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Dr Andrew Carr
President, Amersham Biosciences
Amersham Biosciences
Amersham Biosciences is a leading global provider of products and
services used in gene, protein
and cell research, drug discovery and development, and biopharmaceutical
manufacturing. Comprising two business areas, discovery systems
and protein separations, we bridge the gap between life sciences
and healthcare. In discovery systems, we provide high
throughput systems to help researchers in industry and academia
understand the genetic and molecular basis of disease and speed
up their drug development. In protein separations, we provide research
and manufacturing technologies that enable pharmaceutical and biotech
companies to bring new biological drugs to the market. Together,
our activities cover the entire gene to drug spectrum.
In 2002, we undertook a number of strategic initiatives. We acquired
two filtration companies in the US, adding membrane separation to
our product range in industrial-scale protein separations. We strengthened
our capability in informatics through the acquisition of a controlling
stake in our long-term partner, Cimarron. We bought the CodeLink™
pre-arrayed slides technology from Motorola, building our strength
in gene expression and providing us with further opportunities in
genotyping, proteomics
and diagnostics. In addition, we launched important new products
in proteomics and bioassays.
Market conditions were difficult in the life sciences discovery
systems market in 2002. Pharmaceutical companies, particularly in
the US, saw their sales and profits threatened by patent expirations,
generic competition and market pricing, and as a result they spent
markedly less on life science research instrumentation. We also
saw fewer start-up companies emerging from the biotech sector, reduced
later stage public funding and more caution on spending by companies
in new areas such as high throughput proteomics.
Importantly, customer spending on consumables, reagents and software
remained good for all areas of our business, helping to offset a
significant decline in instrument sales. Pharmaceutical companies
continued to invest in research and development, and we saw good
take-up of new instruments that were viewed as truly enabling and
that significantly improved the drug development process, particularly
in the later stages. Across the breadth of our global franchise,
we saw good sales growth in Europe and Japan.
The market picture was quite different for protein separations,
where continued strong demand for biopharmaceutical drugs led to
good growth in sales of both engineering-based bioprocess
systems and the separations media used in the manufacture of these
drugs. Indeed, one of the biggest concerns for our biopharmaceutical
customers has been the lack of manufacturing capacity, and new plants
are being commissioned or existing facilities expanded to meet the
growing demand.
With protein separations continuing to be a strong growth driver,
total sales in Amersham Biosciences in 2002 were £670 million, up
six per cent. Trading profit increased by one per cent to £163 million.
As planned, the rate of growth in R&D expenditure was held back,
with investment of £88 million, up three per cent. Operating profit
was flat at £75 million. Excluding the dilutive impact of the CodeLink
and Cimarron acquisitions, operating profit grew nine per cent,
benefiting from the excellent margins in protein separations and
the settlement in February of the Applera patent litigation.
Protein separations
Our protein separations business area is the market leader in chromatography
systems (instruments, software and media) for the purification of
proteins on a laboratory and manufacturing scale. The good growth
in this market is driven by the increasing number and volume of
biopharmaceuticals (such as insulin, monoclonal antibodies and vaccines)
on the market or in clinical trials. Our products are used in the
manufacture of over 90 per cent of these biologically-based drugs.
Protein separations sales in 2002 were £276 million, up 15 per
cent, driven by excellent growth in bioprocess sales and including
first-time benefit from filtration or membrane separation products.
Operating profit was up from £96 million to £107 million. Our operating
margin was 39 per cent. As anticipated, our sales accelerated through
the year, with the fourth quarter being particularly strong as biotech
and pharmaceutical companies purchased manufacturing instruments
and media for new production plants and for new drugs going into
clinical trials. We also saw good replenishment sales of media for
existing biopharmaceuticals.
In addition, two further areas contributed to the growth for industrial-scale
bioprocess systems in 2002. First, the market for products used
in the manufacture of DNA-based pharmaceuticals began to grow rapidly,
driving sales of our OligoProcess™ systems. Second, the membrane
separation businesses, acquired in January, delivered good sales
as biopharmaceutical customers took advantage of our broader product
offering. Membrane separation has been successfully integrated into
Amersham Biosciences and a new site in Massachusetts, USA, will
be completed early in 2003.
The laboratory separations area saw lower instrument sales, following
the exceptionally high growth in 2001, and as a result of more cautious
spending by pharmaceutical companies. Media sales continued to be
good, and a new instrument, ÄKTApilot™, launched in December for
the production of clinical grade proteins on the benchtop, has been
well received by customers.
We continue to innovate to maintain our market share and leadership,
and in 2003 we will be increasing our R&D investment in protein
separations. During 2002, a new R&D laboratory was established at
our site in Uppsala, Sweden. Good progress was made with a number
of new products that will be launched in 2003, including a new Streamline™
resin and column and new filtration membranes.
Discovery systems
Our discovery systems business area provides high throughput systems
to improve the effectiveness of life science and pharmaceutical
R&D, as well as a broad range of laboratory research tools and technology
to purify, detect and analyse biological molecules.
Sales in 2002 were £394 million, down one per cent, impacted by
market conditions, notably the slowdown in pharmaceutical company
spending on capital equipment. Instrument sales, representing about
one quarter of discovery systems sales, were down significantly
compared with 2001. However, customer spending on consumables, reagents
and software remained good. Discovery systems had an operating loss
of £32 million, including the dilutive impact of the CodeLink and
Cimarron acquisitions. Excluding this, the operating loss was unchanged
from 2001.
