Beckman Coulter, Inc. History
P.O. Box 3100
Fullerton, California 92634-3100
Telephone: (714) 871-4848
Fax: (714) 773-8543
Incorporated: 1958 as Coulter Electronics, Inc.
Sales: $1.2 billion (1997)
Stock Exchanges: New York
SICs: 3841 Surgical & Medical Instruments
Beckman Coulter is ... Science Serving Humanity. We exist to advance medical science. We apply the infinite promise of biotechnology to serve the world's healthcare needs. Our mission is to be recognized as the world leader in blood cell analysis systems. Our strategy for achieving this is: We will lead in the application of emerging technologies to meet the present and future needs of worldwide customers for blood cell analysis. We will provide the best worldwide sales and customer support services. We will foster a work environment characterized by open communications, quality practices, teamwork, pride, self-development, and respect for each individual. We will remain private and independent.
Beckman Coulter, Inc. is the world leader in the design and production of devices to automatically count and analyze blood cells, a key function of the modern clinical laboratory. Many hospitals and clinics rely on Coulter Counters. In fact, company literature declares that "about 95% of all blood cell counters in use are either manufactured by Coulter or are clones. ..." Beckman Coulter also produces various reagents needed to run and maintain its machines. To assist its customers, Beckman Coulter provides a 24-hour hotline for technical assistance. These two sources give the firm significant portions of its annual revenues. With over 2,400 patents, the firm and its two founders, brothers Wallace and Joseph Coulter, Jr., are well-known for innovative technology. For example, this family firm provides monoclonal antibodies to help fight cancer cells and also an HIV test as part of its recent diversification. With subsidiaries in Canada, Asia, Europe, Africa, the Middle East, Latin America, Australia, and New Zealand, Beckman Coulter is a major international firm in the biomedical industry.
Wallace Coulter was the key person in the early history of Coulter Corporation (the name under which the company operated until early 1998). Born in 1913 in Little Rock, Arkansas, Coulter as a boy began experimenting with electricity. He pursued that interest through his high school years at Monroe, Louisiana, and as a student at Fulton, Missouri's Westminster College and at the Georgia Institute of Technology. He sold X-ray equipment for General Electric in Southeast Asia in the early 1930s, and then in 1937 he went to several nations after being forced out of China by the Japanese invasion.
In 1946 Wallace Coulter was working in Chicago, where he spent much of his spare time tinkering with electronics with his younger brother Joseph R. Coulter, Jr., who had graduated from Chicago's Illinois Institute of Technology and was working as a Motorola engineer. Working in his basement, Wallace in the late 1940s invented what became known as the Coulter Principle, a way of counting small particles in fluid. A test tube with a small pinhole was placed in a conductive solution, such as salt water, which contained the dissolved particles. A negative electrode was inserted into the tube, while a positive electrode was placed in the solution, creating an electric current. A vacuum pump drew the fluid through the pinhole, but each small particle interrupted the current and thus created a pulse. The size of the pulse indicated the size of the particle; the frequency of the pulses indicated how many particles were in the solution.
This basic discovery started automated hematology. Before Coulter Counters were developed, lab technicians had used time-consuming and somewhat unreliable manual methods to count red and white blood cells.
The Coulter brothers made and patented the first Coulter Counter Model A in 1953, with help from a federal grant. It automatically counted red blood cells in about 10 minutes. They continued to make Coulter Counters one-by-one and gradually hospitals requested more of these time-saving and accurate devices. In 1958 the Coulter brothers formed Coulter Electronics, Inc., and three years later they moved their growing business to Hialeah, Florida, next to Miami. Joseph Coulter focused on management, while Wallace worked to improve the Coulter Counter.
The Middle Years (1960--89)
Wallace Coulter's invention was recognized in 1960 when he received the John Scott Award for Scientific Achievement for discovering a concept which revolutionized not only hematology, but also other industries. With this honor, patented technology, and little competition, the firm grew rapidly in the 1960s. By 1962 it had expanded to 15 nations on five continents. In the U.S., the company benefited from general healthcare expansion after Congress passed Medicare and Medicaid during the Lyndon Johnson administration.
