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Mizuho Downgrades Life Tech, Thermo Fisher Amid Concerns Over Academic Spending

NEW YORK (GenomeWeb News) – Mizuho Securities today downgraded Life Technologies and Thermo Fisher Scientific on concerns about an uncertain academic spending environment.

In a research note, Peter Lawson downgraded both firms to Neutral from Buy. He lowered his price target for Life Tech to $45 from $52 and trimmed the price target for Thermo Fisher to $55 from $65.

In his note, Lawson said that he believes sequestration and a cut of almost 8 percent to National Institutes of Health funding in 2013 are "highly unlikely" and that US academic spending in 2013 will probably be flat to slightly up. But the 2013 budget may not be ratified until early 2013, he added, and "funding delays will weigh upon stocks, adversely affecting companies with high government exposure and larger cap companies such as Thermo Fisher that serve as the barometers of the space."

Life Tech has 45 percent exposure to the academic/government end market, including 15 percent exposure to US academia/NIH, while Thermo Fisher has 25 percent exposure to academia/government, and less than 10 percent exposure to NIH funding.

One possible positive consequence of any academic spending reduction, though, is that the two firms could take market share as customers focus on purchasing from companies with diverse portfolios, Lawson said.

For Life Tech, he said that while he is positive about the Ion Proton rollout, competition could pose risks. Illumina's MiSeq is the "most near term threat," while Oxford Nanopore, GnuBio, and Nabsys present longer-term threats.

For Life Tech and Thermo Fisher, organic growth will be limited by austerity measures and overall conditions in Europe, US funding concerns, and budget debates.

In Europe, the lack of austerity measures and its impact on utilization of healthcare and government spending is a concern. The recent political reactions in Greece and France, where voters tossed out government officials who pushed for austerity measures, also are a concern, Lawson said. In his firm's coverage, Bruker has the most exposure to Europe, about 40 percent, while Qiagen has about 33 percent exposure.

But, he said, "channel checks indicate local European companies are faring better in the region."