Life Sciences Business

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In the second half of the year, sales in the Life Sciences Business increased by 7.7% in local currencies and were 7.3% above the prior-year period in Swiss francs. Excluding IBL International, since August 1, 2014 part of the Life Sciences Business, sales in the second half grew by 0.4% in local currencies and by 0.2% in Swiss francs, however order entry for the full-year in the Life Sciences Business exceeded sales considerably, resulting in a significant increase in order backlog. Sales for the full year totaled CHF 236.3 million, representing an increase of 7.5% in local currencies and 5.6% in Swiss francs over the prior-year period (2013: CHF 223.7 million). On an organic basis, sales increased by 3.3% in local currencies and by 1.5% in Swiss francs. Contributing to this growth were increased sales of liquid handling platforms in the established North American and European markets and more revenues from services and consumables. However, the business environment in China was challenging in 2014.

Operating profit in the segment increased markedly to CHF 40.2 million in the year under review (2013: CHF 18.4 million). The increase is primarily the result of the higher sales volumes and lower research and development expenses. The operating profit margin grew to 16.3% of sales (2013: 7.8%). 

Tecan is the market leader and a pioneer in laboratory automation. Tecan has been offering a wide range of laboratory instruments and automated workflow solutions for use by pharmaceutical and biotechnology companies, government research institutions and universities, diagnostic laboratories, as well as scientists from numerous applied markets for 35 years. In 2014, the Life Sciences Business segment represented 59% of total sales of the Tecan Group.

• Launch of the Fluent™ Laboratory Automation Solutions family as the latest addition to the Company’s extensive portfolio for liquid handling solutions 
• Acquisition of IBL International, a leading supplier of specialty diagnostics

In the Life Sciences Business segment, Tecan distributes products through its own market organization and distributors in more than 50 countries worldwide. Sales and application specialists communicate with end customers to discuss their various requirements in terms of automating highly diverse laboratory procedures, while service engineers as well as helpdesk and expert-line specialists work to ensure a high degree of customer loyalty and satisfaction.

Most of these customers work in the field of life science research and applied markets. Around one-third of sales in this segment are generated from customers in the diagnostics market. Customers in the fields of research and diagnostics place various requirements on products and the sales process. The diagnostics market is strictly regulated by national supervisory authorities and each automation solution is used only within a clearly defined area of application. Product features such as instrument reliability, quality and reproducibility of test results as well as user-friendliness are extremely important. And in the area of research, highly innovative, flexible and user-friendly automation solutions continue to play a key role. Greater focus was given to the various needs and requirements of both customer groups in 2014. Tecan’s central management organization and local sales organization, with two separate organization units, is geared specifically toward both groups.

In the year under review, Tecan acquired IBL International, a leading supplier of specialty immunoassays, thereby supporting Tecan’s evolution into a solutions business. 

Within the Life Sciences Business, the largest product group is the scalable liquid handling platforms, which are used to pipette fluids with optimum precision and automate laborious and repetitive manual procedures. These platforms can be configured from the wide-ranging portfolio of available modules and devices to provide a high degree of flexibility and easy adaptability for a diverse range of applications. Highly complex customized offerings are also provided to a smaller group of customers. Tecan also provides a wide range of bioanalytical instruments such as microplate readers and washers which allow reactions to be monitored or specific analytes to be measured and are used as independent devices or integrated within the liquid handling platforms to ensure a complete customer solution. Tecan also works with numerous partner companies to integrate their test procedures or devices to provide comprehensive workflow solutions. Such workflow solutions include instruments, software packages and special application know-how as well as consulting, service and consumables. Tecan is continuing to show strong growth in its consumables business. New, value-added products that have been launched in recent years are the driving forces behind this growth.

In the year under review, Tecan acquired IBL International, a leading supplier of speciality immunoassays, thereby supporting Tecan's evolution into a solutions business.

The introduction of two main platforms marks the beginning of a new product cycle, in both liquid handling and detection. The Company has expanded and further developed its existing ranges, and launched new consumables. Tecan is shortening the intervals between new launches.

Modern laboratory automation increases sample throughput in a laboratory, minimizes human error, enhances precision, delivers reproducible test results, documents these results and thus improves productivity as a whole in the laboratory. Solutions that are available today are technically able to automate most highly complex processes; however, they are often complicated to use, meaning usage is limited to a small expert group within the laboratory. User-friendliness is therefore one of the most important benefits for customers, in addition to existing technical differences in the precision and reliability of the system. Tecan is renowned for its user-friendly solutions and has increased its focus on this area. 

User-friendliness has been improved by liquid handling solutions that are tailored to a special variety of applications thanks to both their instrument configuration and user software. For example, the Freedom EVO® NGS platform, which fully automates sample preparation for next generation sequencing (NGS), was launched in the year under review. Next generation sequencing is the most rapidly growing application in the area of genomics, i.e. research into genetic material. The new workstation automates the key steps of sample preparation and is also user-friendly, even for inexperienced users. The Freedom EVO® NGS platform simplifies and speeds up time-consuming and laborious work steps. Tecan has already developed application protocols for standard reagents and technologies from various manufacturers in the field of sequencing. This enables laboratory users to start their research activities immediately, without having to develop these protocols themselves.

