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BioDiscovery Revenues Rise 10.5 Percent As Invitrogen Reports $40M Profit in Q3

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Invitrogen continued to cash in on changes instituted through 2006 into early this year as it reported a $40 million profit this week for the third quarter, compared to a loss of $129.8 million a year ago.
 
Revenues for the three months ended Sept. 30 rose 10.8 percent to $315 million from $284.2 million a year ago. Revenues for the company’s BioDiscovery division, which houses Invitrogen’s proteomics tools, climbed 10.5 percent to $220.4 million from $199.5 million one year ago.
 
Meantime, receipts from the company’s Cell Culture Systems business grew 11.7 percent to $94.6 million from $84.7 million a year ago.
 
For 2007, the story at Invitrogen has been about its turnaround from a challenging 2006 where efforts to integrate 15 acquisitions made over a three-and-a-half year period and implementing a new enterprise resource-planning system contributed to a loss of $191 million for the year and forced the company to make wholesales changes to its operations.
 
Last year’s third-quarter loss of $129.8 million loss compared to a $23.9 million profit during the prior-year period, and as a result, Wall Street openly questioned the abilities of Invitrogen’s Chairman and CEO Greg Lucier and his management team [See PM 11/02/06] to steer the company out of turbulent currents.
 
To reverse its fortunes, the company late last year took big steps that included management changes, a new sales commission structure, and a new compensation structure.
 
Investors have responded to the turnaround. In the past year, shares of Invitrogen stock have risen about 45 percent.
 
Amidst all the change, though, the BioDiscovery division was largely untouched, and Lucier a year ago said the company remained bullish about its proteomics-related business and acquisitions made to bolster that business.
 
This week, while much of the discussion during a conference call accompanying the release of its quarterly results was about the revitalization of the company’s Cell Culture Systems business, company officials also highlighted the continuing growth in its BioDiscovery segment.
 
Organically, the division grew 7 percent, driven both by molecular and cell biology products, company officials said, and aggregate growth occurred across all regions and products.
 
“Our molecular biology products continued attraction we have been making all year with strong growth in protein separation, RT enzymes, real-time PCR, and RNAi among others,” said David Hoffmeister, senior vice president and CFO of Invitrogen.
 
“We are particularly pleased with the revitalized growth we experienced in our molecular biology product areas, which is a result of new products, positive price realization, and more effective selling by the sales team,” Lucier added.
 
Speaking about the companywide turnaround effort and its impact on current operations, he added, “It may have taken us some time to optimize the performance of the system, but we now feel the operations are in line with the original vision we set forth a few years ago for this company.”
 
Integrating previous acquisitions together with the “critical structural upgrades” at the company “caused strain on the business last year, and we lost some footing in markets where we shouldn’t have,” according to Lucier. ”That said, any traction we lost last year has been gained back, and then some.”
 

“Although we have not acted on many opportunities in the last 18 months, our current pipeline is very promising.”

On the mergers and acquisitions front, Lucier continued to hint that Invitrogen will be mindful of opportunities, saying “acquisition will always be part of our strategy. … We remain focused on finding those unique companies that have a highly dependable market position, unique technologies, and a situation that could create great synergies when combined with our company. Although we have not acted on many opportunities in the last 18 months, our current pipeline is very promising.”
 
Lucier declined to elaborate but said, “We are interested right now and that will indicate where we are going to be investing in acquisitions.” With its new ERP system in place, he said, the problems the company experienced in the past integrating acquisitions are no longer applicable.
 
For the quarter, Invitrogen spent $28.6 million in R&D, $24.1 million of that in BioDiscovery. As of Sept. 30, the company had $648.5 million in cash and investments.
 
Companywide, revenue during the quarter grew 9 percent in the Americas, 14 percent in Europe, and 9 percent in Asia Pacific. Recently the company made commercially available the protein standard mixture it developed in conjunction with the Human Proteome Organization as part of HUPO’s standardization efforts [See PM 10/11/07].
 
In August, the company’s board authorized a buyback of $500 million in shares, and during the third quarter the company repurchased $35 million worth of stock and promised to continue repurchasing shares on an ongoing basis, Hoffmeister said.
 
During the fires that struck Southern California recently, Invitrogen was forced to shut down most of its operations at its Carlsbad headquarters for part of last week. However, it continued to ship products and by late last week, the company was fully operational.
 
Lucier said this week that it is too early to assess the impact the fires had on the company’s business, but said he believes it to be “manageable.”

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