Posted date: 4/28/2008 Analysts Expect Good Revenue Reports from Beckman
Apria, Oxygen Providers Should Weather Slowdown in Hospitals’ Spending, Medicare Cuts
By Vita Reed Orange County Business Journal Staff
Analysts are highlighting medical diagnostic companies as standouts and predicting strong first-quarter financial results.
Fullerton-based Beckman Coulter Inc. hopes not to disappoint when it releases its earnings this week.
Beckman Coulter, which is considered the last large stand-alone company in its sector, is set to release its earnings Wednesday. Wall Street expects the company to post a first-quarter profit of $42 million on revenue of $669 million.
Diagnostic companies such as Beckman Coulter “(look) attractive to us,” Jeffrey Frelick, a Lazard Capital Markets analyst, wrote in a recent preview note.
In particular, Frelick likes what he calls “pure plays” or potential straight buyout deals in the sector, such as Beckman and Becton Dickinson Inc. of Franklin Lakes, N.J.
With diagnostic imaging companies under pressure, companies such as Beckman, which has nearly 80% of its revenue coming from leases of supplies, chemistry kits and services, are less likely to be affected by hospitals’ budgets, Frelick said in the note.
Frelick said that Beckman’s existing contracts should carry it through a slowdown in spending by hospitals, which most likely will reallocate money to expand or renovate their buildings and buy expensive equipment.
Three years ago, Beckman changed how it accounted for leases of its medical testing instruments to recognize revenue spread out for the life of an equipment contract, rather than booking revenue as a lump sum at the start of the lease.
“The diagnostic industry has weathered many storms,” Frelick wrote. Even with pricing pressures and lagging reimbursements, hospitals are spending money on new tests and automated instruments because they “have permitted hospital laboratories to address challenges such as labor shortages while increasing productivity,” Frelick said.
In an earlier report, Frelick said that Beckman watchers are looking to see if the company will develop a simple diagnostic machine that runs various tests that would be meaningful to the routine hospital laboratory market.
Concern for Oxygen Providers
A few weeks ago, Apria Healthcare Group Inc., the Lake Forest home healthcare company, said it was confident that it could hold its own this year in the wake of deep Medicare cuts for its mainstay oxygen business.
But some on Wall Street are a bit concerned about what lies ahead.
In a recent report, Wachovia Securities’ William Bonello wrote that he expected chatter surrounding a final Medicare bill to escalate, potentially causing volatility for some healthcare providers’ stocks. Bonello predicted that Congress could draft a bill in late May or June.
Oxygen providers such as Apria and Clearwater, Fla.-based Lincare Holdings Inc. are at risk because the Senate might consider cutting reimbursement for traditional oxygen concentrator machines by as much as 39%, while more than doubling reimbursement for portable oxygen, according to Bonello.
The analyst estimated that such a cut could dramatically hit Apria and Lincare’s earnings in 2009.
Bonello believes that the odds of a nursing home cut, while less than 50%, were still higher than the odds of home healthcare cuts.
“Of the market adjustments proposed by MedPAC, we believe that skilled nursing facility payments would be one of the first to be tapped if a bill cannot be funded through Medicare Advantage (health plan) and oxygen cuts alone,” he said.
Irvine-based Sun Healthcare Group Inc., Skilled Healthcare Group Inc. of Foothill Ranch and Mission Viejo’s Ensign Group all are part of the nursing home sector, although Bonello only mentioned Louisville, Ky.-based Kindred Healthcare Inc., which has 225 nursing homes, as an example of a company that could be affected by cuts.
Bits and Pieces:
Edwards Lifesciences Corp., the Irvine-based heart valve maker, said longtime board member Vernon Loucks Jr. is retiring, effective May 31. Loucks is chairman of Aethena Group LLC, a Chicago firm that invests in healthcare companies. He’s served on Edwards’ board since its spinoff from Baxter International Inc. eight years ago … BioLase Technology Inc., an Irvine maker of dental lasers, launched its Endolase Root Canal Therapy System. Endolase allows general dentists and endodontists to perform root canal surgeries in a faster fashion … Boyd Hendrickson, chief executive of Skilled Healthcare, will speak at Bank of America’s healthcare conference next month in Las Vegas … Children’s Hospital of Orange County said the clinical documentation team at its CHOC at Mission facility received an honor from Advance for Nurses magazine. The nursing team created and implemented electronic medical records at the hospital.
Beckman Coulter to Present at Upcoming Healthcare Conferences Wednesday March 12, 8:00 am ET
FULLERTON, Calif., March 12 /PRNewswire-FirstCall/ -- Beckman Coulter, Inc. (NYSE: BEC - News), a leading developer, manufacturer, and marketer of products that simplify, automate, and innovate complex biomedical testing, announced today that Charles Slacik, Beckman Coulter's Senior Vice President and Chief Financial Officer, will present at the following conferences:
-- Cowen and Company 28th Annual Healthcare Conference on March 18, 2008, at 2:25 p.m. (ET).
-- Lehman Brothers Global Healthcare Conference on Thursday, March 20, 2008 at 9:00 a.m. (ET).
The live webcast of Beckman Coulter's presentations can be accessed by visiting their website at http://www.beckmancoulter.com. To access the webcast select "go to IR" under Investor Relations and find the event listed under "What's Ahead." The webcast will be archived on the company's website for future on-demand replay.
