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High-End Mass Spec Sales Drive Double-Digit Q4 Growth at Waters, AB Sciex


By Adam Bonislawski

High-performance mass spectrometers spurred double-digit Q4 revenue growth at Waters and AB Sciex with the companies this week reporting strong sales of instruments like Waters' Synapt devices and AB Sciex's TripleTOF 5600.

The "high-end" of the mass spec market "continues to be very robust" and was "particularly strong" in the fourth quarter, Waters' CEO Douglas Berthiaume said during a conference call covering its Q4 2010 results. Lawrence Culp, CEO of AB Sciex's parent firm Danaher, similarly noted during a Q4 earnings call that "customers have responded well" to the release of the 5600, giving the company "tremendous momentum" moving into 2011.

Overall, Waters reported $483.6 million in revenues in Q4, up 13 percent compared to $428.8 million in the same period a year ago. Revenues for Danaher's Life Sciences & Diagnostics division – which houses AB Sciex – rose 58 percent to $681.9 million from $432.1 million in Q4 2009.

Culp said he "saw a lot of enthusiasm for [AB Sciex's] full offerings across both the research and clinical and applied spaces," particularly in emerging markets like China, India, and the Middle East. And while he noted that he didn't "necessarily think that [AB Sciex is] going to be a double-digit grower through a cycle," he noted that the company had seen double-digit growth in the second half of 2010, driven by the launch of the 5600.

Waters' "family of high-end Q-Tof Synapt [mass spectrometers]" had "an extraordinary year of revenue growth" in 2010, Berthiaume said. The company introduced the platform at the 2009 American Society for Mass Spectrometry conference and began shipping in December of that year, installing a record number of the devices in the first quarter of 2010 (PM 04/30/2010). At the 2010 ASMS conference in May, Waters further bolstered its high-end mass spec line with the release of the Xevo G2 QTof machine.

Also at ASMS 2010 the company released its new Xevo TQ-S triple quadrupole machine, which "took more predominance" in the second half of the year, Berthiaume said, drawing "increasing customer interest" and posting a "very impressive [Q4] sales performance" that led to record shipment volumes for the device. He noted that Waters expects the TQ-S to comprise a higher proportion of the company's product mix in 2011, leading to an anticipated improvement in overall margins.

This month Waters introduced its Xevo G2 Tof benchtop instrument, a lower-end version of the Xevo G2 QTof aimed primarily at biopharmaceutical development. That instrument, Berthiaume noted, will "take most of the new product emphasis this year, as we still think that the Synapt product line is very young in the tooth." He added that "particularly in proteomics and metabonomics" the company had had "great success" in the last two years.

Waters also this month announced plans for a new mass spectrometry facility near Manchester, UK. Anticipated to open in 2013, the facility "will house R&D, manufacturing, and customer support systems that are currently spread across multiple buildings in Manchester," as well as "customer demonstration laboratories and training facilities," Berthiaume said.

In addition to high-end mass spec, strong sales of UPLC systems powered Waters' Q4 growth, with Berthiaume calling the early 2010 release of the Acquity H-class UPLC system "potentially the most significant product launch in Waters' recent history."

The launch, he said, had "catalyzed the broad adoption of the new product technology" by the regulated testing market, including labs performing pharmaceutical QA-QC. Waters shipped a record number of Acquity H-class systems in Q4, with shipments of Acquity UPLC systems – both H-class and standard – representing roughly 50 percent of company's chromatography shipments. Berthiaume said he expects that in the next several years Acquity UPLC will move from this 50 percent figure to around 80 percent of Waters' chromatography sales.

In addition to increasing UPLC system sales, this product replacement cycle has the potential to grow the company's chemistry and service businesses, he said, "as more and more customers convert HPLC methods to UPLC [methods reliant on] Waters' proprietary columns and become more reliant on Waters to support new and technologically advanced system offerings."

For the quarter, instrument sales in the Waters division rose 16 percent year over year, while recurring revenues increased 10 percent, chief financial officer John Ornell said during the conference call.

The firm's R&D costs rose almost 16 percent to $22.9 million from $19.8 million.

For the fourth quarter, the company posted a profit of $126.6 million, or $1.36 per share, a 22 percent increase over $104.1 million, or $1.08 per share, for the fourth quarter of 2009. Analysts had expected EPS of $1.31.

For full-year 2010, Waters posted revenues of $1.64 billion, up about 10 percent from $1.50 billion in 2009.

Profits for 2010 were $381.8 million, or $4.06 per share, up 18 percent from $323.3 million, or $3.34 per share, in 2009, beating analyst estimates of $4.03 per share.

For the first quarter of 2011, revenues are expected to grow between 9 and 10 percent, with between 8 and 9 percent of that organic, Ornell said, adding that the company anticipates full-year 2011 growth to be in the high single digits.

Danaher posted company-wide revenues of $3.61 billion, up 15 percent from $3.13 billion a year ago. Net earnings were $473.9 million – $0.69 per share – up 78 percent from $266.9 million -- $0.40 per share – a year ago.

R&D spending at the company was up 44 percent in Q4 to $222 million from $154.2 million in Q4 2009.

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