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WIKI ANALYSIS
Beckman Coulter (NASDAQ: BEC) is a manufacturer of biomedical testing instrument systems with a top 5 market share in blood testing, blood clotting, immunoassay, chemistry testing, and lab automation markets[1]. Beckman Coulter generates its revenue from leases of these instruments to customers as well as from consumables and accessories for those instruments, which include reagent kits, supplies and services.
Beckman Coulter sells its major instruments through leases to customers, which is the commonly practiced methods of sales in the biomedical testing market. This leasing system results in a high proportion of revenue recurring year over year in the form of lease payments, which lowers overall risk of revenue fluctuation. 90% of Beckman Coulter's revenue is recurring year over year[2].
Central laboratories of hospitals represent Beckman Coulter's most significant customer group. Purchase of a Beckman Coulter instrument requires a significant investment for these customers in infrastructure and implementation[3]. These high switching and implementation costs that follow from this steep investment lead to low turnover within the biomedical testing market. As a result, gaining market share from competitors and taking advantage of new market opportunities is critical to the success of Beckman Coulter.
In the first three quarters of 2008, Beckman Coulter posted revenues of $1.94 billion for a net income of $116.8 million. These reflect a 17% increase in revenues from the first three quarters of 2007 and a 30% decrease in net profit. Q4 earnings will be announced on February 9, 2009.
Corporate Overview
History
Beckman Coulter was founded as National Technical Laboratories in 1935 by Arnold O. Beckman to commercialize a pH reader that he had developed. In 1982 the company, then known as Beckman Instruments, was acquired by SmithKline to form SmithKline Beckman. In 1989, as SmithKline merged with Beecham Group to form SmithKline Beecham (now GlaxoSmithKline (GSK)), Beckman Instruments regained its independence. In 1998, Beckman acquired Coulter Corporation to become Beckman Coulter (BEC).
Business Financials
Beckman Coulter's revenue grew from $2.19 to $2.76 billion from 2003 to 2007, reflecting average growth of 5.9% annually, while net income has largely stayed constant, growing from $207 to $211 million in that same period. This is reflected in the trend in profit margin over that time, which has decreased from 9.45% to 7.65%[5].
The decrease in profit margin from 2004 to 2005 can be attributed to a fundamental shift in Beckman Coulter's sales system. Previously, Beckman Couter had sold its systems to customers, which differed from its competitors, who leased their products. In 2005, Beckman Coulter adopted the leasing system for its products, which had the immediate effect of decreased profit margin due to lost product sales [7]. However, the benefit of the leasing system is that product sales turn into recurring annual revenue from lease payments. As more leases are sold for Beckman Coulter's products, recurring revenue accrues and restores the profit margin back to a stable level[8].
Beckman Coulter's product mix is spread relatively evenly across four segments. Cellular Products is the largest segment, with $840 million in revenue in 2007, followed by Chemistry Products ($749.5 million), Immunoassay Products ($595.8 million), and Discovery and Automation Products ($575.1 million).
Major Product Segments
Cellular Products (30% of revenue)
Cellular analysis consists of hematology, flow cytometry, and hemostasis systems.
Beckman Coulter sells the most frequently ordered diagnostic in hematology, the complete blood cell count (CBC). The COULTER® LH 780 Hematology Analyzer is Beckman Coulter's flagship hematology product for blood cell counting[10]. CBCs are very common tests that can be used to assess the general health status of an individual. CBCs are also useful to check for anemia or the presence and progression of diseases such as leukemia or autoimmune conditions[11].
Flow cytometry helps identify and sort cells that can be important for monitoring the presence and status of diseases such as HIV, leukemias, and lymphomas in tissue samples. Beckman Coulter has several flow cytometers, including the Cell Lab Quanta™ line, the Cytomics FC500 Series, the EPICS® XL™, and the VI CELL S system [12].
Hemostasis is the process of by which blood clots. Hemostasis tests test factors such as platlet counts in the blood in order to spot clotting problems in patients. Backman Coulter's ACL series provides these tests for physicians and researchers [13].
Immunoassay Products (22% of revenue)
Immunoassay tests use antibodies to detect the level of certain disease markers in the body. Beckman coulter has a wide range of immunoassay tests that include anemia, cardiovascular, reproductive, thyroid, infectious disease, blood virus, skeletal, and tumor marker tests. Beckman Coulter's tests include the Access®, UniCel®, AccuTnI™, Hybritech®, OSTASE®, and SYNCHRON® systems [14].
Chemistry Products (27% of revenue)
Like immunoassay tests, Beckman Coulter's chemistry tests measure vital molecules in the body, such as glucose (diabetes) and cholesterol (cardiovascular disease), to monitor and diagnose diseases. However, chemistry tests do not use antibodies for detection. Beckman Coulter's chemistry tests share some of the same platforms as their immunoassays, such as the UniCel® and SYNCHRON® systems [15]
Discovery and Automation (21% of revenue)
Laboratories and hospitals that perform a high volume of tests require automation systems in order to achieve maximum efficiency. Beckman Coulter has a 50% worldwide market share in lab automation systems, and has automated systems for many of their other tests, including the UniCel®, COULTER® LH, and Optima™ systems [16].