Beckman Coulter, Inc., based in Orange County, California, develops, manufactures and markets products that simplify, automate and innovate complex biomedical tests. More than 200,000 Beckman Coulter systems operate in laboratories around the world, supplying critical information for improving patient health and reducing the cost of care. Recurring revenue, consisting of supplies, test kits, service and operating-type lease payments, represent more than 78 percent of the company's 2007 revenue of $2.76 billion. For more information, visit http://www.beckmancoulter.com.
4300 N Harbor Boulevard
Fullerton, CA 92834-3100
Beckman Coulter, Inc. provides biomedical testing instrument systems, tests, and supplies for clinical laboratories worldwide. The company offers chemistry systems, such as routine chemistry systems that use electrochemical detection, chemical reactions with patient samples, and antigen-antibody reactions to detect and quantify substances of diagnostic interest in blood, urine, and other body fluids; point of care testing products comprising rapid diagnostic test kits and hematology instruments that give physicians information to manage patient treatment; and manual and automated electrophoresis products. It also provides immunoassay systems performing tests that assess thyroid function, screen and monitor for cancer and cardiac risk, provide information in fertility and reproductive testing, and monitor factors associated with anemia, blood viruses, infectious disease, and therapeutic drugs. In addition, the company offers cellular systems for clinicians, such as hematology systems to study formed elements in blood, such as red and white blood cells and platelets; hemostasis systems offering information to diagnose bleeding and clotting disorders and to monitor anticoagulant therapy; and flow cytometry systems used in applications in basic research, clinical research, and drug discovery. Its discovery and automation products include clinical laboratory automation systems, life sciences automation products, biomarker discovery, genetic analysis systems, centrifugation, particle characterization, life sciences tools, and molecular diagnostics. The company's products are used in various applications ranging from lab solutions used for medical research, clinical research, and drug discovery to diagnostic systems in hospitals and physicians' offices to aid in patient care. The company was founded in 1934. It was formerly known as Beckman Instruments, Inc. and changed its name to Beckman Coulter, Inc. in 1998. Beckman Coulter is headquartered in Fullerton, California.
Mr. Scott T. Garrett, 58
Chief Exec. Officer, Pres
Like all successful life sciences companies, test/diagnostic giant Beckman Coulter (Fullerton, CA) is a mixture of entrepreneurial spirit and technical expertise. Chief executive officer Scott Garrett thus seems a perfect fit.
The 55-year-old Garrett was named Beckman's CEO in February, three years after joining the company as president of its clinical diagnostics division.
Prior to joining Beckman, Garrett had spent the past several years working for himself. He founded Garrett Capital Advisors in 1998, forming an alliance with Chicago Equity Capital. The two ventures acquired several medical device and life science companies. Garrett served on the boards of several of the companies and briefly as CEO of Kendro Laboratory Products, which recently merged with Thermo Electron Corp. (Waltham, MA).
A mechanical engineer by training, Garrett began his career working in the product research and development arena with Baxter International, but eventually segued into business development and management. He headed several Baxter divisions before being named president of its global laboratory products division. A decade ago he helped spin that division off into Dade International, now Dade Behring Inc. (Deerfield, IL).
Beckman Coulter, renowned over the years for introducing many diagnostic tests that are industry standards, reported 2004 sales of $2.4 billion, a 9.8% increase from 2003. About two-thirds of the company's sales are derived from after-market reagents, test kits, and consumables. Garrett predicts a similar increase in 2005 sales, led by strong growth in the company's clinical diagnostics division, particularly in the area of laboratory automation. In April, Garrett consummated his first transaction as CEO, acquiring Agencourt Bioscience Corp. (Beverly, MA) for $140 million and giving Beckman greater range in offering DNA and RNA diagnostic products.
For many medical technology executives, the growing emphasis on information technologies in healthcare conjures a universe that is largely unknown territory. The landscape of healthcare IT is populated by companies and associations that are outside the experience of most medtech leaders, making it difficult to find a common language for discussion.
Fortunately, not everyone considers healthcare IT to be such a foreign land. Following is the profile of one executive who is well positioned to lead medical device companies into the brave new world of healthcare IT, and who has begun to make his influence felt during the past year.
Mr. Charles P. Slacik CPA, 53
Chief Financial Officer and Sr. VP
Mr. Robert W. Kleinert, 56
Exec. VP of Worldwide Commercial Operations
Mr. Arnold A. Pinkston, 49
Sr. VP, Sec. and Gen. Counsel
Mr. J. Robert Hurley, 58
Sr. VP of HR and Sr. VP of Corp. Communications
Beckman Coulter Inc.'s Corporate Governance Quotient (CGQ®) as of 18-Mar-08 is better than 54.7% of S&P 400 companies and 85% of Health Care Equipment & Services companies.
Exchange: New York Stock Exchange
Index Membership: S&P 400 MidCap
Industry: Scientific & Technical Instruments
Full Time Employees: 10,500
Total Cash (mrq): 83.00M
Total Cash Per Share (mrq): 1.324
Total Debt (mrq): 990.80M
Book Value Per Share (mrq): 22.957
Operating Cash Flow (ttm): 397.10M
Levered Free Cash Flow (ttm): 24.92M
Shares Outstanding: 62.70M
% Held by Insiders1: 0.63%
% Held by Institutions: 88.70%
Capital Research, Earnest Partners, Barclays, Morgan Stanley, etc.
http://finance.yahoo.com/q/mh?s=BECStock priceKing Capital Investment Grouphttp://kingcapital.tripod.com