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Life Tech Reports Growth for PGM in Q1, Ships Early-Access Ion Protons; Full Launch by End of Q3

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This article, originally published April 25, has been updated with information from analyst reports.

Life Technologies this week reported a 7 percent increase in first-quarter revenues for its Genetic Analysis group, driven mainly by higher sales of Ion Torrent and capillary electrophoresis products.

Genetic Analysis revenues totaled $356 million, a 4 percent increase after currency effects. The growth in Ion Torrent and CE products was offset by an expected decrease in qPCR royalty revenues and lower sales of SOLiD products.

The company continues to see "strong demand" for the Ion Torrent PGM and consumables, saw "significant" year-over-year growth of the PGM platform, and continues to "enjoy strong competitive positioning," said Greg Lucier, Life Tech's CEO and chairman. He made his remarks during a conference call to discuss the firm's first-quarter earnings.

David Hoffmeister, chief financial officer, said during the call that for competitive reasons, the company will no longer break out revenues for Ion Torrent, but will continue to comment on general results and trends for Ion Torrent and provide updates on "certain milestones."

Analysts from research firm Oppenheimer estimated that Life Tech placed 225 PGM sequencers during the first quarter, and Baird Equity Research analysts estimated that PGM-related revenue was about $30 million.

Regarding the competition in the desktop sequencing market, where the PGM competes with Illumina's MiSeq and Roche's 454 GS Junior, Lucier said that the company is "winning the majority of bids where we compete."

The company has also been expanding the existing market for the PGM "by reaching customers who are new to next-generation sequencing," he said.

Lucier claimed that the company continues to have the largest installed base of desktop NGS sequencers on the market and noted that it adds more than 100 new members to its "Ion community" online forum every week.

Commenting on the AmpliSeq Custom Panels for the PGM that Life Tech launched in March, Lucier said that these panels are "one of the most important breakthroughs since qPCR," enabling researchers to sequence up to hundreds of target genes in a day from very small amounts of DNA, for example from archived samples. "We fully expect these panels to transform disease research," he said.

To improve its profit margins for Ion Torrent, Life Tech recently started to manufacture the system at its Singapore plant, where the company also produces its 510(k)-approved qPCR instruments, according to chief operating officer Mark Stevenson. In addition, Life Tech plans to manufacture some of the reagent kits for the PGM internally, he said.

Asked whether customers are holding back on sequencer purchases because they are waiting for new platforms to arrive at the end of the year, Stevenson said that this has not been the case. "We haven't seen that," he said. "This is a very fast moving space, so customers really want to get going, get results, so we have seen broad adoption."

Ion Proton

Life Tech has started to take orders for the Ion Proton platform, which it introduced in January (IS 1/10/2012), including a "significant number" of orders for multiple units from customers "in all major regions of the world," according to a company statement.

Lucier said the company is "on track for mid-year delivery" of the Ion Proton with the Proton I chip, but the full commercial launch of the system is expected by the end of September.

In early April, Life Tech installed the first early-access Ion Proton sequencers at the Baylor College of Medicine Human Genome Sequencing Center, where researchers generated a number of human exome datasets within 36 hours.

The Ion Proton I chip will deliver up to 10 gigabases of data per run and be suitable for human exome sequencing. Six months later, Life Tech plans to launch the Ion Proton II chip, which will generate data for a human genome within a day for $1,000 in consumables costs.

The company plans to make datasets from the Ion Proton — both from Baylor and internal data — publicly available prior to the commercial launch, and to ship instruments to additional early-access customers.

Lucier said the company expects "a very strong uptake" of the Ion Proton, both for research and clinical use.

Life Tech also sees growth potential for next-generation sequencing in emerging markets. Lucier mentioned, for example, that two "well-known genomic laboratories" in India have placed orders for the Ion Proton.

Q1 Results

Life Tech booked $939 million in total revenues for the first quarter, a 5 percent increase over the previous year's quarter, when revenues totaled $897 million. Revenues were driven by "solid performance" across its businesses, "especially in Genetic Analysis," according to Lucier. Excluding currency effects, revenues grew 2 percent during the first quarter.

Starting with the first quarter, Life Tech reports its earnings in three new business groups: Research Consumables, Genetic Analysis, and Applied Sciences.

Genetic Analysis revenues were $356 million in the quarter, up 7 percent over the same period last year. Excluding currency effects, revenues were up 4 percent.

Research Consumables revenues grew 4 percent over last year, to $420 million, or 1 percent after the impact of currency.

Applied Sciences revenue increased 4 percent as well, to $162 million, or 3 percent excluding currency effects.

SG&A expenses totaled $253.4 million during the quarter, about the same as during the year-ago quarter.

R&D expenses for the quarter dipped 4 percent to $88.6 million from $92.8 million during the first quarter of 2011.

Life Tech's net income for the quarter rose 41 percent to $132.6 million from $93.6 million a year ago.

The company ended the quarter with $264 million in cash and short-term investments, down from $882 million at the end of last year. The planned decrease was due to several one-time cash payments, Hoffmeister said, including a $193 million milestone payment for Ion Torrent.

For the second quarter, Life Tech expects flat revenues compared to Q2 of 2011, when it booked $945 million. The year-ago quarter, Hoffmeister said, benefited from more than $30 million in SOLiD instrument sales that will not reoccur.

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