Equity Research. Life Science Tools Q1 Preview. April 8, 2016

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1 April 8, 2016 Equity Research Life Science Tools Q1 Preview Sector Rating: Life Science Tools, Market Weight FY EPS Valuation Range Rating Price Ticker Curr. Prior 04/08/16 Curr. Prior Curr. Prior Curr Prior Life Science Tools A 2 NC $39.70 $1.83 $1.85 $2.07 $2.10 $38-40 NC BRKR 1 NC $29-30 NC ILMN 2 V NC NC 4.09 NC $ NC MTD 2 NC $ $ TMO 1 NC $ $ WAT 1 NC $ NC Source: Company data and Wells Fargo Securities, LLC estimates 1= Outperform, 2 = Market Perform, 3 = Underperform, V = Volatile = Company is on the Priority Stock List NA = Not Available, NC = No Change, NE = No Estimate, NM = Not Meaningful TMO is our top pick. TMO remains our top pick in the Tools space. We expect positive estimate revisions based on four factors. First, the company recently closed on the AFFX acquisition, which will be at least $0.10 accretive to EPS in the first year, and based on TMO s track record, we think the company could ultimately exceed this target. Second, the recent weakening of the USD should be a tailwind to guidance. Third, we believe TMO will continue to benefit from its exposure to the biopharma end markets. And fourth, we think TMO guidance was conservative relative to capital deployment for the year. Increasing our valuation range for TMO and MTD. Increasing estimates for BRKR, MTD, TMO and WAT (mainly due to FX), and decreasing estimates for A due to the Lasergen deal. Recent FX trends may bode well for guidance. Since the end of 2015, the USD has weakened against several important currencies, including the EUR, JPY, CAD, and CHF (the GBP is a notable exception). A weaker USD is generally positive for Tools earnings, and we highlight TMO and WAT as particularly likely to benefit as the USD takes a time-out from the persistent strengthening over the past few year. As we updated our models to reflect current FX rates, we tend to be at the high-end or even above guidance for the full year based on the implied FX tailwind. Biopharma end markets continue to drive growth. We continue to believe biopharma will be the most significant driver of growth for the Tools sector. In 2015, the biopharma end market contributed 60% of the sector s growth, despite making up only about 29% of revenue. We like WAT due to its high exposure (>50%) to this end market. Macroeconomic headwinds likely to persist. Core industrial end markets are likely to remain weak, particularly in China and other emerging market regions. Global manufacturing PMI continues to be on a downward trend, notwithstanding a bounce in March. We will continue to watch for management commentary around macro trends, though we believe the majority of the companies in our space have managed the risk reasonably well. Please see page 4 for rating definitions, important disclosures and required analyst certifications All estimates/forecasts are as of 04/08/16 unless otherwise stated. Tim Evans, Senior Analyst ( 212) tim.evans@wellsfargo.com Sara Silverman, Associate Analyst ( 212) sara.silverman@wellsfargo.com Wells Fargo Securities, LLC does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of the report and investors should consider this report as only a single factor in making their investment decision.

2 Life Science Tools, Services, & Diagnostics Company-Specific Thoughts A (Market Perform). We expect a relatively in line quarter, though we are on the high-end of the revenue guide for the quarter and the full year as guidance assumes stale FX rates. We have also factored in the $0.02- $0.03 dilution from the Lasergen acquisition into our model. Our focus remains on the 2017 margin targets, which we believe look increasingly ambitious. We expect to get more clarity around this and further color on longer term targets at the analyst day on May 25 th. BRKR (Outperform). As we have previously stated, BRKR is a high conviction pick on a longer-term growth story. However, in the near-term, we believe the current valuation is anticipating an increase to 2016 