2013 Annual Report Forecast and Analysis of the Laboratory ... Annual Report Forecast- Frost... · Total Market for Laboratory Products: Overview Market Overview The global laboratory

2013 Annual Report:2013 Annual Report:Forecast and Analysis of the Global Market forForecast and Analysis of the Global Market forForecast and Analysis of the Global Market for Forecast and Analysis of the Global Market for

Laboratory ProductsLaboratory Products

Laboratory Products AssociationLaboratory Products Association

October 2013October 2013October 2013October 2013

Table of Contents

Section Slide

Research Scope, Methodology, and Definitions 3

Total Market for Laboratory Products 8

Instruments and Equipment Market 33

Chemicals, Reagents, and Life Science Kits Market 41

Consumables Market 48

Laboratory Products End-user Spending Trends 56y p g

Academic End-user Segment – Market Trends 76

Government End-user Segment – Market Trends 95

Biopharmaceutical End-user Segment – Market Trends 103

Industrial End-user Segment – Market Trends 121

Patient Care End user Segment Market Trends 136

2

Patient Care End-user Segment – Market Trends 136

RESEARCH SCOPE, METHODOLOGY, AND DEFINITIONS

3

Research Methodology, Scope, and Definitions:Data Acquisition Processq

• Frost & Sullivan conducted a comprehensive survey of secondary sources, including industry reports and databases, sponsor materials, competitor materials, general media, analyst reports, scientific/medical literature, industry organization materials trade journals government reports patent databases and regulatory

Secondary Research

materials, trade journals, government reports, patent databases, and regulatory databases.

• Secondary research primarily focused on updates and additions to the previous year’s analysis of trends affecting the lab supply market, including macroeconomic trends, funding (public and private), governmental & regulatory, real-estate, and end-user trends.

• Frost & Sullivan conducted in-depth interviews with LPA members, each lasting 45-

Primary R h

Frost & Sullivan conducted in depth interviews with LPA members, each lasting 4560 minutes. The interviewer followed a discussion guide as closely as possible, so that a discrete data point was collected for each question. The interviewer and respondent were free to discuss off-topic issues as they came up. The thorough exchange of views that resulted offered great insight into the relevant issues.

• Frost & Sullivan conducted phone interviews with LPA members to collect market size data growth projections and qualitative market trendsResearch size data, growth projections, and qualitative market trends.

4

Research Methodology, Scope, and Definitions:Data Analysisy

• Frost & Sullivan analyzed the research findings accord to standard protocols for consulting and market research: the interviews were transcribed, the data organized, and the findings summarized and arranged in either a descriptive or

Analysis of Market Trends

tabular format, as appropriate.• Revenues from the sales of laboratory products markets were analyzed according

to relevant product and end-user segments. LPA Member interviews and secondary sources (10-K’s, annual reports, etc.) were used to calculate market size and growth.

• Frost & Sullivan’s consulting team analyzed the quantitative and qualitative data

Market Size and Forecast

Frost & Sullivan s consulting team analyzed the quantitative and qualitative data collected to provide LPA with qualitative trends, end-user trends , and market size (revenue).

• Frost & Sullivan conducted a number of validation interviews with LPA members in order to ensure that the report content met expectations. Validation interviews allowed the consulting team to present preliminary market figures and trends to LPA members in order to “sanity check” data and the market outlookand Forecast

AssumptionsLPA members in order to sanity check data and the market outlook.

5

Research Methodology, Scope, and Definitions:Data Acquisitionq

Geographic Scope• Global, segmented by US, Canada, Europe, Japan, India, China, Brazil, Mexico, and Rest of World

Gl b l P d t M k t t d b US d O t id US• Global Product Market, segmented by US and Outside US• The end-user segment is based off of newly established US market sizes (Canada broken out separately)

Laboratory Product Segment Scope• Instruments > $20K, Instruments ≤ $20K, and Equipment• Chemicals, and Life Science Reagents and Kits• General Laboratory Supplies, Plasticware, Glassware

End-user Segment Scope• AcademicAcademic• Government• Biopharmaceutical• Industrial• Patient Care

Forecast Period• Base Year: 2012• Actual Years: 2011–2012• Forecast Years: 2013–2015• Total Analyzed Period: 2011–2015

6

Research Methodology, Scope, and Definitions:Definitions

Laboratory Instruments and Equipment•Instruments > $20K: Major capital expenditure instruments receiving electrical current with a useful life beyond 12 months that sense a sample characteristic s ch as mass spectrometers chromatographers and spectrophotometersmonths that sense a sample characteristic, such as mass spectrometers, chromatographers, and spectrophotometers

•Instruments ≤ $20K: Lower-value instruments receiving electrical current with a useful life beyond twelve months that sense a sample characteristic, such as balances, pH meters, dissolved oxygen meters, conductivity meters, and recorders

•Equipment: All equipment receiving electrical current with a useful life beyond twelve months that do not sense a sample characteristic, such as furnaces, ovens, incubators, baths, centrifuges, refrigerators, shakers, freezers, mixers, pumps, circulators water purifiers pipettors with electrical current and freeze dryerscirculators, water purifiers, pipettors with electrical current, and freeze dryers

Laboratory Chemicals, Reagents and Kits•Laboratory Chemicals: All routine chemicals and reagents used in research and quality control procedures, such as solvents, acids, dyes, standards, solutions, buffers, solid phase extraction chemicals, columns, and silica gelsLif S i R t d Kit C ll ti f ti i d h i l / t l ti l b d th bl•Life Science Reagents and Kits: Collection of optimized chemicals/reagents, plastic labware, and other consumables that are packaged together with specific protocols and commercialized for a designated genomics, proteomics, molecular biology, cellular biology, or protein biochemistry applications. Examples include reagents and kits for nucleic acid isolation and purification, protein extraction and fractionation, cell culture, and assays

Laboratory Consumables•Plasticware: All containers and vessels made of plastics, for example PE, PF, PMP, and PS. Examples of vessels include cylinders, tubes, carboys, flasks, beakers, dishes, pipettes, and plates

•Glassware: All containers and vessels made of glass (flint or borosilicate). Examples of vessels include cylinders, tubes, carboys, flasks, beakers, dishes, pipettes, and plates.

•General Lab Supplies: All consumables other than glassware and plasticware. Examples include filtration membranes, pipettors and pipette tips corks rubber stoppers tubing clamps gloves wipes absorbents electrodes dispenserspipettors and pipette tips, corks, rubber stoppers, tubing, clamps, gloves, wipes, absorbents, electrodes, dispensers, cans, syringe filters, dissecting tools, burners, boxes, carts, racks, regulators, timers, and disposable bioreactors

7

TOTAL MARKET FOR LABORATORY PRODUCTS

8

Total Market for Laboratory Products:Overview

Market Overview The global laboratory products market totaled $38.1 billion in 2012, with the

2013 market size forecast to reach $38.5 billion. The global laboratory products market grew 2.0% in 2012, and is expected to fall to 1.2% growth in 2013 in response to global economic conditions.C ti d i t i t i ff ti th tl k f lti l l b t Continued economic uncertainty is affecting the outlook for multiple laboratory product market segments, especially in the US and European markets which remain challenged by weak overall economies and are posting 2013 growth rates of 0.3% and 0.1%, respectively. Europe is faring worse than the US in , p y p g2013 despite sequestration measures in the US greatly affecting the government and academic research sectors. India and China remain the fastest growing markets analyzed expanding at

CAGRs of 12.1% and 9.4%, respectively, from 2012–2015. There is general consensus in the industry that market growth will improve in

2014, yet not to the level of 2012. Accordingly, market growth is forecasted to increase at rates of 1 8% in 2014 and 2 2% in 2015increase at rates of 1.8% in 2014 and 2.2% in 2015.

9


US End-user Segments Overview Academic: Sequestration measures have caused a cut in the number of

grants awarded to academic labs and in many cases, a reduction of about 5% in grant award amounts. Academic labs have other sources of funding, offsetting some of the damage caused by government reductions. Government: Sequestration measures are having a greater affect on Government: Sequestration measures are having a greater affect on

government labs, which often acquire little to no outside funding. The market is forecast to remain bleak through 2015 with buying power at an all time low. Biopharmaceutical: This market has many dynamics colliding, includingBiopharmaceutical: This market has many dynamics colliding, including

patent expiration, consolidation, continued outsourcing abroad while others move facilities back to North America, R&D restructuring, trends towards biologics and generics, and an uptick in biotech IPOs. The market is expected t i h lth b t t b i th h 2015 t CAGR f 3 4%to remain healthy, but not booming through 2015, at a CAGR of 3.4%. Industrial: Following the trend of a challenging US economy, industry is

falling to a 2.6% growth rate in 2013, but expected to improve beyond. Patient Care: Growing at a 3 1% CAGR as labs prepare for more insured Patient Care: Growing at a 3.1% CAGR as labs prepare for more insured

patients, lower reimbursement for some tests, and value-based purchasing.

10


Purchasing Trends Overview eCommerce: Buyers continue to shift away from in-person and phone-in

catalog purchasing to online buying. Easy-to-use, fast, information-rich, price-transparent, and attractive supplier websites are in high demand from customers and critical for success as purchasing evolves. Product Information/Transparency: Consumers increasingly use the Product Information/Transparency: Consumers increasingly use the

internet to research product features, costs, and reviews to determine quality and value. This is no different in the lab products market, where labs are asking for more product information to make better decisions, greater and quicker transparency of product and shipping costs, and a transaction process as easy as today’s most popular consumer websites. Product Reviews: This increasingly tech savvy end-user base is

t d t h dli t h i l d t t t b f h iaccustomed to handling technical products at stores before purchasing, or reading/ watching CNET reviews to determine a product’s performance. In this different, yet highly technical marketplace, labs seek this kind of information and wish it was more widely available.y

11


2.5%45.0

Laboratory Product Market Revenue Forecast, Global, 2011–2015CAGR (2012–2015): 1.8%

2.0%

30.0

35.0

40.0

on)

1 0%

1.5%

20.0

25.0

venu

e ($

Bill

io

0.5%

1.0%

10.0

15.0Rev

2011 2012 2013 2014 2015Revenue $37.3 $38.1 $38.5 $39.2 $40.1

0.0%0.0

5.0

12Note: Figures are rounded

Growth rate 2.0% 1.2% 1.8% 2.2%


40.0

45.0

Laboratory Product Market Revenue Forecast by Region/Country, Global, 2011–2015

25.0

30.0

35.0

ue ($

Bill

ion)

5.0

10.0

15.0

20.0

Rev

enu

2011 2012 2013 2014 2015Rest of World $1.2 $1.3 $1.3 $1.4 $1.4 Mexico $0.1 $0.1 $0.1 $0.1 $0.1 Brazil $0 2 $0 2 $0 2 $0 2 $0 3

0.0

Brazil $0.2 $0.2 $0.2 $0.2 $0.3 China $1.2 $1.3 $1.4 $1.6 $1.7 India $1.3 $1.4 $1.6 $1.8 $2.0 Japan $2.0 $2.1 $2.1 $2.1 $2.1 Canada $1.3 $1.3 $1.3 $1.3 $1.3


Europe $15.3 $15.5 $15.5 $15.5 $15.7 United States $14.7 $14.9 $15.0 $15.2 $15.4


12.0%

14.0%

United States

Laboratory Product Market Growth by Region/Country, Global, 2011–2015

8.0%

10.0%

nue

Rat

e (%

)

CanadaEuropeJapanIndia

2.0%

4.0%

6.0%

Rev

enG

row

th R China

BrazilMexicoRest of World

2012 2013 2014 2015United States 1.4% 0.3% 1.2% 1.6%Canada 1.4% 0.5% 1.4% 1.7%E 1 1% 0 1% 0 5% 0 9%

0.0%

Europe 1.1% 0.1% 0.5% 0.9%Japan 1.0% 1.2% 1.0% 1.2%India 12.2% 11.8% 12.4% 12.1%China 9.8% 9.7% 9.4% 9.1%Brazil 4.0% 4.3% 5.0% 5.2%Mexico 1.5% 1.2% 1.3% 1.7%Rest of World 4.8% 4.7% 4.8% 5.0%



2012 Act al 2013 Forecast 2014 Forecast 2015 Forecast O erall Trend

Laboratory Products Growth Forecasts by Region, 2012–2015

2012 ActualGrowth Rate

2013 Forecast Growth Rate



Overall Trend 2013–2015

Global 2.0% 1.2% 1.8% 2.2% ▲

US 1.4% 0.3% 1.2% 1.6% ▲US 1.4% 0.3% 1.2% 1.6%Canada 1.4% 0.5% 1.4% 1.7% ▲

Europe 1.1% 0.1% 0.5% 0.9% ▲

India 12.2% 11.8% 12.4% 12.1% ●●

China 9.8% 9.7% 9.4% 9.1% ▼

Japan 1.0% 1.2% 1.0% 1.2% ●●

Mexico 1.5% 1.2% 1.3% 1.7% ▲

Brazil 4.0% 4.3% 5.0% 5.2% ▲

Rest of World 4.8% 4.7% 4.8% 5.0% ▲

15

Trend Key

Decreasing Stable Increasing▼ ●● ▲


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Gross Domestic Product Growth Forecast,Select Countries, 2004–2014

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014Brazil 5.7 3.2 3.9 6.1 5.2 -0.3 7.6 2.7 0.9 2.5 3.2Canada 3.2 3.1 2.7 2.1 1.1 -2.8 3.2 2.5 1.7 1.7 2.2China 10.1 11.3 12.7 14.2 9.6 9.2 10.4 9.3 7.8 7.8 7.7C a 0 3 9 6 9 0 9 3 8 8France 2.3 1.8 2.6 2.2 -0.2 -3.1 1.6 2.0 0.0 -0.2 0.8Germany 0.7 0.8 3.9 3.4 0.8 -5.1 4.0 3.1 0.9 0.3 1.3India 8.2 9.2 9.3 10.0 6.0 5.2 10.5 6.3 3.2 3.8 6.3Italy 1 6 1 1 2 3 1 5 1 2 5 5 1 8 0 6 2 2 1 0 0 6Italy 1.6 1.1 2.3 1.5 -1.2 -5.5 1.8 0.6 -2.2 -1.0 0.6Japan 2.4 1.3 1.7 2.2 -1.0 -5.5 4.5 -0.6 1.9 2.0 1.2Mexico 4.0 3.2 5.1 3.2 1.2 -6.0 5.6 3.9 3.9 2.9 3.2Russia 7.2 6.4 8.2 8.5 5.2 -7.8 4.3 4.3 3.4 2.5 3.3Spain 3.3 3.6 4.1 3.5 0.9 -3.7 -0.3 0.4 -1.4 -1.6 0.0United Kingdom 2.9 2.8 2.6 3.6 -1.0 -4.0 1.8 1.0 0.3 0.9 1.5United States 3.5 3.1 2.7 1.9 -0.3 -3.1 2.4 1.8 2.2 1.7 2.7GDP Growth Exceeds 10% GDP Upgraded from earlier IMF Forecasts

16

GDP Growth Exceeds 10% GDP Upgraded from earlier IMF ForecastsGDP Decline GDP Downgraded from earlier IMF Forecasts

Source: International Monetary Fund World Economic Outlook Update, July 2013


Laboratory Products Revenue by Region, Global, 2012

U.S.

2012 Revenue ($B)

Percentage of Market (%)

US $14.9 39.2%

C d $1 3 3 4%Canada

Europe

India

China

Canada $1.3 3.4%

Europe $15.5 40.6%

India $1.4 3.8%

China $1 3 3 4%China

Japan

Mexico

Brazil

f ld

China $1.3 3.4%

Japan $2.1 5.4%

Mexico $0.1 0.3%

Brazil $0 2 0 6%Rest of World Brazil $0.2 0.6%

Rest of World $1.3 3.3%

Global $38.1 100.0%

Note: All figures are rounded. Due to rounding, figures may not sum.


Laboratory Products Revenue by Region Forecast Outlook, Global, 2015

2015 Revenue

($B)

Percentage of Market 2015 (%)

PercentageChange from

2012 (%)

US $15.4 38.4% ▼ -0.8%U.S.U.S. US $15.4 38.4% ▼ 0.8%

Canada $1.3 3.3% ▼ -0.1%

Europe $15.7 39.1% ▼ -1.5%

India $2.0 5.1% ▲ 1.3%

Canada

Europe

India

China

Canada

Europe

India

China

China $1.7 4.3% ▲ 0.8%

Japan $2.1 5.3% ▼ -0.1%

Mexico $0.1 0.3% ● 0.0%

Japan

Mexico

Brazil

Rest of World

Japan

Mexico

Brazil

Rest of World

Brazil $0.3 0.6% ▲ 0.1%Rest of World $1.4 3.6% ▲ 0.3%

Global $40 1 100 0% ―

Rest of WorldRest of World

Note: All figures are rounded. Due to rounding, figures may not sum.

Global $40.1 100.0% ―Trend Key

Decreasing Stable Increasing▼ ●● ▲


Global Market Size (2012): $38.1 billionGlobal CAGR (2012-2015): 1.8%

Laboratory Product Market Revenue Forecast,Global, 2011-2015

2.5%40.045.0

%)

• With a slower 2013 than expected caused by US sequestration and a deflated Europe, the global market growth forecast is revised downward to 1.2% from a 1.7% growth forecast in the 2013

0.5%

1.0%

1.5%

2.0%

5.010.015.020.025.030.035.0

Rev

enue

Gro

wth

Rat

e (%

Rev

enue

($ B

illio

n)

1.2% from a 1.7% growth forecast in the 2013 Spring Report.

• The CAGR through 2015 is also revised downward from 2.2% to 1.8%.

