Lab suppliers post solid Q2 growth despite the credit crisis

With fears of a global recession riding on the back of the credit crisis, many laboratory suppliers have managed to weather the storm and still achieve double digit sales growth in the second quarter of 2008.

Thermo Fisher Scientific, Waters and Sigma-Aldrich all maintained their strong growth with the companies all reporting revenue growth of between 13 per cent and 14 per cent.

However, Illumina stole the show by posting a 66 per cent increase in revenues, following its entry into the gene sequencing arena after its January 2007 acquisition of Solexa.

Thermo Fisher Scientific reported a 14 per cent increase in revenues to $2.71bn (€1.73bn) in the second quarter of 2008 from $2.39bn for the same period last year.

Operating income rose 36 per cent for the quarter to $330.2m, accounting for 12.2 per cent of revenues, compared with $243.0m, or 10.2 per cent in the prior year.

Research and development costs increased to $64.4m compared with $58.7m for the same period last year, although decreased as a percentage of revenues from 2.5 per cent to 2.4 per cent.

Second quarter revenues for the firm's Laboratory Products and Services segment grew 14 per cent to $1.16bn, while those from its Analytical Technologies group grew by the same amount to $1.02bn.

However, the Analytical Technologies group proved to be the most profitable segment, generating an operating income of $245.1m, compared with the Laboratory Products and Services group's $231.5m.

Marijn Deckers, CEO of Thermo Fisher Scientific, attributed the company's strong growth to "robust demand in our scientific instruments, specialty diagnostics and biopharma services businesses, as well as ongoing strong performance in Asia overall."

Illumina posted second quarter revenues of $140.2m, up 66 per cent from the figure reported last year. The strong growth was partly ascribed to its acquisition of Solexa that enabled the firm to enter the gene sequencing market.

Operating income for the quarter almost doubled from the same period last year, with the firm reporting $23.9m compared with $12.3m in Q2 2007. As a percentage of revenues this equates to a modest increase in profitability to 17 per cent, from last year's figure of 14.5 per cent.

Research and development spending reached $23.5m, or 16.8 per cent of revenues, a truly staggering level of investment in new product development and no doubt one of the major driving forces behind the company's rapid growth.

While the figure was up by more than $5m from the $18.2m reported in the second quarter of last year, as a percentage of revenues R&D investment fell nearly 5 per cent.Illumina's CEO, Jay Flatley heralded the quarter as the company's best ever as well as highlighting the fact that the firm had now recorded seven consecutive years of quarterly sequential revenue growth.

He also took the opportunity to announce the acquisition of Avantome for $25m in cash and up to $35 in contingent consideration. He described Avantome as a "development stage company working on a low-cost, long-read sequencing technology."

Illumina expects Avantome's technology to have applicability to the research and diagnostic markets while being complementary to Illumina's existing technologies.Waters achieved second quarter revenues of $399m, up 13 per cent from its 2007 Q2 revenues of $353m.

Operating income also rose 13 per cent, with the firm posting income of $87.0m, compared with $76.9m for the same period in the previous year. Net income rose by almost 40 per cent from $59.9m to $83.1m

Research and development spending accounted for $22.2m of the firm's revenues, still around 5.5 per cent of total revenues and ahead of the industry average.

Even though the company achieved double digit revenue growth, Douglas Berthiaume, Waters CEO said: "though the first half of 2008 presented Waters with a challenging economic environment, solid sales of our technologically advanced systems solutions, as well as our recurring revenues, resulted in strong earnings growth and superior cash generation."

Waters has also just announced that it has completed the acquisition of the net assets of sorption analysis and thermogravimetric analysis (TGA) instrument maker, VTI Corporation, for an undisclosed amount. The firm will be immediately merged into Waters' TA Instruments (Thermal Analysis Instruments) division.

Sigma-Aldrich also achieved double-digit revenue growth, posting second quarter revenues of $580.7m, up 14 per cent over the same period a year ago. Second quarter operating income rose nearly 20 per cent to $131.2m, compared with $109.9m in 2007.

Research and development costs accounted for $16.0m or 2.7 per cent of revenues, down slightly as a percentage of revenues from the $14.5m spent in the previous year. Sigma-Aldrich's four business segments each achieved double-digit growth, with the Research Biotech growing 17 per cent compared with the same period last year when revenues were $86.4m. The Research Specialties group also achieved 17 per cent growth to reach revenues of $214.5m.

The Research Essentials group posted revenues of $109.4m, up 13 per cent from last years Q2 results, while the Sigma-Aldrich Fine Chemicals division (SAFC) had sales of $170.4m, up 11 per cent on the previous year's figure.

"We are pleased with our strong second quarter performance as we continue to pursue and achieve above market growth from the five key initiatives driving our sales gains and returns. Our second quarter sales of $580.7 million, which included the best sales month in the company's history in June, represent another new quarterly high, exceeding the record established just one quarter ago," said Jai Nagarkatti, CEO of Sigma-Aldrich.

"And we were able to grow earnings per share faster than sales and improve operating margins as ongoing process improvement activities, lower interest costs and benefits from our supply chain initiative combined to more than offset other cost increases and the impact of a higher effective tax rate."