NEW YORK (GenomeWeb News) – Life Technologies reported after the close of the market Tuesday that its third-quarter revenues rose 7 percent, led by a double-digit increase in sales for its Genetic Systems division.
The Carlsbad, Calif.-based firm brought in total revenues of $928.2 million for the three months ended Sept. 30, compared to $867.1 million in revenues for the third quarter of 2010. On a non-GAAP basis its revenues were $928.7 million, up from $868.7 million for Q3 2010. The company beat analysts' consensus estimate for revenues of $916 million.
Excluding the effects of currency, Life Tech's revenues were up 4 percent year over year.
Sales for Life Technologies' Genetic Systems division, which houses the firm's sequencing products, jumped 12 percent year over year to $256 million on a non-GAAP basis. It was up 8 percent excluding currency effects, and the firm cited strong sales for its Ion Torrent Personal Genome Machine and forensic instrument placements, which was partially offset by lower sales of the 5500 instrument and consumables. Genetic Systems revenues also benefitted from a $9 million forensic order from Russia.
On a conference call following the release of the results, CFO David Hoffmeister said that sales of the Ion Torrent PGM were $20 million for the quarter, up 50 percent sequentially. The Ion Torrent PGM is a lower-priced instrument targeted to a broader audience than traditional sequencers and was launched earlier this year.
Its Molecular Biology Systems reported 3 percent growth to $426 million, but was flat when excluding currency effects. The Cell Systems division had 10 percent revenue growth to $244 million.
Company officials said on the call that the firm is looking to drive growth higher for the molecular biology business through its qPCR franchise. They noted the recent launch of the QuantStudio 12K Flex, Life Tech's new platform that enables researchers to perform both low-throughput and high-throughput quantitative and digital PCR on the same sample using the same software interface.
By region, sales in the Americas grew 2 percent year over year, while Europe was up 5 percent, Asia Pacific was up 14 percent, and Japan declined 2 percent.
The uptick in sales follows a second quarter in which Life Tech had reported slow growth due to budget pressure on academic and government funded research in the US and Europe, the lingering effects of the Japan earthquake on the launch of the firm's 5500 Series Genetic Sequencer, and a temporary slowdown in its China business tied to a shift in its selling strategy.
On the conference call Tuesday, Life Tech Chairman and CEO Greg Lucier said that China sales came back to near historical levels in the third quarter at 16 percent. "We believe China can grow faster than that, and our goal is to deliver on that over the next couple of quarters," he added.
Discussing the general macro environment, Lucier said, "Funding in developed markets is going to be less than it was historically. That said, we believe this environment has settled for the next few months, specifically in the US and Europe. But there remain multiple end markets that are stable, even demonstrating very attractive growth," such as government-funded research in emerging markets and applied markets — food safety, animal, and molecular diagnostics.
Life Tech posted GAAP net income of $96.9 million, or $.52 per share, compared to $105.6 million, or $.56 per share. On a non-GAAP basis its net income was $174.9 million, or $.94 per share, up from $164.9 million, or $.87 per share, for Q3 2010. The firm beat Wall Street's estimate for EPS of $.88.
Life Tech's R&D costs were up 15 percent on a GAAP basis to $103.9 million from $90.1 million, while its SG&A spending increased 5 percent to $251.8 million from $240.7 million.
The firm finished the quarter with $635.9 million in cash and short-term investments.
Life Tech anticipates full-year organic revenue growth of between 2 percent and 4 percent, excluding currency effects, and non-GAAP EPS of $3.70 to $3.80.
"Despite the slowdown in government research funding this year we don't expect it to get materially worse in the near future," Lucier said. He cited the firm's diverse offerings and customer base in mitigating concerns about research funding, but added, "Nonetheless, we are repositioning the company for a slower growth environment. We are doing this by lowering our cost structure, focusing our R&D efforts, and optimizing the way in which we market and sell our products."
During its Q2 call this past summer Life Tech announced cost-savings initiatives intended to create a leaner organization. The firm has said it expects to save between $10 million and $20 million in the second half of the year, and on Tuesday's call Hoffmeister noted third-quarter savings of $5 million tied to the effort.
Following the call, Citi analyst Amit Bhalla raised his 2012 EPS guidance for the firm to $4 from a previous expectation of $3.90. Though he maintained a Neutral rating on the stock, he raised his price target to $44 from a previous $43.
Mizuho Securities analyst Peter Lawson, lowered his Q4 revenue estimate to $961.8 million from $990.6 million and EPS estimate to $1.04 from $1.12, below the Wall Street expectation of $1.09. However, he maintained his above-Street forecast for 2012 revenues of $3.92 billion and EPS of $4.20. Lawson has a Buy rating on Life Tech's stock and a $65 price target.
Leerink Swann analyst Dan Leonard reduced his FY 2011 revenue estimate to $3.74 billion from $3.76 billion but maintained his EPS estimate of $3.71. He also lowered his FY 2012 revenues estimate to $3.84 billion from $3.91 billion and cut the 2012 EPS estimate to $4.11 from $4.18. Leonard, however, raised his price target on Life Tech's stock to a range of $45-$47 from a previous range of $42-$44.