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Life-Sciences Business Enables Agilent to Eke Out 2-Percent Rise in Q4 Revenue

Agilent Technologies’ Life Sciences business helped to offset weakness in other segments, particularly in its Electronic Measurements division, as the company last week reported revenue growth of 2 percent during its fiscal fourth quarter. Profits rose 28 percent year over year.
For the three months ended Oct. 31, the company said total revenues inched up to $1.48 billion from $1.45 billion. While its Electronic Measurement division receipts slipped 3 percent to $865 million from $878 million during the year-ago period, revenue from its Bio-Analytical division grew 10 percent to $616 million from $558 million a year ago.
Meantime, revenue from Bio-Analytical’s Life Sciences arm, which is home to Agilent’s proteomic tools, swelled 17 percent to $276 million from $236 million during the fourth quarter of 2007.
Ever since dropping its semiconductor business in 2006, Agilent has put much of its weight behind growing its life-science footprint. In proteomics that manifested in a strategy to build out its liquid chromatography-mass spectrometry [See PM 01/11/07] business, resulting in the company’s transformation from being a bit player in the space to becoming one of the top-5 mass-spec firms in the world.
During the summer, before the turmoil in the credit and equity markets began pummeling many producers and consumers of capital equipment, Agilent emphasized life sciences as a growth market. During its fiscal third-quarter earnings conference call, CEO Bill Sullivan said that with an expected slowdown in industrial consumption throughout the US, Europe, China, and India, life sciences would be one of four areas that Agilent would concentrate on to maintain growth.
The three others include maintaining a narrower R&D focus on those applications with the greatest potential for quick return on investments; growing its gross margins; and expanding its operating model [See PM 08/21/08].
Last week, company officials repeated the four-point focus, starting with its life-science position, which Sullivan said is the company’s “largest and fastest-growing business opportunity.”
Pharma ‘Particularly Weak’
Reflecting that opportunity during the most recently completed quarter, CFO Adrian Dillon said that sales of its LC-MS products, gas chromatographs, and consumables rose 10 percent compared to a year ago. During the quarter, he said, Agilent began shipping its new 6460 triple-quadrupole instrument and the 6530 Q-TOF instruments.
The firm was opaque about the steps it plans to take to grow its life-science business except to say that it is targeting the academic and government research market. The firm first disclosed the strategy last year when Nick Roelofs, vice president and general manager for the company’s life-science solutions, said that as pharma and biotech increasingly looks at developing biological entities, as opposed to chemical ones, they would need to draw upon work by researchers in the academic/government market [See PM 09/20/07].

“Personally, I think the shoe hasn’t fallen [yet] … and we may not really see the full impact [on pharma’s] capital investments until next year.”

While that segment represents about half of the total $17 billion life-sciences market, Sullivan said last week that it “is just a green field for us.” Academic/government revenues comprise only about 5 percent of Agilent’s total annual revenues, although they grew 22 percent in its fiscal fourth quarter, year over year, he said.
Looking ahead, Sullivan added, “there is the opportunity potentially in the new [Barack Obama] administration that you would, in fact, get additional spending in there.” 
By comparison, the company’s forecast for the pharma and biotech sector was gray and overcast. Although sales to this sector grew 15 percent during the quarter, Dillon said that capital spending remains under pressure, with pharma being “particularly weak” in the US.
The evaluation echoes similar skeptical sentiments voiced by Agilent’s proteomics tools competitors during the past month. When it comes to their pharma businesses, they all are buckling their seatbelts.
“Personally, I think the shoe hasn’t fallen” yet, Sullivan said. “That’s why we’re taking a conservative position as we move forward, particularly as related to big pharma … and we may not really see the full impact [on] their capital investments until next year.”
By the Numbers
Geographically, total revenues for the fiscal fourth quarter increased 6 percent in the Americas, 1 percent in Asia/Pacific, and remained flat in Europe.  
Within the Bio-Analytical business, revenues were up 12 percent in the Americas, 20 percent in Asia, and 2 percent in Europe. Worldwide, orders in the division increased 8 percent during the quarter to $617 million.
Chemical analysis, the other segment comprising the Bio-Analytical business, posted receipts of $340 million, up 5 percent from a year ago.
Company-wide, spending on research and development slid 2 percent to $170 million from $174 million in the fourth quarter of 2007.
For the quarter, Agilent said profits rose 28 percent to $231 million from $180 million a year ago.
For its full-year fiscal 2008, Agilent recorded an increase in profits of almost 9 percent to $693 million, up from $638 million during fiscal 2007. Revenues rose almost 7 percent to $5.8 billion from $5.4 billion.
The company said it had $1.4 billion in cash and cash equivalents as of Oct. 31.
Looking ahead, Agilent said that the effects of the ongoing global financial meltdown on its business are far from clear but expects fiscal 2009 first-quarter revenues to be in the range of $1.34 billion and $1.39 billion, down 4 percent to flat compared to year-ago results. Net income is expected to be in the $113 million to $127 million range, plus or minus 6 percent, compared to a year ago.
“Our planning is based on the assumption that an economic downturn in much of the world will continue through mid-2009 and that no geographies or markets will be entirely immune from its impact,” Sullivan said.

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