30 mars, 2005 19:43

Drug Instrument Maker Sector Tumbles

Wed Mar 30, 2005 12:20 PM ET

By Kim Dixon

CHICAGO - Shares of Waters Corp., a maker of instruments for drug research, fell 21 percent on Wednesday, bringing rivals down with it, a day after the company said quarterly earnings will miss its prior forecast.

The company, shares of which were the biggest percentage loser on the NYSE, blamed delayed orders from large pharmaceutical accounts and weakness in its chemical business for the expected shortfall.

Rivals Varian Medical Systems, PerkinElmer Inc. and Applied Biosystems Group, among others, also fell, on worries that the trend is sector wide.

Lehman Brothers on Wednesday cut its rating on the company to "equal weight" from "overweight," saying the shortfall may also be due to currency valuations or repatriation of cash overseas, which could cause some drugmakers to put off capital spending.

"Would this mean they'd rather reinvest the cash into U.S. businesses rather than buy capital goods for subsidiaries and (research and development) overseas?," Lehman analyst Tony Butler said in a note to clients. "Nobody knows, but if this scenario were to come to fruition, it would be negative" for the entire sector.

Milford, Massachusetts-based Waters now expects first-quarter earnings of 34 cents to 37 cents per share, down from a prior view of 44 cents.

Waters makes instruments used by drugmakers for quality control and drug discovery. It also makes tools to analyze the molecular structure of compounds, used by chemical companies like Dow Chemical Co. and DuPont Co..

Merrill Lynch also downgraded the company to neutral, but analyst Darryl Pardi said he believes the woes are unique to Waters, based on talks with peer suppliers and macro indicators.

Waters also cut its view for first-quarter sales growth to between 3 percent and 4 percent, compared with an earlier estimate of 13 percent.

Its shares fell $9.70 to $36.56 in early afternoon trade on the New York Stock Exchange, after dropping to $35.88, their lowest level in more than a year.