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NEW YORK, Oct. 22 (GenomeWeb News) - The Applied Biosystems unit of Applera this morning reported net revenues of $382.7 million for the first fiscal quarter ending Sept. 30, down $13.2 million compared to the same quarter of 2002.
"Revenues at Applied Biosystems in the first quarter were disappointing," said Applera chairman Tony White, in a conference call this morning to discuss the results.
Later, ABI president Mike Hunkapiller pointed out that the decrease year-over-year in quarterly revenues was due partly to the fact that fiscal first quarter 2003 revenues included $5.4 million for a mass spectrometry technology license and $3.9 million in Celera Diagnostics products that Abbott, rather than ABI, now sells.
White said the company was nevertheless seeing "modest improvements in the research funding situation with our U.S. government-funded customers and in the pharmaceutical sector," and was positioned favorably due to "aggressive investments" in development of new products.
Despite the drop in revenues, Applied Biosystems reported an increase in net income year-over-year: Net income rose to $33.4 million for the quarter, compared to $17.8 million for the year-ago period. This rise in net income reflects the fact that the company recorded a loss of $16.4 million from discontinued operations the same period last year.
The company recorded research and development expenses of $59.6 million, compared to $61 million for the same quarter in 2002.
Broken down by sector, the company's DNA sequencing revenues dropped to $124.8 million, compared to $149.3 million in the first fiscal quarter of 2003; SDS and other applied genomics revenues increased to $94.3 million, from $83.5 million in the same period last year; mass spectrometry revenues were nearly flat at $82.4 million, compared to $84.2 million in the year-ago quarter; core DNA synthesis and PCR revenues increased slightly to $51.2 million, from $49.0 million in the same period last year; and other product lines were flat at $30.0 million, compared to $29.9 million in the same period last year.
In the sequencing area, Hunkapiller said that revenue growth "was negatively impacted in the first quarter by a delay in funding to the large genome centers." He said the company expected the new funding cycle to begin Nov. 1,and that funding allocated by NHGRI for large-scale sequencing for FY 2004 would be "modestly higher than in the prior year." He later specified that the preliminary estimate of total funding in this area was $168 million, compared to about $160 million in FY 2003.
In Mass spectrometry, which declined $1.8 million year-over-year, "our manufacturing capabilities could not fulfill stronger than expected demand for our recently introduced 4000 Q TRAP LC/MS/MS System," Hunkapiller said. The company was able to fulfill less than half of the orders received, due to delays in the "ramp up" of manufacturing by ABI's partner, MDS Sciex, Hunkapiller later said in response to an analyst's question. He said that it historically takes on average three quarters to catch up to a manufacturing lag like the present one -meaning that this problem is likely to continue through the coming two quarters.
Geographically, US revenues accounted for about 50 percent of the company's business, and declined 11 percent year over year, "with the largest factor being a decrease in sales of the 3730xl instruments to large genome centers," Hunkapiller said. European revenues accounted for 27 percent of the total and increased 8 percent over the same period last year. Revenues in Asia Pacific accounted for 20 percent of total revenues and increased 4 percent year over year, the company said.
For the remainder of the year, ABI is holding to its FY 2004 forecast of "single digit annual revenue growth, weighted toward the second half of the fiscal year," said CFO Dennis Winger. "Assuming that the previously discussed funding issues are resolved for the large genome centers," he said the company expected the revenues for the first and second quarters to be flat relative to the first two quarters of FY 2003.
In light of GE's move to acquire Amersham, analysts asked White whether the company's view on acquisitions had changed, and whether the Amersham acquisition had changed the competitive outlook for ABI.
White responded to the first question that the Amersham acquisition and others "do not cause us to rethink our position here at all. I think we're fine and I think we'll continue to keep our eyes open for technology opportunities and continue to grow our business more organically than anything else."
As to whether the competitive picture is changed, White refused to speculate. "I don't have a crystal ball," he said. But, he noted, the company does share one important value with GE. "We don't like underperforming businesses either."
As of Sept. 30, ABI had $590.8 million in cash and cash equivalents.