HPLC Market Analysis 2006: Trends, Growth, and Opportunities

1. 2006 HPLC Market Analysis

2. Overall Market • 180,000 operating systems worldwide • This figure is growing by ~6% every year • Total revenue in 2006 was $3225M* • To put this in perspective – single Quad MS – $136M up 10% from 2005. • * All figures are approximate and in USD

3. HPLC Product Segment • The $3225M can be broken down into: • Service $510M • Aftermarket $1504M • New systems $1220M • (Aftermarket constitutes consumables, computers, post sale detectors, cabling and software upgrades)

4. New System Breakdown • The largest number of new LC systems ordered is in the conventional HPLC – $764M – 920-LC target segment • Fast LC/UPLC – $113M • GPC – $52M • Amino Acid analysis – $35M • Semi-Prep – $180M • In short the target areas for the 920-LC and 940-LC are aimed at 85% of the combined HPLC market

5. Geographical Distribution of LC Systems • 180,000 LC systems worldwide • North America – 38%, • Europe – 31% • Japan – 14% • Asia and Latin America - 11% • ROW – 6%

6. Installed Base by Markets • Pharma – 45,000 systems • Government and Academia – 45,000 systems • Chemical/Agriculture and food – 25,000 systems • Independent test/CRO labs – 15,000 systems • Biotech – 15,000 systems • Preparative systems – 31,000

7. Average Cost of Systems • Average system price is steady at ~$45-50K • This includes, gradient pump, autosampler, absorbance detector, data system and service charges • Basic systems ~$30K • UPLC systems ~$80-90K • Preparative systems - ~$40-50K

8. Market Growth • The HPLC market grew by 6% last year, • In 2006 the number of retired systems was estimated to be ~13,275 • The number of new systems sold worldwide was 23,000 • Indicates a large proportion of the business is available with existing customers

9. Demand by Industry • Pharma market – 28% of sales, continuing to grow worldwide and rapidly in Asia • Independent labs and contract research organisations constitute 10% of market and continue to grow at 6% • Academia and government sectors – 25% of sales • Biotech – 10% and continues to grow rapidly

10. Demand by Function • Research and Development – 37% of market – driven by performance and sensitivity • Quality control – pharma industry – 31% of market – driven by reliability and low cost • Analytical services – 18% – environmental analyses • method development – 10% of market – driven by performance and productivity gains • Teaching – 4% of market – driven by low costs, robustness

11. What Type of Systems? • 94% of systems have an absorbance detector – almost half are PDA • 5-7% have RI, ELSD, Fluorescence • 95% of systems had an autosampler • 40% were purchased with a data system • 64% were purchased with service contract

12. Desired Areas of Improvement • Customer survey revealed the most common areas of improvement are: • Analysis software – 44% • Column switching – 31% • System control – 25% • Autosampler – 18% • Cycle time – 14% • Fraction collection – 14% • Set up – 11% • Calibration – 10%

13. Good News • Analysis Software – NEW Galaxie version and system driver • Column Switching – NEW pre-plumbed, software integrated, automated valves • System Control – NEW system interface – one page, one place system control • Autosampler – NEW autosampler with better precision, carry over and speed • Cycle time – NEW autosampler and control with preplumbing for fast, reliable cycles • Fraction collection – NEW collector and software driver –“real time” and reliable • Set-up – NEW arrives set up, single system driver pre-configured – fast installs • Calibration –IMS to aid all calibration parameters –Analytical –Galaxie is very strong

14. Conclusion of the 920-LC and 940-LC • We have systems that the market is asking for. • Targeted and appropriate for the larger sections of the market. • Present Varian as a supplier for all the software, services, consumables and associated technologies to be a viable, premium level, vendor.