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Disappointed by Q1 Performance, HBIO Says Genomics Solutions Finally on Track

Harvard Bioscience last week reported a slight year-over-year increase in revenues for the first quarter, and turned a small net loss into a small profit.

Total revenues for the quarter increased to $22.4 million, up 1 percent from $22.2 million during the same quarter last year. The company's net income was $200,000, or $.01 per share, compared to a net loss of $51,000 during Q1 of 2004.

"Although we are disappointed in our Q1 results overall, clearly we are very pleased with the progress that has been made at Genomic Solutions," said David Green, HBIO's president, in a conference call to investors last week. Harvard Bioscience acquired Genomic Solutions in 2002 and has been struggling to turn the unit profitable (see BCW 3/17/2005).

The reorganization of the subsidiary last summer, which included the closing of one location, and layoffs of a quarter of the staff, seems to have borne out. On an adjusted basis, excluding amortization and intangible assets, Genomic Solutions was profitable for the second quarter in a row. With a new sales and marketing team in place, HBIO now wants to focus on growing its revenues and products.

Also, HBIO is currently relocating Genomic Solutions' Cartesian product line of liquid dispensers from Irvine, Calif., to its Holliston, Mass., site — its main manufacturing site for its Harvard Apparatus unit and its headquarters. Genomic Solutions still has operations in Huntingdon, UK — the primary manufacturing site for genomics and proteomics products — and a small site in Ann Arbor, Mich.

Besides Genomic Solutions, other "core product lines" showed growth in sales in the first quarter, including syringe pumps from Harvard Apparatus and spectrophotometers and amino acid analyzers from Biochrom. Besides Genomic Solutions, those two business units make up "the bulk" of HBIO's business, according to Green, with the remainder coming from sales of COPAS large-bore flow cytometers and MIAS high-content screening systems. COPAS sales were a "big disappointment" in the first quarter, he said in the conference call, as companies cut back on capital spending.

GE Gives Biochrom a Boost

Biochrom sales had been hampered for several quarters because Amersham, Biochrom's largest distributor since 1999, was reorganized last year after the company was acquired by GE Healthcare. However, sales started stabilizing during the fourth quarter of 2004 and "GE made a very strong commitment to support our product line going forward," said CEO Chane Graziano in the conference call.

He said GE Healthcare added 15 additional people to the sales team that sells Biochrom's products. This sales team now has a headcount of 55, and Biochrom technical personnel will have office space at GE. "They made a much stronger commitment than they had ever been willing to make in the past," Graziano said.

Biochrom also does about 30 percent of its business independently of GE Healthcare now, he pointed out.

Genomic Solutions' Revenues Decline, But Orders Grow

Although year-over-year revenues for Genomic Solutions, which account for about 25 percent of HBIO's total revenues, were down for the quarter, orders were up. Also, revenues were up compared to the fourth quarter, despite the fact that the year's first quarter is usually seasonally weak, according to Green. Genomic Solutions' operating margin was a "low single-digit," but the company hopes it will grow to 10-15 percent by the end of the year.

In particular, revenues from Genomic Solutions' GeneMachines and BioRobotics microarrayers grew in Q1 "as applications such as comparative genomic hybridization and protein arraying [are starting] to replace traditional gene-expression analysis," Green said.

Another Genomic Solutions product, SynQuad nanoliter dispensers, also did well, driven by protein crystallography applications, the company said. The unit's two-dimensional gels and mass spectrometry automation products for proteomics, as well as nanoliter liquid dispenser for high-throughput screening, on the other hand, had weak sales in the first quarter.

According to Green, Genomic Solutions plans to launch two new products for proteomics automation later this year, "which we believe will return the proteomics product line to growth." Those products will target automation for 2D gel and mass spec analysis, Green told BioCommerce Week in an e-mail response to questions, but he declined to provide further details.

In addition to growing its current business, Harvard Bioscience is also eying a new acquisition, Green said, and continues to review several possible acquisition candidates. He did not elaborate on who those candidates are.

As of March 31, HBIO had $12.4 million in cash and cash equivalents.

— Julia Karow ([email protected])

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