Laboratory Product Market Revenue Forecast by P d S Gl b l 2011 2015

Percent of Laboratory Product Market byP d t S t Gl b l 2011 2015

2011 2012 2013 2014 2015Revenue $37.3 $38.1 $38.5 $39.2 $40.1 Growth rate 2.0% 1.2% 1.8% 2.2%

0.0%0.0

Product Segment, Global, 2011-2015 Product Segment, Global, 2011-2015

60%

80%

100%

even

ue (%

)

25 030.035.040.045.0

Bill

ion)

2011 2012 2013 2014 20150%

20%

40%

Perc

ent

of re

2011 2012 2013 2014 20150.05.0

10.015.020.025.0

Rev

enue

($ B


Consumables 28.9% 29.2% 28.9% 28.8% 28.7%Chemicals, Reagents, & Kits 34.8% 36.0% 36.4% 36.6% 36.9%Instruments & Equipment 36.3% 34.8% 34.7% 34.6% 34.4%

Chemicals, Reagents, & Kits $13.0 $13.7 $14.0 $14.4 $14.8 Consumables $10.8 $11.1 $11.1 $11.3 $11.5 Instruments & Equipment $13.5 $13.3 $13.4 $13.6 $13.8

Total Market for Laboratory Products:Regional Breakout – Established Regions

1.2%1.4%1.6%1.8%

ue ate

(%) United States

Canada

g g

Established Regions CAGRs (2012-2015)US: 1.0% Canada: 1.2% Europe: 0.5% Japan: 1.1% Mexico: 1.4%

Laboratory Product Market Growth byEstablished Region, Global, 2012-2015

2012 2013 2014 2015United States 1 4% 0 3% 1 2% 1 6%

0.0%0.2%0.4%0.6%0.8%1.0%

Rev

enG

row

th R

a

Europe

Japan

Mexico

Japa % e co %

• Established regional markets—including US, Canada, Europe, Japan, and Mexico—collectively make up 88.9% of the global market.

E ’ tl k i l f bl th th thUnited States 1.4% 0.3% 1.2% 1.6%Canada 1.4% 0.5% 1.4% 1.7%Europe 1.1% 0.1% 0.5% 0.9%Japan 1.0% 1.2% 1.0% 1.2%Mexico 1.5% 1.2% 1.3% 1.7%

• Europe’s outlook is less favorable than the other established regions, with growth remaining less than 1.0% through 2014.

Laboratory Product Market Revenue Forecast by Percent of Laboratory Product Market byEstablished Region, Global, 2011-2015

Established Region, Global, 2011-2015g

15 020.025.030.035.040.0

e ($

Bill

ion)

40%

60%

80%

100%

rcen

t of

enue

(%)

2011 2012 2013 2014 2015Mexico $0.1 $0.1 $0.1 $0.1 $0.1 Japan $2.0 $2.1 $2.1 $2.1 $2.1

0.05.0

10.015.0

Rev

enue

2011 2012 2013 2014 2015Mexico 0.3% 0.3% 0.3% 0.3% 0.3%Japan 5.5% 5.4% 5.4% 5.4% 5.3%

0%

20%

40%Pe

rR

ev


Europe $15.3 $15.5 $15.5 $15.5 $15.7 Canada $1.3 $1.3 $1.3 $1.3 $1.3 United States $14.7 $14.9 $15.0 $15.2 $15.4

Europe 40.9% 40.6% 40.1% 39.6% 39.1%Canada 3.4% 3.4% 3.4% 3.4% 3.3%Unites States 39.4% 39.2% 38.9% 38.6% 38.4%

Total Market for Laboratory Products:Regional Breakout – Established Regions (continued)

2011 Actual 2012 Actual 2013 Forecast 2014 Forecast 2015 Forecast

g g ( )US Laboratory Products Market Outlook, 2011–2015

US GDP Growth (%) 1.8 2.2 1.7 2.7 ―

US Lab Products Market Size ($B) $14.7 B $14.9 B $15.0 B $15.2 B $15.4 B

US Lab Products Growth (%) 1 4 1 4 0 3 1 2 1 6

US GDP growth is forecast to fall by 0.4% in 2013, but recover nicely with a 1.0% jump in 2014. However, both of these figures were downgraded from 2012 IMF forecasts, reflecting disappointing 2013 economic conditions.

US Lab Products Growth (%) 1.4 1.4 0.3 1.2 1.6

The US lab products market has been hindered by 2013 sequestration measures in the academic and government sectors causing negative growth in these segments. This has been offset by modest low single-digit growth in the biopharmaceutical, industrial and patient care sectorsand patient care sectors.

The US market is expected to recover moving forward as the academic sector improves and the overall US economic health trends upward. Industrial markets should respond in accordance to economic recovery.

Biopharma is undergoing some R&D restructuring, but is expected to net positive growth in 2014. Patient care rates will run higher due to greater testing volumes.

21

Total Market for Laboratory Products:Regional Breakout – Established Regions (continued)


g g ( )Canada Laboratory Products Market Outlook, 2011–2015

Canada GDP Growth (%) 2.5 1.7 1.7 2.2 ―

Canada Lab Products Market Size ($B) $16.0 B $16.2 B $16.3 B $16.5 B $16.7 B

Canada Lab Products Growth (%) 1 4 1 4 0 3 1 2 1 6

Canada GDP growth is forecast to remain stable at 1.7% in 2013. In 2014, this is expected to improve by 0.5%, less than the 1.0% jump forecast for the US, yet the trend is looking favorable.

Canada Lab Products Growth (%) 1.4 1.4 0.3 1.2 1.6

trend is looking favorable.

The Canadian laboratory products market generally follows the economic trends in the US given their economies are highly tied together. However, with an abundance of natural resources Canada’s primary sector markets such as petroleum, natural gas and l i t ib t b t ti ll t th t ’ d d i th flogging contribute substantially to the country’s economy, and drive growth of laboratory products.

Meanwhile, the academic, government and patient care sectors are undergoing budgets cuts to the country’s health portfolio, namely Canadian Institute of Health g y p yResearch, Health Canada and Public Health Agency of Canada. These are partially offset by funding for greater industry-academic research partnerships.

22

Total Market for Laboratory Products:Regional Breakout – Established Regions (continued)g g ( )


Europe Laboratory Products Market Outlook, 2011–2015

European Union Area GDP Growth (%) 1.7 -0.2 -0.1 1.2 ―

Lab Products Market Size ($B) $15.3 B $15.5 B $15.5 B $15.5 B $15.7 B

Lab Products Growth (%) 1 5 1 1 0 1 0 5 0 9

The European lab products market finished at a slow 1.1% in 2012 and has shown sustained challenges in the region. The 2013 overall lab products market is essentially flat as many European countries continue to struggle and few new funding or

Lab Products Growth (%) 1.5 1.1 0.1 0.5 0.9

y p gg ginvestments are being pumped into the region. The market is expected to improve slightly through the forecast period, yet slower than North America. There is no major trend in Europe that points to healthier growth through 2015.

The weak economies of southern Europe such as Greece Spain Italy and Portugal The weak economies of southern Europe, such as Greece, Spain, Italy, and Portugal are weighing heavily on the overall economy. GDP slowdowns in Germany, France and the UK in 2012 and 2013 have caused a deeper recession than previously expected.

The academic and government sector, and small to mid-sized industrial labs have been hit hardest by the economic conditions. The biopharma segment in Europe is showing modest growth (higher in Ireland) to keep the overall lab products market positive.

23



Japan Laboratory Products Market Outlook, 2011–2015

GDP Growth (%) -0.6 1.9 2.0 1.2 ―



Japan, the world’s third largest economy, is the only established country analyzed that had its 2013 GDP growth forecast (2.0%) upgraded from the IMF’s previous forecast


for 2013 (0.5%). Higher than expected GDP growth is being driven by government stimulus policies, consumption and net exports, aided by depreciation of the yen.

The Japanese lab products market is relatively steady at low single digit-growth, expanding at a CAGR of 1.1% from 2012–2015. The market is heavily reliant onexpanding at a CAGR of 1.1% from 2012 2015. The market is heavily reliant on Japan’s industrial sector, including the huge automotive industry and is seeing growth drivers in post-earthquake environmental and human testing.

While the forecast remains conservative, if government stimulus policies continue to be ff ti d d i t i d d i i i t t i th t f t ldeffective and drive sustained and increasing investment in the country, forecasts could

be revised upward in the future for this recovering economy.

24



Mexico Laboratory Products Market Outlook, 2011–2015

GDP Growth (%) 3.9 3.9 2.9 3.2 ―



GDP growth in Mexico is riding higher than all the other established regions analyzed, yet new information from the Mexico’s National Institute of Statistics and Geography suggests the full-year 2013 GDP will be downgraded to under 2%. This is a result of


slowed government spending due to a new administration and the disappointing global economy and demand, particularly from the US to which Mexico’s economy is tied.

In general, laboratory product suppliers are seeing vastly different growth rates from Mexico based on their product lines and how established their businesses are in theMexico based on their product lines and how established their businesses are in the country. The lab products market remains small at $0.1 B and is not expected to boom through the forecast period.

Steady low-digit growth is expected, hindered by security concerns and political i fi hti Y t l f t i t t d t f l b l i i linfighting. Yet low manufacturing costs, trade agreements, presence of global principal companies, and government reform measures will help drive future growth.

25

Total Market for Laboratory Products:Regional Breakout – Emerging Regionsg g g g

Regional CAGRs (2012-2015)India: 12.1% China: 9.4%Brazil: 4.8% Rest of World: 4.8%

Laboratory Product Market Growth byEmerging Region, Global, 2011-2015

12.0%14.0%

%)

India a 8% est o o d 8%

• The remaining 11.1% of the market comes from laboratory product sales to countries such as China, India, Brazil, and other emerging regions.

I di d Chi i th f t t i2012 2013 2014 20150.0%2.0%4.0%6.0%8.0%

10.0%

Rev

enue

Gro

wth

Rat

e (% India

China

Rest of WorldB il • India and China remain the fastest growing

countries analyzed. Increased competition in China and the rising cost to do business has some companies reporting softening of the market while others maintain strong growth.

Laboratory Product Market Revenue Forecast by P t f L b t P d t M k t b

India 12.2% 11.8% 12.4% 12.2%China 9.8% 9.5% 10.1% 10.3%Rest of World 4.8% 4.5% 5.1% 5.2%Brazil 4.0% 4.0% 4.3% 4.5%

Brazil

y yEmerging Region, Global, 2011-2015 Percent of Laboratory Product Market by

Emerging Region, Global, 2011-2015

3 0

4.0

5.0

6.0

$ B

illio

n)

8%10%12%14%16%

cent

of

enue

(%)

$1.3 $1.3 $1.3 $1.3 $1.3 Rest of World $1.2 $1.3 $1.3 $1.4 $1.4

0.0

1.0

2.0

3.0

Rev

enue

($

3.4% 3.4% 3.4% 3.4% 3.3%Rest of World 3.2% 3.3% 3.4% 3.5% 3.6%

0%2%4%6%8%

Perc

Rev

e


Brazil $0.2 $0.2 $0.2 $0.2 $0.3 China $1.2 $1.3 $1.4 $1.6 $1.7 India $1.3 $1.4 $1.6 $1.8 $2.0

Brazil 0.6% 0.6% 0.6% 0.6% 0.6%China 3.2% 3.4% 3.7% 4.0% 4.3%India 3.5% 3.8% 4.2% 4.6% 5.1%

Total Market for Laboratory Products:Regional Breakout – Emerging Regions (continued)g g g g ( )


India Laboratory Products Market Outlook, 2011–2015

GDP Growth (%) 6.3 3.2 3.8 6.3 ―



Market growth in India in 2012 largely met expectations given the established life sciences industry in the country, and remains fairly steady at a CAGR of 12.1%. However, the Indian economy has faced challenges as a whole in 2013 with high

f f G f % f %


inflation a main cause of GDP forecasts dropping to 3.8% from the 5.6% IMF projection in July 2013. While the strong CRO and biopharmaceutical market in India will keep the laboratory products market growing nicely, 2013 growth will suffer slightly in response to macroeconomic issues.

A significant portion of India’s laboratory product spending comes from the services sector, such as contract research organizations (CROs). India’s services sector accounts for approximately two-thirds of the country’s GDP. India’s pharmaceutical industry also accounts for a sizable portion of its laboratory products spending, y p y p p g,especially in the generic drug market. In addition, India’s government is investing $3.6 billion in medical tourism infrastructure, a likely boon for patient care products.

27



China Laboratory Products Market Outlook, 2011–2015

GDP Growth (%) 9.3 7.8 7.8 7.7 ―



China’s growth rate for 2012 were revised downward from what was presented in the October 2012 Annual Report, from 12.2% to 9.8%. There is widespread consensus in the industry that growth rates in China have not met expectations. Nonetheless, China


remains one of the most important regional markets. Market growth is driven by the combination of strong government support for biomedical research, increased attention on food and beverage testing, and continued multinational outsourcing to the country.

The Chinese laboratory products market is expected to soften from 2013–2015 as theThe Chinese laboratory products market is expected to soften from 2013 2015 as the GDP in China is forecast to plateau, market competition in the region increases, and the cost to do business increases in response to rising labor costs. Further, the biomedical research infrastructure development phase in China is slowing as the construction of new research facilities is completed Nonetheless growing at a 9 4%construction of new research facilities is completed. Nonetheless, growing at a 9.4% CAGR, laboratory products suppliers should continue to see strong gains from China.

28



Brazil Laboratory Products Market Outlook, 2011–2015

GDP Growth (%) 2.7 0.9 2.5 3.2 ―



While suppliers continue to view Brazil as a major opportunity for growth, some ease-of-business challenges remain. Local on-the-ground companies or distributors have greater penetration success, while others struggle to make headway.


Brazil’s scientific community enjoyed steady budget increases for Brazil’s Ministry of Science, Technology and Innovation (MSTI) from 2002–2010, increasing from roughly US $575 M to $3.3 B. When President Dilma Rousseff took office in 2011, the budget endured two years of cuts including a major 20% cut of $850 M in early 2012endured two years of cuts, including a major 20% cut of $850 M in early 2012. However, the ministry announced in July that the 2013 budget jumped to $5.6 B from $3.8 B, with about half funding the industrial sector, a new priority for the country.

Given this increased investment, laboratory products growth should strengthen i ifi tl i 2014 f d t M i f d B il ill ti tsignificantly in 2014 as new funds are spent. Moving forward, Brazil will continue to

march its way to greater prominence at a conservative, yet healthy rate.

29

Total Market for Laboratory Products:United States Market

2.0%16 018.0

)

US Market Size (2012): $14.9 billionUS CAGR (2012-2015): 1.0%

Laboratory Product Market Revenue Forecast,United States, 2011-2015

0.5%

1.0%

1.5%

2 04.06.08.0

10.012.014.016.0

Rev

enue

Gro

wth

Rat

e (%

)

Rev

enue

($ B

illio

n)

• The US market has largely been disappointing in 2013, falling to a mere 0.3% growth rate.

• While austerity measures are likely to keep t l b di i d li i 2014


0.0%0.02.0 government lab spending in decline in 2014, some

improvement in the academic sector and the overall economy will help the growth rate return closer to 2012 levels in 2014.

Laboratory Product Market Revenue Forecast by Percent of Laboratory Product Market by

60%

80%

100%

even

ue (%

)

10 012.014.016.018.0

Bill

ion)

y yProduct Segment, United states, 2011-2015

y yProduct Segment, United States, 2011-2015

2011 2012 2013 2014 20150%

20%

40%

Perc

ent

of re

2011 2012 2013 2014 20150.02.04.06.08.0

10.0

Rev

enue

($ B




Total Market for Laboratory Products:Outside United States Market

3.0%30.0 )

Outside US Market Size (2012): $23.1 billionOutside US CAGR (2012-2015): 2.2%

Laboratory Product Market Revenue Forecast,Outside US, 2011-2015

0.5%1.0%1.5%2.0%2.5%

5.010.015.020.025.0

Rev

enue

Gro

wth

Rat

e (%

)

Rev

enue

($ B

illio

n)

• Growth outside of the US is primarily driven by emerging regions with particularly high growth from India and China.

• Europe’s disappointing 2013 economy and slow2011 2012 2013 2014 2015

Revenue $22.6 $23.1 $23.6 $24.1 $24.7 Growth rate 2.4% 1.8% 2.2% 2.6%

0.0%0.0Europe s disappointing 2013 economy and slow recovery is driving down growth rates, as the lab products market in Europe accounts for roughly 66% of revenue generated outside of the US.


60%

80%

100%

even

ue (%

)

20.0

25.0

30.0

Bill

ion)

y yProduct Segment, Outside US, 2011-2015

y yProduct Segment, Outside US, 2011-2015

2011 2012 2013 2014 20150%

20%

40%

Perc

ent

of re

2011 2012 2013 2014 20150.0

5.0

10.0

15.0

Rev

enue

($ B




Total Market for Laboratory Products:End-user Segmentsg

US End-user CAGRs (2012-2015)Academic: -1.4% Industrial: 3.2%Government: -4.8% Patient Care: 3.1%Bi h ti l 3 4%

Laboratory Product Market Growth by End-user Segment, US, 2011-2015

2 0%4.0%6.0%

e e (%

)

Biopharmaceutical: 3.4%

• Sequester budget cuts in the government and academic sectors are expected to produce market contractions through 2014, with the academic sector improving faster.

2012 2013 2014 2015Academic -0.9% -3.4% -0.8% 0.1%

-6.0%-4.0%-2.0%0.0%2.0%

Rev

enu

grow

th ra

te

academic sector improving faster.• The biopharmaceutical, industrial, and patient

care sectors are forecasting modest low single-digit growth through the forecast period.


Government -2.2% -5.3% -5.0% -4.0%Biopharmaceutical 3.2% 3.1% 3.6% 3.4%Industrial 4.1% 2.6% 3.2% 3.7%Patient Care 2.0% 3.5% 3.1% 2.8%

9.0

12.0

15.0

18.0

even

ueB

illio

n)

40%

60%

80%

100%

ent

ofue

(%)

y yEnd-user Segment, US, 2011-2015

y yEnd-user Segment, US, 2011-2015

2011 2012 2013 2014 2015Academic $3.0 $3.0 $2.9 $2.9 $2.9 Government $2.6 $2.5 $2.4 $2.3 $2.2 Bi h ti l $4 1 $4 3 $4 4 $4 6 $4 7

0.0

3.0

6.0R ($

2011 2012 2013 2014 2015Academic 20.5% 20.1% 19.3% 18.9% 18.6%Government 17.7% 17.1% 16.1% 15.1% 14.3%Bi h ti l 28 2% 28 7% 29 5% 30 2% 30 7%

0%

20%

40%Pe

rce

reve

n

Biopharmaceutical $4.1 $4.3 $4.4 $4.6 $4.7 Industrial $2.6 $2.7 $2.8 $2.9 $3.0 Patient Care $2.3 $2.4 $2.5 $2.5 $2.6

Biopharmaceutical 28.2% 28.7% 29.5% 30.2% 30.7%Industrial 17.7% 18.2% 18.6% 19.0% 19.3%Patient Care 15.9% 16.0% 16.5% 16.8% 17.0%


INSTRUMENTS AND EQUIPMENT MARKET

33

Instruments and Equipment Market:Global Market by Region

2.0%14.016.0

(%)

e )y g


Instruments and Equipment Market Revenue Forecast, Global, 2011-2015

0.5%

1.0%

1.5%

2 04.06.08.0

10.012.0

Rev

enue

Gro

wth

Rat

e

Rev

enue

($ B

illio

n

• Among all product segments, the instruments and equipment category is forecasted to be most heavily impacted by academic and government funding cuts.


