This article has been updated to include comments from a conference call.
NEW YORK (GenomeWeb News) – Life Technologies reported today non-GAAP revenue growth of 4 percent for the second quarter, falling short of analysts' consensus estimate on both the top and bottom line.
The Carlsbad, Calif.-based firm brought in total revenues of $945 million for the three months ended June 30, compared to $906 million for the second quarter of 2010. Analysts had expected revenues of $960.8 million. On a GAAP basis, revenues for the quarter were $941.1 million, up from $903.7 million year over year.
Sales for the company's Cell Systems division were up 5 percent at $243 million. Its Molecular Biology Systems division reported sales of $432 million, a decline of less than 1 percent, and its Genetic Systems division reported 12 percent revenue growth to $265 million. Life Tech said that strong sales for the Ion Torrent PGM and 5500 Series Genetic Sequencer were offset by reduced demand for CE instruments and lower sales of next-generation sequencing consumables as sales of the 5500 instrument ramps up.
"Our second quarter results were lower than anticipated, the result of continued budget pressure on academic and government funded research in the US and Europe, the lingering effects of the Japan earthquake on the 5500 launch, and a temporary slowdown in our China business resulting from the evolution of our commercial strategy," Life Technologies Chairman and CEO Greg Lucier said in a statement. "That said, we are taking concerted actions to address these challenges and are expecting growth to increase in the second half of the year."
"We fully understand the issues, have detailed actions underway to address them, and remain confident in our strategic and financial position, as well as the direction of the company," Lucier added on a conference call Thursday morning.
Lucier explained that the firm's evolving sales strategy in China has included the hiring of salespeople and other personnel to sell directly to the market, in addition to its existing dealer network in the country. Life Tech also has been expanding its facilities in China to ensure faster delivery of products.
However, these actions have come with some disruption, Lucier noted. In the quarter, he said that Life Tech experienced reduced demand from parts of the dealer network as certain dealers who were no longer going to be working with the company destocked inventory.
But, he said the firm expects to return to historic sales levels in China over the next couple of quarters.
Life Tech posted net income of $95.5 million, or $.52 per share, down from $110.6 million, or $.58 per share. On a non-GAAP basis, net income was $163.6 million, or $.89 per share, versus $174.6 million, or $.91 per share. The GAAP results include a variety of charges for business consolidation costs, amortization of purchase accounting adjustments, and other items.
The firm's R&D spending for the quarter was $91.1 million, up around 1 percent from $90.3 million. Its SG&A spending was $254.8 million, also up around 1 percent from $252.8 million.
Life Tech finished the quarter with $565.1 million in cash and short-term investments.
The company expects fiscal-year 2011 constant currency revenue growth of between 2 and 4 percent, with non-GAAP EPS of between $3.70 and $3.80. Analysts had expected 2011 EPS of $3.87.
Life Tech also said that it has authorized a $200 million share repurchase program, which supplements an existing program. In total, the firm is now authorized to repurchase up to $500 million of its shares on the open market.
"To offset the pressures on life science industry funding, which we expect to continue for the remainder of the year, we are accelerating a number of cost savings initiatives which will create a much leaner organization by the end of 2011," Lucier said in the statement.
During the call Lucier said that the firm is accelerating cost-saving measures that had been planned for later in the year. However, he didn't provide specifics on those measures.
CFO David Hoffmeister said that savings from the measures would be in the range of $10 million to $20 million for the second half of the year.
Life Tech's guidance assumes a flat funding environment in the US for the remainder of the year. In response to a question on the call Lucier said that the firm believes it can grow revenues, even in the face of a potentially flat NIH budget, through its product mix, its position in the next-generation sequencing space, particularly with Ion Torrent, and by selling its products into non-academic markets, such as pharma and applied markets.
In Thursday afternoon trade on the Nasdaq, shares of Life Tech were down 5 percent at $45.85.