Incorporated: 1962 as Waters Associates
Sales: $795.07 million (2000)
Stock Exchanges: New York
Ticker Symbol: WAT
NAIC: 325414 Biological Products (Except Diagnostic Substances) Manufacturing; 334513 Instruments and Related Products Manufacturing for Measuring; 334516 Analytical Laboratory Instrument Manufacturing
Waters Corporation, an analytical instrument manufacturer, holds worldwide leading positions in three complementary analytical technologies: high performance liquid chromatography (HPLC), thermal analysis, and mass spectrometry (MS). The company has the largest HPLC market share in the United States, Europe, and non-Japan Asia, and holds a leading position in Japan. HPLC, the largest product segment of the analytical instrument market, is utilized in a broad range of industries to detect, identify, monitor, and measure the chemical, physical, and biological composition of materials as well as to purify a full range of compounds. Micromass Ltd., a Waters subsidiary, develops, manufactures, and distributes mass spectrometry instruments, which are complementary products that can be integrated and used with other analytical instruments, especially HPLC. Through another subsidiary, TA Instruments Inc., Waters provides thermal analysis and rheology instruments. Waters products are used by pharmaceutical, life science, industrial, university and government scientists in research, development, and quality assurance, as well as in other laboratories. Waters operates 17 facilities in the United States and 71 international facilities. International sales represent nearly 57 percent of company revenue. Since 1995, the company has reported 21 consecutive quarters of double-digit earnings growth and twice effected a two-for-one stock split. Waters is listed in Standard & Poors Midcap 400 Index.
1958–73: Into New Lands with New Analytical Tools
James Logan Waters, industry pioneer and entrepreneur, was a descendant of immigrants who settled Salem, Massachusetts, in 1640. Drawn by the desire to till the fertile plains of the Midwest, the Waters clan established themselves in Nebraska in 1865. In 1942 Jim Waters’s family returned to Massachusetts when his father became president of Boston and Worcester Bus Lines.
After matriculating in physics at Columbia University, Jim Waters taught math at the university, served as a naval officer, then worked as a project engineer. He designed and built his first analytical instrument in his mother’s basement.
In 1958, Waters founded Waters Associates (WA) in order to invent instruments for others. He worked with five employees in the rented basement of the Framingham, Massachusetts, police station, to build one-of-a-kind process-control instruments, including a balloon hydrometer, a nerve gas detector, and a lab refractometer. The company’s first major breakthrough occurred in 1961 when John Moore, a chemist at Dow Chemical Company, called for help. Backed by Dow’s funds, WA developed a 0.1 milliliter volume flow cell, which enabled Moore to invent an instrument that used gel columns to analyze polymers (naturally occurring or synthetic substances consisting of giant molecules).
In 1963, WA obtained an exclusive license to Dow’s patent for Gel Permeation Chromatography (GPC) and introduced WA’s first Liquid Chromatography (LC) system, the GPC 100, an instrument larger than a refrigerator and weighing five times as much. Geoffrey Smith, in the May 14, 1979 issue of Forbes magazine, explained that LC was “a process for breaking down complex chemical compounds into their individual components for analysis or purification, a process that was first developed by a Russian scientist around 1900.”
However, WA was to experience growing pains before profiting from sales of its new product. From 1952 to 1962, gas chromatography (GC) was the most prevalent analytical technique and WA “quickly saturated people who had a very immediate obvious need for that product. We were creaming the market—a classic problem for entrepreneurial companies,” President Zenie later explained to Forbes’ news writer Smith. Only about 15 percent of one million organic compounds were volatile enough for GC analysis. The remaining 85 percent were non-volatile polymers, carbohydrates, proteins, lipids, amino acids, and other compounds. Waters, however, believed that LC had the potential to make waves in the hitherto untapped 85 percent market.
The economy was softening, but friends lent a helping hand. In 1964 Dow made a $400,000 equity investment in WA. In 1967 WA introduced the ALC 100, a high-pressure LC system (HPLC) which produced ultra-precise separation of the various chemicals in a mixture. This HPLC technique drove “liquid rapidly through a column packed with fine silica particles,” McElheny explained in a March 8, 1978 issue of The New York Times, adding that HPLC “separates the chemicals because different compounds travel at different speeds down the column. The chemicals’ varying size or electrical properties give each a different affinity for the particles in the column. Under high pressure, chemical separations that used to take hours now are performed in minutes.”
In 1967 Waters appointed Dimitri D’Arbeloff, then president of Millipore Corporation, to WA’s board of directors. Millipore was a leader in markets related to membrane technology. In 1970 Millipore made a $600,000 equity investment in WA.
