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ABI Hopes to Increase Revenue from Applied Markets, Consumables Over Next Two Years

Applied Biosystems thinks it can grow revenue and find stability and predictability for its instruments and consumables over the next two years in the diverse applied markets field, company officials said during a webcast this week.

The applied markets, which are worth around $6 billion, according to ABI, comprise forensics, biosecurity, food and environmental testing, quality assurance/quality control, and eventually regulated diagnostics. The company's applied markets division was created as part of a restructuring launched in July 2004 (see BioCommerce Week sister publication GenomeWeb Daily News 7/14/2004), and the firm's presentation this week was heavily weighted toward outlining growth opportunities in these markets.

"If you look at near-term and long-term, and where AB is placing its bets and making investments, clearly it's in this area of applied markets and sequencing tailored for applied markets, including software and kits for that space," said ABI President Cathy Burzik during a webcast this week.

"We see an opportunity opening up in the area of commercial applications, and we see FY07 being an important year of transition into a more stable environment for us from the research space as well as continued opportunities in the commercial space," she said. ABI's fiscal year 2007 will begin on July 1.

"We see an opportunity opening up in the area of commercial applications, and we see FY07 being an important year of transition into a more stable environment for us from the research space as well as continued opportunities in the commercial space."

According to Burzik, the market for molecular biology applications is roughly $7 billion with an estimated annual growth rate of 3 percent to 5 percent over the next two years. The firm believes that its acquisition of RNAi firm Ambion for $273 million (see BioCommerce Week 1/4/2006) and its focus on consumables sales will drive growth in this segment.

The firm said its mass spec business targets a $2-billion market that is growing 4 percent to 8 percent annually. ABI launched four new mass spectrometers in 2005, as well as the Tempo high-resolution HPLC instrument with partner MDS Sciex late in the year, and has already launched the QStar Elite, a new hybrid quadrupole instrument, this year.

Burzik said the largest growth opportunity for the firm's tools is in the applied markets. However, she noted that the clinical diagnostics component of the market represents a longer-term opportunity for the company.

All told, the applied markets applications represent a $6 billion opportunity, with expected annual growth of 10 percent to 12 percent over the next two years, Burzik said during the webcast, which was part of investment bank UBS' West Coast Life Sciences and Diagnostics Bus Tour.

"From a workflow perspective, we think there's an opportunity to go from where AB is today on the sequencer to actually incorporate more of the workflow, including cleanup in our products, and integrating PCR with our sequencing reaction," Burzik added. "We want to continue to expand our position in research from a real-time PCR perspective, but also clearly move into commercial opportunities for real-time PCR."

Burzik said that ABI has placed 14,000 of its sequencers in the marketplace worldwide, and the majority of the work done on these instruments now is in validation, such as biomarker discovery, and genotype and phenotype association.

As its core DNA sequencing revenues have declined over the past year and a half — a trend that the company has said would continue throughout 2006 — ABI has sought new markets and applications for its research instruments. Among the most recent moves the firm has made to position itself for growth was the establishment last year of a sales force to focus on consumables sales, its investment in next-generation sequencing firm VisiGen (see BioCommerce Week 11/3/2005), the sale and restructuring of a diagnostics joint venture with sister company Celera Genomics (see BioCommerce Week 1/11/2006), and the Ambion acquisition.

Driving Consumables; Eyeing the Future of Sequencing

Ambion was "a critical acquisition for us," Burzik said during the webcast. The purchase, which closed this month, gave ABI entry into a market that it estimated at $500 million and growing at an annual rate of more than 10 percent. The acquisition also is a key part of ABI's strategy to drive growth through expanded consumables offerings.

"Consumables in the microbiology space remains critically important for our company," Burzik said "We have invested now in sales force expansion activity in selected countries around the world, primarily in the United States. We have redone our website to be much more consumables friendly, and … we have a very active program in place to leverage the Ambion acquisition in consumables," she said.

ABI is one of several firms in the BCW Index whose primary revenue source is capital equipment sales. As pharma and government budgets for research have tightened, many of these vendors, such as ABI, Agilent, Waters, Beckman Coulter, and Fisher Scientific, have stressed the importance of consumables as a steady source of revenue.

During the webcast, Burzik also reiterated ABI's view that capillary electrophoresis — the technology at the core of ABI's sequencing business — "remains the gold standard for sequencing."

However, she said, "We also understand the new technologies that are coming to the fore. We have already invested in VisiGen, [and] we have our own internal program associated with next-generation sequencing technology."

"You have to take a long-term view of sequencing, kind of like a five-year-plus view of where it's all going," Burzik said. "We see the next-generation sequencers as complementary to capillary electrophoresis by and large. They are really being used now for small, whole-genome sequencing, small microbe kind of sequencing because they are limited to the number of base pairs. They may be able to expand the market in the area of what we would call gene expression counting."

— Edward Winnick ([email protected])

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