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Celera Turns Q4 Profit as Revenues Falter

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Celera reported after the close of the market Wednesday that its fourth-quarter revenues declined 15 percent due to a drop in its lab services receipts.

The Alameda, Calif.-based molecular diagnostics firm brought in total revenues of $40 million for the three-month period ended Dec. 26, 2009, down from revenues of $47.3 million for the fourth quarter of 2008. The results edged analysts' consensus estimate of $39.6 million for the quarter.

The primary driver of the decrease was Celera's lab services revenues, which are derived from the firm's Berkeley HeartLab business, and dropped to $22 million from $29.2 million year over year. It said that the decline was primarily due to lower reimbursement rates and lower sample volume.

"We’ve expanded the menu of tests at BHL, which we believe will allow us to leverage the existing cost base for added return," Celera CEO Kathy Ordoñez said during a conference call following the release of the results. "On the genetics front, we’re seeing sustained adoption of KIF6 testing with nearly 200,000 KIF6 tests performed to date, and we’re encouraged that the LPA test that was launched in the fourth quarter is also gaining market acceptance, with approximately 14,000 tests performed to date."

Celera's products revenue increased to $11.3 million from $11.2 million, while its corporate revenue dipped to $6.7 million from $6.9 million.

Despite the lower revenues, Celera posted a profit versus a loss from the year before. Its net income for the quarter was $7.8 million, or $.09 per share, compared to a net loss of $6.1 million, or $.08 per share, for Q4 2008.

The firm's R&D spending for the quarter declined 14 percent to $6.5 million from $7.6 million, while its SG&A expenses fell 17 percent to $22.4 million from $27 million.

For full-year 2009, Celera reported revenues of $167.1 million, down from $175.2 million for the prior year. Analysts, on average, had expected 2009 revenues of $166.6 million.

The firm posted a net loss of $32.7 million, or $.40 per share, compared to a loss of $124.6 million, or $1.56 per share, for full-year 2008. One factor affecting the 2009 bottom line was a $15.4 million charge for impairment of intangible assets.

Celera's R&D spending for the year decreased to $27.8 million from $35.2 million, while its SG&A expenses increased to $111.4 million from $98.6 million.

The firm finished the year with cash and short-term investments of $326 million.

Celera said it expects to report full-year 2010 revenues of between $145 million and $155 million, with Q1 revenues coming in between $30 million and $32 million. The FY2010 forecast is far below analysts' current consensus forecast of $173.4 million. Its lab services sales are expected to be flat in 2010 compared to 2010.

The firm said that its 2010 revenues are expected to be roughly $12 million to $15 million lower due to the loss of business from accounts serviced by sales representatives who recently resigned from the Berkeley HeartLab business and are now part of a lawsuit filed by Celera against those employees and Health Diagnostic Laboratory. Celera has accused that company of "conspire[ing] with others to injure BHL and its business by stealing clients, employees, property, and confidential and proprietary information."

Celera is in mediation talks with the defendants to assess settlement alternatives. In the meantime, the court has issued a temporary restraining order that restricts the sales reps defendants from soliciting BHL physician clients.

The 2010 outlook also takes into account the expected completion of payments by licensees in 2009 and the first quarter of 2010.

"The weak guidance, or reset, was expected and the Street waited for the conference call before adjusting estimates," Thomas Weisel Partners analyst Peter Lawson wrote in a research note published Thursday morning. "One clear positive from the conference call was that Celera has a firm handle on bad debt, and we believe 2010 is a year to establish a new base for the BHL business."

Ordoñez said during the call that Celera is working on returning its growth trajectory for revenue, driven by its cardiovascular genetics program.

"The cornerstone of this effort is to drive our cardiovascular genetic testing beyond the secondary prevention market where BHL has traditionally been focused and into the primary prevention market," said Ordoñez. "These are high margin tests, and we have set a goal to double the revenue from our proprietary cardiovascular genetic tests in 2010 to more than $20 million."

However, she noted that the opportunity in the cardiovascular genetics market exceeds its current commercial reach. "We’re therefore assessing options to better leverage our scale and expand our commercial reach -- through a broader partnership or alliance — in order to better address the sizeable market potential associated with these assets," said Ordoñez.

In early Thursday trade on the Nasdaq, Celera's shares were down 2 percent at $6. However, by the time the market closed, its shares rebounded and finished up nearly 6 percent at $6.48.

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