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Citigroup Lowers Estimates for Life Tech, Raises Them for Illumina

NEW YORK (GenomeWeb News) – Citigroup yesterday revised its estimates for Life Technologies and Illumina, lowering fourth-quarter 2011 earnings per share estimates for Life Tech while raising EPS for Illumina.

Analyst Amit Bhalla lowered his EPS estimate for Life Tech for the fourth quarter to $1.03 from $1.06, while also reducing his revenue estimate for full-year 2011 to $3.72 billion from an earlier estimate of $3.74 billion. EPS for the full year was lowered to $3.70 from $3.73.

For full-year 2012, he trimmed revenue estimates to $3.81 billion from $3.90 billion, resulting in a reduction in EPS to $3.97 from $4. Organic revenue growth is expected to be 2 percent, compared to an earlier estimate of 4 percent.

He left his rating for Life Tech unchanged at Neutral and the target price for the firm's stock also unchanged at $44.

In a research note, he said the changes were made in order to reflect currency effects. Additionally, he now takes a "more conservative view" of the academic/government end market.

He also noted that in 2012 Life Tech faces a drop-off of about $30 million in qPCR royalties due to the expiration of certain patents held by the company. In addition, in 2011 Life Tech saw about $40 million in revenues from sales resulting from the federal government's stimulus program, and in 2012 that money is likely to disappear.

Another $50 million to $60 million in sales of the Life Tech 5500 sequencer — formerly called the SOLiD — will also probably not materialize, Bhalla added.

On the plus side, the launch of the Ion Torrent benchtop sequencer has been a success and he estimated sales of the instrument could double in 2012 to between $140 million and $150 million. Hedges that cut into Life Tech's EPS in 2011 by about $.25 are not expected to repeat, but, he said, currency effects will likely wipe out that benefit.

Life Tech launched the Ion Torrent Proton system two weeks ago, and Bhalla said that that "could be a significant growth driver in the future."

Life Tech is scheduled to release its 2011 fourth-quarter and full-year results on Feb. 7.

Meanwhile, Bhalla raised his fourth-quarter 2011 revenue estimates for Life Tech competitor Illumina to $250 million from an earlier estimate of $245 million, and EPS to $.34 from $.25.

Full-year 2011 revenue estimates were increased to $1.06 billion from $1.05 billion, while EPS was raised to $1.29 from $1.20.

He maintained a $1.12 billion revenue estimate and $1.58 EPS estimate for full-year 2012, and left unchanged a Neutral rating and a price target of $32 on the firm's stock.

In a separate research note, Bhalla said that though Illumina remains the market leader in next-generation sequencing, "pricing continues to collapse, competition continues to increase, and end-market visibility remains volatile."

Earlier this month, Illumina announced preliminary fourth-quarter revenues of around $250 million, as well as the introduction of its new HiSeq 2500 instrument and improvements to the MiSeq benchtop system.

In a note following those announcements, Bhalla estimated Illumina has a 50 percent to 60 percent share of the next-gen sequencing market. About 72 percent of Illumina's revenues are derived from the government/academic market, making it vulnerable to possible cuts in government-funded research, he said.

Illumina's fourth-quarter and full-year 2011 results are scheduled for release on Jan. 31.

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