guidance. We do ultimately believe guidance will be revised upward, but we think it won t happen until H2. We anticipate an in line Q1. We also highlight that BRKR seems to be increasingly focused on returning capital to shareholders, with the recent implementation of a modest dividend as well as a focus on share repurchases. ILMN (Market Perform). We expect Q1 results in line with current Street estimates. In the near term, we expect investor attention to be focused on instruments placements. We expect instruments placements to be down slight in 2016, with a notable reduction in HiSeq X placements. We believe the company needs to see stronger instrument placements to justify a higher stock price from currently levels. In the longer term, we are focused on the GRAIL initiative. Leveraging our coverage of the diagnostics industry, we think GRAIL is likely to take longer than expected to reach commercialization and is likely to require more investment than is currently anticipated. Our below-street estimates for 2017 reflect this view. TMO (Outperform). TMO is our top pick in the Tools sector given likely upward revisions to guidance from 1) closing of the AFFX deal, 2) conservative guidance on capital deployment, 3) continued strength in biopharma end markets, 4) potential benefits from recent FX moves. We expect Q1 results to be a modest beat, and we remain about consensus for the full year. Our detailed FX modeling gives us confidence guidance will be revised higher based on prevailing rates. MTD (Market Perform). We continue to expect strong execution in the face of macro headwinds. We believe Q1 could be slightly ahead of consensus, and we think 2016 guidance could be revised higher due to favorable moves in FX. We continue to monitor performance in China, where MTD has meaningful exposure to non-life sciences industrial end markets (we estimate 9%). WAT (Outperform). We believe WAT continues to be a top-line growth story driven by exposure to biopharma end markets. We expect an in line Q1, but we see the possibility for upward revision to guidance based on recent FX moves. 2

3 3 Exhibit 1. Life Science Tools Comp Table In millions, except per share amounts Price Div Market Ent. EV / Revenue EV / EBITDA P / E FCF Yield Company Ticker 4/8/16 Yield Cap Val E 2017E E 2017E E 2017E E 2017E Agilent A $ % $ 13,022 $ 12, x 3.0x 2.9x 14.4x 13.6x 12.3x 22.8x 21.8x 19.2x NA 3.9% 4.5% Bruker BRKR $ % $ 4,738 $ 4, x 2.7x 2.6x 16.9x 16.0x 14.5x 32.5x 27.8x 24.8x 4.1% 3.6% 4.3% Danaher DHR $ % $ 64,536 $ 76, x 3.4x 3.2x 16.5x 14.3x 13.1x 21.8x 19.2x 17.6x 4.9% 5.2% 6.0% Illumina ILMN $ $ 24,710 $ 24, x 9.5x 8.3x 32.6x 31.0x 27.1x 50.6x 46.7x 41.1x 2.1% 2.4% 2.9% Mettler-Toledo MTD $ $ 9,427 $ 9, x 4.0x 3.9x 16.6x 15.5x 14.5x 27.2x 24.6x 22.1x 3.7% 3.7% 4.1% PerkinElmer PKI $ % $ 5,498 $ 6, x 2.7x 2.6x 14.4x 13.9x 12.6x 19.6x 18.5x 16.7x 4.7% 5.6% 6.1% QIAGEN QGEN $ $ 5,292 $ 6, x 4.5x 4.2x 15.8x 14.4x 13.5x 21.6x 20.7x 18.9x 4.2% 4.2% 5.1% Techne TECH $ % $ 3,479 $ 3, x 7.3x 6.9x 17.3x 17.2x 16.2x 27.5x 26.9x 25.5x 3.4% 3.7% 4.0% Thermo Fisher TMO $ % $ 56,149 $ 68, x 3.8x 3.6x 16.3x 15.0x 13.8x 19.3x 17.7x 15.4x 4.3% 4.7% 5.8% VWR Corp. VWR $ $ 3,462 $ 5, x 1.2x 1.1x 11.7x 11.1x 10.4x 17.3x 15.7x 14.3x 6.9% 7.1% 8.4% Waters WAT $ $ 10,631 $ 11, x 5.3x 4.9x 16.9x 15.9x 14.8x 22.3x 20.7x 18.6x 4.3% 4.8% 5.3% MEDIAN $ 9,427 $ 9, x 3.8x 3.6x 16.5x 15.0x 13.8x 22.3x 20.7x 18.9x 4.2% 4.2% 5.1% Tax Rate Net Debt Leverage CY Revenue CY EBITDA CY EPS CY FCF Company Ticker 2016E Debt Cash (Cash) Ratio E 2017E E 2017E E 2017E E 2017E Agilent A 20% $ 1,655 $ 2,245 $ (590) 1.9x $ 4,038 $ 4,136 $ 4,326 $ 864 $ 914 $ 1,007 $ 1.74 $ 1.83 $ 2.07 $ 393 $ 509 $ 591 Bruker BRKR 27% $ 267 $ 468 $ (202) 1.0x $ 1,624 $ 1,706 $ 1,765 $ 269 $ 284 $ 312 $ 0.89 $ 1.04 $ 1.17 $ 195 $ 172 $ 204 Danaher DHR 23% $ 12,870 $ 791 $ 12, x $ 20,563 $ 22,828 $ 23,695 $ 4,630 $ 5,369 $ 5,830 $ 4.30 $ 4.89 $ 5.34 $ 3,138 $ 3,342 $ 3,875 Illumina ILMN 26% $ 1,091 $ 1,386 $ (296) 1.5x $ 2,220 $ 2,564 $ 2,946 $ 749 $ 788 $ 902 $ 3.32 $ 3.60 $ 4.09 $ 517 $ 601 $ 705 Mettler-Toledo MTD 24% $ 591 $ 99 $ x $ 2,395 $ 2,468 $ 2,570 $ 596 $ 638 $ 685 $ $ $ $ 344 $ 347 $ 388 PerkinElmer PKI 20% $ 1,013 $ 238 $ x $ 2,262 $ 2,311 $ 2,411 $ 437 $ 452 $ 496 $ 2.55 $ 2.70 $ 2.99 $ 260 $ 309 $ 333 QIAGEN QGEN 17% $ 1,060 $ 290 $ x $ 1,281 $ 1,345 $ 1,429 $ 383 $ 422 $ 450 $ 1.05 $ 1.10 $ 1.20 $ 220 $ 224 $ 271 Techne TECH 30% $ 167 $ 114 $ x $ 452 $ 483 $ 508 $ 204 $ 206 $ 218 $ 3.40 $ 3.48 $ 3.67 $ 119 $ 128 $ 138 Thermo Fisher TMO 14% $ 12,527 $ 452 $ 12, x $ 16,965 $ 17,864 $ 18,756 $ 4,195 $ 4,540 $ 4,949 $ 7.39 $ 8.05 $ 9.24 $ 2,412 $ 2,647 $ 3,241 VWR Corp. VWR 33% $ 1,989 $ 136 $ 1, x $ 4,319 $ 4,519 $ 4,696 $ 456 $ 478 $ 510 $ 1.52 $ 1.68 $ 1.84 $ 240 $ 247 $ 291 Waters WAT 14% $ 1,668 $ 937 $ x $ 2,042 $ 2,159 $ 2,308 $ 673 $ 714 $ 770 $ 5.89 $ 6.35 $ 7.06 $ 460 $ 505 $ 564 MEDIAN 23% 2.3x $ 2,262 $ 2,468 $ 2,570 $ 596 $ 638 $ 685 FTEs Rev / GM % SG&A % R&D % Revenue Growth EBITDA Margin EBIT Margin EPS Growth Company Ticker 2015 FTE (000) 2016E 2016E 2016E E 2017E E 2017E E 2017E E 2017E Agilent A 11,800 $ % 28% 8% (0.2%) 2.4% 4.6% 21.4% 22.1% 23.3% 19.0% 19.9% 21.0% 5.7% 4.9% 13.2% Bruker BRKR 6,300 $ % 24% 9% (10.2%) 5.1% 3.5% 16.5% 16.7% 17.7% 13.3% 14.7% 15.6% 18.5% 16.9% 12.2% Danaher DHR 81,000 $ % 29% 6% 3.3% 11.0% 3.8% 22.5% 23.5% 24.6% 17.1% 17.8% 18.8% 13.0% 13.6% 9.3% Illumina ILMN 4,600 $ % 25% 20% 19.3% 15.5% 14.9% 33.7% 30.7% 30.6% 30.4% 27.1% 27.1% 21.5% 8.3% 13.7% Mettler-Toledo MTD 13,500 $ % 29% 5% (3.6%) 3.0% 4.1% 24.9% 25.9% 26.7% 22.2% 23.2% 23.9% 10.3% 10.6% 11.2% PerkinElmer PKI 8,000 $ % 24% 6% 1.1% 2.2% 4.3% 19.3% 19.6% 20.6% 17.8% 18.1% 18.2% 3.2% 6.0% 10.8% QIAGEN QGEN 4,559 $ % 35% 11% (4.8%) 5.0% 6.2% 29.9% 31.4% 31.5% 24.6% 24.7% 25.2% 5.5% 4.2% 9.4% Techne TECH 1,356 $ % 20% 9% 26.4% 6.8% 5.3% 45.1% 42.6% 42.9% 40.3% 38.2% 38.9% 0.3% 2.4% 5.5% Thermo Fisher TMO 52,000 $ % 21% 5% 0.4% 5.3% 5.0% 24.7% 25.4% 26.4% 22.5% 23.1% 24.2% 6.2% 8.9% 14.9% VWR Corp. VWR 9,300 $ % 18% 0% (1.3%) 4.6% 3.9% 10.6% 10.6% 10.9% 9.5% 9.6% 9.9% 25.6% 10.4% 9.7% Waters WAT 6,594 $ % 24% 6% 2.7% 5.7% 6.9% 32.9% 33.1% 33.3% 29.0% 29.1% 29.4% 7.5% 7.8% 11.1% MEDIAN $ % 24% 6% 0.4% 5.1% 4.6% 24.7% 25.4% 26.4% 22.2% 23.1% 23.9% 7.5% 8.3% 11.1% Source: Wells Fargo Securities, LLC estimates for all covered companies; FactSet for all others; Bold tickers are covered names 1=Outperform; 2=Market Perform; 3=Underperform; NR=Not Rated; NA=Not Available; Data are calendarized where possible Pricing is intraday Note: We treat Agilent s FY (Oct) and CY as functionally equivalent. Life Science Tools Q1 Preview

4 Life Science Tools, Services, & Diagnostics Valuation Range Information: A Basis and Risks: Our valuation range is DCF-based (WACC = 8.0%; terminal NOPLAT growth = 2%) and represents 19x our FY 2017 EPS estimate. Risks include (1) deterioration in global macroeconomic variables;(2) pressure on biopharma R&D and capex budgets; (3) anemic not-for-profit research budgets; (4) increasing competition and/or disruptive technology; (5) risks associated with M&A; and (6) FX volatility. BRKR Basis and Risks: Our valuation range is DCF-based (WACC = 7.0%; terminal NOPLAT growth = 2%) and represents 26x our 2017 EPS estimate. Risks include: (1) deterioration in global macroeconomic conditions; (2) pressure on biopharma budgets; (3) pressured budgets for government-sponsored research; (4) increasing competition or disruptive technology; (5) risks associated with M&A; (6) FX volatility; (7) lack of near-term visibility. ILMN Basis and Risks: Our valuation range is a SOTP using a DCF-based approach for core ILMN (WACC = 7.0%; terminal NOPLAT growth = 2%) and a TAM approach for GRAIL and Helix. Upside risks include: (1) unexpected product innovation and traction; (2) more margin expansion than expected due to business mix. Downside risks include: (1) slow clinical adoptions; (2) competitive threats; (3) technological disruption; (4) manufacturing issues. MTD Basis and Risks: Our valuation range is DCF-based (WACC = 7.0%; terminal NOPLAT growth = 2%) and represents 21x our 2017 EPS