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Life Tech Says SOLiD Sales Saw ’Continued Acceleration’ in Q2, Plans 3.5 Update This Summer

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By Julia Karow

This article was originally posted on July 31.

Life Technologies last week reported a 5.5-percent year-over-year increase in second-quarter revenues for its Genetic Systems division, which includes its SOLiD, research capillary-electrophoresis sequencing, and applied markets CE business.

The current quarter results are compared with Q2 ‘08, when Invitrogen and Applied Biosystems were still separate companies.

During its second-quarter announcement, Life Tech said it plans to upgrade its SOLiD system later this summer, and again in early 2010, to increase performance. At the same time, it continues to invest in single-molecule sequencing, which it plans to launch as a product "in a competitive timeframe," according to a company official.

Overall, Life Tech posted $833 million in revenues for the second quarter. Non-GAAP revenues were $839 million, a 2-percent increase over combined revenues of $822 million during the second quarter of 2008, when Invitrogen and ABI were standalone companies.

Genetic Systems, Life Tech's second-largest division, booked $233 million in revenues for the quarter, 5.5 percent more than during the same period last year. Excluding currency effects, revenues for the division grew 11 percent. The increase resulted from growth in the mid-teens for capillary electrophoresis instruments and consumable kits for applied markets, and from increased sales of the SOLiD platform.

"We had continued acceleration for demand of our SOLiD next-generation sequencing product this quarter, and hit a record win-rate for new orders," said Life Tech CFO and senior vice president David Hoffmeister during a conference call to discuss the earnings this week. He claimed that the system is now "clearly the leader in throughput and accuracy," which he said is "critically important in such areas as cancer research."

As an example of the company obtaining additional orders for the SOLiD platform, he cited Life Tech's recent collaboration with the University of Queensland's Institute for Molecular Bioscience, under which the institute will receive nine additional SOLiD instruments (see other article in this issue).

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According to Life Tech President and Chief Operating Officer Mark Stevenson, the company has been placing SOLiD systems primarily in "translational research centers around the world," both for cancer research and for gene-expression applications.

Later this summer, he said, Life Tech plans to introduce SOLiD version 3.5, "a minor update of software and consumables that will give [customers] tremendous new performance."

Early next year, Life Tech plans to introduce SOLiD version 4, he added, which will improve the instrument's performance further and "accentuate the end-to-end applications workflow."

Gains in the next-gen sequencing and applied markets businesses were offset by a low-single-digit decline in sales of CE instruments and consumables for research, an area that accounts for approximately 50 percent of the division's revenues, according to Hoffmeister.

Originally, the company had expected a larger decline in research CE sales, "but we have had recent success with several large deals in the hospital and clinical labs markets, as well as in emerging geographies," he said. However, the company is not revising its expectations for this business going forward, "given that these deals are unpredictable and lumpy in nature."

Revenues for Molecular Biology Systems, the company's largest division, grew 3 percent, to $399 million, and included the majority of $15 million the company gained from sales of products related to influenza A H1N1 testing. During the call, Hoffmeister pointed out several other "notable areas" that contributed to growth in the division, among them reagent kits for the SOLiD platform, including sample-preparation and whole-transcriptome kits.

The company's Cell Systems division recorded $201 million in second-quarter revenues, a year-over-year decrease of 2 percent, while the mass spectrometry division, a joint venture with MDS Analytical Technologies, booked $129 million in revenues, a 12-percent decline excluding the impact from currency effects.

During the second quarter, Life Tech also acquired Cytonix, a Beltsville, Md.-based company, for its intellectual property in microfluidics-based digital PCR technology, which "will further expand our considerable PCR patent estate," according to Lucier.

Possible applications of that technology, which Life Tech plans to license as well as commercialize on its own, include library quantification for next-generation sequencing and molecular diagnostic assays.

Sequencing continues to play an important role in the company's future strategy. "We plan on investing in some critical R&D and sales and marketing programs that will drive even further growth," said Lucier. Among these programs are an accelerated development of sequencing technology, the development of synthetic biology toolsets to support biofuels research, and an expansion of worldwide sales and services.

The company had $81.8 million in research and development expenses during the second quarter, including for sequencing-related R&D. "Our first priority, and our largest investment, is in sequencing," Stevenson said, though Life Tech also has R&D efforts in real-time PCR, Ambion reagents, transfection devices, and cellular analysis.

Besides improving the SOLiD platform, he said the company continues to invest in long-read single-molecule DNA sequencing as a complementary platform to the short-read SOLiD system, and plans to enter a platform into the market "in a competitive timeframe." He did not elaborate. Pacific Biosciences, a potential rival in the long-read single-molecule DNA-sequencing space, has said it plans to commercialize its single-molecule sequencing platform during the second half of 2010.

Lucier also addressed the progress of integrating the former Invitrogen and ABI businesses. The company had originally expected to gain $80 million this year — the first year following its merger — from "synergy" effects. That number is now likely going to be $15 million higher, according to Lucier, as the integration has been progressing faster than anticipated.

Life Tech reported $38.9 million in net income for the second quarter, and ended the quarter with $583 million in cash and short-term investments. In late July, it repaid $200 million in debt.

For the third and fourth quarters, the company expects organic revenues to grow in the low- and mid-single digits, respectively. This includes expected revenues from National Institutes of Health stimulus funding, although Life Tech believes such revenue will be "minimal" in 2009 and have a bigger impact next year.

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