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ABI's Sequencing Business Grew 3 Percent in Q3; Market 'Stabilized,' 'Growing Modestly'

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Applied Biosystems’ capillary electrophoresis sequencing business grew slightly during the first three months of 2007, and the company said the commercialization of its next-generation sequencer is “progressing as scheduled.”
 
ABI said fiscal third-quarter revenue from DNA sequencing-related products inched up 3 percent to $140.7 million from $136.5 million in the year-ago quarter.
 
“We continue to view this performance as confirmation of our perspective that the DNA-sequencing market has stabilized and is growing modestly,” Tony White, interim president of ABI and CEO of parent Applera, said during a conference call last week.
 
Leading the drive in sequencing instrument sales was “probably forensics, but also additional medical sequencing that’s going on in small labs,” he said, adding that medium- to low-throughput instruments “are getting more attention now” than in the past.
 
Revenue from sales of sequencing consumables also picked up in the quarter as a result of a greater use of ABI’s installed base of 14,000 sequencers. White said the February launch of the company’s BigDye Xterminator purification kits also drove this increase.
 
“This product is an example of our strategy to capture more revenue from customer workflows, in this case, from preparing samples prior to their analysis on our sequencers,” White said.
 
DNA sequencing’s contribution to total revenue in the period dipped slightly to 27 percent of $529.9 million from 28 percent of $490.7 million year over year.
 
Revenue growth from DNA sequencing products lagged behind most other product areas at ABI. Real-time PCR and applied genomics — which includes Ambion’s products — has grown 19 percent year over year; mass spectrometry increased 15 percent, and “other product lines” grew 7 percent. Sales of core PCR and DNA synthesis products decreased 3 percent year over year.
 

“We continue to view this performance as confirmation of our perspective that the DNA-sequencing market has stabilized and is growing modestly.”

ABI spent $54.4 million on research, development, and engineering during the quarter, up from $48 million during the year-ago period. Like in the second fiscal quarter, the company attributed this increase to both the development of its Advanced Genetic Analysis next-gen sequencing platform, which it acquired from Agencourt last year, and the addition of Ambion to its business.

 
“We are spending more money on Agencourt than we’ve budgeted,“ White said. “Most of that is due to redeployment of people and projects onto the Agencourt [platform].”
 
The commercialization of the new platform is “progressing as scheduled,” White said. “We remain on target to provide initial instruments to early-access customers by mid-calendar [year] 2007 and plan additional unit placements in the fall.”
 
The company is already analyzing customer samples on its in-house instruments and has been presenting data at scientific conferences, he said (see In Sequence 02/13/2007, 02/20/2007, 03/06/2007) his will include next week’s Biology of Genomes meeting at Cold Spring Harbor Laboratory.
 
The new system, which uses the company’s SOLiD sequencing chemistry, will “open up a whole set of new applications, we believe,” said Mark Stevenson, president of ABI’s molecular and cell-biology division. He cautioned, however, that “it will also take a while for this market to adopt and [for us to] see how we are going to handle the amount of data and the workflow that’s really rather different to the existing DNA sequencing workflows.”

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