As part of a post-World War II trend, Coulter employees in 1970 founded the Coulter Financial Federal Credit Union. This was part of a general family atmosphere at the firm, where employees often worked for many years.
Coulter's competitors finally began to challenge Coulter's domination of hematology in the 1980s, partly due to the expiration of some Coulter patents. For example, Technicon Instruments Corporation in the mid-1980s came out with the first automatic device to differentiate and count five different kinds of white blood cells (WBCs). Coulter already had a machine which analyzed three WBCs, but it waited at least three years before it introduced its five-cell analyzer. Because Technicon's machines were somewhat unreliable, Coulter eventually gained the advantage in this particular market.
Other rivals were Toa Medical Electronics Ltd., a Japanese firm which by the early 1990s had replaced Coulter as the main hematology company in Japan and was also progressing in Europe. Two other competitors, Ortho Diagnostic Systems Inc. and Instrumentation Laboratory, eventually dropped out of this competitive industry. Ortho in fact sold immunohematology technology to Abbott Laboratories in the late 1980s. Abbott had made minor attempts to enter the hematology market in the late 1970s but then expanded its efforts in the late 1980s and early 1990s. Coulter representatives, however, reported that its sales were not significantly hurt by Abbott. Nonetheless, by the 1980s Coulter did have competitors, unlike its earlier years.
In the mid-1980s Coulter began a major reorganization plan to respond to its growing competitors. For example, Coulter's market share in Spain dropped 30 percent, so it had to do something. Starting in 1987, Coulter replaced most of its overseas managers and began integrating and consolidating various international operations. To serve all its European customers, Coulter built a new reagent production plant in Germany and centralized its repair and spare parts warehousing at one location in France, instead of the five sites used previously. Such steps increased production and reduced labor requirements for Coulter's European subsidiaries.
In 1987 Coulter Corporation began implementing a manufacturing concept pioneered by the Japanese. This "just-in-time" (JIT) concept emphasized receiving parts and supplies just as they were needed on the production line, thus decreasing inventories and floor space requirements. That led to the company in 1990 embracing the total quality management (TQM) concept. These developments involved retraining managers, cross training workers, and a major shift in corporate culture to emphasize a team approach. According to Roger Lopez, Coulter's director of manufacturing operations, "It's become a way of life for us. We now use data. Instead of everybody's opinion, we let data do the talking. The managers' role changes. They become teachers, coaches, facilitators, champions of the process."
In the 1980s Wallace Coulter received numerous honors, including honorary doctorates in science, law, and engineering. In 1988 he received the Florida Industrialist of the Year Award. The following year he was honored by both the Association of Clinical Scientists and the American Society of Hematology. Wallace and Joseph Coulter, Jr., were two of America's wealthiest individuals and key players in promoting general business development in the Miami area.
Developments in the 1990s
After several years of operating in 37 separate buildings in Hialeah and Miami Lakes, Coulter Corporation by the early 1990s was ready for new facilities. So in 1992 it purchased from the Resolution Trust Corporation the 102 acres formerly owned by AmeriFirst, including five two-story buildings and plenty of space for expansion. It was located in the Miami suburb of Kendall.
By the early 1990s the Coulter Corporation had significant overseas exports, including about $3.5 million worth of products to Mexico. The firm thus benefited from the November 1993 passage of the North American Free Trade Agreement (NAFTA), which lowered trade restrictions with Mexico. In fact, President Clinton's Transportation Secretary Federico Pea in September 1993 visited the Coulter plant as part of a NAFTA promotional tour.
Coulter Corporation's main competitor, Toa Medical Electronics, began marketing the first automated device to count immature red blood cells called reticulocytes. Coulter responded by using that technology, in which lasers differentiate cell density and type, to add a new standard feature in its newest model.
In the 1990s Coulter Corporation offered a wide range of products. Its smaller semiautomated blood cell counters used in clinics and doctors' offices cost less than $10,000, while the larger STKS units were priced at over $100,000. It also manufactured flow cytometry devices for various industrial and biomedical customers.
