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Thermo Fisher Hopes to Build LC Portfolio — And Enrich MS Play — Through Bolt-On Buys

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A dominant presence in the mass spectrometry space, Thermo Fisher Scientific has been almost an afterthought when it comes to liquid chromatography despite the launch of its Accela high-speed liquid chromatographer almost a year ago.
 
Now, the company hopes to grow its LC play, and will rely on bolt-on acquisitions to do so, according to CEO Marijn Dekkers.
 
“We’re looking for technology bolt-ons that strengthen our overall capability in HPLC,” Dekkers said during the firm’s first-quarter conference call last week.
 
“Our LC plans are exactly the way we’re executing our LC plans,” Dekkers said responding to an analyst’s question about the firm’s strategy for the LC market. “We want to have a competitive product line, and we do.”
 
He mentioned the Accela HPLC instrument launched at last year’s American Society for Mass Spectrometry Conference on Mass Spectrometry to challenge Waters’ Acquity UPLC and Agilent’s 1200 Series instruments.
 
“Obviously, with the mass-spec franchise that we have, it’s important to have a product line that is strong with mass spec,” said Dekkers. “Our major focus in HPLC is the linkage between HPLC and mass spec — more so than that we focus on stand-alone HPLC.
 
“In addition to that, we have over the last year or so done some very important bolt-on acquisitions of technologies,” he said.
 
For the moment, Thermo Fisher will have to concede the LC space to Waters and Agilent Technologies, widely recognized as the market leaders. But it’s been planning to grow in the space.
 
During an analyst conference in January, Dekkers said that one of Thermo Fisher’s goals for the year was to push the company further up the LC mountain, but acknowledged that the company was at a major disadvantage [See PM 01/11/07 and 01/18/07].
 
“We’re trying to with new technologies bolster our capability in chromatography, but we don’t have the installed base that some of our competitors have in that area,” he said at the time. “We’re not a market leader, and that’s not easily solved.”
 
The company’s current strategy has been to expand its portfolio of LC-associated technologies, software, and parts through mergers and acquisitions. In December, Thermo Fisher purchased Cohesive Technologies, a manufacturer of LC and sample-preparation products. The following month, it acquired Flux Instruments as part of its acquisition of the SwissAnalytic Group. Flux manufactures HPLC pumps and software.
 
During last week's conference call he said that the company will apply its bolt-on strategy to grow its LC business. Dekkers also said the company will continue taking a conservative approach toward additional purchases.
 
While conceding that recently purchased companies such as Molecular Devices, acquired earlier this year by Applied Biosystems, or Biosite, now being chased by Inverness Medical Innovations and Beckman Coulter, had their appeal, “I would say that I found them a little pricey, quite honestly, in the end,” Dekkers said.
 
Mass Appeal
 
For the quarter ended March 31, revenues rose to $2.3 billion, a 240-percent increase from $684.3 million from the same period a year ago, largely as a result of the merger between Thermo Electron and Fisher Scientific.
 

“Our major focus in HPLC is the linkage between HPLC and mass spec.”

Profits grew to $138.9 million from $46.9 million a year ago. R&D spending rose to $59.8 million from $38.7 million year over year. As of March 31, Thermo had $670.9 million in cash and cash equivalents. 
 
The company did not break out first-quarter numbers for its LC business. Similarly, it did not provide specifics on its mass-spec business, saying only there was “strong demand” for the instruments.
 
Dekkers singled out the firm’s LTQ XL mass spec, which the company claims is the first linear ion trap mass spec with electron transfer dissociation capability.
 
“By combining this particular system with our Pierce bioreagents and Sieve software, scientists can better understand how proteins are modified during their search for new biomarkers of disease,” Dekkers said.
 
Responding to an analyst’s question, Dekkers also said that two years after the introduction of the LTQ Orbitrap hybrid mass spec, the instrument was being used in ways that the company did not foresee, suggesting new market opportunities for it.
 
“We continue to see it expand into new applications,” Dekkers said. “We’re sometimes surprised to see what our customers are able to do with our technology. We can take that technology in a number of different directions over the next few years for an expansion of capability, an expansion of the research that our customers can do with it.” He did not elaborate.
 
Among its customer base, the biotech industry continued to be strong, Dekkers said, pharmaceutical sales are “OK,” and the academic and government market was steady and showed modest growth.
 
Geographically, North American lagged behind the company average in terms of organic growth, said Peter Wilber, senior vice president and CFO of Thermo Fisher. Asia Pacific and Europe was slightly above the company average, he said.

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