$3.7 Billion

NO. OF EMPLOYEES: 11,800

It wasn’t so long ago—just two years, in fact—that the hunted was the hunter. Back in 2009, the big news for Beckman Counter in was its whopper deal to purchase the diagnostic systems division of Olympus’ Life Sciences business for approximately $800 million. That purchase helped the company to achieve $3.66 billion in revenues for full-year (ended Dec. 31) 2010, up 12 percent from $3.26 billion in 2009.

2010 was a year of ups and downs that culminated in bottom line growth (though just shy of Wall Street’s expectations)—and ultimately a buyout—for the California-based diagnostics firm. Danaher (see page 96) snatched up the company early in 2011 for $6.8 billion, and it became part of Danaher’s life-science and diagnostics unit.

With the merger, Beckman Coulter leaves behind a dreadful 2010 and started fresh this year. The company was forced to cope with a product recall last March, multiple financial-guidance cuts and the unexpected resignation of its CEO last fall. The company gave no reason for the resignation.

The recall of a test to measure protein that detects heart problems threw Beckman Coulter into turmoil last spring, forcing the company to set up a clinical trial to support two device approval applications with the U.S. Food and Drug Administration (FDA). The agency accused the firm of marketing a diagnostic test without the necessary clearance.

Though the test comprises a small part of Beckman Coulter’s sales—totaling $60 million of the firm’s 2010 sales—its absence from the market nevertheless represented a serious problem for the company. With the test out of commission, analysts claimed Beckman Coulter was handicapped in selling its testing instruments, providing rivals Abbott Laboratories, Roche Holding Ltd., and Siemens AG the opportunity to gain market share.

“Our view is that with several large and well-funded core lab equipment competitors poised to take advantage of (Beckman’s) missteps, winning new business with a key assay omitted will be a high hurdle,” John Sullivan, an analyst with Leerink Swann LLC, said at the time.

The compliance issues focused on the company’s AccuTnI troponin product, a medical device that measures troponin I protein, a marker for heart problems and heart attacks. The product runs on two systems—DxI and Access. In a March 22, 2010, filing with the U.S. Securities and Exchange Commission, Beckman Coulter said its AccuTnI troponin test kits, done on its DxI system, created a positive bias in results when compared to the Access system and recommended customers switch to an alternative methodology.

On Feb. 5, 2010, Beckman Coulter had sent notices to customers informing them of the defect.
Furthermore, the company said the FDA indicated to them that it believes that certain modifications to both troponin test systems were made without obtaining appropriate product clearances from the FDA, and a resubmission would be necessary.The FDA sent a warning letter on June 21, 2010, criticizing Beckman Coulter for allegedly violating agency rules by selling an “adulterated,” “misbranded” and “unapproved” version of its AccuTnI troponin test kits performed on its Access system.The FDA said a review of documentation provided by the company “reveals that you have made significant modifications that may affect the performance of your product and have not obtained marketing approval or clearance before offering your modified product for sale, which is a violation of the law.”

Though the company didn’t give a reason for his departure, Scott Garrett resigned as chairman, president and CEO in September. Most analysts said the fallout from the company’s FDA issues was part of the reason. The company’s board appointed J. Robert Hurley interim president and CEO. Hurley, who has served as the company’s senior vice president, human resources and chairman of Beckman Coulter Japan, joined the company in 2005, and led the integration of the Olympus acquisition.

At the time of his departure, Garrett said, “Over the past eight years, five of them as CEO, I’ve had the pleasure and privilege to lead the company through many significant improvements. Today, the company continues making good progress, even in a very challenging environment. I am proud of all the employees at Beckman Coulter and believe the company is positioned to achieve its long-term potential.”

