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NIH Funds Slow to Reach Vendors, But MS and Other Instrument Firms May Be First to Benefit, Report Says

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This story originally ran on Dec. 17.

Instrument firms, including several mass spectrometry firms, have seen little stimulus funding so far and expect such funds not to impact their fourth-quarter earnings results, Thomas Weisel Partners said in an analyst report issued late last week.

However, in the report, the investment firm said that once recipients of the funds start spending the grants, instrument vendors could be "the biggest beneficiaries of the initial funding wave."

In their financial results for the third quarter, mass spec companies presented a mixed view of the effect of National Institutes of Health stimulus funds on their top line, with the consensus that the majority of the money would not reach them until 2010.

In the Thomas Weisel report, written by Peter Lawson, instrument firms confirmed those expectations. Management from two mass spec firms, Waters and Thermo Fisher Scientific, told Thomas Weisel said that they have seen little stimulus funding. Waters said that it has seen delays in such funding and added that revenue associated with stimulus money would be below expectations for the fourth quarter.

Thermo Fisher also told the investment firm that it expects "limited activity" in the way of such funding in Q4, with most of the benefit coming in 2010 "with global stimulus plans representing a $100 million [to] $200 million opportunity for Thermo over 12 months."

Overall, NIH funding for life sciences in the third quarter of this year was "immaterial … and the upside looks minimal for [the fourth quarter] as funds slowly trickle in," the report said.

Citing Bruker and Illumina, Thomas Weisel said that the first wave of funding — and the spending of it — will be especially beneficial to instrument manufacturers, while reagents firms will be the beneficiaries of a second, "more protracted" wave of stimulus spending.

In analyzing the 13,000 stimulus grants awarded year to date by the NIH, Thomas Weisel said that the brunt of the awards will be spent in the second and third quarters of 2010: 29 percent of the grants will be spent in Q2 2010 and 19 percent in Q3 2010. In each of the first and fourth quarters of 2010, 13 percent of stimulus funds are expected to be spent.

Twenty to 25 percent of the funds will be spent in 2011 and beyond, the report said.

Thomas Weisel assumes that it takes two quarters from the time the grant is awarded to when recipient decide how to spend the money. It also assumes that between 40 percent and half of the grant will be spend within two quarters of receiving the grant.

The average size of the 13,000 awarded grants is $340,000 with an average grant donation of 17 months.

Of the $4.4 billion in awarded grants, 11 percent were awarded in the second quarter of 2009, 88 percent in the third quarter, and 1 percent so far in the fourth quarter, Thomas Weisel estimated.

A recent analysis of an NIH database by ProteoMonitor found that NIH awarded at least 114 stimulus grants totaling nearly $45 million specifically for proteomics researcher in fiscal 2009, which ended Sept. 30 [See PM 10/16/09].

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