Company Profile: Agilent Technologies
van Ingen - the president of Agilent's Life Science and Chemical
Analysis (LSCA) division.
When measurement company Agilent was spun-out of the Hewlett-Packard Company for $2.1bn (€1.6bn) in 1999 it broke the records for the largest initial public offering in Silicon Valley history. The company now operates in two distinct areas, electronic and bio-analytical measurement. Agilent's LSCA division currently operates in two major areas, the life science market which van Ingen believes to be worth about $14bn, and the chemical analysis which is estimated at $6bn. According to van Ingen, the life science market is projected to grow somewhere between 7 and 9 per cent over the next few years while Agilent expects the chemical analysis market to grow at a more sedate pace of between 5 and 7 per cent. Agilent estimates they currently have a 5 per cent share of the life science market and 15 per cent of the chemical analysis market. "We have recently launched a material science solutions unit focused on the $10bn spectroscopy market comprised of microscopy and optical spectroscopy techniques," said van Ingen. "Overall our goal for the LSCA group is to sustain our double digit growth rates, which we have done for several quarters now, indicating that our portfolio is working." What is the size of the life science division within the company? "About 2.5 years ago Bill Sullivan, Agilent's CEO, restructured the company and focussed it on the measurement market: the electronic measurement sector which currently accounts for about two thirds of the company's revenue and the bioanalytical measurement sector of the company, also known as the LSCA, which accounts for about a third of the revenues." "The key focus of the company is on measurement solutions, whether it's electronic or chemical analysis and life sciences - in the electronic measurement space we are leaders in virtually every market and in the bioanalytical area we are leaders in selected market segments. The goal over time is to increase the revenues of the bioanalytical measurement portfolio to roughly 50 per cent of the company." What does the company sell and what are your major product lines? "The key areas that we are focussing on are: separations , GC [gas chromatography], LC [liquid chromatography], CE [capillary electrophoresis]; spectroscopy such as GC-MS [gas chromatography - mass spectrometry], LC-MS [liquid chromatography - mass spectrometry], ICP-MS [inductively coupled plasma - mass spectrometry] and UV/Vis [ultra violet / visible spectrometry] and tools for the life sciences such as DNA microarrays and microfluidics." "Additionally, we have consumables, services and informatics for all of these product lines." Which of these lines do you consider to be "industry leading" product lines? "We are the global leader in GC, and we are three times larger than the nearest competitor. The same applies for GC-MS where we are the global leader in the single quadrupole market by about a factor of three." "In LC Agilent and Waters are the market leaders and between us we hold probably 60 to 70 per cent of the market." "Until about a year ago we had a limited footprint in LC-MS with the ion trap and single quad.. Last year we introduced a refreshed time-of-flight MS, and added a new triple quad MS and a Q-TOF [quadrupole time-of-flight] MS. The expansion of the portfolio has given us a significant presence in the LC/MS market." "In the first half of our 2007 fiscal year we doubled the size of the LC/MS business and have now about a 10+ per cent share of the $1.5bn LC-MS market." "In ICP-MS we are the global leader, with approximately 35 per cent market share, and in the microarray market we are number three with about a 10 per cent market share." "Our goal has been - and continues to be - to achieve number one or number two in the markets in which we participate. It provides critical mass volume and enables us to have a global presence and to invest enough to continuously evolve the portfolio." What is the balance between instrument and consumables sales? "Of our total revenues, about 60 per cent comes from instrument hardware and software sales, 15 per cent from consumables and about 25 per cent from services - making the after market business ~40 per cent of the portfolio." "One of our goals is to double the size of the consumable business over the next two or three years." "Everything that researchers do in the large molecule area in genomics and proteomics requires bioreagents to prepare samples for analysis. Before the Stratagene acquisition we typically procured our bioreagents from a variety of companies but one you never gets optimal performance. So to have a proprietary bioreagents portfolio will enable us to optimize the bioreagents and establish an optimal connection between our instrument and bioreagents platforms." What are the main application areas for your products? "In chemical analysis we focus on four key markets: the petrochemical testing market which includes everything from crude oil to fine and specialty chemicals; environmental testing of water, air and soil; food testing; and forensics." "In life sciences, we focus on the pharma/biotech, academia and government markets, as well as selected segments of the diagnostics market." What is the balance between customers in Industry, Academia and Government? "Of our total revenues in 2006, we sold about 36 per cent to pharma/biotech, 20 per cent to the petrochemical testing market, 20 per cent to environmental, 12 per cent in food,6 per cent in forensics and about 6 per cent to the academic and government market." "One of the reasons we acquired Stratagene was to achieve better market penetration in the academic and government markets.. Stratagene has over 70 per cent of their sales in academia and government, and provides a nucleus for a dedicated sales channels to that market." "We are also moving into selected segments of the diagnostics market, mainly focussed on heart disease and oncology - part of Stratagene's business is also in diagnostics so it gives us more critical mass to expand this into a bigger business for Agilent." Are you seeing a shift in the geographic distribution of your customers? "In the last few years we've seen very strong double digit growth in Asia-Pacific, particularly in China and India as well as in Eastern and Central Europe. If you look at a break down of our 2006 revenues by geographical area about 38 per cent is in the Americas, about 36 per cent is in Europe