Invitrogen Beats the Biotech Gold Rush

By James Klein, Larta VOX Editor

Instead of diving into a competitive industry, it's sometimes better to sell products to those who are doing the diving.

A frequently cited example in business literature might be called the "Gold Rush Paradigm." Thousands of people were lured to California during the gold rush of 1849, even though the chance that any one miner would strike it rich was extremely small. Few ever recouped their initial investment in the tools of the trade: picks, shovels, buckets, and so forth. The moral of the Gold Rush Paradigm is that those who succeeded most consistently during the gold rush were not the miners, but the companies that sold them the tools of their trade. Pants may not be as glamorous as gold, but the Levi Strauss Company is still with us today, after getting its start selling pants to the miners, while thousands of them went bankrupt engaging in this extremely speculative activity.

The lesson is worth reviewing today. Instead of diving into a glamorous, competitive business, it's perhaps better to sell less glamorous products to those who are doing the diving. A growing sector full of opportunities frequently attracts more competitors than can be accommodated. Instead of competing in a crowded market, sell products to all the competitors, and reap the gains no matter which of them wins.

This lesson has not been lost on Invitrogen Corporation (Nasdaq:IVGN), a NASDAQ 100 company that might be thought of as the Levi Strauss of the biotech world. While Invitrogen does perform some biological research and development, most of its revenues are derived by providing research supplies to other biotechnology companies.

Invitrogen was a Silver Sponsor of Larta's Project T2 technology transfer conference.

Invitrogen Corporation develops, manufactures and markets tools for biotechnology scientists in academic and government institutions, pharmaceutical companies and other biotechnology industries worldwide, helping life scientists perform biological procedures faster, more reliably and in a more cost-effective manner. The company conducts business in more than 70 countries and employs approximately 3,000 scientists and other professionals worldwide. Its products are used in nearly every major laboratory in the world.

Invitrogen's success is based on a strategy of research, product innovation, licensing and acquisition. The company has so far done everything right. It has effectively marketed a high-quality line of products, recruited a talented and experienced management team, and strategically acquired other companies and licensed technologies to enhance its value. With over $1 billion in cash and securities, Invitrogen is well-positioned to undertake further investments, both internally and externally, to strengthen its position as a global leader in the life sciences market.

The company offers thousands of products and services that simplify and improve gene cloning, gene expression, and gene analysis techniques, as well as protein production and protein characterization applications. Products range from reagents to software to custom laboratory services, with an emphasis on innovative research tools in kit form.

The company has already established itself as a leader in RNA interference (RNAi) products, which help scientists understand how genes and proteins function. Using RNAi technology, scientists can turn genes "off," enabling them to observe a cell's behavior in the absence of the targeted gene's effects. RNAi is one of the most chosen techniques in drug discovery research, and may lead to a better understanding of disease mechanisms and more effective therapies.

In 2002, Invitrogen began a wide-ranging plan for new product innovation, with an emphasis on high-growth, high-margin products. In September, 2003, the company announced the introduction of the BLOCK-iTTM RNAi family of products, which extends its leadership position in the field of RNA interference.

"RNAi is changing the way scientists look at drug development," said Dr. John Carrino, Invitrogen's Chief Scientist. "To truly take advantage of this new technology, researchers need a complete system that keeps up with their evolving applications. Invitrogen's BLOCK-iTTM RNAi platform provides the total solution they need to drive their discovery efforts."

The BLOCK-iTTM RNAi platform builds upon the success of the company's industry-leading solutions for delivery of siRNA, Invitrogen's LipofectamineTM 2000 and OligofectamineTM transfection reagents.

"As the foremost innovator in life science, we are re-shaping drug discovery with solutions in key areas of emerging research," said Invitrogen Senior Vice President of R&D, Claude Benchimol. "We have seen the impact that RNAi is making and have responded with the industry's leading family of products. We will continue to provide innovative additions to the BLOCK-iTTM platform to lead researchers to new levels in RNAi research."

"The BLOCK-iTTM platform's total solution to RNAi research exemplifies our commitment to providing breakthrough innovations that enable scientists to push the limits of discovery," said Invitrogen's President and CEO, Gregory T. Lucier. "RNAi will yield some of the most important advances in drug discovery in the coming years. Invitrogen will be the company making them possible."

Invitrogen's own research and development efforts are focused on breakthrough innovations in all major areas of biological discovery, including functional genomics, proteomics, bio-informatics and cell biology. The company also engages in technical expertise and support for other different areas of life science, including large-scale bioproduction.

Invitrogen has strategically acquired companies that enhance the company's effectiveness and value. In August of 2003, the company announced that it had completed its acquisition of Molecular Probes Inc., the leader in novel fluorescence-based technologies for labeling biological molecules in disease research and biopharmaceutical development.

"In addition to contributing strong growth and profitability to Invitrogen, the combination of the two companies will create benefits for our customers and our shareholders through distribution and technology synergies," said Lucier. "Our combined operations will allow us to create an array of new and beneficial products that will further position us to be the premier supplier of solutions for drug discovery and development."

