Company Profile: Thermo Fisher Scientific

By Dr Matt Wilkinson

- Last updated on GMT

Related tags Fisher scientific Thermo fisher scientific Laboratory equipment Thermo electron

LabTechnologist.com brings you an exclusive interview with Greg
Herrema - president of the Scientific Instruments division of
Thermo Fisher Scientific.

Thermo Fisher Scientific was founded in 1956 as the Thermo Electron Corporation by George Hatsopoulos to give his graduate school thermodynamics experiments legitimacy and make grants easier to obtain. Last May​, Thermo Electron merged with Fisher Scientific to form Thermo Fisher Scientific and create an industry giant with annual sales of over $9bn, over 30,000 employees and around 350,000 customers. What does the company sell and what are your major product lines? ​ Our vision is to be the world leader in serving science and our product portfolio really is the broadest of any supplier in the industry focussed on analytical instrument, equipment, consumables and laboratory supplies. We are positioning that capability into two brands: the Thermo Scientific brand which focuses on complete laboratory workflow solutions including analytical instruments, laboratory equipment, software and consumables; and the Fisher Scientific brand which represents convenience and choice for customers in the scientific, security and healthcare markets. In the Scientific Instruments division we focus on analytical instrumentation and services, all branded under the Thermo Scientific brand. We have the broadest range of analytical instrumentation of any supplier in the industry and a very strong position in advanced scientific research applications as well as a growing position in more routine applications. Which product lines do you consider to be "industry leading" within the Scientific Instruments division? ​ We feel we have a clear leadership position in both life science and inorganic mass spectroscopy (MS). We are the definitive technology leader in 3D ion traps linear ion traps and hybrids, as evidenced by the next generation of products recently introduced at ASMS that deliver greater sensitivity, resolution and accurate mass capabilities. We are also focussed on adding new capabilities such as the ETD (electron transfer dissociation) technology for proteomics​ on the LTQ XL which won the 2007 Silver Pittcon Editor's award​. We have taken that strong leadership position with ion trap technology and coupled that with a hybrid strategy to introduce the Orbitrapand FT family of MS​ which extend that technology into very high resolution accurate mass instruments. We are also a very strong player in triple quadrupole and single quadrupole technology; we feel that our triple quadrupole instrument is as sensitive and as capable as any other instrument on the market. In addition to investing in enhancements to the ionization source and the triple quad technology itself we are also investing in integrative workflow capabilities that couple sample preparation on the front end with strong software packages and analysis capability. Isotope Ratio Mass Spectrometry (IRMS) is also a very strong area for us. In molecular spectroscopy, we have a real position of industry leadership in FT-IR [fourier transform infra red] analytical method both with instrumentation and infrared microscopes and our product portfolio contains the leading instruments in terms of technical position and capability. We are focussed on taking that strong position and making the technology more applicable to routine QA/QC [quality assurance / quality control] use. We have a very strong position in both the bulk and trace elemental analysis markets. Our iCAP line of ICP [inductively coupled plasma] optical emission instruments for trace elemental analysis has unparalleled sensitivity and performance with the lowest cost of ownership. Our bulk elemental analysis instruments are also very strong and we continue to build our portfolio of XRD and XRF instruments. Lastly, in the chromatography area, we tend to focus on areas of strength, such as our Accela UHPLC (ultra high pressure liquid chromatography) platform, the DSQII GC-MS (gas chromatography - MS) as well as the TurboFlow technologies that came into the company with our acquisition of Cohesive​. Coupled with our portfolio of Hypersil columns we feel that we have an extensive range of chromatography products that are industry leading within their specific area of focus. What sort of percentage sales growth has the company been seeing recently (during 2006 and the first half of 2007) and has this translated into increased profits? If not, why not? ​ After the merger of Thermo Electron and Fisher scientific during the second quarter of 2006, revenues grew on a pro forma​ basis by 10 per cent with operating income up 21 per cent which puts the company in the high end of the industry in which we participate. We had a tremendous first quarter of the year with record revenues of $2.34bn, up 12 per cent on the same period in 2006 and with operating income up 34 per cent. We've just released our Q2 results​ and they show we've had another record breaking quarter with revenues up to $2.39bn and operating income up 25 per cent on the previous year, again on an adjusted pro forma​ basis. What is the balance between instrument and consumables sales? ​ For Thermo Fisher Scientific as a whole the largest segment of our business is the consumables