Partnering Business

(OEM business)

Total sales Partnering Business1

(CHF million)

EBIT Partnering Business

(CHF million)

EBIT margin Partnering Business

(in % of sales)

1 Sales to third parties + intersegment sales

Performance

After recording declining sales in the first half of the year, the Partnering Business recovered strongly in the second half, posting growth of 14.2% in local currencies and 14.7% in Swiss francs. The Partnering Business generated sales of CHF 163.2 million in financial year 2014 (2013: CHF 164.6 million), which corresponds to a slight decrease of 0.2% in local currencies and 0.8% in Swiss francs. Significant growth from newly launched instruments largely offset headwinds from lower order placement from one large customer account and reduced sales in the components business, which had recorded significant growth in the prior-year period. Order entry in the Partnering Business saw substantial growth in the second half enabling the strong H2 sales, but also resulting in a significant double-digit increase in order backlog at year end.

 

Operating profit in the Partnering Business reached CHF 24.9 million in 2014 (2013: CHF 42.7 million). The operating profit margin decreased from an extraordinary high level in the prior-year period to 14.9% of sales (2013: 25.5%). This reduction is mainly a reflection of lower profitability in the launch phase of new instruments and increased investments in Tecan’s innovative eFluidics™ technology. 

Sales by product groups

(in % of sales)

Tecan not only provides end customers with automation solutions, but is also a leading developer and manufacturer of OEM instruments and components which partner companies sell under their own name. Tecan has been operating its OEM business since the Company was founded 35 years ago; parts of the business within today’s Group can even look back on 40 years of history. The share of this segment in the total sales of the Tecan Group was 41% in 2014.

Highlights of 2014

  • Significant increase in serial production of Dako Omnis, a platform launched by partner Dako in 2013 for tissue-based cancer diagnostics. 
  • Completion of development and start of serial production and delivery of the ORTHO Vision™ Analyzer to partner Ortho- Clinical Diagnostics.

Organization

In the Partnering Business, corporate customers, who are mainly diagnostics companies, are managed centrally via Key Account Management. Employees in Europe, North America and Asia ensure local management of existing customers and support the acquisition of new customers. There are direct sales employees in individual national markets for the components business.

 

The sales organizations for components and complete instruments, which were previously managed separately, were brought together under a single management organization in the year under review, resulting in synergies between the two areas. In the components business, Tecan supports instrument makers with essential components where they want to develop an instrument themselves. By contrast, in the instruments business, Tecan takes over the development of the entire system, which it then manufactures under contract. By joining these two areas, Tecan can now address individual customer needs even better and offer ideal solutions for customers. 

 

Product portfolio

In the Partnering Business, Tecan benefits from diagnostics and other life science companies outsourcing instrument development, either entirely or for specific parts, to specialists like itself. This enables these companies to focus on developing diagnostic or research-related tests. In recent years, this trend has been accelerating. OEM customers benefit from Tecan’s extensive technology experience in a wide range of instruments and modules in the area of laboratory automation. By outsourcing instrument development, customers are able, among other things, to shorten the time to launch while also gaining access to Tecan’s innovative technologies.

 

Tecan has a wide range of products. The Company supplies various well-known diagnostics instruments in the OEM business and serves several hundred customers with components. 

 

Components

Tecan’s Cavro® brand is the market leader in laboratory automation liquid handling components. The Company supplies laboratory instrument manufacturers with essential components such as precision pumps, valves, robotic arms and development software. They are used in systems that have a wide range of applications in life science research, diagnostics, forensics and numerous other industries. In customers’ product ranges, Tecan components generally remain an indispensable element over the entire life cycle of a device. For example, Tecan supplies manufacturers in the fast-growing area of next generation sequencing with the Cavro® XMP 6000 Multi-Channel Pump for precision handling of fluids in different sequencers. 

DAKO OMNIS

Platform-based automation solutions

Rapid market launch and low development costs are key for some OEM customers. In these cases, Tecan can adapt the products and platforms it develops for its own end customers to the specific needs of OEM customers. These adapted and standardized platforms are then distributed under the customers’ own brand name as system solutions that combine Tecan’s instruments with the partner’s own specific tests. Detection instruments from Tecan can also be modified or integrated into fully automated laboratory solutions for OEM customers. 

 

One example of this type of platform-based automation solution is one of the world’s most successful molecular diagnostic platforms. It is marketed by the partner as a system solution jointly with a wide range of different molecular diagnostic tests. Applications include, for example, therapy monitoring in HIV or hepatitis patients and detection of sexually transmitted infections. 

CAVRO® XMP 6000

Dedicated automation solutions

When an OEM customer is looking for a specific product, designed and manufactured to a specific functionality and cost, a dedicated system development can be the answer. Dedicated systems are usually most appropriate for products with a longer life cycle and when the specific functionality and total cost-of-ownership are the key decision criteria. By choosing to partner with Tecan, OEM customers get access to the Company’s full range of technologies, modules and software solutions as well as its expertise in system integration and regulatory and quality-related processes. 

