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PKI AT A GLANCE

P/E ► 23.5 AVG EV/EBITDA ► 15.1 AVG ROA ► 3.2% AVG ROE ► 4.7% AVG Debt to Equity ► 0.910 AVG Current Ratio ► 1.66 AVG Interest Coverage Ratio ► 6.45 AVG

 

 

 

 

 

 

PerkinElmer (NYSE:PKI) sells diagnostic tools and specialized optics for medical and environmental analysis, and had 2007 sales of $1.8 billion.^[1] PerkinElmer sells approximately half of all prenatal genetic diagnostics in the US and is currently the only company to offer a complete genetic screening package that test for hereditary diseases and saves umbilical cord blood for potential stem cell use.^[2][3] In 2007, it acquired ViaCell for $296 million to make use of their ViaCord umbical cord blood samples to expand its neonatal and prenatal scanning business.^[4]

Currently 90 percent of newborns in the US receive mandatory screening and the passage of two new federal bills favoring genetic screening would expand PerkinElmer's target market.^[5] In 2007, PKI launched EcoAnalytix, a new environmental diagnostics platform targeted for developing countries that includes tools to test for food safety, water quality, and biofuel standards. As an international company, favorable foreign exchange rates accounted for 25% of PerkinElmer's revenue growth between 2006-2007.^[6]

Business Financials

PerkinElmer has increased its gross sales from $1.5 billion in 2006 to $1.8 billion through acquisitions and the development of international sales. Growth has been particularly strong in China, where sales have increased more than 100% from $46 million in 2006 to $97 million in 2008.^[7] PerkinElmer seeks to increase its presence in India through the opening of Ecolytix and the $2 million acquisiton of minority shares of PerkinElmer India. ^[8]

Business Segments

‎ ^[9]

‎ ^[10]

• Life and Analytical Sciences (74% of sales, 63% of operating income) provides analytical and genetic screening tools for the biological and environmental sciences, including genetic screening equipment and analytical supplies, instruments, and reagents. The segment also includes molecular and atomic spectroscopy, inductively coupled plasma, gas chromatography, liquid chromatography, and thermal analysis instruments.^[11] Pre-birth screening constitutes a primary element of this segment; PerkinElmer has approximately 50% of total sales in prenatal genetic screening products in the US among other markets.^[12] The company makes instruments, software, reagents, and analytic tools to test for metabolic and genetic disorders at birth. With the acquisition of Viacell, PerkinElmer also extracts stem cells from umbilical cord blood to help treat disorders screened by the system.^[13] The acquisition of Pediatrix' genetic screening counseling service now provides a one-stop genetic screening product with imagery to newborns. PerkinElmer has the most comprehensive genetic screening package of any of its competitors.^[14]

• Optoelectrics (26% of sales, 37% of income) sells specialty lighting equipment used in medical imagery. ^[15] This segment primarily makes silicon flat panel detectors used for diagnostic medical imaging and radiation therapy, but also sells specialized lighting equipment used in consumer products such as digital cameras and cell phones.^[16][17]

Research

PerkinElmer increased its research and development funding by over 14% between 2006 and 2007, but did not did not change the distribution of its funding. In 2007, as in 2006, the company allocates most of its funding to genetic screening within its Life and Analytical Sciences Segment and medical imaging within its Optoelecronics segment.^[20]

Geographic Distribution

PerkinElmer sells its products in over 150 countries worldwide, but primarily in the United States, United Kingdom, China, France, and Italy.^[21] It has opened a regional office in Mumbai in 2007 in order to increase its presence in the developing world. The company is aiming to develop its sales in emerging economies, specifically in China, where its sales have grown more than 100% to $97 million since 2006. ^[22]

Acquisitions

• PerkinElmer acquired Viacell for $295 million in 2007. Viacell provides blood-banking services and research into the use of umbilical cord blood. Viacell's research in preserving umbilical cord blood would help advance PKI's pre- and neonatal genetic screening technology. PKI plans to close or sell non-essential parts of ViaCell.^[23]
• PerkinElmer also acquired Pediatrix Medical Group's Newborn Metabolic Screening Business, which provides newborn and neonatal metabolic screenings for hospitals. PKI expects that these products will create a complete genetic and metabolic screening package to offer at hospitals.^[24]

Trends and Forces

Bills mandate more genetic screening

PerkinElmer has screened over 240 million babies world wide for genetic disorders; more than any other company.^[25] Pre-birth or prenatal genetic screening is rapidly advancing in the US and has now become mandatory for nearly 90% of newborn babies in the US. Many of the states which require genetic screening do not screen for all genetic disorders (i.e. Mass., a pioneer in this field, only requires genetic screens in 12 of 29 of the core test areas); however, two new federal bills have been introduced that would mandate more genetic screening. The passage of these bills would expand the market for PerkinElmer's neonatal genetic screening business.^[26]