0.0%0.02.0 funding cuts.

• A lack of new laboratory openings and renovations worldwide limits growth in this product segment, particularly in basic equipment.

Instruments and Equipment Market Revenue Percent of Instruments and Equipment Market by

60%

80%

100%

even

ue (%

)10.0

12.0

14.0

16.0

Bill

ion)

Forecast by Region, Global, 2011-2015y

Region, Global, 2011-2015

0%

20%

40%

60%Pe

rcen

t of

re

0 0

2.0

4.0

6.0

8.0

10.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 63.0% 63.4% 64.1% 64.4% 64.8%US 37.0% 36.6% 35.9% 35.6% 35.2%

0%2011 2012 2013 2014 2015Outside US $8.4 $8.6 $8.7 $8.8 $9.0 US $4.9 $4.9 $4.9 $4.9 $4.9

0.0


Instruments and Equipment Market:United States Instruments and Equipment Marketq p

US Market Size (2012): $4.9 billionUS CAGR (2012-2015): -0.4%

Instruments and Equipment Market Revenue Forecast, United States, 2011-2015

0.5%

1.0%

5.0

6.0

(%)

e )

• Sequestration in the US is restraining capital equipment budgets. The lack of buying power in academia will be more pronounced in 2013 than out-years, causing a greater decline in 2013 and-1.5%

-1.0%

-0.5%

0.0%

1.0

2.0

3.0

4.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

out years, causing a greater decline in 2013 and slight improvement moving forward.

• Overall the US is not expected to see many lab openings or expansions, also limiting the market.

Instruments and Equipment Market Revenue Forecast Percent of Instruments and Equipment Market by

2011 2012 2013 2014 2015Revenue $4.9 $4.9 $4.9 $4.9 $4.9 Growth rate -0.1% -1.6% -0.1% 0.6%

-2.0%0.0

60.0%70.0%80.0%90.0%

100.0%

$ B

illio

n)

4.0

5.0

6.0

$ B

illio

n)

q pby Product Segment, United States, 2011-2015

yProduct Segment, United States, 2011-2015

4.0

5.0

6.0

Bill

ion)

2011 2012 2013 2014 20150.0%

10.0%20.0%30.0%40.0%50.0%

Rev

enue

($

2011 2012 2013 2014 20150.0

1.0

2.0

3.0

Rev

enue

($

2011 2012 2013 2014 20150.0

1.0

2.0

3.0

Rev

enue

($ B

Equipment 24.5% 24.2% 24.1% 24.0% 23.9%Instruments ($ ≤ 20K) 12.5% 12.4% 12.4% 12.4% 12.4%Instruments ($ > 20K) 62.9% 63.3% 63.5% 63.6% 63.7%

Equipment $1.2 $1.2 $1.2 $1.2 $1.2 Instruments ($ ≤ 20K) $0.6 $0.6 $0.6 $0.6 $0.6 Instruments ($ > 20K) $3.1 $3.1 $3.1 $3.1 $3.1



Instruments and Equipment Market:Outside United States Instruments and Equipment Market

2.5%9.0

10.0

(%)

e n)q p


Instruments and Equipment Market Revenue Forecast, Outside United States, 2011-2015

0.5%

1.0%

1.5%

2.0%

1 02.03.04.05.06.07.08.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• The CAGR for instruments and equipment outside the US remains slow. A deeper European recession in 2013 and slower recovery, along with a minor softening in China will restrain the market.


0.0%0.01.0 a minor softening in China will restrain the market.

• Lab openings and expansion will be greater than in the US, driving higher growth in 2014–2015 in addition to some pent-up demand in Europe.

Instruments and Equipment Market Revenue Forecast Percent of Instruments and Equipment Market by

60.0%70.0%80.0%90.0%

100.0%

$ B

illio

n)

6.07.08.09.0

10.0

$ B

illio

n)

by Product Segment, Outside United States, 2011-2015Percent of Instruments and Equipment Market by

Product Segment, Outside United States, 2011-2015

2011 2012 2013 2014 20150.0%

10.0%20.0%30.0%40.0%50.0%

Rev

enue

($

2011 2012 2013 2014 20150.01.02.03.04.05.0

Rev

enue

($




Instruments and Equipment Market:Global Market by Product Typey yp

Product Segment CAGRs (2012-2015):Instruments ($>20K): 1.1%Instruments ($≤20K): 0.9%E i t 0 5%

Instruments and Equipment Market Growth by Product Segment, Global, 2012-2015

1 5%

2.0%

Equipment: 0.5%

• All global CAGRs for this product segment are downgraded due to a disappointing 2013 globally, and slower recovery in the US and to a greater extent Europe moving forward.

0.0%

0.5%

1.0%

1.5%

Rev

enue

Gro

wth

Rat

e (%

)

Instruments ($ > 20K)Instruments ($ ≤ 20K)Equipment g p g

• While researchers can delay purchases in this segment when budgets are cut, they often opt to purchase analytical technology upgrades over basic equipment if prioritization is required.

Instruments and Equipment Market Revenue Percent of Instruments and Equipment Market by

2012 2013 2014 2015Instruments ($ > 20K) 1.4% 0.4% 1.2% 1.7%Instruments ($ ≤ 20K) 0.8% 0.2% 1.0% 1.4%Equipment 0.5% -0.1% 0.6% 1.0%

-0.5%G Equipment

60.0%70.0%80.0%90.0%

100.0%

$ B

illio

n)

10.0

12.0

14.0

16.0

$ B

illio

n)

Instruments and Equipment Market Revenue Forecast by Product Segment, Global, 2011-2015

yProduct Segment, Global, 2011-2015

2011 2012 2013 2014 20150.0%

10.0%20.0%30.0%40.0%50.0%

Rev

enue

($

2011 2012 2013 2014 20150.0

2.0

4.0

6.0

8.0

Rev

enue

($




Instruments and Equipment Market:Global Instruments ($>20K) Market

1.6%1.8%2.0%

8.09.0

10.0

%)

e )($ )


Instruments ($>20K) Market Revenue Forecast,Global, 2011-2015

0 2%0.4%0.6%0.8%1.0%1.2%1.4%

1 02.03.04.05.06.07.0

Rev

enue

Gro

wth

Rat

e (

Rev

enu e

($ B

illio

n

• The CAGR for instruments > $20K is downgraded by 0.5% due to lackluster sales in 2013.

• Paradigm shifts in research, such as biopharma’s movement to large molecules and the strong


0.0%0.2%

0.01.0 movement to large molecules and the strong

growth in genomic/proteomic technologies (next-gen sequencing, mass spectrometry) keep this market in the positive.

Instruments ($>20K) Market Revenue Forecast by Percent of Instruments ($>20K) Market by

60%

80%

100%

even

ue (%

)6 07.08.09.0

10.0

Bill

ion)

( ) yRegion, Global, 2011-2015


0%

20%

40%

60%Pe

rcen

t of

re

0 01.02.03.04.05.06.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 62.1% 62.4% 63.0% 63.4% 63.8%US 37.9% 37.6% 37.0% 36.6% 36.2%

0%2011 2012 2013 2014 2015

Outside US $5.1 $5.2 $5.3 $5.4 $5.5 US $3.1 $3.1 $3.1 $3.1 $3.1

0.0


Instruments and Equipment Market:Global Instruments ($≤20K) Market

1 5%

2.0%

1.61.82.0

(%)

e n)($ )


Instruments ($≤20K) Market Revenue Forecast,Global, 2011-2015

0.5%

1.0%

1.5%

0 20.40.60.81.01.21.4

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• Growth rates for instrumentation costing $20,000 or less are expected to increase in 2014 and 2015 as academic and government customers make delayed purchases. After holding off of


0.0%0.00.2 make delayed purchases. After holding off of

making purchases in 2012 and 2013, customers will need to acquire their necessary low-end instruments.

Instruments ($≤20K) Market Revenue Forecast by Percent of Instruments ($≤20K) Market by

60%

80%

100%

even

ue (%

)1 21.41.61.82.0

Bill

ion)



0%

20%

40%

60%Pe

rcen

t of

re

0 00.20.40.60.81.01.2

Rev

enue

($

2011 2012 2013 2014 2015Outside US 64.0% 64.5% 65.2% 65.5% 65.8%US 36.0% 35.5% 34.8% 34.5% 34.2%

0%2011 2012 2013 2014 2015

Outside US $1.1 $1.1 $1.1 $1.1 $1.2 US $0.6 $0.6 $0.6 $0.6 $0.6

0.0


Instruments and Equipment Market:Global Equipment Market

1.5%

2.0%

3 03.54.0

(%)

e n)q p


Equipment Market Revenue Forecast,Global, 2011-2015

0.0%

0.5%

1.0%

0.51.01.52.02.53.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• There is more consensus among suppliers about the state of the equipment market in 2013 than the instruments market. Most companies are reporting declines and think labs are delaying new

2011 2012 2013 2014 2015Revenue $3.4 $3.4 $3.4 $3.5 $3.5 Growth rate 0.5% -0.1% 0.6% 1.0%

-0.5%0.0declines and think labs are delaying new purchases and instead fixing their older equipment.

• While pent-up demand will drive some growth in 2014 and 2015, labs are more likely to seek upgrades in higher-end technologies.

Equipment Market Revenue Forecast by Region, Percent of Equipment Market by

60%

80%

100%

even

ue (%

)2.5

3.0

3.5

4.0

Bill

ion)

q p y g ,Global, 2011-2015


0%

20%

40%

60%Pe

rcen

t of

re

0 0

0.5

1.0

1.5

2.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 64.6% 65.2% 66.0% 66.3% 66.6%US 35.4% 34.8% 34.0% 33.7% 33.4%

0%2011 2012 2013 2014 2015

Outside US $2.2 $2.2 $2.3 $2.3 $2.3 US $1.2 $1.2 $1.2 $1.2 $1.2

0.0


CHEMICALS, REAGENTS, AND LIFE SCIENCE KITS MARKET

41

Chemicals, Reagents, and Life Science Kits Market:Global Market by Region

3.5%4.0%

14.016.0

(%)

e )y g


Chemicals, Reagents, and Kits Market Revenue Forecast, Global, 2011-2015

0 5%1.0%1.5%2.0%2.5%3.0%

2 04.06.08.0

10.012.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• The market remains relatively stable as chemicals are necessary for day-to-day lab work. A slight decline in growth in 2013 represents price erosion of commoditized products, particularly solvents.


0.0%0.5%

0.02.0 of commoditized products, particularly solvents.

• As automation trends towards using lower reagent volumes, a trade-off exists with the greater throughput levels enabled from it, keeping the trend from restraining the market.

Chemicals, Reagents, and Kits Market Revenue Percent of Chemicals, Reagents, and Kits Market

60%

80%

100%

even

ue (%

)10.0

12.0

14.0

16.0

Bill

ion)

gForecast by Region, Global, 2011-2015

gby Region, Global, 2011-2015

0%

20%

40%

60%Pe

rcen

t of

re

0 0

2.0

4.0

6.0

8.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 57.6% 57.7% 58.0% 58.1% 58.3%US 42.4% 42.3% 42.0% 41.9% 41.7%

0%2011 2012 2013 2014 2015Outside US $7.6 $7.8 $8.1 $8.3 $8.6 US $5.6 $5.7 $5.8 $6.0 $6.2

0.0


Chemicals, Reagents, and Life Science Kits Market:United States Chemicals, Reagents and Kits Market

2.5%

3.0%6.07.0

(%)

e n), g


Chemicals, Reagents, and Kits Market Revenue Forecast, United States, 2011-2015

0.5%

1.0%

1.5%

2.0%

1.02.03.04.05.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• Increased competition and greater price-awareness in the budget crunched academic and government sectors is reducing pricing hikes.

• Technology trends such as the biopharma shift


0.0%0.0Technology trends such as the biopharma shift away from traditional synthesis chemistry to biologics and diagnostic use of rapid stick-based tests instead of beaker chemistry are affecting usage.

Chemicals, Reagents, and Kits Revenue Forecast Percent of Chemicals, Reagents, and Kits Market

60%

80%

100%

even

ue (%

)

5.0

6.0

7.0

Bill

ion)

gby Product Segment, United States, 2011-2015

gby Product Segment, United States, 2011-2015

0%

20%

40%

60%

Perc

ent

of re

0 0

1.0

2.0

3.0

4.0

Rev

enue

($

2011 2012 2013 2014 2015Reagents & Kits 66.6% 66.9% 67.1% 67.4% 67.7%Chemicals 33.4% 33.1% 32.9% 32.6% 32.3%

0%2011 2012 2013 2014 2015

Reagents & Kits $3.7 $3.8 $3.9 $4.0 $4.2 Chemicals $1.9 $1.9 $1.9 $2.0 $2.0

0.0


Chemicals, Reagents, and Life Science Kits Market:Outside US Chemicals, Reagents and Kits Market, g


Chemicals, Reagents, and Kits Market Revenue Forecast, Outside United States, 2011-2015

4 0%

5.0%

8 09.0

10.0

%)

e n)

• The market outside of US is running a bit higher than US at a CAGR of 3.2%.

• Greater added production in emerging markets ill k thi k t h lth d t bl th h

1.0%

2.0%

3.0%

4.0%

1 02.03.04.05.06.07.08.0

Rev

enue

Gro

wth

Rat

e (

Rev

enu e

($ B

illio

n

will keep this market healthy and stable through the forecast period.

Chemicals, Reagents, and Kits Market Revenue Forecast Percent of Chemicals, Reagents, and Kits Market by


0.0%0.01.0

Chemicals, Reagents, and Kits Market Revenue Forecast by Product Segment, Outside United States, 2011-2015 Product Segment, Outside United States, 2011-2015

6 07.08.09.0

10.0

Bill

ion)

60%

80%

100%

even

ue (%

)

0 01.02.03.04.05.06.0

Rev

enue

($

0%

20%

40%

60%

Perc

ent

of re


2011 2012 2013 2014 2015Reagents & Kits $4.8 $4.9 $5.1 $5.3 $5.5 Chemicals $2.8 $2.9 $2.9 $3.0 $3.1

0.02011 2012 2013 2014 2015

Reagents & Kits 63.2% 63.3% 63.5% 63.7% 63.8%Chemicals 36.8% 36.7% 36.5% 36.3% 36.2%

0%

Chemicals, Reagents, and Life Science Kits Market:Global Market by Product Type

3.5%4.0%

)

y yp

Product Segment CAGRs (2012-2015):Chemicals: 2.3%Reagents and Kits: 3.3%

Chemicals, Reagents, and Kits Market Growth by Product Segment, Global, 2012-2015

0 5%1.0%1.5%2.0%2.5%3.0%

Rev

enue

Gro

wth

Rat

e (%

)

Chemicals

Reagents & Kits

eage ts a d ts 3 3%

• The market for specialized life science reagents and kits is riding 1.0% higher than chemicals.

• Labs are willing to pay premium pricing for l t i l th t k li bl

2012 2013 2014 2015Chemicals 2.4% 2.1% 2.3% 2.6%Reagents & Kits 3.2% 3.0% 3.3% 3.5%

0.0%0.5% Reagents & Kits complete, simple assays that work reliably.

Chemicals, Reagents, and Kits Market Revenue Percent of Chemicals, Reagents, and Kits Market

60%

80%

100%

even

ue (%

)

10.0

12.0

14.0

16.0

Bill

ion)

gForecast by Product Segment, Global, 2011-2015

Percent of Chemicals, Reagents, and Kits Market by Product Segment, Global, 2011-2015

0%

20%

40%

60%

Perc

ent

of re

0 0

2.0

4.0

6.0

8.0

Rev

enue

($

2011 2012 2013 2014 2015Reagents & Kits 64.6% 64.8% 65.0% 65.2% 65.4%Chemicals 35.4% 35.2% 35.0% 34.8% 34.6%

0%2011 2012 2013 2014 2015

Reagents & Kits $8.5 $8.8 $9.0 $9.3 $9.7 Chemicals $4.7 $4.8 $4.9 $5.0 $5.1

0.0


Chemicals, Reagents, and Life Science Kits Market:Global Chemicals Market

2.5%

3.0%

5.0

6.0

(%)

e n)


Chemicals Market Revenue Forecast,Global, 2011-2015

0.5%

1.0%

1.5%

2.0%

1.0

2.0

3.0

4.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• Certain sectors of the chemicals market, such as solvents, have seen competitors undercut pricing. Since the chemicals market relies on pricing increases to offset any volume declines,


0.0%0.0pricing increases to offset any volume declines, this will continually challenge market growth.

• The CAGR for chemicals Outside of the US (2.8%) is running higher than US (1.6%).

Chemicals Market Revenue Forecast by Region, Percent of Chemicals Market by

60%

80%

100%

even

ue (%

)

4.0

5.0

6.0

Bill

ion)

y gGlobal, 2011-2015

yRegion, Global, 2011-2015

0%

20%

40%

60%Pe

rcen

t of

re

0 0

1.0

2.0

3.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 60.0% 60.2% 60.5% 60.8% 61.0%US 40.0% 39.8% 39.5% 39.2% 39.0%

0%2011 2012 2013 2014 2015

Outside US $2.8 $2.9 $2.9 $3.0 $3.1 US $1.9 $1.9 $1.9 $2.0 $2.0

0.0


Chemicals, Reagents, and Life Science Kits Market:Global Life Science Reagents and Kits Market

3.5%4.0%

10.0

12.0

(%)

e n)g


Life Science Reagents and Kits Market Revenue Forecast, Global, 2011-2015

0.5%1.0%1.5%2.0%2.5%3.0%

2.0

4.0

6.0

8.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• The life science reagents and kits market is witnessing some growth decline in 2013 due to budget restraints in the academic and government sectors in the US.