 

Dako Omnis, a new platform for automated advanced staining for tissue-based cancer diagnostics, is one example of a dedicated automation solution. The system automates both established processes in the diagnosis of abnormal cells: immunohistochemistry (IHC) and in-situ hybridization (ISH). 

 

 

Customer service and consumables

Support for OEM customers does not end once the instrument development is finished. Tecan also offers OEM customers a range of services after the product is launched via its global service infrastructure. The Company can install instruments directly at the end customer’s location, provide a helpdesk facility, train the OEM customer’s service team and even handle customer service itself. In addition, Tecan maximizes instrument operation time by providing a global spare parts service. OEM customers in the diagnostics market may benefit from Tecan’s high-quality consumables such as certified pipette tips, which are an important component of a validated workflow solution. Only high-quality consumables can help ensure a high level of quality and reproducibility in tests. Thanks to the growing number of installed devices in recent years, this business posted high growth rates.

Launch of new products

Tecan has a broad base of OEM customers and is continuously increasing the number of supply agreements. The supply of new instruments generates additional sales stepwise, building on the established base. This enables Tecan to grow more rapidly than the market. In the coming years, Tecan expects a significant increase in sales of new diagnostics instruments in the Partnering Business.

 

Numerous customers are also developing instruments incorporating innovative Tecan components as elements. When serial production of these instruments begins, it will result in higher volumes of the components being required and therefore higher sales for Tecan. 

 

Dakno Omnis for Dako

Dako Omnis is used in tissue-based cancer diagnostics. The platform was launched by partner Dako, an Agilent Technologies Company, in 2013. Dako Omnis offers full automation and fulfils the requirements of large diagnostic laboratories, hospitals and universities. It offers continuous loading with individual samples or batch loading, as well as the option of leaving the system to run overnight. It therefore sets new standards for what customers can expect from an automated platform with regard to flexibility, capacity, efficiency and traceability of samples. The platform offers state-of-the-art software that is intuitive to operate and allows an improved level of monitoring in the laboratory. Key processes such as slide processing and instrument maintenance can now be traced back to individual employees, which significantly improves quality control.

 

ORTHO VISION™ ANALYZER

ORTHO VISION™ Analyzer for Ortho-Clinical Diagnostics

The ORTHO VISION™ Analyzer is a next-generation diagnostics instrument used for blood typing and to determine other important blood parameters. The device was developed by Tecan for Ortho-Clinical Diagnostics, the market leader in immunohematology, and was launched in several regional markets in the fourth quarter of 2014. The ORTHO VISION™ Analyzer heralds a new era in transfusion medicine, with Responsive Automation. Innovative monitoring technologies and control mechanisms give transfusion medicine professionals the ability to track every critical process step. The instrument can also be accessed, and data monitored and evaluated, remotely. In addition, laboratory personnel can react at any time to ever-changing conditions within the laboratory and unpredictable requirements. For example, particularly urgent cases can be rapidly processed by loading into the ORTHO VISION™ Analyzer on the fly, allowing for prioritization. 

 

ORTHO VISION™ Max, a variant of the instrument with a higher sample throughput, is also being developed by Tecan.

 

Other growth drivers

Tecan has set itself the aim in the Partnering Business of further expanding its leading market position and becoming the clear partner of choice for customers for instrument development in the in-vitro diagnostics business. Growth in this segment is driven by concluding new development and supply agreements, and by regional expansion. 

 

eFLUIDICS™ TECHNOLOGY DEMONSTRATOR

Conclusion of new development and supply agreements

Tecan gained new customers for platform-based solutions in the recent past; these will contribute to sales growth in the years ahead. The Company has a pipeline that is well filled with potential new projects and is currently discussing a range of projects with potential partners. 

 

Tecan is focusing increasingly on developing proprietary, patent-protected technologies. One example is the innovative eFluidics™ technology. eFluidics is an alternative liquid handling technology based on electrowetting, which can manipulate fluids by altering the electrical field. Tecan is already holding discussions with diagnostics and life science companies who are very interested in the development of extremely compact instruments for a range of applications.

 

Numerous customers are also developing instruments incorporating innovative Tecan components as elements. Other customers have already started serial production of new devices, resulting in the supply of higher volumes by Tecan.

 

Expansion of partnership in China

As in the Life Sciences Business segment, significant market potential is also presenting itself to Tecan in the Partnering Business in China. The Partnering Business still only generates a modest share of sales in this country, although these have increased disproportionately in recent years. Local device manufacturers are increasingly integrating Tecan components in various areas of application to ensure the necessary instrument quality and reliability. The first of these instruments were granted marketing authorization in the year under review, and are now being manufactured in larger quantities. In addition, Chinese diagnostics companies are interested in the supply of complete instruments by Tecan. An initial development project of this type was pursued in the year under review, and Tecan supplied instruments to the partner for validation in the fourth quarter of 2014.