Facing a challenging macroeconomic environment, most leading international publicly held life science and analytical instrument companies reported sales declines in the mid-single digits for the fourth quarter of 2023 and drops in the low single-digits for the full year—all against tough comparisons of strong growth from the previous year. In short, 2023 was a year when the pandemic tailwinds became headwinds.
Bruker stood out as an exception, reporting organic revenue gains around 15% for both the quarter and full year. The company saw organic growth in the mid teens in all divisions, with NMR growth across biopharma, academia and government, industrial research, and applied markets and mass spectrometry (MS) and optical spectroscopy gains driven by life sciences.
Shimadzu was also an exception. Organic revenue grew 6% for the quarter for its analytical instrumentation business, with sales of “key models”—liquid and gas chromatography (LC and GC) and MS— up 12% in a fourth consecutive quarter of double-digit growth, driven mainly from pharmaceutical and academia for LC, by academia for MS, and by new energy development for GC. Shimadzu’s spectroscopy sales were down 1%, and the company felt the post-pandemic decline in MALDI and PCR.
Pharma/Biopharma and China—the Biggest Weights on Growth
The biggest sector drag on growth was the bio/pharmaceutical industry, with sales falling in the mid-single digits as intense pandemic-era investments normalized following robust growth a year ago.
Declines in China weighed the most heavily on this sector. For example, Agilent’s biopharmaceutical sales for the quarter fell 12%, versus 11% growth a year ago, but ex-China, the sector grew by low single digits. Similarly, full-year China revenues for Waters, heavily weighted in pharma, fell more than 20%, creating a 5% headwind to total growth; ex-China, Waters’s sales grew by high-single-digits.
Shimadzu was able to balance pharma and CRO declines in China with MS sales for academic and clinical use. The company also sees positive future signs in traditional Chinese medicine, the preparation of the 2025 edition of the Chinese pharmacopeia, and new regulations requiring clinical use of MS in hospitals of a certain scale.
On a positive note, stabilization and even signs of growth are seen in the emerging biotech sector, which has been facing a challenging funding market.
PFAS and Batteries Propel Applied Markets
Applied markets held steady in the quarter and overall for 2023, with companies expressing optimism for future growth driven by PFAS analysis and renewable energies, particularly batteries. Food and environmental applications account for about 11% of the laboratory instrumentation market, while industrial applications (chemicals, energy, plastics, metals/minerals, etc.) account for about 16%.
Shimadzu saw growth in both GC and non-destructive testing for new energy development, particularly in Japan and China. Battery applications revenues at Waters are now ten times above 2019 levels. Thermo Fisher, which showed low single-digit growth in industrial and applied markets for both the quarter and the year, opened a customer experience center for battery manufacturing in Seoul, Korea.
New regulations worldwide continue to drive PFAS testing, currently focused on water but expanding to food, tissue samples, soil, sewage, and industrial effluent streams. Waters expects PFAS testing to contribute an additional 30 basis points to revenue growth for the foreseeable future.
Veralto, the environmental and applied solutions company spun out of Danaher last year, reported 2% core sales growth for its water quality business versus 9.5% a year ago, with Chinese municipal budgets continuing to be impacted by government funding cuts; full year sales were up 5%.
Academic and government sales, which generally contribute about 30% of the lab market, were positive. The stability of academic funding and government laboratory activity were reflected in Agilent’s and Thermo Fisher’s growth in the low- to mid-single digits for the academic and government markets for the quarter and, in Thermo’s case, high-single digits for the full year. For Waters, this sector fell 9% in the quarter, dragged down by a 40% decline in China after government stimulus ended in the second quarter, but grew by mid-teens for the year.
Challenges in Life Sciences Research and Diagnostics
As in biopharma, producing growth in life sciences research and diagnostics compared to strong numbers from a year ago was also a challenge.
Core revenue for Agilent’s Diagnostics and Genomics Group fell 6% while the Life Sciences and Applied Markets Group dropped 11%, against 10% growth last year. At Thermo Fisher, fourth quarter revenue for diagnostics and healthcare declined in the high teens and was 30% lower for the full year. At Danaher, life sciences core revenue was down 4%, and the life sciences instruments business declined mid-single digits.
Danaher’s clinical diagnostics business, however, delivered high-single-digit core revenue growth, led by Beckman Coulter Diagnostics with double-digit gains in both instruments and consumables.
Illumina also grew Q4 core revenue, at 4%, with 352 shipments of the new NovaSeq X high-throughput sequencing system. Annual revenues were flat, however, amid the general constraints affecting the laboratory space overall.
Bruker, as outlined above, stood out with large gains.
2024 Outlook: Expecting a Tough Year Ahead
Looking ahead to 2024, the industry expects another challenging year. Sales will start slowly as customers continue to exhibit spending caution, followed by slow normalization in the second half of the year as budgets open up and prior-year comparisons become easier, particularly in China, given high first-half growth numbers last year driven by the China loan program. Post-pandemic biopharma destocking conditions should improve, with the drawing down happening fastest in Western Europe and North America.
Overall, companies are forecasting organic sales growth in 2024 in the very low-single digits, but it is unclear whether that will be on the negative or positive side. Bruker, an exception, anticipates organic growth of 5% to 7% for 2024.