Life Technologies Corporation



|Life Technologies Corporation |(LIFE-NASDAQ) |$75.50 * |

Note: This report contains substantially new information. Subsequent reports will have changes highlighted.

Reason for Report: 3Q13 Earnings

Prev. Ed.: Aug 22, 2013: 2Q13 Earnings (brokers’ material considered till Aug 9, 2013)

Prev. Ed.: September 1, 2010: News

Brokers’ Recommendations: Neutral: 100.0% (12); Positive: 0 %; Negative 0% Prev. Ed: 10; 6;

Brokers’ Target Price: $76 (no change from the last edition; 8 firms) Brokers’ Avg. Expected Return: 0.6%

*Note: A flash update was provided on Nov 7, 2013

Though dated Dec 6, share price and broker material are considered till Nov 29,2013

Note: The tables below for Revenue, Margins, and Earnings per Share contain fewer brokers’ material than that material used in the Valuation table. The extra figures in the Valuation table come from reports that did not have accompanying spreadsheet models.

Portfolio Manager Executive Summary

Life Technologies Corporation (LIFE) is a leading manufacturer of instrument and consumable products used in life science markets around the world. The products are also used in forensics, food and water safety and animal health testing and other industrial applications.

Of the 12 firms covering Life Technologies all provided Neutral Ratings (100.0%). None of the firms assigned any positive or negative ratings to the stock.

Neutral or equivalent outlook (12/12 firms): While the neutral firms are encouraged by the company surpassing the firms and the street estimates, they prefer to remain on the sidelines due to limited upside potential owing to the impending acquisition by Thermo Fisher. The firms are concerned about the weak organic growth and the declining revenue in the international markets. Furthermore, the firms are cautious, as they expect that the company might face pressure due to U.S. sequestration as a considerable portion of revenues are generated from academic and government customers who are likely to face budget cuts. According to these firms, the Life Technologies sell out of its mass spectrometry division to Danaher Corporation in Feb 2010 led to the reduction in its capex exposure. Besides, although Life Technologies product portfolio is consumable-based, it continues to offer a large number of expensive instruments, which could come under pressure in periods of a tighter credit/spending environment. Additionally, the company is also exposed to the risk of Intellectual Property litigation as the product portfolio is viewed as cutting edge technology in the life sciences research field.

Moreover these firms find that the Thermo Fisher deal which is pegged at $76 a share is undervalued. They believe that because of this impending acquisition, this stock is now insulated from any further higher bidding. The firms expect that Life Technologies could be a target for bolt on acquisitions in the future as the company has a solid cash flow and a strong balance sheet position. Moreover the industry is highly fragmented and thus in the occurrence of any such further acquisition, Life Technologies will become a much more diversified company. In view of existing challenges in the core markets, these firms have maintained their Neutral stand. The firms anticipate that Life Technologies can generate healthy revenue growth through new product introductions, geographic expansions, and expansion into new markets. Furthermore, emerging markets continue to be an important growth opportunity for the company. Moreover, margins are expected to improve due to better manufacturing productivity, global supply chain efficiencies, and fixed cost leverage. Life’s leadership position in the molecular biology kit market and the wide offerings in the DNA sequencing technologies, are considered as positive factors that can propel its growth going forward. Additionally solid cash flow and the diverse end market opens greater opportunities for the company.

Dec 6, 2013

Overview

Life Technologies Corporation (LIFE) operates as a global biotechnology tools company focused on improving the human condition. It offers systems, consumables, and services that enable researchers and commercial markets to accelerate scientific exploration, drive discoveries and developments for improved living. The company’s product portfolio includes technologies for capillary electrophoresis-based sequencing, next generation sequencing, PCR, sample preparation, cell culture, RNA interference analysis, functional genomics research, proteomics and cell biology applications, as well as clinical diagnostic applications, forensics and animal, food, pharmaceutical and water testing analysis. In Oct 2010, the company acquired Ion Torrent Systems, a business that has transformed DNA sequencing through the use of semiconductor technology and resulted in a sequencing system that is simpler, faster, less expensive and more scalable than other sequencing technologies. Life Technologies emerged after combining Invitrogen Corporation (IVGN) and Applied Biosystems, Inc. (ABI) (with merger completed in Nov 2008). The company is based in Carlsbad, Calif.