0.0%0.5%

0.0government sectors in the US.

• However, in the 2013 Lab Products Survey, all end-user segments reported expected growth in their life science reagents and kits budgets in 2014.

Life Science Reagents and Kits Market Revenue Percent of Life Science Reagents and Kits Market gForecast by Region, Global, 2011-2015

gby Region, Global, 2011-2015

6 0

8.0

10.0

Bill

ion)

60%

80%

100%

even

ue (%

)

0 0

2.0

4.0

6.0

Rev

enue

($

0%

20%

40%

60%Pe

rcen

t of

re


2011 2012 2013 2014 2015Outside US $4.8 $4.9 $5.1 $5.3 $5.5 US $3.7 $3.8 $3.9 $4.0 $4.2

0.02011 2012 2013 2014 2015

Outside US 56.3% 56.4% 56.6% 56.7% 56.8%US 43.7% 43.6% 43.4% 43.3% 43.2%

0%

CONSUMABLES MARKET

48

Consumables Market:Global Market by Region

2.5%

3.0%

12.0

14.0

(%)

e )y g


Consumables Market Revenue Forecast,Global, 2011-2015

0.5%

1.0%

1.5%

2.0%

2.0

4.0

6.0

8.0

10.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• The consumables market has largely been disappointing so far in 2013. With the US consumables market running about flat in 2013, global growth for the market is forecast to drop


0.0%0.0global growth for the market is forecast to drop to 0.6%, down significantly from the 2013 Spring Report, which projected global growth at 1.9%. Many laboratories are getting by purchasing on an as-needed basis.

Consumables Market Revenue Forecast by Percent of Consumables Market by

60%

80%

100%

even

ue (%

)8.0

10.0

12.0

Bill

ion)

Consumables Market Revenue Forecast by Region, Global, 2011-2015


0%

20%

40%

60%Pe

rcen

t of

re

0 0

2.0

4.0

6.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 61.1% 61.4% 61.6% 61.8% 62.1%US 38.9% 38.6% 38.4% 38.2% 37.9%

0%2011 2012 2013 2014 2015

Outside US $6.6 $6.8 $6.8 $7.0 $7.1 US $4.2 $4.3 $4.3 $4.3 $4.3

0.0


Consumables Market:United States Consumables Market

1 5%

2.0%

4.04.55.0

(%)

e n)


Consumables Market Revenue Forecast,United States, 2011-2015

0.5%

1.0%

1.5%

0 51.01.52.02.53.03.5

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• US customers, particularly in academic and government labs, are keeping 2013 consumables budgets relatively flat year-over-year, buying only necessary products to keep up


0.0%0.00.5 year, buying only necessary products to keep up

day-to-day operations. In addition, labs are keeping reserve stocks of consumables low in favor of purchasing products when needed.


60.0%70.0%80.0%90.0%

100.0%

$ B

illio

n)3.03.54.04.55.0

$ B

illio

n)



2011 2012 2013 2014 20150.0%

10.0%20.0%30.0%40.0%50.0%

Rev

enue

($

2011 2012 2013 2014 20150.00.51.01.52.02.5

Rev

enue

($

Glassware 13.2% 12.9% 12.4% 12.0% 11.7%Plasticware 27.7% 27.9% 28.3% 28.6% 28.9%Lab Supplies 59.1% 59.3% 59.4% 59.4% 59.5%

Glassware $0.6 $0.5 $0.5 $0.5 $0.5 Plasticware $1.2 $1.2 $1.2 $1.2 $1.3 Lab Supplies $2.5 $2.5 $2.5 $2.6 $2.6


Consumables Market:Outside United States Consumables Market

3 0%3.5%4.0%

6 07.08.0

(%)

e n)

Outside US Market Size (2012): $6.8 billionOutside US CAGR (2012-2015):1.8%

Consumables Market Revenue Forecast,Outside United States, 2011-2015

0.5%1.0%1.5%2.0%2.5%3.0%

1.02.03.04.05.06.0

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• Only glassware is faltering outside US declining at a CAGR of -2.5%. Plasticware is growing at CAGR of 2.8%, while Lab Supplies grow at a close 2.4%.


0.0%0.0close 2.4%.

• Affected by the slowdown in Europe, the market growth will increase in 2014–2015 in response to the region’s recovery.

Consumables Market Revenue Forecast by Product Percent of Consumables Market by

60.0%70.0%80.0%90.0%

100.0%

$ B

illio

n)5.0

6.0

7.0

8.0

$ B

illio

n)

ySegment, Outside United States, 2011-2015

yProduct Segment, Outside United States, 2011-2015

2011 2012 2013 2014 20150.0%

10.0%20.0%30.0%40.0%50.0%

Rev

enue

($

2011 2012 2013 2014 20150.0

1.0

2.0

3.0

4.0

Rev

enue

($




Consumables Market:Global Market by Product Typey yp

Product Segment CAGRs (2012-2015):General Lab Supplies: 1.7%Plasticware: 2.4%Gl 2 5%

Consumables Market Growth by Product Segment,Global, 2011-2015

2.0%3.0%

Glassware: -2.5%

• Glassware’s reusability continues to limit its growth. Meanwhile disposable plasticware and lab supplies maintain more stable growth.

• Customers, in search for cost-savings, are4 0%-3.0%-2.0%-1.0%0.0%1.0%

Rev

enue

owth

Rat

e (%

) Lab SuppliesPlasticwareGlassware

Customers, in search for cost savings, are increasingly willing to choose private-label products. Pricing pressures from private-label consumables—especially glassware—are limiting market growth.


2012 2013 2014 2015Lab Supplies 2.3% 0.9% 1.9% 2.4%Plasticware 2.6% 2.1% 2.5% 2.7%Glassware 0.2% -3.3% -2.7% -1.6%

-4.0%Gro

60.0%70.0%80.0%90.0%

100.0%

$ B

illio

n)8.0

10.0

12.0

$ B

illio

n)



2011 2012 2013 2014 20150.0%

10.0%20.0%30.0%40.0%50.0%

Rev

enue

($

2011 2012 2013 2014 20150.0

2.0

4.0

6.0

Rev

enue

($




Consumables Market:Global General Laboratory Supplies Market

2.5%

3.0%7.08.0

%)

e n)y pp


General Laboratory Supplies Market Revenue Forecast, Global, 2011-2015

0.5%

1.0%

1.5%

2.0%

1.02.03.04.05.06.0

Rev

enue

Gro

wth

Rat

e (

Rev

enu e

($ B

illio

n

• General lab supplies in the US are growing at a slower CAGR of 0.8% compared to outside US at 2.4%. While US customers are purchasing these products as-needed, emerging regions are


0.0%0.01.0 these products as needed, emerging regions are

experiencing greater expansion.

• Pricing changes have been very conservative, with no pricing changes for many product categories.

General Laboratory Supplies Market Revenue Percent of General Laboratory Supplies Market by

60%

80%

100%

revenu

e (%

)

5.0

6.0

7.0

Bill

ion)

yForecast by Region, Global, 2011-2015

Percent of General Laboratory Supplies Market byRegion, Global, 2011-2015

0%

20%

40%

60%Pe

rcen

t of

0 0

1.0

2.0

3.0

4.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 60.4% 60.6% 60.8% 61.2% 61.7%US 39.6% 39.4% 39.2% 38.8% 38.3%

0%2011 2012 2013 2014 2015

Outside US $3.8 $3.9 $3.9 $4.0 $4.2 US $2.5 $2.5 $2.5 $2.6 $2.6

0.0


Consumables Market:Global Plasticware Market

3 0%3.5%4.0%

2 5

3.0

3.5

(%)

e n)


Plasticware Market Revenue Forecast,Global, 2011-2015,

0.5%1.0%1.5%2.0%2.5%3.0%

0.5

1.0

1.5

2.0

2.5

Rev

enue

Gro

wth

Rat

e

Rev

enu e

($ B

illio

n

• The disposable nature of most plasticware means laboratories need to maintain continual purchases rather than managing to get by with older products.


0.0%0.0older products.

• The CAGR for the US is running 1.0% less than outside US at 1.8% and 2.8% growth, respectively.

Plasticware Market Revenue Forecast by Region, Percent of Plasticware Market by

60%

80%

100%

even

ue (%

)

2.5

3.0

3.5

Bill

ion)



0%

20%

40%

60%Pe

rcen

t of

re

0 0

0.5

1.0

1.5

2.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 60.8% 61.0% 61.3% 61.5% 61.7%US 39.2% 39.0% 38.7% 38.5% 38.3%

0%2011 2012 2013 2014 2015

Outside US $1.8 $1.9 $1.9 $2.0 $2.0 US $1.2 $1.2 $1.2 $1.2 $1.3

0.0


Consumables Market:Global Glassware Market

-0 5%0.0%0.5%

1.41.61.8

%)

e n)

Global Market Size (2012): $1.6 billionGlobal CAGR (2012-2015): -2.5%

Glassware Market Revenue Forecast,Global, 2011-2015

-3.0%-2.5%-2.0%-1.5%-1.0%0.5%

0.20.40.60.81.01.2

Rev

enue

Gro

wth

Rat

e (

Rev

enu e

($ B

illio

n

• Glassware is unlikely to see any jumps in growth in the future. The market is retrained by reusability, pricing erosion, and limited new laboratory openings.

2011 2012 2013 2014 2015Revenue $1.6 $1.6 $1.5 $1.5 $1.5 Growth rate 0.2% -3.3% -2.7% -1.6%

-3.5%0.00.2 laboratory openings.

• Global restructuring of biopharmaceutical R&D labs resulting in co-locating may cause greater consolidation of labware, making new glassware unnecessary.

Glassware Market Revenue Forecast by Region, Percent of Glassware Market by

60%

80%

100%

even

ue (%

)1.2

1.4

1.6

1.8

Bill

ion)



0%

20%

40%

60%Pe

rcen

t of

re

0 0

0.2

0.4

0.6

0.8

1.0

Rev

enue

($

2011 2012 2013 2014 2015Outside US 64.6% 65.2% 65.3% 65.2% 65.3%US 35.4% 34.8% 34.7% 34.8% 34.7%

0%2011 2012 2013 2014 2015

Outside US $1.0 $1.0 $1.0 $1.0 $1.0 US $0.6 $0.5 $0.5 $0.5 $0.5

0.0


LABORATORY PRODUCTS END-USER SPENDING TRENDS

56

Research Objectives

The primary goals of this research are to establish the size of laboratory budgets for purchase of products in seven categories and to establish baselines for developing trends (2013 to 2014):baselines for developing trends (2013 to 2014):

InstrumentsEquipmentChemicalsChemicalsLife science reagents and kitsGeneral laboratory suppliesPlastic labwarePlastic labwareGlass labware

Additionally, this research investigates the factors that drive selection of laboratory products and how these laboratory products are associated withlaboratory products and how these laboratory products are associated with factors driving selection.

Research MethodologyMethodologyReaders of Lab Manager magazine were invited to participate in an online survey in September 2013. To qualify for survey participation, readers must play a role in their l b t ’ h i b f ili ith th i l b t i ’ d t b d t dlaboratory’s purchasing process, be familiar with their laboratories’ product budgets, and represent a laboratory that either uses or plans to use products in one or more of the seven specified laboratory product categories.SamplepThe target group was screened to ensure only qualified respondents participated. In total, 354 decision makers were surveyed and represent the following types of laboratories:

Type of Laboratory Sample Size

Academic 118

Biopharmaceutical 34

Industrial 98Industrial 98

Patient Care 45

Government 25

Other 34

Total 354

Research Methodology (continued)Reporting Notes Readers are cautioned that results for the biopharmaceutical and government sectors

are based on a small number of observations, and should therefore be taken as di ti l th th ti bldirectional rather than as actionable.

Respondents indicate a wide range of job titles such as researcher, scientist, investigator, director, manager, or technician. For convenience, they are generally referred to as “researchers” in this study, but this term should be understood to include all respondents.

In total, 79 percent of respondents work in the United States. The number-two country cited is Canada at 5 percent. Nevertheless, this is called a global study because the survey was open to respondents from all countries.y p p

Monetary values are reported in US dollars. Percentages in charts and tables may not add to 100 due to rounding. A similar study was conducted among the same targeted respondents in 2012 (n=170);

th f h li bl ill b t d t d t i ltherefore, where applicable, year-over-year will be presented to determine any early trend developments.

Respondent Demographics

Respondent’s Country: Global, 2013 (n=354)

United States: 79%Canada: 5%

Organization Type: Global, 2013 (n=354)Academic institution: 33%Hospital or clinical lab: 13%Manufacturing: 7%Canada: 5%

India: 2%United Kingdom: 2%France: 1%Germany: 1%Italy: 1%

Manufacturing: 7%Environmental testing: 6%Chemical or petrochemical: 6%Food, beverage, or agricultural: 5%Biotechnology: 5%State government: 5%Italy: 1%

Mexico: 1%Spain: 1%Other: 9%

gPharmaceutical: 4%Contract research organization: 3%Federal government: 2%Other: 10%

Q12. In which country are you located? Q13. Which of the following best describes your organization?

Respondent Demographics

Respondent’s Job Title: Global, 2013 (n=354)

Laboratory manager: 40%Laboratory director: 14%

Purchasing Authority: Global, 2013 (n=354)

Authorize: 53%Laboratory director: 14%Department manager: 12%Senior researcher: 7%Staff scientist: 6%Principal investigator: 5%Laboratory technician: 3%Group leader: 2%

Recommend: 42%Evaluate: 4%

Q1a. Which best describes your purchasing authority for the research products used in

l b t /f ilit ?p

Project leader/project manager: 2%Graduate student: 1%Post-doctoral fellow: 1%Other: 6%

your laboratory/facility?

Familiarity with Budget: Global, 2013 (n=354)

I know what my laboratory spends annually on laboratory products: 42%

I help determine my laboratory's product budget: 27%

I provide input regarding how and where my laboratory spends for supplies: 27%

I am somewhat familiar with my laboratory's product budget: 4%

Q14. Which of the following best describes your job title or position?

Q1b. Which of the following statements best describes your role when it comes to budgeting for products used in your laboratory/facility?

Laboratory Products Purchase

Consistent with 2012, nearly all laboratory decision makers purchase (or expect to purchase) general laboratory supplies and chemicals. Conversely, life science reagents and kits are least prevalently purchased, among products surveyed.

98% 94%95% 90%82%

Laboratory Products Purchase: Global, 2012 and 20132012 2013

70%78% 80%

69%

51%

82% 81% 77%69%

57%

General laboratory supplies

Chemicals Instruments Equipment Plastic labware

(plasticware)

Glass labware (glassware)

Life science reagents and

kits

Base: All respondents (2012, n=170), (2013, n=354).

Q2. Which of the following types of laboratory products has your laboratory purchased or expects to purchase?

Laboratory Products Purchase

Laboratory Product Purchase

95%

90%

2% 1% %

97%

92%

83%

% 86%91

%

94%

% 85%

88%

%

94%

91% 95%

87%

9%

100%

%

87%

2%84% 96

%

0% 0% %

Total Sample Academic Biopharmaceutical Industrial Patient Care Government

82 81 77%

69%

57%69

%

72% 8

78

8

74% 8

62%

76%

71% 7 9

73% 82

67%

58%

8 80 80 76%

72%

52%

20%29

%

General laboratory supplies

Chemicals Instruments Equipment Plastic labware

(plasticware)

Glass labware (glassware)

Life science reagents and

kits

Base: All respondents (n=354).

Q2. Which of the following types of laboratory products has your laboratory purchased or expects to purchase?

Matrix to Guide the Strategic Prioritization of Needs When Selecting Laboratory ProductsThe derived importance matrix (also known as Kano analysis) plots perceived needs based on derived importance (statistically determined by correlating feature ratings) and stated importance (explicitly stated top reasons for selection). We use the following to guide the prioritization of needs when selecting laboratory products.

g y

Strategic driversBasic driversBasic drivers:

These are usually a minimum requirement for consideration in the category.

gFeature 12

Feature 8

Feature 4

Feature 17

Strategic drivers:

These are needs recognized as important, which actually drive preference.

Feature 1 Feature 18

Feature 14 Feature 10Feature 19

Feature 3Feature 6

Secret drivers:

These are not explicitly expressed or recognized, but they affect preference.

nce

Feature 12Feature 9

Feature 2

Feature 5

Feature 20Non-drivers:

These are not considered as important and have no significant positive effect on

f Stat

ed Im

porta

n

Secret driversNon-driversFeature 11

Feature 16Feature 7

Feature 20

Feature 13

preference. S

Derived Importance

Secret driversNon drivers

Strategic Prioritization of Needs When Selecting Laboratory Productsy

Strategic Prioritization of Needs When Selecting Laboratory Products: Global 2013

When selecting laboratory products, three tested attributes drive selection: product quality, brand reputation, and quick delivery.

Products: Global, 2013

Basic DriversStrategic Drivers

High

Product qualityC

orta

nce

Brand reputationQuick delivery

Past experienceProduct specific

application features

Competitive price

Stat

ed Im

po

Sales representative

Quick ordering process

Available from one of my contracted

Shipping costs

Loyalty discounts

Non-drivers Secret DriversLow

Sales representative

Manufacturers’ marketingEasy ordering

process

manufacturers

Product is used in journalNon drivers Secret Drivers

HighLowDerived Importance

Strategic Prioritization of Needs When Selecting Laboratory Products (continued)y ( )

Basic drivers: Must-have attributes to be a participant in the marketHaving product specific application features and competitive prices are standard attributes for a laboratory product to be a participant in this market—must haves as a point of entry/consideration.

Non-drivers: Not important in the decision processAttributes pertaining to the ordering process are not important in the selection process (ease, quickness, and shipping costs). Additionally, offering loyalty discounts, having products in journals and being an available contracted manufacturer have little to noproducts in journals, and being an available contracted manufacturer have little to no influence when laboratory decision makers are choosing laboratory products.

Secret drivers: Differentiating factorsThe two features have the potential to differentiate laboratory products: sales representatives and the marketing material. Secretly, these direct (sales representatives) and indirect (marketing material) faces of laboratory product manufacturers are influential, and have the opportunity to differentiate manufacturers from one another.pp y

Technical Note: Understanding Perceptual Maps• Perceptual map

derived statistically applying correspondence

Product C is rated better on easy to install, than Products A

analysis between listed attributes and the product

• Visual representation of how closely a

easy to install, than Products A and B.