Waters’s reputation as an inventor and entrepreneur led Harvard University’s Dr. Robert Woodward—recipient of the 1965 Nobel Prize for Chemistry for his work in synthesizing chlorophyll—to call Waters for help. According to Today’s Chemist, Waters recalled that “Woodward was trying to synthesize vitamin B12, but the molecule kept rearranging. He wanted us to purify the positional isomers, which were needed to give him the right compound for the final stages of the synthesis.” Waters brought a LC instrument to Harvard where he worked ten days with Dr. Hamberger, Woodward’s chief assistant. They developed a separation, obtained larger columns to scale up the separation, prepped the material, and gave Woodward 200 micrograms of the isolated and purified precursor compound.
Energized by his success, Waters went on an all-out marketing spree for LC sales. Soon, the name Waters Associates became a synonym for liquid chromatography. Unfortunately, though, WA’s former emphasis on GPC stalled sales of the new LC technical process; furthermore, the slow economy of the 1970s was wreaking havoc on the company’s cash flow. According to the April 1979 issue of INC. magazine, Waters was now “constantly torn between his two most demanding tasks: overseeing production and designing new products.” He hired Francis H. Zenie as production vice-president. Zenie was an M.I.T. electrical engineer who had left his job as manufacturing manager of Foxboro Company. With Zenie’s help, Waters cut the workforce from 175 to 125, stepped up his marketing effort, and reorganized the company. “We were a $4 million company organized and staffed like a $10 million one,” Waters explained. Not only had Millipore’s 1970 investment in WA upheld the fledgling company’s entrepreneurial thrust, but Millipore President Dimitri D’Arbeloff’s position on WA’s board of directors helped to steer the company back to profitability.
Frank Zenie was promoted to general manager in 1971 and appointed president in 1972. Waters remained chairman of the board and manager of special projects; he opened a WA subsidiary in Japan, did computer and systems programming, and directed a special marketing task force. In 1972 WA introduced its M6000 pump—the industry’s first dual-piston reciprocating pump and the firm’s first product to win the prestigious Industrial Research Magazine’s R&D 100 Award.
1973–94: Going Public, Merger, Continuing Recession
During the mid-1970s, company sales grew from $4.7 million in 1972 to $37.7 million in 1977; earnings rose from $346,000 to $4.4 million. Waters gradually ceded more control to his senior managers, thereby removing himself from day-to-day operations. Later, when the INC. analyst asked if he regretted losing control of the company, the former chairman, president, and CEO quipped: “Ambition overcame pride. I wanted that company to succeed more than I wanted to hold on or control of it. The company would have stopped growing it I’d kept my hands in every pie. The entrepreneur makes his biggest contribution simply by picking good people—and then staying out of their way.” In 1973 WA moved its headquarters from Framingham to Milford, Massachusetts, and made an initial public stock offering on NASDAQ.
Despite a bear market, WA remained a solid competitor even with such industry giants as Hewlett-Packard and DuPont. Zenie attributed the survival to WA’s focus on one field, HPCL, and to technical support and software tailored to many specialized customers. For instance, WA designed equipment modules for each of LC’s separate stages and in 1977 began to equip the modules with microprocessors. The first of these devices was the Waters Intelligent Sample Processor (WISP), which could “be loaded with up to 48 separate vials containing different samples and automatically feed each of them into LC analysis,” wrote McElheny.
Waters Corporation’s technologies provide pharmaceutical, life-science, industrial, university, and government scientists with fundamental data on chemical mixtures and materials. Then, by turning these analytical data into useful information, we help scientists understand the complexities of chemistry and of life itself.
The company also developed the first solid-phase extraction (SPE) cartridge and a new integrated high-temperature GPC system, known as the Waters 150C. In 1980 WA’s sales outside the United States exceeded those from within the country. That same year, Millipore began to diversify by acquiring WA in a stock transaction valued at $167 million; WA was renamed Waters Chromatography Division (WCD) and merged with Millipore Corporation.
The new division was highly profitable at the time of the merger, but around 1985 it became clear that the two companies lacked synergy. Millipore’s business depended on products made to customer specifications, while WCD focused on developing innovative products to meet special needs—and continued to do so despite the uncertain financial climate of the mid-1980s. WCD launched its first personal computer software—known as ExpertEase—and introduced Millennium 2020 Chromatography Software for networked data management. Other first-of-a-kind products included new chemistries, Microsoft Windows-based software, a system for amino acid analysis, and new detectors.
