NEW YORK — PerkinElmer is divesting its applied, food, and enterprise businesses, with plans to form a separate high-margin life sciences and diagnostics firm, the company announced early Monday.
The Waltham, Massachusetts-based company also announced its second quarter revenues were flat year over year.
The $2.45 billion sale of its applied, food, and enterprise services to New Mountain Capital will split the company into two businesses: a life sciences and diagnostics firm that will operate under a yet-to-be-announced name and an analytical and enterprise solutions business that is expected to retain the PerkinElmer name and brand. PerkinElmer and New Mountain Capital expect to close on the deal in the first quarter of 2023.
PerkinElmer President and CEO Prahlad Singh said on a conference call that the change would make the company faster and more flexible in responding to customer needs and able to work with customers on drug discovery, translational medicine, and disease detection. The company is expected to have 11,000 employees and $3.3 billion in revenue from products in areas including infectious disease, autoimmune, reproductive health, medical research, biologics, and cell and gene therapy.
"After the transaction, our company will have a compelling revenue growth rate in the double digits, largely in line with our new higher-value peers," Singh said. "We will have stronger margins and differentiated scale with total revenues that well exceed the average of our peers."
PerkinElmer documents indicate the new analytical and enterprise solutions company will have 6,000 employees and revenue of about $1.3 billion in 2022.
PerkinElmer spokesman Chet Murray said that the deal was "purely a strategic move" rather than one intended to alter staffing or investment levels. Each business requires intense focus, capital deployment, and different business models, and company leaders predict both companies will see faster growth and investment, he said.
Singh said proceeds of the deal with New Mountain Capital, along with recent deleveraging, gives the new life sciences and diagnostics company "the ability to continue to rapidly invest in our areas of focus and positions us well to being appropriately deploying capital meaningfully sooner than we have previously anticipated."
PerkinElmer said that it anticipates the life sciences and diagnostics business will lead the market in infectious disease and autoimmune diagnostics, continue leadership in reproductive health diagnostics, and improve its "omics" sample preparation market position. On the life sciences side, the company is focused on preclinical research and discovery, biologics and cell and gene therapy, automation, and informatics.
According to PerkinElmer, the new company will have a 60-40 split between diagnostics and life sciences.
Separately, the firm also announced that its second quarter revenues were flat year over year at $1.23 billion, beating the consensus Wall Street estimate of $1.20 billion. Revenues from its Diagnostics segment declined 20 percent to $569.0 million from $715.8 million, which company officials attributed to lower COVID-19–related income.
Jamey Mock, PerkinElmer CFO, said on the call more than half of PerkinElmer's $365 million in COVID-19 income last year came from two laboratories operated on behalf of government agencies. Both have since closed, most recently with the end of a contract for operations at the California Department of Public Health's Valencia laboratory.
He said most of the company's COVID-19 revenue will now come from RNA and DNA extraction instruments and kits, automated liquid handling, related consumables and service on those instruments, and diagnostic tests, although the company expects PCR testing demand will continue to decline.
The company also saw a decline in demand for immunodiagnostics during lockdowns in China. PerkinElmer is selling more diagnostic services for acute needs, such as reproductive health, now that lockdowns have subsided, but its immunodiagnostics business has yet to recover. Singh said PerkinElmer also continues seeing strong performance from recently acquired businesses, especially BioLegend, which PerkinElmer acquired for $5.25 billion in July 2021 — the largest acquisition in company history. San Diego-based BioLegend has been an antibody and reagent seller for customers in academia and the biopharmaceutical industry.
Meanwhile, PerkinElmer's applied genomics business also grew slightly during the quarter, and new products and services in reproductive health helped offset flat birth rates in the US and declines in some other regions, including China.
The company reported a net income for the quarter of $179 million, or $1.42 per share, compared to $246 million, or $2.19 per share, a year earlier. It also reported adjusted EPS of $2.32, which beat the consensus Wall Street estimate of $2.02.
It ended the quarter with $360.9 million in cash and cash equivalents.
PerkinElmer raised its revenue forecast for the year to $4.60 billion-$4.64 billion, which would be slightly higher than analysts' average estimate for the year of $4.58 billion, and adjusted earnings per share of $7.80-$7.90, which would beat analysts' average estimate of $7.33.
In afternoon trading on the New York Stock Exchange on Monday afternoon, PerkinElmer's shares were up more than 5 percent at $161.64.