Predicting difficult times ahead, Agilent Technologies’ top executive last week said that the company will continue to focus on the life-science market as a strategy to maintain growth.
In the midst of reporting that revenue for the fiscal third quarter rose 5 percent to $1.44 billion, company officials said they anticipated a mixed outlook moving ahead, a view marked by the expectation that the slowdown of US and European industrial consumption will continue, and that even China and India, which have seen explosive growth in recent years, are possibly heading for a slowdown.
In order to keep the company growing in those regions, William Sullivan, president and CEO of Agilent, cited four growth areas, headed by plans to “to continue to develop and expand our life-science channels.” In addition, he said, the company is narrowing its research and development investments and targeted a three-to-five-year window in which it plans to release “innovative and revenue-generating products,” citing new liquid chromatography-mass spectrometry platforms as well as gas chromatography-mass spec systems introduced in the quarter as examples of that plan.
“The life-science market is Agilent's largest and fastest-growing business opportunity,” Sullivan said.
The two other growth opportunities he cited were maintaining or growing the company’s gross margins as well as its operating model, which “enables us to allocate resources to opportunities while we continue to increase the variability of our cost structure,” he said.
For a company that only recently completed its shift away from the semiconductor business to becoming a major life-science player, the emphasis laid out last week by Sullivan comes as no surprise and is in line with a strategy first laid out by Agilent early last year when it unveiled a four-point growth initiative centered on its life science business [See PM 01/11/07].
As part of that strategy, company officials had made the growth of its profile in the proteomics space a priority, and since then the firm has hit the market with a steady stream of new instruments. During its third fiscal quarter ended July 31, the company introduced the 6530 Q-TOF LC-MS, which incorporates Agilent’s True High Definition TOF technology and the 6460 triple-quadrupole LC-MS/MS at the annual conference of the American Society for Mass Spectrometry [See PM 06/05/08].
“The life science market is Agilent's largest and fastest growing business opportunity.”
During the quarter, sales of the company instrument platforms for life sciences, including those with proteomic applications, along with services and consumables, were up 15 percent compared to a year ago. Responding to an analyst’s question, Sullivan said that the strength in orders for Bio-Analytical Measurement instruments — which includes life science instruments — was up across the board, and the company believes “that we continued to make great progress on our high-end mass spec and we will be shipping those products in” the fourth quarter.
Overall, life science revenues grew 18 percent for the quarter to $247 million. Excluding the acquisitions of Stratagene and Velocity 11, revenues in the segment were up 11 percent.
Agilent officials cited 36-percent growth in the academic and government markets, compared to a year ago, as contributors to the growth in the company’s life-science business. “Our microarray business was up nearly 50 percent and we also saw strong demand for related bio-reagents as well as mass spec,” said Adrian Dillon, CFO and executive vice president of finance and administration at Agilent.
Historically, the company has been only a bit player in the academic and government markets. But a year ago, company officials said that as large pharma’s interest in biologics grows, it would be turning to the non-profit sector for new scientific breakthroughs. That represented a chance for Agilent to increase its 5 percent share of the academic and government market [See PM 09/20/07].
While Sullivan characterized the quarter’s growth in those markets as “significant,” the pharma and biotech markets were organically flat from a year ago. Total pharma/biotech revenues grew 14 percent year over year but the increase was largely due to the acquisitions of Stratagene and Velocity 11, company officials said.
US and European pharma/biotech business saw “modest” growth, Dillon said, while Asian business posted a “strong performance.” The company did not elaborate.
“Continued consolidations and restructuring of large pharma across the world has resulted in cautious spending from traditional customers while we continue to see the offshoring of research centers and the outsourcing to [contract research organizations] and [contract manufacturing organizations] in Asia,” Dillon said.
For the immediate future, company officials sounded a cautious note. “We have to be realistic about the fact that the environment is very mixed and that the slowdown in the US is being followed by Europe and Japan,” Dillon said. “And while we expect China, India, and other successfully developing nations to continue to demonstrate generally robust growth, those nations will not be entirely immune to the slowdown in the rest of the world.”
For the three months ended July 31, Agilent’s total revenues rose to $1.44 billion from $1.37 billion during the fiscal third quarter of 2007. In the Americas revenues increased 5 percent, while Agilent’s European business grew 9 percent though almost all of the growth was due to currency trends, the company said. In Asia, Japan was down 2 percent, China was up 23 percent and India improved by 14 percent.
In its Bio-Analytical Measurements division, revenues climbed 13 percent to $566 million from $500 million; life-science revenues rose 18 percent during the period, and chemical-analysis revenue swelled 10 percent to $319 million year over.
Geographically, within Bio-Analytical, revenues in the Americas were up 15 percent. Europe grew by 5 percent, and Asia was up 23 percent.
Agilent’s Electronics Measurement division rose about 1 percent to $878 million from $874 million a year ago.
Spending on research and development was flat compared to a year ago at $170 million. The company said it had $1.64 billion in cash and cash equivalents as of June 30.
For the fiscal fourth quarter, Agilent forecast revenue growth of 5 percent to 9 percent year-over-year, or total revenues in the range of $1.52 billion to $1.58 billion.