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Rough Q2 Leads to Cost-Cutting for Bruker, Ciphergen, Harvard Bioscience


After reporting disappointing second-quarter results in the past week, three companies with substantial proteomics businesses— Bruker Biosciences, Ciphergen, and Harvard Biosciences — have all said they are implementing cost-cutting measures and crafting strategies to get sales back on track.

Bruker, which reported second quarter revenues of $64.1 million, compared to a previously published guidance of $70 to $74 million, attributed its rocky quarter to its introduction of new products in the first and second quarters, including its Apex QE FTMS and its HCT plus ion trap, as well as X- ray source and X-ray detector technology from Bruker ASX.

“These new products are exciting to our customers and are driving our bookings growth but they are taking longer than expected to transfer from R&D into manufacturing, to produce, to ship, and to install,” Frank Laukien, the company’s CEO, said in a conference call Tuesday evening to discuss the company’s results.

Citing the fact that the company’s new order bookings for the quarter grew 15 percent year-over-year, Laukien said in the call, “we believe this is a transitional issue that will be resolved in the short term.”

Nevertheless, he added, “based on the disappointing second quarter, we have decided to pursue additional cost savings initiatives which we expect to announce during the third quarter.” He refused to provide further details on these initiatives, but only said they would “cover the business broadly,” and that the company would lay out its plans in the next few weeks. ProteoMonitor’s call to Bruker for additional comment on this area was not returned before deadline.

Additionally, Laukien said the company plans to launch “some additional products” at the HUPO meeting in October, and that Bruker is well on its way to hiring a new CFO.

The Billerica, Mass., company’s revenues increased five percent over the comparable quarter of 2003, in which it had $60.9 million in revenues. Losses totaled $4.7 million, or $.05 per share, up from $1.6 million, or $.02 per share, for the year-ago quarter. R&D expenses increased to $10.9 million, compared to $9.7 million for the second quarter of 2003. As of June 30, the company had $79.2 million in cash and short-term investments, compared to $76.8 million as of December 31, 2003.

These figures did not come as a complete surprise to investors, as the company warned of these losses in a pre-announcement July 15.

Ciphergen Bets on Biomarkers, New Instrument

Ciphergen also warned investors before coming out with its financial results last week. As a result, its stock price slid down from over $7 a share in late June to the $4 range in early July (see PM 07-16-04). Since the company reported its results, shares have dipped to $2.91, where they closed Wednesday.

Instrument sales, which accounted for more than a third of Ciphergen’s revenues, were down 45 percent compared to last year’s second quarter. Revenues from BioSepra protein separation products also fell, while sales of arrays and service revenues increased.

Overall, Ciphergen reported $10.8 million in revenues, about 25 percent less than during the same quarter last year.

Ciphergen shipped 26 ProteinChip systems during the quarter, but could only book the revenue from 20 for technical reasons, according to CFO Matt Hogan. While sales in Asia— especially Japan and China—were “solid,” business in the US and Europe was “below our expectations,” he said.

During a conference call, Hogan re-iterated the reasons for the dismal results: decreased overall spending in proteomics, “noise” from competition, “misperceptions in the marketplace” about Ciphergen’s approach to biomarker discovery, and criticism of its instruments and approach by core mass spec groups and others.

“We are disappointed by the second quarter financial results but are taking concrete steps that we believe will allow us to regain momentum on the research tools side,” said CEO Bill Rich during the call. These include the promotion of a new instrument and its biomarker discovery program, as well as cost cutting measures.

To get instrument sales up to speed again, Ciphergen is betting on its new ProteinChip instrument, Series 4,000, which it launched last month (see PM 7-23-04).

The company has already taken several orders for the instrument, which comes in a “low end” version and an automated enterprise version. “The early indicators are that the enterprise system is probably going to do very well,” said Martin Verhoef, adding that customers “seem to value” its better throughput and software tools.

As previously announced, the company trimmed its operating costs last month but did not specify by how much. As part of this measure, it reduced the headcount of its sales force back to what it was earlier in the year, when it had added to its sales force. Further cuts came from research and development for research instruments and general operating costs. However, several company executives stressed that the diagnostics division remained unaffected.

Indeed, Ciphergen appears to believe that diagnostics—which so far does not contribute significantly to its revenues—will be key in its pursuit of profitability. “We believe that next year we can start to bring the losses down, fairly attractively, fairly aggressively, and then the swing factor is how the diagnostics part of the equation comes into play,” said Hogan.

The company said it still hopes to sign on a reference lab or an in vitro diagnostics company to commercialize its ovarian cancer biomarker assay, and has several collaborative biomarker discovery and validation studies going. It also plans to do less fee-for-service-work at its biomarker discovery centers, in favor of more internal projects.

Ciphergen’s net loss for the quarter was $13.1 million, down from $15.6 million during the year-ago quarter. However, in the second quarter of 2003, net losses included $7.3 million in costs for a non-recurring litigation settlement.

As of June 30, Ciphergen had $29.8 million in cash, cash equivalents, and investments in securities.

Harvard Bio Splits Genomic Solutions Business

For Harvard Bioscience, which last week reported flat revenues and dwindling earnings for the second quarter, the culprit was the genomic solutions line of products.

“In the first half of this year our Genomic Solutions product lines produced disappointing results that have dragged down our overall growth and profitability so far this year,” said CEO Chane Granziano in a company statement. “We have made significant changes in managing this business that we believe ... will return this business to profitability and growth.”

The business changes include breaking out the Genomic Solutions business into two business units, one for proteomics and one for genomics. “The revenues were lower than expected mainly because we lacked focus on individual product lines,” David Green, Harvard Biosciences’ president, said in a conference call to discuss the results. “There was no clear responsibility for individual product lines.”

This new structure, in which each of the two businesses has control over its own product line and there is dedicated marketing for each unit, has “already added to significant strength in the pipeline for Q3 and Q4,” he said.

The company is also eliminating what Green characterized as “excess infrastructure in G&A and manufacturing” by closing its San Carlos, Calif., Genomic Solutions production site, and reducing its headcount in Genomic Solutions from 151 to 115 employees. The company expects to complete these layoffs in Q4.

The company’s revenues for the quarter totaled $22.5 million, compared to $22.4 million during the same period last year. HBIO’s net income was $300,000, or $.01 per share, down from $740,000, or $.02 per share, for last year’s quarter.

R&D expenses for the quarter remained flat at $1.7 million, similar to last year’s costs. As of June 30, HBIO had $10.5 million in cash and cash equivalents.

— JK and MMJ


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