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Agilent Fiscal Q1 Revenues Rebound, Growing 4 Percent; Life Science Receipts Jump 10 Percent

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By Tony Fong

A 10-percent jump in life science revenues helped Agilent Technologies grow total revenues for its fiscal first quarter 4 percent, the company said today.

The bounce was the first reported by the company in more than a year as its slumping Electronic Measurement business and the effects of the overall economic recession resulted in four consecutive quarters in which total revenues shrank.

For the three months ended Jan. 31, 2010, Agilent posted $340 million in revenues for its Life Sciences Group, up from $309 million in the year-ago period. On a local currency basis, revenue growth for the quarter was 5 percent.

Life Sciences orders increased 9 percent year over year to $336 million from $307 million.

This was the first quarter that the firm reported Life Sciences as its own segment. Starting Nov. 1, 2009, it broke up its Bio-Analytical Measurements business into Life Sciences and Chemical Analysis in response to its growing life-science business.

The growth in life sciences was driven by an 8-percent spurt in its pharma/biotech business and 15-percent growth in its government and academic business, William Sullivan, president and chief executive officer of Agilent, said during a conference call accompanying its earnings release.

Rather than taking away share from its competitors, company officials said that Agilent's increased revenues could be seen as part of an industry-wide thaw among pharma/biotech sector businesses, which are once again opening their wallets.

"There is growth here, everyone's seeing it, and everyone's being pretty clear that there's a growth opportunity in this space," said Nick Roelofs, president of the Life Sciences Group.

Indeed, two of Agilent's competitors in the life science space said during their recent earnings releases that they had seen improvements in their pharma/biotech businesses. Thermo Fisher said last week during its fourth-quarter earnings release that its top-20 accounts growth rate outpaced the company average, driven by improvements in its biopharma business. And last month Waters reported modest improvement in its pharma business during its fourth quarter.

Roelofs added that some of the uptick in its pharma/bitotech business was due to replacements of existing systems. "The pharma guys are just figuring out what they're going to do," he said. "They had a reality that the patent cliff a year ago was a problem."

However, he said that the growth in that market is mainly the result of a demand for new products and technologies. "We're seeing a lot of relocation of pharma [and] adding equipment and capacity," he said, and added that the trend is global. He did not elaborate on what technologies pharma and biotech are buying.

While the academic/government market still represents a minority of Agilent's Life Sciences operations, it has been a focus of growth efforts by the company in recent years and today represents roughly 28 percent of that segment's business, Roelofs said.

Life Sciences, he added, saw minimal benefits from global stimulus funding efforts during the quarter.

The company was largely silent about its mass spectrometry business and proteomics technologies, though it said that market acceptance of its 1290 UHPLC platform, launched last spring, has been "outstanding." LCs and microarrays were up 15 percent year over year, the company said.

Back to Black

For the quarter, Agilent said that revenues grew to $1.22 billion from $1.12 billion during the fiscal first quarter of 2009. It was the first time since the company's 2008 fourth quarter that it reported revenue growth. Since then, Agilent has had four consecutive quarters in which revenues declined — including a 21-percent drop last quarter — though its life science operations during that period managed to outperform the company, as a whole.

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Today, Sullivan said that the first-quarter results "exceeded our own expectations and [are] a very solid start for fiscal year 2010."

He added that "all signs point to recovery in most of our key markets."

In particular, he said, Asia saw robust improvements from a year ago. Excluding Japan, revenues in Asia increased 20 percent led by China, where business grew 30 percent. Asia now represents as big of a market for Agilent as the Americas with 36 percent of the company's total business, company Chief Financial Officer Adrian Dillon said.

"Non-Japan Asia is clearly driving the company's overall growth trajectory," he said.

The Americas were down 2 percent from a year ago and Europe was up 6 percent.

In Life Sciences, the Americas were up 3 percent while Europe was up 9 percent. Revenues were up 16 percent in Japan and 28 percent in the rest of Asia, Dillon said.

Among the company's other segments, Chemical Analysis saw a 13-percent uptick in revenues, or 9 percent on a local currency basis, year over year to $244 million from $216 million a year ago. Electronics Measurement, Agilent's largest business, saw a 2-percent decline year over year to $629 million from $641 million.

Earlier this week, the company announced an agreement to sell its networks solutions business for $165 million in cash to communications technology firm JDSU.

Companywide profits for the quarter rose 23 percent to $79 million, or $0.22 per diluted share, from the year-ago figure of $64 million, or $0.18 per share.

R&D spending was down 12 percent year over year to $149 million, compared to $169 million last year. As of Jan. 31, Agilent said it had $2.5 billion in cash and cash equivalents.

For Q2, Agilent forecast revenue growth of 12 percent to 15 percent over last year's numbers, which would put it in the $1.23 billion to $1.27 billion range. The company forecast a 10 percent revenue bounce for full-year 2010 for total revenues of $4.93 billion.

The forecast does not include the effects of the divestiture of the network solutions business or the purchase of Varian.

That $1.5 billion acquisition remains pending and Agilent provided no update on its status. Last month, the European Commission gave conditional approval of the transaction but required both companies to divest certain businesses: Varian must sell its laboratory gas chromatography business; triple-quadrupole gas chromatography mass specs operations; and inductively couple plasma mass spec business.

Agilent is selling its micro-gas chromatography business.

Last month Varian told Agilent it had extended the "end date" for their merger agreement by 90 days to April 26.

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