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Life Tech's Molecular Biology Systems Division Reports Drop in Q1 Organic Revenues

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Life Technologies this week reported a 3 percent decrease in organic revenue for its Molecular Biology Systems division in the first quarter of 2011 amid flat overall organic revenue growth for the company.

Life Tech said that the slowdown in Molecular Biology Systems receipts was due primarily to "difficult" year-over year comparisons for its PCR and molecular biology reagents businesses, although this was partially offset by "strong demand" for the company's TaqMan assay products.

In a conference call discussing Life Tech's Q1 results, CFO David Hoffmeister noted that both PCR and molecular biology reagents "were negatively impacted by reduced consumables demand in Japan, as the majority of customer labs were shut down for a time in the last few weeks of the quarter."

Life Tech also reported a year-over-year decrease in royalties, a large portion of which are derived from the company's qPCR business. The company also informed investors that it expected a company-wide decline in gross margin in the second quarter of 2011 due in part to lower royalties.

In a Q&A session following Life Tech's Q1 conference call, when asked to quantify the qPCR royalty decline in Q1, Hoffmeister said that the company hasn't broken this out by quarter.

Hoffmeister also reiterated that Life Tech expected its qPCR royalty decline in 2011 to total about $20 million, information first disclosed in the company's full-year 2010 financial conference call (PCR Insider, 2/10/11).

"As we've also said, we've got a group that last year was able to more than offset the $15 million decline that we had last year," Hoffmeister said this week. "And so they're basically working away to try and offset it at this point."

In Q1 2011, Life Tech's Molecular Biology Systems division reported non-GAAP revenue of $426 million, a decrease of 1 percent over the same period last year. Excluding impact from currency and acquisitions, this translated to a 3 percent decline in organic revenue growth.

Overall, the company reported revenues of $895.9 million in Q1 2011, a 1 percent increase from $884.9 million in the same quarter last year. Meantime, Q1 organic revenue growth was flat year over year due to a "difficult comparison" to Q1 2010 — which benefitted from H1N1 influenza-related product sales and a large purchase order — and "the extraordinary events that occurred in Japan," Life Tech said.

Excluding the effects of Japanese events and the difficult year-over-year comparisons, the company reported organic growth of 5 percent.

In other divisions, Genetic Systems reported an 8 percent decline in organic revenues; and Cell Systems reported an 11 percent increase in organic revenues in Q1.

For the quarter, Life Tech recorded a profit of $93.6 million, or $.50 per share, a 4 percent improvement from $91.5 million, or $.48 per share, a year ago. In addition, the company increased R&D spending by 1 percent in the quarter to $92.8 million from $91.5 million.

In the Q&A session following Life Tech's Q1 conference call, an investor asked for more clarity on the company's R&D spending patterns.

President and COO Mark Stevenson said that about a third of the company's R&D investment is in sequencing, with another third "across the … microbiology franchise, particularly as we refreshed the qPCR franchise" and in the company's efforts in areas such as digital PCR.

"And then the third area … we broadly describe as some of the benchtop devices, and we have a series of those launches planned," Stevenson said, without elaborating.

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