Meanwhile, sales of chromatography products continued to slow down in both the United States and Europe. By the late 1980s and into the early 1990s, depressed worldwide economic conditions, a stronger U.S. dollar, anemic growth of the analytical instruments market, and concern over healthcare reform in the United States had a negative effect on sales growth. However, although sales from pharmaceutical customers continued to be depressed, sales to generic pharmaceutical companies increased and became a more significant segment of WCD’s business, as did requests from the chemical manufacturing industry, which was recovering from cyclical lows. Millipore decided to reorganize its operation, placed many capital spending plans on hold, and in 1993 put WCD up for sale.
1994–99: Independence Regained and a Sharper Focus
In 1994, an investor group led by WCD’s management bought WCD for $360 million, forming the independent Waters Corporation. Under the aegis of Douglas A. Berthiaume—Waters chairman, president, and chief executive officer—in 1994 the company began to renew its focus and regain its entrepreneurial spirit with the introduction of Symmetry HPLC columns for the future. Then came the Integrity LC/MS (Liquid Chromatography/Mass Spectrometry) Thermal Beam Electron Ionization (TBEI) system, the industry’s first fully integrated benchtop LC/MS system for identifying unknown compounds in chemical mixtures. The Integrity system was user-friendly; for instance, it incorporated ease-of-use features—such as a “No Tools” approach to maintenance, automatic tuning and calibration—and helpful “wizards” in Millennium software. No longer did a chromatographer have to be an MS expert to obtain MS sample data.
Waters expanded its sales and profitability through the acquisition of closely related businesses and product lines. The company went public on the New York Stock Exchange in November 1995. In May 1996, for $84 million in cash, Waters acquired New Castle, Delaware-based TA Instruments Inc. (TAI), the leading maker of thermal analysis instruments that test how polymer materials (such as plastic and asphalt) react to heat. This acquisition expanded the company’s product offerings to include thermal analysis and rheology products.
Then, targeting pharmaceutical scientists in regulated laboratories seeking to conform to the Food and Drug Administration’s streamlining of the drug-approval process, Waters introduced its family of Alliance HPLC Systems. These systems had been designed for “analytical method flexibility, superior sensitivity, and the information-rich detection required for bioanalysis,” according to the September 1997 issue of Chemical Business. Alliance reached the market just as mass spectrometry was gaining importance.
In September 1997 Waters acquired Manchester, England-based Micromass Ltd. for $178 million and established its position as a leader of LC/MS instruments. Micromass was a market leader in the development, manufacture, and distribution of MS instruments, complementary products that could be integrated and used with other analytical instruments, especially HPLC. “Both Micromass and Waters sold a large portion of their hardware to drug and biotech companies, but Waters’ distribution network was five times the size of the Micromass network, enabling it to plug its new MS line into a much larger selling organization,” according to Loren Fleckenstein in the April 1998 issue of Investor’s Business Daily.
In early 1998, Waters launched Millennium 32, a 32-bit updated version of Millennium software for Microsoft Windows 95 and NT environments. Indianapolis, Indiana-based drug giant Eli Lilly & Co. contracted with Waters to be its sole provider of LC software. That same year, Waters opened a state-of-the-art consumables manufacturing plant in Wexford, Ireland. Thus, in 1998, Waters celebrated 40 years of innovation in technology and chromatography and entered the ranks of New England’s top 50 publicly held corporations. Net sales peaked at $618.81 million in 1998, compared to net sales of $465.47 million in 1997.
- James L. Waters founds Waters Associates.
- Waters Associates is incorporated.
- Waters Associates introduces the industry’s first liquid chromatography (LC) system.
- Dow Chemical invests $400,000 in Waters Associates.
- Millipore invests $600,000 in Waters Associates.
- Company’s stock is issued on NASDAQ and headquarters are moved to Milford, Massachusetts.
- Company introduces the first variable-volume autosampler: WISP.
- Millipore Corporation acquires Waters Associates, which changes name to Waters Chronology Division (WCD).
- WCD launches the first data networking software: ExpertEase.
- Having been sold by Millipore, WCD becomes Waters Corporation and is listed on the New York Stock Exchange.
- Waters is listed among the top 50 New England publicly held companies.
- Waters debuts c.shop.waters.com, an online venue for orders and support.
In January 1999, Waters was awarded its largest single order to date when Japan’s National Police Agency signed an $8-million contract for 50 LC/MS systems for use in forensics. Waters’ Japanese subsidiary, Tokyo-based Nihon Waters K.K., worked with the Agency to educate, train, and support the contingent of scientists assigned to operate the instrumentation.
