Three major laboratory tool companies held their investor days this month, sharing the strengths of their businesses and detailing areas of increased investment. Agilent Technologies, PerkinElmer and QIAGEN have clearly defined their target end-markets and technologies going forward, maintaining a balance between established footholds and new opportunities. The summaries presented here feature highlights of the presentations and are not complete synopses.
Agilent Technologies’ investor day highlighted areas of growth for the company, business opportunities and a healthy financial performance. The $5.3 billion company serves more than 275,000 labs worldwide. Agilent provided a financial outlook of 5%–7% core revenue growth over the next 3–5 years.
Agilent consists of three businesses. The Life Science & Applied Markets Group (LASG), which has an installed base of over 600,000 instruments and serves more than 260,000 labs; Agilent Cross Lab (ACG), which serves a similar number of labs; and the Diagnostics and Genomics Group (DCG), with an installed base of 29,000 systems and customers in 18,000 labs.
From fiscal 2015–20, the company posted a revenue compound annual growth rate (CAGR) of 6% with FY20 sales of $5.3 billion (see IBO 11/1/20). This growth consisted of a 2% CAGR for the core franchise to reach $600 million, 7% CAGR for CrossLab services and consumables to total $1.9 billion, and 41% CAGR for the biopharma tools, cell analysis and NASD businesses combined to total $2.8 billion.
A component of the company’s current and future growth is its “build-and-buy” strategy. This strategy encompasses transforming the analytical lab, gaining market share in cancer diagnostics and genomics, and entering and expanding in high-growth markets. Discussing the ongoing transformation of the analytical lab, Agilent President and CEO Mike McMullen commented, “At the core of our efforts is an integrated platform strategy, where in the lab we will offer intelligent instruments, new customer business models, like subscription services, integrated workflows—all in an integrated digital ecosystem.” This digital lab will operate in new ways. As Jacob Thaysen, LSAG President, put it in his talk, “We envision that the future lab will be a completely digitally connected lab where all instrument solutions are operated from the same informatics platform.”
The company’s digital channel is currently responsible for nearly two-thirds of consumables sales.
The build-and-buy strategic also fits with the company’s emphasis on expanding customer business models such as more purchasing options, such as technology subscriptions, rentals, leasing and flexible spending plans, and new online features, such as eRenewals and eMethods. The company’s digital channel is currently responsible for nearly two-thirds of consumables sales.
Another avenue for growth prospects is Agilent’s expanding presence in cancer diagnostics and genomics. Commenting on this, Sam Raha, president of the Diagnostics and Genomics Group, noted, “To give you a frame of reference for DGG in terms of revenue, about a half a billion dollars comes from our cancer diagnostics businesses in pathology and companion diagnostics. The other half a billion comes from our DNA and RNA businesses in NASD [Nucleic Acids Solutions Division] and genomics.” Expanding companion diagnostics partnership, and panels for its Dako pathology business are among the drivers of growth in the area of cancer diagnostics for DGG. On the genomics front, new applications utilizing new products such as single-guide RNAs for CRISP-based gene editing will fuel sales opportunities.
High-growth markets for the company encompass biopharma, cell analysis, NASD and COVID-19. As an indicator of its importance, biopharma accounts for 70% of LSAG’s R&D budget. Biopharma opportunities include offerings for cell therapy and online and inline process measurements. In ACG, the company is offering solutions for new biotherapeutic targets as well as workflows with consumables and services, including a new Biomolecular Service Organization addressing biotech and CROs.
Regarding cell analysis. Agilent described a focus on three application areas: immunology, immune-oncology and immunotherapy; infectious disease, virology and vaccine research; and therapeutic development and production. Agilent described NASD as a CDMO for oligo-based therapeutics, with partnerships with over 20 pharmaceutical companies. The company estimates the division could grow to half a billion dollars over five years, as Agilent adds capacity and customer products move from clinical trials to commercialization.
