After adding several new businesses and products through acquisitions over the last couple of years, Invitrogen is now considering selling off or discontinuing some 'minor' yet undisclosed product lines or business units, the firm said this week.
The firm is not disclosing which products or businesses are being considered for divestiture, and a company spokesperson told BioCommerce Week that the process is the natural result of integrating many pieces into the company over the past two years.
Separately, Invitrogen announced that although its first-quarter revenues rose 12 percent year over year, the results fell 3 percent short of its expectations.
"We just started recently looking at all the acquisitions we made over the past two years and ensuring that every single one of those products strategically fits into our portfolio," said an Invitrogen spokesperson this week. "It's what you do when you do integrations. Now that we've integrated the companies, we're looking at" seeing if everything fits, "and if it doesn't and if there's a buyer out there, we will sell it," she said.
The spokesperson noted that the product lines or businesses that would be sold "are going to be minor — less than one percent of our revenue individually." Invitrogen generated revenue of $1.2 billion in 2005, up 17 percent over revenue of $1 billion in 2004.
"We just started recently looking at all the acquisitions we made over the past two years and ensuring that every single one of those products strategically fits into our portfolio."
She also said the firm will not sell off any of the companies it purchased during its acquisition spree over the past couple of years.
Last year, Invitrogen spent nearly $650 million to acquire eight businesses with an eye clearly on applications closer to the patient, primarily molecular diagnostics, as well as building its cell biology and proteomics businesses. That followed $500 million spent on acquisitions the year before.
During a December 2005 conference call, Invitrogen Chairman and CEO Greg Lucier said that although the firm added many new pieces throughout the year, the strategy was focused. He said the plan for 2005 was to build the cell biology and proteomics businesses — areas toward which the firm sees science moving toward — and it did just that through the acquisitions of firms such as Dynal, Quantum Dot, and BioSource (see BioCommerce Week 12/22/2005).
Following those and other acquisitions, Invitrogen realigned the company in an effort to integrate all of the new technologies and accelerate its growth rate (see BioCommerce Week 12/8/2005). The realignment plan, which took effect Jan. 1, created the Life Sciences division and Enabling Technologies division within the BioDiscovery unit. The BioProduction unit, though remaining virtually unchanged, now includes a division called BioProduction Services and Systems.
Though the firm will not release its full first-quarter results until next week, Invitrogen said this week that its revenues in the quarter were $309 million amid slower-than-anticipated sales in the company's US BioProduction and Japan businesses. The company spokesperson stressed that the firm's biomanufacturing business was the cause of the shortfall in first-quarter BioProduction sales, not the GIBCO cell culture business or the BioReliance business, which has struggled over the past year.
Lucier has previously acknowledged that Invitrogen may have made some mistakes in integrating the BioReliance business, which was acquired in February 2004 for $500 million. The business accounts for roughly 10 percent of Invitrogen's annual revenue.
Invitrogen replaced the management of BioReliance in the second half of 2005, and is betting that IT improvements at the firm will pay off, leading BioReliance to recover in the second half of 2006. Part of that prediction is based on the firm's view that the pharmaceutical industry will continue to move towards a cost-variable structure and outsource many activities, such as those provided by BioReliance.
According to a company press release, pro forma earnings per share for the first quarter of 2006 were slightly higher than anticipated due to an improved mix of sales, lower royalty expense, and lower share count.
Looking ahead, Invitrogen said that it is widening its fiscal year 2006 revenue guidance to a range of $1.3 billion to $1.355 billion due to first quarter performance and the anticipated discontinuation and sale of certain minor business units. Previously, the company projected that full-year 2006 revenues would be $1.33 billion to $1.355 billion — a gain of between 10.8 percent and 11.4 percent over 2005.
Its pro forma earnings per share guidance remains unchanged with a range of $3.90 to $4.10.
Investors showed their displeasure with the announcement by sending Invitrogen's shares down 4.9 percent on Monday — the day the news was released — to close at $64.11. Its shares closed at $62.50 on Tuesday, near a 52-week low of $60.14, which was reached on Oct. 28, 2005, following the release of disappointing third-quarter results (see chart).
The company will provide more details of its planned divestitures and financial results during its first-quarter conference call on April 27, the spokesperson said.
— Edward Winnick ([email protected])