Being an old-timer churning out new products is beginning to pay off for Fullerton-based Beckman Coulter Inc.
While the high-tech stocks took a beating in March, Beckman Coulter actually had a 28% runup that month. In fact, its stock price has risen about 60% in the past six months.
“The capital markets have been more volatile lately but friendly to people who have substance,” said Beckman Coulter chairman and CEO John P. Wareham (see OC50 biogrpahy on page 36).
“In 1999, we were building the foundation of the company through the integration of Beckman and Coulter. We finished that off last year. The recognition of that success always lags a bit (on Wall Street).”
Last week, Beckman Coulter announced a 23% increase in earnings to $21 million for the quarter ending March 31, beating most analysts’ estimates. Revenue increased 7.2% to $434 million.
Beckman Coulter is Orange County’s largest employer in the manufacture of medical supplies, making everything from centrifuges for universities to DNA and protein systems for drug and biotechnology companies to blood tests for laboratories. It was founded in 1934 by Dr. Arnold O. Beckman, who invented the first pH meter.
The reasons for optimism at Beckman Coulter are plentiful. Beckman Instruments’ merger in 1997 with Miami-based Coulter Inc. appears to have gone smoothly. Beckman and Coulter had essentially no overlap in their product offerings, but served substantially the same customer base and the combined company was able to consolidate sales efforts. As a result, it has been able to downsize its workforce, from 10,500 in 1998 to its current 9,500. (Its OC employment has increased year over year 4% to 2,184).
In 1999, revenue increased 5% to $1.81 billion, but earnings increased three-fold to $106 million. Wareham said the earnings increase was attributed to 1998 being a year of consolidation.
“All of our commercial operations have been reengineered,” he said. “We are now a single company focused on a single market.”
Value Line analyst Kenneth A. Nugent, in a March 10 report, said the merger between Beckman and Coulter has “resulted in an almost four-percentage-point improvement in operating margins and a drop in interest expense,” as the company used the extra cash to pay down debt.
Beckman Coulter’s efforts to reduce its debt also earned it a higher debt rating from Moody’s.
In March, Beckman Coulter announced, ahead of the Street’s expectation, that the Food and Drug Administration had approved two new blood tests for the detection of prostate cancer.
The company said the new tests, known as Access Hybritech PSAs, can be done in 20 minutes, compared with the previous system’s four hours. This means they are expected to be more widely used. Men over 50 are urged to have prostate cancer tests, but only 21% of the estimated 90 million men in that age group in Europe and the U.S. do so. The current worldwide market for PSA testing is estimated to be about $300 million annually, said the company.
Beckman Coulter also recently obtained FDA approval for its Access Ostase System to aid in management of osteoporosis and Paget’s disease. The company also has announced a couple of agreements: Sunnyvale-based Amersham Pharmacia Biotech is using Beckman technology for DNA sequencing; and ThermoQuest Corp. of Austin, Texas, is jointly marketing with Beckman Coulter a system to analyze basic pharmaceuticals.
Wareham said the company is expecting revenue to grow 5% this year and is looking forward to a couple of new product launches.
“We have an immune-response measurement that we’re quite excited about,” said Wareham. “We will be launching some clinical trials into vaccines in the next months, and we’ll have some standard products at the end of the year.”
Most analysts have maintained constant ratings on the stock, with five calling it a strong buy, eight a moderate buy and one a hold, according to Zacks Investment Research. While analysts remain positive, they are concerned about flat or declining sales of some of Beckman Coulter’s products. Analysts are projecting a steady if unspectacular increase in the stock price from its current low-60s level to the mid-70s within the next 12 months. That could work for investors who want a little less volatility.
“Given that about 70% of the company’s sales flow is from the after-market sales of consumables, service contracts, etc., BEC’s revenues and earnings are less volatile than many other companies in the medical tech arena,” wrote Prudential Securities analyst Marie Conway in a May 1 report.