Additional examples of liquid handling solutions that are tailored to a special variety of applications:

• The Freedom EVO® ppSPE MS workstation can reduce the time needed for sample preparation for mass spectrometry by over 50% and can be operated by users who don’t have experience with automation. Each sample can be tracked throughout the entire process.

• The Freedom EVO® Nucleic Acid Purification workstation can be used for a range of applications in the field of genomics. The application can be started and operated intuitively via a touch-sensitive screen using the software interface TouchTools™, which reduces training time and therefore laboratory costs, and helps to prevent errors.

At the beginning of 2015, Spark™ marked the introduction of a new generation of the reader platform to the portfolio of detection instruments. The Spark™ 10M multimode microplate reader is designed to offer greater flexibility and increased productivity for cell biology and genomics customers. The all-new platform delivers a combination of exceptional capabilities and ease-of-use to simplify routine laboratory tasks. At the heart of the Spark 10M is a unique optics module that ensures that laboratories no longer have to make a trade-off between flexibility and sensitivity. Integrated capabilities for cell counting and incubation simplify cell biology protocols, while ultra-fast scanning – in under five seconds – allows for rapid application analysis in the field of genomics. 

The acquisition of IBL International is an important strategic step to support Tecan’s evolution into a solutions business with a higher share of recurring revenues. IBL International is a leading Company in the field of microtiter plate-based immunoassays, with one of the widest ranges of tests for specialty diagnostics to be used in research and clinical laboratories. Tecan has a long tradition serving the clinical market with instruments optimized for immunoassay processing. Microtiter plate-based immunoassays are a growing market with a large and increasing number of tests for medical specialities, a market segment generally outside the scope of large in-vitro diagnostics companies and therefore outside the focus of Tecan’s typical Partnering Business customers.

Established over 30 years ago, IBL International employs staff of over 80 and has its main operations in Hamburg, Germany. The Company develops, manufactures and offers a comprehensive portfolio of immunoassays. The portfolio comprises enzyme, radio and luminescence immunoassays for research and clinical laboratories, including a large selection of specialty assays for endocrinology (hormone measurement), neurodegeneration (e.g. Alzheimer’s disease), neonatal screening and assessing steroid hormones in saliva.

Although the number of different specialized tests is large and growing, only a smaller number of each single test is processed by laboratories per day (high mix/low volume). New tests for such medical specialities are usually developed using proven immunodiagnostic technologies and first introduced in a microtiter plate format. In this growing segment, there is an increasing need for an integrated instrument and reagent offering. End-users would greatly benefit from less complex, user-friendly automation with lower throughput and which is pre-configured with reagents. 

Automated microtiter plate processing of immunoassays is a traditional stronghold of Tecan in the in-vitro diagnostics market. Together with IBL International, Tecan can leverage its automation expertise and leading position within the immunoassay market for open instrumentation platforms and combine dedicated instruments with one of the widest ranges of immunoassays for specialty diagnostics.

In addition to launching new, innovative products and expanding its existing business through acquisitions, Tecan’s Life Sciences Business has other growth drivers.

Tecan generated 23% of sales in this segment from services and 14% from plastic consumables in the year under review. The acquisition of IBL International enabled Tecan to generate 4% of sales in this segment from reagents for the first time. The share of all these recurring sales is to be further expanded. Plastic pipette tips, which are used with liquid handling platforms, account for the largest proportion of consumables. Tecan supplies several hundred million pipette tips per year. The use of high-quality consumables improves data quality and ensures that test results are reproducible. They are a key part of the validated workflow solution in diagnostics. 

Tecan is continuously expanding its product offering in the area of plastic consumables and benefits from the broad base of existing installed instruments. New products were also launched in 2014, most recently a new version of special pipette tips, individual layers of which can be stacked nested in one another. This enables high-throughput processing in which only a fraction of the liquid handling platform surface is needed to prepare the consumables. 

Tecan is also increasingly launching consumables that contribute even greater value to the workflow solution. The first product of this kind, the AC Extraction Plate™, was used in various laboratories in the year under review. This extraction plate, with the inner surface of each well coated with a special technology, was developed to make it possible to easily automate sample preparation for mass spectrometry. The proprietary TICE™ (Tecan Immobilized Coating Extraction) technology enables extraction of low molecular weight analytes such as vitamin D or testosterone for subsequent analysis with a mass spectrometer. The AC Extraction Plate eliminates numerous laborious and difficult-to-automate process steps. 

As shown by the example of IBL International, Tecan aims to increasingly offer reagents for specialty diagnostics, thereby adding a new source of recurring revenues.