This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
Last week at the UBS Global Life Sciences Conference in New York, officials from Applied Biosystems and MDS told investors they are confident of revenue growth from new instruments that are about to launch.
At a breakout session following ABI’s presentation, investors were most interested in the firm’s impending launch of its next-generation DNA sequencer, while for MDS the focus was on resurgences in its Pharma Services unit and Molecular Devices business.
While Mark Stevenson, executive vice president of Applied Biosystems, presented an overview of all of ABI’s divisions — Molecular and Cell Biology, Protein and Small Molecule, and Applied Markets — during his presentation, investors asked many questions about the firm’s next-generation sequencing instrument, SOLiD, and a potential split with sister firm Celera.
The firm didn’t present any new information about its plans for SOLiD, which it expects to commercially launch this month following feedback from early-access customers. The instrument, which will cost around $600,000, is one of several new DNA sequencing instruments being offered by ABI and competitors including Illumina, Roche, and Helicos, that the firm expects will drive the next-generation DNA sequencing market from a current total of $150 million up to $450 million by 2011.
Stevenson said that SOLiD “will cannibalize slightly” the firm’s traditional capillary electrophoresis sequencing business, which has been a cornerstone of ABI’s business for years. However, the firm expects to target new applications, such as gene expression, for the new sequencer.
Company officials also provided little extra information about a review currently being conducted by investment firm Morgan Stanley, which could result in a split of ABI from its sister company Celera (see BioCommerce Week 8/15/2007). ABI and Celera currently trade as tracking stocks under the parent company Applera.
Tony White, chairman and CEO of Applera, said during the breakout session following Stevenson’s presentation that Celera is “at an inflection point,” as it expects to become profitable in a couple of quarters.
“It’s been no secret that a lot of people in the investment community don’t like this structure,” said White, referring to the tracking stocks. He said he thinks Morgan Stanley will favor a split, but the question is, “Is Celera ready to stand on its own?”
With both ABI and Celera seeking a greater presence in the molecular diagnostics market, a key step in providing more clarity over diagnostic rights was achieved in early 2006 when ABI sold its 50-percent stake in Celera Diagnostics to Celera Genomics in exchange for the right to sell instruments to end-user diagnostic customers (see BioCommerce Week 1/11/2006).
ABI recently reported fiscal 2007 revenues of $2.09 billion, a roughly 10 percent increase over 2006 revenue of $1.91 billion. Its fiscal year ends June 30.
Molecular Devices and Mass Spec for MDS
MDS President and CEO Stephen DeFalco said Molecular Devices, which MDS acquired earlier this year for $615 million (see BioCommerce Week 1/31/2007), has performed better than expected.
Molecular Devices posted 16 percent revenue growth to $55 million and reported record profitability in MDS’ third quarter, which ended July 31 (see BioCommerce Week 9/12/2007). Overall, MDS’ revenues rose 24 percent to $321 million for the quarter.
“It’s been no secret that a lot of people in the investment community don’t like this structure.”
Molecular Devices’ performance has surprised investors, and DeFalco was asked at the UBS conference how MDS was able to rapidly turn around the business, which struggled in selling to large pharma accounts in 2006.
DeFalco said there are a couple of factors that can explain Molecular Devices’ resurgence. He said the firm’s end markets are stronger now than they were a year ago, and Molecular Devices “was caught between product cycles” last year.
Since the acquisition, Molecular Devices has launched a handful of new products, the most recent of which is this week’s introduction of the MetaMorph Integrated Confocal System for live cell and functional imaging. DeFalco also expects the next cycle of products from Molecular Devices to launch in two to three years.
DeFalco said that in addition to the more favorable market conditions, the integration went very smoothly and there was “no disruption in the business development chain.”
He also believes MDS’ mass spec business, which is part of a joint venture between its Sciex unit and Applied Biosystems, will get a boost from the launch of the FlashQuant, which combines a triple quadrupole instrument with MALDI. The new instrument, which was introduced earlier this year but will not ship until either the fourth quarter of this year or early next year, is aimed primarily at pharmaceutical labs doing absorption, distribution, metabolism, and excretion profiling (see BioCommerce Week 4/18/2007).
He said new applications, such as ADME-Tox, offer “huge” market-growth potential, “but it will take time” to establish the FlashQuant because it is novel for the field and some users will not have had much experience with mass spectrometers.
Following the acquisition of Molecular Devices, that business was merged with Sciex to form MDS’ Analytical Technologies segment. That segment brought in third-quarter revenue of $127 million.
Meanwhile, the firm’s Pharma Services segment, which struggled amid a US Food and Drug Administration review over the past few years regarding bioequivalence studies conducted at a couple of its Canadian facilities from 2000 to 2004, grew revenues 4 percent to $118 million in the third quarter.
DeFalco told investors last week that the segment is “winning back” biopharma customers, particularly for early-stage drug studies, and he expects that trend to continue on a quarter-by-quarter basis.