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Oppenheimer Revises Revenue Estimates for Life Technologies

By a GenomeWeb Staff Reporter

NEW YORK (GenomeWeb News) – Investment firm Oppenheimer revised its revenue estimates for Life Technologies while maintaining its "Outperform" rating, amid concerns about the effect of the Japanese earthquake, competition in the next-generation sequencing space, and government funding on the company's business.

In a research note on Monday, analyst David Ferreiro wrote that "Life's story remains strong; however, lingering concerns over [foreign exchange] hedging, [next-gen sequencing] competition and the NIH budget remain as overhangs."

Ferreiro estimated first quarter revenues to be $898 million, which would be an increase of just over 1 percent year over year. Life Tech had given guidance of between 1 and 3 percent revenue growth for the quarter.

For the second quarter, he estimated revenues of $952 million, which would be an increase of about 5 percent year over year, compared to the guidance of between 5 percent and 7 percent growth given by Life Tech. Ferreiro also reduced full-year 2011 revenue estimates by $16 million to $3.81 billion but kept EPS estimates at $3.85.

He also maintained a 12- to 18-month price target on Life Tech's stock of $60. In early afternoon trading today, shares of Life Tech were down a fraction of 1 percent to $53.04 on the Nasdaq.

In his report, Ferreiro noted that the impact of the earthquake and tsunami in Japan on Life Tech continues to be clouded. The launch of the company's 5500 SOLiD and 5500xl sequencers were scheduled for the last two weeks of the first quarter, but as a result of the disaster, Life Tech's partner Hitach High-Technologies suffered damage to its sites and its manufacturing facility would not reopen until April 4.

Hitachi High-Tech collaborated with Life Tech on the development of the two platforms and manufactures them. A new launch date for the platforms has not been set, though Ferreiro said it is expected to be in the second quarter.

GenomeWeb Daily News sister publication In Sequence reported last week that Hitachi High-Tech's Naka Division and Hitachi High-Tech Manufacturing & Service facilities suffered structural damage to their buildings and were not in operation. Mark Stevenson, president and chief operating officer for Life Tech, said during an investor presentation that the impact on the company's first quarter "will be at least a $10 million."

About 25 percent of Life Tech's total Japanese revenue derives from the tsunami-affected regions, Ferreiro said. While the company has not provided an estimate of how much in lost revenues it may suffer as a result, Ferreiro said he anticipates "the potential for an additional [approximately] $10 million impact" in the second quarter.

Despite the uncertainty over the company's Japanese operations, he noted several positives in the company's overall business, including continued health in its capillary electrophoresis sequencing and PCR businesses, and new opportunities including flow cytometry, geographic expansion, and molecular diagnostics, all of which "remain key upside drivers to the story."

Ferreiro also wrote that demand for Ion Torrent's Personal Genome Machine "has remained brisk," and said that Life Tech management has indicated a first stage sample preparation solution, which will automate and speed up the process, will be unveiled in the second quarter.