Recently, Life Technologies (LIFE) began the shipment of Ion Total RNA Seq Kit for its Ion Personal Genome Machine (PGM) sequencer. Significantly, the Ion PGM sequencer will help scientists to get accurate and complete data compared to microarrays for transcript expression analysis.
Life’s Genetic Systems division includes sequencing systems and reagents, including capillary electrophoresis (CE) and the SOLiD system, as well as reagent kits developed specifically for applied markets, such as forensics, food safety and pharmaceutical quality monitoring.
During the reported quarter, this division recorded revenues of $228 million, down 4%. Organic revenue declined 8% resulting from delayed shipment of the new 5500 sequencer, as fallout of the disaster in Japan and slower-than-average sales of the SOLiD 4 System, as customers delayed purchases in anticipation of the 5500 launch.
Moreover, sales of CE instruments and consumables declined in the low single digits during the quarter due to a difficult year-over-year comparison. Excluding the impact of these comparables, the CE business grew in the low single digits. Maintaining the previous trend, sales of PGM were strong and the company expects significant contribution from Ion Torrent in the second half of 2011.
Life Technology believes that PGM will have the highest installed base of any next-generation sequencing instrument within the next 12 months if it can sustain ongoing trends. The company has introduced the Ion OneTouch system, an automated sample preparation system for the Ion PGM sequencer.
The company will begin shipment of the product in late June. The Ion OneTouch system is expected to reduce complexity and time required thus making things more convenient for researchers.
Life enjoys a strong position in the life sciences market and we believe robust performance from its core business along with new product launches will help drive revenues going forward. Over the past few years, the company has developed a portfolio of innovative products, weighed toward high-margin consumables.
Moreover, the company is undertaking additional steps to expand margins going forward. With a strong balance sheet, the company primarily focuses on suitable acquisitions and rewarding shareholders. However, challenges remain in the form of increased competition from players such as Illumina (ILMN) and Qiagen (QGEN) among others, economic uncertainty and unfavorable currency movement.
We have a ‘Neutral’ recommendation on the stock.
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