After everything was said and done, the numbers were positive overall. Recurring revenues comprised the bulk of total sales, $2.97 billion, up 12 percent from $2.65 billion in 2009. Instrument sales increased 13 percent to $694 million from $615.4.Revenues for Beckman Coulter’s clinical diagnostics segment climbed 15 percent to $3.21 billion from $2.79 billion. Within that segment, immunoassay and molecular diagnostic revenues rose to $886.8 million from $798.3 million, an 11 percent hike. Revenues for the life-science segment declined 4 percent to $453.3 million from $472 million in 2009. The company’s 2010 research and development costs inched up less than 1 percent to $268.6 million from $266.4 million a year ago. Beckman Coulter’s net income for the year climbed 57 percent to $230.7 million, or $3.25 per share, compared to $147.1 million, $2.18 per share a year ago, but short of the $3.92 estimated by Wall Street.

“22. Beckman Coulter

$3.3 Billion

KEY EXECUTIVES:
Scott Garrett, Chairman, President and CEO
Paul Glyer, Sr. VP, Strategy, Business Development and Communications
Charles Slacik, Sr. VP and CFO
Pamela A. Miller, Sr. VP, Supply Chain Management
Carolyn D. Beaver, Corporate VP, Controller and Chief Accounting Officer
Scott Atkin, Executive VP, Chemistry, Discovery and Instrument Systems Development

NO. OF EMPLOYEES: 11,800

GLOBAL HEADQUARTERS: Fullerton, Calif.

With 2009 revenue of $3.26 billion and sales in more than 160 countries, Beckman Coulter has come a long way since it was founded in a garage in Pasadena, Calif., 75 years ago. One of the company’s slogans is “making science routine.” It seems that turning a profit also is pretty routine for the maker of clinical diagnostic equipment (chemistry and clinical automation, immunoassay/molecular diagnostics and cellular diagnostics) and life-science research instrumentation. Clinical diagnostics—a $41 billion global market according to Beckman Coulter—made up 86 percent of the company’s total sales in fiscal 2009 (ended Dec. 31).

The big news for Beckman Counter in 2009 was its whopper deal to purchase the diagnostic systems portion of Olympus’ Life Sciences business for approximately $800 million—one of the largest medtech acquisitions of the year.

Olympus Diagnostics is a division of Tokyo, Japan-based imaging giant Olympus. The goal of the purchase was to establish a leadership position in larger hospital laboratories, extend the firm’s chemistry customer base and offer a new customer set for Beckman Coulter’s immunoassay products. For 2010, the Olympus Diagnostics business is anticipated to bump up the firm’s revenue by approximately $500 million on a full-year basis and generate approximately $40 million to $50 million in operating income, officials said.

“This compelling transaction combines the chemistry product lines of our two companies into a complete chemistry systems offering,” said Scott Garrett, Beckman Coulter’s chairman, president and CEO at the time the deal was announced. “It enhances Beckman Coulter as a leading provider of chemistry products with additional opportunities to expand our immunoassay reach into their chemistry installed base. Customers will benefit from the expanded range of products, particularly those large hospital and university laboratories where higher throughput systems are preferred. In addition, Beckman Coulter’s strength in total lab automation will be complemented by Olympus’ strong pre-analytical automation position in Europe and Asia.”

U.S. operations for Olympus, including its life sciences and medical device units, are located in Center Valley, Pa.

The purchase, which closed in the third quarter of the year, had an immediate impact on the year’s financial results. Revenue for the full year was up 5.2 percent. Excluding the Olympus acquisition, total revenue declined about 1 percent. Operating income was $231.2 million, down from $284.5 million in 2008. Net earnings were $147.1 million, or $2.18 per fully diluted share, down from $186 million. On an adjusted basis and excluding Olympus intangibles amortization, net earnings increased 16.5 percent to $263 million.

Interestingly, 81 percent of the company’s sales and 93 percent of gross profit are derived from recurring revenue (which grew 3.5 percent), which comes from consumable supplies (including reagent test kits), services and leased instruments. The remaining balance of revenue is derived from instrument sales.