By the 1990s the blood diagnostic market was growing only a few percent annually. That fact, coupled with Wallace Coulter's bout with cancer, led the firm to diversify into cancer research. In cooperation with Boston's Dana-Farber Institute, Coulter Corporation developed monoclonal antibodies to specifically target certain forms of cells. Coulter was aided up front by $3 million in venture capital funds from InterWest Partners of Menlo Park, California.
In August 1993 Coulter and the University of Michigan announced they had produced a monoclonal antibody to fight B-cells, white blood cells that proliferate and become malignant in non-Hodgkin's Lymphoma. Two years later Coulter Corporation and InterWest Partners of Menlo Park, California, created a subsidiary called Coulter Pharmaceuticals Inc., a Palo Alto, California, firm which conducted successful trials of this B-1 antibody system. Then in May 1996 InterWest Partners raised $22 million in a private stock sale to fund the clinical trials necessary to win FDA approval of this new product.
Coulter Pharmaceuticals on January 28, 1997, became a public firm, offering 2.5 million shares for $12 each. Two months later the subsidiary announced it had received a method-of-use patent for its B-1 Therapy, thus helping pioneer the new field of radioimmunotherapy. Meanwhile, Coulter Corporation in 1995 acquired a French biotechnology firm called Immunotech because of its product line of about 800 antibodies.
In the 1990s Coulter Corporation also developed a successful diagnostic test for the HIV virus, which causes AIDS. The Coulter HIV-1 p24 Antigen Assay was able to detect HIV only 19 days after initial exposure, six days earlier than other tests. Following FDA approval, in 1996 Coulter Corporation granted the California firm of Ortho Clinical Diagnostic, Inc., a subsidiary of Johnson & Johnson, the rights to sell its HIV diagnostic test worldwide. By the summer of 1997 Ortho Clinical had received permission from the Japanese government to market this diagnostic product. Abbott Laboratories received FDA approval for its HIV antigen test just six months after Coulter's test was approved in 1996.
In the 1990s Coulter put significant resources into laboratory automated systems. In 1992, for example, it created a partnership with IDS Ltd. of Japan, a manufacturer of robotic blood testing equipment. Coulter marketed and installed these devices and modified some of its products to work with this Japanese technology. Costing from $500,000 to $3 million apiece, these devices processed over 1,000 blood samples per hour and automatically logged the results in lab, nursing station, and hospital records.
Another Coulter joint venture in automated lab technology began in August 1995 when it became the sole worldwide distributor for the MICRO21 automatic microscope system developed by Intelligent Medical Imaging Inc. (IMI), a Palm Beach Gardens, Florida, firm started in 1989. This system was designed to accurately and quickly diagnose AIDS, anemia, most cancers, and other diseases.
In March 1997 Coulter settled a dispute with IMI. The arbitration agreement was that Coulter no longer would have exclusive rights to sell and distribute IMI's MICRO21 System. Coulter was paid $4.2 million to return 26 MICRO21 systems to IMI, which was developing its own sales force. IMI noted that Coulter in 1996 and 1997 had sold nine MICRO21 systems in Japan, so it looked forward to selling directly in such overseas markets. This agreement also stipulated that Coulter could continue on a nonexclusive basis to buy IMI products for worldwide distribution on the same terms as other distributors.
Coulter Corporation in July 1996 teamed up with two other firms to develop and promote automated laboratory systems. Lab-Interlink Inc. of Omaha, Nebraska, agreed to provide software for the automated systems, while Johnson & Johnson was responsible for sales, support, and service in this three-company alliance.
A New Owner
In the fall of 1997 Beckman Instruments, Inc., a firm with stock sold on the New York Exchange under the symbol BEC, announced that it was acquiring Coulter Corporation. Effective April 1998, the new firm was renamed Beckman Coulter, Inc. Based in Fullerton, California, Beckman paid $875 million cash for Coulter's outstanding shares and also about $275 million to retire Coulter's debts. To finance this transaction, Beckman negotiated a credit agreement with Citibank, Merrill Lynch, Bank of America, First Chicago, Industrial Bank of Japan, and several other banks in the U.S., Japan, Europe, and Latin America. Because almost 70 percent of the combined company's total revenues came from repeat sales of reagents and service, it expected to have strong cash flows in the future.
