Lab Science Industry Trends and Peer Group Analysis

The case for Peer Group analysis

Business leaders are constantly faced with a multitude of strategic decisions. Where to invest? Which country to focus on? Which business line needs special focus? Should we improve cost of goods sold or minimize SG&A expenditure. Should we increase our R&D spending? Is our end user focus still appropriate? Should we improve profitability (always ) or should we focus on growth?

Typically, information available for such decisions is limited. One may use GDP and GDP growth to evaluate country performance, business units can be bench-marked against each other, and historic information can be extrapolated into the future and product managers may recognize customer trends if we are lucky.

In essence, inside company information can help for decisions making, but may also be myopic in nature and lead to errors of judgement. The Lab Science Peer Group Analysis presented here, provides an external benchmark for comparison and will assist in more informed strategic decision making.

Contents of the Peer Group Analysis

The Peer Group Analysis contains a Profit & Loss statement for each company, notes from the call, interpretation, context, outlook 2024 and general trends and topics of interest. The main element, however, is a benchmark comparison across multiple dimensions comparing performance in aspects such as:

• gross margin

• geographic split

• end user markets

• sales per employee,

• business units growth

• Recurring revenue

• growth

• profit

• R&D ratio

• SG&A ratio

• CAGR

• P/E ratio

These benchmark analyses come in an excel file, ready to compare with your own business.

General trends and topics of interest

As a taster, please find some general trends and topics of interest below

The global laboratory instrumentation and consumables market was valued at 100 bUSD in 2022 and is expected to grow by 6% CAGR for the next 6 years. After an all-time high demand during the COVID 19 pandemic, 2023 has been a more difficult year for the industry. Nine out of ten Peer Companies presented here experienced organic revenue decline in 2023, however, this is against a background of tremendous growth in prior years.

Some common themes that emerged for the Peer Companies during 2023 are as follows:

Decline in China:

China is the second largest economy in the world and has been a source of growth and strength for many Lab Science companies. During the first 15 years of our millennium, double digit growth was normal for the industry and many players invested in China with joint ventures and wholly owned subsidiaries for distribution and also for manufacturing and research and development.

However, the party seems to be over, at least for the moment, as most Peer Companies now experience double digit decline in China. Reasons are manifold - the property sector crisis affected general economic growth, international Bio-Pharma seeks to mitigate geo-political risks by “home shoring” and the Chinese government is enforcing Chinese made guidelines for many equipment categories relating to government purchases.

Bio-Pharma is investing less

After the vaccines and COVID drugs boom during the pandemic years, Bio-Pharma is returning to more normal times. As an example, Pfizer grew revenues from 41 bUSD in 2019 to 100 bUSD in 2022 and declined to 58 bUSD in 2023. Such financial decline naturally reduces the appetite for equipment investment irrespective of the – still amazing – long term growth. The inflation reduction act in the US further affected earnings potential for Bio-Pharma, which also reduced their appetite for spending.

De-stocking issues are on-going

Supply chain crunches during the pandemic led to massive over stocking on consumables across many end-user markets. Pipette tips, chromatography consumables or diagnostics assays are just some examples to illustrate this phenomenon. Reduced activities in 2023 perhaps accentuated the problem and meant that de-stocking is still ongoing for many markets across many geographies. The situation appears to be more pronounced in Asia.

Broad end-user appeal is beneficial

With the weakness of Bio-Pharma, those companies that have significant exposure to Academia & Government and Industrial & Applied markets performed significantly better than others. Emerging segments such as PFAS (Per-and polyfluoroalkyl substances) analyses (or battery testing, further helped to compensate Bio-Pharma’s weaknesses. Bruker’s good performance, for example, may be partly due to its large share of business with Academia.

The diagnostics segment performed inconsistently for different companies. Some benefited from increased post-COVID medical testing, others suffered from destocking and tough COVID comparisons.

Innovation is still a growth driver

Innovation was mentioned in almost every presentation as a major growth driver. Particularly the field of Proteomics appears to be very dynamic. Some companies expanded their presence in this field by own developments, such as Thermo Fisher Scientific, who launched the Orbitrap Astral Mass Spectrometer and claims, that with this, brand new analytical targets are accessible. Another example is Bruker, who experienced strong growth with their TIMS-TOF platform for the separation, identification and quantification of peptides and proteins.

Other companies used acquisitions to make progress in Proteomics and other biological applications, such as Waters, who acquired Wyatt light scattering for the characterization of bio-molecules in the fields of cell and gene therapy, antibodies, proteins and polymers. Sartorius acquired Polyplus, an upstream solutions provider specializing on transfection vectors for cell and gene therapy. Danaher acquired Abcam Biotage acquired Astrea, a Bio-Separations specialist, helping them enter the large molecule chromatography market.

Outside Bio-Pharma, demand from environmental testing for better PFAS analysis enabled Waters to grow with their Xevo Absolute Tandem quad Mass Spec platform. Similarly, Agilent launched the 6475 Triple Quadrupole MS to benefit from this emerging sub-segment.

The Peer Group Analysis is the ideal tool to improve strategic planning for Lab Science companies.

We are happy to provide the Peer Group Analysis as a product to Lab Science companies. It is availabe in 2 versions: A small company/business unit license  for CHF 1250 + VAT for a company size of up to 1000 employees and for up to 3 users and as an enterprise license for CHF 2100 + VAT with no restrictions.

Contact Inside-Out Consulting today, to secure your copy

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