estimate Risks include (1) deterioration in global macroeconomic variables; (2) pressure on biopharma R&D and capex budgets; (3) increasing competition and/or disruptive technology; and (4) FX volatility TMO Basis and Risks: Our valuation range is DCF-based (WACC = 7.0%; terminal NOPLAT growth = 2%) and represents 16x our 2017 EPS estimate. Risks include: (1) deterioration in global macro variables;(2) pressure on biopharma R&D and capex budgets; (3) declining budgets for government-sponsored research; (4) increasing competition and/or disruptive technology; (5) risks associated with M&A; (6) FX volatility; (7) failure to execute on LIFE transaction; and (8) lack of return-based compensation incentives. WAT Basis and Risks: Our valuation range is DCF-based (WACC = 7.0%; terminal NOPLAT growth = 2%) and represents 21x our 2017 EPS estimate. Risks include: (1) deterioration in global macroeconomic conditions; (2) pressure on biopharma R&D and capex budgets from either funding or consolidation; (3) pressured budgets for government-sponsored research; (4) increasing competition and/or disruptive technology; and (5) FX volatility Required Disclosures This is a compendium report, to view current important disclosures and other certain content related to the securities recommended in this publication, please go to or send an to: equityresearch1@wellsfargo.com or a written request to Wells Fargo Securities Research Publications, 7 St. Paul Street, Baltimore, MD Additional Information Available Upon Request I certify that: 1) All views expressed in this research report accurately reflect my personal views about any and all of the subject securities or issuers discussed; and 2) No part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this research report. 4

5 Life Science Tools Q1 Preview Wells Fargo Securities, LLC maintains a market in the common stock of Illumina, Inc., Thermo Fisher Scientific, Inc., Waters Corporation, Agilent Technologies, Inc., Bruker Corporation, Mettler-Toledo Int'l, Inc. Wells Fargo Securities, LLC or its affiliates received compensation for investment banking services from Mettler-Toledo Int'l, Inc. in the past 12 months. Mettler-Toledo Int'l, Inc. currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided investment banking services to Mettler-Toledo Int'l, Inc. Bruker Corporation currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided noninvestment banking securities-related services to Bruker Corporation. Bruker Corporation currently is, or during the 12-month period preceding the date of distribution of the research report was, a client of Wells Fargo Securities, LLC. Wells Fargo Securities, LLC provided nonsecurities services to Bruker Corporation. Wells Fargo Securities, LLC received compensation for products or services other than investment banking services from Bruker Corporation in the past 12 months. Wells Fargo Securities, LLC or its affiliates has a significant financial interest in Bruker Corporation, Mettler-Toledo Int'l, Inc., Agilent Technologies, Inc., Waters Corporation, Thermo Fisher Scientific, Inc., Illumina, Inc. A: Risks include (1) deterioration in global macroeconomic variables;(2) pressure on biopharma R&D and capex budgets; (3) anemic not-for-profit research budgets; (4) increasing competition and/or disruptive technology; (5) risks associated with M&A; and (6) FX volatility. BRKR: Risks include: (1) deterioration in global macroeconomic conditions; (2) pressure on biopharma budgets; (3) pressured budgets for government-sponsored research; (4) increasing competition or disruptive technology; (5) risks associated with M&A; (6) FX volatility; (7) lack of near-term visibility. ILMN: Upside risks include: (1) unexpected product innovation and traction; (2) more margin expansion than expected due to business mix. Downside risks include: (1) slow clinical adoptions; (2) competitive threats; (3) technological disruption; (4) manufacturing issues. MTD: Risks include (1) deterioration in global macroeconomic variables; (2) pressure on biopharma R&D and capex