For clinical diagnostics sales, the Olympus acquisition accounted for $158.5 million, or 7.2 percent of growth in recurring revenue during 2009 (overall clinical diagnostic revenue was $2.8 billion). Excluding revenue from the Olympus acquisition, instrument sales declined in all product areas when compared with the prior year due primarily to weakness in the United States and emerging markets. Revenue from Life Science division products decreased due to sluggish sales as a result of the economy. The Life Sciences division posted sales of $472 million, down 6.9 percent.

From a global perspective, a total of 48.5 percent of overall sales came from the United States, while 8.3 percent came from emerging growth areas, including Eastern Europe, Russia, the Middle East, Africa and India. “

$3.1 Billion
NO. OF EMPLOYEES: 11,000

In a letter to shareholders, Scott Garrett, president and CEO of Beckman Coulter, said changes the company implemented in 2005 have produced “visible strategic, operational and financial benefits.” He noted that the company-wide adoption of Lean and Sig Sigma manufacturing methods have allowed the company to shrink its brick-and-mortar footprint, increase quality and optimize processes.
He also said abandoning the company’s two-division structure in favor of a more integrated “one-company” approach has “yielded greater organizational flexibility.”

Given the company’s financial performance for fiscal 2008 (ended Dec. 31), Garret doesn’t seem to be leading his shareholders astray. The Fullerton, Calif.-based company, which manufactures biomedical testing instrument systems, tests and supplies for laboratories, reported revenue for the year of $3.1 billion, up from $2.7 billion last year. Recurring revenue (supplies, services and lease payments) accounted for $2.4 billion of the total, while equipment sales were $696 million. Earnings for the year before interest, tax, depreciation and amortization increased to $619 million from $542 million.
In 2008, the company made five significant product launches.

One of the most significant releases, according to the company, was the UniCel DxH 800 cellular analysis system, cleared by the U.S. Food and Drug Administration in December. Capturing 29 individual measurements per cell analyzed, the system provides improved sensitivity and specificity, which means more reliable assessment of abnormal cell populations. Laboratories equipped with the system will be able to respond more quickly and accurately to physician demands, improving patient health and reducing the cost of care, the company said. Also in December, the company launched three new systems, completing its family of integrated chemistry-immunoassay work cells. The new systems range from high-volume to very high-volume: UniCel DxC 660i Synchron Access Clinical System, UniCel DxC 680i, and UniCel DxC 860i. Each system targets a different test mix and volume, allowing laboratories to perform chemistry and immunoassay testing simultaneously from a single sample with a single point of entry.

According to Scott Atkin, group vice president of Beckman Coulter’s Chemistry and Clinical Lab Automation business, “We’ve used our industry-leading systems integration capability to deliver a range of systems which offer labs tremendous flexibility in addressing their needs.”

Looking forward, the company—as most firms do—expects slower growth as a result of the economy this year. However, company officials optimistically point to a 4.5 percent increase in Medicare reimbursement in 2009 for lab-based diagnostics —the largest increase in 15 years.

So far, for the first quarter of fiscal 2009 (ended March 31), total revenue was $691.5 million, down 5.3 percent, or flat in constant-currency terms. On a constant currency basis, solid recurring revenue gains of 4.7 percent were offset by declines in cash instrument sales, primarily in Life Science and Cellular Analysis. Reported net earnings were $20.6 million, or $0.32 per fully diluted share, including a $0.03 after-tax, non-cash charge to interest expense due to new accounting rules governing convertible debt instruments.

The big news for the company so far in 2009 (and undoubtedly for the rest of the year) is Beckman Coulter’s plan to purchase the diagnostic systems portion of Olympus’ Life Sciences business for approximately $800 million. The purchase of the diagnostic business of Tokyo, Japan-based imaging giant Olympus Corp. is expected to broaden Beckman Coulter’s chemistry offering, establishing a leadership position with strength in larger hospital laboratories. Company officials also expect the transaction to extend Beckman Coulter’s chemistry customer base and offer a new customer set for its immunoassay products. U.S. operations for Olympus, including its life sciences and medical device units, are located in Center Valley, Pa.

