Life Sciences Business
LIFE SCIENCES BUSINESS1(CHF million)
LIFE SCIENCES BUSINESS(CHF million)
LIFE SCIENCES BUSINESS(in % of sales)
SALES BY PRODUCTS
SALES BY REGIONS
Sales in the Life Sciences Business increased by 9.0% in local currencies to CHF 306.9 million (2016: CHF 280.2 million) in 2017 and were 9.5% above the prior-year period in Swiss francs. On an organic basis (excluding SPEware for the first nine months), sales in 2017 rose by 3.6% in local currencies, with contributions from a broad range of instrument platforms, the service business and further strong growth in consumables. Among the regions, China again stood out with a high growth rate. After posting strong growth in the first six months of 2017, sales increased by 2.5% in local currencies and 3.8% in Swiss francs in the second half of the year. At -0.6% on an organic basis, the second half of the year was slightly below the prior-year period, during which sales had benefited from a major project installation.
Full-year order entry in the Life Sciences Business segment once again exceeded sales, achieving double-digit growth. Orders also increased in the second half of the year, comfortably exceeding overall sales growth.
Operating profit in this segment (earnings before interest and taxes; EBIT) rose by 10.6% to CHF 50.5 million (2016: CHF 45.7 million), after acquisition-related costs for the integration of Tecan SP. This positive performance is primarily a result of sales growth and a higher gross margin, as well as further efficiency gains. The operating profit margin improved by 30 basis points to 15.9% of sales (2016: 15.6%).
Tecan is the market leader and a pioneer in laboratory automation. Tecan has offered a wide range of laboratory instruments and automated workflow solutions for use by pharmaceutical and biotechnology companies, government research institutions and universities, diagnostic laboratories, and scientists from numerous applied markets for more than 35 years. In 2017, the Life Sciences Business segment represented 56% of total sales of the Tecan Group.
Highlights of 2017
Integration of US company SPEware (now Tecan SP) and market launch of the Resolvex™ product line for sample preparation for mass spectrometry
Market launch of additional functions and applications of the Fluent laboratory automation family and development of the Fluent Gx platform variant for regulated markets
Markets and organization
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 a help desk 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 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. The local sales organizations take into account the various needs and requirements of both customer groups.
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 is the global market leader in automated liquid handling platforms. 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. They 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. Tecan’s offering includes instruments, special software packages and application expertise as well as consulting, service and consumables. The consumables business in particular recorded strong growth again in the year under review.
In the fields of immunoassays for diagnostic special parameters and sample preparation for mass spectrometry, Tecan also offers integrated total solutions, including appropriate reagents and functional consumables.
The corporate strategy pursues three vectors to ensure sustainable, profitable growth. Tecan’s specific strategies allow it to drive forward customer projects with the respective business models of the two business segments.
EXPANDING THE CORE BUSINESS
In Life Sciences Business the market leading position will be further increased and market share gained through launching new products and expanding geographically.
LAUNCH OF NEW PRODUCTS
The introduction of two main platforms marks the early stage of the product cycle, in both liquid handling and detection. A continuous stream of innovations and market launches should continue to safeguard future growth.
Fluent: Simplicity – Productivity – Confidence
The market launch of the first application configuration of the Fluent product family some three years ago marked a further expansion of Tecan’s extensive portfolio of liquid handling solutions for laboratory automation. Fluent is a unique automation concept that provides high precision, superior throughput and extended walkaway time. Employees in the laboratory can get more done, with greater confidence in the results. Completely new from the ground up, it is available in three sizes to suit the throughput requirements of almost any laboratory. Fluent was developed around the application-specific needs of laboratories. In recent years, Tecan continuously launched new Fluent solutions on the market that target specific applications. For example, these solutions address the need for automation in the rapidly growing cell biology market, in compound management, in the area of genomics as well as in numerous other fields of application.
High-definition liquid handling ensures precision and accuracy over a wide range of volumes, from sub-microliter to several milliliters. The patented Adaptive Signal Technology™ detects even small volumes of liquid with precision, allowing for the use of smaller reagent and sample volumes for significant cost savings. The patented Dynamic Deck™ uses a modular, multilevel design to offer exceptional deck capacity.
Liquid handling and labware logistics have never been easier, thanks to the instrument’s three, task-specific arms, which operate simultaneously to ensure timely completion of assays, minimizing the time cells spend outside of the incubator. The platform’s intuitive FluentControl™ software and built-in touchscreen interface simplify day-to-day activities by guiding scientists through routine set-up and operation of the system for consistent, reproducible operation.
