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'Particularly Strong' Mass-Spec Sales Help Push Thermo Fisher Q1 Revenue 19 Percent

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This story originally ran on April 28.

By Tony Fong

A year after a grim earnings period, Thermo Fisher Scientific this week reported record first-quarter revenues, helped by "particularly strong" mass-spec sales.

Revenue for the three months ended April 3 advanced 19 percent to $2.68 billion from $2.26 billon a year ago — the most revenue the company has ever posted for a quarter.

By comparison, 2009 first-quarter revenue, hurt by the global economic downturn, declined 12 percent over the same period one year earlier.

Profits for the 2010 period rose 56 percent to $232.3 million, or $0.56 per diluted share, from $148.9 million, or $0.35 per diluted share, from Q1 2009.

In Analytical Technologies, the division housing Thermo Fisher's mass spec business, revenue climbed 18 percent to $1.1 billion from $938.8 million a year ago.

”Particularly strong" mass-spec sales helped drive a 7-percent rise in overall instrument sales, Chief Financial Officer Peter Wilver said during a conference call following the release of the company's earnings.

On the call, CEO Marc Casper pointed to strong results from the academic and government markets, which were aided by $60 million in global stimulus-related spending. He said the stimulus funding had an especially strong impact on Thermo Fisher's mass spec sales, though he did not break out sales figures for the instruments.

Also helping instrument sales was a greater willingness by Thermo Fisher's North American customers to open their wallets again, Casper said. And in the life sciences, the company recorded "very, very strong performance" in mass specs.

For Thermo Fisher, the quarter's mass spec results bear out a concentrated effort to take over leadership in the space. While AB Sciex, which formerly operated as a joint venture between Applied Biosystems and MDS, has been viewed in recent years as the market leader, Thermo Fisher has made strong gains in the space, with wide adoption of its Orbitrap platform.

Indeed, Casper has been bullish about his company's mass spec business since succeeding Marijn Dekkers as CEO in the fall.

At an investors' conference in September, he estimated that half of all stimulus grant proposals involving mass specs centered around his firm's technology. The claim was based on surveys conducted by Thermo Fisher and others.

The company, he added, helped many researchers write their grant proposals, "so we have a pretty good sense of what's going on in the mass spectrometry landscape," Casper said during the release of the company's Q3 2009 earnings in October.

Casper has also said Thermo Fisher's goal in the mass spec space is to rule it. At the JP Morgan Healthcare Conference in January, Casper brushed aside what he said were remarks from competitors that Thermo Fisher looks "long in the tooth … and tired," and said that AB Sciex had ceded market share to his firm.

Pointing to Thermo Fisher's breakthrough technology, such as the Orbitrap platforms, Casper said at the time that the company is "ruthlessly focused on winning in that space." (PM 01/15/10)

In step with that goal, the company earlier this month bought Danish proteomics workflow company Proxeon, whose lead product is its nano-LC technology. While Thermo Fisher has been bundling its Accela HPLC and UHPLC platforms with its mass specs for non-proteomics applications, the Proxeon acquisition allows the company to provide an integrated system with its own nano-HPLC on the front end and mass spec at the back end specifically to proteomics researchers (PM 04/16/10).

During the conference call, Casper said the purchase "complements our leading portfolio of proteomics tools. … Obviously, we have a really strong position in proteomics, whether it's our reagents business [or] our incredible mass spec portfolio. But we like their technology."

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He also said on the call that while stimulus funds provided a bounce to its mass spec business in the first quarter, that business was "incredibly strong" beyond stimulus spending.

Still, Thermo Fisher saw significant stimulus-related business in the quarter, a dramatic difference from what one of its competitors said earlier this week. On Tuesday, Waters CEO Douglas Berthiaume said his company had seen little benefit from National Institutes of Health stimulus grants.

For Thermo Fisher, though, the story was different. Based on the $60-plus million in stimulus-related sales for the quarter, Casper said the company is on target to reach its previously stated estimate of $50 million to $150 million in stimulus sales for all of 2010.

He also reiterated the $100 million to $200 million the company had earlier said it expects to see in total stimulus funding. In 2009, Thermo Fisher achieved $50 million in stimulus-related sales.

While much of the stimulus funding it saw in the first quarter came from Japan, some came from the US, Casper said.

"We feel good about how stimulus is flowing," Casper said. "Japan has been very impressive [and] we're starting to see funds flow in the US. Obviously our instrument technologies are really being extremely well-embraced by our government and academic customers."

Numbers Up

For the quarter, Thermo said revenue grew 13 percent organically while acquisitions and the favorable effects of currency-exchange rates added 3 percentage points each. Revenues in Analytical Technologies grew 10 percent on an organic basis, Wilver said.

Revenue for Thermo Fisher's other division, Laboratory Products and Services, grew 19 percent to $1.7 billion from $1.4 billion a year ago.

Geographically, Thermo Fisher saw double-digit organic growth in North America and Asia-Pacific, which it said was "driven by very strong growth in China and Japan."

Europe returned to positive growth in the quarter, at low-single digits, compared to a mid-single-digit drop in the year-ago period.

Thermo Fisher sales throughout the rest of the world continued growing at a faster clip than the company average, "though from a relatively small base," Wilver said.

By end market, in addition to strength in its academic and government customer base, the firm's top-20 pharmaceutical accounts grew in the double digits organically.

Spending in the biopharma space as a whole, though, continued to be constrained, Casper said, but added "we believe we have the ideal value proposition to support new operating models being put in place by pharma companies to improve their competitive positions."

Last month, Thermo Fisher announced a five-year deal with Eli Lilly in which Thermo Fisher will take over responsibility for the drug firm's in-house clinical trial-materials manufacturing, packaging, and labeling operation located at the Lilly Technology Center in Indianapolis. Thermo Fisher also will distribute clinical trial materials for Lilly in North America.

Casper called the deal this week "a terrific example of how we're supporting these new models."

For the quarter, the firm's R&D spending rose to $66.8 million from $58.2 million in Q1 2009, though as a percentage of revenue, it remained virtually unchanged.

The company said it had $1.4 billion in cash and cash equivalents as of April 3.

Thermo Fisher raised its revenue guidance for 2010 on the low end to $10.65 billion from an earlier guidance of $10.6 billion, while maintaining its high-end guidance at $10.8 billion. This would represent a 5-percent to 7-percent improvement on 2009 revenue.

Organic revenue growth for the year is projected to increase between 3 percent and 5 percent, up from an earlier forecast of 2 percent to 4 percent.

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