Harvard Bioscience, reporting a small decline in second-quarter revenues, said it would exploit its database of more than 150,000 academics in an effort to increase sales.
The firm also disclosed that it has engaged investment banking firm Thomas Weisel Partners to help it find a buyer for the capital equipment segment, which includes the struggling Genomic Solutions business. The company said it would use proceeds from the sale to pay down a $15.2 million debt facility and finance tuck-in acquisitions for the apparatus business.
During a conference call following the release of the results, however, Harvard Bio President David Green said that such tuck-in acquisitions could occur before the sale of the capital equipment business is finalized — which the company has cautiously predicted will happen within one year. Since 1996, Harvard Bio has made 15 acquisitions that have been tucked into the apparatus and instrumentation business.
Harvard Bio officials have also said the firm has hired an undisclosed investment bank to assist in identifying acquisitions that would significantly add to the apparatus business portfolio.
These details emerged this week as the company reported second quarter revenue of $21.7 million, a 3.3 percent drop from revenue of $22.5 million in last year's second quarter.
The firm's apparatus and instrumentation unit, which it is retaining, brought in revenue of $16.3 million for the quarter, up 4.2 percent year over year from $15.6 million. Revenue for the capital equipment segment dropped a sharp 20.3 percent to $5.4 million from $6.8 million in last year's second quarter.
Harvard Bio posted a net loss of $27.4 million, or $.90 per share, compared with a net profit of $298,000, or $.01 per share, in its 2004 Q2. The loss includes asset abandonment and impairment charges of $17.9 million related to the divestiture of the capital equipment business, as well as roughly $1 million in restructuring expenses.
The decision to divest the capital equipment business, which includes the struggling Genomic Solutions subsidiary, comes less than two months after Harvard Bio announced that it would split out financial information for the two major components of the company: the capital equipment business, which has been volatile and unpredictable, and the apparatus and instrumentation business, which has provided more consistent results (see BioCommerce Week 6/9/2005).
Genomic Solutions supplies instruments, software, and consumables, including the Cartesian Dispensing high-throughput screening products, Gene Machines and BioRobotics microarray technologies, and Investigator proteomics technology. Its products for DNA, RNA, and protein analysis are distributed by much larger players in the molecular biology tools and lab equipment space, including GE Healthcare, PerkinElmer, and Fisher Scientific.
The unit, which Harvard Bio purchased in 2002 for $26 million, was built around enabling the home-brew microarray market, selling technology platforms that would allow researchers to manufacture their own chips. But the market for such products declined as mass-manufactured arrays displaced these systems, and Genomic Solutions struggled.
On the other hand, the apparatus and instrumentation business — which sells syringe pumps, ventilators, amino acid analyzers, and electroporation instruments, among other products — has recorded strong revenue growth since 1997, driven by both organic growth and acquisitions, according to the firm. The segment has returned a compound annual growth rate of 20 percent in revenue since 1996.
The sale of the capital equipment business should enable the firm to deliver more consistent returns, according to both company officials and analysts.
"By breaking apart the business and basically throwing in the towel on Genomic Solutions, they are going to allow investors to really invest in the business that is the more attractive of the two, has the better prospects of the two, and that really fits their strategy, which is organic growth augmented by small tuck-in [acquisitions]," Pacific Growth Equities analyst Adam Chazan told BioCommerce Week in an interview last week (see BioCommerce Week 8/4/2005).
As of June 30, Harvard Bio had cash and cash equivalents of $13.2 million.
Going forward, Harvard Bio forecast third-quarter revenue of $16 million to $17 million and fourth quarter revenue of $17 million to $18 million for the apparatus and instrumentation segment.
— Edward Winnick ([email protected])