On Apr 15, 2013, the takeover battle of Life Technologies came to an end with Thermo Fisher emerging as the clear winner. The latter disclosed that it will acquire Life Technologies for roughly $13.6 billion (or $76 per share), plus the assumption of Life Technologies’ net debt ($2.2 billion as of year-end 2012). The deal is expected to close by early FY14.The companies are currently looking forward to the special stockholder’s meet on Aug 21, 2013.

On Nov 26, 2013 The European Commission approved Thermo Fisher Scientific Inc’s $13.6 billion acquisition of Life Technologies Corporation, subject to certain conditions. The decision was taken after considerable consultation with other parallel bodies of Japan, Australia, China and New Zealand, besides the U.S Federal Trade Commission.

On Aug 21, 2013 more than 98% of the shareholders of Life Technologies (representing more than 72% of the company’s outstanding shares) voted in favor of its impending takeover by Thermo Fisher Scientific. The acquisition is expected to close in early FY14.

Additional information is available online at .

The brokerage firms identified the following factors for evaluating the investment merits of LIFE:

|Key Positive Arguments |Key Negative Argument |

|Life Technologies holds leadership position in many of the end markets it |Life generates the majority of its sales outside the US. Swing in exchange |

|serves. The company’s strong portfolio is poised to boost sales gradually.|rates could affect the company’s financial performance. |

|Management expects the Ion franchise to further strengthen its portfolio |Economic uncertainty continues to remain a challenge for Life. Research funding |

|in sequencing. The firms are encouraged by the robust growth of the PGM |for life science research is witnessing challenges amidst prevalent economic |

|platform and consider it to be a significant growth driver. |uncertainty. In addition, some countries have frozen grants due to their |

| |economic condition. |

|Life’s focus on emerging markets is likely to generate strong revenue |Life faces significant competition in the life sciences market. While the PGM |

|growth based on the immense potential of this region. |appears promising, it will witness stiff competition from Illumina’s MiSeq. |

Note: The company’s fiscal year references coincide with the calendar year.

Dec 6, 2013

Long-Term Growth

The firms are encouraged by the continued uptake of the PGM platform (with more than 1,000 placements) and consider it to be an important growth driver for the company. They are also optimistic about the success of the benchtop sequencing platforms including PGM, MiSeq and the Proton. Last year, new product introduction in this field more than doubled the revenue of Ion Torrent franchise for the second consecutive time. The firms are satisfied with the progress made so far with Ion Torrent technologies and expect the growth momentum to continue.

The company has expanded its presence in broader applied markets, including commercial (e.g., food testing, forensics and animal health) and clinical (e.g., molecular diagnostics, molecular and regenerative medicine) applications. In turn, Life Technologies is selectively investing its free cash flow in new emerging technologies (via M&A and R&D). The company is working on its diagnostics business strategy and has recently acquired Navigenics and Pinpoint Genomics to achieve this objective.

Life Technologies is raising its commitment to business in China, growing its sales force, launching new local training centers and customer care hubs, and improving its e-commerce capabilities in local languages. For the long term, the company plans to increase local manufacturing, offer products in line with local preferences, conduct R&D locally, and build local strategic relationships across government agencies and key accounts in China. The company’s strategy is similar in other fast-growing Asia-Pacific markets. Recent successes in India, Vietnam, South Korea and other Asian countries will be extended with strategies similar to those employed in China. The firms are encouraged to note that China is back on the growth path compared with the year-ago period.

