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Invitrogen Posts 10 Percent Q1 Revenue Gain as Cell-Culture Segment Rebounds

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Invitrogen this week reported that its first-quarter revenues increased 10 percent year over year, with its Cell Culture Systems unit rebounding, due partially to the sale of the struggling BioReliance business during the quarter.
 
Company officials said during a conference call this week that recent changes to sales force management and compensation plans as well as the completion of an enterprise resource planning (ERP) system in North America also helped boost first-quarter revenue growth.
 
They also reiterated statements that Invitrogen would focus on smaller, tuck-in acquisitions after difficulties last year in integrating its new businesses.
 
Invitrogen reported first-quarter revenue of $309 million, a 10 percent increase over revenue of $280 million in the first quarter last year.
 
“The plans we had in place for driving revenue growth, minimizing costs, and managing cash all delivered the desired results,” said Invitrogen Chairman and CEO Greg Lucier during the conference call. “This is not always the case in our business, and we don’t count on this happening every quarter.”
 
Revenue for the firm’s BioDiscovery business grew 9 percent year over year, or 6 percent without currency benefits, to $220 million. Its Cell Culture Systems unit grew 13 percent, or 10 percent excluding currency benefits, to $89 million. Company officials noted that sales of BioProduction media, which is part of the Cell Culture Systems unit, grew in the double digits.
 
“As we’ve said before, this is an inherently lumpy business, which is highly sensitive to order timing,” said CFO David Hoffmeister during the call. “So, one quarter of results cannot be used as a trend. But we’re encouraged by our pipeline and remain confident of the long-term prospects for this business.”
 
While the firm’s Sera business grew in the low single digits, he said, Invitrogen expects that business to decline for the year as demand for production sera continues to decrease.
 
Currency produced an $8 million benefit for the quarter, but the firm is assuming its affect will be neutral for the year.
 
Invitrogen posted first-quarter net income of $30.3 million, or $.62 per share, compared with net income of $19.2 million, or $.34 per share in the first quarter last year.
 
A review of the firm’s operations last year led to the eventual sale in the first quarter of BioReliance, which Invitrogen acquired in early 2004 for roughly $500 million, to private-equity firm Avista Capital Partners for approximately $210 million (see BioCommerce Week 2/14/2007). The unit never met expectations and became a drag on earnings over the past couple of years.
 
Following that review, Invitrogen also decided to change its sales force compensation scheme and replaced some of its sales management.
 
“Our sales reps have embraced the revised compensation plan, new leadership, and enhanced training programs,” said Lucier during the call. “The plans we put in place in late 2006 have started to show some positive benefits, which is earlier than we expected.”
 
Invitrogen also overhauled its information-technology systems in North America, made necessary by its aggressive acquisition strategy in the previous couple of years. The firm completed that process during the first quarter, and company officials sounded upbeat about its benefits.
 
“Overall, the implementations went as planned,” said Karen Dixon, chief information officer of Invitrogen, during the call. “However, implementing an ERP system introduced an enormous amount of change into our business, and we have experienced some minor issues as expected."
 
She said the company “experienced some initial delivery delays” that in turn increased volume at its call center. “This temporarily decreased service level clearly impacted our normal daily revenue streams during the first few days of the implementation,” said Dixon. “However, as we’ve worked through these issues we are encouraged by the trends as they are climbing back towards our normal service level.”
 
According to Lucier, the firm is “very encouraged by what just continues to be a shift from other different channels onto the web, and now we’re seeing a large portion of our business as a web-based company.
 

"This temporarily decreased service level clearly impacted our normal daily revenue streams during the first few days of the implementation.”

“From a back-office perspective, it allows us to really streamline the prediction of orders,” he added. “We’re able to use computer modeling to have a much better prediction then on what will need to be produced, where, and be able to move it through our distribution systems in a more effective way.”
 
Focusing on Tuck-Ins
 
Following last year’s difficulties in integrating several acquisitions, Invitrogen officials reiterated statements made earlier this year that the firm would focus on smaller, tuck-in acquisitions in 2007.
 
Following 2005, during which Invitrogen spent at least $650 million acquiring eight companies, the firm made just one acquisition in 2006: the $25.9 million deal to acquire Sentigen, which was completed at the end of August (see BioCommerce Week 9/6/2006).
 
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 its BioReliance business, the IT overhaul, and integration issues related to purchases made in 2005.
 
Invitrogen started this year with a tuck-in acquisition of Cascade Biologics, a provider of cell-culture technologies. Lucier said the acquisition, which the firm had not previously announced, is immaterial to the firm’s financial results, but sets Invitrogen up for some “very exciting opportunities in the future.”
 
He said the firm would continue to make smaller, tuck-in acquisitions in the balance of 2007. However, “overall, we remain committed to returning excess money to our shareholders via [share] buyback,” Lucier said.
 
He also said that the firm would not have the “same level of public commitment on acquisitions” that it previously had.
 
“It’s going to be much more strategic in terms of if we see something that could really impact the growth trajectory of the business, then I guess that we’ll spend what we spend to do it,” he said.
 
“In the near-term, though, we don’t anticipate anything large,” said Lucier. “We anticipate things that are smaller, more tuck-in, and nearer the spaces that we’re currently participating in so that we can grow our relative market share in what we are already doing.”
 
Invitrogen finished the first quarter with $333.6 million in cash and investments.

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