The COVID-19 market is being served by the company’s NGS QC, automation, qPCR and cell analysis solutions, which are being utilized for therapeutics, vaccine development and production, and diagnostics, and even for wastewater detection through the company’s environmental channels. Offerings specifically for the market include a COVID-19 serology test, the SARS-CoV2 IgG ELSA kit, which will be submitted to the FDA for Emergency Use Authorization this month. Applications for the test could include monitoring immune status.
Throughout the presentation. Agilent emphasized the ability to leverage its installed base, which totals over 600,000 serviceable instruments, and worldwide presence. ACG is in particular driving higher attachment rates and customer lifetime value. Discussing the value of the attachment rate, Padraig McDonnell, president of ACG commented, “Approximately $30 million [in revenue comes] with every 1% increase in connect rate.” The company also stated that it is unique in the scale of its service organization, which can also be a source of sales leads.
Geographically, Agilent emphasized growth opportunity in China. The nation currently accounts for 20% of company revenues, or more than $1 billion in sales, and 18,000 employees. By segment, China represents 28% of LSAG sales, 18% of ACG sales and 6% of DGG sales. Agilent described itself as underpenetrated in both the ACG and DGG businesses in the country. ACG posted a 15% CAGR in China from fiscal 2015 to fiscal 2017 with revenues of $347 million, and now has almost 700 employees in Greater China. Growth is coming the digitally enabled services and products including 901services and workflows specifically for the Chinese market. For DGG, recent expansion in the country has included direct importation of diagnostics products, a new opened genomics application of excellence and a reduction in NGS assay delivery time starting next year.
Last week, PerkinElmer, a company with 2019 sales of over $2.8 billion, recently held its first full investor day in many years. The focus was the company’s Life Sciences segment of its Discovery & Analytical Solutions business (DAS). DAS will account for 47% of PerkinElmer’s estimated 2020 revenues, or $1.7 billion, with the remainder of sales belonging to the Diagnostics segment. Between 2017 and 2019, DAS posted an average organic growth rate of 5%, with a forecast of continued mid-single digit plus organic growth.
DAS is broken into three subsegments: Life Science, with around $1.0 billion in revenue; Applied, mostly industrial and environmental, an approximately half a billion dollars business; and Food, with revenues of around $200 million. Analytical instruments make up about $500 million of DAS product revenue, mostly in the Applied business. As PerkinElmer Senior Vice President and CFO Jamey Mock commented, “DAS is more consistent and faster growing in a post-COVID world.” Future opportunities for DAS overall include grow the key accounts business, bundling of products across the company, and ecommerce, where the company estimates it currently captures less than 10% of DAS’ opportunity.
Within DAS, the Life Science (LS) business is a driver. The business consists of Discovery, 40% of the 2020 revenue mix; OneSource Enterprise, with 27% of LS sales; Analytical, with 19%; and Informatics, with 14%. The portfolio is equally divided between small and large molecule solutions, with around 30% of LS sales from early-stage research applications, around 60% from discovery and around 10% from development. Future opportunities include the manufacturing space, where the company already offers analytical systems for QA/QC. For example, the company’s new LC 300 system and SimplicityChrom Software will further support applications this year. Describing LS’ future. Alan Fletcher, vice president, and General Manager, Discovery, stated, “While our platforms have been used for many years by all leading pharma and biotech companies for small molecule research, we’ve been working with our customers to expand our applicability in the high-growth areas of biologics and cell therapy.” In the area of cellular biology, the company views cell selection, separation QA/QC and delivery as opportunities.
Adding Horizon Discovery will bring Research Solutions revenues to 42% of Discovery revenue versus 30% for Detection and 28% for Imaging.