Trends and Forces
Market share and customer loyalty is important in Beckman Coulter's markets
Beckman Coulter's instruments are very expensive, and typically require investments in infrastructure and planning as they are implemented into customer labs[17]. As a result, there is a high switching cost for customers once a system has been implemented. This places a high priority on Beckman Coulter and its competitors to take market share from each other. While Beckman Coulter has successfully taken market share from its competitors in the past year (see Immunoassay Market Share and Chemistry Market Share), they continually face the risk that they will lose customers to competitors. High customer loyalty also puts pressure on Beckman Coulter to pursue new markets aggressively as they open up in the biomedical testing space.
Beckman Coulter competes with much larger companies
While Beckman Coulter has obtained significant market share in the markets in which it competes, its competitors, such as JOHNSON & JOHNSON (JNJ), Roche Pharmaceuticals (RHHBY), Siemens AG (SI), and Abbott Laboratories (ABT) are much larger companies. However, Beckman Coulter is fully devoted to biomedical testing, while its competitors are much less focused[18]. Beckman Coulter's focus allow it to devote more of its top talent to make proper market decisions in the market and grab share away from competitors. However, the size and breadth of Beckman Coulter's competitors make them robust to market shifts and downswings relative to Beckman Coulter. This makes Beckman Coulter a riskier company to invest in than its competitors (albeit with higher potential returns).
Sales of Beckman Coulter's tests will be aided by an aging population and increased monitoring of ongoing diseases
For a detailed discussion of the aging population, see also Aging Baby Boomers.
Increased life expectancy in the developed world coupled with decreased birth rates, and an aging "Baby Boomer" generation will increase expenditure on many of the tests that Beckman Coulter sells. In addition, increased expenditure on diseases requiring ongoing treatment, such as AIDS, cancer, and diabetes continue to open up opportunities for Beckman Coulter and its competitors to grab market share[20]. As a result, it is important that Beckman Coulter continue to provide cost-effective and competitive products so that it is able to take advantage of these opportunities.
Competition
Beckman Coulter's major competitors include Becton, Dickinson and Company (BDX), Abbott Laboratories (ABT), JOHNSON & JOHNSON (JNJ), Roche Pharmaceuticals (RHHBY), and Siemens AG (SI). Beckman Coulter competes in several major markets, which are divided in a manner similar to Beckman Coulter's product line in this article.
| Income Data, in millions USD | Beckman Coulter | Abbott Laboratories (ABT) | Roche Diagnostics | JOHNSON & JOHNSON (JNJ) | Becton, Dickinson and Company (BDX) | Siemens AG (SI) | ||||||
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |
| Net revenue | $2,761 | $2,528 | $25,914 | $22,476 | $9,350 | $8,747 | $61,095 | $53,324 | $6,360 | $5,738 | $72,448 | $66,487 |
| Net income | $211.3 | $186.9 | $3,606 | $1,716 | $1,648 | $1,422 | $10,576 | $11,053 | $890.0 | $752.3 | $2,417 | $3,043 |
| R&D as % of sales | 9.9% | 10.5% | 9.7% | 10% | 8.4% | 8.0% | 12.6% | 13.4% | 5.7% | 5.3% | 4.7% | 4.6% |
| Return on Assets | 5.9% | 5.7% | 9.1% | 4.7% | N/A | N/A | 13.1% | 15.7% | 12.1% | 11.0% | 2.6% | 3.5% |
| Return on Equity | 14.7% | 16.2% | 20.3% | 12.2% | N/A | N/A | 24.4% | 28.1% | 20.4% | 19.6% | 8.3% | 12.1% |
Cellular Market Share
The cellular market includes hematology, flow cytometry, and hemostasis testing. In 2007, Beckman Coulter obtained revenues of $508 million in the hematology market, $257 million in the flow cytometry market, and $85 million in the hemostasis market [21]. These markets have values of around $1.9 billion, $900 million, and $1 billion, respectively. Market share information is included in the table below (recent information on flow cytometry is not readily available):