Demand was strongest for Waters’ MS family of products; particularly for time-of-flight mass spectrometry products for protein analysis and high-throughput drug discovery. Waters also established itself as an industry leader in proteomics, with 70 percent of the instrument market. The goal of proteomics was to define the proteins that genes express, their interactions with each other, and their relationships to disease states. Waters partnered with Bio-Rad Laboratories to introduce an integrated proteomics workstation and analysis system, anchored by Waters industry leading Q-TOF mass spectrometer, first introduced in 1996 as a tandem quadruple time-of-flight mass spectrometer. ProteomeWorks was the definitive system for determining the function of proteins in vivo, the major analytical challenge of the post-genomic era.
Waters introduced a number of other new products for drug discovery, including the Alliance HT and CapLC Systems, instrument products aimed squarely at scientists seeking new drugs. Alliance HT could process up to 1,500 samples per run; CapLC System could detect trace particles too small to be found by Waters’ older products, thereby creating the possibility of new drugs. Waters also launched the XTerra family of chromatographic columns, which used an organic/inorganic hybrid packing that extended HPLC performance limits and set a new standard for HPLC column speed, peak shape, and operating pH range.
In June 1999, Waters entered into an agreement with Mantra Software Corporation to develop and market a NuGenesis Archive software application for Waters Millennium 32 Chromatography. This new technology allowed laboratory professionals to reliably and easily capture, catalog and store raw data and associated methods within moments of their creation, or alteration, thus improving both workflow and compliance practices. In July, Waters introduced the Oasis HLB 96-Well Extraction Plate, for which R&D Magazine granted Waters its fifth “R&D 100 Award” for technological innovation. Scientists used Oasis HLB sorbent in a variety of formats for isolating a wide range of organic compounds in aqueous samples—such as drugs and their metabolites in biofluids or agrochemicals in soil, water, and food.
During 1999, Waters Corporation was named to Standard & Poors Midcap 400 Index and announced a two-for-one stock split. For fiscal 1999, net sales rose to $704.4 million, an increase of 14 percent over 1998. Net income was $121.88 million, compared to $74.4 million in 1998.
2000 and Beyond: Horizons Unlimited
At the beginning of the new millennium, the major reasons for Waters’ continuing growth were its pursuit of improved capabilities and technological breakthroughs. For instance, from 1999 through the first quarter of 2001, the company introduced the Alliance HT and CapLC chromatographs, and the XTerra family of chromatographic columns—as was mentioned above. In July R&D Magazine, for the sixth time granted Waters an award for technological innovation. The 2000 R&D 100 Award was for XTerra reversed-phase HPLC columns that extended the limits of HPLC performance.
Furthermore, Waters launched the Q-TOF II and the Quattro Ultima mass spectrometers, the ZQ Mass Detector, and the MassLynx software which handled LC/MS data and controlled the ZQ Detector. The ZQ Mass Detector, created in collaboration by Waters and Micromass, was part of Waters LC/MS system solution, which included hardware, software, columns and chemistries designed to work together for reliability and convenience.
In February Waters launched an inclusive online venue (c.shop.waters.com) from which U.S. scientists could locate, view, price, and place orders for more than 8,000 different Waters HPLC columns, sample preparation and filtration products, and Waters Quality Parts. In September 2000 c.shop became available to scientists and purchasing agents in the United Kingdom, Netherlands, Belgium, Canada, Puerto Rico, and Mexico. In October c.shop became available in Europe and in March 2001 in India, Singapore, Hong Kong, Taiwan, and Australia. C.shop was available 24 hours, seven days a week; it could link scientists to Waters’ worldwide-information network to check product availability, order status, delivery timetables, and customer-specific pricing.
Since 1995 Waters had focused aggressively on the HPLC market. However, in February 2000, when Instrument Business Outlook interviewed Berthiaume, the president/CEO remarked that “growing genetic sequencing activity” was only the beginning of the biotechnology revolution that would soon follow. Citing forecasts that proteomics “would grow to be a larger size than the DNA sequencing world,” Berthiaume explained that “Waters was far and away the leader in the proteomics marketplace ... and our Q-TOF is far and away the best instrument in that high sensitivity segment of the marketplace. We think our market share for 1999 [was] over 70 percent.” He then went on to say that Waters wanted to expand into the whole residual DNA market, but not necessarily through full-scale acquisitions. Waters had already benefitted from joint ventures, such as those with Bio-Rad Laboratories and Mantra Software Corporation.
