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Life Tech Says qPCR Consumables, Applied Testing Strong Despite Q2 Drop in Division Revenues

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Life Technologies last week reported "strong sales" of qPCR consumables and molecular testing kits for applied markets in the second quarter of 2011 amid an overall 2 percent decline in organic revenue in the Molecular Biology Systems division, which houses the company's PCR business.

Although the company did not specify what products were responsible for the dip in overall MBS division revenues, Chairman and CEO Greg Lucier hinted during a conference call discussing the company's earnings that lukewarm sales of PCR instrumentation or shifts in academic laboratory purchasing may have been contributing factors.

In response to one analyst's question as to whether uptake of the company's next-gen sequencing products could be linked to a slowdown in sales of other high-end platforms such as qPCR instrumentation, Lucier noted that there was a clear "shift toward sequencing in terms of the funding."

"Evermore, researchers are taking a genetic analysis perspective," Lucier said. "When you can start selling a sequencer for $50,000 — and a [higher end] qPCR instrument … sells for about that as well — you're now faced with tradeoffs, and I think you're starting to see that take place."

In the longer term, Lucier added, this trend "plays quite well into our portfolio in that there is a continuum of: You'll sequence, and then you'll validate the gene function. We're seeing really incredible double-digit growth [of] our assay business, the consumables side of our qPCR business. And so getting that right mix kind of oriented is a big body of work that [President and COO] Mark [Stevenson] and his team are working on right now. That's how we think it will all play out for us in that the consumables side of qPCR will have really robust growth over the coming years as it is evidenced today."

Non-GAAP revenues for MBS, the company's largest division revenue-wise, were $432 million in Q2, a decline of less than 1 percent over the prior-year period. Excluding foreign currency impact, however, organic revenue for the division fell 2 percent. The company does not report GAAP revenues for its divisions.

In the conference call, CFO David Hoffmeister noted that "strong sales of qPCR consumables and molecular testing kits for applied markets were offset by slower growth in government-funded accounts in the US and Europe;" as well as a "temporary slowdown" in China that the company blamed on sales and marketing snafus.

The lackluster results from the MBS division contributed to Life Tech's failure to meet analysts' consensus estimates on both the top and bottom line in Q2. For the three months ended June 30, Life Tech logged total revenues of $945 million, compared to $906 million for the second quarter of 2010. Analysts had expected revenues of $960.8 million. On a GAAP basis, revenues for the quarter were $941.1 million, up from $903.7 million year over year.

Meantime, non-GAAP revenues for the company's Genetic Systems division were up 12 percent, aided by strong sales of the Ion Torrent Personal Genome Machine and the 5500 Series Genetic Analysis system, although the company sold fewer capillary electrophoresis instruments and SOLiD sequencing consumables compared to the same quarter a year ago.

In addition, Life Tech's Cell Systems division logged revenues of $243 million in Q2, a 5 percent increase over the year-ago period.

Later in the conference call, when asked for additional guidance on the 2012 outlook for various pieces of Life Tech's traditionally strong businesses, such as PCR, Lucier reiterated that long-term prospects for the PCR franchise remain positive.

"When we think about how we grow in the future, there's clearly a product mix opportunity as more funding goes toward sequencing and … [there is] more and more money flowing into this economical approach to desktop sequencing that leverages Ion Torrent," Lucier said. "We also see good opportunity that as all those sequences get done, they have to be validated, and we're the number-one consumables company in the world for that type of technology with our qPCR consumables business, so that should be good."

In February, Life Tech reported that its MBS 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.

A large part of that growth, Lucier noted at the time, was due to the April 2010 launch of the ViiA 7, the first in a line of next-generation real-time PCR instruments and associated real-time PCR assays from the company (PCR Insider 2/10/11).