an e-mail seeking comment by press time.
However, when BioArray News spoke to Banks last month in Boston at IBC's Chips to Hits conference, he did provide some perspective on how PE's protein and DNA array business is evolving (see BAN 9/21/2005).
Banks was on hand to announce the signing of a co-marketing agreement with Germany-based array manufacturer Eppendorf that pairs PE's ScanArray GX microarray analysis system with Eppendorf's DualChip content arrays, and said that PE's decision to enter into the agreement stemmed from a reevaluation of the market, which he said used to be dominated by academic research, but was now moving in other directions.
"If you look at the marketplace itself, there's relatively slow growth in academic research. You see a big increase in growth when you start going towards clinical diagnostics, for example," Banks said at the conference. Instead of catering to the academic research market, PE is now reaching out to the pharmaceutical industry as well, he said.
"We like to think of ourselves as an open platform for not only academic researchers but also for the small biotechs and the pharmas coming out that are interested in the content," Banks explained.
Still, rather than diving into providing integrated systems with catalog arrays, like Agilent or Affymetrix, Banks said PE will continue to build on its readers, scanners, spotters, and reagents, and leave the content to its partners, such as Eppendorf or Procognia. Under the Procognia deal, PE will sell Procognia's U-c fingerprint lectin array-based platform with its Protein Array Workstation and ProScanArray HT.
"If you look at our product offering, we're really strong in processing and reading, and spotting, and we are not very strong with regards to the actual content," Banks explained. "We see us serving the marketplace much better if we work with content providers." Banks said that his firm was open to exploring similar partnerships to reach out to pharmas and biotechs.
Also, Banks said that PE will continue to build on its existing Protein Array Workstation and ProScanArray HT offerings by introducing a new, upgradeable scanner by the end of this year.
"With that, we are going to have essentially four separate products spanning applications. From the very simple two-laser [scanner] to the very high-end four-laser [scanner] with automation capability of doing 20 slides at one. We are expecting some serious sales this year," Banks said.
Dan Sutherby declined to comment on other next-generation products that will be available following the release of the upgradeable scanner, but said the firm is "working on all kinds of stuff."
Sutherby added that now, with "the fluids business gone, [PE] will be able to channel all of [its] free cash flow towards the growth businesses."
— Justin Petrone ([email protected])