New focus on environmental diagnostics

PerkinElmer's Life and Analytic Sciences segment sells analytic tools to measure the impact of human activities on the environment. The company launched a new platform EcoAnalytix in India and China, which includes tools to test for food safety, water quality, and biofuel development.^[27][28] The company cites sales of a food safety test (which tests for the presence of melamine, a contaminant) as the first tangible result of EcoAnalytix, although results of sales have not been published.^[29]

Currency exchange rates increase international sales

60% of PerkinElmer's sales are located outside of the United States, which makes foreign exchange an important part of sales revenues and production costs. ^[30] While currency exchange rates are a risk associated with international business, the export-favorable fall of the dollar was responsible for 25% of the increase of sales between 2006 and 2007.^[31]

Competition

No one competitor competes with PerkinElmer in all of its product and geographic markets. Many of PKI's products incorporate patented technologies, so they have no direct competitors for those products.

• Thermo Fisher Scientific (TMO) is primarily a competitor in the lab hardware and diagnostic component of the Life and Analytical sciences segment. The company also produces diagnostic and analytic tools that compete directly with PKI's environmental diagnostic offering. Although TMO's sales in this segment are almost four times those of PKI in this segment, their product offerings differ in that TMO's core business is in disposable laboratory products while PKI's is in genetic screening. ^[32]

• Agilent Technologies (A) had annual sales of over $5 billion in 2007 and is specialized in wireline test equipment and bioanalytic test equipment. The bioanalytic segment has sales of more than $1.6 billion and competes with PKI in its analytic products, but not in its diagnostic products.^[33]

• Waters (WAT) had annual sales of $1.5 billion in 2007. It competes with PerkinElmer in water and environmental diagnostics as well in the creation of diagnostics and lab equipment for specialized types of research and in thermal analysis. Furthermore, more than two thirds of its sales come from outside of the United States. Its research and development budget was $80.6 million in 2007. ^[34]

While many of its products are comparable to competitors' products, PerkinElmer's one-stop genetic scanning and umbilical blood preservation system is new and unique in the genetic screening market.

Notes

1. ↑ PKI 2007 SEC Filing 10-K, Item 8, Pg. 106
2. ↑ PKI 2007 Annual Report, Pg. 2
3. ↑ PKI 2007 SEC Filing 10-K, Item 1, Pg. 3
4. ↑ PKI 2007 SEC Filing 10-K, Item 1, Pg. 3
5. ↑ Nearly 90 Percent of Babies Receive Recommended Newborn Screening Tests
6. ↑ PKI SEC Filing 10-K, Item 7A, Pg.30
7. ↑ PKI SEC Filing 10-K, Item 8, Pg.107
8. ↑ PKI SEC Filing 10-K, Item 8, Pg.71
9. ↑ PKI 2007 SEC Filing 10-K, Item 6, Pg. 27
10. ↑ PKI 2007 SEC Filing 10-K, Item 6, Pg. 27
11. ↑ PKI SEC Filing 10-K, Item 1, Pg.3
12. ↑ PKI 2007 Annual Report, Pg. 2
13. ↑ PKI SEC Filing 10-K, Item 1, Pg.6
14. ↑ Pediatrix Screening
15. ↑ PKI SEC Filing 10-K, Item 1, Pg.3
16. ↑ PKI SEC Filing 10-K, Item 1, Pg.8
17. ↑ PKI SEC Filing 10-K, Item 1, Pg.8
18. ↑ PKI 2007 SEC Filing 10-K, Item 6, Pg. 27
19. ↑ PKI 2007 SEC Filing 10-K, Item 8, Pg. 106
20. ↑ PKI 2007 SEC Filing 10-K, Item 7, Pg. 31
21. ↑ PKI 2007 SEC Filing 10-K, Item 8, Pg. 107
22. ↑ PKI 2007 SEC Filing 10-K, Item 8, Pg. 107
23. ↑ PerkinElmer to Acquire Viacell in 300m deal
24. ↑ PKI SEC Filing 10-K, Item 1, Pg.4
25. ↑ PKI 2007 Annual Report, Pg. 3
26. ↑ Nearly 90 Percent of Babies Receive Recommended Newborn Screening Tests
27. ↑ PKI 2007 Annual Report, Pg. 3
28. ↑ Ecoanalytix
29. ↑ PKI 2007 Annual Report, Pg. 3
30. ↑ Hoovers: PKI
31. ↑ PKI SEC Filing 10-K, Item 7A, Pg.30
32. ↑ TMO 2007 SEC Filing 10-K, Item 7, Pg. 36
33. ↑ A 2007 SEC Filing, Item 1, Pg. 4
34. ↑ WAT 2007 SEC Filing, Item 1, Pg. 4