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Caliper Says New IVIS Spectrum Will Drive Sales to Big Pharma; Q4 Revenues Rise

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Caliper Life Sciences believes the recent launch of its IVIS Spectrum in vivo imaging platform, which is able to perform both bioluminescent and fluorescent imaging, will help drive sales to large pharmaceutical customers that passed over previous iterations of the instrument.
 
The IVIS Spectrum was developed by Xenogen, which Caliper acquired last year for $80 million as a key component of its effort to offer customers a technology platform that spans in vitro and in vivo testing (see CBAN 2/17/2006).
 
Caliper President and CEO Kevin Hrusovsky said last week that the new instrument and its related patents give the firm a “powerful position” in the market as it pursues big-pharma customers.
 
He made his comments during a conference call following the release of the firm’s fourth-quarter results, which included a 29-percent increase in revenue year over year.
 
Caliper unveiled the IVIS Spectrum at the Society for Molecular Imaging conference in Hawaii in late August, but it wasn’t commercially available until this quarter. The instrument combines the traditional bioluminescent technology that was part of the original system with advanced fluorescent imaging. Caliper said the result is a unique offering for the market.
 
“What we’ve done in the launch of this Spectrum is actually move toward big pharma,” said Hrusovsky during the call. “Big pharma, if you go back and look at our 400 installations, probably 60 percent of them plus, have tried to use our traditional systems for fluorescence,” he said.
 
“Fluorescence has one advantage over bioluminescence that we can see right now, and that is that fluorescence has been used in the human and it makes it more translational for our customers,” he said. “But our old IVIS units weren’t really built for fluorescence. They were being kind of doctored and used for fluorescence, but they weren’t built with fluorescence in mind.”
 
However, with the launch of the IVIS Spectrum, the instrument “goes right at where the competition has been playing,” said Hrusovsky. “Most importantly we’ve reduced significantly autofluorescence, which is a major drawback to fluorescent small-animal imaging.”
 
According to Hrusovsky, the firm recently received a notice of allowance for the continuation of a patent that gave the firm the first branch of its fluorescence patent estate, “which is major to the ability to operate freely around some of these fluorescent assays that [customers] would like to run in the mouse.”
 
The patent is assigned to Stanford University and licensed exclusively to Xenogen.
 
“You can see we are building and amassing a very powerful position from the commercial standpoint, and folks like Pfizer and others that hadn’t really bought IVIS prior to the merger are now buying them because they believe very much in the future and where we are taking this,” said Hrusovsky.
 
Two months ago, Caliper combined the operations of Xenogen and NovaScreen Biosciences, which Caliper purchased in late 2005 for approximately $30 million (see CBAN 9/12/2005), into a single drug-discovery service division called Caliper Discovery Alliances and Services (see CBAN 1/12/2007).
 
CDAS offers more than 700 in vitro assay types, including receptor, enzyme, and ion-channel screening and profiling, side-effect and ADME-tox panels, as well as cellular models for immunology, oncology, and other fields.
 
It also offers more than 85 in vivo pharmacological assays that measure more than 400 parameters for applications such as compound profiling and phenotyping, and target validation.
 
Other in vivo services include the creation of genetically modified animal models and biophotonic imaging of animals for oncology and other therapeutic areas.
 
Don’t Forget the Academics
 
Caliper officials also said during the call that the firm expects sales to the academic sector to continue increasing in 2007 as the benefits from the Xenogen acquisition and several new products gain momentum.
 
“We have this situation where we believe that academics are still going to play a major role for our company,” said Hrusovsky. “I would say the old Caliper, prior to Xenogen, had only about 20 percent of our sales in academic and government institutions, and the old Xenogen, prior to the combination, actually had 80 of the revenue coming from academics.
 
“We’re hoping to expand the channel and product breadth that go into the academics to not only the Xenogen products but also the Caliper products,” he said. These products include the Zephyr, a compact, multi-channel liquid handler; Twister, a microplate handler; as well as “some of the smaller products that we sell that have price points less than $100,000.”
 
Hrusovsky noted that gross margins for Xenogen products in the academic market are a “concern” for the company and currently in the neighborhood of 40 percent. While that margin “isn’t that exciting to us,” he noted that the academic market is still very critical because of the scientific publications it generates.
 
“Many of the reasons why big pharma do get involved is because of some of the work that has been done at the academic level,” he said. “We actually think it’s a greater feeder for future commercial growth, where we do believe there is better profitability.”
 
Hrusovsky said that Caliper launched five new products that are expected to account for 20 percent of the firm’s 2007 revenues. He cited the Desktop Profiler for kinase profiling, in particular, as a key growth driver, and said that the instrument is expected to increase sales to smaller biotech customers.
 

“Fluorescence has one advantage over bioluminescence that we can see right now, and that is that fluorescence has been used in the human and it makes it more translational for our customers.”

Q4 Revenues Rise; OEM Sales May Rebound
 
Caliper’s total revenue for the three months ended Dec. 31, 2006, increased to $34.7 million from $26.9 million year over year.
 
A majority of that revenue came from product sales, which swelled 31 percent to $23.7 million; services, which rose 32 percent to $8.1 million; and licensing and contracts,which grew 14 percent to $2.9 million.    
 
Caliper’s Q4 net loss increased to $8.9 million, or $.19 per share, from $1.5 million, or $.04 per share, in Q4 2005. The acquisition of Xenogen was the most significant factor that contributed to the quarterly loss, according to the firm.
 
Caliper reported $4.3 million in charges during the quarter related to amortization of intangible assets, including $1.7 million related to NovaScreen. Hrusovsky said this was primarily due to rebranding NovaScreen as part of CDAS and the planned phase-out of the NovaScreen trademark.
 
R&D spending increased to $6.5 million from $4.8 million year over year.
 
For full-year 2006, total revenue rose 16.1 percent to $69.2 million from $59.6 million in 2005.
 
Sales of Caliper’s microfluidic instruments were flat for the quarter, but up 38 percent for full-year 2006. Sales of these products were hurt in the second half of the year by lower OEM sales to Agilent, according to Hrusovsky.
 
He said during the call that Caliper no longer provides the reagent packages with the chips it supplies to Agilent, which shaved between $1 million to $1.5 million from Caliper’s top line in 2006. But, he noted that the upcoming launch of Agilent’s cholesterol test, which uses Caliper’s technology, will boost revenue in 2007.
 
“We believe there are going to be more diagnostic launches from Agilent, [and] we feel very comfortable that we’re going to see additional growth there from Agilent over the next several years,” said Hrusovsky.
 
Meanwhile, sales of the firm’s liquid-handling products declined during the year due primarily to lower sales of products to Affymetrix, which struggled throughout the year. He said there was about a $6 million negative impact in 2006 due to that alliance, but noted that Affymetrix had “worked its way through some chip issues.”
 
“The markets themselves we think are going to be rather marginal from a standpoint of growth,” he said. “We think we’re going to have nice share gain in 2007 in [the liquid-handling] segment due primarily to Affymetrix and the Zephyr launch … which we’re already getting some uptake on.”
 
Caliper reported a full-year 2006 net loss of $28.9 million, or $.75 per share, nearly doubling its 2005 net loss of $14.6 million, or $.46 per share, in 2005.
 
The firm had around $11.6 million in cash and equivalents and $13.3 million in marketable securities as of Dec. 31, 2006.
 
Caliper projects its 2007 revenue will be between $137 million and $143 million, a jump of between 27 and 33 percent from 2006.

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