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Quarterly Review: New Technologies, Markets a Key Focus for Big Research Tools Firms

By Tony Fong

NEW YORK (GenomeWeb News) – By now, most life science tool companies have reported their earnings results for the most recently completed quarter. As many of the firms covered by GenomeWeb Daily News reported jumps in revenues year over year, with some improving substantially, many singled out the performance of technologies such as next-generation sequencers, mass spectrometers, and PCR systems not only as revenue drivers for the quarter just ended but also for the future.

The continuing advancement of technologies in the sequencing space was a key driver of revenue growth for the quarter for several firms.

Though its newest platform was just launched earlier this year, Illumina cited adoption of its HiSeq next-generation sequencing system as a key contributor to the firm's 31 percent spike in second-quarter revenues.

Priced at $690,000, the HiSeq is more expensive than the older Genome Analyzer, but Illumina President and CEO Jay Flatley said in the company's conference call that the higher price tag has not hindered customers from opting for the HiSeq.

"Even in the smallest labs, we see customers migrating towards this platform if they can get the funds to buy it," he said.

Since March, when Illumina began shipping the system, more than 100 HiSeqs have been shipped, "representing the fastest instrument scale-up in the company's history for the most complex product it has ever built," Flatley said. The company has had to "significantly" increase its production of the HiSeq, and it plans to ramp up production by at least another 50 percent to meet customer demand, Christian Henry, Illumina's CFO and general manager of life sciences, added.

At Life Technologies, officials similarly were bullish about their next-gen sequencing business, which saw double-digit growth during the second quarter, while revenues for the company as a whole expanded by 9 percent. According to CFO David Hoffmeister, about half of the installed base of SOLiD 3.5 instruments has been upgraded to SOLiD 4. Mark Stevenson, president and chief operating officer of Life Tech, added that uptake of the SOLiD platform continues to be strong in the smaller genome centers, particularly in those doing cancer research.

The firm anticipates launching a smaller version of SOLiD 4, called SOLiD PI, which it expects will broaden its customer base.

Its biggest news was saved for this week, however, when the company announced that it was buying Ion Torrent, which has developed a chip-based sequencer, for up to $725 million. Its benchtop instrument, called the Personal Genome Machine, is expected to launch later this year for about $50,000 along with a sample prep instrument also priced at $50,000. In a statement, Life Tech said that the system is "optimal for mid-scale sequencing projects, such as targeted and microbial sequencing."

The announcement follows two other news items of note in the sequencing space: This week, Pacific Biosciences, which is developing a real-time, single-molecule technology platform, said it plans to raise up to $200 million in a proposed initial public offering, and earlier in the month Complete Genomics announced its planned IPO to raise up to $86.3 million.

Lastly, Roche said during its earnings release that it expects its recently launched GS Junior bench top sequencer, a smaller version of its GS FLX, to open new markets for its sequencing business. During the company's recent earnings conference call, Roche Diagnostics COO Daniel O'Day called the GS Junior one of the firms' "key launches" for 2010 that will bring Roche's sequencing technology "to an affordable level for every size lab."

PCR Back in the Spotlight

While sequencing has been a hot technology space for the genomics tools market over the past couple of years, other technologies that have been staples of the molecular tools market also helped spur revenue growth or are expected to enhance sales in the future. For example, Thermo Fisher and Illumina both discussed their recent entry into the PCR market.

PCR remains a new and small part of Thermo Fisher's business, but during the firm's second-quarter conference call, President and CEO Marc Casper noted its recent purchases of Fermentas and Finnzymes.

"PCR is a major product category and it's one that as a company historically, we didn't participate much in, and I think it's important that we participate in the market," Casper said. The Finnzymes deal, in particular, adds "instrumentation capabilities" — an area where "other companies have very large positions."

The patent landscape continues to evolve, he said, and by moving into the PCR space now, the company will be "well positioned to accelerate organic growth in our biosciences business … and get ourselves set up for some good growth down the road in that market segment."

Meanwhile, Illumina announced during its Q2 earnings release that it had acquired PCR firm Helixis and concurrently introduced the benchtop Eco real-time PCR system, launching the company into the space. According to Flatley, PCR is "a very important market segment in the tool space. It's very large from a dollar perspective," and he said that because many of Illumina's sequencing customers need PCR instrumentation either in the front end or for sample preparation, Illumina has a "built-in" market.

Life Tech, however, is not ready to cede any market share to its new competitors and Chairman and CEO Greg Lucier said during the company's conference call that it has the broadest product offering "by far" in PCR. In April, the firm launched the ViiA next-generation PCR system, a platform that was newly built from the ground up with the intention of making it the basis for all derivatives for the next decade, a company official told GenomeWeb Daily News' sister publication PCR Insider at the time.

Lucier said last month that customer response to ViiA, which became available in June, was "very positive." Of its PCR business, in general, he added that Life Tech has "millions of assays available on demand, and it really is the standard that people continue to come to more and more."

On the mass spec front, while none of the major players divulged any specific numbers, they reported healthy businesses. Waters President and CEO Douglas Berthiaume, for instance, said mass specs were the "strongest performer across the line," in his company's business. While Waters reported an 8 percent increase in total revenues, mass spec revenues grew "well into the double digits," he said, and the Synapt line of instruments, as well as its Acquity UPLC platforms, were Waters' "star performers."

He also singled out its Xevo T-QS mass spec, launched at the American Society for Mass Spectrometry conference in the spring, as potentially a game changer for Waters. "This new system targets the largest market opportunity in mass spectrometry-based instrumentation," he said. "We feel that we have an opportunity to gain share in applications where high sensitivity, that is the ability to see trace amounts of organic or bio molecules, is of primary importance."

Bill Sullivan, President and CEO of Agilent Technologies, in the midst of reporting 31 percent revenue year over year growth this week also noted "very strong" sales of its LC-MS systems for life science applications.

Meanwhile, Thermo Fisher, whose Orbitrap technology has been widely viewed as a technology game changer, is turning its attention to software to better interpret the data coming off mass specs.

While CFO Pete Wilver said during the company's recent conference call that mass specs saw "especially strong growth," CEO Casper highlighted software such as Proteome Discoverer, which he said "virtually reinvents mass spec-based workflows for life sciences."

His remarks seemed to echo those of Iain Mylchreest, VP and general manager of Life Sciences Mass Spectrometry for Thermo Fisher, who told GWDN sister publication ProteoMonitor at ASMS, "What we've tried to portray is that it's not all just about the mass spectrometer. We have our Orbitrap technology, which is a proven technology, and there's plenty of runway in that technology to make it faster, higher resolution, more accurate."

During the second quarter, Thermo Fisher also acquired LC firm Proxeon, and Wilver said on the Q2 conference call that the deal "complements our leading ion trap and hybrid systems by adding capabilities for nanoflow liquid chromatography."

At Danaher, this past quarter was the first complete quarter that it owned AB Sciex, which it acquired at the start of the year. Danaher did not break out sales figures for AB Sciex, but said that AB Sciex and Molecular Devices, which was purchased simultaneously with AB Sciex, helped increased its Medical Technologies segment revenues by 31 percent, compared to a year ago. Overall, Danaher revenues spiked 24 percent.

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