and about 26 per cent in Asia." "My prediction is that in the next two to three years we will see a third come from Asia, a third from Europe, and a third from the Americas." What percentage of revenues is the company spending on R&D? "The life sciences and chemical analysis group currently spends between 8 and 9 per cent of our revenue on R&D, and that will continue to be our goal moving forward." Can you tell us which areas major R&D investment is going into? "We made some fairly significant changes to our portfolio investments over the past few years and currently we invest about 50 per cent in our core businesses to continue to keep it competitive in terms of cost and capabilities." "We have refreshed the entire core business portfolio in the last three years - we have a GC, a new GC-MS, a new LC, a new LC-MS and a new ICP-MS and we plan to continue to refresh the core platforms in the future." "The remaining 50 per cent of our R&D investment is focussed on five key growth initiatives. "The first is the microarray business which we have refocussed on newer value added applications such as CGH [comparative genomic hybridisation], microRNA, and High Density arrays. It is now one of the fastest growing businesses in our portfolio." "The second growth initiative is LC-MS, which we started investing in a number of years ago, and last year we saw the first results with the introduction of the triple quadrupole and Q-TOF LC/MS. LC/MS will continue to be a growth initiative for the next couple of years. There is still a lot of work we need to do to round out the portfolio in terms of capabilities and applications. "Our ultimate goal is to focus on an LC/MS for the biologist, bio-MS, a simple-to-use, low-cost LC/MS.." "The third growth area is the diagnostics market, where we have developed cholesterol tests for heart disease on our microfluidics platform, one for HDL and LDL. We are working towards FDA approval for by the end of the calendar year." "We've also seen a fairly rapid take-off of the CGH application for cyto-geneticists. The options we are exploring include the use of the chip-LC/MS for diagnostic applications." "The fourth growth initiative is in informatics. We are reducing the number of software platforms and refocussing our efforts on software applications and informatics capabilities - such as LIMS [laboratory information management systems], e-lab notebooks." "The fifth growth initiative we just launched and is focused on microscopy and optical spectroscopy tools. As part that initiative Agilent recently made an acquisition [of Molecular Imaging] to enter the atomic force microscopy market." Does this represent a continuation of current strengths or a move into new areas? "Our focus is on keeping our core business competitive while adding new measurement platforms and moving into adjacent application areas." Does the company look to move into new areas through in-house R&D, inward licensing, or by company acquisition… or a combination of these? "It is really a combination of the three, we do have some very significant in-house R&D programs, we continuously look at opportunities to cooperate and in-license technology and we've also made quite a few acquisitions over the past few years." When you design new instruments what sort of effort do you put into hardware and software upgradeability? "Hardware platforms usually last for a while. At the same time, though, there are typically lots of changes in software arena. Having standard software architecture enables you to move more rapidly and continuously expand the applications portfolio." "Having a large installed base, we have an obligation to protect the investment of our customers, so we try to ensure backwards compatibility with our software upgrades." "We also use an open systems architecture, standard interfaces and standard protocols that allow our customers to use other standard software packages." Where are the instrument parts manufactured and assembled? "We have three major manufacturing sites for the LSCA: one in the US on the east coast in the Wilmington, Delaware area, which is our centre for MS products; a site in Waldbronn, Germany where we manufacture our liquid chromatograph and bioanalyser products; and a site in Shanghai, China where we manufacture our gas chromatography products. We also have a limited numbers of smaller sites for some of specific product areas." What percentage of revenues does the company invest in after sales support and servicing? "As I said earlier, 25 per cent of our revenues come from customer service and support." "We are focused on developing new technologies which enable easier and faster servicing of the equipment. One of these areas is what we call Intelligent Services, which makes it easier for customers to do remote diagnostics." "A key part of the investment in support services is really in the customer interface, such as in call centres, the web, training, things important to keep customers laboratories operational at all times." What sort of after sales service packages do you offer? And does the company help install and teach users how to run the instruments optimally? "In some geographies, the services are bundled in with the instrument sales, particularly in emerging countries. In Western Europe and North America we have unbundled the services and are tailoring the service offering towards the individual needs of the customer." Roughly how much of your installed base is supported by your own service staff and those of your authorised agents/distributors versus third party service firms? "More than 70 per cent of our installed base instruments are serviced by our own engineers. We strongly believe that the direct sales and support services model is the appropriate business model for this industry." "We do have many authorised distributors and support providers to augment our direct model." Have you or third party contractors done any assessments of brand loyalty for your products? If so, can you give us any information about this? "We conduct 'blind' customer loyalty studies twice a year of customers in selected geographies. The surveys cover the total customer experience, from the product portfolio to sales and support process and several other functions" "Over the past four years, we continue to rank as leader in the industry in terms customer satisfaction and loyalty. And that continues to be an important goal for Agilent moving forward - to be the leader in customer satisfaction and customer loyalty in the markets we serve."