KEY EXECUTIVES:
Scott Garrett, Chairman, President and CEO
Paul Glyer, Sr. VP, Strategy and Business Development
Charles Slacik, Sr. VP and CFO
Peter Heseltine, Medical Director
Scott Atkin, Group VP, Chemistry, Discovery and Automa-
tion Business and Instruments Systems Development Center
NO. OF EMPLOYEES: 11,000
GLOBAL HEADQUARTERS: Fullerton, Calif.
In a letter to shareholders, Scott Garrett, president and CEO of Beckman Coulter, said changes the company implemented in 2005 have produced “visible strategic, operational and financial benefits.” He noted that the company-wide adoption of Lean and Sig Sigma manufacturing methods have allowed the company to shrink its brick-and-mortar footprint, increase quality and optimize processes.
He also said abandoning the company’s two-division structure in favor of a more integrated “one-company” approach has “yielded greater organizational flexibility.”
Given the company’s financial performance for fiscal 2008 (ended Dec. 31), Garret doesn’t seem to be leading his shareholders astray. The Fullerton, Calif.-based company, which manufactures biomedical testing instrument systems, tests and supplies for laboratories, reported revenue for the year of $3.1 billion, up from $2.7 billion last year. Recurring revenue (supplies, services and lease payments) accounted for $2.4 billion of the total, while equipment sales were $696 million. Earnings for the year before interest, tax, depreciation and amortization increased to $619 million from $542 million.
In 2008, the company made five significant product launches.
One of the most significant releases, according to the company, was the UniCel DxH 800 cellular analysis system, cleared by the U.S. Food and Drug Administration in December. Capturing 29 individual measurements per cell analyzed, the system provides improved sensitivity and specificity, which means more reliable assessment of abnormal cell populations. Laboratories equipped with the system will be able to respond more quickly and accurately to physician demands, improving patient health and reducing the cost of care, the company said. Also in December, the company launched three new systems, completing its family of integrated chemistry-immunoassay work cells. The new systems range from high-volume to very high-volume: UniCel DxC 660i Synchron Access Clinical System, UniCel DxC 680i, and UniCel DxC 860i. Each system targets a different test mix and volume, allowing laboratories to perform chemistry and immunoassay testing simultaneously from a single sample with a single point of entry.
According to Scott Atkin, group vice president of Beckman Coulter’s Chemistry and Clinical Lab Automation business, “We've used our industry-leading systems integration capability to deliver a range of systems which offer labs tremendous flexibility in addressing their needs.”
Looking forward, the company—as most firms do—expects slower growth as a result of the economy this year. However, company officials optimistically point to a 4.5 percent increase in Medicare reimbursement in 2009 for lab-based diagnostics —the largest increase in 15 years.
So far, for the first quarter of fiscal 2009 (ended March 31), total revenue was $691.5 million, down 5.3 percent, or flat in constant-currency terms. On a constant currency basis, solid recurring revenue gains of 4.7 percent were offset by declines in cash instrument sales, primarily in Life Science and Cellular Analysis. Reported net earnings were $20.6 million, or $0.32 per fully diluted share, including a $0.03 after-tax, non-cash charge to interest expense due to new accounting rules governing convertible debt instruments.
The big news for the company so far in 2009 (and undoubtedly for the rest of the year) is Beckman Coulter’s plan to purchase the diagnostic systems portion of Olympus’ Life Sciences business for approximately $800 million. The purchase of the diagnostic business of Tokyo, Japan-based imaging giant Olympus Corp. is expected to broaden Beckman Coulter’s chemistry offering, establishing a leadership position with strength in larger hospital laboratories. Company officials also expect the transaction to extend Beckman Coulter’s chemistry customer base and offer a new customer set for its immunoassay products. U.S. operations for Olympus, including its life sciences and medical device units, are located in Center Valley, Pa.
In 2010, the Olympus Diagnostics business is anticipated to increase Beckman Coulter’s revenue by approximately $500 million on a full year basis and generate approximately $40 million to $50 million in operating income, according to the company. As part of the agreement, Beckman Coulter has the right to deliver up to 37.5 percent of the purchase price in the form of stock. The company expects to finance the acquisition with a combination of newly issued common stock (approximately $300 million) and newly issued debt (approximately $500 million).
“This compelling transaction combines the chemistry product lines of our two companies into a complete chemistry systems offering,” said Garrett. “It enhances Beckman Coulter as a leading provider of chemistry products with additional opportunities to expand our immunoassay reach into their chemistry installed base. Customers will benefit from the expanded range of products, particularly those large hospital and university laboratories where higher throughput systems are preferred. In addition, Beckman Coulter’s strength in total lab automation will be complemented by Olympus’ strong pre-analytical automation position in Europe and Asia.” The deal is expected to close in the third quarter of this year.