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Waters Reports Meager Mass Spec Growth in 05, Promises New Instruments, UPLC Adaptations

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Waters reported this week that its mass spectrometry business grew only slightly during the fourth quarter and full-year 2005, with especially weak sales in the single quadrupole and lower-end triple quadrupole mass spec markets.

At the same time, Waters continues to bank on its Acquity Ultra Performance Liquid Chromatography products to drive overall revenue in 2006. Specifically, the company said it plans to launch enhancements to the system in two months and intends to introduce new products to make the system more compatible with other mass-spec brands.

Waters' overall fourth-quarter sales increased 3 percent to $332 million from $324 million one year ago. Eliminating the effects of foreign currency, sales grew by 7 percent. Sales of mass specs during Q4 2005 increased by 2 percent, a number that Waters CEO Douglas Berthiaume called "weak." The company did not give a specific growth percentage for mass specs during the full 2005 year, but said it grew minimally.

"Overall, we delivered sales that were less than expected," said Berthiaume during a quarterly conference call this week. "Last year at this time, it seemed like 2005 would be a strong year for us. … In fact, the year did not unfold as anticipated. It was more difficult for us. … There was greater-than-expected weakness in pharma spending."

Berthiaume blamed the meager growth in mass spec sales on flaccid pharma spending.


"Last year at this time, it seemed like 2005 would be a strong year for us. In fact, the year did not unfold as anticipated. It was more difficult for us. … There was greater-than-expected weakness in pharma spending."

While pharma's weak appetite hurt sales of single quadrupole mass specs and lower-end triple quadrupole mass specs, sales of Q-TOFs grew more than 20 percent during 2005, Gene Cassis, vice president of investor relations at Waters, told ProteoMonitor.

"It was a great year for high-end mass specs and high-end triple quadrupoles," said Berthiaume. "Our Q-TOFs have done very well."

Asked why single quads and lower-end triple quads performed poorly, Berthiaume said that the lower end products had been very popular with big pharma for drug discovery applications, so they were affected more by pharma's spending slump.

Q-TOFs, on the other hand, appeal primarily to the proteomics market, which remains strong, according to Berthiaume. Cassis said that Q-TOFs represent about one-quarter of Waters' total mass spec sales.

"The Q-TOF is an important product for us because we want to maintain a strong position in [the proteomics] marketplace," said Waters spokesman Brian Murphy. "The applications for the low-end mass specs are definitely more in the small-molecule, large pharma area [whereas] the triple quads are used more in clinical trials and advanced drug development stages, and that's all big pharma-related."

Berthiaume also said that the lower-end mass specs were "at the end of the product stage." He said that Waters plans to introduce new high-end and quadrupole mass specs during this year's American Society for Mass Spectrometry conference, scheduled to take place in Seattle at the end of May.

Berthiaume added that single quad and low-end triple quad sales were not affected by weak industrial markets or by competition. "Nowhere in our business are we seeing the effect of price to be very aggressive," he said.

Waters expects its mass spec sales to grow by a low- to mid-single digit percentage during 2006, Berthiaume said.

Waters to Link Acquity UPLC
To Other Mass Specs Brands

Waters continued to bank on its Acquity Ultra Performance Liquid Chromatography products to drive overall revenue in 2006.


"We've focused on our mass specs for the past couple of years to make them compatible with the UPLC. Well, there's also incredible interest from customers using other brands of mass specs to make it so that the UPLC can work with those mass specs in much the same manner as it works with ours."

Launched in March 2004 (see ProteoMonitor 3/12/2004), Waters' UPLC system costs 20 to 25 percent more than the company's traditional High Performance Liquid Chromatography Alliance systems, but it offers "an 80 percent productivity advantage," according to Berthiaume.

"With Acquity, you can often run four times as many samples per unit time than an HPLC can run," he said.

Berthiaume said Waters will "actively push" its Acquity technology ahead in 2006. According to spokesman Murphy, the company will launch enhancements to the system during the March 2006 PITTCON conference. Further ahead, the company will also introduce new products to make the system more compatible with mass specs from Waters' competitors.

"We've focused on our mass specs for the past couple of years to make them compatible with the UPLC. Well, there's also incredible interest from customers using other brands of mass specs to make it so that the UPLC can work with those mass specs in much the same manner as it works with ours," said Murphy.

Murphy said Waters is now working with "a couple of mass spec companies" to make its UPLC system compatible with their instruments. He declined to identify those companies.

"We see the demand is bubbling up from scientists, and it's clear that we need to head in this direction in order to meet the demands of the market," said Murphy.

One Acquity rival is Agilent, which launched its new 1200 Series liquid chromatography system this week. Berthiaume seemed confident that Waters' UPLC system would triumph over the 1200.

"We haven't seen anything that even claims to produce the Acquity kind of performance," said Berthiaume. "Looking ahead into 2006, the combination of Acquity with mass spec will be important in driving overall mass spec sales."

John Ornell, Waters' chief financial officer, said that the company does not want to release the amount of revenues generated by Acquity for Q4 2005, but that "it more than doubled in the quarter in terms of underlying growth rate and order rate."

Waters' HPLC Alliance systems also grew nicely during the quarter, Ornell said, despite the fact that UPLCs may take the place of HPLCs.

"We clearly think that long term, the world is going to move to UPLC. But we don't anticipate that's going to be overnight," said Ornell. "There's still a large market for traditional HPLC separation."

Waters' Nano-Acquity systems, which are mostly used for proteomic applications, represent about 5 percent to 15 percent of total Acquity sales, Berthiaume said.

Waters' R&D spending in the fourth quarter period increased slightly to $16.7 million from $16.5 million year over year.

The company's net income increased to $78.2 million, or $0.72 per basic share, from $71.5 million, or $0.59 per basic share in the year-ago period.

As of Jan. 1, Waters had approximately $494 million in cash and equivalents.

â€" Tien-Shun Lee ([email protected])

With ABI Litigation Over, Waters Plans to
Resume Pace of New Product Launches

The rate at which Waters has released new products has slowed over the past few years. According to Gene Cassis, Waters' vice president of investor relations, this is largely due to a patent suit that the company had with Applied Biosystems, which resulted in Waters having to pull several high-end Q-TOF and triple quadrupole mass specs off the market (see ProteoMonitor 4/1/2002).

Cassis said that because the lawsuits are now over, he expects Waters to resume its historical mode of operation during which it launched a new Q-TOF every two or three years.

"As we look back at 2005, I feel that we're finally over the patent situation that hit us in 2002, and we can finally devote our development resources to moving ahead," said Cassis.

â€" TSL

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