Development of the Fluent Gx platform variant for regulated markets was stepped up in the year under review. The last remaining major area of application – the market for clinical diagnostics and other regulated sub-markets – will be addressed during the course of 2018. In the regulated markets, greater focus will be placed on, for example, process security, the traceability of samples and stricter user management. Tecan has a long tradition when it comes to laboratory automation for regulated markets such as clinical diagnostics. End-customers including large laboratories have been relying on Tecan platforms for years, for example, for automating process steps in genomic applications or for tests for infectious diseases. In addition, Tecan, through its Partnering Business, is the partner of choice in automation systems for many companies in the in-vitro diagnostics industry. Following the launch of Fluent Gx, customers in regulated markets will also be able to benefit from the high level of productivity and performance offered by Fluent platforms.
Spark ignites productivity in the lab
In 2015, Spark marked the introduction of a new generation of the reader platform to the second product line of detection instruments. The Spark 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. In the core of the instrument a unique optics module was developed 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 special fusion optics function provides a unique sensitivity, speed and flexibility. Other options include the Te-Cool™ cooling module. This module makes it possible for the first time to set the temperature of the measuring chamber lower than the room temperature and thereby achieve exact and reliable results. Automated cell imaging and confluence measurement allows cell cultures to be incubated and monitored in the measuring chamber.
In the year under review, Tecan again launched new options for the Spark reader platform, including a new stacker to enable longer operating times without user interaction. The integrated Spark-Stack™ provides space for up to 50 microplates, which are then automatically loaded into the Spark reader, unloaded after being analysed and transferred back to the Spark-Stack. The module thus raises productivity in that lab employees do not waste valuable time on loading and unloading the microplates. It further enables testing procedures to be run overnight without user interaction. The Spark-Stack can also be fitted on platforms already installed in customer permises.
In order to provide research laboratories with a more cost-effective entry into state-of-the-art reader technology, Tecan added an updated version of the still highly popular Infinite® 200 PRO series of multimode microplate readers to its product offering in the year under review. This proven, reliable reader platform has already been cited in more than 1,800 scientific publications and enjoys great popularity across the world. Customers in the area of life science research can now order one of six application-oriented configurations of the Infinite® 200 PRO platform that is perfectly geared to their research and budget.
Products with a high level of user-friendliness and application focus
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. The currently available solutions are technically able to automate 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.
Tecan offers, for example, automation solutions that fully automate sample preparation for gene sequencing (next-generation sequencing) and mass spectrometry. Both areas are among the fastest-growing applications in life science research.
OPENING UP GLOBAL GROWTH MARKETS
Many countries are currently investing considerable amounts in healthcare and life science research. Tecan is focusing in particular on expanding its business in China, which is already one of the world’s largest healthcare markets, even though the country’s spending per capita is still only a fraction of that in many western industrialized countries. Continuing economic growth combined with rising spending per capita make this an extremely attractive market. Tecan has already been active in China for a number of years, and since 2008 through its own subsidiary. In recent years, sales have had a high average growth rate in the double-digit percentage range. They continued to do so in the year under review.
In China, for example, Tecan is a market leader in liquid handling platforms for the largest hospitals (class 3). The laboratories use Tecan platforms to test blood samples for infectious diseases, for instance. The number of the largest hospitals is constantly growing, along with patient numbers and utilization. The corresponding rise in diagnostic test volumes is increasing the need for efficient automation.
Large investments are also being made in laboratory infrastructure in the area of academic research. According to estimates, government funding already accounts for half of the budget of the National Institutes of Health (NIH) in the US. It is assumed that government funding in China will exceed that in the US by as early as 2020. Research once again represented a growth driver for Tecan in the year under review.
In order to exploit the various end markets in China, Tecan is continuing to invest heavily in expanding its marketing and service organization. Headcount in the local organization increased to around 100 in the year under review. A larger direct market presence should lead to a further significant increase in sales in China in the coming years.
BUILDING UP FURTHER PILLARS IN THE INSTRUMENT MARKET
Tecan is aiming to build up further pillars in the instrument market for life science research. This applies in particular to areas beyond conventional, open and flexible robotics solutions for liquid handling and microplate readers. There are plenty of opportunities here, especially in dedicated instruments for sample preparation. In adjacent markets, Tecan sees opportunities to extend its traditional core business so as to grow faster than the overall markets for life science research instruments. This potential can be accessed both organically and through acquisitions. For example, the acquisition of SPEware (now Tecan SP) in August 2016 makes it possible to offer dedicated instruments in the area of sample preparation for mass spectrometry, which are increasingly being used for automated solid phase extraction. Automated solid phase extraction with positive pressure workstations offers many advantages compared with conventional vacuum-based purification. The positive pressure ensures a steady flow across a series of pillars. Ultimately, better-purified samples can produce higher-quality analytical results that, thanks to automation, are not dependent on the individual user.
