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Life Technologies' Q1 Revenues Inch up 1 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Life Technologies reported after the close of the market on Tuesday revenues of $895.9 million for the first quarter of 2011, impacted in part by the Japanese earthquake and tsunami, and falling short of Wall Street forecasts.

For the three months ended March 31, total receipts inched up 1 percent year over year from $884.9 million a year ago, but missed the $905.4 million that had been expected by analysts.

Organic revenue growth for the quarter was flat year over year, due to a difficult comparison to the first quarter of 2010 — which benefitted from H1N1 influenza-related product sales and a large purchase order — and "the extraordinary events that occurred in Japan," that resulted in a delay of the launch of the company's 5500 SOLiD and 5500 xl sequencers, as well as a halt in the manufacturing of its capillary electrophoresis systems and capillary arrays.

Excluding the effects of Japan and the tough year-ago comparisons, organic growth for Life Tech was 5 percent, the company said. Company officials had previously said that the impact of the disaster would be at least $10 million in the first quarter.

As previously reported, Life Tech's partner Hitachi High-Technologies manufactured the 5500 systems and the CE systems and arrays, and after the disaster, several of Hitachi's sites and its manufacturing facility were damaged, causing operations to shut down for a few weeks. The two 5500 platforms were supposed to launch at the end of the first quarter but because of the earthquake and tsunami, the launch had to be pushed back.

During a conference call on Tuesday following the release of Life Tech's earnings results, Chairman and CEO Greg Lucier said that Hitachi has resumed manufacturing the 5500 systems, as well as CE systems and capillary arrays, and shipments of the 5500 platforms have begun, "and we expect to be able to clear a large portion of that backlog in the second quarter."

Regardless, the delay led to a 4 percent decline in revenues for Life Tech's Genetic Systems division, which houses its sequencing business. During the quarter, the division posted revenues of $228 million on a non-GAAP basis.

In addition, Genetic Systems sales were negatively affected by slowing demand for the company's SOLiD next-generation sequencing platform as customers, instead, waited to buy the 5500 instruments, David Hoffmeister, Life Tech's CFO, said on the conference call.

Company officials had better news about the firm's Ion Torrent Personal Genome Machine, a lower priced instrument targeted to a broader audience than traditional sequencers. Sales of the instrument were "strong," though they declined to provide figures. Lucier, however, said that at the current rate of ramp-up "the PGM will have the highest installed base of any next-generation sequencing instrument within the next 12 months."

He added that with the successful launch of the system, Life Tech will begin to see growth in consumables stemming from the PGM.

Meanwhile, within Genetic Systems, capillary electrophoresis instruments and consumables were down, in the low-single digits, company officials said.

The company's Molecular Biology Systems also experience softness during the quarter as revenues declined 1 percent year over year to $426 million on a non-GAAP basis. While demand for TaqMan assays were strong, it was offset by slower growth in PCR and molecular biology reagents sales, Hoffmeister said.

Life Tech's Cell Systems saw an 11 percent increase in revenues to $238 million on a non-GAAP basis, driven by "strong demand" across the entire portfolio, he said.

By region, Asia-Pacific saw the biggest year-over-year jump, 7 percent, followed by Europe at 2 percent and the Americas at 1 percent. Japan sales retreated 16 percent.

In the Americas, Lucier said that sales were weighed down by uncertainty within the academic research market over the 2011 US budget. With the budget issue resolved earlier this month, he said that the company is "starting to see a return to normal trend lines," in spending.

For the quarter, the Carlsbad, Calif.-based firm recorded a profit of $93.6 million, or $.50 per share, a 4 percent improvement from $91.5 million, or $.48 per share, a year ago. On an adjusted basis, EPS was $.85, matching Wall Street estimates.

The company increased R&D spending by 1 percent in the quarter to $92.8 million from $91.5 million. Its SG&A costs shrank 3 percent to $252.8 million from $259.7 million a year ago.

Life Tech reported $735.2 million in cash and short-term investments as of March 31.

The company said that for 2011, organic growth is expected to be in the mid-single digits, and it gave EPS guidance of between $3.80 and $3.95, unchanged from an earlier forecast.

In early Wednesday trade on the Nasdaq, shares of Life Technologies were down nearly 2 percent at $53.70.

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