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PerkinElmer Betting That Recently Acquired Cell-Analysis Tools Will Grow Revenue in '07

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PerkinElmer last week released its first-quarter earnings report and said it hopes new cell-analysis products obtained through recent acquisitions will help drive revenue over the remainder of the year.
 
“We are investing in [cell analysis], as we believe researchers will increasingly find the cellular level an efficient, information-rich area for biological analysis,” Rob Friel, president of the LAS business, said during the firm’s first-quarter conference call last week.
 
Total revenue for the three months ended March 31 increased 13 percent to $403 million from $355.5 million year over year. Revenue from the Life and Analytical Sciences business, which includes the company’s cell-based products, increased 14 percent to $299.5 million. Acquisitions contributed about 4 percent of the overall growth in the quarter.
 
Friel said that it is the fourth consecutive quarter that the segment increased both its reported and organic revenue growth rate.
 
The firm saw low- to mid-single digit growth across its biopharma customers, according to Friel, with cellular-analysis products growing the fastest among those customers.
 
CEO Greg Summe said he expects the firm’s “momentum to continue through the year, as our new products and services continue to make a greater contribution to our overall revenue."
 
Focusing on Cell-Based Screens  
 
Included among those new products is a variety of cell-screening and -analysis instruments PerkinElmer gained through a series of acquisitions in late 2006 and early 2007. Last month, the firm acquired Improvision, a privately held developer of cell-imaging software, for an undisclosed amount. (see CBA News 4/6/2007)
 
It was the third acquisition in four months for PerkinElmer that centered on cell-based assays: In December, it bought Evotec Technologies for $30.5 million, which provided the firm with high-content screening tools, and Euroscreen, which it acquired for $18.1 million, giving it a greater presence in the GPCR-screening market. Both acquisitions were completed in January. (see CBA News 1/12/07)
 
According to Friel, biopharmas appear to be focusing on cell-based screens, and PerkinElmer will try to focus on this area in the future.
 
Summe said during that call that PerkinElmer is rapidly broadening its reagent line and assays for GPCR and kinases. “We have been investing a fair amount in new reagents, clarifying where the most productive targets are for researchers and then trying to build complete catalogs and libraries around those,” he said.
 
M&A Math
 
Summe said that the firm’s recent acquisitions fit its overall M&A strategy. “Our M&A has been focused on smaller- to medium-sized opportunities for a couple of reasons,” he said. “One, because we are focused around organic growth, we’re looking for selective products and technologies that have good organic growth.
 

“We are investing in [cell analysis], as we believe researchers will increasingly find the cellular level an efficient, information-rich area for biological analysis.”

“So, they’re growth accretive, and we can take them and give them wider distribution, or we can broaden the product line, or we can provide a complete system,” he said. This strategy could bode well for Improvision, Evotec Technologies, and Euroscreen, which are relatively small companies with good organic growth that PerkinElmer could try to exploit further.
 
The “second reason is they tend to be a little lower risk in terms of the integration. And the third reason is the valuations are better than we have found on the larger-size deals,” said Summe.
 
“All this is subject to change depending on what opportunities come along,” he said. “So far, we are looking not so much to broaden out our portfolio but to build the relative market shares within each of the businesses that we’re in now.”
 
He said the company targets “fairly specific properties” that are “small, contained, and tend to be in fairly narrow product lines. So, they bolt on to the existing products we have.
 
“Our philosophy here has been not to take a lot of cost out of these acquisitions, because these are growth-based acquisitions,” he added.

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