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At Bear Stearns, Bruker Looks Beyond Proteomics, Waters Preens, Thermo Eyes M&A

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At the Bear, Stearns & Co. Healthcare Conference in New York last week, three of the world’s largest proteomics companies had very different takes on the state of their markets.
 
For Bruker BioSciences, with revenues in its division housing its proteomics instruments falling short of expectations, the company said it plans to look for other mass-spec applications to grow revenue, according to CEO Frank Laukien.
 
According to Laukien, Bruker Daltonics, the unit that controls Bruker’s proteomics business, has not been performing up to expectations in recent years, partially as a result of greater competition. As a result, the company is looking beyond proteomics to grow revenues, Laukien said during the conference.
 
“In Daltonics, our growth in the last couple of years has not been fully satisfactory; we have slowed down a little bit,” he told the audience. Full-year 2006 revenue declined 1 percent to $160 million compared to $161.4 million in 2005, according to records filed with the US Securities and Exchange Commission. In 2004 Daltonics posted receipts of $152.6 million.
 
During the first six months of 2007, revenue for Bruker Daltonics increased 3 percent to $79.7 million from the same period a year ago.
 
The company grew rapidly during the mid-‘90s from being a niche player to becoming one of the top-three mass spec shops today, Laukien said. “But the field overall is larger, and we have begun investing three, four years ago [outside of] proteomics in order to sustain and re-accelerate our Daltonics growth.”
 
Two areas that the division is looking for growth are small molecules and industrial mass spectrometry.
 
“We didn’t want to enter this with a ‘me-too’ triple-quad-type product because we don’t think we would get satisfactory margins, so we’ve made very much an effort of bringing out new technologies for new applications where we have very significant advantages over existing triple-quad or other technologies,” Laukien said.
 
In proteomics, the company introduced its apex-ultra Fourier transform mass spec at Pittcon last winter [See PM 03/01/07], and at the conference this week, Laukien said the instrument is gaining ground in the pharma and biotech setting as well as with academic researchers doing top-down proteomics.
 
Waters, Waters Everywhere
 
At the conference Bruker rival Waters said instruments introduced during the past few years continue to fuel growth and feed high expectations for the future.
 
For starters, the company’s Acquity Ultra Performance Liquid Chromatography system has allowed Waters “to enter accounts where our traditional technology wouldn’t have,” said Waters CFO John Ornell.
 
He added that the company has been “very successful in selling this technology into discovery and development types of applications, particularly when we couple it with mass spectrometry.”
 
As a result, Waters expects that its LC business will be able to sustain double-digit growth for the next several years. “We think there are a lot of legs to this technology and we’re really at the front end of the adoption of this technology in the market space,” he said.
 
On the mass-spec front, Waters launched the IdentityE high definition proteomics system and MALDI Synapt HDMS system at the American Society for Mass Spectrometry Conference in June [See PM 06/07/07]. The company has been leveraging those tools along with the original Synapt HDMS platform as well as triple- and single-quadrupole mass specs lauched last year, and “for that reason I’m pretty comfortable that we’re going to see double-digit growth this year on the mass spectrometry product front,” Ornell said.
 
He also said the company is keeping an eye out for selective acquisition targets.
 

“We still are in a very fragmented industry. There are a lot of smaller companies whose lives are getting tougher quite honestly.”

“We’re not going to be a major consolidator in the space,” Ornell said, but “we are continuing to focus on the M&A front. We would like to make similar small acquisitions as we did last year,” he said, referring to its acquisition of Vicam, Thermometric, and Environmental Resource Associates [See PM 08/31/06]
 
Asked by an analyst whether Waters would buy back some of its shares rather than pursuing an M&A strategy, Ornell said the company’s focus is “to continue to be a bit more aggressive on the M&A front, and perhaps a little bit less aggressive on the stock buyback front.”
 
Thermo Fishing for Buys
 
Also at Bear Stearns, Thermo Fisher CEO Marijn Dekkers remarked that like its competitors, Thermo Fisher remains on the lookout for M&A opportunities.
 
The company generates about $1 billion a year in free cash flow, Dekkers said, and has authority to use some of that to buy back shares. But most of the funds are reserved for possible acquisitions, he said.
 
“We still are in a very fragmented industry. There are a lot of smaller companies whose lives are getting tougher quite honestly,” Dekkers said.
 
“In a global economy, being a small supplier is hard unless you have a beautiful niche that everybody wants, and usually that’s a technology niche,” he said. “So we think a level of consolidation continues, and we need cash available for that, and we do have it.”
 
Dekkers also said that the current pharma environment, in which drug makers are increasingly outsourcing more of their operations to contract research organizations, may prove beneficial to companies with instrument operations such as his as they continue buying new instruments.
 
“There is, I think, an accelerated replacement cycle that is already happening or will be happening even more,” Dekkers said. “And I think we’re already benefiting from that, [and] it could be a gift that keeps on giving for a while.”

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