I used a lot of Millipore's (NYSE:MIL) prep kits and filters back when I was doing biological research. But for all my fond memories of building miniature nitrocellulose filter bonfires, liking this company doesn't guarantee I'll like its stock.
Fourth-quarter results were fairly likable, though. Sales were up 14% as reported, and up 15% organically and in constant currency. The larger Bioprocess business led growth (sales up 24%), though Bioscience was no slouch (up 11%). Margins improved at both the gross and operating line, and reported adjusted net income was 30% higher year over year.
Millipore is still in the midst of a corporate metamorphosis. As the (relatively) new CEO said, it is trying to transform from a "solid company" to a "leading franchise" in biosciences. To that end, Millipore has been restructured into two units, roughly two-thirds of the top execs are in new or revised positions, and the company has focused on launching new products and services and making strategic acquisitions. Millipore's alliance with Gen-Probe (NASDAQ:GPRO) suggests that it's also established a middle ground for when it can't create a new product by itself or buy a company outright.
At the risk of oversimplification, Millipore is now a play on global growth in life sciences and biosciences R&D. For example, the company saw strong growth from businesses tied to monoclonal antibodies, recombinant proteins, and vaccines. These are major areas of clinical research interest, and often purification- and filtration-intensive work. As long as companies like Protein Design Labs (NASDAQ:PDLI), Amgen (NASDAQ:AMGN), or GlaxoSmithKline (NYSE:GSK) are looking for blockbusters, they'll need a lot of Millipore's building blocks (supplies, equipment, etc.).
That's a fine story, but how does it play with competitors like Qiagen (NASDAQ:QGEN) or Sigma-Aldrich (NASDAQ:SIAL)? While I think Millipore has ample competition to grow in this industry, its valuation is more problematic. Simply put, they must do very well simply to justify the current stock price, let alone grow in the future. As optimistic as I may be about the company, I'd rather seek stocks with less of their future performance already baked into the price.
For more scientific Foolishness:
Protein Design Labs is a Motley Fool Rule Breakers recommendation. GlaxoSmithKline is a Motley Fool Income Investor recommendation.
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
