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PerkinElmer Becoming Pure Play Dx, Life Science Firm, Spurred on by COVID Innovations

SAN FRANCISCO – When it completes the divestiture of its applied, food, and enterprise businesses at the end of Q1 2023, PerkinElmer plans to become a pure-play life sciences and diagnostics company, President and CEO Prahlad Singh said during his presentation Tuesday at the 41st Annual JP Morgan Healthcare Conference.

Afterward, the firm will share its brand name with the divested business for a few months, but the new business will eventually have a separate name and brand identity, he added. 

The idea to divest the business came as the COVID-19 pandemic offered PerkinElmer the chance to demonstrate its innovation in diagnostics while it also provided a robust balance sheet that the company used to ensure it had a revenue profile of high-growth, high-profile businesses to offset the eventual drop in COVID-19 revenue. The close of the firm's $5.25 billion acquisition of BioLegend in 2021 marked a fork in the road for PerkinElmer, according to Singh. 

"We were essentially two businesses, one with a high-growth, high-margin profile, and one with decent growth but lower profitability," he said. It soon became obvious that divesting the applied, food, and enterprise business would provide more value to shareholders, he added. 

Although the company did not provide full preliminary earnings results, Singh said it is expecting nearly $2.7 billion in revenues for 2022 excluding COVID-19, with a roughly even split between life sciences and diagnostics. The company estimates about $1.3 billion in revenues for the life sciences division for the full-year 2022, with 55 percent coming from reagents, assays, and services, 30 percent from instruments, and 15 percent coming from informatics. 

Meanwhile, it expects about $1.4 billion from diagnostics: 45 percent from immunodiagnostics, 35 percent from reproductive health, and 20 percent from applied genomics. Nearly 80 percent of the total revenue is recurring, Singh added. The firm's Q4 earnings results are expected to meet or exceed its previous guidance. 

On the life sciences segment, Singh highlighted two key products demonstrating the firm's commitment to innovation. He noted the goal to bring its Pin-point base editing technology, exclusively licensed from Rutgers University, into the mainstream, calling it the "next chapter of the CRISPR growth story." PerkinElmer will bring it to customers either by licensing it to pharma and biotech customers, or providing them with commercial products based on the Pin-point, or offering specialized services to customers without the capability to perform base editing. 

The firm is also leveraging reagents from its BioLegend business with its all-in-one image cytometer Cellaca PLX to drive further productivity in cell and gene therapy. The instrument can multiplex with up to four channels and is a therapeutic-agnostic platform to streamline the phenotyping of immune cells. Although the firm is already integrating products from companies it has acquired, Singh said there is an opportunity for further commercial and technological synergies across the businesses. BioLegend, he noted, makes up nearly half of the company's $700 million reagents business. 

Singh also said he expects the life sciences business to grow in the double digits in the future. 

When it comes to the diagnostics business, Singh said the noninvasive prenatal testing business saw significant growth in 2022 and he expects NIPT to be a major growth driver for the reproductive health segment in the future. 

Singh noted that before the acquisition of Immunodiagnostic Systems in 2021, the company's immunodiagnostics business was lacking a contiguous platform of instrumentation to test its portfolio of assays. With that purchase, the firm had a tabletop random access platform, and the launch of the high-throughput Accentis chemiluminescence platform has provided a full comprehensive portfolio for labs regardless of size. PerkinElmer also plans to continue to bolster its assay pipeline with more investments, he said. 

Although the $600 million in COVID-19-related revenues the firm has seen will decrease to about $100 million in 2023, Singh noted that the COVID-19 pandemic gave PerkinElmer a platform to increase the company's installed base for microfluidics, nucleic acid extraction, and liquid handling instruments. 

Singh addressed headwinds from China lockdowns on the diagnostic reagents segment, noting that much of the business deals with noncritical testing and that life must return to normal before people get tested for autoimmune, allergy, and infectious disease testing. The firm still expects diagnostics reagents demand in China to return to normal in the second half of 2023, he added. 

The firm's midterm outlook until 2026, assuming a stable macroenvironment, is 10 percent organic growth, about 80 percent of revenues recurring, and adjusted earnings per share growth of 13 to 15 percent, Singh said. In 2021, the firm forecast 5 to 7 percent growth in the midterm, with about 75 percent of revenues recurring and adjusted EPS growth above 10 percent. The firm will also have significant capital available to deploy to support its outlook, Singh said. 

In the long term, the company expects the diagnostics segment to grow in the high-single digit percent range. Reproductive health, despite tough birth rates, is expected to grow in the mid- to high-single digit percent range, Singh added. 

Singh said that most of the deals the firm has closed aren't with competitors, and the company will focus acquisition activity on businesses that fit PerkinElmer culturally, strategically, and financially. The company has an active funnel and will continue to look for strategic opportunities, he said.