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Still on the Rebound, Invitrogen Q2 Revs Increase 13 Percent, BioDiscovery Steady

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Continuing on the road back from a rocky 2006, Invitrogen this week reported a 12.7 percent jump in second-quarter revenues, helping profits increase 107 percent.
 
Revenues company-wide for the three months ended June 30 reached $321.7 million, up from $285.4 million a year ago. For Invitrogen’s BioDiscovery division, which houses its proteomics tools among other product lines, revenues rose 9.9 percent to $222.8 million from $202.8 million during the year-ago period.
 
Company-wide revenues grew 9 percent in the Americas, 20 percent in Europe, and 4 percent in Asia Pacific.
 
Net income was $40.9 million for the quarter, up from $19.7 million. This year's profit includes $11.5 million in income from discontinued operations compared with $678,000 for the same item in last year's second quarter, as a result of the sale of BioReliance and BioSource Europe earlier this year.
 
After a dismal 2006 left the company $191 million in the red, compared to a profit of $132 million the year before, the company has been in comeback mode. Beginning in late 2006 and into early 2007, Invitrogen implemented company-wide restructuring moves that resulted in management changes, a new sales commission structure, and compensation structure changes.
 
But even amid the overhaul, the company left its BioDiscovery operations largely untouched. This week, Invitrogen said revenues for its Cell Culture Systems jumped 19.8 percent to $98.9 million. But company officials also warned that sales in that division are “inherently lumpy.”
 
In comparison, BioDiscovery sales are less prone to fluctuation.
 
“Our BioDiscovery business is doing better than we’ve anticipated, driven by the improvements that we’ve made in the sales force and the strength of the product portfolio,” David Hoffmeister, CFO of the company, said during a conference call accompanying the release of its earnings results. “That’s more of a run-rate business and we expect that to continue at the rate that it has.”
 
Key contributors to growth in the division included continued strong growth in cell biology product lines such as labeling and detection, multiplex and protein cytokine assays, and enzyme substrates, as well as growth in molecular biology basics such as protein gels.
 
BioDiscovery revenues also included $5.4 million in licensing revenues resulting from a settlement related to a patent infringement dispute. Invitrogen did not identify the other party in the suit, but in late May, the company settled ongoing litigation with Clontech. Under the terms of the settlement, Clontech agreed to stop selling its RNase H minus reverse transcriptase products.
 
No other conditions of the settlement agreement were disclosed by either party.
 
According to Greg Lucier, chairman and CEO of Invitrogen, a growing part the BioDiscovery division is in web-based sales.
 
“We are seeing an increased conversion from other order modes, whether it’s phone or fax, to the web,” he said. “We don’t see any stop to that trend. If our projections are accurate, most of our business … several years away will be really across the web.”
 
In the short term, the company is focusing on keeping on the path it has followed for the past few months.
 
“We continue to execute upon our three focus areas, which include driving organic revenue growth, optimizing the mix of products sold, and improving our operational efficiencies across the company,” Lucier said.
 

“Our goal is to really continue just to do tuck-in acquisitions between now and the balance of the year.”

On the mergers and acquisitions front, the company is also taking a conservative approach after a period in which it made 15 acquisitions over three and a half years.
 
“In 2007, we’re very focused on doing the basics, but when we do find potential … technologies or platform companies that can add to what we’re doing, and they are very complementary to our core focus on tools and technologies, then we will make an acquisition,” Lucier said. In 2007, the company has acquired only one firm, Cascade Biologics, a provider of cell-culture technologies.
 
“Our goal is to really continue just to do tuck-in acquisitions between now and the balance of the year,” he said.
 
He sounded a similar conservative note on Invitrogen’s research and development strategy, where the company will focus on segments where it already has a market position.
 
“If we have a presence in a particular area … our goal is to go even deeper into that with more of the reagents, potentially more of the instruments and become a market leader … around that segment of tools and technologies,” Lucier said.
 
During the quarter, Invitrogen spent $28.7 million on R&D, including $23.8 million on R&D in BioDiscovery. In the same period of 2006, Invitrogen spent $25.8 million on R&D, and $22.2 million on R&D for BioDiscovery.
 
As of June 30, the company had $570 million in cash and investments.
 
The company also said this week that its board of directors has authorized the company to repurchase up to $500 million of its shares either on the open market or in privately negotiated transactions. The purchases will be made over a three-year period.
 
A $500 million share-repurchasing program approved last year by the board was completed during the second quarter with the purchase of 700,000 shares for $50 million, Invitrogen said.

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