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Life Tech Genetic Analysis Revenues Decline as qPCR Royalties Wither, Though QuantStudio Sales Spike

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Life Technologies this week reported a 6 percent drop in second-quarter revenues for its Genetic Analysis segment, primarily due to dwindling qPCR royalties and a decline in sales of its SOLiD sequencers.

However, excluding these "headwinds," Genetic Analysis revenues increased 5 percent, the company said, driven in part by sales of its Ion Torrent sequencers and "a record number" of its QuantStudio 12K Flex real-time and digital PCR platform.

In addition, Life Tech executives this week discussed increasing customer interest in the company's QuantStudio 12K Flex platform; and provided more insight into the firm's burgeoning molecular and clinical diagnostics play and how its qPCR products fit into it.

For the three months ended June 30, Life Tech reported total revenues of $949.3 million, a 1 percent increase over $941.1 million a year ago.

Revenues for Genetic Analysis — which houses the company's qPCR and capillary electrophoresis research instruments and associated consumables, as well as its sequencing products — dipped 6 percent year over year to $353 million, due to an expected $30 million decline in SOLiD instrument sales and an $8 million decline in qPCR royalties, Life Tech said.

Excluding the impact of SOLiD sales and qPCR royalties, Genetic Analysis was up 5 percent year over year, the company noted.

Meantime, the Research Consumables division saw its revenues increase 1 percent to $403 million, as a result of improved sales in cell culture products, benchtop instruments, and molecular biology consumables, Life Tech said. Research Consumables contains all of the company's non-qPCR and non-CE molecular and cell biology reagents as well as its endpoint PCR benchtop instruments and consumables

Lastly, Applied Sciences rose 15 percent year over year to $194 million due to increases in bioproduction and forensics products.

In a conference call recapping Life Tech's Q2 earnings, president and CEO Greg Lucier said that the company shipped "a record number" of QuantStudio platforms in the quarter, although he did not provide specifics on the number of instruments shipped. Life Tech launched QuantStudio, an all-in-one qPCR and digital PCR system, last October (PCR Insider, 10/13/2011), so has only logged two full quarters of sales of the product.

"QuantStudio does more than just genotyping," Lucier said. "It does gene expression, genotyping, and digital PCR and is taking share from genotyping and gene expression arrays. It combines flexible throughput capabilities with a streamlined workflow … and takes customers from targeted discovery through confirmation and screening, all on a single platform. In fact, we are seeing an increasing number of OpenArray [the company's digital PCR consumable] technology applications that are cannibalizing the current genotyping array business."

Life Tech's decline in qPCR royalties, which has been ongoing over the last few quarters and is expected to continue, has led some analysts to keep an eye on the company's overall traditionally strong position in the qPCR market.

In response to one analyst's question about the "defensibility" of the qPCR franchise in light of new instrument and reagent offerings from a number of competitors — including one of its main rivals, Illumina — president and chief operating officer Mark Stevenson acknowledged that the market is "very competitive," but that Life Tech similarly learned how to compete in such a market when some of the original Applied Biosystems PCR patents expired nearly 10 years ago.

"It's a similar situation in qPCR," Stevenson said. "We've had a very competitive instrument market for a long period of time and continue to compete in that. We have the same, really, in the follow-through reagents. There's always been a competitive aftermarket [with] groups that have made oligos and compete in the assays."

Stevenson said that Life Tech differentiates itself by offering customers a wide variety of options, "whether it be lower-end instruments all the way up to the newly introduced QuantStudio, for different experiments. We do the same in reagents. So we have [choices] of chemistries across TaqMan and SYBR Green [that] allow different price points and formats for customers … which allows us to compete."

Finally, Stevenson noted, the company has "a very strong support infrastructure for customers doing these experiments. So for the assays we've built out a very strong franchise around all the available gene expression, microRNAs, [and] SNPs, [which] allows customers to [go] to our website and order those as predesigned assays. And … those experiments … have a lot of variables … so [the customers] want to go to a trusted source. And that's really a lot that's defensible and a very sticky business in that nature."

Lucier also noted that the company's use of qPCR in its growing molecular diagnostics business offers additional room for growth of the franchise.

"Once a lab brings up a qPCR product and is managing patients with that product, it's very difficult to change out that system … due to the trending of patients, et cetera," Lucier said. "We do have a number of instruments … in the clinical space," which offers a "strong opportunity for us to maintain our current share and maybe even grow it as we go forward."

Underscoring Lucier's comments is the company's recent acquisition of Pinpoint Genomics and its early-stage non-small cell lung cancer test designed to help doctors identify early-stage patients at high risk for progression to late-stage disease.

Pinpoint's gene panel "was developed on a Life qPCR platform," the 7500 Fast Dx, Ronnie Andrews, president of medical sciences at Life Tech, noted during the call, adding that the test will eventually be transitioned from a laboratory-developed test to an CE IVD marked kit for sale outside the US.

"We plan to launch the test commercially later in 2012 as an LDT to ensure that lung cancer patients, who today worry about their risk for recurrence, will now have access to information that will help them and their physician make an informed choice about the need for adjuvant therapy," Andrews said. "We will begin immediately, though, to work on transitioning the test to a kit-based offering, which we will launch through our global channel, allowing us to access our large installed base of qPCR platforms currently being used in clinical labs outside the US."

And while it's true that Life Tech's diagnostics strategy will rely heavily on its qPCR franchise, it will also lean on a number of other technology platforms, officials noted.

"We intend to leverage Life's tremendous instrument installed base with over 7,500 placements of genetic analysis platforms in clinical settings today," Andrews said. "The important point here, though, is that our placements span across our CE, qPCR, SOLiD, [fluorescence in situ hybridization], immunohistochemistry, and Ion PGM technologies and platforms. Life's global channel access is a powerful advantage as we build out our molecular diagnostics business.

He added that the company is eyeing five principal disease areas for its molecular diagnostics business: oncology, inherited disease, neurological disorders, transplant diagnostics, and infectious diseases.

Life Tech is also developing a diagnostic version of its QuantStudio platform, although it has offered little detail thus far on its development (PCR Insider, 7/26/2012).

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