| Rank | Company | Revenue ($ million) | Market Share |
|---|---|---|---|
| 1 | Sysmex | 540 | 28.9% |
| 2 | Beckman Coulter | 508 | 27.2% |
| 3 | Abbott Laboratories (ABT) | 290 | 15.5% |
| 4 | Siemens AG (SI)/Bayer AG (BAYRY) | 270 | 14.5% |
| 5 | HoribaABX | 260 | 13.9% |
| Rank | Company | Revenue ($ million) | Market Share |
|---|---|---|---|
| 1 | Dade Behring Holdings (DADE) | 336 | 40.4% |
| 2 | Instrumentation Laboratory | 155 | 18.6% |
| 3 | Sysmex | 136 | 16.3% |
| 4 | Stago | 120 | 14.4% |
| 5 | Beckman Coulter | 85 | 10.2% |
Immunoassay Market Share
Beckman Coulter has been gaining ground in the $7 billion immunoassay market, from which it obtained $596 million in revenue in 2007. Moreover, in 2007, 50% of Beckman Coulter's new immunoassay sales displaced competitors[24]. Market share information is included in the table below:
| Rank | Company | Revenue ($ million) | Market Share |
|---|---|---|---|
| 1 | Abbott Laboratories (ABT) | 2100 | 33.3% |
| 2 | Siemens AG (SI)/Dade Behring Holdings (DADE) | 825 | 13.1% |
| 3 | Siemens AG (SI)/Bayer AG (BAYRY) | 750 | 11.9% |
| 4 | Beckman Coulter | 596 | 9.5% |
| 5 | Siemens AG (SI)/DPC | 595 | 9.4% |
| 6 | Roche Pharmaceuticals (RHHBY) | 575 | 9.1% |
| 7 | BIOMERIEUX (BIM-FR) | 363 | 5.8% |
| 8 | Fujirobio | 299 | 4.7% |
| 9 | Ortho Clinical Diagnostics | 200 | 3.2% |
Chemistry Market Share
Beckman Coulter has a strong and growing share in the $4 billion chemistry assay market. In 2007, 30% of Beckman Coulter's new immunoassay sales displaced competitors[26]. Market share information is included in the table below:
| Rank | Company | Revenue ($ million) | Market Share |
|---|---|---|---|
| 1 | Roche Pharmaceuticals (RHHBY) | 1634 | 38.2% |
| 2 | Dade Behring Holdings (DADE) | 1205 | 28.2% |
| 3 | Beckman Coulter | 750 | 17.5 |
| 4 | Ortho Clinical Diagnostics | 525 | 12.3% |
| 5 | Siemens AG (SI)/Bayer AG (BAYRY) | 160 | 3.7% |
Automation Market Share
Beckman Coulter dominates the lab automation market for hospitals, with 65% market share in the U.S. and 50% share worldwide. Beckman Coulter's revenue in this segment in 2007 was $575.1 million. The company also holds a 20% share of the life science liquid handling market and a 30% share in the centrifugation market[28].
References
- ↑ Beckman Coulter (BEC) 10K Financial Report 2007
- ↑ Beckman Coulter October 2008 Investor Presentation, p. 24
- ↑ Beckman Coulter (BEC) 10K Financial Report 2007, p.3-5
- ↑ Funding Universe - Beckman Coulter History
- ↑ Beckman Coulter (BEC) 2007 Annual Report, p. 32
- ↑ Beckman Coulter (BEC) 2007 Annual Report, p. 32
- ↑ Beckman Coulter (BEC) Form 10-K, Fiscal year 2007, p. 27-28
- ↑ Beckman Coulter (BEC) Form 10-K, Fiscal year 2007, p. 27-28
- ↑ Beckman Coulter (BEC) 2007 Annual Report, p. 32
- ↑ Beckman Coulter - COULTER® LH 780 Hematology Analyzer
- ↑ Lab Tests Online - Complete Blood Count
- ↑ Beckman Coulter - Flow Cytometry: Instruments and Software
- ↑ Beckman Coulter - Hemostasis
- ↑ Beckman Coulter - Immunoassay
- ↑ Beckman Coulter - Chemistry
- ↑ Beckman Coulter - Laboratory Automation
- ↑ Beckman Coulter (BEC) 10K Financial Report 2007, p.3-5
- ↑ Beckman Coulter October 2008 Investor Presentation, p. 7
- ↑ Beckman Coulter October 2008 Investor Presentation, p. 7
- ↑ Beckman Coulter (BEC) 10K Financial Report 2007, p.3-5
- ↑ Beckman Coulter (BEC) 2007 Annual Report, p. 20
- ↑ Kalorama Information. The Worldwide Market for In Vitro Diagnostic (IVD) Tests, 6th Edition. May 2008, p. 708
- ↑ Kalorama Information. The Worldwide Market for In Vitro Diagnostic (IVD) Tests, 6th Edition. May 2008, p. 744
- ↑ Beckman Coulter (BEC) 2007 Annual Report, p. 18
- ↑ Kalorama Information. The Worldwide Market for In Vitro Diagnostic (IVD) Tests, 6th Edition. May 2008, p. 402
- ↑ Beckman Coulter (BEC) 2007 Annual Report, p. 18
- ↑ Kalorama Information. The Worldwide Market for In Vitro Diagnostic (IVD) Tests, 6th Edition. May 2008, p. 708
- ↑ Beckman Coulter (BEC) 2007 Annual Report, p. 24
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