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Goldman Sachs Revises Estimates for Life Science Tools Firms

NEW YORK (GenomeWeb News) – Investment bank Goldman Sachs has revised estimates for a number of firms in its life science tools and diagnostics portfolio in advance of first-quarter earnings announcements.

As companies begin to report their first quarter earnings results next week, analyst Isaac Ro on Thursday issued a research note saying that the first quarter "appears to have trended better than initially expected" based on improved macroeconomic conditions, including employment, as well as commentary from management on R&D funding and weather.

As a result, he made changes to estimates for several companies in the life science tools and molecular diagnostics markets.

On Life Technologies, Ro said he expects Q1 revenues to be in line with Wall Street estimates and at the high end of management's guidance of between $915 million and $925 million.

"However, we expect EPS at the mid-point of guidance, as we believe stronger revenues will likely be partially offset by a weaker gross margin due to increased sales of [Ion Torrent's Personal Genome Machine year over year] and strong promotional activities associated with it," Ro said in his note.

He revised pricing and volume assumptions about the Ion Torrent business and adjusted organic growth estimates for Life Tech's other businesses. While he is positive about organic revenue growth in the first half, Ro also said that the growth in the Molecular Biology division in the second half of the year could decelerate due to competition in PCR pricing.

Life Tech said this week that it has realigned its financial reporting segments, and among the changes, its revenues will not be broken out by technology platforms including Molecular Biology Systems.

Ro lowered 2012 EPS estimates for Life Tech to $3.94 from an earlier estimate of $4.03 and the 12-month price target on Life Tech's stock price to $46 from $48.

Earlier this month Illumina pre-announced Q1 revenues, saying it anticipates $270 million for the period, above consensus Wall Street estimates of $257 million. Ro raised his 2012 EPS estimate on Illumina to $1.56 from $1.54 to reflect the pre-announcement. He also said he raised his HiSeq consumable pull-through, "modestly" raised system placements, modified MiSeq pacing forecasts, and took "a more conservative view of array utilization."

Ro lowered earnings-per-share estimates on Agilent Technologies for 2012 to $3.19 from $3.20 while maintaining a 12-month price target on the company's stock of $43.

Ro raised his organic growth estimates for the firm "based on higher 1H12 organic growth assumptions," and took a more positive view of academic spending and a less negative opinion on the growth of Agilent's Electronic Measurement Group. He also made modest revisions to his incremental margin assumptions, offsetting the revenue increases, he said.

Ro raised 2012 EPS estimates for Gen-Probe to $2.62 from $2.60, and said he expects the firm's Q1 results to be at the high end of management's guidance of $148 million to $152 million in revenues and $.48 and $.52 in EPS. His $62 price target on the stock was unchanged.

For Qiagen, Ro slightly increased the 2012 EPS estimate to $.98 from $.97, while maintaining the six-month stock price target at $14. In his note he said that he expects greater growth for the firm's non-HPV business, but is more cautious on the potential for growth of its HPV business in the US, "as we believe pricing pressure will weigh on growth in 2012 and beyond."

He is more optimistic about Q1 than previously, he added, because of better academic spending trends.

Ro also noted improved academic spending as well as a better than anticipated global gross domestic product in the first quarter and a previously too-conservative view of organic growth in increasing Thermo Fisher Scientific's 2012 EPS estimate to $4.80 from $4.77.

He raised organic growth assumptions for the firm for 2012 based on anticipated higher growth for the Analytical Technology unit, he said.

Lastly, Ro trimmed his 2012 EPS estimate on Sigma-Aldrich to $4.08 from $4.09 and lowered the 12-month price target on the firm's stock to $72 from $73.

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