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Brooks Automation Strives for Life Sciences Leadership

Wise business moves aren’t always recognized immediately, but for Brooks Automation, divesting its semiconductor cryogenics business to Edward Group, an affiliate of Atlas Copco, for $675M in cash delivered a big same-day reward: an immediate pop in its share price of more than 30%. The company has said it plans to use the influx of cash to spur its fast-growing life sciences business. The notable bump in price was just more good news that highlighted the company’s stunning performance overall. Brooks Automation stock is up 49% YTD (2018) and has nearly tripled in the past two years at +189%, making it one of the top performance leaders of the ROBO Global Robotics & Automation Index.

Brooks made its name as one the world’s top suppliers of automation equipment for the semiconductor industry. But times are changing, and investors are likely to see a new level of growth as a result. The company began in 1978, offering automation, vacuum, and instrumentation solutions for the semiconductor manufacturing industry. While the company is not walking away from its roots, it is now focused on taking advantage of one of the most interesting and fastest growing segments of the automation market: sample lifecycle management solutions for the life sciences industry.

The transition to life sciences began seven years ago when the Brooks team first recognized the value of its automation and cryogenic solutions to researchers. They also saw that applying these core competencies to this underserved market had the potential to significantly grow business. Brooks quickly turned this vision into reality, creating a global one-stop-shop for cryogenic storage and management using robotics and automation via a series of acquisitions. Brooks acquired RTS Life Sciences in 2011—its first major step in becoming a global leader in automated sample storage systems.

It didn’t stop there. To continue to strengthen its life sciences offerings, Brooks has acquired a total of 10 strategic businesses in the past 5 years, including Nexus Biosystems Inc., a leading innovator in biobanking and compound sample management; FluidX, a leader in 2D tube technology, consumable products, and instrumentation designed to protect biological samples; and BioStorage Technologies, Inc., a leader in comprehensive sample lifecycle management of biological samples. Its 2017 acquisition of UK-based 4titude, Ltd., a manufacturer of scientific consumables for biological sample materials, expanded its reach into genomic and DNA analytical applications using Polymerase Chain Reaction (PCR) plates, seals, and related bench-top instrumentation.

These key acquisitions combined with the company’s well established in-house expertise has quickly created a global one-stop-shop for cryogenic storage and management using robots and automation. In 2017, the company’s life sciences segment revenue grew 39% to $149M, propelled by 27% organic growth—the “fastest in the industry” according to certain industry analysts. Company management is already projecting the business to hit $200M in FY’18. And while life sciences accounted for just 25% of total revenue, it is the fastest growing segment of its business, with that percentage expected to climb to 50% within the next few years. Within life sciences, half of the current revenue is recurring, coming directly from its steadily expanding storage business, which includes more than 30 million samples in on-site freezers that are charged on a per month/per sample basis. 40% of current revenue comes from the pharmaceutical industry, with the remainder coming from other sectors.

It seems Brooks’ intense focus on life sciences couldn’t have been better timed. What makes Brooks unique is its comprehensive end-to-end solution for sample management that focuses on biological samples used in research. This type of comprehensive lifecycle management of samples is vital to the success of some of today’s most exciting research like cell-based therapy, regenerative medicines, genomic analysis, and more. Brooks delivers customized solutions to safely handle any stage of a research sample’s lifespan—including sample planning, collection, transport, processing, storage, analytics, retrieval, and disposal—and its solutions specifically target the growing demand for exceptional quality control from clinical labs.

Because its solutions are designed to address the complete lifecycle of sample management, Brooks’ menu of solutions is vast. Automated, modular cryogenic temperature freezers that can store a million samples. Robots that efficiently transport samples from lab to storage, including into cryogenic freezers where temperatures dip below -150° Celsius to perfectly preserve the cell structure of the sample. Infrastructure solutions for offsite sample management. On-site equipment sales and installation. Hospitals, research institutes, biopharmaceutical companies, and biobanks rely on these solutions to tackle the complex task of storing research samples, and Brooks has emerged at the forefront of the industry by delivering these specialty services offerings.

To meet growing customer demand, Brooks has locations worldwide, including in California, the UK, Singapore, Germany, and China. On the strategic relationship side, the company has partnered with cancer research firm Grail (a division of Illumina) and life sciences data management firm Verily (a division of Alphabet, formerly Google Life Sciences). Together, these businesses are working to add intelligence to the genomic and sequencing services equation.

As the company’s transition to life sciences continues, expanding its margins will be a key success driver. Luckily, the fundamentals have been in place for decades. While Brooks’ shift to life sciences has been focused on strategic acquisitions, the team is consistently thoughtful about its deployment of capital. Like its solutions, every move is designed to create a predictable outcome, and Brooks is carefully adding the tools and technologies it needs to continue to grow its life sciences business and become more profitable.

And yet life sciences isn’t the company’s only business. Far from it. Brooks continues to innovate and advance existing technologies within its flagship solutions portfolio for semiconductor manufacturers, including adding more processes under vacuum, and working to improve contamination control for its large and stable semiconductor customer base. The company has also been actively fine-tuning this side of the business with a number of key acquisitions. These additions to its existing solutions portfolio helped boost the company’s semiconductor sector revenue by 20% in 2017—a level of growth more commonly seen by industry newcomers. Brooks, however, has been in the business for 40 years and counting. The company is clearly in the space to stay.

That said, there is no doubt that the life sciences sector is set to be a fundamental building block for the company’s future. If history does indeed repeat itself, Brooks is on track to win yet another title for “world’s top provider”— this time as the one-stop-shop for sample lifecycle management solutions. The race is on.

By Lisa Chai, Senior Research Analyst, ROBO Global

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