Harvard Bioscience Inc (HBIO) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the fourth-quarter 2011 Harvard Bioscience earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference call is being recorded.

I would now like introduce your host for today's conference, Mr. Tom McNaughton, CFO. Sir, please begin.

Thank you, Stephanie, and good morning, everyone. Thank you for joining us to discuss our results for the fourth quarter of 2011. Chane Graziano, our CEO; and David Green, our President, are also on the call today. After the safe harbor statement, I'll turn the call over to Chane and David, who will present comments on the Company's fourth-quarter core business performance, on the status of our new Regenerative Medicine Device Business, and our outlook for Q1 and the full year of 2012. Following those comments, we will open the call for any questions.

In our discussion today, we'll make statements that constitute forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ materially from those projected due to risks and uncertainties, including those detailed in our annual report on Form 10-K for the fiscal year ended December 31, 2010, (sic - see press release) and our other public filings.

Any forward-looking statements, including those related to our future results, represent our estimates as of today, and should not be relied upon as representing our estimates of any subsequent day. Further information regarding forward-looking statements and risk factors is included in the press release issued earlier today reporting our fourth-quarter results.

Please note that during this call we will discuss non-GAAP financial measures, because we believe those measures provide an enhanced understanding of how our businesses are performing. These non-GAAP measures approximate information used by our management team to internally evaluate the operating results of the Company.

For each non-GAAP financial measure discussed, we've made available as part of our press release or on our website in the Investor Relations section, a reconciliation of the most directly comparable GAAP financial measure. Additionally, any material financial or other statistical information presented in the call which is not included in our press release will be archived and available in the Investor Relations section of our website. Look on the Investor Relations section of our website, and then click on the Investor Presentations or other website icons as appropriate. A replay of this call will also be archived at the same location on our website. Our website is located at www.harvardbioscience.com. Lastly, all financial information presented on this conference call relates to our continuing operations unless otherwise stated.

I'll now turn the call over to Chane.

Thank you, Tom, and good morning, everyone. Clearly, 2011 was a difficult year for life science companies. Spending by researchers in several of our key markets was restrained by economic uncertainty throughout the year. However, although 2011 was disappointing in that way, I believe that the actions we took during the year have established a strong base to provide good growth in revenues and profits in 2012, even in the current economic environment.

These actions included -- we acquired CMA Microdialysis business, which should add approximately $2 million in incremental revenues in 2012. Secondly, we restructured our behavior products and Hoefer businesses. We expect savings of almost $1 million in 2012 from these actions. During 2011, sales of our Nanovue microvolume spectrophotometer products suffered, because General Electric Healthcare, our sole customer for that product, entered a year with excessive inventories. GE's Nanovue inventories have normalized. And at the current sale rates, we expect $1.5 million to $2 million revenue growth in 2012 from this product.

We recently launched a novel patented-pending microvolume Cuvette that can effectively turn the standard spectrophotometer into a microvolume unit. This exciting new product should add approximately $2 million into revenues in 2012. We hired a new General Manager to run our Denville Scientific business to focus on growing that business. In February 2012, we acquired AHN Biotechnologie, a German manufacturer of consumables for the molecular biology market. We expect this new business to generate $2.5 million to $3 million of revenues this year.

Based on these actions, we expect revenues in 2012 to be in the $115 million to $120 million range, on a year-to-year increase of approximately 6% to 10%; and for diluted non-GAAP adjusted earnings per share for our core Life Science Research Tools business to be in the $0.39 to $0.42 range, or an increase of 11% to 20% over 2011. In the first quarter 2012, we expect revenues to be in the $27 million to $28 million range, and our Life Science Research Tools diluted non-GAAP adjusted earnings per share to be in the $0.08 to $0.09 range. Our guidance does not include the impact of any future acquisitions.

In our Regenerative Medicine business, we participated in two major breakthrough surgeries for tracheal cancer during 2011. We provided the bioreactors in which artificial scalpels were cellularized and developed into organs for those life-saving transplant surgeries. We continue to increase our activities in this exciting new business opportunity. We expect our investment in this business to be approximately $0.04 during the first quarter of 2012. We are also actively evaluating strategic alternatives to fund this business going forward.

I will now turn the call over to David.

Thank you, Chane, and good morning, everyone. As Chane said, in 2011 we laid a strong foundation for revenue and profit growth in 2012. One of the key elements of that plan is the acquisition of AHN. AHN is a manufacturer of plastic consumable laboratory products, including pipette sets. This acquisition is complementary to the current Biochrom product line of molecular biology instruments, and is being integrated into our Biochrom business. AHN is located in the former East Germany, and has a high-quality product line with a relatively low cost structure. In addition, German tax rates are very attractive. And the euro is at almost historic lows, making an attractive acquisition for a US company. The transaction was funded entirely out of cash already on hand at our Biochrom subsidiary in the UK, and required no additional borrowings under our credit facility. We expect AHN will add approximately $2.5 million to $3 million in annual revenue. And we expect this acquisition to be accretive to 2012 earnings per share. Both the revenue and earnings impact of AHN are included in our guidance for 2012.

