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With Merger Two Weeks Away, Thermo and Fisher Post Q3 Revenue Gains, Though Thermo's Profit Slides

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With their impending merger two weeks away, Thermo Electron and Fisher Scientific this week reported strong third-quarter revenue growth, though Thermo’s profits slid 15 percent while Fisher’s surged 62 percent.
 
For the quarter ended Sept. 30, Thermo said revenues grew 7 percent to $725 million, compared to $679 million a year ago. Net income dropped 15.4 percent to $49 million from $58 million a year ago, which included a $17 million gain on disposal of discontinued operations.
 
Fisher said sales for the quarter increased 10.8 percent to $1.5 billion from $1.4 billion from a year ago. Net income surged 62.3 percent to $152 million from $94 million a year ago.
 
Thermo officials said new products helped drive sales in the quarter. New products accounted for 27 percent of Thermo’s total sales in the period, President and CEO Marijn Dekkers said during a conference call with investors.
 
“We’ve been able to consistently improve our operating margins mainly because we are selling more new products which tend to have higher margins,” Dekkers said. He cited Thermo’s LTQ Orbitrap hybrid mass spectrometer, introduced in June 2005, and the iCAP elemental analysis systems, introduced in March.
 
In the second quarter, Dekkers sounded bullish on the state of Thermo’s mass-spec business when he said demand from researchers for increasingly sophisticated instruments would continue to drive innovation in the mass-spec space [See PM 07/27/06]. Dekkers reiterated that sentiment this week. “As long as our customers have a need for improved sensitivity and accuracy, and we know they do have significant needs in that area, we will be able to come out with improved versions or new technologies that help them to do their research better,” he said. “I don’t believe this trend is going to stop any time soon because I believe the customers are still demanding improved capability from us.”
 
Along with the Orbitrap mass spec, Thermo recently introduced the high-field asymmetric ion mobility mass spectrometry as an option for its TSQ Quantum triple quadrupole mass specs and the LTQ FT Ultra hybrid FTICR mass spec [See PM 08/10/06].
 
According to Dekkers, “our mass spec business is doing very, very well.” He did not elaborate, and the company did not break out sales figures for its mass spectrometry systems.
 
In late May, Thermo introduced the Accela high speed chromatography system, which has proteomic applications. Customers are still evaluating the product, Dekkers said, and feedback has been “excellent.”
 
Its life and laboratory sciences segment saw revenues grow 5 percent for the quarter to $543 million from $516 million a year ago. Revenue for its measurement and control segment, which develops instruments for, among other things, safety and homeland security, grew 11 percent for the quarter to $181 million from $163 million a year ago.
 
The company spent $39 million on R&D. Excluding any results from the potential merger with Fisher, Thermo raised its revenue guidance for full-year 2006 to between $2.88 billion and $2.9 billion from a previous forecast of between $2.81 billion and $2.86 billion.a previous forecast of "r, company raised its guidance for full-year 2006 v. under the Hart-Scott-Rodino Antitrust Improv
 
November Nuptials
 

“As long as our customers have a need for improved sensitivity and accuracy, and we know they do have significant needs in that area, we will be able to come out with improved versions or new technologies that help them to do their research better.”

During the conference call Dekkers reiterated that the Thermo-Fisher merger will close on Nov. 9. The company had previously said that since Fisher agreed to divest its $17-million subsidiary Genevac, the US Federal Trade Commission had cleared the way for the merger.
 
The merger still needs approval by European regulators, but Thermo said it expects that to happen on Nov. 9. If that occurs, Thermo and Fisher intend to complete the merger on that date. The management team for the merged company has been organized and announced internally, Dekkers said.
 
“We’re completely on target in terms of synergies and completely on track to have a day 1 somewhere in November,” he said.
 
After the merger, armed with $1 billion in cash flow and nearly half a billion dollars in cash and equivalents, Dekkers said, the new company will continue to actively seek out acquisition targets, “especially considering the fact that our industry is still highly fragmented and therefore will likely continue to undergo a fair amount of consolidation.”
 

Thermo had $158 million in cash and cash equivalents as of Sept. 30. Fisher had $279 billion in cash and cash equivalents.

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