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Strong Revenues Boost Biophotonics Cos.’ R&D Spending in First Half

BioPhotonics
Oct 2016
JAMES SCHLETT, EDITOR, james.schlett@photonics.com

Amid a surge in revenues, R&D spending at biophotonics-related companies also rose heartily during the first half of their 2016 fiscal years, according to a Photonics Media analysis of 20 publicly traded companies’ quarterly financial reports.

During their fiscal year’s first six months, which had end dates ranging from Dec. 26 to July 3, the 20 companies recorded an aggregate $35.2 billion in revenues, up 14.1 percent from the same period a year earlier. This robust growth in revenues helped drive the 20-company total R&D expense up by 10.2 percent to $2.2 billion (Figure 1).

The Pipeline’s 20 biophotonics-related companies together saw during the first two quarters of fiscal 2016 a 10.2 percent increase in R&D spending to a total $2.2 billion, and their average R&D percentage inched up to 9.46 percent.

Figure 1.
The Pipeline’s 20 biophotonics-related companies together saw during the first two quarters of fiscal 2016 a 10.2 percent increase in R&D spending to a total $2.2 billion, and their average R&D percentage inched up to 9.46 percent.

On average, the 20 companies devoted 9.46 percent of their revenues to R&D during the first half of fiscal 2016, up 0.05 percentage points from the same period a year earlier. This metric, known as the R&D percentage, is important because it is indicative of management’s commitment to developing the next generation of products or finding new applications for existing technology. For example, at 21.9 percent, Key Technology reported one of The Pipeline’s largest increases in R&D spending during its first half, attributable in part to support of the launch of its VERYX platform, which uses high-resolution cameras and laser sensors to sort fruits, vegetable and other food products.

Driving down the R&D expense total were declines at the mid- and large-cap companies Bruker and Agilent Technologies, as well at several small-cap companies: Rofin-Sinar Technologies, Oclaro, Lumentum, II-VI and Lightpath Technologies. Rofin-Sinar President and CEO Thomas Merk noted that his company’s second-quarter results were “significantly affected” by the announced proposed merger with Coherent Inc.

Lightpath’s R&D expense decline of 54.4 percent, or $377,400, was primarily attributable to a “decrease in wages as a result of the reclassification to SG&A [selling, general and administrative expenses] in connection with our transition to a technical sales process,” the company’s quarterly (10-Q) report states. However, Lightpath President and CEO Jim Gaynor said, “We have also continued to diversify our business by developing new applications for our products in markets such as digital imaging, medical instruments and fiber laser delivery systems, which are bolstered by our more traditional applications in telecommunications, industrial equipment and weapon sights.” Notably, Lightpath reported The Pipeline’s second-largest increase in revenues for the first half: 41.5 percent to $8.4 billion.

The overall R&D spending picture appears positive, with 12 of the 20 companies seeing their R&D expense increase during the first half, though only seven of them did so to an extent that translated into higher R&D percentages (see accompanying table). The Pipeline’s star performers for the first half — recording positive growth in revenues, R&D expense and R&D percentage — were Bio-Rad Laboratories, FEI, MKS Instruments, which recently acquired Newport, and PerkinElmer.


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