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Invitrogen to Increase Focus on Cell Biology Tools; Q3 Revenues Rise 11 Percent

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
An Invitrogen executive said this week that the firm plans greater investments and focus on the cell biology field rather than its traditional molecular biology market.
 
Chairman and CEO Greg Lucier said during the firm’s third-quarter conference call that more R&D dollars are being directed to its Cell Culture Systems business segment, and the firm is working on a lower-cost multiplex cell-analysis instrument.
 
Meanwhile, Invitrogen posted 11 percent growth in third-quarter revenues, as the Cell Culture Systems segment continues its rebound from a difficult 2006. It also appears that Invitrogen may be ready to resume its acquisition activities after being very quiet on that front for the past year and a half.
 
“We are putting the cell at the center of our strategy — [it is] the key link between our BioDiscovery and Cell Culture Systems segments,” Lucier said during the call. “While we continue to innovate in molecular biology elements, we see more and more work being done by scientists to put biology in context. That context being the cell,” he said.
 
“In this area we feel our position is differentiated, with extremely promising growth trends,” said Lucier.
 
He said that although Invitrogen continues “to invest in the broad definition of cell biology, the stem cells team continues to get bigger and more share of our R&D dollars.” In addition, “the cell culture research business has some really exciting plans, and they’re getting funded because we see obviously more and more cells being grown and [customers] need our media,” said Lucier.
 
He said the firm has “two major thrusts” in addressing cell analysis in particular. “We’re building up very broad content in terms of antibodies, labels, [and] things like that, on our website,” said Lucier.
 
“Building up our capability in instrumentation in multiplexing is another key thrust in cell analysis for us,” he said.
 
Lucier said a key area for R&D investment is the firm’s nascent efforts in developing instrumentation. “We’re building more and more capability to develop on our own lower-priced more consumable-like instruments that are tied to our reagents,” he said.
 
The firm launched its first instruments — the iBlot Dry Blotting system and iPrep purification instrument — in September (see BioCommerce Week 9/27/2006). The instruments build off of reagents and chemistries Invitrogen developed and sold out of the BioDiscovery business segment.
 
The iBlot transfers proteins from polyacrylamide gels to nitrocellulose membranes in preparation for downstream analysis, while the iPrep automates nucleic acid purification using Invitrogen’s ChargeSwitch technology. Invitrogen has also since launched the Qubit fluorometer for DNA, RNA, and protein quantitation.
 
“For stem cells, or cell separation [and] things of that nature … we’re designing the instrumentation on our own with an ultimate engineering partner to execute the final piece of work,” Lucier said this week.
 
Q3 Revenues Up 11 Percent
 
Continuing a rebound from a difficult 2006, Invitrogen reported third-quarter revenue of $315 million, an 11 percent gain on last year’s third-quarter revenues of $284 million. Organic revenue growth was 8 percent. The double-digit revenue growth followed 13 percent growth in the second quarter.
 
The BioDiscovery segment had 7 percent organic growth, and 10 percent overall, to $220 million in the quarter driven by both molecular and cellular biology products, said Lucier. “We are particularly pleased with the revitalized growth we experienced in our molecular biology product areas, which is the result of new products, positive price realization, and more effective selling by the sales teams,” he said.
 
Lucier cited real-time PCR consumables as a particularly strong performer in the quarter. “Our growth in this segment is in excess of 25 percent,” he said.
 
Cell Culture Systems delivered 12 percent year over year growth to $95 million, and continues to perform better than the firm had anticipated, company officials said on the conference call.
 
That segment has benefited this year from the sale of the BioReliance unit to private-equity firm Avista Capital Partners for approximately $210 million (see BioCommerce Week 2/14/2007). The unit, which Invitrogen acquired for around $500 million in 2004, never met expectations and became a drag on earnings over the past couple of years.
 

“We are putting the cell at the center of our strategy — [it is] the key link between our BioDiscovery and Cell Culture Systems segments.”

The firm’s sera business, which is part of the Cell Culture Systems segment and had struggled in late 2006, has since provided modest revenue growth.
 
Lucier noted that the stem cell market is around $100 million, but “growing very quickly.” He said individual state funding of stem cell initiatives, particularly in California, is driving growth for this segment. Company officials said Invitrogen’s sales in the stem cell market are currently in “the tens of millions” of dollars and growing in the double digits.
 
Invitrogen posted a third-quarter profit of $31 million, or $.64 per share, compared to a net loss of $129.8 million, or $2.47 per share, in the comparable period a year ago. Last year’s results included a charge of $145.6 million associated with goodwill impairment in the Cell Culture Systems segment.
 
Invitrogen’s R&D spending increased to $28.6 million from $26.3 million a year ago, while its selling, marketing, general, and administrative costs rose to $104.3 million from $99 million.
 
Company officials could not yet provide a monetary impact that last week’s wildfires in southern California had on the firm’s bottom line.
 
“We have sound business continuity plans in place that allowed us to continue to ship products to our customers, primarily from other sites,” said Lucier. “As of last Thursday, we are back to full operations in Carlsbad. At this point, it would be premature to assess the exact impact of the situation on our business. However, we believe it to be manageable.”
 
Invitrogen finished the quarter with $648.5 million in cash and investments.
 
Eyeing M&A Opportunities
 
Lucier also suggested during the call that Invitrogen may soon jump back into the merger and acquisition market.
 
“We remain focused then on finding those unique companies that have a highly defendable market position, unique technologies, and situation that could create great synergies when combined with our company,” said Lucier during the call. “Although we have not acted on many opportunities in the last 18 months, our current pipeline is very promising.”
 
He declined to comment on specific companies or spaces the firm is focusing on. “I think I’ve answered where we’re interested right now, and that will indicate where we’re going to be investing in acquisitions,” he said, apparently referring to the cell research field.
 
“The basic fact is we can’t possibly be the inventors of all the cutting-edge technologies that are important to our customer segments, so acquisitions will always be part of our strategy,” said Lucier. “Now that we have the ERP implemented in the majority of the world, it’s much easier for us to integrate a company and gain the required synergies to make the investment pay off.”
 

Although Invitrogen officials had insisted in early 2006 that the firm intended to spend roughly $500 million on acquisitions that year, that plan was derailed by continuing difficulties in the BioReliance business, a massive IT overhaul, and integration issues related to the purchases in 2005.

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