Product A is best rated with total initial investment, compared to Products B and Easy to install

of how closely a product corresponds to attributes

• A product positioned closely to a particular

pC.

Total initial investmentBrand A

Brand CProduct C

Product Ay p

attribute, indicates that there is a strong perceived correspondence

The distance between

There is more difference between the products on easy to use than

The products that are similar across most attributes appear

Vendor service and support

Easy to use Common look and feel

Brand BProduct B

• The distance between attributes and products represents the extent to which they are similar or diff t

easy to use than there is on easy to install.

across most attributes appear close together.Products C and B are similar compared to Product A.

8.4%

different 91.6%

2D Fit = 100%

Perceptual Map of Laboratory Products

Strategic driversBasic drivers

Products

Secret driversNon-drivers

Perceptual Map of Laboratory Products: Product Associations Analysisy

Life science reagents and kits

Chemicals, plastic labware, and general lab equipment are

Life science reagents and kits and glass labware are less

associated with other laboratory products.

perceived similarly.

Instruments and equipment

laboratory products.

Instruments and equipment are perceived similarly.


Products


Perceptual Map of Laboratory Products: Attribute Associations Analysisy

Instruments and equipment are more strongly associated with the strongest

strategic drivers and secret drivers.

All other laboratory

products are t lmore strongly

associated with non-drivers ofdrivers of selection.


Products


2013 Laboratory Product Budgets by End-user and Product Categoryg y

Average Laboratory Product Budgets by End-user and Product Category, Global, 2013

Total Sample Academic Biopharma Industrial Patient Care Government

Adjusted Average* 2013 Total Products Budget $347,302 $100,598 $304,292 $341,612 $1,321,344 $265,872

Average* of Laboratory Product Budget to Each Category:Average* of Laboratory Product Budget to Each Category:

Instruments $69,146 $23,736 $113,020 $80,074 $198,356 $23,531

Equipment $37,929 $17,008 $33,890 $49,889 $85,498 $29,327

Chemicals $38,126 $11,718 $49,633 $47,294 $98,515 $14,874

Life science reagents/kits $117,411 $20,117 $51,196 $86,206 $619,823 $140,125

General lab supplies $53,465 $14,763 $28,362 $39,382 $238,953 $35,505

Plastic labware $18,540 $7,710 $19,580 $20,252 $55,139 $14,405

Glass labware $12,685 $5,546 $8,611 $18,515 $25,060 $8,105

*Based upon calculations with removals of zero values.

2014 Expected Laboratory Product Budgets by End-user and Product Categoryg y

Expected Laboratory Product Budgets by End-user and Product Category, Global, 2013–2014


Adjusted Average* 2013 Total Products Budget $347,302 $100,598 $304,292 $341,612 $1,321,344 $265,872

Expected Laboratory Product Budget in 2014 (Average*) Green font=increase Red font=decreaseExpected Laboratory Product Budget in 2014 (Average*) Green font=increase, Red font=decrease

Instruments $66,745 $20,112 $95,955 $77,876 $207,602 $24,575Equipment $38,598 $17,673 $30,735 $49,936 $93,471 $29,085Chemicals $39,682 $12,265 $52,503 $49,513 $98,782 $14,725Chemicals $39,682 $12,265 $52,503 $49,513 $98,782 $14,725Life science reagents/kits $125,110 $22,083 $52,848 $90,880 $659,118 $153,908General lab supplies $54,290 $14,925 $29,449 $39,968 $241,963 $35,343Plastic labware $18,934 $7,787 $20,606 $20,586 $55,379 $14,679Glass labware $12,860 $5,620 $8,030 $18,640 $25,032 $8,091Expected Average 2014 Total Products Budget $356,219 $100,465 $290,126 $347,399 $1,381,347 $280,406

Expected Budget Change $8 917 ($133) ($14 166) $5 787 $60 003 $14 534


Between 2013 and 2014 $8,917 ($133) ($14,166) $5,787 $60,003 $14,534

Where Is the Money Going in 2014: Expected Percent Growth/ Decline

Expected Laboratory Products’ Budget Percent Growth/DeclineGlobal, 2014


Expected Laboratory Product Budget Percent Change, 2013 to 2014 (Average*) Green font=increase, Red font=decrease

Instruments -3.5% -15.3% -15.1% -2.7% 4.7% 4.4%

Equipment 1.8% 3.9% -9.3% 0.1% 9.3% -0.8%

Chemicals 4.1% 4.7% 5.8% 4.7% 0.3% -1.0%

Life science reagents/kits 6.6% 9.8% 3.2% 5.4% 6.3% 9.8%

General lab supplies 1.5% 1.1% 3.8% 1.5% 1.3% -0.5%

Plastic labware 2.1% 1.0% 5.2% 1.6% 0.4% 1.9%Plastic labware 2.1% 1.0% 5.2% 1.6% 0.4% 1.9%

Glass labware 1.4% 1.3% -6.7% 0.7% -0.1% -0.2%

Expected Percent Budget Change Between 2013 2.6% -0.1% -4.7% 1.7% 4.5% 5.5%and 2014


Sources of Laboratory FundingOverall, labs rely on internal resources for close to half of their funding. Product/service sales and funds from public granting agencies each account for approximately 20% of lab funding. Not surprisingly, academic and government institutions rely more on public granting agencies than other organizations types. Thus, these labs are more susceptible to government actions than the other groups.

Sources of Laboratory Funding: Global, 2013 (n=354)

yp p g g pAlternatively, biopharmaceutical, industrial and patient care labs are tied more closely to their product/service sale, and therefore fluctuate more significantly with the state of global economics.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Academic

Internal resources Public granting agency Product/service sales Private granting agency Other

Government

Biopharmaceutical

Industrial

Patient Care

Other

Total SampleTotal Sample

Q7. Approximately how much of your laboratory's funding comes from the following sources? - Mean scores

Preferred Purchase ChannelIn the era of e-commerce, many suppliers are seeing shifts in how researchers acquire products. To get a sense of the most widely-used distribution methods, the following table presents purchasing channel preferences by organization type. Overall, purchasing products online from the distributor or manufacturer are the most preferred acquisition methods. However, patient care labs most often prefer

Preferred Purchase Channel: Global, 2013 (n=354)Distributor catalog via online Manufacturer via online

p q p pto purchase products directly through sales professionals in person.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Procurement office Sales professional directly, in personDistributor catalog via phone orders Manufacturer via phone ordersOther

Academic

Government

Biopharmaceutical

Industrial

Patient Care

Other

Total SampleQ8. Which of the following is your most preferred way to purchase laboratory products?

ACADEMIC END-USER SEGMENT –MARKET TRENDS

76

Academic End-user Segment:Market Trends

The academic sector took a major hit in 2013 with US sequestration measures reducinggovernment-based funding. Moving forward, this sector is unlikely to endure such drasticcuts, but will continue to struggle with buying power significantly hampered.

Academic End-user Segment Revenue Forecast, US, 2011–2015CAGR (2012–2015): -1.4%

1.0%3.5

Academic20 1%

-1.0%

0.0%

2.0

2.5

3.0

h ra

te (%

)

Bill

ion)

20.1%

Others79.9%-3 0%

-2.0%

1.0

1.5

even

ue g

row

th

Rev

enue

($

2011 2012 2013 2014 2015Revenue $3.0 $3.0 $2.9 $2.9 $2.9

-4.0%

3.0%

0.0

0.5 Re

Note: Figures are rounded

77

Growth rate -0.9% -3.4% -0.8% 0.1%


The academic research market segment includes all university-affiliated laboratories and core facilities involved in bioscience or chemical research, including the following:

– University biomedical research laboratories

– University chemical research laboratories

– University-affiliated research institutions

– University core facilities

The academic research community is funded from the following sources:

US Government based funding agencies such as the NIH NSF USDA FDA– US Government-based funding agencies, such as the NIH, NSF, USDA, FDA, DOD, DOE

– State, provincial, and local governments

Industry– Industry

– Non-profit organizations

– Patient advocacy groups

78


Lab products revenue generated from the US academic end-user segment declined in 2012 at a rate of -0.9%. In 2013, the segment is forecast to decline at an even steeper pace of 3 4%pace of -3.4%.

Moving forward, the government is likely to operate under the continuing resolution, with funding remaining relatively flat, resulting in a 2014 growth rate similar to 2012. If 2014 will include another round of sequester cuts remains unclear, but this action would reduce forecasted rates significantly.

Overall, factoring in inflation, the buying power of academic labs has dwindled. Those labs relying heavily on government funds remain in fear of further cuts and therefore curb spending whenever possible by extending buying cycles delaying instrument andcurb spending whenever possible by extending buying cycles, delaying instrument and equipment purchases, reducing their project scopes, and placing greater emphasis on product pricing.

Fortunately, according to the 2013 Lab Products Survey, academic labs reported public agency grants accounted for roughly 45% of lab funding, with 55% stemming from internal resources, private grants and other sources. Thus, the more stable sources of funding, as well as, increasing partnerships with biopharma are helping to offset government-based cuts somewhat.

79


Impact of Sequestration on Academic government-funded R&D

Overall: As of March 1, 2013, national security discretionary funding was reduced 7.3% for the fiscal year. Non-security discretionary funding was reduced by 5.1%. While these were smaller percentages than first scheduled, the impact of these cuts has been substantial as they were applied retroactively to spending since October 1, 2012. Thus the measures doubled in effect, applying a full year’s cut to be absorbed between March and October 2013.

NIH: Sequestration cut 5.0%, or $1.55 B of 2013’s NIH budget. NIH was required to apply the evenly across all institutes and centers (IC)NIH estimated that approximately 700 fewer competitive research project grants will be issued in 2013, roughly 750 fewer new patients will be admitted to the NIH Clinical Center and there will be no increase in stipends for National Research Service Award recipients in FY2013. Reductions to noncompeting research project grants will vary depending on the circumstances of the particular IC with the NIH-wide average at -4.7 percent.

80



NSF: NSF funds only academic research, as the agency does not house any intramural research labs. Therefore, the agency’s cuts will almost entirely impact the academic research community. The major impact of sequestration will be seen in reductions to the number of new NSF research grants and cooperative agreements awarded in FY 2013. NSF anticipates that the total number of new research grants will be reduced by approximately 1,000 and all continuing grant increments in FY 2013 will be awarded, as scheduled, and there will be no impact on existing NSF standard grants.

DOD: The DOD funds approximately $1.6B to academic laboratories. The DOD R&D budget was cut by roughly 8.6% in 2013, according to AAAS. If cut equally across programs, this would result in a decline of roughly $138 million available for academic labs. Nevertheless, the Defense University Research Instrumentation Program awarded $38.7 million in June 2013 to 140 university researchers to support the purchase of research instrumentation and equipment.

81



USDA: The USDA’s Research, Education and Economics (REE) National Institute of Food and Agriculture (NIFA) partners with universities in carrying out extramural research, higher education, and extension activities. About 49% of the $2.7 billion 2012 REE budget was allocated for NIFA grants, for approximately $1,323 million going to this program. NIFA relayed that the following measures would take place in response to sequestration:

–A reduction of $13 million for the Agriculture and Food Research Initiative (AFRI), competitive grants program, potentially resulting in fewer new proposals that may be funded during FY 2013be funded during FY 2013

–AFRI Continuation awards from previous fiscal years will not be impacted by the sequestration, and, continued funding will be based on evaluations of performance and meeting stated goals–Reductions totaling almost $37 million for capacity/formula funding–Reductions for other research, education and extension programs totaling over $10 million.

In 2014, the USDA is expected to provide 47% of the $2.8 billion REE budget to NIFA resulting in a $1,316 million budget, still a decline over 2012 levels.

82


Impact of Sequestration on Academic government-funded R&DOther sequestration program announcements affecting academia:NIST: NIST cuts fell largely on grants, contracts, equipment procurements, deferment of open positions, and cuts in the repair and maintenance of NIST facilities that will negatively impact NIST's ability to keep them in acceptable working condition. In addition, NIST will be forced to end work it is currently doing through the Manufacturing Extension Partnership (MEP).

Department of Energy: The Office of Science would reduce research grants both in number and size affecting researchers at national labs and universities.

NASA: NASA Administrator Charles Bolden advises that NASA will necessitate a reduction in funding for competed research (e.g., “research and analysis”) projects by about 2 percent, resulting in about a 5 percent reduction in new awards to support labor/jobs at universities, businesses, and other research entities distributed around the nation this year.

83

Biopharmaceutical End-user Segment:Market Trends

In 2013, NIH and NSF are expected to fund a combined 2,701 fewer grants than in 2012 amounting to $1,481,223 in lost funds to academic laboratories.

Sequestration Impact on NIH and NSF, U.S, 2012–2013FY 2012 Final Allocation ($M) FY 2013 Operating Plan ($M)

DepartmentFY 2012 Final Allocation ($M) FY 2013 Operating Plan ($M)

No. Grants Funding ($M) No. Grants Funding ($M)

NIH Extramural Academic R&D 45,058 $23667,927 43,357 $22,186,899

Research Project Grants* 34 617 $15 882 226 33 335 $14 906 182Research Project Grants 34,617 $15,882,226 33,335 $14,906,182

Research Centers 1,453 $3,040,375 1,353 $2,748,798

Other Research 6,496 $1,808,138 6,425 $1,779,278

R&D Contracts 2,492 $2,937,188 2,244 $2,752,641

NSF R&D ~10,000 $5,705 ~9,000 $5510

TOTAL 55,058 $23,673,632 52,357 $22,192,409

84

Notes: All figures are rounded. Source: Frost & Sullivan analysis.*Excludes SBIR/STTR


While the Senate and House budgets are more than $6.5 B apart with regards to the 2014 NIHbudget, it is likely the budget will remain relatively flat.

35,000

40,000

Senate

NIH Budget, US (2000-2014E)

20,000

25,000

30,000

House

Se ate

dget

($ M

illion

)

5,000

10,000

15,000Bud

02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013NIH B d t


85

NIH Budget 17,821 20,458 23,296 27,067 27,888 28,495 28,461 29,030 29,530 34,768 36,660 30,760 30,700 29,000

Source: Frost & Sullivan analysis.


The grant success rate for NIH hit an all-time low of 17.6% in 2012, dropping 2.5% from 2011,the greatest rate year-over-year since 2003–2004.

NIH Grant Success Rate, US (2001-2012)

30.0%

35.0%

dget ($

Million)

15 0%

20.0%

25.0%

Bud

5.0%

10.0%

15.0%

0.0%2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Success Rate 32 1% 31 2% 29 9% 24 6% 22 3% 20 0% 21 3% 21 8% 20 6% 20 6% 20 1% 17 6%


86


Success Rate 32.1% 31.2% 29.9% 24.6% 22.3% 20.0% 21.3% 21.8% 20.6% 20.6% 20.1% 17.6%


While 2014 requests imply the possibility of increased budgets compared to the sequestrationyear of 2013, many budget requests do not reach 2012 levels.

87

Source: AAAS, FY 2014 Congressional Action on R&D by Agency, August 2013

Regional Data: US Federal R&D Funding (continued)

Trends in Federal R&D as a Percent of GDP, 1976-2012

n)ge

t ($

Bill

ion

Bud

YYear

88

Source: AAAS, Research and Development series; National Science Foundation, Survey of Federal Funds for R&D (March 2012).

Regional Data: US Federal R&D Funding (continued)

Trends in Nondefense R&D by Function, 1953-2013

)et

($ B

illio

n)B

udg

Year

89

Source: AAAS, based on OMB Historical Tables in Budget of the United States Government FY 2013 (February 2012).

Desired Changes to Laboratory Products Purchasing Experiencep

D i d Ch t P h i E i A d i I tit ti Gl b l 2013

In the 2013 Laboratory Products End-user Purchasing Trends Survey, respondents were askedwhat they would to change about their laboratory products purchasing experience. Below areverbatim responses from respondents from academic institutions by response category.

ResponseCategory Verbatim Response

s

Ease of comparing prices over all companies, not just ones who pay to be on certain comparison sites. Ease of finding products

Desired Changes to Purchasing Experience, Academic Institutions, Global, 2013

f Pro

cess

Ease of finding products. Ease of obtaining a quote & price comparisons.Easier to use catalogs.Better websites and customer service.Easier website access and use; pricing availability without having to contact manufacturer via phone or email or without having to set up accounts and knowing your university's designated account number; acceptance of credit cards instead of PO numbers/checks.Fast feedback from the companies

Spee

d of Fast feedback from the companies.

Faster processing of orders.I do not have time to sit on the phone and speak with sales people. If they have discounted pricing, send it to me electronically with a supplies list and I will forward it to the appropriate faculty. I would like to see friendly websites, easy ordering and chats. Make finding products easier and quote prices quicker.O i bl h i ti i th t d If th i ld d li ll i l d d h d t d t ti

Ease

and

Our main problem when importing is the custom procedures. If the companies could deliver all included or had a trade representative, would make our life easier. Some companies make it difficult or impossible to order online. It would be very much desirable to be able to purchase online and get an invoice. Still have to deal with some companies by phone/fax. Prefer a good internet site. Streamline the process of ordering. To be able to review more than one product brand. O fE Online indicative prices allow easier procurement assessment and budgeting calculations without having to bother suppliers for quotes that may never be filled...wastes their time and builds poor reputation.

Q4b. What, if anything, would you like to change about your laboratory products purchasing experience?




Category

cess

Employer must have qualified vendor before able to purchase products. I cannot use my university's online ordering system for small equipment, just consumables. If I could use it to order small equipment too, it would be much easier for me. My institution's purchasing software is inefficient and time consuming to use.I like to simplify my ordering processing. But this is most internal to our university. I i h i tit ti l h d i d d i t d

erna

l Pro

Issu

es

I wish our institution no longer had a prime vendor designated. Internal institutional delays for purchasing from vendors not yet on the approved vendor listing.Nothing external, only internal practice/constraints.Move lab of long-time professor into online ordering and computer-based order tracking. Also, our university has its own software setup to purchase from approved vendors. They could make the system easier and more user friendly. Not have to go through a central buyer in the university.

Int Our institutional purchasing software is sub-optimal.

Our purchasing department is extremely slow at processing when the orders are from new companies. It would be quite nice to change this.As a state institution, we have to follow our own guidelines.