business which represented 54 per cent of our 2006 revenues which were about $9bn. That level of importance in the overall portfolio remains fairly consistent through the first half of 2007. In Thermo Scientific, while we do have a strong presence in consumables through our LC and GC columns, our primary focus is on the analytical instrumentation, services and laboratory equipment. There is a significant focus throughout the company on coupling our leading positions in both instrumentation and laboratory reagents to deliver truly integrated workflows. A perfect example of that was the recent launch of the SILAC (stable isotope ratio labelling in cell culture) kits where we've been able to bring together our leading reagents and Thermo Scientific MS and introduce novel kits that really enhance the quality of research in protein sciences. What are the main application areas for your products? ​ The best way to answer that is within the context of our mission statement, which is to enable our customers to make the world healthier, cleaner and safer. We therefore have a significant presence in life sciences, from basic research and drug development, and a very strong position in healthcare and clinical applications. A significant portion of our overall portfolio is aligned with our mission to support a healthier world. In terms of making the world cleaner, we have a very strong presence in environmental testing laboratories as well as in air and water quality monitoring. There is a fair amount of work that we do helping researchers design cleaner and more environmentally friendly fuels, such as bio-diesel. Many of products are used in defence and homeland security applications and we have a very large presence in forensics laboratories as well as in food safety applications and all these things help make the world safer. What is the balance between customers in Industry, Academia and Government? ​ For Thermo Fisher Scientific, about 46 per cent of our revenues come from life science applications, 20 per cent from the healthcare and hospital customers, with the remaining 34 per cent coming from industrial, environmental and safety customers. In the Scientific Instruments division, we have a stronger presence in industrial and academic markets with a little less presence in the healthcare and hospital arena. Are you seeing a shift in the geographic distribution of your customers? ​ Our revenue make-up by region for the entire Thermo Fisher Scientific company is about two thirds from North America, a quarter from Europe and then 10 per cent from Asia and the rest of the world. If you look at that more on the basis of analytical instruments and laboratory equipment it's much more global in nature, with a little more than 35 per cent coming each from North America and Europe, and the remainder coming from Asia and the rest of the world. We are seeing very strong growth continuing in the Americas and Europe, but we are seeing a disproportionate amount of growth coming from the Asia-Pacific region from countries like China and India where we see significant double digit growth. We also see significant growth from the other developing regions in Asia-Pacific with continued strength in Japan. What percentage of revenues is the company spending on R&D? ​ In 2006 we invested $225m in R&D across the company and if you look at that on the basis of the whole company that might seem a little low as it equates to about 2.5 per cent of revenues. Certainly that is skewed because our Fisher Scientific brand doesn't really invest in R&D, whereas if you look at that in the context of the instruments part of the business the investment is comparable with many of our competitors in the industry. We continue to invest very strongly in analytical instrumentation R&D to ensure our portfolio maintains in technological leadership. We measure our product vitality very closely, which is a measure of our sales that come from products in the last two years, and that remains at about 25 per cent and we see it continuing at that kind of level in the future. Can you tell us which areas major R&D investment is going into? ​ Our R&D investment is managed with an objective to ensure we maintain a technical leadership position in areas such as mass spectrometry, molecular spectroscopy and elemental analysis. In MS, researchers are constantly looking for ways to look deeper into spectral identification and identification of samples in proteomics, drug discovery etc. and our R&D is focussed at providing them with instrumentation that has the performance to allow that. It's fair to say that there is an equally strong investment in software to help researchers benefit from the capabilities of our cutting edge instrumentation. We are also investing in developing software and workflows that support routine applications where sample preparation and in particular compliance reporting are critical. In molecular spectroscopy we continue to focus on pushing the capabilities of our instruments to keep at the cutting edge, with a special focus on designing robust technology that has the software to be used in QA/QC (quality assurance / quality control) applications. In elemental analysis, again it's continuing to try to push the limits of the instrumentation, but there is a drive to push high-throughput and automation to allow at-line and on-line applications. ​In the chromatography arena, we continue to focus on