Prior Fiscal: $6.25 Billion
Percentage Change: +4.95%
No. of Employees: 60,000 (total)
Global Headquarters: Washington, D.C.
Thomas P. Joyce Jr., President and CEO
Matthew R. McGrew, Exec. VP and Chief Financial Officer
Brian W. Ellis, Sr. VP, General Counsel, and Chief Compliance Officer
William H. King, Sr. VP, Strategic Development
Robert S. Lutz, Sr. VP and Chief Accounting Officer
Daniel A. Raskas, Sr. VP, Corporate Development
Julie Sawyer Montgomery, President, Beckman Coulter Diagnostics
Matt Turner, President, Ormco
Christophe Duret, President, HemoCue
Markus Lusser, President, Leica Microsystems
Susan Murphy, President, Molecular Devices
Jennifer Honeycutt, President, Pall
Inese Lowenstein, President, SCIEX
Patrik Eriksson, President, Nobel Biocare
Success is hardly ever attained easily.
It usually is hard fought, obtained through great sacrifice, risk, hard work, and failure (the latter being an “essential prerequisite” for achievement, according to researchers).
Success almost never arrives unescorted, either—it typically is ushered in by any number of attendants: determination, perseverance, faith, honesty, flexibility, loyalty, courage, etc.
Luck can play a part too, though many of the world’s most successful people scoff at such a suggestion. They believe there is a “science” to luck—i.e., that good fortune occurs not through serendipity but rather by invitation or permission.
“When you ask highly successful people for their best success story you almost never hear a tale of a step-by-step plan executed to perfection,” August Turak, one of MTV’s founding members, wrote in a Forbes column last fall. “Instead serendipity or what seems like just pure dumb luck always seems to play the starring role. I see that same serendipitous thread in my own life. But as contradictory as it may sound, I also believe there is a bit of ‘science’ to serendipity. In other words, being a lucky person is not just a function of being lucky. While luck can never be willed or forced, it can be ‘invited’ and ‘allowed’...”
Maybe. Or maybe not.
Maybe luck has nothing at all to do with success.
Thomas P. Joyce Jr. would likely support this theory as head of Danaher Corporation, a multinational science and technology conglomerate that claims to have developed a “proven system” for achieving success through continuous improvement, quality management, and accountability.
ANALYST INSIGHTS: After adding to its Life Sciences Business in the past year through the acquisition of GE’s Life Sciences Business Unit, expect Danaher to continue to “pour gas” in this segment of their business through both internal growth efforts and bolt-on M&A. It’s rare that Danaher stays silent on the sidelines and the next year will be no different.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
“Success at Danaher doesn’t happen by accident. We have a proven system for achieving it,” the company states on its website. “We call it the Danaher Business System (DBS), and it drives every aspect of our culture and performance.”
Danaher’s “proven” method for securing success dates back virtually to its mid-1980s founding. Faced with intense competition, the young company launched a process improvement effort based on Lean manufacturing principles (enhancing efficiency, effectiveness, and profitability).
As it grew, Danaher augmented its continuous improvement program with homegrown approaches to innovation, commercialization, and leadership development that involved all levels of management and were led directly by the company’s successive CEOs.
Today, more than three decades after its birth, the DBS continues to be the focus of Danaher’s long-term growth strategy. “The Danaher Business System remains the driving force in our pursuit of a better, stronger Danaher. DBS is our core—it’s who we are, and how we do what we do,” Joyce, Danaher’s president and CEO, said in the company’s 2019 annual report. “At the heart of DBS is kaizen, ‘continuous improvement.’ We challenge ourselves to be better every day, and the tools and processes of DBS are uniquely impactful in this endeavor. The team’s daily commitment to DBS and our Core Values is what differentiates us. DBS is our competitive advantage...”
Indeed, DBS has given Danaher quite an advantage over the years: Since its 1984 inception, the company has consistently beat the S&P 500 in total shareholder return (TSR). Its 35-year TSR is 100,000 percent, a 25-fold increase over the 4,000 percent TSR posted by the S&P 500 during that period, and Danaher’s TSR since 2015 is double that of the well-known stock index (144 percent). In addition, Danaher claims to stand alone among publicly traded companies in outperforming the S&P 500 in every five-year period since 1984.
No luck involved there.
The DBS advantage maintained its edge last year too, increasing sales, capital investment returns, and operating profit margins for both Danaher and many of its 24 member companies. Beckman Coulter Life Sciences and Cepheid, for example, each topped $1 billion in revenue last year (a first for both), and water quality analytics firm Hach surpassed a 20 percent return on invested capital.
“Since we acquired Beckman in 2011, the team has focused on implementing DBS Growth tools and processes to increase the cadence of innovation,” Joyce stated in the annual report. “These initiatives have been a key contributor to Beckman’s enhanced growth trajectory and market share gains—going from flat core revenue growth at the time of acquisition to mid-single digit or better core revenue growth each of the last five years. DBS...continued to be the primary driver of our strong performance in 2019.”
Luck took a back seat this time.
DBS proved to be quite the leadfoot in fiscal 2019, raising total sales 5.1 percent to $17.91 billion, expanding operating profit 7 percent to $3.26 billion, and boosting net earnings 13.5 percent to $3.01 billion. Net earnings per common share also improved, jumping 8.7 percent (basic) and 8.3 percent (diluted).
Danaher’s three business reporting segments hitched a ride on the DBS express last year to reach profitability: Environmental & Applied Solutions sales rose 1.8 percent to $4.39 billion, Diagnostics revenue swelled 4.9 percent to $6.56 billion, and Life Sciences proceeds jumped 7.4 percent to $6.95 billion. Segment operating profit improved as well, with Environmental & Applied Solutions posting a 6.4 percent increase and Life Sciences generating 13.9 percent growth.
