This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
Caliper Life Sciences expects sales to the academic sector to continue increasing in 2007 as the benefits from its acquisition of Xenogen last year and the launch of several new products gain momentum, company officials said last week.
The firm also expects OEM sales of its chips to Agilent and liquid-handling equipment to Affymetrix will pick up in 2007 after a drop-off in 2006.
“We have this situation where we believe that academics are still going to play a major role for our company,” said Caliper President and CEO Kevin Hrusovsky during the firm’s fourth-quarter conference call last week. “I would say the old Caliper, prior to Xenogen, had only about 20 percent of our sales in academic and government institutions, and the old Xenogen, prior to the combination, actually had 80 of the revenue coming from academics.”
Caliper acquired Xenogen in August 2006 and NovaScreen Biosciences in October 2005, and recently combined the operations of those firms into a single drug-discovery service division called Caliper Discovery Alliances and Services.
He made his comments as Caliper reported that its fourth-quarter revenues increased 29 percent. However, its net loss surged 500 percent as charges related to its acquisitions of Xenogen and NovaScreen took a toll.
During the call, Hrusovsky called 2006 a “transformative year” for the firm, as it made acquisitions that furthered its goal of providing customers with an in vitro-in vivo bridge in the preclinical drug research field.
“We’re hoping to expand the channel and product breadth that go into the academics to not only the Xenogen products but also the Caliper products, including this new Zephyr launch as well as Twister and some of the smaller products that we sell that have price points less than $100,000,” he said. “That is where we see the primary opportunity.”
The Zephyr is a compact, multi-channel liquid handler, while Twister is a microplate handler.
However, Hrusovsky noted that “the gross margin is a concern for us with Xenogen and the academics.” He said the gross margins there were about 40 percent, which “isn’t that exciting to us, [but] the great news about academics is the bibliographies and the references — these are publications that get written up, and many of the reasons why big pharma do get involved is because of some of the work that has been done at the academic level.
“We actually think it’s a greater feeder for future commercial growth, where we do believe there is better profitability,” he said.
Hrusovsky said that Caliper launched five new products that are expected to account for 20 percent of the firm’s 2007 revenues. He cited the Desktop Profiler for kinase profiling, in particular, as a key growth driver, because of its lower price point, and said that the instrument is expected to increase sales to smaller biotech customers.
Q4 Revenues Rise; OEM Sales May Rebound
Caliper’s total revenue for the three months ended Dec. 31, 2006, increased to $34.7 million from $26.9 million year over year.
A majority of that revenue came from product sales, which brought in $23.7 million, up 31 percent, while services brought in $8.1 million, a 32 percent increase, and licensing and contracts earned $2.9 million, 14 percent over last year.
Caliper’s Q4 net loss increased to $8.9 million, or $.19 per share, from $1.5 million, or $.04 per share, in Q4 2005. Caliper said that its acquisition of Xenogen was the most significant factor that contributed to the quarterly loss.
Caliper reported $4.3 million in charges during the quarter related to amortization of intangible assets, including $1.7 million related to NovaScreen. Hrusovsky said this was primarily due to rebranding NovaScreen as part of Caliper Discovery and Advisory Services and the planned phase out of the NovaScreen trademark.
Caliper’s R&D spending increased to $6.5 million from $4.8 million year over year.
For full-year 2006, Caliper brought in revenue of $69.2 million, up 16.1 percent over revenue of $59.6 million in 2005.
Sales of Caliper’s microfluidic instruments were flat for the quarter, but up 38 percent for full-year 2006. Sales of these products were hurt in the second half of the year by lower OEM sales to Agilent, according to Hrusovsky.
He said during the call that Caliper no longer provides the reagent packages with the chips it supplies to Agilent, which shaved between $1 million to $1.5 million from Caliper’s top line in 2006. But, he noted that the upcoming launch of Agilent’s cholesterol test, which uses Caliper’s technology, will boost revenue in 2007.
“The old Caliper, prior to Xenogen, had only about 20 percent of our sales in academic and government institutions, and the old Xenogen, prior to the combination, actually had 80 of the revenue coming from academics.”
“We believe there are going to be more diagnostic launches from Agilent, [and] we feel very comfortable that we’re going to see additional growth there from Agilent over the next several years,” said Hrusovsky.
He also said the firm would benefit from a collaboration announced in October 2006 with Canon US Life Sciences, which selected Caliper’s microfluidics platform as the base for its molecular diagnostics business. “Canon is one of several collaborations in the area of gene-based diagnostics that has invested over $120 million in Caliper licensing and R&D over the past three years,” said Hrusovsky.
Caliper is in the early stages of developing its molecular diagnostics strategy based on its LabChip platform (see BioCommerce Week 2/14/2007). But the firm has made no decision on whether it will delve into supplying content for such a platform.
“We’re still trying to establish just how strong our commercial position is in the platform itself,” said Hrusovsky during the conference call. “It’s premature for us to think that we would actually be providing our own content in our platforms. It’s first important for us to get a platform established that we feel has some universal capability that can cut across different companies’ content.
“To the extent that we can get that established and get a good sense of supply behind it, I think it does then raise the question of whether we would have an opportunity to bring our own content to market,” he said.
Meanwhile, sales of the firm’s liquid-handling products declined during the year due primarily to lower sales of products to Affymetrix, which struggled throughout the year. He said there was about a $6 million negative impact in 2006 due to that alliance, but noted that Affymetrix had “worked its way through some chip issues.”
“The markets themselves we think are going to be rather marginal from a standpoint of growth,” he said. “We think we’re going to have nice share gain in 2007 in [the liquid-handling] segment due primarily to Affymetrix and the Zephyr launch … which we’re already getting some uptake on.”
Caliper reported a full-year 2006 net loss of $28.9 million, or $.75 per share, nearly doubling its 2005 net loss of $14.6 million, or $.46 per share, in 2005.
The firm had around $11.6 million in cash and equivalents and $13.3 million in marketable securities as of Dec. 31, 2006.
Caliper projects its 2007 revenue will be between $137 million and $143 million, a jump of between 27 and 33 percent from 2006.
Hrusovsky said the firm is now “positioned well for organic growth, margin improvement, and the possibility of additional tuck-under acquisitions.”