With the AHN and CMA acquisitions, plus the new microvolume Cuvette product and the recovery of Nanovue shipments, we are optimistic about the prospects for the core Life Science Research Tools business in 2012.

Let me now turn to progress in our Regenerative Medicine business. In our Regenerative Medicine business, we are very pleased to report that Mr. Beyene, the patient we helped treat for tracheal cancer in June 2011, is alive and well eight months after the surgery. Mr. Lyles, the second patient we helped to treat for tracheal cancer, whose surgery was in November 2011, is also alive and well at three months after his surgery. We are also pleased to report that the scientific and medical advances of Mr. Beyene's surgery were published in the Lancet, one of the world's top medical journals, in November 2011.

We are also pleased to report that Dr. Mark Holterman of the Children's Hospital of Illinois and Professor Paolo Macchiarini have received approval from the US FDA to perform the first replacement tracheal transplant in the USA. This is a major milestone for us, as the US FDA is widely regarded as the global gold standard in terms of the use of an experimental device on human patients.

At this point the technique is still experimental, and can only be used on humans when proper investigational device regulations have been followed. We expect the surgery to take place sometime in the first half of this year. In addition to the progress in our bioreactor business, we've also made progress on our clinical stem cell therapy injector. We are on track to submit this product for regulatory review this year. For the EU, we expect to submit by the end of June, with submission to the US FDA the following quarter.

We are currently in the process of hiring a VP of clinical sales to begin the selling process. And, as a result, we expect to get our first clinical revenue this year. In 2011, we invested approximately $0.07 in EPS in the Regenerative Medicine business. And the annualized rate in the fourth quarter was approximately $0.10. In 2012, we expect to invest approximately $0.13 in EPS in the Regenerative Medicine business, with approximately $0.03 to $0.04 in Q1.

As we previously stated, we are reviewing our strategic alternatives to maximizing the value we can create for our stockholders in our Regenerative Medicine Device Business. Based on feedback we received from potential investors after the announcement of Mr. Beyene's surgery, we feel that both the publication of the results in a journal, now accomplished; and the first surgery in the USA, now approved by the FDA; could be important steps in the near term that could create value for our stockholders.

Hence, we are pursuing these goals while we continue to progress the possible financing for the Regenerative Medicine Device Business. We are seeking additional financing for the Regenerative Medicine business because we believe there may be opportunities to significantly increase the addressable market size in the regenerative medicine field. If a significant event such as an investment or partner agreement is reached, we will announce it in the press release.

We'll now open up the call to any questions.

(Operator Instructions).

If there aren't any questions --

Pardon me. We do have a question.

Okay.

Kelly Cardwell, Central Square Management.

Just hoping for a little more color around your comments that you are actively engaged and exploring options for the Regenerative Medicine business. You've been actively engaged now for a year. So I'm just curious if there is a timeframe that we should be looking at here.

Yes, Kelly. You're right; we've been pursuing this for about a year now. As I mentioned earlier, when we started that process, we had not actually treated the first patient. And, clearly, having the first-in-man treatment is a major milestone in any kind of medical-oriented business. That happened in June of last year? And as a result of that, obviously, almost all of our investors were very pleased to hear that result. But there were two areas in which people expressed some concern, in some of the maximizing the value. And those two areas were that the first surgery was not published in a major academic medical journal. Of course, that happened in November of last year when it was published in Lancet.

And the second one was that all the patients -- at that point, it was just the first patient; by the end of the year there were two patients -- had both been treated in Europe and had not been treated in the US. And many investors wanted to see US data before they felt like there would be the appropriate value ascribed to that business. As I just mentioned earlier, we now have received the approval to treat first the patient in the US. That surgery has not yet been accomplished. We expect that surgery to take place in the first half of this year.

So, I think, once that is done, I think we will have achieved two very important milestones in terms of the valuation of this business, which I think will help us to maximize the value of that business to our stockholders. So that's really why the process has taken longer than we originally anticipated, largely because we've achieved great clinical success in that period.

Okay. Thanks.

I am showing no further questions at this time. I will now turn the call back over to Chane Graziano for closing remarks.

Thank you. All in all, with both the strength in the core Life Science Research Tools business and the progress we have made in the Regenerative Medicine business, I am optimistic that 2012 would be a very good year for Harvard Bioscience. I want to thank everybody for joining us today. Thank you.

Ladies and gentlemen, that does conclude today's conference. You may all disconnect, and have a wonderful day.