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Applied Biosystems Reports Modest Q2 Revenue Growth

NEW YORK (GenomeWeb News) – Applied Biosystems today announced fiscal 2008 second-quarter revenues of $561.9 million, a 6 percent increase over revenues of $530 million in last year’s second quarter. In addition, the favorable impact from foreign currency was 4 percent of that growth compared to last year.
Instrument sales in the quarter were $233.3 million and were essentially flat with the comparable period a year ago, while consumables revenue grew 12 percent year over year to $230.6 million. Revenues from other sources, which includes service and support, royalties, licenses, and consulting, increased 10 percent to $98 million in the quarter.
The firm said sales for DNA sequencing products were flat with last year’s second quarter at $146.8 million, while real-time PCR and applied genomics products sales increased 16 percent to $200.5 million from $172.6 million.
Mass spectrometry sales rose 1 percent to $137.6 million from $135.9 million, core PCR and DNA synthesis products grew 2 percent to $50.2 million from $49.2 million, and sales from other product lines rose 5 percent to $26.8 million from $25.5 million.
Sales in the US were flat with last year’s Q2 at $215.5 million, while sales in Europe rose 13 percent year over year to $210.2 million, sales in Japan fell 10 percent to $47.8 million, and sales to other Asia Pacific countries increased 15 percent to $60.3 million.
“I’d characterize the business environment in the life science end market as quite mixed right now,” Tony White, CEO of ABI parent firm Applera, said during a conference call today. “It’s healthy in some segments and geographies and clearly challenging in others.”
ABI’s R&D spending declined 12.8 percent to $44.4 million from $50.9 million in the second quarter of 2007. The firm said the decrease was primarily due to “lower employee-related costs, the termination in June 2007 of a contract with the US Department of Defense, and the timing of R&D project expenses.”
ABI posted a profit of $86.3 million, or $.49 per share, a 15.4 percent increase over net income of $74.8 million, or $.39 per share, in the second quarter of 2007. Foreign currency effects provided a benefit of approximately $.05 per share, the firm said. Its gross margin increased to 58.1 percent from 55.6 percent year over year, driven by lower costs for enzymes and favorable foreign currency effects.
“While the magnitude of the margin and earnings improvement might not be fully sustainable due to some factors that may not repeat in future quarters, it is clear that we are moving aggressively to expand our operating margins and mitigate the effects of this period of modest revenue growth," White added in a statement. "We have freed up costs in the business, some of which we intend to redeploy in our growth areas in subsequent quarters.”
Mark Stevenson, president and chief operating officer of ABI, noted in the statement that the firm has experienced “strong interest” in its recently launched SOLiD next-generation sequencing platform, and that it will start booking revenue in the current quarter, which ends March 31, from systems it shipped during the second quarter. He added that the firm is currently limiting shipments of the system so it can provide an appropriate level of service and support.
ABI said that although a final decision has not been reached, it expects Applera to file a registration statement with the US Securities and Exchange Commission by the end of the current quarter to finalize a split from sister company Celera. As reported by GenomeWeb Daily News earlier this month, Celera President Kathy Ordoñez told investors at the JPMorgan Healthcare Conference that Applera’s board of directors recently stated its preference that the affiliated firms be split into two independent entities rather than remaining tracking stocks of Applera.
ABI said it expects fiscal 2008 sales growth to be in the mid-single digits, assuming current exchange rates. It also expects revenues to be comparable to the prior year for instruments but higher for consumables.
Shares of ABI dropped 4.8 percent to close at $29.40 on the New York Stock Exchange on Thursday.

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