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Tecan reports a 35.9% sales increase for the first nine months 2001
Zurich, Switzerland, 22 October 2001 – Tecan, a leading player in the fast-growing Life Sciences supply industry, reported today worldwide sales of CHF 258.6 million for the nine months ending September 30th, 2001, an increase of 35.9% compared with CHF 190.2 million in the same period 2000. In local currencies, sales increased by 37.2%, reflecting a continued acceleration of growth compared with a 30% increase reported last year. Due mainly to significant R&D investments (13.4% of sales compared with 10.2% in 2000) operating profit remained unchanged at CHF 39.0 million or 15.1% of sales (2000: CHF39.0 million or 20.5% of sales). Net profit for the first nine months of the year reached 27.5 million (2000: CHF 24.6 million), an increase of 11.8%.
“Due to Tecan’s powerful portfolio effect and the synergies we are able to develop among our four business segments, we managed to sustain a very high growth rate despite the slowdown in pharma R&D spending. Lower sales in our Drug Discovery market segment were more than compensated by an outstanding performance in the Diagnostics and Genomics/Proteomics business segments. ” said Emile Sutcliffe, CEO of the Tecan Group.
Mr. Sutcliffe further commented: “Our lower operating profit margin reflects lower than expected sales in Drug Discovery during the third quarter 2001 as well as high R&D investments. Due to our strong sales growth, we were able to finance from our operations incremental R&D investments to enter new markets such as proteomics and to develop a new core competency in the field of high-tech miniaturization, in particular with the Lab CD microfluidics disposables. Despite difficult market conditions, Tecan was also able to improve its gross margin. “
Because of a tighter market in drug discovery, third quarter sales were lower than expected and represent the weakest quarter this year. Total sales reached CHF 84.0 million (2000: CHF 66.2 million), an increase of 26.9%. Operating profit reached CHF 10.8 million or 12.8% of sales (2000: CHF 13.8 million or 20.8% of sales), primarily due to higher R&D spending, the amortization of goodwill and operating investments. In the third quarter 2001, R&D investments represented 13.6% of total sales compared to an exceptionally low level in the third quarter 2000 of 9.2% of total sales.
In Genomics and Proteomics, sales increased by 56.3% in the first nine months 2001 to CHF 50.5 million (2000: CHF 32.3 million), or 19.5% of total sales. Tecan’s success in this very dynamic market is due to strong demand for the company’s front end sequencing systems and in functional genomics.
Drug Discovery sales amounted to CHF 86.9 million or 33.6% of total sales for the nine months ending September 30th, 2001, (2000: CHF 85.0 million), a slight increase of 2.2%. This lower than expected sales growth, especially in the third quarter, results from lower R&D expenditures from large pharmaceutical companies.
Diagnostic sales increased by 66.3% during the period to CHF 121.1 million (2000: CHF 72.8 million) or 46.9% of total sales. This strong sales growth was driven by the continued market penetration of the Genesis FE 500 workcell as well as by new applications in molecular diagnostics resulting from Tecan's expertise in genomics. This division also continued to benefit from the development and implementation of new distribution channels.
By location of customers, sales in Europe increased by 36.6% in local currencies to CHF 97.1 million (2000: CHF 72.7 million) or 37.5% of total sales, whereas North American sales for the first nine months increased by 35.3% to reach CHF 125.1 million (2000: CHF 91.0 million) or 48.4% of total sales. For the first nine months of the year, sales in Asia grew by 23.4% in local currencies to CHF 21.8 million (2000: CHF 19.1 million) or 8.4% of sales. During the third quarter 2001, sales slightly declined (- 7.7%) in Asia. This was however more than compensated by a sharp increase in other markets (+ 105.8%). For the nine months, sales in these other markets doubled from CHF 7.4 million to CHF14.6 million.
For the first nine months of the year, R&D expenditures increased significantly to CHF 34.7 million (2000: CHF 19.4 million) and represented 13.4% of total sales (2000: 10.2%). R&D resources were mainly allocated to the continuing strengthening of Tecan’s existing core competencies in liquid handling, detection, robotics and software. In addition, Tecan invested heavily in the development of a new core competency in the field of high-tech miniaturization, in particular in Tecan’s revolutionary microfluidics disposables, the Lab CD, and in the entry into the new market of Proteomics. Tecan’s first proteomics workstation and the Lab CD were unveiled for the first time last September on the occasion of the company’s Innovation day.
Compared to the second quarter 2001, R&D expenditures were reduced from CHF 12.4 million to CHF 11.5 million for third quarter 2001. This trend is expected to continue also during the fourth quarter of the year. For the entire year, R&D expenditures should be around CHF 45 million, representing a 55% increase compared to the corresponding period last year. R&D expenditures should consequently be slightly above the company ‘s mid term target of 10-12% of sales.
Tecan’s gross profit margin for the nine months 2001, reached 68.6% compared with 68.0% achieved during the corresponding period last year. The amortization of goodwill from acquisitions amounted to CHF 3.5 million (2000: CHF 1.8 million), or an increase of 0.7% of sales during the period, while significant investments, representing 1.2% of sales, were also made during the period to implement new processes and information systems to sustain the company’s high growth rate. R&D expenditures increased by 3.2% of total sales during the period.
As a result of these investments, increased R&D spending and the amortization of goodwill, operating profit remained unchanged at CHF 39.0 million, or 15.1% of sales (2000: CHF 39.0 million or 20.5% of sales). Excluding these items, operating profit would have reached 20.2% of sales, indicating a consistent high level of operating efficiency.
Net profit for the first nine months 2001 increased by 11.8% to CHF 27.5 million (2000: CHF 24.6 million). Earnings per share increased by 11.8% to CHF 2.11 from CHF 1.88.
Having achieved, during the first nine months of the year, a very strong result in an increasingly difficult market environment for the Life Sciences industry, Tecan is still hopeful that it will be able to meet its objective of growing by about 35% in local currencies for the entire year 2001. This is supported by a 30% higher backlog of orders at the beginning of the fourth quarter compared with the beginning of the third quarter. In accordance with a number of external studies, Tecan anticipates a gradual improvement of the drug discovery market as the need for pharmaceutical and biotech companies to improve efficiencies and eliminate essential bottlenecks in the drug discovery process remains a critical success factor. However the timing of this recovery remains unpredictable, and will probably happen later than anticipated before the events of September 11th 2001.
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Tecan anticipates an EBIT margin around 18% of sales for the year 2001. As a consequence, the company’s net profit objective is expected to be above 12% of sales.
Tecan (www.tecan.com) is a leading player in the fast growing Life Sciences supply industry that specializes in the development, production, and distribution of enabling solutions for the discovery of pharmaceutical substances, as well as for genomics, proteomics, and diagnostics. Tecan clients are leading pharmaceutical and biotechnology companies, university research departments and diagnostic laboratories. Founded in Switzerland in 1980, the company has manufacturing, research and development sites in both North America and Europe and maintains a sales and service network in 52 countries. In 2000, Tecan achieved sales of CHF 273.5 million (USD 162 million; EUR 175 million). Registered shares of Tecan Group are traded on the Swiss SWX stock exchange (TK: TECN / Reuters: TECZn.S / Valor : 707821).
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