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Life Technologies Focused on China


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Based on its strong potential in China, Life Technologies aims to strengthen its business in that region. In order to achieve this objective, the company has formed a partnership with Sino Biological Inc., a leading Chinese biotech company, for distribution and product development. As per the partnership, Life Technologies will distribute Sino Biological's portfolio which includes recombinant proteins, antibodies and Elisa kits.

This partnership agreement comes on the heels of the recent acquisition of Beijing Mao Jian United Stars Technology Co., Life technologies’ distributor of the Invitrogen brand reagent portfolio in Beijing and the rest of North China. This deal has created one of the largest direct selling forces in the Chinese life sciences reagents market.

Life Technologies has gained a strong foothold in the emerging markets as well as in the Asia-Pacific region, where operations are currently being expanded. After recording a temporary slowdown in its Greater China business about a year ago, the company augmented its dealer model and supplemented it with its own sales force. These efforts have led to success in restoration of operations in Greater China to normal levels with high-teens growth.

The company’s distribution centers in both Singapore and China are currently expanding, as is its manufacturing center of excellence in Singapore, which will eventually be a 133,000 square feet facility (from 75,000 square feet). The center will design and manufacture a wide range of products including Ion next-generation sequencing and molecular diagnostic instruments. Benefits from these initiatives are being realized in the form of products with higher margins and faster turnaround in addition to providing further tax efficiencies.

While the growth prospects in the emerging markets are encouraging, Life Technologies has adopted a conservative outlook with respect to the rest of the international market. The company expects overall growth of the European region (which includes all of the Europe and the emerging markets in Russia, the Middle East and South Africa) to be at the low end of the previous guidance — approximately at 1%.

As a result, Life Technologies now expects organic revenue growth for 2012 to be at the low end of the previously guided range of 2−4% due to slower growth in Europe. The company also lowered the top end of the earnings guidance on the heels of currency headwinds, dilution from recent acquisitions and lower organic growth. However, some of these factors are expected to be offset by lower discretionary spending and a marginally lower tax rate. A continuous share buyback program will also benefit it by lowering the outstanding share count. Life Technologies experiences tough competition from players like Illumina (ILMN - Analyst Report) and Thermo Fisher Scientific (TMO - Analyst Report), among others.

We have a Neutral recommendation on Life Technologies. The stock retains a Zacks #3 Rank (Hold) in the short term.

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