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GEN News Highlights : Feb 1, 2013
Affymetrix, PerkinElmer Cut Losses in Q4
Two providers of technologies widely used in biopharma reflected similar fortunes as they released fourth-quarter and full-year 2012 results yesterday that showed reduction in red ink, but continuing uncertainty over the future.
Affymetrix vowed to get back in the black this year, following a fourth-quarter 2012 in which it narrowed its GAAP net loss from a year earlier—to $12.3 million or 17 cents per diluted share, compared with a net loss of $14.7 million, or 21 cents per diluted share in the final three months of 2011.
Excluding special items, the non-GAAP net loss was $1.3 million or 2 cents per diluted share, versus $8.3 million or 12 cents per diluted share in Q4 2011.
“We plan to return to growth and profitability in fiscal 2013,” Frank Witney, Ph.D., Affymetrix’s president and CEO, said in a statement. “We had a good finish to 2012, achieving modest growth in our core business during the fourth quarter, which was a very challenging environment for academic spending.”
Uncertainty over the fiscal cliff in Washington and continued concern about the size of eventual federal budget cuts dampened sales among Affy’s customers in universities and other research institutions. That explains why, in its core business of consumables, Affymetrix racked up $53.1 million in revenue during Q4 2012, down 3% from $54.9 million. However, instrument revenue rose more than one third (37%), to $5.2 million from $3.8 million a year earlier.
Saving Affymetrix’ bottom line from sinking further—and boosting its top line—was results from eBioscience, the maker of flow cytometry and immunoassay reagent products that Affy acquired for $315 million cash in June. eBioscience accounted for $18.1 million in new revenue during Q4 2012; Affymetrix did not furnish a net-income number attributable to eBioscience.
However, Affymetrix did say that without eBioscince, its quarterly total revenue would have risen only 2%. Total revenues rose during Q4 to $84.4 million—$76.4 million in product revenue, the remaining $8 million in service and other revenue.
For all of 2012, Affymetrix more than halved its GAAP net loss to $10.7 million, or 15 cents per diluted share, compared with a 2011 net loss of $28.2 million, or 40 cents per diluted share. Non-GAAP net loss last year was $6.8 million or 10 cents per diluted share, an improvement from 2011’s net loss of $13.0 million or 18 cents per diluted share.
Total revenue was $295.6 million—a 3% decrease from 2011 after excluding $37 million from eBioscience.
This year, Affymetrix is expecting better numbers in part from a restructuring projected to achieve about $25 million in annual savings, of which $5 million is in cost-of-goods sold. The company said it expects to record a total charge against Q1 2013 earnings of approximately $7 million, on top of the $1.8 million charge taken in 2012.
At least two analysts share Affy's optimism. "The turnaround story moves from realignment and stabilization to profitable growth. Genotyping and genetic analysis growth stand out, and recent cost cuts better-position Affymetrix to accelerated profitability," Peter Lawson, Ph.D., and Eric Criscuolo of Mizuho Securities wrote in a note to investors.
PerkinElmer finished Q4 2012 with a nearly $15.9 million net loss from continuing operations, or EPS of 14 cents, blamed on increasing pension contributions. The result showed improvement from the company’s $83.6 million net loss or EPS of 74 cents a year earlier, when the company took significant charges against earnings. The company’s quarterly revenue rose 6% year-to-year to $572.9 million from $539.3 million in Q4 2011.
For all of 2012, PerkinElmer finished the year with a net income of $69.9 million, up from nearly $7.7 million in 2011. However, operating cash flow from continuing operations plunged by more than one third—$153.6 million versus $234 million in 2011—since last year’s results reflected what the company said were increased pension contributions, tax payments, incremental working capital, and prepaid royalties.
"We are pleased with our strong finish to 2012, particularly in light of difficult year-over-year comparisons in the fourth quarter,” Robert Friel, PerkinElmer’s chairman and CEO, said in a statement. “This performance caps another solid year of revenue growth and adjusted operating margin expansion, which we believe is a result of our differentiated detection, imaging, and informatics portfolios each focused on attractive end markets.”
That strong finish includes several PE initiatives announced during Q4—such as the company’s acquisition of Shanghai-based Haoyuan Biotech, a supplier of molecular infectious disease screening technologies, and a collaboration with Verinata Health to distribute its noninvasive prenatal fetal test.
“The combination of PerkinElmer's distribution channel and capability and Haoyuan's leading automation assay technology and manufacturing expertise creates a formidable competitor in the large and growing Chinese blood screening and diagnostic markets,” Friel said during a conference call, according to a transcript published by Seeking Alpha.
He added that uncertainty over the fiscal cliff and sequestration helped dampen U.S. sales, especially in its research business.
PerkinElmer expects a better 2013, judging from its guidance to investors. The company said it expects organic revenue growth “in the mid-single digit range” over 2012, with this year’s GAAP earnings per share from continuing operations to fall between $1.57 per share to $1.65 per share. Non-GAAP EPS, which excludes special items, is expected by PerkinElmer to range from $2.24 to $2.32.
A restructuring effort should start paying off this year, and especially so next year, analysts Dan Leonard and Justin Bowers, CFA, of Leerink Swann wrote in a note to investors.
"We expect the company’s efforts to reduce its manufacturing footprint and move more manufacturing to low-cost geographies should be completed by mid-year, and its efforts to streamline its back-office functions will be ongoing throughout the year. The full benefits from both should materialize in 2014," Leonard and Bowers wrote.
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