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While ABI Reports Modest Growth in Mass Spec Business, Waters Shows Q2 Sales Weaken

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While Applied Biosystems reported a modest 5 percent increase this week in mass spec sales for the second quarter, Waters said it had experienced a “disappointing double digit decline” in its mass spec business.

Nevertheless, during a quarterly earnings conference call this week, Waters executives expressed optimism for the success of the company’s new mass spec technologies: The Quattro Premier triple quadrupole and LCT Premier ESI-TOF instruments introduced at the American Society for Mass Spectrometry conference in June, as well as the pipeline Q-TOF instrument that the company plans to release in the first half of 2004.

Douglas Berthiaume, Waters CEO, confirmed that triple quad and LCT customer demos are being shipped “as I speak” and that results from the demo activities are expected over the next couple of weeks.

Final products will be shipped for revenue at the end of the third quarter, Berthiaume said, emphasizing that these products will not be beta units.

The company said sales of its current Q-TOF model had weakened in the second quarter — mostly, Berthiaume said, due to a “broad market dynamic” that was influencing overall spending on mass specs with proteomics applications.

Berthiaume also cited the buzz over the newly introduced mass spec instruments as a reason for low sales volume in the mass spec sector during the second quarter. “That’s the most significant thing as we look at the slower performance of the mass spec business in the current quarter,” he said. “We think it’s perhaps exaggerated because of the impact of the introductions.”

ASMS might seem like a weak excuse for weak sales, but ABI also cited it in its quarterly conference call. Revenue growth in mass specs “moderated to 5 percent as customers delayed orders in advance of the annual American Society of Mass Spectrometry conference in early June,” said ABI President Michael Hunkapiller in the call. When asked by an analyst to explain this phenomenon, he added, “the meeting is pretty important every year as a product introduction venue and there were significant product introductions from us as well as others that people were looking forward to there.” At the conference, ABI introduced its 4700 Proteomics Discovery System, an upgrade of its 4700 MALDI-TOF/TOF that includes new software, a trial subscription to the Celera Discovery System database, and ICAT reagents, and a new version of its triple quad ion trap mass spectrometer called 4000 Q-TRAP LC/MS/MS System.

Hunkapiller was also asked by an analyst how Waters’ new triple-quad instrument stacks up to the comparable ABI one. “I think we know from what they presented at ASMS that it’s still a big unknown as to what it is,” he said. “Our guess is that it’s comparable to where they were a year and a half ago when they took their old high-end triple quad off the US market.”

Waters was forced to pull its triple-quad instrument from the market after losing a patent infringement suit with ABI (see PM 4-1-02, 4-29-02, 3-17-03). The company said in the call this week that it would launch in the first half of 2004 the next generation of Q-TOFs, which would replace the models it had to remove from the market , and hinted that the ASMS conference in June might be the site of the big release party. Shipments would follow in the second half of 2004.

John Nelson, Waters chief technology officer, said that a major feature of the new Q-TOF will be the traveling wave technology that Waters inaugurated in its Quattro Premier. “Traveling wave is an example of technology that allows you greater control of where the ions are and how you move them around. So it’s a basic building block technology and we think it will be something that has a lot of different utilizations,” Nelson said. He also said that technology used in the LCT Premier instrument will contribute to building the Q-TOF, “because the [LCT] is essentially a TOF-based product.”

Waters chief financial officer John Ornell predicted that the mass spec business will continue to decline in the “high single digits” in Q3. Q-TOFs make up 30 percent of Waters’ mass spec business, while mass specs account for 25 percent of the overall business, according to the company.

Waters’ overall financial condition remained fairly stable in the second quarter compared to 2002, thanks to modest gains in the HPLC and thermal analysis parts of the business. Sales increased 7 percent, to $232 million this year from $217 million last year, and income increased to $42 million from $38 million in Q2 of 2002. The company’s cash and cash equivalents increased slightly to $283 million, from $263 million at the end of 2002.

Waters officials confirmed that the company’s strongest geographical area was now Asia, with business in India leaping from $5 million “a year or two ago” to a projected $20 million this year, and growth in the double digits in Japan. The weakest market remained the U.S., with similar unfavorable conditions in Europe.

Applied Biosystems’ forecast for its mass spec business in coming quarters was a little rosier than Waters’. “We expect to see growth of the mass spec business — maybe not on the extraordinary levels year-on-year that we saw early this fiscal year, but certainly consistent with the growth in the market overall,” Hunkapiller said.

Overall, ABI had a strong quarter — its fiscal fourth quarter — reporting net revenues of $432.9 million, compared to $417 million for the same quarter of 2002 and net income of $96.1 million for the quarter, compared to $38.2 million for the year-ago period

In terms of geographic market strengths, ABI reported results directly opposite to those of Waters. U.S. sales, which made up 51 percent of revenues for the fourth quarter, rose 8 percent from the same period last year, while European sales increased 5 percent year-over-year to 28 percent of total revenues, and Asia-Pacific revenues dropped 7 percent to 18 percent of total revenues, with the strength in most of Asia being offset by weakness in Japan.

— KAM & MMJ

 

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