Companies that supply instruments and consumables to the life sciences industry have been hit hard by reined in research spending resulting from the current adverse economic climate. However, one chief executive believes there are signs of an upturn.
Marijn Dekkers, president and CEO of Thermo Electron, told the Thomas Weisel Partners' Healthcare Tailwinds conference that he is sensing an increased willingness for the pharmaceutical industry to invest in new instrumentation after several quarters of caution.
However, his optimism does not extend to the biotechnology industry, which is still keeping its purse strings tightly fastened after a difficult couple of years in which it has been very difficult to raise funds.
"At the end of the second quarter, there were signs that the pharma industry had taken its foot off the brake," Dekkers said, adding that this trend seems to have continued into the third quarter. However, he would not be drawn on when the evidence for this upswing would register in terms of higher revenues.
Thermo has sales of over $2 billion (€1.85bn) a year and is currently predicting growth between 0 and 3 per cent over the next two years. However, Dekkers believes it is well placed to put in 10 per cent growth if an economic recovery materialises.
Sixty per cent of Thermo's business comes from the life sciences sector, where it is the second largest supplier of instruments in the world behind Applied Biosystems. The company has undertaken a concerted effort to build its expertise in this area - adding executives from big pharma and other life science instrumentation specialists - and expects this focus to lead to a rise in market share.
Dekkers told the meeting that Thermo has been steadily recapturing market share in the life sciences over the last two years and has retaken the number two slot. This effort was helped by a focus on building a leading position in ion trap mass spectrometry, although the firm's triple quad range suffered somewhat as a result. This imbalance has now been redressed, he said.
The company has great expectations for its recently-launched LTQ-FT mass spectrometer, which is addressing the same market as hybrid mass spectrometry technologies such as TOF/TOF (time of flight) but is a much more affordable option.
On the acquisition trail?
Dekkers also told the conference that Thermo is in a position to consider acquisitions after a busy few years that has seen the firm integrate 75 separate companies under its banner. Three and a half years ago, the company was a sprawling $4 billion conglomerate and a huge effort has been undertaken to sell off non-instrument companies, reduce the headcount and close down surplus facilities.
At one point, Thermo companies were operating 16 sales offices in Paris alone, while the group had sites at 330 locations, he noted. There is now a single unit in France, which incorporates a demonstration building where potential customers can take a look at all the company's product lines, and by the end of the year the number of sites will be trimmed to 160. Staffing levels have been reduced by 3,000 over the last three years to around 11,000.
This divestment programme has left Thermo with no net debt and a strong balance sheet, so the company is "looking hard at some good acquisitions in the laboratory and life sciences area, as well as in measurement/control and environmental monitoring," according to Dekkers.
Measurement/control makes up 30 per cent of Thermo's revenues and is geared at providing instrument for process control in industries such as chemical manufacturing. The remaining 10 per cent provides components for other industries, such as semiconductors.