Discussing LS’ $400 million Discovery segment, which has over 5,000 customers, the company emphasized its focus on solutions for investigating phenotypes and helping create better disease models. Bolstering the segment will be the acquisition of Horizon Discovery (see IBO 11/15/20), which is now expected to close this year rather than first quarter 2021 as originally announced. Adding Horizon Discovery will bring Research Solutions revenues to 42% of Discovery revenue versus 30% for Detection and 28% for Imaging. Additional benefits include Horizon Discovery’s presence in the academic market and at pharma accounts. On the technology side for LS as a whole, the purchase will increase genomics tools offerings and add new biomanufacturing opportunities, such as cell line engineering.
The day also provided an overview of DAS’ Informatics segment, a $140 million business serving over 4,000 customers and growing double digits organically. Major product lines include ELNs, and analytics and data processing software serving the life science research and clinical markets and, to a lesser extent, agrochemical, specialty chemical and other industries. The company’s Signals platform is built on SAAS, which differentiates it, according Kevin Willoe, Vice President/General Manager, Informatics. “Many of our competitors have decided to try to retrofit on-premise technologies to the cloud. This is causing them scalability and flexibility issues and leaving them with technical baggage that at some point they are going to have to deal with.” Highlights of the Informatics business include a 95% renewal rate and a third of orders being for SAAS solutions, which is expected to increase to around 50% by 2022. Future areas of focus include new point product solutions, such as ChemDraw; biologics; formulations and registration; and greater penetration across all of its end-market segments.
DAS’ approximately $700 million OneSource business consists of Core Services, offering service for PerkinElmer products, and Enterprise Services, which provides asset services, representing 70%-80% of total Enterprise revenues, and professional and technical services. A $270 million business, Enterprise manages over 200,000 assets, only 2% of which are PerkinElmer branded, with over 800 customers. Personnel wise, the business has 1,650 technical experts and 660 dedicated on onsite personnel. Multiple customer programs manage over 20,000 assets each. As Gary Grecsek, VP/GM, OneSource Enterprise Laboratory Service, put it, “We’ve developed the technology portfolio that provides transparency across workflows, buildings and global sites, enabling data-driven insights for our customers to improve the performance of the lab.” The segment’s main customer growth is pharma where Enterprise’s business model provides the ability to scale, customer intimacy and access to new accounts.
Although the day was focused on Life Sciences, PerkinElmer also highlighted other business opportunities within DAS. This includes capitalizing on the DAS’ business team of around 1,500 R&D employees and around 5,000 commercial personnel. R&D will enable refresh of analytical instrument platforms and faster product development. In addressing customer experience, the company explained how each customer now has only one point of contact. Part of this effort is growing the Food business. Here, the company plans to expand from grain, dairy and cannabis to end-market segments, such as meat, seafood and poultry, with full workflows and improved commercial channels.
It has been a busy year for QIAGEN, an over $1.5 billion company supplying molecular biology tools. The company has experienced major demand for consumables and instrumentation for COVID-19 testing. Such revenues are estimated to total $600 million in 2020. The company was also the subject of a proposed acquisition by Thermo Fisher Scientific, but shareholders rejected the offer this summer (see IBO 8/15/20). This month, the company held its first investor day under Thierry Bernard, who was named CEO in March (see IBO 3/31/20).
QIAGEN kicked off the day by announcing the raising of its sales and adjusted EPS forecasts for the fourth quarter, full-year 2020 and full-year 2021 (see Executive Briefing), citing better-than-expected results for both COVID-19 and non-COVID-19 associated sales.
At the event, QIAGEN also unveiled a new financial reporting structure divided between: Sample Technologies, PCR/Nucleic Acid Amplification, Diagnostic Solutions, Genomes/NGS and Other. In the first nine months, on a CER basis, sales for each were up 44%, up 54%, down 13%, down 10% and down 10% to $568 million, $255 million, $302 million, $116 million and $58 million, respectively.