In 2010, the Olympus Diagnostics business is anticipated to increase Beckman Coulter’s revenue by approximately $500 million on a full year basis and generate approximately $40 million to $50 million in operating income, according to the company. As part of the agreement, Beckman Coulter has the right to deliver up to 37.5 percent of the purchase price in the form of stock. The company expects to finance the acquisition with a combination of newly issued common stock (approximately $300 million) and newly issued debt (approximately $500 million).

“This compelling transaction combines the chemistry product lines of our two companies into a complete chemistry systems offering,” said Garrett. “It enhances Beckman Coulter as a leading provider of chemistry products with additional opportunities to expand our immunoassay reach into their chemistry installed base. Customers will benefit from the expanded range of products, particularly those large hospital and university laboratories where higher throughput systems are preferred. In addition, Beckman Coulter’s strength in total lab automation will be complemented by Olympus’ strong pre-analytical automation position in Europe and Asia.” The deal is expected to close in the third quarter of this year.

“$2.8 Billion

KEY EXECUTIVES:

Scott Garrett, Chairman, President and CEO
Mike Whelan, Group VP, High Sensitivity Testing Group
Scott Atkin, Group VP, Chemistry, Discovery and Automation
Business Group
Cindy Collins, Group VP, Cellular Business Group
Pam Miller, Sr. VP, Supply Chain Management
Russ Bell, Sr. VP and Chief Scientific Officer
Melina Cimler VP, Quality and Regulatory Affairs

NO. OF EMPLOYEES:

10,000

GLOBAL HEADQUARTERS:

Fullterton, CA

Ever since President and CEO Scott Garrett stepped into his role in 2005, Beckman Coulter has been a company in transition as it builds on a new business structure encompassing Lean manufacturing, Six Sigma and an operating-type lease model, among other changes. Although 2006 net sales only increased 3.5% compared with 2005, the past year’s improved results—9.2% growth compared with 2006—are a testament that Garrett’s strategies are showing signs of paying off and securing the company’s foothold as a diagnostics leader for the long term.

As part of the transition in effect, the manufacturer of biomedical testing instrument systems notably had many shifts occur within its employee ranks in 2007. Today, 80% of Beckman Coulter’s top 100 executives are either new to the company or have moved into new roles in the last two years.

“Beckman Coulter has distinct advantages in the marketplace: a legacy of quality, superior brand equity, loyal customers around the world and a highly capable workforce. With our talented people and our innovative technology, we lead the industry in our ability to design, develop, manufacture, sell and support the systems that customers want for their laboratories. I am confident that we are on the threshold of great achievement as we embrace the challenge to improve patient health and reduce the cost of care,” said Garrett in the company’s 2007 annual report.

Revenues for the fiscal year ended Dec. 31 totaled more than $2.76 billion, compared with approximately $2.53 billion for 2006. Net earnings also improved 13% to $211 million. Operating in more than 130 countries, nearly 52% of revenues were generated within the United States ($1.4 billion total), with the remainder coming from international territories ($1.3 billion total).

One of the company’s largest sales drivers has been its Immunoassay Products segment, which had 2007 revenues of $595.8 million, a 23% increase from $484.4 million in 2006—this segment has grown by double digits annually for a decade. Beckman Coulter has a share of about 7% for the $7 billion global immunoassay testing market. One of the major coups for 2007 included the commercialization of the first automated Inhibin A test, an assay used to help diagnose and monitor various reproductive diseases. Another launch included the UniCel Dxl 600, a mid-range immunoassay testing system. As the company looks to expand its presence in areas such as China and India, it has acquired NexGen Diagnositics, LLC and the research flow cytometry instrument business from Dako Denmark A/S, as well as pursued various licensing agreements for new products and technologies.

Beckman Coulter’s Chemistry Products segment, consisting of systems and kits that perform various routine patient tests (eg, blood glucose and cholesterol measurements), had revenues of $749.5 million, representing approximately 11% growth from $677.1 million reported in 2006. The company’s total market share in the $3 billion chemistry market is 20%.

