Corning Is Making A Big Bet On Life Sciences

Dec.30.11 | About: Corning Inc. (GLW)

If you are a fifteen year investor in Corning (NYSE:GLW) like me, one who has ridden the dizzying highs and lows on the stock, then you know that it's a company that understands the "lumpiness" of science innovation, and is not afraid to make big bets in either technology or markets. Looking at their innovation timeline, they rode their ceramics inventions from 1913 to the 1970s, and their invention in optics from the 70's all the way thru the 90's. In 2002, they blew past optical oblivion to become the world's dominant display company.

Now fast forward to the last five years. Again, a look at their innovation timeline (which has at most one major invention per year) shows two major life sciences inventions over the last 5 years! One in 2007 around drug discovery that radically reduced drug testing errors, and one in 2010 around being able to conduct stem cell experiments at radically lower cost and higher quality.

Ok, all this science is great, but we are impatient investors who think in time horizons of 12-18 months, not decades. What is to say that we'll see major moves of earnings significance from Corning Life Sciences in this time frame? Well, consider these investments across the board in Life Sciences, and their timeline :

  • New Senior Executive. In June 2011, GLW hired Dr. Richard Eglen, 54, as vice president and general manager of the Corning Life Sciences business segment.
  • Acquisition. On December 1st 2011, GLW acquired MediaTech for an undisclosed sum, and merged them into the Life Sciences business. According to the news release, Mediatech develops, manufactures, and sells a broad range of high-quality cell culture media and molecular biology reagents related to tissue and cell culture applications.
  • New Board of Directors member. On December 6th 2011, GLW appointed Richard T. Clark, retired chairman and chief executive officer of the major pharma Merck (NYSE:MRK), to Corning’s board of directors, effective immediately.
  • Major R&D and Business Investments over the recent past. All the things above are 'macro' moves - but what's happening at the grass roots. Is GLW Life Sciences hiring engineers, managers, sales guys etc in a major way? Well, turns out that LinkedIn (NYSE:LNKD) Analytics is a terrific tool to understand a business at that level. If you take a look at the charts below on 2011 hiring, hiring in the Life Sciences business (Figures 1,3 and 4) is notably more aggressive than their competition in the Life Sciences space. Sales hiring is (Figure 5) is a slight exception in that sales staff hiring is not significantly more aggressive than their competition. However, note (from the Figure 2) that GLW Life Sciences already has 3x more Sales personnel than their competition.

Life Sciences Entire Business Click to enlarge
(Click to enlarge)

Figure 1. Company Growth - GLW Life Sciences vs. Industry

Job Function BreakdownClick to enlarge
(Click to enlarge)

Figure 2. Job Function Breakdown - GLW Life Sciences vs. Industry

R&D investmentClick to enlarge
(Click to enlarge)

Figure 3. R&D Growth - GLW Life Sciences vs. Industry

G&A growthClick to enlarge
(Click to enlarge)

Figure 4. G&A Growth - GLW Life Sciences vs. Industry

SalesClick to enlarge
(Click to enlarge)

Figure 5. Sales Personnel Growth - GLW Life Sciences vs. Industry

Conclusion. GLW has never been a slow and steady widows and orphans stock, but they've executed well on "big bets." If you believe in their ability to successfully make major moves, then this might be a good time to consider their stock, because the "tea leaves" indicate a big bet in progress.

Disclosure: I am long GLW.