For its first quarter 2018, processing technology firm Agilent announced it recovered from a 5% quarterly decline in the previous period to report a return of growth across its pharma business.
“Pharma is our largest business and had a strong showing of 8% growth,” CEO Michael McMullen told investors on a call. “Growth is very solid across instruments, services and consumables in both the biopharma and small molecule market segments. We remain very confident in achieving our 2018 pharma growth objectives.”
McMullen spoke of a number of changes in the industry which he expects to drive further growth in the segment, including the prospect of increased pharma M&A. Big Pharma has been described as making its strongest start to M&A in a decade, with announcements including Sanofi buying Bioverativ for $11.6bn and Celgene buying Juno for $9bn.
Agilent has been through merger cycles before, but McMullen said the firm is now in such a different position than it was during some of the other bigger consolidations in the past.
“We've also found historically when there's been merger and acquisition where they tend to want to consolidate or put more spends on to a fewer vendors, it plays to our strength, [with our] really reliable equipment that has high performance and really has a cost of ownership advantage to them.”
And while he said M&A will lead to pauses on new instrument purchases, he added it'll create new opportunities in the Agilent CrossLab Group (ACG) business.
“[The ACG business] relates to both enterprise services, relocation, also refurbished business units. We'll probably get very actively involved in taking some of the excess equipment that customers may have and taking it back into Agilent and redeploy in other set market segments.”
Teva and generics
McMullen was asked about the upcoming downsizing of Teva Pharmaceuticals, one of Agilent’s customers. The drugmaker has begun a global restructure of its operations set to include the closure of 20 to 25 API and drug manufacturing plants over the next two years.
“Teva is going through some of its own internal challenges, but I wouldn't say that's indicative of the overall marketplace,” he said. “They are a customer of ours, but I think it's not material at the company level in terms of the business volume there.”
He added: “Teva is a company-specific challenge,” and not an indicative of the industry as a whole where opportunities continue to grow for Agilent, especially in the generics and biosimilar sector.
Citing a recent trip to India, he told stakeholders: “I was with a number of executives from generic pharma companies, and they're really excited about where things are going. I think there's something like $50 billion worth of new drugs coming off of patents in the next two years, on the small molecule side. They're making a lot of investments in biosimilar. So, that marketplace is very healthy.”