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Life Technologies Posts 3 Percent Revenue Gain in Q4, Provides Few Details on Strategic Review

NEW YORK (GenomeWeb News) – Life Technologies reported after the close of the market Monday that its fourth-quarter revenues rose 3 percent on a non-GAAP basis but were down 1 percent on a GAAP basis.

The Carlsbad, Calif.-based genetic analysis tools firm reported total revenues of $998.9 million for the three months ended Dec. 31, compared to $1.01 billion for the fourth quarter of 2011. However, on a non-GAAP basis, its revenues were up 3 percent to $999.4 million from $970.3 million. Excluding the effects of currency translation its revenues were up 4.5 percent.

It beat analysts' consensus estimate of $989.5 million in revenues for the quarter.

Sales for its Research Consumables business group increased 2 percent year over year to $409 million, while sales for its Genetic Analysis business group were also up 2 percent at $401 million, and Applied Science revenue was up 8 percent year over year to $190 million.

On a geographic basis, sales for the Americas were flat, Europe grew 5 percent, Asia Pacific grew 18 percent, and Japan grew 6 percent.

Life Technologies posted net income of $110 million, or $.63 per share, on a GAAP basis and $1.11 per share on a non-GAAP basis, matching the Wall Street consensus estimate. Its net income for Q4 2011 was $93.7 million, or $.51 per share, or $1.05 on a non-GAAP basis.

Its R&D spending declined 7 percent to $83.7 million from $90.2 million, while its SG&A costs increased 6 percent to $264.6 million from $249.5 million. Business consolidation costs more than doubled year over year to $38.5 million from $18.9 million.

The Q4 and FY 2012 report comes a couple of weeks after reports surfaced that Life Tech had hired advisors to conduct a strategic review and the firm was considering a potential sale or leveraged buyout.

Life Technologies Chairman and CEO Greg Lucier said on a conference call following the release of the results that the annual strategic review began last summer, when Life Tech's stock was trading in the low $40s.

"As any thorough review would entail, all ideas are on the table, including pursuing our current strategy, which has yielded solid results, or something different," he said. "The board has not decided on any specific course of action, but the decision will be based on what the board believes is in the best interest of shareowners to further create value."

Lucier declined to provide any further commentary on the review, but said that it is ongoing and the firm will provide an update as appropriate.

For full-year 2012, Life Tech reported revenues of $3.80 billion, up 1 percent from $3.76 billion in 2011, and nudging past analysts' consensus estimate of $3.79 billion. On a non-GAAP basis its revenues were $3.8 billion versus $3.7 billion the previous year.

"This growth was driven principally by Ion Torrent and our research consumables and bioproduction businesses," Lucier said.

The Research Consumables business group had 1 percent revenue growth to $1.6 billion, while sales for its Genetic Analysis business group were flat year over year at $1.5 billion, and revenue for the Applied Science business group increased 7 percent to $719 million.

In the Genetic Analysis business, sales were driven by a "substantial increase" in the firm's Ion Torrent business, including sales of the Ion PGM instruments and Ion Proton System, but were partially offset by an expected decline in SOLiD instrument sales and in qPCR royalty revenue, the firm said.

The firm also more than doubled the revenue of its Ion Torrent franchise for the second consecutive year, said Lucier. He estimated that Life Tech holds around a 60 percent share of the desktop sequencing market.

On a geographic basis, sales in the Americas declined 1 percent, Europe grew 2 percent, Asia Pacific grew 13 percent, and Japan grew 3 percent.

The mix of consumables and services is now 85 percent of total revenues, Lucier also noted on the call.

"In addition, 2012 is the first year half our revenue has been generated outside the Americas," he said, adding that the firm has reduced its exposure to academia and government end markets by 10 percent over the past 18 months. "While this is still an important customer base for us, given the leading-edge science taking place in those end markets, we invested more heavily in expanding our footprint in the faster growing hospital and clinical end markets," said Lucier.

During the year, Life Technologies focused some of its efforts on developing its burgeoning molecular diagnostics business, by hiring management for that part of the business and acquiring Navigenics, Pinpoint Genomics, and Compendia.

"In a very short amount of time we've been able to assemble capabilities in software and bioinformatics and launch our first lab-developed test, the Prevenio lung cancer test service," said Lucier. "In 2013 and over the next several years we intend to focus our efforts on strengthening our position in oncology and transplant diagnostics by developing a rich menu of compelling assays and panels on multiple platforms."

Life Tech posted a profit of $430.9 million, or $2.40 per share, for full-year 2012 on a GAAP basis, with non-GAAP EPS of 3.98, matching the Wall Street consensus estimate. For FY 2011, its profit was $379.8 million, or $2.05 per share, and $3.71 on a non-GAAP basis.

The firm's R&D expenses for the year dropped nearly 10 percent to $341.9 million from $377.9 million. Its SG&A costs increased about 5 percent to $1.05 billion from $1.01 billion.

Life Technologies finished the year with $276.4 million in cash and short-term investments.

For 2013, the firm expects revenue growth of between 3 percent and 5 percent, excluding the effects of currency translation. It noted that if sequestration cuts are implemented in the US that would reduce its revenue by around 1 percent and would place the firm at the low end of its guidance range. The firm expects to report FY 2013 non-GAAP EPS in a range of $4.30 to $4.45.

Life Tech expects to report first-quarter revenues of between $950 million and $965 million, which assumes sequestration may be implemented on March 1, with non-GAAP EPS expected to be between $1.02 and $1.07, CFO David Hoffmeister said on the call.

"As we look to 2013, we're hopeful it will be a bit better market place than it was in 2012," said Lucier, "but … more of our growth comes from the headwinds that we had in 2012 evaporating and then continued growth in our applied and our genomics business."

Following the release of Life Tech's results, Credit Suisse analyst Vamil Divan raised his price target on Life Tech's stock to $69 from $60. "There were limited insights provided on the strategic review front (other than that it has been going on since last summer) but we continue to lean towards LIFE remaining an independent, publicly traded company after the review is completed," Divan said in a note.

Leerink Swann analyst Dan Leonard downgraded the firm's shares to Market Perform from Outperform, reflecting "a more cautious view on the nextgen sequencing business and a view that the recent run-up in stock price more accurately reflects LIFE's value." He kept his valuation on the stock between $58 and $62, and added, "We believe the stock could take a breather absent a strategic deal."

Meanwhile, ISI Group Senior Managing Director Ross Muken upgraded Life Tech's shares to Neutral from Cautious and upped the price target from $57 to $65. He said the increase in price target was based on "an improved outlook for LIFE's core and the increased likelihood of a strategic deal."

Life Tech's shares were up 2 percent at $64.39 in Tuesday morning trade on the Nasdaq.

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