On Harvard Bioscience
By Robert J. and Brian D. Flaherty
On May 28th my son Brian and I attended the third annual SeeThruEquity Microcap Investor Conference in New York City. Here are presentations we found particularly intriguing.
A Transformative Period Reshaping Harvard Bioscience. Adapt or die!
Nowhere is this truth of human evolution more visible than among the older technology pioneers. Corporate missions must be broadened not only concerning product lines but in where these products are marketed globally. What doesn't fit must go. Everything must flourish or fail on its own merits.
Founded in l901 by a doctor at Harvard Medical School as Harvard Apparatus, this highly respected well regarded operation lagged while revenues have declined.
What to do? In 2013 the company was split in two parts, both based in Holliston, MA. Now each separate management team can concentrate on achieving its destiny.
Spun off last November was exciting Harvard Apparatus Regenerative Technology (Nasdaq:HART-8.83) and top management went along with HART. Here at this clinical stage biotech the focus is on developing and then commercialization of regenerated organs for human transplant. HART is developing the HART-Trachea.
This includes a scaffold, the patients' cells and a bioreactor to restore the structure and or function of a severely damaged trachea plus an automated solid organ bioreactor that has the ability to seed cells on an organ scaffold and keep them sterile and healthy during the growth phase prior to transplant.
A trachea? That's your windpipe which transports air to your lungs. Try living without one! That's exciting. That's also another story.
The spinoff left remaining lagging Holliston, MA -based Harvard Bioscience (HBIO-4.70) which was the first of the companies we visited at the SeeThruEquity conference. HBIO is a tiny pure play global developer, manufacturer and marketer of a broad range of primarily under $20,000 apparatus and scientific instruments, systems, laboratory consumables and accessories such as gloves to advance life science research.
Products are sold to thousands of researchers in over 100 countries. Sales are primarily though their 850 page catalog and other specialty ones, their website, distributors including GE Healthcare and a field sales organization. Products divide into five segments: Fluidics like syringe pumps, Lab Equipment and supplies, Molecular Analysis, Cell Analysis and Animal Research.
Since the old top management decided to head HART, 48-year-old President and CEO Jeff Duchemin came on board in August 2013 free to create his own new youthful transformative team at HBIO. Previously he spent 8 months as Global Business Director at Corning Life Services (NYSE:GLW) after Corning had acquired his unit from mighty Becton Dickinson (NYSE:BDX). At Becton Jeff had a 16 year career of success with positions involving sales, marketing, executive leadership and strategic acquisitions. HBIO's new 40-year-old CFO Robert Gagnon was previously CFO at Clean Harbors, Inc. (NYSE:CLN). Other key top management additions have impressive global experience at mighty Becton Dickinson and /or Corning.
Revenues for 2014 are estimated to be flat in the same range as 2013 of $105 million. Non-GAAP fully diluted earnings per share are estimated at $0.26 and GAAP eps at $0.14, up mainly from cost cutting. That is because the CEO describes 2014 as a bridge year to return the company to topline organic growth in 2015.
Because research consumables have only been growing 1% or so in the U.S. and Europe and instruments 2% rival companies had been shifting emphasis to Asia where growth has been over 7% to low double digits. Failing to do so is one reason HBIO's revenues have been sagging.
Last December HBIO realigned its organization which had been built over last 15 years by a series of acquisitions. The global workforce had been reduced by about 13%. The streamlined structure was revamped for efficiency to accommodate the new management team's mission.
"We are reallocating resources for the purpose of global expansion, "says President Duchemin.
Partnering with Chinese companies to expand distribution in China, a market which has been neglected, should help drive a new global growth strategy. So will reinvigorating product development and accretive product acquisitions.
The prime target is Asia which had not been a high priority for several years. Driving global growth will be emerging markets not only in China but Japan, Korea and India. HBIO is building strategic channels and making better relationships with global distributors. HBIO's strong brands, especially Harvard, should be a hit in China.
"We want to become a company which on an annual basis is launching new products," says Duchemin. "We have a portfolio of new products we're working on. We expect to start delivering new products in the near future."
That is an important statement. Earnings gains this year will come mainly from cost cutting. But real growth must be based on new and improved products plus the new global marketing emphasis to restore growth to the lagging top line. His new top team comes with global skills. "This should help us do business on an international basis," predicts the CEO.
Last and most important in transforming Harvard Bioscience from a small company is its new business development strategy. Acquisitions will be selected to transform HBIO into something much broader. A guess? A few will involve more expensive instruments because these have been growing faster than HBIO's lower priced products.
Hopefully 2015 will show indications of top line growth. Those anticipated new products now with an international market will also increase potential.
Summarizing the transformational restructuring CFO Robert Gagnon ads, "We are confident that the business is going to turn and we are going to start to grow."
For more information please visit: www.harvardbioscience.com.
