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Life Science Tools Survey Reveals Cautious Budget Outlook for Academia, Government Researchers

NEW YORK (GenomeWeb) – A proprietary survey conducted by GenomeWeb and Bank of America Merrill Lynch that included more than 300 respondents in the life sciences industry showed that a majority expect their budgets to either stay the same or increase in the next 12 months, despite the uncertainty created by President Donald Trump's suggested 2017 and 2018 budget cuts.

The survey — which reached out to respondents in academia, the government, the pharmaceutical and biotech industries, contract research organizations, and hospitals — found that 35 percent of participants expect their total budgets to increase and 46 percent expect stable or flat budgets over the next 12 months. The remaining 19 percent expected a budget decrease in the next 12 months.

However, the survey also showed that all budgets are not created equal. While 46 percent of respondents thought they would see an increase in their consumables budgets in the next year, only 32 percent anticipated a similar increase in their budgets for new instruments. Further, 47 percent of respondents thought their instruments budgets would be stable while only 38 percent of respondents anticipated flat consumables budgets, and 21 percent anticipated decreases in their instruments budgets while only 16 percent anticipated the same for their consumables budgets.

"This is consistent with our expectations as consumables spend is more stable during periods of uncertainty due to the razor/razor-blade model of many [life science tools] analytical processes, while instrument and basic lab equipment purchases may be more susceptible to some volatility as labs wait for more long-term clarity on their funding outlook before committing to a large capital outlay for instruments," Bank of America analyst Derik de Bruin wrote in an analysis of the survey results.

The survey responses also varied by sector. Perhaps not surprisingly, participants from academia and the government were the most cautious about their future budgets, despite the survey results' overall optimistic outlook. Relative to three months ago, only 17 percent of academia and government respondents said they were feeling more positive about their funding or budget outlooks, while 55 percent felt less positive. The remaining 28 percent felt about the same.

Similarly, over the next 12 months relative to the past 12 months, only 25 percent of academia and government respondents said they anticipated an increase in their organization's headcount. Nearly half, 49 percent, said they anticipated headcount to remain the same while 26 percent said they expected a decrease in headcount.

In stark contrast to the academia and government respondents, pharma and biotech respondents were much more bullish. Relative to three months ago, only 23 percent of pharma and biotech respondents said they were less positive about their funding or budget outlooks. Nearly half, 47 percent, felt about the same, while 30 percent said they were more positive.

Similarly, a whopping 67 percent of pharma and biotech respondents said they anticipate an increase in headcount over the next 12 months, while 25 percent said they expect headcount to remain the same, and only 9 percent said they expect headcount to decrease.

Overall, only 25 percent of academia and government respondents expected their budgets to increase in the next 12 months, compared to 42 percent of pharma and biotech respondents. In contrast, only 13 percent of pharma and biotech respondents expected their budgets to fall compared to 25 percent of academia and government respondents.

"While we continue to believe that the likelihood of deep NIH funding cuts is low (our base case continues to be flat funding in FY17 and likely FY18), our survey would suggest that the persistent headlines of proposed budget cuts are creating concern in academia," de Bruin wrote. "We believe this anxiety could result in volatile 1H17 spending by US [academia and government life science tools] customers, and continue to prefer [life science tools] names with lower US [academia and government] exposure," such as Agilent Technologies, Danaher, and Mettler-Toledo International.

However, de Bruin added, the bullishness from pharma and biotech survey respondents bodes well for companies such as Waters, Thermo Fisher Scientific, and PerkinElmer. "We are encouraged by our survey results that indicate that spending is likely to continue to grow, particularly in consumables (and buoyed by an increasing headcount)," he noted.

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