By Ben Butkus
Life Technologies this week reported flat year-over-year organic revenue growth for its Molecular Biology Systems division despite new product launches and overall growth of the company's qPCR franchise, which is part of the division, company officials said.
As such, Life Tech will primarily focus on achieving additional growth via its qPCR franchise in the coming months in an attempt to counteract the relative slowdown in the MBS division over the past several quarters, officials said.
For the third quarter ended Sept. 30, Life Tech reported that MBS brought in revenues of $426 million, a 3 percent increase over the same quarter last year when taking into account foreign currency effects. However, when excluding such effects, growth in the division was flat year over year, which the company said was a result of the general funding environment.
"One exception is our qPCR franchise, which grew, driven by new products launched in the last year and increased consumables sales," Life Tech CFO David Hoffmeister told analysts during a conference call this week discussing the Q3 earnings.
CEO Greg Lucier also noted during the conference call that the company has recently announced several new products and collaborations in the qPCR space, most notably the October launch of the QuantStudio 12K Flex, an all-in-one platform that enables both low- and high-throughput quantitative and digital PCR (PCR Insider, 10/13/11); and the company's agreement with GlaxoSmithKline to develop a qPCR-based companion diagnostic for an investigative GSK cancer immunotherapy, announced this week (see related story, this issue).
"You should expect more of these types of companion diagnostic arrangements from us in the future," Lucier said, referring to the GSK collaboration.
During the conference call's Q&A session, an analyst asked if Life Tech has a "renewed sense of enthusiasm" regarding potential growth of the qPCR franchise, noting that Lucier had hinted in the company's Q2 earnings call that instrument sales in that franchise could slow down in light of the difficult funding environment and the fact that many researchers are starting to embrace next-generation sequencers as an alternative to qPCR platforms when considering big-ticket instrumentation purchases (PCR Insider, 8/4/11).
However, Lucier said this week that the company believes it is succeeding in its efforts to revitalize the qPCR business, a charge led by President and COO Mark Stevenson.
"The QuantStudio builds on our acquisition a couple of years ago now of the [BioTrove] OpenArray and really integrates to allow people to do a high range … of experiments all the way from research [to] validation," Stevenson said during the call.
"It also now gives us a nice portfolio at the top end … in the mid-range with our ViiA 7; [and at] the entry level with our Step One and Step One Plus," Stevenson added. "So we're well-positioned to cross the range of the systems."
Stevenson added that the company's investment in assays and new assay formats "has allowed us to continue to grow that business" on the consumables side after the initial instrument sale. "It's working out very well, that strategy."
Despite the renewed confidence in the qPCR business, Life Tech executives conceded that the company has experienced ongoing softness in the MBS division over the past several quarters, a problem it hoped that a healthy qPCR franchise could help solve.
Specifically, one analyst noted that MBS had experienced little to no year-over-year organic revenue growth since the second quarter of 2010, and that Life Tech predecessor Invitrogen was typically able to grow the business even in difficult academic funding environments.
To this Lucier responded that the signs have in fact pointed over the last few quarters to a rebound in the MBS division. In addition, he said that "the primary area we're now focused on to bring that overall growth rate of molecular biology higher is in the overall qPCR franchise. That's the work we're doing, and we hope to have that business … coming back to a reasonable organic growth rate in the next couple of quarters."
Lucier also said that the company has not experienced what it considered to be an uptick in competition in the molecular biology arena, but that organic revenue growth in MBS "just requires more focus on our part. I think these are things that we believe we can control better and execute better upon. Can we do things that overall drive our competitiveness and results? … The answer is yes. And I think you're now picking at an area where we have an opportunity for improvement."
Overall, Life Tech reported that its Q3 revenues rose 7 percent to $928.2 million on a GAAP basis, driven primarily by a double-digit increase in sales from the Genetic Systems division, which houses the firm's sequencing products business and its forensic analysis business, much of which is based on PCR, qPCR, and sample prep technologies.
Sales in Genetic Systems spiked 12 percent year over year to $256 million on a non-GAAP basis, and 8 percent excluding currency effects. Life Tech cited strong sales of its Ion Torrent Personal Genome Machine sequencer and forensic instrument placements, which was partially offset by lower sales of the 5500 sequencing instrument and consumables. The Genetic Systems division also benefitted from a $9 million forensic order from Russia, the company said.
Meanwhile, the company's Cell Systems division experienced 10 percent revenue growth to $244 million in Q3.
Life Tech posted GAAP net income of $96.9 million, or $.52 per share, compared to $105.6 million, or $.56 per share, in Q3 2010. 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.
Life Tech's R&D costs rose 15 percent on a GAAP basis to $103.9 million from $90.1 million; while 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.
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