Celera Retains Sell Rating

Highlights include Celera Corporation (CRA - Analyst Report) and Abbott Laboratories (ABT - Analyst Report).

Celera Corporation: 1Q09 financials improve; challenges ahead

Celera Corp. (CRA - Analyst Report) recently reported first quarter 2009 financials.

Total revenue came in at $45.7 million for the first quarter of 2009 ended March 31, 2009, compared to $39.5 million in the prior year quarter. Total revenue was slightly ahead of our estimate of $43 million.

Revenue by segment for the first quarter 2009 was as follows:   

• Lab services revenue was $28.5 million compared to $22.3 million in the prior-year quarter, primarily due to increased test volumes and the broad-scale launch of the blood-based KIF6 test in July 2008. Lab service revenue exceeded our estimate of $25 million for the quarter.    
• Products revenue was $10.4 million compared to $9.3 million in the prior-year quarter. Revenue for the first quarter of 2009 was primarily from sales of Celera-manufactured products and royalties from sales of RealTime assays used on the m2000 system from Abbott (ABT - Analyst Report). Product revenue was lower than our estimate of $13 million for the quarter.    
• Corporate revenue was $6.8 million compared to $7.9 million in the prior-year quarter. The reduction in revenue in the first quarter of 2009 was due to the completion of payments by a licensee in addition to reduced royalty revenue received from another licensee, both of which were partially offset by $2.3 million from two new real-time licenses. Corporate revenue was ahead of our estimate of $5 million for the quarter

For the first quarter of 2009, Celera reported a net loss of $1.4 million, or $0.02 per share on a GAAP basis, compared to a net loss of $7.4 million, or $0.09 per share, for the prior-year quarter. Net income on an adjusted basis was $0.8 million, or $0.01 per share, for the first quarter of 2009, compared to a net loss of $1.0 million, or $0.01 per share, for the prior-year quarter.

At March 31, 2009, Celera's cash and short-term investments were approximately $321 million, compared to approximately $316 million at December 27, 2008. The company maintains a $200 million unsecured revolving credit agreement with four banks that matures on April 15, 2010. The existing funds are more than adequate to satisfy Celera's normal operating cash flow needs and planned capital expenditures for the foreseeable future. Therefore, cash burn is not a concern.  

Although Celera reported better-than-expected 1Q09 results, which was mainly due to our low expectation after the much-worse-than-expected financial results for the calendar fourth quarter of 2008. We believe challenges are still waiting for the company due to the current economic downturn.

Guidance for 2009 was not improving during the quarter. We have lowered our estimates of revenue and EPS for 2009 and beyond since 4Q08. We don't believe the company will achieve profitability in 2009 on an adjusted basis (including share-based expenses).

We maintain our Sell rating for Celera shares with a price target of $6.