Life Technologies officials today cited strong demand for the company's PCR and qPCR systems — as well as a boost for its H1N1-related products — for a double-digit increase in revenue for its Molecular Biology Systems division for the fourth quarter of 2009.
Life Technologies posted $422 million in fourth-quarter revenues for the division, an increase of 19 percent over the same period last year. Organic revenue growth for the division was 15 percent.
Full-year revenue for the division rose 7 percent to $1.58 billion, with organic revenue growth of 9 percent.
Officials said that H1N1-related products contributed approximately $15 million in revenue for the quarter — translating to about 4 percentage points of growth — and about $45 million for the full year.
The company's H1N1-related products include viral RNA isolation kits, qRT-PCR kits for amplification of viral RNA, the TaqMan influenza A-detection kit, and the 7500 Fast and Fast Dx Real-Time PCR instrument.
In 2008, the 7500 Fast Dx instrument received 510(k) clearance from the US Food and Drug Administration for use with the US Centers for Disease Control and Prevention's H5N1 flu panel. Last April the FDA issued an Emergency Use Authorization allowing clinical labs to use the CDC's H1N1 flu panel in combination with the instrument. Since then, the company has said that it is seeing strong adoption of its technologies for H1N1 testing.
However, the company does not expect this trend to continue into the current year.
"While we continue to partner with the CDC and other global health organizations to ensure H1N1 public health monitoring, we expect minimum revenue from H1N1 related products in 2010," Mark Stevenson, Life Technologies' president and chief operating officer, said during a conference call with analysts today.
Revenue for the Molecular Biology Systems division is expected to grow in the mid-single digits in 2010. Eileen Pattinson, senior director of investor relations, said during a Q&A session following the call that growth drivers for this division in 2010 will be the continuing impact of the federal stimulus program the government approved last year, as well as "continued strong growth in the assay business and new benchtop instrumentation."
Pattinson reiterated Stevenson's comments about H1N1-related product sales tapering off in 2010, but noted that the company "did place a lot of [7500 Fast Dx] instruments as a result of the swine flu, and we do expect some reagent pull-through on that new installed base."
She stressed, however, that these reagent revenues "will be at a lower level than the $45 million we saw in 2009 from H1N1-related sales because a good portion of that revenue was from instruments."
Stevenson said that organic growth for the division in 2009 "was also positively impacted by continued strength in the TaqMan array business, in addition to strong demand for qPCR instrumentation and reagents."
The company also "saw an uptick in the sale of PCR instruments and consumables," which he said was "a direct result of stimulus funding."
Revenue growth from product sales in the division was offset by an expected decline in PCR royalties, but this decline was not as steep as the company had originally anticipated.
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Earlier this month, at the JP Morgan Healthcare Conference in San Francisco, Life Tech CEO Greg Lucier said that the company's PCR patent portfolio generated around $10 million more than expected in 2009. The company had initially predicted PCR royalties to decline by $30 million in 2009 and by a total of $15 million in 2010 [PCR Insider 1/14/2010].
Life Technologies last year formed a licensing team focused on offsetting these declining PCR royalty revenues, and company officials today credited that group with reversing the trend.
Royalty revenue "is no longer expected to decline in 2010," said David Hoffmeister, chief financial officer, during the call. "Due to the efforts of our licensing team, the previously announced decline of $10 million to $15 million has been offset by revenue from new license agreements."
He noted, however, that the company still expects PCR royalties to decline by $20 million in 2011.
Lucier attributed the 2009 licensing revenue uptick to a number of factors, including a revamped effort to ensure that existing customers are paying the required fees and an expanded IP portfolio that includes digital PCR patents picked up in its acquisition of Cytonix last year.
The licensing team has "gone back to existing licensees, they've looked back into our portfolio and gone out to license other technologies," Lucier said. "This year they achieved nice progress to mitigate the decline we were expecting, and they've got their work cut out to start for 2011."
The Big Picture
The strong performance for the Molecular Biology Systems division came amid a companywide double-digit revenue increase for the fourth quarter and a single-digit increase for the full year.
Total revenues rose 14 percent to $874.1 million from $763.9 million in the year-ago period. The year-ago figure treats the company's Applied Biosystems and Invitrogen businesses as if they were a single company for the entire quarter. The merger of the two firms closed in November 2008 to create Life Technologies.
For full-year 2009, Life Tech posted a 5-percent revenue increase to $3.3 billion from $3.1 billion in 2008.
Organic revenue for the fourth quarter grew 11 percent over the comparable quarter of 2008 and full-year organic growth for 2009 was 7 percent.
The company spent $92.3 million in R&D during the fourth quarter in 2009, compared to $47.3 million in the same period of 2008. For the full year, the firm spent $337 million on R&D in 2009 and $142.5 million on R&D in 2008.
As of Dec. 31, the company held cash and short-term investments of $648.1 million.
Life Technologies said it expects organic revenues to increase in the mid- to high-single digits in 2010.