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Life Tech Sees 'High Double-Digit' Growth in Q1 SOLiD Systems Revenue; Applied Markets Drive Increase in CE

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Life Technologies last week reported "high double-digit growth" in first-quarter revenue from SOLiD sequencing systems along with increased revenues from capillary electrophoresis instruments and consumables.

Overall, Life Tech's Genetic Systems division, which includes DNA sequencing, applied genomics, and HLA diagnostics, generated $219 million in revenue during the quarter, up 3 percent over the same period last year, when Invitrogen and Applied Biosystems were separate companies. Excluding currency effects, Genetic Systems revenues grew 6 percent in the first quarter.

A company official noted during a follow-up call with analysts after Life Tech's first-quarter earnings call last week that the firm had "a record revenue recogntion quarter for SOLiD as customers accepted and paid for previously installed SOLiD systems," though the growth of the Genetic Systems division was "more a result of good growth in capillary electrophoresis systems and consumables in research and applied markets."

During the earnings call, Life Tech President and COO Mark Stevenson said that SOLiD systems have been installed both in large genome centers and in smaller labs around the world, though he did not disclose the total number of SOLiD placements. The company is "seeing a quite wide distribution," including in the US, Europe, Asia-Pacific, and Japan.

About 60 percent of SOLiD customers so far have upgraded their systems from version 2.0 to 3.0, which Life Tech's Applied Biosystems division started shipping in February. The company's goal is to convert all existing instruments to version 3.0 by the end of June, according to Stevenson. Typically, it takes about two weeks to install the upgrade, he said, which involves changes in hardware, reagents, protocols, and software.

"We received positive feedback from our customers that the 3.0 system has better reliability, an easier workflow, and increased throughput," he added.

Following the upgrade, the company expects customers to spend between $175,000 and $200,000 per year in reagents per SOLiD system, Stevenson said in response to an analyst's question about reagent use for the system. The number is similar to Illumina's, which said last week that its customers currently spend about $200,000 per year on consumables for each Genome Analyzer.

Stevenson also addressed how Life Tech plans to grow market share for the SOLiD system, which it commercialized about a year after Illumina launched its Genome Analyzer. Illumina last week estimated that it holds at least 50 percent of the next-generation sequencing market (see In Sequence 4/28/2009).

"While we are pleased with the technical progress that we have made with SOLiD 3.0, we also realize that we are not where we want to be in this market," Stevenson said.

To address this, the company will continue to "invest significant resources" in the SOLiD platform to "amplify" existing advantages in throughput and accuracy, to simplify the system's workflow, and to reduce the cost per run.

The firm will also continue to partner with other companies to address the data storage and analysis challenges associated with next-generation sequencing, which he said are "particularly difficult for some of the smaller research labs." As an example of such a partnership, he cited a cloud computing-based data analysis solution that ABI and Geospiza launched this week.

Life Tech is apparently determined to defend its traditional leadership in the DNA sequencing market, and is not conceding to its competitors. "The field of research centered around this next-generation sequencing technology is really just getting started, and progress to date in terms of customer wins and technological achievements cannot be used as a measure to predict the future," Stevenson said. "We are the leading company in sequencing, when it comes to a breadth of offerings, and we plan to uphold this position through both internal and external investments that we are making."

He added that "there are many different types of technologies and business models that may prove to work in the future, and we plan to have a lead role in many of them."

In its traditional capillary electrophoresis market, the company continues to see research sequencing applications migrate from CE systems to second-generation sequencing platforms. However, its overall CE business actually grew during the first quarter, mostly in applied markets, which include forensics, pharmaceutical manufacturing, and clinical diagnostics.

"We certainly see room for increased sequencing applications in those applied markets, and consider further offerings and investing in the CE platform to look at further products" to meet the needs of these customers, Stevenson said.

Customers used their installed CE instruments more heavily during the quarter, he said, and CE sales for the forensics market in particular grew "in double digits."

Finally, the company also hopes its business — including sequencing — will benefit from National Institutes of Health funding for its customers through the American Recovery and Reinvestment Act.

Overall, Life Tech estimates that it could gain "well over" $100 million in revenue from NIH stimulus funding in the next 18 months. Over the last two months, it has given "record levels" of quotes, including for SOLiD and mass spec instruments, Chief Commercial Officer Bernd Brust said during yesterday's call.

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