Emerging from a restructuring aimed at streamlining itself after a glut of acquisitions during the past three and a half years, Invitrogen this week said that revenue from the division housing its proteomics business grew 9 percent in the first quarter, while the company grew 10.2 percent year over year.
Total first-quarter revenue in the BioDiscovery division, which contains the company’s proteomics tools, rose to $220.1 million from $201.8 million during the year-ago period, with 6 percent of the growth, organic.
Total receipts for the three months ended March 31 increased to $308.7 million from $280 million the year before. Invitrogen sold BioReliance and BioSource Europe earlier this year and excluded results from those segments from year-ago figures.
After a rough 2006 that saw the company absorb a loss of $191 million, compared to a profit of $132 million the year before, the results represent the possibility that changes implemented since the second half of last year are beginning to steer the company back on course.
“The plans we had in place for driving revenue growth, minimizing costs, and managing cash all delivered the desired results,” said Greg Lucier, chairman and CEO of Invitrogen, during a conference call accompanying the earnings results. “We are very pleased to be starting out 2007 in this position.”
During the summer, in the midst of reporting disappointing 2006 second quarter results, Lucier said a thorough review of the company’s operations and necessary changes were impending [See PM 08/10/06]. However, his remarks also suggested the company’s proteomics operations would be largely untouched.
Since then and into the early part of this year, the company moved to change some of its management, alter its sales commission structure, and “harmonize compensation systems across the product mix” in its major geographic regions.
During the conference call, company officials tried to keep expectations for the near future in check. The implemented changes succeeding in boosting earnings for the first quarter, but “let me say up front that obviously this is not always the case in our business, and we don’t count on this happening every quarter,” Lucier said.
In the BioDiscovery segment, results were helped by $5 million in royalty revenues, said David Hoffmeister, a senior vice president and CFO of Invitrogen. In an analyst note, Quintin Lai of Robert W. Baird estimated that the purchase of Sentigen, completed last December, contributed $1.3 million in revenues to the unit.
The BioDiscovery division benefited from the reorganization, Hoffmeister said. “The BioDiscovery segment had good growth as a result of our efforts on price, mix, and marketing effectiveness,” he said.
Also contributing to growth in the division was the installation of a new enterprise resource-planning system in its North American facilities. By trying to anticipate customer needs and working to meet them ahead of time, any negative impact on revenues were minimized, Hoffmeister said.
Problems associated with implementing the new ERP system in its European operations were largely avoided in the North American rollout, completed on April 9. Initially, there were delays in deliveries to some customers in North America, resulting in an undisclosed amount of lost revenues, but “considering the magnitude of volume and the complexity in this implementation compared to Europe, we’re quite pleased with the outcome so far,” said Karen Gibson, a senior vice president and chief information officer for Invitrogen.
“The BioDiscovery segment had good growth as a result of our efforts on price, mix, and marketing effectiveness.”
“However, we’re also cautious toward declaring complete success yet,” she said, adding that a team is in place to monitor and fix issues that may arise.
First-quarter profits increased to $30.3 million from $19.2 million a year ago, Invitrogen said.
During the call, company officials reiterated that Invitrogen’s mergers and acquisition strategy for the rest of the year will concentrate on smaller firms. During the past three and a half years, Invitrogen went on a buying spree that nabbed 15 companies. But after suffering through the challenges of integrating those purchases into its operations, Invitrogen is now treading more lightly.
“Going forward, we’re not going to have that same level of public commitment on acquisitions,” Lucier said in the call. “It’s going to be much more strategic … If we see something that can really impact the growth trajectory of the business, then I guess we’ll spend what we spend to do it.
“In the near term though, we don’t anticipate anything large,” he added. “We anticipate things that are smaller, more tuck-in, and certainly more near the current spaces that we’re participating in, so that we can grow our relative market share in what we’re already doing.”
As of March 31, Invitrogen had $333.6 million in cash and investments. During the quarter, the company spent $27.4 million on R&D. For now, Lucier said, the company anticipates spending about 8.5 percent to 9 percent on R&D expenses, but later in the year that figure may grow.