This story originally ran on April 29.
Aided by market acceptance of its new mass spectrometers introduced in the fall, Life Technologies said that results for its mass-spec division were better than expected in the first quarter.
The company also this week reported that total receipts for the three months ended March 31 inched up 1 percent to around $785 million.
The company said mass-spec revenues declined 5 percent to $123 million from $128.5 million for the instruments. While the figure continued a two-year trend of slumping sales growth for the instruments, it represented an improvement over what officials had expected.
In a conference call accompanying its earnings release, Life Tech CEO Greg Lucier said "It was a very good quarter for our mass-spec business."
Officials have not disclosed earlier revenue projections for its mass specs.
Preventing revenue from falling farther in that business were the introductions of the Triple Quad 5500 and the QTrap 5500 in the fall, which represented the most significant mass-spec introductions by ABI in more than three years [see PM 10/16/08]. This week, company officials, without disclosing any sales figures, singled out the new instruments.
During the conference call, Mark Stevenson, president and chief operating officer of Life Tech, called the instrument launches "successful" and said that they had seen "good uptake."
Mass spec-business in the applied markets was "strong," he said, while sales to the pharmaceutical sector declined. Mass spec-services "grew robustly" as customers extended the use of existing systems, he added.
Lucier, however, cautioned that the first-quarter results are not necessarily suggestive that the mass-spec business will be fertile for 2009.
The new instruments are being "very well accepted and [are] really providing a stimulative affect to our position, perhaps versus others today, in what still is a very difficult market," he said. "I don't want to make any claims other than that. This is a part of our business that has its challenges but we are very fortunate to have a very good piece of technology out here being sold today."
Indeed, while the mass-spec business may have performed above company expectations, it still was the only one of Life Tech's technology divisions that saw negative growth in Q1.
Molecular Biology Systems, the company's largest technology division, posted receipts of $367 million, "approximately the same" as Q1 2008 figures, the company said. Genetic Systems revenues grew 3 percent to $219 million. Cell Systems recorded a 2 percent increase to $192 million.
ABI's mass spec business has been operating in a state of unrest for the past year. Along with slumping sales growth, the merger between ABI and Invitrogen led to speculation of an impending sale of the mass-spec operation [see PM 06/19/08]. At the same time, its joint-venture partner on the instruments, MDS, is dealing with its own financial slump and has formed an exploratory committee to raise shareholder value. It also hired investment banks Goldman Sachs and RBC Capital Markets to advise it and the MDS board on the process.
'Constructive With MDS'
During Life Tech's fourth-quarter and full-year 2008 earnings release in February, company officials said they had met with MDS to discuss their partnership. At the time Life Tech declined to say whether any assurances had been given by either party to keep the JV agreement intact or if there had been any discussion about buying out the mass-spec business. However, in the Q4 2008 conference call, Lucier sounded unsure about possible developments in the near future.
"At this stage we're trying to be constructive with MDS, whatever happens on their side of the joint venture," he said. "We'll just have to see what happens on the MDS side over the next couple of months.” [see PM 02/19/08].
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No mention of the joint-venture agreement was made this week.
Regardless, Lucier has repeatedly said that Life Tech intends to "run the business for success." And in the meantime, the company has been replenishing its mass-spec portfolio. Along with the 5500 instruments, it earlier this month launched the AB/Sciex TOF/TOF 5800 [see PM 04/09/09].
"As I hope you can see, we are increasing the cadence of new technology introductions in this business to maintain our market leadership," Stevenson said this week.
As with other life-science firms, the Life Tech has been thinking about the recently enacted economic stimulus bill, called American Recovery & Reinvestment Act of 2009. The firm's officials have spent the months since it was passed helping customers with their grant proposals, they said this week.
According to Bernd Brust, chief commercial operations officer, about 15 percent to 20 percent of Life Tech's business is funded by the federal government, and the potential revenue generated by the stimulus funding going to the National Institutes of Health could translate to more than $100 million for the company.
The firm has seen record levels for quote volumes for instruments, including mass specs and the SOLiD second-generation DNA sequencer during the past two months, he added, without elaborating. Life Tech has put together a team of "fully dedicated people" to carry out strategies designed to put the company "in a position to maximize the revenue opportunity amongst our NIH-funded customers," Brust said.
Funding from the stimulus is not expected to have an impact on revenues until the fourth-quarter, he said.
Lucier said he expects that NIH will receive "a modest increase" to its budget in 2010, and the focus now is on the 2011 budget. "The current dialogue in Washington is, 'How do we sustain the elevated funding levels that the stimulus will give us in 2010,'" he said.
"Nothing is assured, but certainly the tenor of the dialogue has changed just in the last few months here, and so we feel good where the NIH is going," Lucier added.
In an update on work integrating ABI and Invitrogen, Brust said that currently more than 50 people are working full-time on the effort with "hundreds" more supporting them. So far, action taken is expected to result in savings of $60 million this year, 75 percent of the $80 million targeted for 2009. The majority of the savings has been done through eliminating redundant overhead, procurement savings, and small-facility closings, he said.
Where the Money Went
For the quarter, Life Tech said revenues rose to $785 million from $775 million a year ago. The year-ago figure was calculated as if ABI and Invitrogen had been combined. The companies completed their merger, which resulted in Life Tech, late last November, and Q1 2009 marked the first full quarter that the company reported as a combined firm.
Revenues shrank 1 percent in the Americas due to a decline in royalty revenue and a "weak demand" in pharma and biotech, David Hoffmeister, chief financial officer of the company, said during the conference call, while academic, government, and applied market sales grew.
European revenues climbed 12 percent while Asia Pacific business rose 28 percent. Sales in Japan were flat.
Life Tech recorded a profit of $15.6 million, compared to $53.5 million in Q1 2008. Excluding costs related to the merger such as purchased intangibles, amortization, and business consolidation costs, its profits would have been $125.6 million.
The company spent $79.5 million on R&D during the quarter, compared to pro forma spending of $78.5 million in the year-ago period. Hoffmeister said that R&D programs got off to a "slow start" this year due to the focus on integration-related activities, and spending on such programs will increase in the second quarter.
SG&A spending was $238.7 million, up 4 percent from pro forma costs $248.3 million a year ago.
The company said it had $465.3 million in cash and short-term investments as of March 31.