At $575.1 million, the 2007 revenues for Beckman Coulter’s Discovery and Automation Products segment was somewhat flat with only 2.6% growth compared with $560.7 million in the prior year.

The largest total revenues came from the Cellular Products segment, which reported revenues of $840.9 million for 2007. Although it’s the largest revenue generator, these sales represent only a 4.3% increase from revenues of $806.3 reported in 2006.

In terms of streamlining overall operations, Lean initiatives led to consolidations and some building eliminations, freeing 100,000 square feet of space. For example, in the first quarter of 2007, Beckman Coulter relocated its centrifugation business from Palo Alto, CA to the Indianapolis, IN area as a measure to streamline the company’s supply chain.

Beckman Coulter also strengthened partnerships in the past year. The company signed a three-year agreement with Premier, Inc. to enable members to purchase clinical diagnostics products, as well as an agreement with the healthcare purchasing network for Beckman Coulter’s flow cytometry instruments and its core laboratory systems and supplies. An agreement with Amerinet, Inc. also allowed the company to provide core laboratory systems and supplies to Amerinet’s members. Furthermore, Beckman Coulter renewed agreements of approximately $94 million annually with MedAssets Supply Chain Systems.

In terms of other alliances, Beckman Coulter received a grant from the Imperial College of London to develop a cost-effective test for monitoring CD4 lymphocytes in patients who have HIV/AIDS, which could aid poorer areas such as sub-Saharan Africa. Furthermore, the company signed agreements to provide exclusive options to license cancer genomics intellectual property that may arise from Johns Hopkins University’s studies of various types of cancer. Beckman Coulter also signed on to a two-year research project pertaining to cardiovascular and obesity-related hypertension genetic markers, to be performed at Thomas Jefferson University (Philadelphia, PA) and Laboraf Diagnostica e Ricerca San Raffaele SpA (Milan, Italy). Molecular diagnostics remain a top-line focus for the company, which seeks to be among the first with a “sample-to-result” molecular diagnostics system for the hospital market.

More recently, in April Beckman Coulter licensed certain rights to testing for hepatitis C virus from Siemens Healthcare Diagnostics. Per the agreement, Beckman Coulter can develop, manufacture and sell a quantitative viral load blood test for use on the company’s molecular diagnostic instrument, currently in development and anticipated to launch in 2010. In addition, the company launched the UniCel DxC 880i, an integrated workcell that consolidates chemistry and immunoassay testing for high-volume laboratories.

Total first-quarter 2008 revenue of $730.5 million rose 19.1% compared with the same period in 2007. Immunoassay, Autochemistry, Cellular and Automation (the designations of which are slightly different from those used to categorize products in 2007) segments rose 23%, 16%, 19% and 28%, respectively. The company expects total 2008 revenues to rise 11% to 13% from last year’s reported revenues.”

$2.5 Billion
No. of Employees: 10,340

Like a roller coaster, 2006 was a series of twist and turns for Beckman Coulter, a manufacturer of biomedical testing instrument systems, as the company faced and overcame various challenges in its financial performance. With shaky numbers reported in the first half of of the year, the company proved itself capable of finishing the year on a positive note.

With a focus on immunoassay, clinical laboratory automation, geographic market expansion and molecular diagnostics, Beckman Coulter reported revenue of $2.53 billion in 2006, up 3.5% from FY 2005. About 75% of the company’s  revenue came from sales in the clinical diagnostics market.

The company is divided into four main product areas, which include cellular systems, chemistry systems, immunoassay systems and discovery and automation. Each sector was valued at $806.3 million, $677.1 million, $484.4 million and $560.7 million, respectively, in sales for 2006. Products contributed $2.1 billion to overall sales in 2006, with services rounding out the balance. Beckman Coulter’s product stronghold is immunoassay testing, which in the past few years has been the company’s primary growth driver and an area where most high-value tests come to market.

Product highlights in 2006 included the introduction of the UniCel DxC 600i, which combines chemistry and immunoassay into a consolidated system, and the AutoMate 800 system, which has the ability to automate sample preparation in the clinical laboratory.