CategoryBetter pricing and knowledge of freight cost up front on orders. Cheaper materials and faster delivery.Cheaper shipping. Competitive pricing for quality products.Consistency with pricing and discounts.

ng

Consistent price over a year period.Need reasonable handling fees -- the S&H costs are out of control; prompt shippingI would like it if more vendors would have a search by low price option when multiple equivalent items are available from a vendor. I would like to know upfront what the shipping costs will be from some suppliers who do not provide that information. I would like to see the price up front, not have to request a price. Just display it!! It would be nice to be able to determine the shipping costs before getting to one of the last steps of the ordering process.

Pric

in

pp g g g p g pLower cost.Lower prices for some of the extremely overpriced instrument spare parts/repair. Lower prices of the warranty and longer time extended. Lower pricing always a bonus.More discounted products. More efficient quote generation processMore efficient quote generation process.More money to spend, cheaper products to buy. More opportunities for percentage discounts. i.e. 10%, 20%. Need more contract price agreements.Price comparison.Price, especially shipping. I purchased a product yesterday for 185 and shipping was 150.Shipping costs!


Shipping costs! Price.




CategoryGive more technical information online. Clear website labeling on quantities of a product to order, and the ability to split a case if needed. Need prompt notification of back orders; need customer service people who speak without an indecipherable accent; need maintenance manuals with diagrams for equipment and reasonable prices for spare parts -- it's hard to purchase spare parts when you don't know the name of the part and it's ridiculous to pay over $100-$700 for something that costs less than $2 to produce.E er man fact rer of the same instr ment sho ld speak abo t the same set of specifications feat res and benefits

rmat

ion

Every manufacturer of the same instrument should speak about the same set of specifications, features, and benefits.Find information easier in order to make informed choices and to get quotes faster. Generalize the option to test products at the lab. More samples issued. Better description on website. Get a representative to visit us quickly.Have suggested alternatives when my usual product is backordered. I wish there were more websites with reviews of brands and specific products that I could use as a reference when researching a new it

Mor

e In

for item.

I would like to see better tracking of products. Some but not all companies supply a tracking number of some sort to see where the package is located. Sometimes I have run into trouble with products being delivered to the wrong location and would like to see a delivery address and full name of someone who accepted the item.It needs to be online and I need immediate notification of back-orders.Monitor more carefully ordering by my technicians.M f l il bl ( f l l b d t ) t t b f b D t i l f l d t /i t tM More free samples available (of general lab products) to try before you buy. Demo trials of larger products/instruments.More information available online or in catalogs. More user friendly websites with lots of information posted regarding equipment. It would be good if sales reps could help you find or select products -- sometimes there are so many options online it is difficult to decipher. Online catalogues that have smart searching and are easier to navigate. Web sites need to me more informative about products.





CategoryGood general quality. Some issues with maintenance. Apart from annual budget limitations, the biggest time consumer for me is my workplace's internal purchase approval system. I determine what I want to buy, but if it's a larger ticket item, say over $150.00, I have to wait for bursar approval, which can take over a week, as it involves 3 people. However, we are having a new budget manager system installed by next year that should simplify the processMost of the purchases we had had been done through suppliers, not the manufacturers of those products. l would love a situation where one can deal with manufacturers directly so that the installation would be monitored by the manufacturer

ther

one can deal with manufacturers directly, so that the installation would be monitored by the manufacturer. I have worked out good relationships with reps, and generally find the ordering of lab products straightforward. Our university distributes purchasing credit cards, which eliminate having to go through a purchasing department for the bulk of all ordering. This saves considerable time and hassle. Order directly from the vendor/manufacturer, instead of going through the central purchasing office. Prompt delivery and follow-up.Public procurement act and proceduresO Public procurement act and procedures.Reduce the internal bureaucracy.Reps trying to sell us products that we don't need.Small amount order. Sometimes the sales people are not at all connected to the installation or maintenance persons, which makes it very difficult to handle this. All companies should have a strong connection between these. W d f diff t i th t it i h d t E bit t hi i t ti b t th i t hWe order from so many different companies that it is hard to say. Exorbitant shipping costs are aggravating, but there is not much you can do. For standard lab items we use our state contract company, because they do not charge for shipping. Be able to find small sizes of chemicals available for trial use. Customer service after the sale.


GOVERNMENT END-USER SEGMENT –MARKET TRENDS

95

Government End-user Segment:US Market Size and Growth

Sequestration has amplified challenges in the government sector, which expected to declineat a CAGR of -4.8% between 2012 and 2015

Government End-user Segment Revenue Forecast, US, 2011–2015CAGR (2012–2015): -4.8%

0.0%3.0

-2.0%

-1.0%

2.0

2.5

owth

rate

(%)

($ B

illio

n)

Gov’t17.7%

Others82.9%

0%

-4.0%

-3.0%

0

1.0

1.5

Rev

enue

gro

Rev

enue

(

2011 2012 2013 2014 2015Revenue $2.6 $2.5 $2.4 $2.3 $2.2

-6.0%

-5.0%

0.0

0.5


96

Growth rate -2.2% -5.3% -5.0% -4.0%

Government End-user Segment:Market Trends

The government laboratories market segment includes all government-housed laboratories and core facilities involved in bioscience or chemical research. Example institutions include:institutions include:

– National Institutes of Health Intramural Research Program (NIH)– US Department of Energy (DOE)– US Department of Agriculture (USDA)p g ( )– US Department of Defense (DOD)– Veterans Affairs (VA)– National Institute of Sciences and Technology (NIST)

Government laboratories are mainly funded by government-appropriated funding. Each year the federal budget contains funding for intramural research at its various scientific research funding agencies.

Government labs can also compete for extramural funding unless specified ineligible. g gSome labs can receive contract work from private industry or pull resources for public-private initiatives.

97


2009/2010: United States American Recovery and Reinvestment Act (ARRA) stimulus funding with $10.4 billion allocated to the NIH

2011: NIH budget cut by ~1% ($322 million) resulting in grant success rate dropping to all-time low of 17.4%

2012: NIH budget fell to $30.7, but viewed as a success given the possible mature cuts proposed throughout the yearproposed throughout the year

2013: In March, President Obama signed an order of continuing resolution initiating sequestration measures following the 2011 Balanced Budget and Emergency Deficit Control Act. Investment in overall federal research will reach its lowest point since 2002, according to AAAS.

The lab products market for the US government sector was already facing challenges in 2012, with a total year decline of -2.2%. At relatively flat or declining R&D budgets across government research agencies for the past several years (excluding ARRA) theacross government research agencies for the past several years (excluding ARRA), the sector has not been able to keep up with inflation rates. The buying power of government laboratories has thus suffered tremendously. There is no light at the end of the tunnel yet, with this market expected to decline at a rate of -4.8% from 2012–2015.

98


Impact of Sequestration on Government-based R&DOverall: As of March 1, 2013, national security discretionary funding was reduced 7.3% f th fi l N it di ti f di d d b 5 1% Whil thfor the fiscal year. Non-security discretionary funding was reduced by 5.1%. While these were smaller percentages than first scheduled, the impact of these cuts has been substantial as they were applied retroactively to spending since October 1, 2012. Thus the measures doubled in effect, applying a full year’s cut to be absorbed between March

d O t b 2013and October 2013.

NIH Intramural Research: The intramural research budget declined by roughly $140 million, or 4.1%.

Department of Energy: Overall, DOE R&D took a cut of about 6.8%. The Office of Science budget was reduced by roughly 5.2%. For the Biological and Environmental Research program 3 funding opportunity announcements were cancelled impactingResearch program, 3 funding opportunity announcements were cancelled, impacting potentially over 25 grants. Other grants will be cancelled before their final year. Argonne National Laboratory, Lawrence Berkeley National Laboratory, Pacific Northwest National Laboratory, and Oak Ridge National Laboratory took reductions in their BER research programsprograms.

99


Impact of Sequestration on Government-based R&DDepartment of Agriculture: The DOA R&D took a cut of about $164 million, or 7.0%.

Department of Defense: The DOD R&D budget declined by 8.6%. The S&T portion of the budget took a smaller cut at -4.6%.

Veterans Affairs: The VA R&D budget faired better than others, with a cut of just 2.5%.

National Institute of Science and Technology: NIST was the only R&D budget to gain $of those analyzed, with an addition of $31 million, or 5.6%.

100


Sequestration Impact on Government-based Research Budgets, U.S, 2012–2013

Department FY 2012 Final All ti ($M)

FY 2013 Operating Pl ($M)

Change 2012–2013($M)

Change 2012–2013(%)Department Allocation ($M) Plan ($M) ($M) (%)

NIH Intramural Research 3,402 3,262 -139 -4.1%

Total DOE R&D 11,081 10,325 -756 -6.8%

DOE Offi f S i 4 463 4 231 232 5 2%DOE Office of Science 4,463 4,231 -232 -5.2%

DOE Energy Programs 2,091 1,882 -209 -10.0%

DOE Defense 4,257 3,914 -343 -8.1%

DOA R&D 2 331 2 167 164 7 0%DOA R&D 2,331 2,167 -164 -7.0%

DOD R&D 74,460 68,036 -6,424 -8.6%

S&T (6.1-6.3 + medical) 13,330 12,712 -618 -4.6%

All Oth DOD 61 130 55 325 5 805 9 5%All Other DOD 61,130 55,325 -5,805 -9.5%

Veteran Affairs 1,160 1,131 -29 -2.5%

NIST 557 588 +31 5.6%

92 991 85 509 7 842 8 0%

101

92,991 85,509 -7,842 -8.0%

Notes: All figures are rounded. Source: AAAS; Frost & Sullivan analysis.



Fewer sales calls from vendors.

Desired Changes to Purchasing Experience, Government Laboratories, Global, 2013

Ease

and

Sp

eed

of

Proc

ess Searches of supplier's catalogs can be a nightmare. Easy search with a restricted set of answers would be welcome.

Supply of some chemicals can be slow, i.e. many months. Being located in a rural area (~450 kilometres from nearest major city),delivery of toxic chemicals can be problematic, so need to factor in delivery time when chemicals are ordered. Better organization in process.Timing of delivery is crucial, but most of the necessary streamlining will come from our ordering protocols. Try to make it more streamlined with fewer purchases.Try to make it more streamlined with fewer purchases.

Proc

ess

ues

Lots of paperwork required for our lab to complete purchases. As a public institution, we often have to choose the cheapest offer instead [of] the best one. It is difficult to explain to decision makers reasons to buy product with more quality instead [of a] cheaper one. A right to choose the best offer is necessary for excellentmanagement of the laboratory. Most of our issues are internal to our department's purchasing process. Our internal financial purchasing process

Inte

rnal

Is

s Our internal financial purchasing process. Our internal process. Our internal system works very poorly. Would like to have the State of Illinois approve enough funds so we can purchase equipment. Our purchase of non-consumable materials (instruments, equipment, etc.) has been curtailed the past two years because of state budget problems. We then have to find alternative funds to purchase items we absolutely need.

e Better pricing and after[-sales] service

Pric

e Better pricing and after[ sales] service.Finances. Prices going up and we have less money to spend. Limit the over-pricing of items just because they are considered "lab items".

Mor

e In

fo

Pictures of products online would help feeling more confident when purchasing. Websites easier to navigate. Descriptions of some products more fully informational. Fewer pop-up ads, less "bonus goods" and just give us lower prices. Improved support for new methodologies after equipment/instrument purchasesImproved support for new methodologies after equipment/instrument purchases.

Q4b. What, if anything, would you like to change about your laboratory products purchasing experience?Note: Government laboratories include respondents that identified as federal government laboratory or state government laboratory.

BIOPHARMACEUTICAL END-USER SEGMENT –MARKET TRENDS

103


US biopharmaceutical labs are expected to maintain stable spending on laboratory products,expanding the market at a CAGR of 3.4% between 2012 and 2015.

Biopharmaceutical End-user Segment Revenue Forecast, US, 2011–2015CAGR (2012–2015): 3.4%

4.0%

4 5

5.0

2.5%

3.0%

3.5%

3.0

3.5

4.0

4.5

rate

(%)

Bill

ion)

Biopharm28.2%

Others72.1%

1.0%

1.5%

2.0%

1.0

1.5

2.0

2.5

venu

e gr

owth

Rev

enue

($

2011 2012 2013 2014 2015Revenue $4.1 $4.3 $4.4 $4.6 $4.7

0.0%

0.5%

0.0

0.5

1.0

Rev


104

Growth rate 3.2% 3.1% 3.6% 3.4%


The biopharmaceutical end-user segment generated $4.3 billion for laboratory product suppliers in 2012. While spending is forecasted to remain stable throughout the forecast period growth is expected to hover between 3 1% and 3 6%forecast period, growth is expected to hover between 3.1% and 3.6%.

R&D spending in the pharmaceutical industry is expected to increase at a slow pace of between 1-3% moving forward. This sector continues to focus on efficiency, productivity and cost-savings, and appear more willing to change vendors to meet these aims. As bl kb t t t ti t i th i ill h l tblockbuster patents continue to expire, these companies will have lower revenue to work with, yet will need to build promising pipelines to fill the void. Finding cost savings will likely be of greater importance for these particular companies as revenue falls.

While some outsourcing to international markets continues, other companies are g pbringing work back to the US. As quality issues and manufacturing and labor costs have increased in Asia, US wages have decreased, making US-based manufacturing more competitive. Moreover, following the recession, US-based manufacturers were forced to work more efficiently allowing for increased productivity despite employment y g p y p p yrates staying flat. India recently announced it will hire an additional 110 inspectors for greater quality control over its pharmaceutical industry amid several US FDA bans and warnings on India-based products. If quality issues continue, some companies may be scared away from further outsourcing in Asia-Pac. Nevertheless, strong M&A and IPO y g gactivity among CROs demonstrates high demand.

105


Several companies, such as Pfizer, Roche, AstraZenca, Merck, and Astellas Pharma, are going through a period of R&D restructuring. Some strategies include closing unproductive units co locating groups for increased collaboration across R&D to speedunproductive units, co-locating groups for increased collaboration across R&D to speed decision-making and information sharing, and relocation to globally recognized science clusters.

In addition, engagement with government research institutes, universities, specialty h ti l i d th t l t f id tif i i i dpharmaceutical companies, and other external partners for identifying promising drug

candidates is likely to increase. Meanwhile, the biotechnology sector is having a robust year driven by R&D success

causing an increase in new drug approvals. IPO activity has increased substantially in this segment through the first half of 2013, aided by the 2012 Jumpstart Our Business Startups (JOBS) Act making it easier for companies to gauge investor IPO interest and success of already-public biotech companies. With 16 US-based biotech IPOs through July bringing in an estimated $1.2 billion in proceeds, 2013 is shaping up to be the best year for such activity since 2004. With greater cash on hand, these biotech companies can further boost their R&D spending, driving a robust marketplace for laboratory products.

106


Reorganization, mergers and acquisitions, partnerships and portfolio changes are being evaluated to maintain growth centers and build pipelines. Activity is expected to remain strong due to the following factors:remain strong due to the following factors:

– Patent expirations and need for greater pipelines– Desire to enter growth markets, such as biologics– Generic competition– Personalized medicine (bringing together drugs and diagnostics)– Conservative risk/benefit perspective from the Food and Drug Administration

(FDA) resulting in fewer FDA approvals– Prolonged FDA regulatory process resulting in exacerbated pipeline gapsProlonged FDA regulatory process resulting in exacerbated pipeline gaps– Prescription Drug User Fee Act (PDUFA) IV requirements for advisory committee

reviews– Negotiated Risk Evaluation and Mitigation Strategies (REMs) required for most

NDA filiNDA filings– Tougher patent litigation settlements resulting in loss in key franchise– Tougher reimbursement requirements

107


Global biopharmaceutical R&D spending saw declines in 2012–2013, but will improve beyond 2013. While the future growth is minor, it is a positive signal th t th di i t iti d it h R&D t t i d tthat the spending is net positive despite much R&D restructuring and cost-cutting.

2 5160

Pharmaceutical R&D Spending Forecast, Global, 2011–2015CAGR =0.7%

1

1.5

2

2.5

100

120

140

160

%)

ion)

-0.5

0

0.5

40

60

80

100

Gro

wth

Rat

e (%

Spen

d ($

Bill

-2

-1.5

-1

0

20

40

2011 2012 2013 2014 2015Revenue 138 137 135 138 140

G


108

Revenue 138 137 135 138 140 Growth Rate -0.7 -1.5 2.2 1.4-

Source: EvaluatePharma


The growth decline in 2012 reflects patent expiration of blockbuster products. Moving forward, the industry is expected to return to solid growth, breaking the t illi k i 2014trillion mark in 2014.

109

Note: All Figures are rounded. The based year is 2011. Source: Frost & Sullivan analysis.


Global healthcare spending is shifting to provide better prediction and diagnosis of disease. Meanwhile, spending on treatment will decline in response to earlier

d b tt di k l d With i d li d di i tiand better disease knowledge. With increased personalized medicine options, treatment will be more effective and shorter, shifting greater spend to back-end monitoring. Overall, these trends may affect the lab products customer base and development of new products. a d de e op e t o e p oducts

10% 12% 16%90%

100%

Healthcare Spend Shift, Global, 2007–2025

Monitor

70% 60%

35%

50%

60%

70%

80% Treat

Diagnose

Predict

22%15%19%

27%

10%

20%

30%

40%

110

5% 9%0%

10%

2007 2012 2025 Frost & Sullivan analysis.


Between 2012–2016, patent expirations of brand-name drugs worth $117.2 billion in US sales will lose up to 80% of the revenue generated for the

i A il bl f dditi l R&D i t t d li thcompanies. As revenue available for additional R&D investment declines, these pharma companies must adopt cost-cutting measures.

Patent Expirations for Major Drugs: 2011–2016

2011 Global Sales US Patent ExpirationCompany Product 2011 Global Sales ($ B)

US Patent Expiration Date

Pfizer Lipitor 10.7 2011

GlaxoSmithKline Advair Diskus 8.1 2010

Abbott Humira 7.9 2016

Sanofi Aventis/Bristol-Myers Squibb Plavix 7.1 2012

AstraZeneca Crestor 6.6 2016

AstraZeneca Nexium 5.0 2014

AstraZeneca Seroquel 4.6 2012

Merck & Co Singulair 4.6 2012

111

Eli Lilly Cymbalta 4.2 2013

Key: Expired Source: Frost & Sullivan analysis.