Recently, the takeover battle for Life Technologies came to an end with Thermo Fisher emerging as the clear winner. The latter disclosed that it will acquire Life Technologies for roughly $13.6 billion (or $76 per share), plus the assumption of Life Technologies’ net debt ($2.2 billion as of year-end 2012). The deal is expected to complete in early FY14. The firms expect the deal to add value to Life Technologies shareholders. Additionally, after acquiring Life Technologies, Thermo will be in a strategic position to tap Life’s portfolio of genetic analysis offerings. The firms look forward to the completion of this acquisition with sublime optimism as they expect the deal to benefit both the companies. They believe that Thermo Fisher is a strategic fit for Life Technologies’s portfolio with complementary line of products. More than 98% of the shareholders of Life Technologies gave a positive response to the acquisition. This was followed by the European Commission’s approval of the deal on Nov 2013

The firms believe that Life Technologies as one of the leaders in genetic research, has high growth opportunity in this field over the long term. Genetics research is the most advanced research taking place in laboratories today. With advanced research that is currently taking place in these labs today on the genome, the possibility to translate that knowledge into cures is increased. However the revenue is expected to grow at 1% organically due to aggressive contraction in the CE Research business.

The long-term opportunity for life science research is attractive, but the level of government funding in this field is high, and a reduction in government research budgets could have a dampening effect on future growth prospects.

The economic downturn has compelled governments around the world to reduce the level of funding and that itself is major challenge for the company as 10-15% of Life Technologies customers receive funding for their research from governments.

Target Price/Valuation

|Rating Distribution |

|Positive |0.00% |

|Neutral |100.0% |

|Negative |0.00% |

|Avg. Target Price |$76 |

|Maximum Target |$76.00 |

|Minimum Target |$76.00 |

|No. of analysts with Target price/Total |8/12 |

|Upside from current |0.6 % |

|Maximum upside from current |1.0% |

|Minimum upside from current |0.0 % |

The primary risks to target price and valuation include FTC issues, the deal falling apart, or any type of change in the definitive merger agreement, antitrust issues with the TMO merger, tightening research budgets, technology obsolescence, increasing competition in key product lines, acquisition selection and integration, foreign currency fluctuations, and management execution and also the possibility of the acquisition of Life Technologies being delayed or cancelled.

Recent Events

On Nov 5, 2013, Life Technologies reported its 3Q13 results. Highlights are as follows:

➢ The company reported EPS of $0.67 in 3Q13. However, after taking into account certain one-time items adjusted EPS came in at $1.02, up 10.9% y/y.

➢ Revenues for 3Q13 increased 3% y/y on a reported basis (up 4% at constant exchange rates or CER) to $935 million.

➢ The three divisions of Life Technologies, viz. Research Consumables, Genetic Analysis and Applied Sciences recorded revenues of $404 million (up 5% y/y; 6% at CER), $338 million (down 4%; down 3% at CER) and $194 million (up 12%; up 13% at CER), respectively, in 3Q13.

➢ Based on its impending acquisition, Life Technologies has not provided any quarterly guidance. However, the company still believes that the currency exchange headwind will affect its fiscal numbers. The company expects currency to have an impact of approximately $57 million (earlier prediction was $75 million) on revenues and $0.13 ($0.17) on its adjusted EPS in fiscal FY13.

Revenue

Revenues in 3Q13 increased 3% y/y on a reported basis (up 4% at constant exchange rates or CER) to $936 million.

Revenue growth is attributable to robust sales from Research Consumables and Bioproduction business. However growth in these segments was offset by lower sales in Genetic Analysis.

The Zacks Digest average total revenue in 3Q13 was above the company’s report.

Provided below is a summary of segmental revenue as compiled by Zacks Digest:

|Revenue ($ in million) |3Q12A |

|Copy Editor |Anita Ganguli |

|Content Editor |Urmimala Biswas |

|No. of brokers reported/Total |12/12 |

|brokers | |

|Reason for Update |Earnings |

|QC |Souvik Guha |

|Lead Analyst |Urmimala Biswas |

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Dec 6, 2013

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