Looking back at the start of FY 2006, sales took a slight hit in the first quarter, but the company’s income remained undeterred. In the first quarter, ended March 31, sales were down 1.2% from FY 2005 to $569 million. The loss was attributed to a previously announced shift in a leasing policy towards more operating-type leases. Despite the negative effects of the leasing policy change, net earnings were $32.6 million. Net earnings in the United States increased 5.1% from the first quarter of 2005. International sales, however, were not as affirmative and decreased 3.2% from the first quarter of 2005.

Shortly after the close of the first quarter, Beckman Coulter resolved an outstanding legal dispute with Applera Corp. related to claims of certain Beckman Coulter patents and Applera’s allegations of breach of contract with respect to certain licensed technology. Under terms of settlement, Beckman Coulter would grant royalty-bearing licenses to Applera for its patents related to replaceable gels for capillary electrophoresis instruments and DNA sequencers and to its patent for a heated lid for thermal cyclers. Applera would grant Beckman Coulter licenses bestowing rights in the diagnostics market to its patent for nucleic acid sequencing and real time thermalcycling.

By the second quarter of 2006, which ended June 30, quarterly revenue took a minor hit and went down .4% to $616 million from 2005’s second quarter.

In July 2006, Beckman Coulter remained steadfast in its efforts to improve financial performance. The company sold its minority equity investment in APG to Applera for $50 million. In the same month, Beckman entered an agreement with Quest Diagnostics Inc. to have its cellular technology automate Quest’s hematology line. Also in July, Beckman Coulter acquired a product license for all real-time polymerase chain reaction (PCR) patents and pending patent applications owned and controlled by Roche Diagnostics. Beckman Coulter shelled out a license fee of $27.5 million to Roche.

Beckman Coulter finally made a turnaround in the third quarter, ended Sept. 30, with revenue up 6.4% to $631 million.

In October, Beckman Coulter signed an agreement to acquire Lumigen, Inc., a manufacturer of novel detection chemistries for high-sensitivity testing in clinical diagnostics and life science research, for a reported $185 million.

By the fourth quarter, which ended Dec. 31, 2006, Beckman Coulter stayed on its positive financial track with reported revenue of $712 million, up 8.6%.

If the first half of 2007 is any indication, the company will undergo a series of changes this year with the decision to close of one of its facilities, various acquisitions and newly established agreements.

In January, Beckman Coulter announced the closure of Palo Alto, CA operations by the end of 2008 in an effort to reduce operating costs. The facility develops and manufactures centrifuges, a major product line in the company’s Discovery and Automation product area. The company said it would shift operations to other Beckman Coulter facilities.

Beckman Coulter, through acquisitions and partnerships, has been able to boost its product offerings in the first half of 2007. With the acquisition of Diagnostic System Laboratories, Inc., Beckman Coulter received an exclusive license in April to manufacture and market Access Inhibin A, an automated assay for quantitative determination of dimeric inhibin A levels in human serum and plasma.

Also in April, Premier Inc. and Beckman Coulter formed new agreements in which the healthcare purchasing network will provide a full range of Beckman Coulter’s core laboratory systems and supplies.

In May, Beckman Coulter and Bio-Rad Laboratories extended their development and manufacturing agreement related to immunodiagnostic testing for blood virus and infectious disease. As part of the eight-year extension, Bio-Rad will develop new immunoassays for Beckman Coulter’s Unicel and Access immunoassay systems.

The company has remained in the spotlight this spring over its battle to acquire Inverness Medical Innovations Inc. After initially offering $85 a share, Beckman Coulter was challenged by Biosite, which swooped in with a $90 per share offer. Although Beckman Coulter sweetened its initial deal by rising to the $90-per-share purchase price, ultimately Biosite emerged the victor after it upped its offer to $92.50 a share and Beckman Coulter bowed out. Had the company won the bid, it would have paid about $1.67 billion in the deal.