In June 2000 Waters formed a strategic alliance with Cambridge, Massachusetts-based Variagenics, Inc. to develop and commercialize “SNP” (single nucleotide polymorphisms) analysis capabilities for the emerging field of pharmaco-genomics. (Genomics is the study of the collection of genes within an organism.) Micromass also established a partnership with Manchester, England-based Caprion Pharmaceuticals Inc. in order to develop new processes for research in proteomics, which explored the nature and function of all proteins. With the completion of the sequencing of the human genome, the discovery of the proteome stood as the next great challenge in biotechnology. Caprion applied proprietary processes in sub-cellular biology together with large-scale MS to create an unprecedented base of knowledge and understanding of the proteome.
Midway through 2000, Waters Corporation became free of net debt; by the end of the year the company had accumulated $75 million of cash and short-term investments. In August, Waters introduced a new HPLC system designed for laboratories having limited financial and technical resources but needing basic HPLC-derived information. Waters Breeze HPLC System was an all-in-one system consisting of a binary or isocratic pump, automated or manual injector, UV or refractive index detector, and Breeze software.
Fiscal year 2000 combined net sales peaked at $795.07 million, representing a 13 percent increase over 1999. Consistent with the past several years, sales growth was led again by life science customer demand, particularly by requests for MS products. Company sales from operations outside the United States accounted for 57 percent of the company’s net sales. Operating income for 2000 was $210.83 million, an increase of 19 percent over the $176.5 million Generaled in 1999. Net income per basic common share was $1.22 in fiscal 2000, compared to $.99 in 1999. In 2000, Waters announced its second two-for-one stock split.
In May 2001, Waters exhibited its best-selling MS detector: the ZQ. This instrument was a single-quadrupole, atmospheric pressure ionization (API) mass spectrometry detector; it required only about 15 inches of linear bench space and was the centerpiece of Waters two new FractionLynx Systems for autopurification. Optimized for use with Waters 600 Solvent Delivery Module, the ZQ detector also operated with HPLC systems made by other manufacturers. Waters reported that first quarter 2001 sales increased by 17 percent, as measured in local currencies. Earnings per diluted share were $0.28 for the quarter, representing a 27 percent increase over those of first quarter 2000.
From its earliest years, Waters Corporation built on its ability to bring innovative new products to market and established lasting ties in the drug and biotech industries. With the race on to map the human genome in order to link genes to human diseases, scientists could use Waters instruments to Generale, organize, and analyze huge amounts of data. As research intensified, the need for Waters’ advanced separations, mass spectrometry, and informatic technologies increased; the company leveraged technologies that positioned Waters as an essential element of the future, particularly of life science research.
Waters Technologies Corporation; Extrel FTMS, Inc.; Phase Separations, Ltd.; TA Instruments Inc.; Micromass Ltd. (U.K.); Waters Ltd. (U.K.); Nihon Waters K.K. (Japan).
Agilent Technologies, Inc.; APBiotech Inc.; Applera Corporation; Beckman Instruments; E.I. du Dupont de Nemours and Company; Hewlett-Packard Co.; Hitachi Ltd.; Millipore Corporation; Perkin-Elmer, Inc.; Shimadzu Corp.; Shiseido Company, Ltd.; Sigma-Aldrich Corporation; Varian Associates.
Biederman, David, “Organized for Effective Exporting,” Traffic World, August 3, 1998, p. 47.
Elliott, Alan R., “Drug Makers Drive Sales of Analysis Gear,” Investor’s Business Daily, October 20, 1998.
Fleckenstein, Loren, “Souping Up Analysis Skills Via Acquisitions,” Investor’s Business Daily, April 14, 1998.
McElheny, Victor K., “Separating Chemicals in a Mixture,” New York Times, March 8, 1978.
“One Boss Who Knew How to Let Go,” INC., April 1979, p. 47.
“Pioneer Profiles: Jim Waters, Gordon Wilkinson,” Today’s Chemist at Work, October 1990.
Smith, Geoffrey, “Knowing When to Bow Out,” Forbes, May 14, 1979. pp. 162.
“Waters Alliance HPLC Systems,” Chemical Business, September 1997, p. 73.
“Waters Rise and How It Plans to Stay on Top,” Instrument Business Outlook, February 29, 2000.
Young, Alison, “Tech Primes Itself for Role in Genetic Work,” Investor’s Business Daily, August 8, 2000.
—Gloria A. Lemieux