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New Sales Methods at Invitrogen Help Drive 30-Percent Q3 Revenue Growth

Invitrogen’s US sales force was recently given new marching orders on how to sell the company’s wide line of products, and this shift has quickly provided top-line benefits to the firm, Greg Lucier, CEO and chairman, told analysts last week during the company’s third-quarter conference call.

“We think we will see future growth driven by this type of sales performance in all regions around the world,” Lucier said. “I think most of our gains in the quarter are attributable to more packaging of our products together — something we didn’t do before, and we could be faulted for that.”

Invitrogen reported a 30-percent increase in third-quarter revenue, to $256.3 million from $196.9 million in Q3 2003, and a 106-percent jump in net income, to $28.2 million from $13.7 million for the same quarter in 2003.

“If you look at Invitrogen over the past few years, it was always very much of a deep scientific style, and one-off transactions,” Lucier said. “What we started to do was leverage the breadth of our product line to be much more of a full-line supplier and sell in a way that we can provide all of the products and services that an organization needs.”

The company began training its sales force for this new initiative early in 2004.

“It took lots of training,” Lucier said. “We saw the positive effect of those changes in the third quarter. It takes time for human beings to change and we felt that it caught on in the third quarter.”

Invitrogen offers its products through two divisions — BioProduction, which sells sera, cell and tissue culture media, and reagents, and BioDiscovery, which offers tools for gene cloning, gene expression, and gene analysis.

To fill a gap in its molecular tools product offering, the company on Thursday announced the acquisition of UK-based DNA Research Innovations for $35 million in cash and up to $30 million in cash tied to certain research and development milestones. DRI is commercializing its ChargeSwitch technology for nucleic acid purification.

DRI, which is based in Kent, sells its purification kits in the UK and has additional products under development. Invitrogen will offer the products with certain of its own offerings, which were developed internally over the past 18 months, the company said.

ChargeSwitch will give Invitrogen entry into the market early in a research project, with the hope that it leads to sales of other products downstream in the research process, Lucier said.

“Invitrogen has virtually no footprint in this very important growing segment,” Lucier said. “This will allow us to provide a product line that will cover about 100 percent of the nucleic acid-purification segment within the next 12 months. This is a business that we think has long-term possibilities in both research applications and as we move towards the world of personalized medicine.”

With the acquisition, Invitrogen enters competition with Qiagen, the reagent giant.

“Our goal is not to displace Qiagen, a great company,” Lucier said. “If we can provide customers a choice, and we can get humbly a 5- to 6-percent market share, this is an accretive proposition for us. Five percent of a billion-dollar business is a good move.”

Lucier said Invitrogen would work with Tecan and Beckman Coulter to provide automation options for the technology.

Qiagen representatives declined comment.

The acquisition of DRI is Invitrogen’s fourth this year, following the purchase of BioReliance in February, Protometrix in April, and Xeotron in May. In 2003, the company purchased Molecular Probes, Genicon Sciences, Sequitur, and PanVera.

The $325 million cash acquisition of Molecular Probes, which develops and markets fluorescence-based technologies for molecular labeling, has been a growth driver for the company’s BioDiscovery unit, which contributed $146 million to Invitrogen’s total revenues for the quarter, compared to $125.3 million for the year-ago period.

“BioDiscovery delivered at the top end of our expectation in the third quarter,” Lucier said. The unit’s revenue contribution grew 17 percent compared to the previous year’s quarter, including 5-percent organic growth, with 2 percent of that growth attributable to Molecular Probes. The company does not break down unit performance.

However, Invitrogen is constructing a $20 million chemistry facility for Molecular Probes in Eugene, Ore.

“We are filling that with scores of new hires,” Lucier said. “It’s a business with an incredible runway, with lots of growth there.”

For the third quarter, Invitrogen spent $45.6 million on sales and marketing, up from $38.4 million in the year-ago quarter. General and administrative costs increased to $27.6 million from $22.7 million for the comparable period in 2003, while research and development climbed to $19 million from $15.3 million in the third quarter of 2003.

“SG&A was higher than what we were looking for,” Lucier told analysts. He said the rise in costs followed an increase in its promotional activities during the quarter, and the addition to its management team.

Invitrogen projected that total revenue for 2004 will top $1 billion, with pro forma earnings per share expected to range from $.75 to $.77 for the fourth quarter and $2.89 or more for the fiscal year.

— Mo Krochmal ([email protected])

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