Life Technologies Forms JV in China

Consistent with its strategy of further expanding in the emerging markets, Life Technologies Corporation (LIFE - Analyst Report), a global biotechnology tools company, recently entered into an agreement with a Chinese molecular in-vitro diagnostics (IVD) company, DaAn Gene. The companies intend to form a joint venture named Life Technologies DaAn Diagnostics with headquarters in Guangzhou, China.

The Deal

The new joint venture will develop and market a range of molecular diagnostic tests based on Life Technologies' 3500Dx Capillary Electrophoresis instrument and the Big Dye Cycle Sequencing technologies that will work on the early diagnosis of oncology, infectious diseases and genetic diseases.

Moreover, the joint venture will work on disease prevention and therapy selection, complementing the Chinese government's 12th five-year plan to promote national economic and social development. However, financial terms of the agreement were not disclosed.

Emerging Markets a Key Focus Area

Life Technologies expects this deal to play a major role in enhancing its presence in the emerging clinical diagnostics market. The company is increasing its focus on emerging markets that accounted for approximately 10% of the total revenue in 2010. While the company had derived $188 million in 2007 from this region, it is expected to increase to $1.6 billion in 2015, representing a CAGR of 30%. In order to drive growth in emerging markets, the company is adopting strategies such as investment in new product development, infrastructure, increasing sales force and maximizing eCommerce capability.

Life Technologies has expanded its distribution network in China, Singapore as well as India, where it acquired LabIndia, a long-time distributor of Applied Biosystems’ products, during the third quarter of 2011. Although revenues from China witnessed some slackness in previous quarters, the company undertook certain changes. Consequently, China is back to the historical growth rate of 16% in the last reported quarter, a trend expected to improve going forward based on its immense potential, the recent approval of 3500 Genetic Analyzer as well as the new deal withDaAn Gene.

We are encouraged by Life Technologies’ strategy to strengthen its presence in the high growth markets of Latin America, the Middle-East, China and India.  Given the sustained slowdown in government and academic research funding, we expect the company to focus on developing industry-leading franchises in high-growth technology areas, applied markets and emerging geographies. These should be the key drivers for long-term growth. Presently, the company competes with other players such as Thermo Fisher Scientific (TMO - Analyst Report) and Illumina (ILMN - Snapshot Report) in the life science market.  Over the long term, we maintain our Neutral recommendation on Life Technologies.

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