By Mark Maurer

Revvity, the former life-sciences and diagnostics business of the company previously known as PerkinElmer, is stepping up investments in software and research as it works to shape its new identity more than a year after a major split and rebranding.

The Waltham, Mass.-based provider of health science technologies and services is increasing capital spending in the midsingle-digit range this year with plans to significantly boost investments over the next several years, Chief Financial Officer Max Krakowiak said.

The spending efforts are the latest steps to develop a new iteration of the company. For years, life-sciences testing company PerkinElmer was evenly divided into three businesses: life sciences, diagnostics and enterprise services. In March 2023, PerkinElmer sold the applied science, food and enterprise services operations to private-equity firm New Mountain Capital for $2.45 billion. The remaining company reaped about $2.13 billion in cash proceeds and renamed itself Revvity that May. The PerkinElmer name lives on as a privately held part of New Mountain's portfolio.

"We are focused on turning this into the company we want it to be as Revvity," Krakowiak said. "We have to shed the PerkinElmer legacy."

The sale of a third of its business is allowing the company to be more nimble and have more focused discussions on capital allocation around life sciences and diagnostics, Krakowiak said. "If you just have a lot less things to review in terms of capital allocation and markets to understand, you can be quicker in your decision-making," he said.

One key area of greater investment has aimed to strengthen and boost efficiencies in the company's internal operations. Revvity in recent weeks launched a new e-commerce platform on which employees can sell products. The company also invested in some of its supply-chain facilities to optimize its freight and logistics and consolidate its footprint.

The net cash Revvity used for capex such as manufacturing and software totaled $81.4 million in 2023, down 5% from the previous year.

Revvity expects its research and development costs as a percentage of revenue to increase, in part due to the skilled employees it gained through recent acquisitions, Krakowiak said. "We now have the opportunity to invest organically at a higher clip than we have historically," he said.

The company's R&D expenses totaled $48.1 million for the quarter ended June 30, down 16% from the prior-year period. Pharma companies generally have sought to cut costs including R&D expenses as they contend with a slowdown in sales because of the lower demand from pharma clients.

Amid the pullback in demand in some areas, Revvity needs to keep investing in new products and manufacturing capacity to remain relevant to customers, said Julie Utterback, a senior equity analyst at Morningstar's equity research arm. "Revvity's growth opportunities are higher than the broad industry because of its investments aimed at solving some of these unmet needs," Utterback said.

Life sciences and diagnostics each comprise roughly half of Revvity's revenue. More than 60% of its revenue is derived from products and services that weren't part of its portfolio five years ago, the company said. In that time, Revvity and its previous iteration collectively acquired 11 companies in the past five years, largely in 2020 and 2021. That was mainly driven by strategies to expand beyond reproductive health into more specialized diagnostics areas.

But now, Revvity is becoming more selective about the acquisitions it makes, Krakowiak said. The company is still targeting companies with large molecule capabilities in the preclinical research space, along with those focused on antibodies, spatial biology and other high-growth areas of preclinical research, Krakowiak said.

Revvity's diagnostic work centers on newborn screening and testing of rare diseases, among other specialty areas. That's in contrast with pharma giants such as Roche and Abbott Laboratories that specialize in more general testing areas such as respiratory testing and large-panel screening for infectious diseases.

Krakowiak said there's a "ton of opportunity" to offer newborn screenings in more countries through acquisitions. The company in recent years expanded the offering of those services in countries such as Egypt, Indonesia and the Philippines. "Africa and India [in Asia] continue to be largely untapped," he said.

The company's debt, including more than $3 billion in long-term debt, will limit the amount of flexibility it has for deals. But over time, it will likely continue to acquire smaller businesses, said Vijay Kumar, a senior managing director at Evercore ISI, the research arm of the financial-services firm.

"The bid-ask spread between buyers and sellers is generally wide when end markets are in a flux," Kumar said.

To further escape the shadow of its past self, Revvity wants to continue educating investors on the basics of the business, such as its services, end markets and how it differs from peers. The company plans to hold an investor day in November that will be "very much a Revvity 101-type discussion," he said.

"Truthfully, that's probably been the most challenging to really change, just given the fact that they were very familiar with PerkinElmer," Krakowiak said.

Write to Mark Maurer at mark.maurer@wsj.com

(END) Dow Jones Newswires

October 15, 2024 06:00 ET (10:00 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.