Diagnostics operating profit rose 10 basis points, or 5.6 percent to $1.13 billion, due to higher core sales volumes, cost savings measures, service and marketing investments, and foreign currency exchange rates.
Serendipity be damned.
Any lucky break or “happy accident,” actually, was damned last year, as the DBS extended its influence into each Diagnostics product division. Acute care diagnostics sales growth, for instance, was fueled by strong demand for blood gas and immunoassay products in China, Japan, Western Europe, and North America.
Three of those four regions—China, Western Europe, and North America—helped drive core revenue growth last year in the pathology diagnostics business, though sales also benefited from increased demand for advanced staining and core histology products. The division fed that demand with the U.S. Food and Drug Administration (FDA) approval of the Aperio AT2 DX System, used for clinical diagnosis.
Marketed by Leica Biosystems, the Aperio AT2 System features clinical image management software for an integrated digital pathology workflow solution.
Leica Biosystems announced FDA approval of its Aperio AT2 System on the same day Cepheid revealed U.S. regulatory clearance of its Xpert CT/NG test for Chlamydia and Gonorrhea. Operating on Cepheid’s GeneXpert system, the assay enables same-day patient consultation and treatment of the two most common sexually transmitted bacterial infections in the United States. Xpert competes with Hologic’s Gen-Probe for market share.
“We are bringing to market a true next-generation molecular diagnostic product for detection of CT/NG—a test we designed from the ground up to provide accuracy, ease of use, and results availability,” Cepheid CEO John Bishop said in announcing the FDA clearance in late May 2019. “We expect this diagnostic test to deliver new levels of confidence to clinicians, in addition to enabling same-day decisions about treating their patients—the critical first step in effectively managing these epidemics.”
Cepheid’s Xpert product line underwent further diversification in early October 2019 with the FDA clearance of its BCR-ABL Ultra test for chronic myeloid leukemia (blood cell cancer). The in-vitro diagnostic, designed to be run on demand, delivers results from whole blood samples in less than three hours. The automated assay is Cepheid’s first FDA-cleared oncology application.
Cepheid’s regulatory clearances and its $1 billion sales club accession last year helped boost core revenue in Danaher’s molecular diagnostics business.
Clinical lab proceeds rose as well, driven by robust demand in China and North America for immunoassay, chemistry, and automation products; those gains, however, were partially offset by modest sales declines in Western Europe.
Danaher kept those losses to a minimum through a bevy of FDA clearances and product releases within the Beckman Coulter Diagnostics business. The new portfolio additions included:
- The fully automated hemoglobin A1c (HbA1c) Advanced assay
- The DxH 520 hematology analyzer
- The Access PCT assay
- The Early Sepsis Indicator
- The DxA 5000 total laboratory automation solution
- The DxH 690T hematology analyzer
Q1 2020 Revenue: $4.34 Billion
Q1 2019 Revenue: $4.22 Billion
Percentage Change: +2.8% (total)
Cepheid’s Xpert Xpress SARS-CoV-2, a rapid molecular diagnostic test for qualitative virus detection, received FDA emergency use authorization (EUA) on March 21—the first point-of-care assay to be awarded such designation. Designed to operate on any of Cepheid’s more than 23,000 automated GeneXpert Systems worldwide, the test boasts a 45-minute detection time.
The Sunnyvale, Calif.-based firm is now working to develop a single test to detect SARS-CoV-2, Flu A, Flu B, and RSV (respiratory syncytial virus) in time for the 2020-21 flu season. Cepheid plans to pursue the FDA’s EUA pathway for the four-in-one combination test, and is aiming for a detection time of 35 minutes. The assay will be designed for use on the company’s cartridge-based GeneXpert System, with instruments configured for either patient point-of-care or high-volume laboratory testing.
Beckman Coulter is developing assays to identify IgM (immunoglobulin M) and IgG (immunoglobulin G) antibodies to the coronavirus. The firm’s Access SARS-CoV-2 IgG antibody test won CE mark approval in mid-June and is currently commercially available in Europe. Beckman Coulter’s IgM and IgG serology assays are designed to determine whether a patient has developed an immune reaction to the coronavirus; such tests can help virologists and epidemiologists better understand individual immunity levels and health officials identify prospective vaccine candidates.
Leica Biosystems added to the COVID-19 diagnostics repository in early April with emergency regulatory clearance of its Aperio ImageScope DX Viewer for remote SARS-CoV-2 diagnosis. The product’s software enables pathologists to safely view images acquired through the Aperio AT2 DX Scanner and remotely diagnose cases. “This remote use capability will be transformative—and help alleviate the pressure that the emergence of the COVID-19 outbreak has put on healthcare facilities,” Melissa Aquino, Leica Biosystems president, said in announcing the clearance.
HemoCue, meanwhile, is repurposing scrapped pallets of plastic film originally used in microcuvette production to create head visors for front-line healthcare workers.
Finally, Pall Corporation—as part of a consortium led by the University of Oxford (England)—is scaling up the manufacturing of ChAdOx1, which has been fast-tracked as a leading COVID-19 vaccine candidate. A single dose of the investigational ChAdOx1 vaccine protected six rhesus macaques from pneumonia caused by the virus, National Institutes of Health scientists and University of Oxford collaborators reported in mid-May. ChAdOx1 has been used to develop investigational vaccines against several pathogens, including a closely related coronavirus that causes Middle East respiratory syndrome.