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Amid Reorganization, Invitrogen is 'Very Committed' to 'Promising' ProtoArrays

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As Invitrogen continues its housekeeping, most recently divesting its BioReliance business, CEO Greg Lucier said the firm’s ProtoArray protein chips would see continued investment.
 
“We are very committed to protein chips, and it is one [area] where unfortunately, tools just take a long time to mature and get adopted,” Lucier said during a conference call accompanying the firm’s fourth-quarter earnings release this week. “But we think it’s going to be a very promising, large opportunity as the year progresses and as we go into 2008.”
 
“We have a number of very close collaborations around the world with this chip on a number of different research processes,” he added. “We think that this is the year that these collaborations really bring to fruition the full power of the technology.”
 
Invitrogen spent the past three months evaluating every corner of its business for inefficiencies, so it came as a good sign that Lucier didn’t mention changes in the BioDiscovery segment, which contains much of the company’s proteomics consumables.
 
Other units weren’t so lucky: Invitrogen said this week that it was selling its BioReliance business unit to Avista Capital Partners for $210 million. Justifying the divestiture, Lucier said expectations of synergies between Invitrogen’s cell culture media business and BioReliance’s testing and development capabilities never materialized.
 
“Clients believed each offering had to stand on its own,” he said. “I would also say that we owned this business at a particularly bad period for biologics and their movement through the pipeline.”
 
The divestiture, expected to close during the second quarter of the year, will hurt Invitrogen’s revenue. BioReliance is a contract service organization providing biological safety testing, toxicology, viral manufacturing, and laboratory animal diagnostic services to the pharmaceutical and biopharmaceutical industries. Annually, BioReliance generates about $110 million in revenues, Invitrogen said.
 
The company also sold BioSource Europe, a unit that generated revenues of $7 million each year, to a private investor group in Belgium. The subsidiary is a component of BioSource.
 
The divestitures are the result of a major housecleaning Invitrogen has undergone for more than three months in the midst of free-falling losses. Lucier first spoke of the need to stir things up in August when he said the company would “conduct a strategic review on each and every one of the businesses in which we operate … and if actions are needed, actions will be taken in order to make our portfolio one where we can … produce high margins in a very, stable consistent way.” [See PM 08/10/06]
 
In November, as he fielded questions from skeptical, even hostile, Wall Street analysts, Lucier reiterated his message of impending changes. It was apparent, though, that Invitrogen’s proteomics business would remain largely untouched as Lucier told analysts that “there could be some slight changes in BioDiscovery, but again I would give you the early sign that there’s not going to be a very lot of change” in that division [See PM 11/2/06].
 
Beside the sales of BioReliance and BioSource Europe, the reevaluation led to changes in management, including a new global sales leader, Bernd Brust; changes to the company’s sales commission structure; and “harmonized compensation systems across the product mix” in its major geographic regions.
 
In the past, Lucier had spoken about the difficulties of integrating the acquisitions it had made in recent years. In total, during the past three and a half years, Invitrogen acquired 15 companies.
 
This week, Lucier said that most of the integration has been completed, and, in particular, the acquisitions of three protein-related assets could soon prove fruitful for Invitrogen.
 
“We finished the facility consolidation of Caltag, Zymed, and BioSource,” Lucier said. “And these companies now have one of the largest portfolios of antibodies on the market. And, in fact, we grew over 20 percent in primary mouse antibodies and 15 percent in human antibodies for the full year.”
 
Lucier made his comments as Invitrogen posted a 1.4-percent rise in the fourth quarter, which grew to $329.8 million from $325.32 million during the year-ago period. One-off charges created a net loss of $100.2 million compared with a profit of $49.6 million a year ago.
 

“We are very committed to protein chips, and it is one [area] where unfortunately, tools just take a long time to mature and get adopted. But we think it’s going to be a very promising, large opportunity as the year progresses and as we go into 2008.”

Revenues in the BioDiscovery unit rose to $212.5 million, a 2.7-percent increase over $206.8 million a year ago.
 
During the fourth quarter, Invitrogen spent $25.3 million on R&D, including $21.4 million in the BioDiscovery unit. For full-year 2006, the company spent $107.6 million on R&D, including $91 million in BioDiscovery.
 
For full-year 2006 revenues rose to $1.27 billion from $1.2 billion in full-year 2005, a 5.4 percent climb. Losses for full-year 2006 were $191 million, compared to a profit of $132 million.
 
In the BioDiscovery unit, revenues rose 11.6 percent to $821.9 million from $736.6 million a year ago.
 
Invitrogen said it had $380.3 million in cash and cash equivalents as of Dec. 31, 2006, down 49 percent from $751.8 million from a year ago.
 
During the conference call, Lucier attributed the company’s flagging financials during the year to numerous factors including a down business cycle for some of its product lines, most notably its sera business, whose sales plummeted 40 percent during the first half of 2006 year-over-year.
 
Also blamed was a shift mix, resulting in lower-margin products comprising a larger share of the company’s overall revenues; and an increase in manufacturing and freight costs.
 
Shares in Invitrogen rose 11 percent at the close of market Wednesday as Wall Street welcomed the divestiture and better-than-expected earnings per share.

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