areas where we can drive technology differentiation and are very focussed on driving common software and applications capability across our portfolio of instruments. We then want to couple that with technologies, at times through acquisition, to further enhance those areas where we have respected strengths. Does the company look to move into new areas through in-house R&D, inward licensing, or by company acquisition… or a combination of these? ​ It's definitely a combination of all of the above. We are constantly evaluating market dynamics and our strategic objectives, and are making business investment decisions based on how to best meet those strategic objectives. When you design new instruments what sort of effort do you put into hardware and software upgradeability? ​ A lot of effort goes into providing steadily improving levels of performance on existing instruments. Novel innovations in mass spectrometry like FAIMS (high field asymmetric waveform ion mobility spectrometry) and ETD (electron transfer dissociation) are designed for use on existing platforms, and in many cases older instruments can be upgraded to this new technology. Software is a faster changing product area. Customers expect ongoing improvements to software as hardware is enhanced and computing power increases, so our software will improve at the same rate, if not faster. We will deliver software that more closely aligns with customer workflow needs, from instrument control to LIMS. In improving software, we will make a conscious effort to support backward integration for existing customers. Where are the instrument parts manufactured and assembled? ​ Broadly, we manufacture instruments at different locations in the Americas and Europe as well as Asia. In particular, we are making a considerable investment in our China manufacturing capacity and developing a strong, local supplier base that can support sub-component production in China and for our factories throughout the world. What percentage of revenues does the company invest in after sales support and servicing? ​We look at the service capabilities that we provide as an integral part of our overall offering to customers. We may attract customers through having leading edge instrumentation, but we retain them through the quality of the service that we provide to them. There is an enormous amount of effort that we put in to building our service organizations and in training our engineers. Software and services account for 16 per cent of total Thermo Fisher Scientific revenues. This figure is nearer 30 per cent for analytical instruments where the services business is a very important part of our total product offering. What sort of after sales service packages do you offer? And does the company help install and teach users how to run the instruments optimally? ​ I think it's fair to say that we have the broadest range of service packages available to our customers. That starts with contracted maintenance for our instruments, but we also provide a whole range of multi-vendor service capabilities as well as the leading asset management and maintenance offerings. In our Fisher Scientific branded channels we have many services that support our customers who have decided to outsource entire capabilities for their operation, whether it's clinical packaging and testing or bio-specimen storage. We view services as a critical part of the overall company and invest just as significantly in this part of the company as we do for our products. Roughly how much of your installed base is supported by your own service staff and those of your authorised agents/distributors versus third party service firms? ​ Our analytical instrumentation service staff generally provides service direct through all of North America, most of Western Europe as well as in India, China, Japan and Australia where we also have direct sales operations. In other regions we do rely on third party relationships to support our customers. How much importance does the company put on building a relationship between specific engineers and support staff and individual customers? ​ In some cases we actually develop contracted relationships with customers that assign specific service engineers to them because they have built up such strong relationships over the years. We view that relationship and that connectivity through the service organisation as critical so we focus on stability and continuity of those relationships wherever possible. Have you or third party contractors done any assessments of brand loyalty for your products? If so, can you give us any information about this? ​ We conduct regular customer surveys as part of our customer allegiance program as well as brand surveys as well. If you look at the importance of the brands that come from some of the legacy companies that we have acquired through Thermo Electron and Fisher Scientific we have retained many of those company names in our product names - such as in the Nicolet FT-IR range. Since the merger last year we have been focussed on building our brands in Thermo Scientific to represent the instrumentation and equipment and Fisher Scientific to represent our channel reach and we are constantly evaluating what we can do to strengthen our brand position in those two areas while trying to protect the loyalty that has been built up by other brand names over the years.

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