|
Perkin-Elmer revamps
|
 |
April 29, 1999: 9:07 p.m. ET
Life-sciences instrument maker posts good numbers, splices in to two stocks
|
NEW YORK (CNNfn) - With an impressive third-quarter performance, Perkin-Elmer Corp. guaranteed a lot more investor interest when it splits into two distinct stock issues after the close of business May 5.
The Norwalk, Conn.-based company is the biggest player in a hot industry. It gets the vast majority of its sales from making analytical instruments for life sciences, particular gene research and DNA sequencing.
"They are pretty much the only game in town, and demand for sequencers is just exploding," says Sheryl Zimmer, an analyst who covers the company for Deutsche Bank. Perkin-Elmer captures 80 percent to 90 percent of that market, she said.
But don't get used to that name. Perkin-Elmer (PKN) will change its moniker to PE Corp. As of the morning of May 6, PE Corp. will serve as the holding company and parent to two distinct stocks, PE Biosystems Group (PEB) and Celera Genomics Group (CRA).
For now, PE Biosystems, the unit that makes the DNA sequencers, is capturing all the attention and driving revenues. Celera is a more-traditional biotechnology company, as yet untested and losing money.
The split, which will give investors a share of PE Biosystems and half a share of Celera for each Perkin-Elmer share, will allow investors to concentrate on the side of the business they prefer. "They're very different companies, different agendas, different strategies. That calls for different investor sets," Zimmer said.
For the first quarter, Perkin-Elmer earned 60 cents a diluted share, excluding a 10 cent gain from a business it is selling. But as the company starts to break out its two units separately, analysts were drawn to PE Biosystems sales and earnings Thursday.
At 83 cents on a pro forma basis, PE Biosystems outdid an 80 cent consensus Wall Street estimate. Sales of $305.9 million rose 37.0 percent year over year on stronger than expected demand for Perkin's new DNA sequencing machine, the 3700.
The company has 700 orders so far for the machine, which sells for around $300,000. That leaves management in the odd position of managing expectations more than sales. PE Biosystems management promises solid, long-term annual growth of 20 percent even though sales are running at 37 percent growth right now.
"We're having a great time right now, we're enjoying this, as you might imagine," Tony White, chairman, president and CEO, said in a Thursday conference call with analysts. The 3700 caught on quicker than anticipated, he said. But he was cautionary. "It's easy to get caught up in the euphoria when everything is going well."
He pointed out the PE Bioscience Group's products have a quick obsolescence cycle. Right now, he said, "we have a number of products that seem to be hitting on all cylinders." The company promised to introduce nine to 12 new products this year and is on pace, he said. "If we can pull that off, we'll have a great year."
"Near time, obviously business is extremely strong," David Molowa, an analyst with Bear Stearns, agreed. The sequencing machinery is "a great business to be in right now," he said. "This is just booming."
Breaking Celera out makes sense to Molowa. "It's a more traditional biotech company," he said. They're "fundamentally two different businesses."
Celera, which lost 47 cents a share, or $11.9 million, as expected by analysts. It's a new business unit with just 300 employees and in the development stage. It is signing up pharmaceutical and life-science clients to provide them research from its labs.
It expected to land three or four clients for the quarter and signed five-year deals with Amgen Inc., Pharmacia & Upjohn Inc. and Novartis Pharma.
White joked in the conference call that Celera didn't even have a five-year business plan. "This is a new paradigm in information in an emerging market."
Though internally Celera has a range of revenue expectations, it is not prepared to commit to anything publicly. "For now, unfortunately, we're going to leave that up to your imagination," White said.
|
|
|
|
|
|
Perkin-Elmer Web site
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
