NEW YORK (GenomeWeb News) – The earthquake and tsunami that decimated parts of Japan last week may have some short- and mid-term negative effects for most life science tools and diagnostics firms, but longer-term softness from the disaster is not expected, according to an investment analyst.
In a research note today, Jon Groberg of Macquarie Capital wrote that in the near-term companies with large consumables businesses will be at greater risk, while instrument firms face increased risks in the mid-term from possible disruptions in the supply chains of manufacturers of electronic components for their platforms.
Clinical diagnostic companies appear to be the least impacted, he added.
Among the 15 life science and diagnostic firms covered by Groberg, the companies with the greatest revenue exposure in Japan are Agilent Technologies and Waters, where Japan makes up about 11 percent of each shop's total revenues. Life Technologies and Pall each generate 10 percent of their revenues from Japan.
Of the other firms in his coverage area, Groberg said that Japanese revenues comprise about 7 percent of Affymetrix's total revenues; minimal amounts for Alere; 5 percent for Becton Dickinson; 5 percent for Beckman Coulter; minimal for Gen-Probe; less than 5 percent for Hologic; 5 percent for Illumina; 3 percent for Mettler-Toledo; 5 percent for PerkinElmer; 7 percent for Sigma-Aldrich; and 3 percent for Thermo Fisher Scientific.
For a firm such as Life Tech, which has more consumables sales exposure in Japan, the near-term risk is that businesses and laboratories will shut down for a period of time. If that were to happen for two weeks, for example, assuming constant daily sales volume, the Carlsbad, Calif.-based company would see a sales decline between 1 percent and 2 percent, Groberg said.
He added, however, that "most of these customers will likely return to work, and in fact, in the mid-term, you could see a spike in sales as destroyed product is replaced or catch-up orders are made."
The near-term impact on instrument firms is more ambiguous as it is unclear whether they completed business transactions before the earthquake hit on March 11. While logistical issues could delay shipments, the greater revenue risk to them comes from potential disruptions to Japanese manufacturers of electronic components.
In a separate note, Macquarie analyst Damian Thong reported that several manufacturers of semiconductor parts are reporting power outages and other disruptions to their operations.
That, Groberg said, could affect Agilent in particular, which in spite of its move away from the semiconductor business in recent years, still has a Semiconductor and Board Test segment. Groberg noted, however, that "[l]onger term customers are again likely to replace broken or damaged equipment creating an opportunity."
Since the earthquake and ensuing tsunami, most life science tools and diagnostics firms have been silent on the impact to their operations. Agilent, however, issued a statement saying its Japanese operations were unaffected. Sigma-Aldrich said that while communications remain a challenge, "at this point, we have no confirmed reports that any of the products we source from Japan have been adversely impacted by the earthquake disaster."
Becton Dickinson has a manufacturing facility and distribution center in Fukushima prefecture where a nuclear reactor plant is facing the threat of a meltdown in several of its reactors. On Tuesday, the company said that both the manufacturing and distribution facilities are "temporarily closed." Damages do not appear to be extensive, it added.
"BD sources certain component parts and finished products from third-party suppliers in Japan, and currently believes that inventories of these items will be sufficient to meet global demand until supply chain interruptions are resolved," it said.