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Waters Says Switching to UHPLC Could Trigger Significant Growth In Instrument Business


This story originally ran on Oct. 28.

By Adam Bonislawski

Growing demand for Waters' Acuity H-Class UPLC platform in the third quarter was a principal driver of instrument sales, which rose roughly 9 percent year over year as total revenue during the period grew 7 percent to $401 million and profits swelled 25 percent.

CEO Douglas Berthiaume said he believes the "broad conversion" of high-performance liquid chromatography systems to ultra-performance liquid chromatography systems may represent "the largest business-growth opportunity in analytical instrumentation."

When Waters launched its Acuity platform in 2004, it marked a leap in liquid chromatography. Using sub-2 micron particles packed into 10 cm columns subjected to 15,000 psi of pressure (PM 03/12/2004), the instrument offered improvements in peak height, resolution, and sensitivity over HPLC systems.

Since then, a number of other firms have developed their own UHPLC offerings, most notably Agilent, which released its 1290 Infinity LC system in April of 2009 (PM 04/30/2009).

During Waters' Q3 call, Berthiaume acknowledged that "most [of Waters'] competitors have now introduced systems that claim performance advantages of UPLC," and called it a "welcome" development insofar as the wider availability of UPLC technology would encourage its broad adoption.

This claim reinforced comments made by Gene Cassis, Waters' vice president of investor relations, who noted that Agilent's introduction of the Infinity 1290 LC could help Acquity sales by converting more HPLC users to the new technology.

Cassis, who made his remarks during last year's UBS Global Life Sciences Conference, said that before Waters launched the 1290, some potential UPLC customers had expressed worries that having Waters as the sole provider of the technology would limit their access to consumables and equipment. Cassis suggested that having another vendor in the space would help assuage those concerns (PM 09/24/2009).

During the Q3 call, Berthiaume echoed that sentiment, saying the company "feel[s] that as this conversion [from HPLC to UHPLC] materializes, Waters is best positioned to increase market share."

He added that he believed the Acquity H-Class "is helping to initiate a long-awaited replacement cycle for applications such as pharmaceutical QA-QC … that has the potential to augment LC system growth over a multi-year period."

Key to the growing adoption of UHPLC technology has been the recent trend by vendors, Waters among them, towards making these platforms backwards compatible with traditional HPLC instruments. Many HPLC users — especially those that run regulated testing assays such as pharmaceutical QA-QC protocols — have been hesitant to shift their LC work to a new platform. To offset this anxiety, LC vendors like Waters, Agilent, and Dionex recently began offering UHPLC instruments that can work in concert with their HPLC products.

For instance, Waters' Acuity H-Class, which debuted in February, enables labs to use the same column chemistries employed in their HPLC workflows. And in June, Waters rival Dionex said it plans to introduce UHPLC compatibility across its entire HPLC product line.

That month, Agilent introduced its new 1200 Infinity Series, a portfolio of three machines — the 1220 Infinity LC, the 1260 Infinity LC, and an enhanced version of 1290 Infinity LC — each of which is compatible with the company's existing 1100 and 1200 HPLC lines.

In an online presentation accompanying the 1200 series launch, Michael Frank, Agilent's HPLC product and solutions manager, said that in 2011 the company will release software that would enable the 1290 to emulate any other system from Agilent's 1100 and 1200 product lines.

This, he said, would allow total method reproducibility across the platforms and enable researchers to "select any other LC to be emulated by a simple mouse click" (PM 06/25/2010).

According to Berthiaume, roughly 25 percent of Acquity H-Class orders have come from customers who were not previously users of the company's HPLC systems. In fact, he said, most have ordered UPLC columns on which they run their existing HPLC assays.

"We're clearly seeing more and more examples of customers saying things to us like, 'We're not going to invest any more strategic money in the HPLC arena,'" Berthiaume said. "What they tend to do is transfer their existing HPLC applications to the new instrumentation as they work in the future toward moving into a UPLC universe.

"The great benefit of this technology is that you can put your old methods on there and yet eventually still move up to the UPLC platform," he added.

Sales of Acquity UPLCs grew in the double digits in the third quarter, Berthiaume said, without elaborating.

He also said mass spectrometry helped drive Waters' instrument sales growth, saying that "sales of systems incorporating high-end mass spectrometry" — including the Synapt G2 and Xevo G2 Qtof — "were particularly strong in the quarter."

The company began shipping its new Xevo TQ-S triple quadrupole system during the third quarter. During the call, Berthiaume said he expects "to ramp shipments [of the machine] to reduce our current order backlog and to fulfill new TQ-S orders."

This order backlog caused a roughly 50 basis point reduction in Waters' overall third-quarter profit margin, chief financial officer John Ornell said during the call, noting that the company saw a significant reduction in the number of triple quadrupole instruments shipped in the quarter as it transitioned from older triple quadrupole models to the new TQ-S.

Waters also said net income widened 25 percent to $94.7 million, or $1.02 per basic common share year over year, from $75.9 million, or $.80 per basic common share year over year. The profit growth beat analysts' consensus estimate of $0.97 per share.

R&D costs for the quarter rose 6 percent to $20.5 million from $19.3 million a year ago.

Waters said it had around $837 million in cash and equivalents as of Oct. 2.