By Julia Karow
This story was originally published Oct. 27.
Life Technologies last week reported a 12 percent revenue increase for its Genetic Systems division in the third quarter, driven by strong sales of the Ion Torrent PGM and forensic CE instruments that were partially offset by weaker sales of 5500 Genetic Analysis systems and consumables.
The company also obtained approval in China for the diagnostic use of its 3500 Dx/3500xL Dx Genetic Analyzer.
Non-GAAP revenues for the Genetic Systems group, which includes capillary electrophoresis and next-generation sequencing technology, totaled $256 million in the quarter, a 12-percent increase over the same period last year. Not considering currency effects, revenue grew 8 percent.
Life Tech attributed the growth to a large order from Russia for CE instrumentation for forensic use, and strong sales of the Ion Torrent PGM and related products.
'Great Adoption' of the PGM
Ion Torrent sales were approximately $20 million, up 50 percent over the second quarter. Life Tech noted that it shipped more than 400 Ion OneTouch systems during the quarter, a $5,000 sample prep instrument that automates the emulsion PCR process (IS 4/26/2011).
Life Tech president and chief operating officer Mark Stevenson said during a conference call to discuss the company's third-quarter earnings that it is seeing "great adoption" of the PGM in smaller labs that have traditionally run its qPCR and CE instrumentation. Many of these labs are new to next-generation sequencing because they could not afford that technology before. "That's the market we see for this product in the next couple of years," he said.
While "the majority" of PGMs are currently used in research labs, some labs intend to apply it in diagnostics eventually, he said. Stevenson reconfirmed that Life Tech intends to file for diagnostic clearance of the instrument, a plan the company recently revealed (CSN 10/12/2011). Life Tech expects to obtain CE-IVD clearance for the PGM in Europe first, he said, followed by 510(k) clearance with the US Food and Drug Administration in 2013.
"The reason we have laid out a pathway to work with the FDA and other regulatory authorities is to take this into the clinical setting, as we think the rapid turnaround time of this technology, … will be ideal for a clinical setting," he said.
Life Tech CEO Greg Lucier said during the call that the company has made "incredible progress" with the Ion Torrent technology and is ahead of its technical roadmap and milestones. An undisclosed technical milestone was met in the third quarter and will trigger a milestone payment in early 2012 that will be paid 60 percent in cash and 40 percent in stock, he said. When Life Tech acquired Ion Torrent a year ago, it agreed to pay $375 million in cash and up to another $350 million in cash and stock when certain milestones were met (IS 8/24/2010).
Lucier said the firm remains on track for a December launch of the Ion 318 chip, which is expected to increase the output to a gigabase per run (IS 3/1/2011).
Following the introduction of the Ion 316 chip this summer, which has an output of about 100 megabases, PGM customers now spend the equivalent of $50,000 per instrument and year in reagents, said Stevenson. With the launch of the Ion 318 chip, this number is expected to increase to about $60,000 to $70,000.
5500 Less SOLiD in Q3
While PGM sales soared in the third quarter, instrument and reagent sales for the 5500 Genetic Analysis System — formerly known as the SOLiD system — were down in the third quarter. The company did not cite specific reasons for the downturn or provide revenue figures for the platform.
Stevenson said the company has almost finished upgrading SOLiD 4 systems to the 5500, and will complete the remaining upgrades this quarter. It expects consumables sales for the 5500 to increase as customers start using their new systems.
Third-quarter Genetic Systems sales were also boosted by a large order from Russia for CE instruments for forensics. Lucier said that the forensics business is one of the company's "great franchises," a "sticky business" that's also a "lumpy business" because orders do not come in a steady stream. "It's also an important area of growth for our CE instrumentation," he said.
CE technology in general, while it is "certainly a mature product," still has potential to grow, according to Lucier, for example in research, where it is becoming an important tool for confirmatory testing of next-generation sequencing results. "Whether it's in forensics or, increasingly now, molecular diagnostics, in validated settings, it's a product that's just at the very beginning of its life cycle," he said, noting some investors have written it off "too soon."
Earlier this week, for example, the company said that its 3500 Dx and 3500xl Dx Genetic Analyzers have been approved by China's State Food and Drug Administration for diagnostic use in China. "I think that's a very, very important milestone," said Lucier, predicting that "a lot of content will be developed around [the instrument] in China."
He added that Life Tech is currently forging "important partnerships" around the 3500 that it plans to announce in the near future. These will make the instrument "a real stalwart and an important part of virtually every diagnostic lab in that country."
The 3500 Dx instruments are already CE-market for in vitro diagnostic use in Europe, and the company submitted the 3500 Dx, along with an HLA typing assay, to the FDA for 510(k) clearance this summer.
Overall, Life Tech's third-quarter revenues totaled $928 million, a 7 percent increase over last year's $867 million.
R&D expenses for the quarter increased 16 percent to $104 million from $90 million during the year-ago quarter.
SG&A expenses rose 5 percent to $252 million from $241 million during last year's third quarter.
Life Tech had a net income of $96 million during the quarter, a 9 percent decrease from $105 million last year.
As of Sept. 30, the company had $636 million in cash and short-term investments.
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