Biophotonics Cos.’ R&D Spending Strong Out of the Gate in FY2016

JAMES SCHLETT, EDITOR, james.schlett@photonics.com

Research and development (R&D) spending at many biophotonics-related companies grew at a robust pace during the first three months of their 2016 fiscal years, though a key R&D metric slipped slightly amid even stronger revenue growth, according to a Photonics Media analysis of 20 publicly traded companies’ quarterly financial reports.

During their first quarters, which had end dates ranging from Sept. 26, 2015, to April 3, 2016, the 20 companies reported a total of $17.1 billion in revenues, up 13.3 percent from the previous year. However, during the same period, R&D expenses rose by 8.8 percent to $1.09 billion. That meant the average R&D percentage — a key ratio of revenues over R&D expense that indicates management’s pursuit of new products or new applications of current products — actually declined to 9.5 percent during the first quarter from 9.7 percent a year earlier (Figure 1).

Figure 1. The Pipeline’s 20 biophotonics-related companies together saw an 8.8 percent increase in R&D spending to $1.09 billion during the first three months of their 2016 fiscal years, but their average R&D percentage declined 20 basis points to 9.5 percent.

Although 11 companies experienced first-quarter R&D expense growth, when compared to the same period of fiscal 2015, only nine of them did so to an extent that would yield a higher R&D percentage (Table 1). Several companies, including Agilent Technologies Inc., Bruker Corp. and Coherent Inc., attributed the lower R&D expenses in part to the favorable impacts of foreign currency exchange rates.

Out of the 20 companies, II-VI Inc., FEI Co. and PerkinElmer Inc. were the only ones to experience positive growth in their revenues, R&D expense and R&D percentage. II-VI, for example, attributed its 16.1 percent increase in R&D expense to its efforts to develop large volumes of vertical cavity surface emitting lasers (VCSELs). At 45 percent, Becton, Dickinson & Co. reported the largest year-over quarterly increase in R&D expense, driven largely by its acquisition of Carefusion Corp. Veeco Instruments Inc. had the largest increase R&D percentage — 9.4 percentage points to 28.3 percent — attributable to, among other things, the increased use of third-party contractors for the development of lighting, display and electronics market products.