Thermo Fisher Scientific clocked strong revenue and earnings growth for the second quarter ended June 30, 2012. What is the contribution of the various regions (North America, Europe, APAC, ROW)?
| Marc Casper |
As of the end of our second quarter this year, (trailing 12 months through Q2’12) approximately 20 per cent of our revenues came from APAC and ROW. Europe accounted for 26 per cent, whereas North America comprised the remaining for 54 per cent.
Of the company’s three business segments, i.e. Analytical Technologies, Speciality Diagnostics and the Laboratory Products and Services, which is the fastest growing product/ service segment?
We have a track record of growth and innovation in each of these segments. Our Lab Products and Services segment represents just under half of our revenues and is expected to grow steadily. This segment has an addressable market of about $29 billion, growing at two to four per cent annually. Our annual (trailing 12 months through Q1’12) revenues of around $ 6 billion came from a balanced mix of everyday lab equipment, consumables and services. Our Analytical Technologies segment is a third of our revenues and is where the bulk of our product innovation occurs. This segment addresses a market of approximately $31 billion, growing between four and six per cent. Our annual (trailing 12 months through Q1’12) revenues of $4.1 billion came from our range of Chromatography and Mass Spectrometry Equipment and Consumables, Chemical Analysis Instruments, Environmental and Process Instruments and Biosciences portfolios.
The Speciality Diagnostics segment is just over 20 per cent of our revenue, and covers a broad spectrum of products such as Clinical Assays, Immunodiagnostics, Microbiology, Anatomical Pathology and our healthcare channel – all adding to annual (trailing 12 months through Q1’12) revenues of about $2.8 billion. The addressable market for us is about $19 billion, growing at between four and six per cent annually.
Our recent acquisitions of Dionex, Phadia and One Lambda give us added capabilities in growing markets within the analytical and speciality diagnostics segments, adding to the unique value proposition we can bring to our customers.
What are the region-wise trends in these segments?
In Analytical Technologies, APAC and ROW contributed almost 32 per cent of our revenues, with North America representing 39 per cent and Europe 29 per cent. (trailing 12 months through Q1’12)
In Speciality Diagnostics, a high majority of revenue (trailing 12 months through Q1’12) (about 59 per cent) comes from North America. Europe represents 29 per cent of our revenue in this segment, whereas APAC and ROW total about 12 per cent.
In Laboratory Products & Services, North America contributes 66 per cent of revenues, followed by Europe (21 per cent) and APAC & ROW (13 per cent) (trailing 12 months through Q1’12)
Analysts predict that since around two-thirds of revenue is generated from the sale of consumables and services, the company is insulated to some degree from the cyclic nature of the manufacturing industry. Is this observation bearing out?
Yes –it is correct that from a product mix perspective, about two-thirds of our revenue is from the sales of consumables and services. This ensures that many of our 13,000-strong customer-facing team interact with our customers every day. This puts us in a position to have a unique mind-share in this industry.
What are the other strategies put in place by Thermo Fisher Scientific to maintain strong growth?
Looking at the end markets, we are indeed very balanced as nearly a quarter of our revenues come from each of our major market segments – Pharmaceuticals & Biotechnology, Healthcare & Diagnostics, Industrial & Applied and Academic & Government. This, combined with our unique product mix spanning instruments, equipment, consumables, reagents and chemicals, software and services gives us an industry-leading position in most markets that we serve.
An important part of our growth strategy is to increase our presence in Asia Pacific and Emerging Markets. At the time of our merger in 2006 that created Thermo Fisher Scientific, only 10 per cent of our revenue came from Asia Pacific and emerging markets. Today it is 20 per cent and in five years we expect it to be at least 25 per cent. Our tremendous success in China, India and other parts of these exciting markets has shown that we have a proven strategy.
Is the company mulling further acquisitions? In which areas?
Thermo Fisher looks at organic as well as inorganic routes to growth. We have been investing in acquisitions that help us to enhance our offering to our customers and increase our access to growing markets worldwide.
What are the consumer trends driving the healthcare and diagnostics markets (in terms of evolving paradigms of patient care, constraints facing healthcare providers, role of the government, etc.)?
All across the world, doctors and patients are clearly demanding early and accurate diagnosis – whether for a serious illnesses such as sepsis through our novel biomarker, early detection of cancer, or characterisation of allergies that are otherwise difficult to diagnose using our first and only fully automated allergy panel.
Today, infections and epidemics are no longer confined to a territory; they quickly become a global concern. In fact, we are proud that in India, Thermo Fisher has been supporting high-throughput screening of H1N1 samples through our protein purification technology and has been a consistent and preferred technology provider to the National AIDS Control Program for the past decade. The programme aims to ensure safe and quality-checked blood components for transfusion to check the spread of infections such as HBV, HCV and HIV. Our robust equipment, including blood bank centrifuges, ELISA readers, refrigerators and plasma freezers have been running and protecting samples for more than a decade.
In India, we also see an emerging market for In-Vitro Fertilization and Bio-Banking, of which cord blood processing and stem cell banking are fast growing sectors. We provide a good technology platform in all these areas, such as our CO2 incubators, cell culture consumables, centrifuges, ultra low temperature and cryogenic storage—all of which are vital for the therapies.
For the healthcare and diagnostics end markets, what is the focus of the company in the APAC region and India specifically, in terms of product focus areas, etc?
Asia Pacific and India in particular have a tremendous opportunity for growth for our speciality diagnostics applications.
With a large percentage of the global population being located in this region, as well as China’s and India’s investments in healthcare facilities, we are optimistic of this business here.
Our focus is on bringing immunodiagnostics, clinical assays, microbiology and anatomical pathology to our customers in India. Globally, we are leaders in novel biomarker development and share great partnerships with leading in vitro diagnostic companies. We look forward to creating similar such long-lasting relationships in India. Another potential area of growth is mass spectrometry in routine clinical use.
Thermo Fisher Scientific announced in July that it would acquire One Lambda, the leader in transplant diagnostics. How does this fit into the company’s existing healthcare and diagnostics portfolio?
We are pleased that we have recently completed the acquisition of One Lambda Inc. With approximately 320 employees and revenues of $ 182 million (2011), this will now become part of our Speciality Diagnostics Business. This acquisition significantly increases our access to the attractive transplant diagnostics market. One Lambda’s tests for tissue typing and antibody detection complement our existing immunosuppressant assays, allowing us to offer a broad menu of tests across the transplant-testing work-flow. We are excited about this combination and the opportunities it presents to ultimately improve the lives of transplant patients.
What are the channels used to service this clientèle?
In India, for our speciality diagnostics products, we have a network of channel partners. We also have excellent relationships with our key customers such as major hospitals, corporate healthcare providers and large diagnostic chains.
What is the guidance for FY2012 for the healthcare & diagnostics segment?
We do not give formal guidance by end market but we do expect the healthcare and diagnostics market, worldwide, to remain relatively stable for us.