Tecan SP realigned its product portfolio in the year under review, consolidating it under the Resolvex™ brand. Existing instruments previously geared exclusively to the US market were technically revised in part so as to make them compatible with the different electric voltages and the corresponding regulations of the global market. In September 2017, the new Resolvex A200 positive pressure workstation was unveiled. The Resolvex A200 increases the productivity of labs by, among other things, enabling longer operating times without user interaction. It weighs less and is more compact, powerful and easier to operate than other models.
Positive pressure workstations can be embedded in a semi-automated work process as an individual solution or integrated in Tecan’s liquid handling workstations as a fully automated solution. Integration enables all process steps of a workflow to be automated.
EXPANSION OF RECURRING SALES
The third vector focuses on expanding recurring revenues in Tecan’s two main markets, life science research and in-vitro diagnostics. The Company wants to supply reagents and consumables for select applications in both markets so as to be able to offer fully integrated solutions as well. Reagents and consumables contributed 31% of segment sales during the period under review.
EVOLUTION INTO A SOLUTIONS BUSINESS
As part of the company’s strategy, Tecan is increasingly seeking to provide comprehensive solutions in the areas of diagnostics and life science research in the life sciences business, including the reagents or functional consumables used during specific applications. This range of solutions should open up new markets for Tecan, without competing with the typical customers in Tecan’s Partnering Business.
Tecan made the first step in this direction with the acquisition of IBL International in 2014. In the field of microtiter plate-based immunoassays, Tecan now has one of the widest ranges of tests for specialty diagnostics to be used in research and clinical laboratories. This enables Tecan to 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. New tests were again added to the broad portfolio in the period under review. A total of 84 assays have already been tailored to the Tecan automation platform.
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 diagnostic companies and therefore outside the focus of Tecan’s typical Partnering Business customers.
The product 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.
With the acquisition of the US-based SPEware Corporation (Tecan SP), Tecan expanded its offer of dedicated total solutions to a new market segment in the autumn of 2016. Tecan SP is a leading provider of sample preparation solutions for mass spectrometry, previously with a focus on the North American market.
Its comprehensive product portfolio provides analytical laboratories with solutions for sample preparation by combining functional consumables with dedicated instruments and modules. As a result, the procedures for the combination of liquid chromatography with mass spectrometry (LC-MS) can be made more efficient. The total market for this type of extraction technology is growing in the mid single-digit percentage range per year. In recent years, Tecan SP has expanded significantly above the market rate of growth, thanks to a differentiated product offering and a market development that increasingly promotes the use of automated solid-phase extraction for high-complexity tests over other sample preparation methods. Some 80% of the sales of Tecan SP are generated with functional consumables.
The current customers for these products are mainly large reference laboratories as well as specialized laboratories in North America. They use the solutions that are provided mainly for toxicological investigations and other analyses of complex samples such as urine and saliva. The separation of a target analyte from a complex sample before it can be introduced into an LC-MS improves the robustness of the assay, and the improved purification of the samples enables longer maintenance intervals. The proprietary, microparticle-filled consumables for enrichment of a substance for the solid phase extraction offer significant advantages, including higher selectivity, reproducible separation and improved data quality. Tecan’s application-oriented approach is unique on the market and enables it to offer its customers a one-stop shop for everything from receiving samples to sample preparation to transferring sample parameters to the mass spectrometer. Tecan has two dedicated laboratories, one in California and a new one in Hamburg. Its team of application scientists comprises automation specialists, chemists and mass spectrometer experts. These experts collaborate directly with customers, supporting them in adjusting solutions to the specific requirements of their lab workflows.
EXPANSION OF RECURRING SALES WITH PLASTIC CONSUMABLES
Sales of consumables made of plastic grew strongly again in the period under review. Tecan plans to further expand the share of these recurring sales. 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. In the year under review, for example, it launched a special variant of pipette tip on the market that has a greater diameter, making it particularly suitable for viscous, non-homogeneous liquids. This pipette tip addresses demand from, for instance, biobanks, which store biological samples.