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Life Tech Reports Accelerated Real-Time PCR Sales Growth in FY'10

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Life Technologies last week reported that its Molecular Biology Systems division experienced 6 percent overall growth in 2010, driven in part by an acceleration in the demand for its real-time PCR consumables and instruments and an uptick in royalty revenue.

Life Tech also provided investors with additional details on how it plans to combine its PCR assay products with microfluidics technology gained last year through the acquisition of Stokes Bio; and how the combined offering is expected to expand the company's addressable market share by tapping into the global microarray market.

Chairman and CEO Greg Lucier and CFO David Hoffmeister discussed these and other items in an investor conference call last Thursday following release of Life Tech's Q4 and full-year 2010 financial results.

For the fourth quarter ended Dec. 31, Molecular Biology Systems, the company's largest division by revenue, reported revenue growth of 2 percent over the year-ago period to $445 million. On an organic basis, sales for the division were down 1 percent, due to a weaker H1N1 flu testing season this year; however, excluding H1N1-related revenue, organic growth was around 4 percent for the quarter, the company said.

For full-year 2010, Molecular Biology Systems receipts rose 6 percent to $1.7 billion. During the conference call, Lucier said that acceleration in demand for real-time PCR consumables and instruments, as well as strong demand for genomic assays, contributed to this growth for the year.

More specifically, Lucier noted that a large part of this growth was due to the April launch of the ViiA 7, the first in a line of next-generation real-time PCR instruments from the company (PCR Insider, 4/22/10); and associated real-time PCR assays.

"Internal investments in R&D resulted in the 2010 launch of the ViiA 7 platform, a truly innovative product that takes out 60 percent of the steps in a PCR run, greatly increasing productivity in the lab," Lucier said. "This product, along with a variety of new assays, have accelerated growth and increased our market share in the real-time PCR business."

Lucier said that excluding the impact of H1N1 sales in 2009, growth in the company's real-time PCR business accelerated from 9 percent in 2009 to 12 percent in 2010.

Later in the call, Hoffmeister said that another contributing factor to overall growth in Molecular Biology Systems was the fact that royalty revenue for the division grew 14 percent for the year "as a result of the concerted efforts of our licensing team." Overall, royalty revenue at Life Tech grew 7 percent in 2010.

Hoffmeister noted that the spike in royalty revenues was able to "more than offset the decline in PCR patent" revenues for the year. Several key real-time PCR patents owned in whole or part by Life Tech expired in 2010, and others are expected to expire in the coming year.

"Royalty revenue is still projected to decline by $20 million in 2011, the result of a decline in the PCR royalties as patents expire throughout the year," Hoffmeister said.

Besides Molecular Biology Systems, Life Tech's Genetic Systems division, which includes the company's sequencing products, reported sales growth of 11 percent to $246 million in Q4, and 11 percent for the full year to $946 million; while receipts for the Cell Systems division grew 11 percent to $238 million in Q4, and 13 percent to $904 million for 2010.

Breaking its revenues down into the categories of consumables and instrumentation, Life Tech said that its instrument business, which accounts for about 20 percent of overall revenues, grew more than 8 percent in 2010, driven by the ViiA 7 system, the 3500 CE sequencer, and SOLiD sequencers. The company noted that its instrument business grew 14 percent over 2009, excluding the impact of lower H1N1 sales and a large forensics-related order by the Japanese police force in the previous year.

Meantime, Life Tech's consumables sales, which comprise 80 percent of overall income, grew 7 percent in 2010; and grew 8 percent excluding the impact of H1N1 and the Japanese police order.

Stoking Additional Growth

During the conference call, Lucier noted how large investments in innovation, either through R&D or acquisitions, have begun paying off for the company and are expected to drive future growth.

Besides the launch of the ViiA 7 real-time PCR franchise, Lucier highlighted the company's April acquisition of Irish microfluidics specialist Stokes Bio for an undisclosed amount (PCR Insider, 4/29/10).

In the past, Life Tech discussed how Stokes' nanoliter-scale microfluidics based systems, which are designed for quantitative PCR-based genetic analysis applications, were expected to drive the development of high-throughput genotyping and provide foundational intellectual property for the company's digital PCR products (PCR Insider, 7/8/2010).

During last week's conference call, Lucier said that the Stokes acquisition provided Life Tech with "a transformational technology" whose "speed, scalability, and high performance will not only drive growth in our traditional PCR applications but also expand our addressable market by taking share from the $1.2 billion microarray market."

Lucier further noted that by combining the Stokes technology with Life Tech's TaqMan PCR assays, it will "allow customers to analyze up to 50,000 data points in one hour to get the industry's best quality and most reliable results. The Stokes platform is cost-competitive with microarrays on per-sample basis; performs better than microarray platforms in terms of throughput; and is significantly better in terms of the data quality."

In fact, Life Tech believes that the Stokes Bio platform will, along with other new products, significantly contribute to continued growth in the company's real-time PCR business: In response to an analyst's query as to whether the company can again expect double-digit growth in its real-time PCR franchise in 2011, Lucier responded that it was likely, but that nothing was set in stone.

"I think that business overall has very good fundamentals for a variety of reasons," Lucier said. "And we think it will continue to gain share due to the launch of the Stokes technology and some other technology that we will be announcing. But we're not prepared yet to give an estimate for 2011 …other than it's going to do, we think, pretty darn good this year."

Lucier said that the Stokes Bio platform will be available to early-access customers this year with a full launch expected in early 2012.

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