August Sick, formerly Invitrogen's vice president for Business Development, has been appointed general manager of Molecular Probes. "Molecular Probes' strength in organic chemistry, combined with Invitrogen's leading capabilities in enzymes, cloning systems, protein analysis tools and cellular and biochemical assay technologies, provide us with the means to develop new products for the determination of protein function and other critical aspects of discovery research."

In July of 2003, Invitrogen acquired product lines and technology rights from Genicon Sciences, including the purchase of an ultra-sensitive detection platform for life science research.

"Invitrogen's goal is to become the preeminent partner for organizations performing disease research and drug development worldwide," said Lucier. "As the science of biological discovery shifts increasingly toward understanding protein function, Invitrogen will be well-positioned to provide novel new products incorporating Genicon's core detection technology. In addition, our global sales, marketing and distribution capability will provide scientists around the world with broad access to these products."

A pioneer in applying nanotechnology to the life sciences, Genicon employs gold and silver nanoparticles for the detection of nucleic acids and proteins. This platform technology, called Resonance Light Scattering (RLS), has been successfully applied in diverse life science research applications, including protein microarray analysis, a core application for proteomics research.

"The extraordinary sensitivity of the RLS technology allows researchers to detect low abundance molecules directly and to better monitor biological interactions such as nucleic acid hybridization," said Carrino.

Invitrogen has also been steadily honing its management team and structure. In May of 2003, Invitrogen appointed Greg Lucier as President and CEO. Lucier left his position as President and CEO of General Electric's Medical Systems Information Technologies business unit to join Invitrogen.

"He developed the strategy that drove the growth of GE's Medical Information Systems Technology business from $700 million in sales, which is approximately Invitrogen's current size, to $1.8 billion in three years, and he has produced similarly impressive results in his other executive positions," said Bradley G. Lorimier, Invitrogen's Chairman.

In September, 2003, the company announced the addition of Claude Benchimol, Ph.D., as Senior Vice President of Research and Development. Dr. Benchimol brings 25 years of experience building, developing and leading technology innovation teams.

"By focusing our R&D efforts under Dr. Benchimol's leadership, we will instill cutting-edge thinking, develop breakthrough technologies, and make drug discovery faster, easier, and more efficient than ever before, " said Lucier.

"The impact that Invitrogen is having on drug discovery and the fight against human disease is astounding," commented Benchimol. "What is truly exciting, however, is that we have only scratched the surface of what is possible. I look forward to propelling Invitrogen to the forefront of innovation by applying my knowledge and experience to life sciences."

The company's diligence and perseverance have paid off in significant financial results. In July, Invitrogen announced record sales and earnings for the second quarter of 2003. Revenues for the second quarter were $192.4 million, an increase of 17% over the $164.3 million reported for the second quarter of 2002. Net income for the quarter ended June 30, 2003 was $16.9 million, or $0.34 per share, which compares to $8.1 million, or $0.15 per share, in the comparable quarter of 2002. Reported net income and earnings per share increased 110% and 127%, respectively.

Revenues for the six months ending June 30, 2003 were $373 million, an increase of 15% over the $324.2 million recorded for the first half of 2002. Net income for the six months ending June 30, 2003, was $33.8 million, or $0.67 per share, which compares to $22.6 million, or $0.42 per share, in the comparable period of 2002. Reported net income and earnings per share increased 50% and 60%, respectively.

"We are very pleased with our second quarter and first half performance," remarked Lucier. "The company has done well and we expect to build on this performance going forward. Our plans are to improve operational efficiencies so that we can shift spending toward new product development and customer service activities while maintaining or improving our profitability. A greater investment in R&D will allow us to accelerate our organic engine and keep us at the leading edge of innovation."

Invitrogen was founded in 1987 by Lyle Turner. His vision was to simplify and accelerate life science procedures. He believed this was possible by packaging novel technologies and reagents into an easy-to-use kit format. Lyle grew the company by licensing technologies from universities and other institutions that could be developed into high value kits. Invitrogen's first product, The Librarian, was launched in 1987 and it was the first complete kit available for making cDNA libraries.

Throughout the 1990's, Invitrogen continued its in-licensing strategy, focusing on technologies for cell and molecular biology. By 1999, Invitrogen had become a market leader in cloning and gene expression products with $93 million in worldwide sales. Invitrogen went public in February 1999 and subsequently acquired four companies: NOVEX, Research Genetics, Ethrog Biotechnologies, and Life Technologies. In addition to the recent addition of Genicon and Molecular Probes, Invitrogen has also acquired a bioinformatics group, InforMax, and a provider of drug discovery tools, PanVera.

It is likely as biotech companies battle in an increasingly competitive environment, some will go the way of the California gold miner, while Invitrogen will still be around to sell to the victors.

For more information about Invitrogen, visit the company's website at www.invitrogen.com. If you are looking for a successful development of your life science technology, you might also consider contacting the corporate development group (email at business.development@invitrogen.com or call at 800 955 6288 x 66142 or 760-476-6142).

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