budgets; (3) increasing competition and/or disruptive technology; and (4) FX volatility TMO: Risks include: (1) deterioration in global macro variables;(2) pressure on biopharma R&D and capex budgets; (3) declining budgets for government-sponsored research; (4) increasing competition and/or disruptive technology; (5) risks associated with M&A; (6) FX volatility; (7) failure to execute on LIFE transaction; and (8) lack of return-based compensation incentives. WAT: Risks include: (1) deterioration in global macroeconomic conditions; (2) pressure on biopharma R&D and capex budgets from either funding or consolidation; (3) pressured budgets for government-sponsored research; (4) increasing competition and/or disruptive technology; and (5) FX volatility Wells Fargo Securities, LLC does not compensate its research analysts based on specific investment banking transactions. Wells Fargo Securities, LLC s research analysts receive compensation that is based upon and impacted by the overall profitability and revenue of the firm, which includes, but is not limited to investment banking revenue. STOCK RATING 1=Outperform: The stock appears attractively valued, and we believe the stock's total return will exceed that of the market over the next 12 months. BUY 2=Market Perform: The stock appears appropriately valued, and we believe the stock's total return will be in line with the market over the next 12 months. HOLD 3=Underperform: The stock appears overvalued, and we believe the stock's total return will be below the market over the next 12 months. SELL SECTOR RATING O=Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. M=Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. U=Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. VOLATILITY RATING V = A stock is defined as volatile if the stock price has fluctuated by +/-20% or greater in at least 8 of the past 24 months or if the analyst expects significant volatility. All IPO stocks are automatically rated volatile within the first 24 months of trading. 5

6 Life Science Tools, Services, & Diagnostics As of: April 8, % of companies covered by Wells Fargo Securities, LLC Equity Research are rated Outperform. 54% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Market Perform. 3% of companies covered by Wells Fargo Securities, LLC Equity Research are rated Underperform. Wells Fargo Securities, LLC has provided investment banking services for 37% of its Equity Research Outperform-rated companies. Wells Fargo Securities, LLC has provided investment banking services for 28% of its Equity Research Market Perform-rated companies. Wells Fargo Securities, LLC has provided investment banking services for 12% of its Equity Research Underperform-rated companies. Important Disclosure for International Clients EEA The securities and related financial instruments described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. 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7 Life Science Tools Q1 Preview This report is for your information only and is not an offer to sell, or a solicitation of an offer to buy, the securities or instruments named or described in this report. Interested parties are advised to contact the entity with which they deal, or the entity that provided this report to them, if they desire further information. The information in this report has been obtained or derived from sources believed by Wells Fargo Securities, LLC, to be reliable, but Wells Fargo Securities, LLC does not represent that this information is accurate or complete. Any opinions or estimates contained in this report represent the judgment of Wells Fargo Securities, LLC, at this time, and are subject to change without notice. For the purposes of the U.K. Financial Conduct Authority's rules, this report constitutes impartial investment research. Each of Wells Fargo Securities, LLC and Wells Fargo Securities International Limited is a separate legal entity and distinct from affiliated banks. Copyright 2016 Wells Fargo Securities, LLC. SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE 7