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White to Remain at ABI Helm for at Least One More Year; RT-PCR, Mass Spec Lead Q2 Growth

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Applera CEO Tony White last week said that he would remain as interim president of Applied Biosystems for the next one to two years and that the search for a full-time replacement would likely be limited to internal candidates.
 
White’s comments come three months after former ABI President Cathy Burzik left the company and will give Applera’s board of directors plenty of time to assess in-house candidates.
 
ABI also reported last week that its second-quarter revenue grew 10 percent year over year, aided by $16 million in sales from its Ambion subsidiary and a 2 percent benefit from currency translation. Excluding these contributions, ABI’s revenues rose a little more than 4 percent for the quarter.
 
“Last October, I stepped into the role of interim president of AB,” said White during the firm’s second-quarter conference call. “I plan to continue in this role for the next one to two years.
 
“One of my priorities is to work with the division and regional presidents and the rest of the executive team on strategic issues to ensure the continued health of Applied Biosystems into the future … [and] to refine my view of the skill set necessary for the next president” of ABI, he said.
 
“As of now, the board of directors and I have no plans to conduct an external search. Rather, we are focusing on further developing the high-potential leadership team within Applied Biosystems,” said White.
 
Among the obvious candidates for the post are ABI’s four division presidents: Mark Stevenson, Laura Lauman, Leonard Klevan, and Michael Schneider. All four joined White during the conference call to answer questions from analysts.
 
Whoever eventually takes over at the helm of ABI will be running a firm that looks considerably different than it did three years ago, before a restructuring in the summer of 2004 and numerous strategic efforts to reposition the firm to focus on new growth opportunities such as RNAi reagents, next-generation sequencing, molecular diagnostics, and the applied markets. This change in direction was led by Burzik, who resigned in October to take over as CEO of Kinetic Concepts (see BioCommerce Week 10/25/2006).
 
Burzik joined ABI as vice president and COO in 2003 from Johnson & Johnson where she was president of J&J’s Ortho-Clinical Diagnostics business. She replaced Michael Hunkapillar as president when he retired in 2004.
 
Asked during the Q&A portion of the conference call why the firm was not considering outside candidates, White said, “I think this is an opportunity … for me to get much closer to the business without a filter, to get to know the senior management of the division … and work with them more closely and see if we are aligned the way I think we are around the future of the company.
 
“It also gives me a chance, again, without a filter to get close to the strategy,” he said. “We’re going back and looking at our long-term and medium-term strategies, sort of the culture of the company towards development and innovation, how we’re going to address all of the new challenges we see in this business, because we have a lot more competition than we used to have. We have a lot more applications than we used to have, and I have a sense that if we don’t adjust all of that, then in the way we do business and the way we think about our business we might not be able to be as successful long-term as we had been,” said White.
 
He said that it is very important to leave ABI “in the hands of people who feel as passionately as I do about what we have to do to make a secure future for this business. Within that group of people there are very talented, high-potential individuals who I think deserve a chance to run this place. So, for all those reasons I’d rather go that route than to go outside and look for an unknown quantity right now,” said White.
 
RT-PCR, Mass Spec Drive Revenues
 
For its fiscal second quarter ended Dec. 31, ABI posted revenue of $530 million, a 10 percent increase over revenue of $481.9 million for the second quarter last year. The revenue growth was led by the firm’s Real-Time PCR/Applied Genomics business, which generated revenue of $172.6 million, an 18 percent gain over revenue of $146.8 million for the second quarter a year ago.
 
Sales of the firm’s mass spec products grew 14 percent year over year to $135.9 million.
 
Lauman, president of the proteomics and small molecule division, said ABI has seen “solid growth” for its mass spec products over the past year or two, and she doesn’t see the market changing much going forward.
 
“We certainly are competing on the performance of our systems and integrated applications,” she said during the conference call. “That’s what has really been driving the market as a whole, as well as our growth. Really what customers are looking for are integrated systems and key application areas.”
 

“I think this is an opportunity … for me to get much closer to the business without a filter, to get to know the senior management of the division … and work with them more closely and see if we are aligned the way I think we are around the future of the company.”

Sales of ABI’s DNA sequencing products increased 4 percent to $146.8 million, while sales of the firm’s PCR and DNA synthesis products gained 3 percent to $49.2 million.
 
ABI’s instrument sales grew 5 percent year over year to $234.4 million, while consumables sales were up 16 percent to $206.8 million, and other sources of income — including service, royalties, and licenses — grew 10 percent to $88.8 million.
 
The firm posted net income of $74.8 million, or $.39 per share, compared to net income of $30.9 million, or $.17 per share, for the comparable period last year. During last year’s second quarter, ABI took a tax charge of $28 million related to the repatriation of cash balances held outside the US and overseas dividends.
 
ABI’s R&D spending in the quarter increased 13 percent to $50.9 million from $45.2 million year over year.
 
The firm finished the quarter with $343.7 million in cash and short-term investments.
 
For fiscal year 2007, the company said it expects singe-digit to low double-digit revenue growth, led by its DNA sequencing, PCR, and mass spec product lines. It also said it expects sales in core PCR, DNA synthesis, and “other” product lines to decline during the fiscal year.

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