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WIKI ANALYSIS
Techne Corporation synthesizes proteins, antibodies and other tools are used by scientists within the medical community to develop methods of diagnosing and treating diseases. The company's hematology division also develops instruments that can be used to test the accuracy of blood testing equipment. Techne's largest customers include pharmaceutical companies universities and government research centers, and the company's research is guided by both proposals from its own scientists.
Techne Corporation has been able to capitalize on the growth in the health care sector during the past two decades. Techne also faces competition from larger companies such as Becton, Dickinson and Company (BDX) and Millipore (MIL), whose primary business is not in the biotechnology industry but who do have divisions actively researching areas concerning biotechnology.
Business Financials
The biotechnology division produces proteins and antibodies as well as kits for measuring the biochemical or immunological activity of a sample for research purposes while the hematology division develops instruments to test the accuracy of blood analysis equipment.[1]
Techne's product catalog has over 11,000 products that are used for biological research throughout the world with 51.7% of sales domestically in the United States and 42.9% internationally. [2] Over 95% of Techne's revenue comes from products that are developed and manufactured in-house. [3]
Consolidated net sales for 2007 increased by $20.9 million (10.3%) to $223.5 million from 2006 with the biotechnology division accounting for 65% of the sales. Approximately $1.2 million of the increase in biotechnology net sales was the result of price increase with the majority of the rest of the increase due to higher sales to pharmaceutical/biotechnology and academic customers. [4] Gross margins, as a percentage of net sales, was 79.1% in 2007 with the biotechnology division again leading the way with a gross margin of 79.9% and R&D Europe and the hematology division lagging behind at 52.9% and 43.1%, respectively. Techne also paid off all of its mortgage debt of $13.8 million and currently has no debt and low liabilities of $14.80 million.[5]
With $256 in cash and investments, Techne has the surplus cash necessary to both reinvest in their existing business and acquire new technology, products, and entire companies. It's most recent acquisition was in July 2005 when it acquired Fortron Bio Science, Inc. and BiosPacific. Techne also established R&D Systems China in late fiscal year 2007 to distribute biotechnology products there and provide better support for its Chinese customers. All orders from third-party distributors should be fulfilled from that facility beginning is the second quarter of fiscal year 2008.[6]
Techne also announced in November a stock stock repurchase authorization of $150 million.
| Year | Revenue | Net Income |
| 1998 | 67.29 | 15.18 |
| 1999 | 90.9 | 16.66 |
| 2000 | 103.84 | 26.58 |
| 2001 | 115.36 | 34.05 |
| 2002 | 130.9 | 27.13 |
| 2003 | 145.01 | 45.4 |
| 2004 | 161.26 | 52.93 |
| 2005 | 178.65 | 66.13 |
| 2006 | 202.62 | 73.35 |
| 2007 | 223.48 | 85.11 |
Trends and Forces
- Growth of Biotechnology - With 65% of its sales coming from the biotechnology division, Techne's growth is naturally correlated with the growth of the industry as a whole. While the industry has had a slight downturn in recent years, the growth in net income of the industry is still 20.05% annually over the past five years. During the same time period, Techne's net income grew at 25.69%.[9] The biotechnology industry is also becoming more concentrated as more traditional pharmaceuticals are acquiring companies in the biotechnology industry.
- International Expansion - Techne now has offices in the United States, three countries in Europe, and China. It's new subsidiary in Shanghai, China has potential to grow due to the increased investment in research and medical health in the country. Whether Techne can obtain a significant market share in China remains to be seen though as the subsidiary has just opened this year. The strong Euro and British Pound have also boosted the company's earnings during the past year, and as Techne expands, it will be impacted even more by these fluctuations in the currency exchange rate.
- Aging Population both in the US and Internationally - The aging worldwide population and increases in investments in health care could impact Techne. While the company is not directly a drug manufacturer, its products are used in hospitals and research facilities for drug research. The largest area of expenditure for many countries is now health care, and that figure is only expected to increase in the coming years. In the United States, nearly a quarter of the population was born during 1946 to 1960, and as they age, spending for medical products is increasing as seen by the rising cost of Medicare. In China, where Techne is looking to expand into, the lower mortality and one-child policy is also leading to a rise in the average age of the population. By 2020, over 23% of the population is expected to be over 65. The increase in age of the worldwide population will thus lead to both more funding in biological research and hospital equipment purchases, both of which could be beneficial to Techne.