"The formation of this new company, Beckman Coulter, from two of the industry's most recognized and respected names not only creates a powerful presence in diagnostics, but also strengthens our life sciences business," said Louis T. Rosso, Beckman's chairman and CEO.
One major advantage of this merger was that the two firms sold different products to the same customers. Coulter was the major supplier of hematology analyzers, while Beckman provided a well-known line of automated devices for clinical chemistry and related diagnostic tests. Their combined product offerings would allow hospital laboratories to purchase more than 75 percent of their supplies and equipment from one firm, thus making one-stop shopping in this field more of a reality.
This acquisition saddled Beckman with massive debt. In fact, its debt-to-capital percentage approached 90 percent. And Beckman expected to lose almost $300 million in the fourth quarter of 1997 due to the costs of this acquisition. In spite of these negative factors, the combined firm considered it a wise move because consolidation could be expected to bring lower operating costs and expanded markets. Beckman's leaders said they would sell some real estate and use its increased cash flow to reduce its high debt, but some observers suspected that debt reduction would remain a major difficulty for the new firm.
Not surprisingly, various credit rating firms decreased Beckman's rating to speculative levels because of its acquisition of Coulter. For example, Standard & Poor's gave Beckman a BB+ rating.
Coulter and Beckman each brought relative strengths to this merger. Beckman expected that Coulter would help increase its usually weak sales among managed care firms and purchasing groups. On the other hand, Beckman's expertise in fiscal restraint and being accountable to stockholders were hoped to increase Coulter's profitability.
Beckman's 1997 purchase of Coulter surprised some analysts, who knew Coulter had sought a buyer for some time, partly because of the question of succession in this family-owned and -managed firm. Cofounder Joseph Coulter, Jr., had died in 1995. His daughter, Laura Coulter-Jones, replaced him as president of Coulter Corporation. Wallace Coulter, who never married and had no children, remained board chairman. Some observers speculated that either Roche or Johnson & Johnson would buy Coulter as it made the transition to the second generation of family leadership. The normally conservative Beckman had purchased several small firms, but this major acquisition broke new ground.
Beckman's Chairman Rosso explained that, "There were certain attractions to Beckman in our cultural and historical base. In that sense, we may have been emotionally well-positioned." Rosso was referring to Beckman Instruments being founded by Dr. Arnold Beckman in 1935 with the invention of the acidimeter, reminiscent of Wallace Coulter and Joseph Coulter developing the first Coulter Counter in the late 1940s and early 1950s. Both firms thus started with the invention of a single device.
The bottom line was that only time would tell if this merger proved successful. Although the merger had several positives, the trend to cut healthcare costs and the fact that medical diagnostics was not a growth industry indicated turbulent times ahead for the newly created Beckman Coulter, Inc.
Principal Subsidiaries: Coulter Electronics, Pty. Ltd. (Australia and New Zealand); Instrumentation Laboratory, Ges.m.b.H. (Austria); Coulter Electronics Ind. & Com. Ltda. (Brazil); Counter Electronics of Canada, Ltd.; Coultronics France, S.A.; Coulter Electronics, GmbH (Germany); Coulter Electronics (Hong Kong) Ltd.; Coulter K.K. (Japan); Coulter de Mexico S.A., DE C.V.; Coulter Electronics, Ltd. (Netherlands, U.K., and Turkey); Coulter Electronics Sales of Puerto Rico, Inc.; Coulter Electronics S.A. Pty. Ltd. (South Africa); Coulter Electronics S.A. (Venezuela); Coulter/Immunotech, Inc.; Izasa, S.A. (Spain); Instrumentation Laboratory AG (Switzerland); Instrumentation Laboratory, SpA (Italy); Coulter Pharmaceutical Inc.
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Source: International Directory of Company Histories, Vol. 22. St. James Press, 1998.