Below is a list of announced major reductions in biopharmaceutical and ancillary workforces from March–October 2013* affecting the US market. R t t i t tti d f ilit l th jRestructuring, cost-cutting, and facility closures are the major causes.

Company Location Cause Jobs Cut

Merck & Co. Global Cuts 16,000AstraZeneca Global (DE, UK) Restructure/Cuts 5,500Teva Pharmaceutical Global Restructure/Cuts 5 000Teva Pharmaceutical Global Restructure/Cuts 5,000Merck Serono Global Cuts 2,000Eli Lilly US Sales force cuts 1,624Boehringer Mannheim (Ben Venue Labs) MA Facility Closing 1,100Endo Health Solutions Global Cuts 700John Muir Health CA Sale 540Teva Pharmaceutical PA Facility Closing ~470 Baxter International Puerto Rico Relocation/ Upgrade/Cut 400Quintiles NC Cuts 400Boehringer Ingelheim VA Facility Closing 240Affymax CA Possible Bankruptcy 230Astellas Pharma NY, CA Restructure/ Cuts 200Bristol-Myers Squibb NJ Cuts 200Lonza Biologics MA Cuts 200Solgar Inc. NJ Facility Closing 196AVEO Oncology MA Cuts 140Merck & Co NJ Facility Closing 113

112

Merck & Co. NJ Facility Closing 113IMPAX Laboratories CA Cuts 110

Note: List continued on following slide; Source: BioSpace; Frost & Sullivan analysis.*List includes press release announcements from March 7, 2013 through October 14, 2013, available on BioSpace.com. List is not comprehensive.


If companies move forward with all cuts announced, a total of over 36,000 jobs will be eliminated in the near-term*. While many layoffs relate to sales forces f d i ff t t id bl R&D t t i i i llfor drugs going off-patent, considerable R&D structuring is occurring as well.

Company Location Type Jobs Cut

Warner Chilcott NJ Cuts 88Cardinal Health OH Cuts 70Roche 454 CT Restructure/ Facility Closing >60Roche 454 CT Restructure/ Facility Closing >60 Zogenix CA Cuts 55GTx TN Cuts 53Delcath Systems NY Cuts 52Bayer HealthCare Medrad PA Restructure/ Cuts 50ArrayBioPharma CO Partnership Ended 50y pNovartis CA Restructure/ Cuts 50Vical Incorporated CA Restructure/ Cuts 47Rigel Pharmaceuticals CA Restructure/ Cuts 30Unigene Laboratories NJ Cuts 40%Novartis NE Cuts 40%Biota Pharmaceuticals MD, GA Relocation, Cuts 30%Pharmaxis Global Cuts 30%Amylin Pharmaceuticals CA Facility Closing Hundreds AbbVie US Sales force cuts Hundreds PRACS Institute ND, MO Closing UndisclosedGlaxoSmithKline MA Relocation Undisclosed

113

GlaxoSmithKline MA Relocation UndisclosedAastrom Biosciences MI Cuts Undisclosed

Source: BioSpace; Frost & Sullivan analysis.*Some workforce cuts will be realized over the course of a few years.


Below is a list of the announced expansion of biopharmaceutical and ancillary workforces during the same time period in the US market. Should these jobs be

li d i li t d ill dd 6 200 l i th trealized, companies listed will add over 6,200 employees in the near-term.Company Location Investment Jobs Created

Regeneron Pharmaceuticals NY $170 M 785Bristol-Myers Squibb FL Undisclosed 579Roche Global CA $880 M 500Roche Global, CA $880 M 500Perrigo Company MI $192 M 400Bristol-Myers Squibb MA $250 M 350Pharma Medica Research MO $31 M 320MedImmune (AstraZeneca ) MD Undisclosed 300Spirit Pharmaceuticals SC $12.2 M 296pActavis FL $40.5 M 220Alexion Pharmaceuticals CT $100 M 200–300 Catamaran Corp. IN Undisclosed 200+ H. Lundbeck US Undisclosed 200+ Jubilant Cadista MD Undisclosed 200KenCord Bio Therapeutics NC $15 M 200Syngenta NC $94 M 150Mallinckrodt MO $2 M 150Gerresheimer GA Undisclosed 120Catalent Pharma Solutions MA, KY $35 M 120Unipharma (Venezuela) FL $50 M 100

114

Unipharma (Venezuela) FL $50 M 100Bayer CropScience NC Undisclosed 100

Note: List continued on following slide; Source: BioSpace; Frost & Sullivan analysis.*List includes press release announcements from March 7, 2013 through October 14, 2013, available on BioSpace.com. List is not comprehensive.


Companies are co-locating many facilities for greater efficiency and information sharing. Other factors determining new US facility openings include state tax i ti d h ti l d i it t i l tincentives and research stimulus programs, and proximity to science clusters.

Company Location Investment Jobs Created

Donald Danforth Plant Science Center MO $45 M 100Purdue Pharma Manufacturing NC $59 M 100RxCrossroads KY Undisclosed 80AstraZeneca MA Undisclosed 80Prime Therapeutics NM Undisclosed 80Durata Therapeutics CT $2.25 M 80Baxter Corporation MN Undisclosed 60Major Pharmaceuticals WI $10 M 50Major Pharmaceuticals WI $10 M 50AmeriPharm via AstraZeneca hiring SD Undisclosed 50Octapharma Plasma NC $39.2 M 45Zoetis NE Undisclosed 30CoreRx FL $2 M 25Medical Products Laboratories PA $1 M 14Sorenson Forensics UT Undisclosed Up 33% Exela Pharma Sciences NC $1 M Undisclosed

115

Source: BioSpace; Frost & Sullivan analysis.


A recent analysis scoured job sites of top pharma companies in mid-June 2013 to determine the total number of jobs listed, the number of US-based jobs

d th th t l ti f j b ti f h Th USopen, and the other top locations of job creation for each company. The US was the primary hiring location for 9 out of the 10 companies. China, Switzerland and Germany also faired well in the analysis.

Company Total Global Jobs Available

US-based Jobs Other Top Job Locations (# of jobs)

Novartis 2,740 1,096 Switzerland (500); Germany (224); UK (127); India (113); Austria (109)

Roche 1,450 591 Switzerland (240); Germany (192); China (148); Poland and Singapore (40 each)

Sanofi 1,427 744 China (465 ); France (68); Germany (51); Canada (45); UK (18)

Pfizer 815 332 China (249 ); UK (26); Mexico (18); Taiwan (17); Ukraine (16)

GlaxoSmithKline 733 223 Belgium (174); UK (114); Singapore (55); Australia and Germany (33 each)

Johnson & Johnson/ Janssen Pharmaceuticals 655 232 Belgium (81); China (63); The Netherlands (40); Mexico (30); France (26)PharmaceuticalsAbbVie 555 367 Germany (68); China (28); France (20); UK (16); The Netherlands (14)

AstraZeneca 544 259 China (202); UK (55); France (11); Turkey (8); Sweden (7)

Eli Lilly 484 146 China (319); Canada (16); Australia (2); U.K. (1)

116

Bristol-Myers Squibb 368 318 Ireland and United Kingdom (12 each); France (9)1; Belgium (7); Spain (5)

Source: Genetic Engineering & Biotech News; Frost & Sullivan analysis.Note: Job totals were analyzed from company websites the week of June 17–21, 2013.


R&D spending by the top pharmaceutical companies showed varying trends from 2011–2012. 5 companies increased their spending, with Pfizer’s spend i i th t i d ll M hil 5 i d d th iincreasing the most in dollars. Meanwhile, 5 companies reduced their spending, with Bristol-Myers Squibb the outlier at a -13.3% decline.

Biopharmaceutical Industry: R&D Spending by Leading Corporations, Global, 2011–20122011 R&D Spending 2012 R&D Spending

Leading Corporations2011 R&D Spending

($ Million)2012 R&D Spending

($ Million) % Change 2011-2012Roche 5,021 5,278 5.1Pfizer 8,812 9,251 5.0M k & C 6 492 6 642Merck & Co 6,492 6,642 2.3Johnson & Johnson 3,839 3,904 1.7Novartis 7,548 7,665 1.6Sanofi 6,390 6,324 -1 01.0GlaxoSmithKline 8467 8,168 -3.5Eli Lilly 7,232 6,918 -4.3AstraZeneca 5,523 5,243 -5.1Bristol Myers Squibb 9 074 7 870

117

Bristol-Myers Squibb 9,074 7,870 -13.3

Note: Sorted by % Change. Non-CER adjusted. Does not exclude impairments, amortization, or other exceptional items. Source: Frost & Sullivan analysis.


M&A activity continues at a brisk pace, particularly as companies wish to expand into growth markets, feed drying pipelines, and gain greater stakes in

i iemerging regions.

Target Company Acquirer Company YearPh t Gil d 2012

Life Sciences Industry: Major M&A Deals, Global, 2011–2013

Pharmasset Gilead 2012Amylin Pharmaceuticals Bristol-Myers Squibb 2012Boston Biomedical Dainippon Sumitomo Pharma 2012Inhibitex Bristol-Myers Squibb 2012Actavis Watson Pharmaceuticals 2012Gambro AB Baxter Healthcare 2012Gambro AB Baxter Healthcare 2012Human Genome Sciences GlaxoSmithKline 2012Medicis Valeant Pharmaceuticals 2012Fougera Pharmaceuticals Novartis 2012Ardea Biosciences AstraZeneca 2012Bausch & Lomb Valeant Pharmaceuticals 2013Bausch & Lomb Valeant Pharmaceuticals 2013Elan Perrigo 2013Warner Chilcott Actavis 2013Pearl Therapeutics AstraZeneca 2013Conceptus Bayer 2013Onyx Pharmaceuticals Amgen 2013

118

Onyx Pharmaceuticals Amgen 2013Aragon Pharmaceuticals Johnson & Johnson 2013

Source: Frost & Sullivan analysis.Note: Selected M&A deals valued at over $1.0 B.


Response Verbatim Response

Desired Changes to Purchasing Experience, Biopharmaceutical Laboratories, Global, 2013

Category Verbatim Response

peed

of

s

Direct contact with companies. Easier way to find the best products for my applications, i.e. more references to publications would be helpful in some situations. Everything should be available to be purchased via credit card by choosing from internet market store.Expedited delivery and ease of online ordering process.Fast delivery

Ease

and

Sp

Proc

es

Fast delivery. More streamlined; every time a company is sold the purchasing procedure, pricing, and product name and number changes. If companies could keep track of regular purchases so that we could order quicker. The dealership, distribution and agency issues as the most times delay product deliveries. For our buyer to not provide substitutes… they sometimes substitute items and it is a process to change it back to what is really needed. I'd like things to never be backordered. OR if an item that I frequently buy is backordered or if supply is limited, I'd like some notification. N tifi ti h d h i d d d t d d li d tE Notification when vendor has received order and expected delivery date. Speed of Delivery.

Pric

e Would order EVERYTHING online with a discounted price that is good for an entire year. We have to get too many quotes as they expire. Would like instrument software & licenses not to be so expensive. I would like it to be easier to get price quotes without applying for an account.

d on At times we must depend on sales rep's suggestions to find comparable products, which is not always the case.

Mor

e an

dB

ette

r In

form

ati o More detailed information on websites.

Clearer, more transparent information on assay kit origins.Trying to decide which equipment to buy is difficult when you have so many choices. You may have experience with one brand and want to stick with that, but several other companies may make a similar product and you don't know if they will be any better or worse. A website like Consumer Reports or CNET for laboratory products would be awesome.


Note: Biopharmaceutical laboratories include respondents that identified as biotechnology company, contract research organization, or pharmaceutical company.



Desired Changes to Purchasing Experience, Biopharmaceutical Laboratories, Global, 2013


More choice.More demo, leasing.More variability.My experience is generally good. Can be annoying waiting from some goods, but all part of planning and workflow.Regulatory systems of laboratory products in developing countries and international registry of IVD products

Oth

er

Regulatory systems of laboratory products in developing countries and international registry of IVD products.Would have more items sub-contracted to vendor-managed inventory programs.Bigger vendors (VWR, Fisher, Cardinal, etc.) tend to shy away from RUO or research kits...would help if they made these available Real salespeople.Better awareness of suppliers to required storage conditions.Better communication between vendor and user when items are out of stock, delayed etc. D d th b d b t li bilit d lit i t tDepends on the brand, but reliability, accuracy and quality are very important.The service, and the support after purchasing.


INDUSTRIAL END-USER SEGMENT –MARKET TRENDS

121

Industrial End-user Segment:Market Trends

The lab products market for US industrial labs is experiencing a growth slowdown in 2013.Between 2012–2015, this market is expected to gain steam, growing at a 3.2% CAGR.

Industrial End-user Segment Revenue Forecast, US, 2011–2015CAGR (2012–2015): 3.2%

5.0%3.5

3.0%

4.0%

2.0

2.5

3.0

h ra

te (%

)

llion

)

Industrial

1 0%

2.0%

1.0

1.5

even

ue g

row

t

Rev

enue

($ B

il 18.2%

Others81.8%

2011 2012 2013 2014 2015Revenue $2.6 $2.7 $2.8 $2.9 $3.0

0.0%

1.0%

0.0

0.5 ReR


122

Growth rate 4.1% 2.6% 3.2% 3.7%


The industrial market segment includes all segments of industry outside of pharma/biotech and patient care that employ laboratory products for R&D, Q&A, environmental monitoring or non diagnostic applied testing Example organizationsenvironmental monitoring, or non-diagnostic applied testing. Example organizations include:

– Chemical & Petrochemical Industries

Food & Beverage Industries– Food & Beverage Industries

– Agricultural Industries

– Forensic Testing

– Automotive Industries

Laboratories in the industrial segment drastically vary in size, budget, and technologies used.

123


The lab products market stemming from industrial labs is highly dependent on the growth metrics of the wide-ranging end-markets it serves. Because of the diversity of this marketplace the industrial sector generally follows the current macroeconomicthis marketplace, the industrial sector generally follows the current macroeconomic trends.

The globalization of R&D continues to shift the market share of R&D investments from developed nations to emerging regions. However, large multinational companies with R&D spread across the globe may follow the trend in biopharmaceutical companies of co-locating research centers for greater synergy in cost-cutting and information sharing.

While the overall US economy is not meeting expectations in 2013 there are pockets While the overall US economy is not meeting expectations in 2013, there are pockets of growth in the industrial sector benefiting the laboratory products market. These include more established industries, such as food and beverage testing, synthetic biology, and the recovering automobile market, along with other trending emerging markets like oil fracking and medical marijuanamarkets like oil fracking and medical marijuana.

In this highly diverse market tied to the overall low-growth economy, lab product suppliers must find the niches of growth to compete.

124


A clear picture of the industrialization of emerging economies is displayed in the below table. US and Canada, Western Europe, and Japan have all fallen in th i h f th ld’ l t bli ti Chi i l l th f t ttheir share of the world’s largest public corporations. China is clearly the fastest gainer, jumping from 0 to an estimated 250 of the top 2,500 largest public corporations in just 5 years.

2000 2005 2010

US d C d 1 050 1 050 750

World’s 2,500 Largest Public Corporations by Region

US and Canada 1,050 1,050 750

Western Europe 750 650 600

Japan 350 300 150

Other Mat re Economies 200 300 350Other Mature Economies 200 300 350

China 0 0 250

Brazil, Russia, India 50 50 150

Other Emerging Economies 100 150 250

125

Other Emerging Economies 100 150 250

Source: Booz & Company


Greater regulations, standards, and oversight are leading to increased food and beveragetesting globally. Laboratories that conduct such testing continue to be strong customers oflaboratory products.

126


Greater regulations are leading to increased food safety products globally. Biosensors, safetysoftware, and testing products are the key product segments supporting overall marketgrowth during the forecast period.

127

Note: All figures are rounded. The base year is 2012. Source: Frost & Sullivan analysis:


The US market for food safety products is forecast to grow at a CAGR of 6.1% from 2012–2017. APAC and ROW are the primary growth engines in the global food safety productsmarket.

128



The agricultural sector is expected to grow at a CAGR of 5.0% from 2011–2020. The rapidglobal population growth has increased investment in technologies to efficiently feed theglobe. Opportunities exist in synthetic biology and biofuel production.

129



Because of the US economy’s reemergence through the natural gas boom and the expecteddrop in energy costs, the demand for food and beverage products will grow domestically. Asdemand rises, so does testing and manufacturing activity which require lab products.

130

Source: Frost & Sullivan analysis: Food and Agriculture Global Growth Trends Review, September 2013.



Desired Changes to Purchasing Experience, Industrial Laboratories, Global, 2013

Category

ss

Being up front on delivery times and costs. Easier way to obtain competitive pricing. Faster quote process.I would like to have a more seamless way to receive invoices via email. Inventory system so I can order frequent parts and supplies.

ed o

f Pro

ces Most of the stockists of imported chemicals keep no stock of slow moving and/or high value products, though the product is manufactured

by them. This makes the delivery period as high as 2 to 4 months. Seamless ordering/tracking from the web catalog. Comparison between different web pages/sources during ordering.Software issues with purchasing system.Back order times. Most of my back orders are for months, not weeks or days. The ability to interact with a representative [who] has the power to implement changes quickly.

ase

and

Spee On-time delivery.

Some vendor's sites do not specify availability of products! Once a purchaser knows the system, it is easy to make a purchase. Having to re-learn a new system is a time waste. Delivery times go wanting when carriers shuffle cargo. Faster delivery. Items are sometimes backordered. Online ordering.

Ea

Online ordering. Vendor we mainly purchase through doesn't have a great website for finding products. Delivery and lead time to receive products. Mainly instrumentation. Easier to navigate websites. Less backordered items. Same day delivery if need be. The ordering process and details available on the websites.


Note: Industrial laboratories include respondents that identified as chemical and petrochemical company, environmental testing laboratory, food, beverage, or agriculture company, manufacturing company laboratory, or other.




Category

of P

roce

ssed

)

Quicker delivery.It seems to work well. However, ease of ordering products is always welcome to new better ordering techniques. If product is out of stock, need to know when item will be available -- a call/ email to me will be nice, or let me know who else carries the same item. Better on-line details, correct pricing and availability. I have to call to verify the item is available and the price is correct. Shipping and f l h ti i

and

Spee

d o

(con

tinue fuel charges are sometimes excessive.