- Rapidly Changing Technology - The rapidly changing technological landscape in health care presents both opportunities and challenges for Techne. The potential for growth is strong as there are still many areas of research that it could pursue, but Techne must also be constantly be spending money on research and development to stay ahead of the competition. New products introduced within the last five years accounted for 77.5% of the growth in the biotechnology division in 2007[10], and some of their older products are no longer in demand.
| Research and Development Expenses for 2007 (in thousands)[11] | ||||
| 2007 | 2006 | 2005 | ||
| Biotechnology | 19,333 | 18,114 | 17,609 | |
| Hematology | 749 | 711 | 770 | |
| Overall | 20,082 | 18,825 | 18,379 | |
Competition
Techne Corporation operates in a relatively specialized market in which there are high barriers for entry due to the technological nature of their research. They are an established and respected research company having been in existence since the 1980s, and with the requirement for accuracy needed for medical research, institutions and universities are more likely to buy from a reputable company. Competitors to Techne include Invitrogen, BD Biosciences, and Millipore.
- Invitrogen (IVGN)- A leading biotechnology company, Invitrogen also features a catalog of pre-made products to facilitate the research process. They have a larger research and development base and have expanded more into international markets, but Invitrogen is also heavily dependent on grants from the National Institute of Health whereas Techne's research and development is wholly owned and self subsidized.
- Becton, Dickinson and Company (BDX) - While the main focus Becton, Dickinson, and Company is the manufacture of medical devices, one of its segments, BD Biosciences, also sells research and clinical tools to researchers and clinicians. While Becton Dickinson is a much larger company than Techne with 27,000 employees in over 50 countries, BD Biosciences is the smallest of its divisions.
- Millipore (MIL) - An international biosciences company, Millipore is known for its micrometer pore-size filters and tests. Thus, while its products also serves researchers and hospitals fo purification purposes, Millipore's filters are also used in other industries such as in food and beverage production. Milipore, however, does not produce the research kits and purified proteins and antibodies that Techne does.
| Comparison of Techne and Its Competitors | ||||
| 2006 Revenue (in Millions US$) | Percentage Growth Over Previous Year | 2006 R&D Expenses (in Millions US$) | % Revenue Spent on R&D | |
| Invitrogen[12] | 1,263 | 5.4% | 107.6 | 8.52% |
| BD Biosciences[13] | 877 | 10% | N/A | N/A |
| Millipore[14] | 1,255 | 27% | 86.6 | 6.9% |
| Techne[15] | 223 | 10% | 20.1 | 9.0% |
Market Share
Techne is the leading US supplier of cytokines with 50% of the market share. It acquired its largest competitor in the cytokine market in 1998, a division of Genzyme (GENZ), which had a 10% market share. Techne is also the third largest supplier of hematology control products behind Beckman Coulter (BEC) and Streck.
Footnotes
- ↑ Techne Corporation Website: About TECHNE
- ↑ Techne Annual Report 2007, P.4; http://www.techne-corp.com/pdf/Techne_AR_2007.pdf
- ↑ Techne Annual Report 2007, P.7; http://www.techne-corp.com/pdf/Techne_AR_2007.pdf
- ↑ Techne Annual Report 2007, P.9; http://www.techne-corp.com/pdf/Techne_AR_2007.pdf
- ↑ Google Finance TECH
- ↑ Techne Annual Report 2007, P.8; http://www.techne-corp.com/pdf/Techne_AR_2007.pdf
- ↑ MSN Ten-Year Summary TECH
- ↑ Techne Annual Report 2007, P.8; http://www.techne-corp.com/pdf/Techne_AR_2007.pdf
- ↑ MSN Money TECH
- ↑ Techne Annual Report 2007, P.2; http://www.techne-corp.com/pdf/Techne_AR_2007.pdf
- ↑ Techne Annual Report 2007, P.10; http://www.techne-corp.com/pdf/Techne_AR_2007.pdf
- ↑ Yahoo Finance IVGN
- ↑ BD Investors Relations Press Release
- ↑ Yahoo Finance MIL
- ↑ Yahoo Finance TECH Income Statement
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