In its presentation, the company emphasized its new streamlined focus and post COVID-19 growth drivers. Going forward, QIAGEN will invest a greater proportion of resources into these higher-growth opportunities, which the company refers to as its “five pillars of growth”: sample technologies, the QIAcuity digital PCR solution, the QIAstat-Dx solution for syndromic testing, the NeuMoDx integrated PCR platform and its QuantiFERON latent TB testing franchise. Two of the pillars, sample technologies, such as DNA and RNA isolation solutions, and latent TB testing via QuantiFERON, are already established company franchises, whereas the others are relatively new product lines. Underlying the pillars are what the company calls its core businesses: genomics/NGS, precision medicine, PCR/nucleic acid amplification, human ID/forensics, QIAGEN Digital Insights and OEM reagents. For all pillars, excluding sample technologies, revenues are expected to grow double digits at constant exchange rates (CER) post COVID. Mr. Bernard also described other priorities, stating “One, transforming customer service and service activities as a profit center for our company. And, second, having a much stronger monitoring of our installed base management and installed base profitability.”
The company expects COVID-19-related sales to decline next year down from an expected $600 million this year due to vaccinations. In 2020, sample tech is expected to account for $400 million of COVID-19 sales. But as Mr. Bernard declared, “What we do not believe is that vaccination kills testing. There are many examples in healthcare proving that a test-and-treat strategy is the right strategy.” He cited flu and HPV as two examples. Going forward, new COVID-19 related testing opportunities for the company include tests for monitoring immunity status with a new QuantFERON assay, and for influenza-like infections with the NeuMoDx platform and assays.
Instruments are expected to reach more than $770–$780 million in sales this year and more $750 million next year…
For sample technologies, the company promised expanded consumables sales driven by rapid uptake of its instrumentation this year as a result of pandemic-related testing. Instruments are expected to reach more than $770–$780 million in sales this year and more $750 million next year, which includes an expected decrease in manual RNA sample prep sales. A key part of the strategy for sample tech is driving consumables growth as a result of new instrument placements, up by more 3,300 placements this year, including 2,000 new sample prep placements, and new applications, such as microbiome research.
With shipments beginning in October, QIAGEN estimates its QIAcuity business will total $10 million this year with an installed base of approximately 150 systems. In 2021, sales are estimated to reach around $45 million and the installed base should reach 600. The product line features three different instruments, with differentiation features, according to the company, such as a plate-based workflow very similar to PCR, a time to result of 2 hours and an entry-level system price of $30,000 per system. With initial applications in the research market, such as COVID-19 wastewater testing, the company then plans to enter the clinical market, gaining CE-IVD marking for the system in 2023.
Introduced in 2018, the QIAstat Dx real-time PCR platform is expected to hit $50 million in sales this year, having racked up around 2,000 placements. In 2021, sales are estimated to total around $120 million. Supporting QIAstat Dx growth in coming years and expanding on its growth in installed base that has resulted from COVID-19 testing, QIAGEN will introduce a number of new panels, including GI panels in the US and a meningitis assay in Europe in 2021. The company will also launch a COVID-19 RUO assay for the platform next year. Priority investments include building out manufacturing capacity to meet unfulfilled consumables demand.
One of QIAGEN’s newest products and one accessed through the purchase of NeuMoDx Molecular (see IBO 10/1/20), the PCR-based NeuMoDx launched in late 2018. Sales are expected to be approximately $50 million this year, rising to around $140 million next year. In 2020, the installed base will reach an estimated 130 systems. Like NeuMoDx, QIAGEN will expand product sales in coming years with expanded menus and regulatory submissions in both the US and Europe over the next two years. This includes 7 test submission to the US FDA in 2022 and following years.
In the latent TB testing market, QIAGEN sees much growth ahead, estimating only 25% of the overall market for this test has switched from the traditional skin test to blood-based testing, such as that offered by its QuantiFERONn test. The business is expected to record around $180–$190 million in sales this year, with sales of approximately $230 million forecast for 2021. As with NeuMoDx, growth will come from new regulatory approvals for assays, including the launch of QIAreach in the second half of 2021. The QIAreach SARS-Cov-2 virus enables testing in decentralized setting such as airports. Although sales declined in 2020 due to COVID-19, the company expects 2021 sales to equal those of 2019.