By Julia Karow
Life Technologies said last week that first-quarter revenues in its genetic systems division fell year-over-year as the Japanese earthquake delayed shipments of the 5500 SOLiD, fewer customers bought SOLiD 4 systems and reagents, and the capillary electrophoresis business declined compared to the previous year's exceptionally strong first quarter.
Sales of the Ion Torrent PGM, on the either hand, were larger than the company had anticipated for the quarter.
Genetic systems, which includes both CE technology as well as next-generation sequencing, generated $228 million in non-GAAP revenues during the quarter, down 4 percent year over year and 8 percent after accounting for currency effects. The company did not report GAAP revenues for its business divisions.
The revenue decline was caused in part by a delay in the shipment of the 5500 and 5500xl SOLiD due to the Japanese earthquake in March. The new SOLiD systems, which are manufactured by Life Tech's partner, Hitachi High-Technologies, were originally scheduled to start shipping at the end of the first quarter, but the Hitachi facility that produces both the 5500 and CE instruments was damaged and had to be shut down temporarily for repair (IS 3/29/2011).
Life Tech chairman and CEO Greg Lucier said during a conference call to discuss the company's earnings that the facility has since resumed manufacturing the instruments. Life Tech has begun shipping the 5500 and expects to "clear a large portion" of its order backlog for the system in the second quarter.
Lucier also mentioned that sales of the SOLiD 4 were "slower than average" during the quarter, and the company sold fewer SOLiD 4 consumables, which he attributed to customers waiting for the launch of the 5500.
Another reason for the drop in genetic systems revenues was that sales of CE instruments and consumables declined "in the low single digits" during the quarter, "the result of a difficult year-over-year comparison," according to Life Tech CFO David Hoffmeister. Revenues had been unusually strong during the prior-year quarter because of a large one-time order of CE instruments from the Japanese police force.
Excluding one-time items during the year-ago period, the company's CE business "grew in the low single digits in line with expectations," Hoffmeister said.
PGM Sales Soar
Sales of the Ion Torrent PGM during the quarter, on the other hand, "have exceeded our expectations on all measures," Lucier said, but he declined to say how many instruments the company has sold.
"At the rate we are placing instruments, the PGM will have the highest installed base of any next-generation sequencing instrument within the next 12 months," he claimed.
According to chief operating officer Mark Stevenson, PGM customers include "a mix" of existing and new customers, among them large genome centers and "smaller universities." While the majority of PGM customers already have another next-generation sequencing platform, for a number of customers, the PGM is their first next-gen instrument.
Life Tech sold PGMs in the US, Europe, and in several Latin American countries, reflecting "an expansion of the market of next-generation sequencing," he said.
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The company is now working to increase the PGM's accuracy through "molecular and software improvements," Lucier said, and expects the instrument to "get great adoption in the coming years in the clinical applications."
Stevenson said that the firm is making "tremendous progress" in improving the accuracy of the system. The "majority" of reads on the PGM currently have a quality score of Q20 or above, he said, and at 100 bases, the single-base accuracy is several times better "than other next-generation systems at that read length," which he did not mention by name.
The Ion 316 chip, which is designed to increase the PGM's output to 100 megabases from a current level of 10 to 20 megabases per run (IS 1/11/2011), is now in the hands of "a couple" of early-access customers, and will be shipped commercially toward the end of the second quarter, he said.
Eventually, he said, Life Tech expects PGM customers to purchase approximately $80,000 worth of consumables per year for each system.
Overall, Life Tech reported $895.9 million in first-quarter revenues, a 1 percent increase over $885 million during the same quarter last year.
R&D expenses totaled $92.8 million, up from $86.3 million during the year-ago quarter. About a third of R&D spending currently goes into sequencing, to support the Ion Torrent and 5500 SOLiD systems.
SG&A expenses amounted to $252.8 million, down from $259.7 million during the first quarter of 2010.
Net income for the quarter was $93.6 million, up from $91.5 million during the same quarter last year.
The company had $735.2 million in cash and short-term investments as of March 31.
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