Direct purchasing. I have moved towards a standing order on supplies we use daily and order monthly. Eventually I would like to get all chemicals used set up the same. I might want to put some on repeat shipping on big consumables.I prefer to order online, which I am able to do with most of my suppliers. I would not change anything.

Ease

I would prefer better websites from the vendors I regularly use. Nuisance advertising or catalogs that are unsolicited.Maintaining a stock is very important.

cess

Cannot change much. Have in-house process for doing purchasing. Make internal purchasing procedures easier.It's not my purchasing methods that need changing. I go through a great deal of trouble to get the products I need.

nter

nal P

roc

Issu

es I would like to have more budget each year for equipment >$5,000. I have plenty of budget for consumables and maintenance, but new equipment (over $5K) is harder to justify and get. It is difficult to get capital to purchase larger ticket items. It would be great if there was a way to use the equipment to get some results to show the upper echelon of management the value of the equipment before asking for the funding. I would prefer my vendors to have pre-negotiated contracts with the State of Texas.I would like to have less to do with it. In other words, I would like the lab manager to possess the qualities needed to enable me to take I , g p qmore of a hands-off approach.





CategoryIt will be nice if we can see the rates online and order them online with free shipping. Also there should be offers for bulk purchase.Consistency in pricing over time. Cost and compatibility.Cost.Lower prices. It is amazing how much lab products cost. A trash can available at Target for $5 will cost $50 in a scientific catalog.

Pric

e

Online discounted pricing for our account. Instead of contacting a sales representative to get a better price. Consistent pricing.get estimate of ongoing equipment support costs. Be able to get everything from one place at the best price. Shipping cost/time to Winnipeg from Mississauga/Calgary are high, so reducing them would be beneficial. Less negotiating -- give me the best price, first time. P g g g pWe purchase a lot of laboratory equipment that has been used from EBay. This way we can buy perfectly good equipment and reagents for pennies on the dollar. Understandably, we would prefer low prices, high quality and excellent customer service. However, if we target low prices, then either quality or customer service are lowered, and, therefore, value is altered. If we want high quality and excellent customer service, then price will be higher, and, value is altered. It's always great when considering the purchase of an expensive item, that I can speak with a knowledgeable vendor and ask about the item. Talking with the right salesperson usually saves time, money and mistakes... and gets me the best value. When the budget purse strings are tight, the plan is simply to buy what I can with the money in the budget. If I have a vendor I trust, the quality will be acceptable. When a big vendor sacrifices good customer service to optimize profits, I can always figure out that I am on my own. When I call their toll-free number, I talk to an order-taker instead of an experienced, knowledgeable sales representative.





Category

mat

ion

Better product information on web sites.I would like for some of the catalogs that I ordered out of to have a little more description of the product. Knowledge of products available on-line rather than on the phone.When reviewing items on a website, obtain complete information about item. Sometimes want more details in vendor's websites or ease in asking them to provide details.

Bet

ter I

nfor

m

Easier to obtain technical support.More equipment demos when a decision to purchase is close would be helpful. Some products need a more thorough description of intended uses, particularly when the products are replacement consumables for equipment/instruments. Some of the reps need to be more knowledgeable about the products. We would need more technical demos to take a decision.

Mor

ean

d Web based, easily accessible purchasing with PICTURES of the products is really important. I believe that a "showroom" -- even a virtual showroom where a potential buyer could shop and compare instruments, equipment, glassware, etc. side by side would be an invaluable tool to Lab Supervisors and Managers who strive to make the most of their annual budgets.Lack of information/ specifications on interoperability/ software compatibility for different equipment/ instrumentation sets when ganged as an automated follow-on system. Better search engines on websites and better product descriptions/pictures.





CategoryConsumable part/reagents; Obsolete equipments; Replace old method with less hazard methods; lab management; sampling devices.Receiving the correct item and not a substitution. Eliminate mistakes made when vendors change their Unit of Purchase and don't communicate that to us. Fuel surcharges, hazardous charges, having chemicals in stock or any item used frequently.Like to try equipment out before purchasing for ease of use and quality of product and results. Also, like trials and replicates of samples t lt i t

r

to see result consistency. Product availability – would like the product available when I need it. There are some items (AA lamps, for example) that USED to be warehoused by my suppliers so I could replace them quickly when needed. Now most items like that require too much lead time, forcing me to either order before I have an actual need and lose some of the product's life just sitting on a shelf, or I have to go without for longer than I feel I should. A wider variety of product selection would be a good improvement.

Oth

e Getting orders right the first time.Instrument sales -- some vendors have extremely poor customer service. In one case, an instrument vendor on a warranted product took over two months to [make a] repair. More visibility on customer service at time of purchase. Angies list for instrument suppliers where you could air your service issues. Most websites are cumbersome, slow, and often have to purchase more than I want. I can search on Google to find what I want on the company website faster than the site. I pay same amount for a small quantity than for more than I need. Finally, it should be a sin to h h t th l b h i l l i h h f hi i Th h h th it ft t hi h dcharge what the lab chemical clearing houses charge for shipping. They charge as much as the item often, to ship a non-hazardous

chemical. Would appreciate that all of my order arrives intact. I would like to see a system whereby I could receive an electronic notice of the ordered items that have shipped with the ETA. Electronic notice of products that could potentially be backordered and suggested available substitutions.Some manufacturers are consolidating products without customer input or informing customers prior to implementation. This has put us in the predicament of finding replacement products in a short time to maintain lab services Examples: urinalysis preservation systemsin the predicament of finding replacement products in a short time to maintain lab services. Examples: urinalysis preservation systems and pill plates for GC culture.


PATIENT CARE END-USER SEGMENT –MARKET TRENDS

136

Patient Care End-user Segment:Market Trends

Customers based in US. patient care labs are expected to spend $2.5 billion on lab products in2013. Between 2011 and 2014, this market is expected to grow with a 3.1% CAGR.

Patient Care End-user Segment Revenue Forecast, US, 2011–2015CAGR (2012–2015): 3.1%

3.5%3.0

2.0%

2.5%

3.0%

2.0

2.5

h ra

te (%

)

Bill

ion)

Patient

1.0%

1.5%

0 5

1.0

1.5

even

ue g

row

t

Rev

enue

($ Care

16.0%

Others84.0%

2011 2012 2013 2014 2015Revenue $2.3 $2.4 $2.5 $2.5 $2.6

0.0%

0.5%

0.0

0.5 R


137


Growth rate 2.0% 3.5% 3.1% 2.8%


The patient care market includes all reagents, consumables and analyzers that are used to perform testing outside the body on obtained specimens such as blood or urine to measure analytes of interest for patient evaluationurine, to measure analytes of interest for patient evaluation.

The market includes immunoassay, clinical chemistry, clinical microbiology, tissue diagnostics, hematology, molecular diagnostics, self monitoring blood glucose (SMBGH) and point-of-care (POC) specific tests.

These tests are performed in central laboratories, reference laboratories, professional testing near patients (point-of-care settings) and patient self testing.

Revenues associated with the patient care market for laboratory products come from the sales of instruments & equipment, chemicals, reagents, & kits, and consumables for diagnostic testing.

General laboratory products make up a relatively small proportion of overall laboratory budget as the majority of products purchased in this segment are 510(k) approved bybudget as the majority of products purchased in this segment are 510(k) approved by the FDA.

138


The US lab products market for patient care generated $2.4 billion in 2012, and is expected to grow at a CAGR of 3.1%.

Patient care labs are highly tied to new regulations and dynamics occurring under the Affordable Healthcare Act (ACA), such as:– The Census Bureau estimated 48.0 million people in the US do not have health

insurance coverage. Families USA estimates 25.7 million people will be eligible for a g p p ghealth insurance premium tax credit. Lastly, the Congressional Budget Office forecast 6 million people will receive subsidized coverage through an exchange next year, expanding to 22 million by 2017.

– Value-based PurchasingValue based Purchasing– Medical Device Excise Tax– New codes and reimbursement standards from the Center for Medicare and

Medicaid Services (CMS)– New paradigms for clinical testing labs, likely to result in consolidation, or mounting

success of large labs that can increase testing to overcome lower reimbursements.– Employer mandate requires businesses to provide healthcare or an alternate means

for employees to secure healthcarep y– Expected increased premiums for company-based insurance

139


With Obamacare launching October 1, 2013, the effects will be greater analyzed next year. It is expected that 2014 will be a year of change for the entire healthcare community as it adapts to the new systemcommunity as it adapts to the new system.

While there are likely to be varying effects on the laboratory products market, early predictions of

– An overall increase in diagnostic test volumes as newly insured patients seek the g y pmedical tests they put off when without coverage. This is expected to increase usage of chemicals and reagents.

– An increase in hospital and large clinical testing lab infrastructure to accommodate the growing insured population This could certainly result inaccommodate the growing insured population. This could certainly result in increased spending on patient care products.

– Consolidation of clinical testing labs as large corporations (i.e. Quest and LabCorp) survive lowered reimbursement rates for some high-utilization codes through increased testing volume while smaller diagnostic labs cannotthrough increased testing volume, while smaller diagnostic labs cannot.

– The Medical Device Tax will affect some lab product suppliers with direct or indirect play in this marketplace

– Not unique to lab product suppliers, all companies are likely to see increased healthcare insurance expenditures as a result of mandates and mounting premiums

140


Beyond the ACA, other factors affecting growth in the US patient care market include the rising prevalence of chronic diseases, aging baby boomer population, personalized medicine leading to better care greater patient awareness an increased focus onmedicine leading to better care, greater patient awareness, an increased focus on preventative care, the increasing medical tourism trend taking care out of the US, and remote patient monitoring. In addition, hospital are grasping the need for greater efficiency as patient numbers increase exacerbating the labor shortage across in the industryindustry.

Customer consolidation trends like physicians moving away from self-employment in private practice settings and towards employment by hospitals means that the customer base is shrinking and there will be fewer accounts for which to compete. Increased customer buying power leaves the market vulnerable to non-ideal pricing wars.

Commoditization for certain basic products within the patient care market continues to drive down pricing Cost cutting in hospitals and clinical labs are making thesedrive down pricing. Cost-cutting in hospitals and clinical labs are making these customers more aware of product costs.

The following slides provide information on the changing healthcare landscape and insight into selected diagnostics markets covered by Frost & Sullivan.

141

Patient Care End-user Segment:Market TrendsTrends in the $66.6 billion US clinical laboratory market, growing at a CAGR of 6.3% will affectpatient care products in various ways discussed below.

142

Patient Care End-user Segment:Market TrendsSeveral current dynamics in molecular research, personalized care, and biosimilars ischanging the face of healthcare and life sciences.

143


Laboratory Profile Examples Opportunities Threats

Reference Laboratories • Quest DiagnosticsL bC

• Demand for esoteric and advanced tests

• Competition from specialized laboratories• High degree of automation

• Large sales force• Significant cash reserves• Large test menus

• LabCorp• ARUP Laboratories

advanced tests• Hospital send-out testing

specialized laboratories• Alternate healthcare

delivery models• CPT coding changes

Specialty laboratories • Athena Diagnostics • Demand for esoteric and • FDA oversight on LDTsSpecialty laboratories• Strong branding around speciality• Expert staff• High margin tests• Robust organic growth

g• Myriad Genetics• Genomic Health

advanced tests• Physician preferences• Personalized medicine

g• Disruptive technologies

Hospital laboratories• Community presence• Medical expertise• Academic collaborations

• Mayo Medical Laboratories

• Cleveland Clinic Laboratories

• Regional testing• National testing• Cutting-edge clinical

research• Patient specimen banks

• Loss of revenue through send-out testing

• Large reference laboratories

Physician office laboratories• Near patient testing• Direct patient interaction• Able to implement change rapidly

• Mount Kisco Medical Group

• Digestive Health Associates of Texas

• Supplementary revenue• Outcomes based

medicine• Connected health

• Falling physician fees• Employment by hospitals• Retail clinics• Laboratory oversight


144

Able to implement change rapidly Associates of Texas


Testing volume is expected to rise considerably in 2014 in response to newly insured patientsseeking testing and treatment under the ACA.

9%100

Clinical Laboratory Market Revenue Forecast, 2009–2017, USCAGR = 5.7%

5%6%7%8%

60708090

Rat

e (%

)

$Bill

ion)

2%3%4%5%

20304050

Gro

wth

R

Rev

enue

($

2009 2010 2011 2012 2013 2014 2015 2016 2017Revenue 58.9 61.5 63.9 66.6 70.3 75.8 80.0 84.6 89.3G th R t 4 4% 3 9% 4 3% 5 5% 7 8% 5 5% 5 8% 5 5%

0%1%

010


145

Growth Rate 4.4% 3.9% 4.3% 5.5% 7.8% 5.5% 5.8% 5.5%Year


National Health National Health Percent of National National

Clinical Laboratory Market: Forecast Model (US), 2011

Expenditure ($Billion)

Expenditure Growth Rate

(%)

NHE that is Diagnostic Testing (%)

Expenditure on Diagnostic

Testing ($Billion)

Expenditure on Diagnostic

Testing Growth Rate (%)

2009 2,486.3 - 2.4 58.9 -

2010 2,584.2 3.9 2.4 61.5 4.4

2011 2,708.4 4.8 2.4 63.9 3.9

2012 2,823.9 4.3 2.4 66.6 4.3

2013 2,980.4 5.5 2.4 70.3 5.5

2014 3,227.4 8.3 2.4 75.8 7.8

2015 3,417.9 5.9 2.3 80.0 5.5

2016 3,632.0 6.3 2.3 84.6 5.8

2017 3,849.5 6.0 2.3 89.3 5.5


146


Medicaid will be paying a greater percentage of the nation’s laboratory testing, howevertypically reimburses at lower rates than Medicare and private payers.

100%

Clinical Laboratory Market Percent Revenue Forecast by Payment SourceUnited States, 2009-2017

40%

60%

80%

even

ue (%

)

0%

20%

2009 2010 2011 2012 2013 2014 2015 2016 2017Other Third Party Payers 16 9 16 7 16 7 16 9 17 0 16 3 16 3 16 4 16 6

Re

Other Third Party Payers 16.9 16.7 16.7 16.9 17.0 16.3 16.3 16.4 16.6Other Health Insurance Programs 3.6 3.9 4.0 4.1 4.2 4.2 4.2 4.1 3.9Medicaid 15.0 15.5 15.8 16.2 16.4 18.2 18.5 18.9 19.0Medicare 20.2 20.3 20.5 20.0 20.1 19.7 19.5 19.5 19.5Private Health Insurance 32.2 31.8 31.4 31.3 31.1 31.4 31.5 31.4 31.2


147

Out-of-Pocket Payments 12.0 11.8 11.5 11.4 11.2 10.2 10.0 9.7 9.8Year


Chemistry and microbiology tests are over half of the total laboratory test volume.

Antibacterial or

Other*9.0 %

Percent of Laboratory Test Volume by SpecialtyClinical Laboratory Market: US, 2011

Chemistry29.9 %

Serology

Coagulation3.4 %

Antibacterial or Antiviral susceptibility

2.4 %

Allergy

Urinalysis5.0 %

Serology4.4 %

Microbiology21.6 %

Hematology11.6 %

Drug levels & Toxicity6.7 %

Allergy6.0 %


148


Immunochemistry, self-monitoring blood glucose, and point of care testing are the top 3largest IVD segments.


149


Several testing, disease, budgetary, and regulatory factors play into the patient care market.


150



Desired Changes to Purchasing Experience, Hospitals and Clinical Laboratories, Global, 2013


eed

of

s

A more standardized approach to the Terms and Conditions that are routinely negotiated in the purchase contracts.Ability to purchase direct from manufacturers instead of middle man. Contracts. Delivery time is a problem at times. Especially in products [that] are backordered. Example Petri dishes through our primary vendor were backordered. It was difficult to get petri dishes from another vendor through our hospital. A lot of red tape in setting up new vendors.

ase

and

Spe

Proc

ess backordered. It was difficult to get petri dishes from another vendor through our hospital. A lot of red tape in setting up new vendors.

For companies that deliver a variety of products clear invoices that reflect a specific order not all orders placed within a time frame. Ability to customize the orders to reflect what department and who is ordering. Have all manufacturers offer on-line ordering as this is efficient. I know cost, delivery time, availability, etc. immediately. I wish purchasing on contract had at least 2 options rather than a usual sole source. Ordering directly from the company instead of ordering through a supplier. Quick orderingE Quick ordering.Sometimes quicker shipment.Timely notification of product availability and quality issues.

rnal

ce

ss

ues

All our purchasing goes through the purchasing department, we can not order directly. Not have to go through our purchasing department. Go directly to the vendor and avoid the middle man. Ordering would be faster if I could order directly from suppliers rather than through our purchasing department. P h di t d l b d t

Inte

rPr

oc Issu Purchase according to needs only vs budget.

The negatives that I have experienced have not been generated by the manufacturers but with[in] my own organization. The corporation drags [its] feet when making decisions about instrument purchases. More authority




Desired Changes to Purchasing Experience, Hospitals and Clinical Laboratories, Global, 2013


ricin

g

Best equipment at best price with best after sales service. Better able to cross compare like items against price and quality.Change policies regarding shipping costs. These can be so complex with some companies that it is difficult to determine your overall cost of the product. Full pricing catalogues available online.

Pr

Full pricing catalogues available online. I would like to see a negation of the pricing increasing by vendors during a contract period or even during the renewal of a contract period. Lower cost of supplies.

and

r Inf

o Fabricants and/or distributors must have in the web complete catalogs with price, presentation, instructions, and EXPIRATION DATES of all his products. More transparency

Mor

e B

ette

r More transparency.Need more information available from websites. No more white papers! The vendor evaluation and customer services need to be improved, The technical knowledge needs to be looked at.I would expect to use instruments with touch screen services.


Frost & Sullivan Research Team

Project Manager

Christi BirdSenior Industry AnalystSenior Industry AnalystHealthcare Research Group

(1) [email protected]@

Customer Research Analyst

Diana HerreraIndustry AnalystCustomer Research

57 1 [email protected]

153

Documents

2013 Annual Report Forecast and Analysis of the Laboratory ... Annual Report Forecast- Frost... · Total Market for Laboratory Products: Overview Market Overview The global laboratory