The steps taken in our genomics
business at the beginning of 2002, together with the Applera litigation
settlement, moved genomics into profit for the year. We are the
market leader in enzymology as applied in genomics, and our good
sales of reagents and consumables not only reduce our exposure to
the market slowdown in instrumentation sales, but also underpin
our vision of developing technologies to enable personalised medicine.
TempliPhi™, the DNA template preparation kit, continued to make
good progress. All of the five major public genome centres now use
TempliPhi, with three of them – the Joint Genome Institute, the
Whitehead Institute, and Baylor College of Medicine – using it in
daily sequence production. It is also seeing very good acceptance
in Japan. New products based on this technology are in development,
and the first of these, GenomiPhi™, will be launched in 2003 for
use in whole genome amplification.
In July, we acquired the CodeLink pre-arrayed slides business from
Motorola Life Sciences. The acquisition takes us into the pre-arrayed
(ready-to-use) chip market, building on our wellestablished business
of spotters and scanners for researchers to make their own arrays.
CodeLink has a unique, patented manufacturing process that produces
arrays of high quality, sensitivity and reproducibility, and with
more useable data points than any other pre-arrayed slide. There
are currently six CodeLink products on the market, with several
more in development including higher density chips with 20,000 DNA
spots per slide. CodeLink has been undergoing comparison tests in
customer laboratories and the feedback has been very positive. As
anticipated, the pre-arrayed slide distribution agreement with Affymetrix
in Japan ended in December.
The proteomics product area also saw good sales growth in reagents
and consumables. Our market-leading 2D DIGE technology, which allows
the protein content of several samples to be simultaneously analysed
and compared, continued to grow well and development work is ongoing
to expand further the range of DIGE reagents and software. During
2002, we launched our new MALDI mass spectrometer, the Ettan™ MALDI-TOF
Pro for protein characterisation, as part of the complete Ettan
range of systems for stand alone or integrated protein analysis.
In February 2003 we entered into an alliance with Thermo Electron
Corporation to co-market mass spectrometry products to life science
researchers. The collaboration enables us to offer customers a complete
and user-friendly solution, combining our strong franchise and knowledge
of the proteomics market with Thermo Electron’s portfolio of mass
spectrometry products and extensive sales and support infrastructure.
Bioassays products are used by researchers to quantify the biological
processes involved in cellular activity,metabolism and disease.
Pharmaceutical customers use our products to identify drug targets
and develop potential new drugs, eliminating poor drug candidates
and those with side effects as early as possible, thus reducing
the time and cost spent in drug development. We launched two new
instruments in 2002. The latest generation LEADseeker™ was launched
in September and enables researchers to screen over one million
drug compounds a day, in a number of different modalities including
radiometric, luminescent and fluorescent. The IN Cell Analyzer high
throughput system enabling researchers to study the effects of a
potential new drug in living cells in real time, continued to be
well received by customers, and a number of systems were sold in
the last quarter of the year. As well as its use by pharmaceutical
companies, the IN Cell Analyzer is also being used in a collaboration
between Amersham and the Sloan-Kettering Institute to study the
human genome for disease-related genes. We also saw particularly
good growth in custom-labelled products used in the drug development
process, as pharmaceutical companies began to outsource more of
this work.
Informatics
and software continue to be critical elements of the life science
market, with researchers needing tools to help them manage, store
and analyse the vast amounts of data being generated. In May 2002,
we announced an agreement to acquire a controlling stake in our
long-term partner, Cimarron, an informatics company based in Salt
Lake City, Utah, USA. This has given us increased synergy and flexibility
in the development of informatics products, and enabled us to better
integrate these products with our existing platforms. We launched
a number of new products – Laboratory Workflow Systems for sequencing,
microarrays
and genotyping – towards the end of the year. Total software sales
across Amersham Biosciences grew well in 2002.
Restructuring of discovery systems
Discovery systems is a business area with good long-term growth
prospects, and its market franchise and strong portfolio position
it well for the future. In light of developments in the life sciences
market, a restructuring programme has been put in place to accelerate
the move into profitability during 2004.
The research and development portfolio will be refocused on a smaller
number of high-value, systems-based products linking instruments
with reagents, and on high-value, standalone consumables. Our sales
and marketing team will increase efficiency by more effectively
targeting the high growth customer segments. Driving to deliver
a more efficient manufacturing cost base and focusing research and
development on fewer sites will result in the loss of approximately
400 jobs.
Following the good performance in 2002, Amersham is well placed
to achieve further good growth in 2003. The following guidance is
given before the impact of foreign exchange, which is discussed
in the Financial review.
Amersham Health is expected to continue the good growth in medical
diagnostics excluding Japan, and operating margins are anticipated
to be at similar levels to those achieved in 2002. Amersham Health
sales in Japan are expected to decline at a lower rate than in 2002.
Within Amersham Biosciences, protein separations is expected to
see good growth, with sales growth again expected to be stronger
in the second half of the year. Increased investment in R&D will
bring operating margins down slightly.
Discovery systems is expected to see good sales growth in reagents,
consumables and software.Visibility for capital expenditure on instrumentation
remains low. The restructuring plans are expected to bring benefits
in 2003 moving the business to profitability during 2004.
Sir William Castell Chief Executive
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