賽默飛世爾科技 (TMO) 2002 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Invitrogen's first quarter earnings teleconference. At this time, all parties have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. I would like to turn the floor over to one of your hosts, Mr. Lyle Turner.

The floor is yours, sir.

Good afternoon. I'm Lyle Turner, Invitrogen's chairman and CEO. With me on the call today are Jim Glynn, executive vice president and CFO; Vic Nole, president of Cell Culture Group; and Eric Winzer, vice president finance; and Paul Goodson, vice president of investor relations. We will all be available to answer your questions after our prepared remarks.

Before we begin, I want to caution all of our listeners that our discussion today will include forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. It is our intent that those statements be protected under the Safe Harbor created by the Private Securities Litigation Reform Act of 1995, and we refer you to risk factors listed in today's press release in our filings with the SEC, including our most recent 10-K.

I'll begin the call today by describing some of the notable events of the first quarter, and share with you our current business outlook and priorities. Then, Eric Winzer will discuss the financial results for the first quarter and give you our guidance for the remainder of the year. I am very pleased to report that we exceeded the first quarter guidance we gave on February 28, for both revenues, as well as earnings. As we reported in our press release earlier today, our first quarter revenues were $160 million, and our pro forma earnings per share was $0.46 cents.

We exceeded our February guidance principally because of the strong finish for the quarter by our Cell Culture business. On our fourth quarter earnings call in February, I told you about certain parts of our business that were not performing up to our expectations. I also made a preliminary comment on our plans to address these areas. I can now give you more current information and our plans for them while we are confident by an improvement of those aspects of our business by the end of the year. I'll start with our custom oglionucleotides business, which experienced strong demand in 2001, which caused production capacity shortages and longer delivery times to some of our customers in the United States. I am happy to report that we have built on new, low-cost capacity and we were able to deliver at least 95% of orders within two days within during the first quarter. This is the highest on-time delivery time level we have ever achieved during Invitrogen's ownership of this business. Now that our on-time delivery performance has been improved, we have reengaged the sales force to sell these products. We have also created a dedicated telesales force with oligos that begun a direct mail campaign to get this business back on a growth track in this fast growing market. Customer interviews that we've have completed recently have confirmed the quality of their top priority with on-time delivery closed second. Invitrogen continues to be recognized as a leader supplier of the highest quality oligos. Now that we have addressed our delivery problems and our strong sales support, I am confident that this business will turnaround in the next two quarters.

On February's call, I also spoke about the genomics services business. Our challenges here originated from old contracts that called for us to perform some extremely difficult tasks, but ultimately could not be accomplish within the revenues provided by the contracts profitably. We have already renegotiated some of these contracts and are in the process of renegotiating others. We are also in the process of launching an important news service dot com based on a subscription concept that is designed to promote our Gateway platform, as well encouraged service customers to make us the preferred partner for gene [indiscernible].

Despite the recent weaknesses we have seen in oligos and services, we are optimistic about the market opportunity they represent. However, it will take several quarters for our initiative to take root for the performance to be completely effective today.

. Some of our services have been performed out of our Huntsville, Alabama location. We have analyzed those products and services, and believe that they can be more successful if they were more fully integrated with our other operations. As such, we plan to move these activities to Carlsbad. In addition, the oligos production in Huntsville will be consolidated with our oligos facility in Frederick, Maryland. Our objective is to move all these operations from Huntsville by the end of September. With the closure, and the Huntsville facilities, we will complete our rationalization of Molecular Biology. After this rationalization is complete, we will have achieved a net reduction of approximately $300,000 square feet of space worldwide.

Eric Winzer will provide you with more detail and the financial impact of the relocation. I would like to note that we expect considerable net annual operating cost savings that will quickly repay the costs associated with the closure. Then in clone collections and cloning products at Carlsbad will also better position us to integrate Gateway into our extensive collection of full length gene, which in turn will better serve our customers as they study gene function.

On the February call, I also spoke to you about the rest of our Molecular Biology portfolio, which was generally doing well, but growth appeared to be slow. Excluding oligos and services, these Molecular Biology products grew 16% in Q1, a solid performance set down from the growth rate achieved in 2001. We expect these Molecular Biology businesses to continue to show solid growth. Our current expectation is for these businesses to grow in the 15 to 20% range in 2002. In the U.S., we expect our government academic business to grow in the 10 to 15% range, while we expect our commercial business, including pharmaceutical and biotech customers, to grow from 15 to 20%. We believe international growth will exceed our U.S. grow rates by about 5.0%. To view the growth rate we experienced in this year's first quarter, and again, these exclude oligos and genomic services. Our Cell Culture division continued its strong performance record during the first quarter. Revenues from continuing Cell Culture products increased 19% during the first quarter of 2002, while foreign currency exchange remains constant. Sales in Cell Culture products, and large-scale bio collection applications, increased 38% in the first quarter compared with the first quarter of 2001.

Before I ask Eric to review first quarter financing, I want to share with you some of the accomplishments during the first quarter. In our new 320,000-square foot facility in Carlsbad, we have completed the installation and startup of our distribution operations on schedule. We are on track for the relocation of the Molecular Biology manufacturing operations into that facility by the end of June, and we're moving our electrophoresis GmbH manufacturing by the end of the summer. In parallel with these moves, we've made similar progress, transitioning production from our Frederick, Maryland facility for its dedicated use for oligonucleotides. Relocation of our manufacturing and distribution operations within our Carlsbad operations will free up space to accommodation expansion of our research and development labs.

We have also made important progress in other areas. Within the quarter, we launched a total of 22 new products, including several sniff detection kits, a high throughput version of our E-Gel nucleic acid electrophoresis system, our Lentiviral Expression System, our Expressway product for accelerating protein production of three new Gateway vectors. In Cell Culture, we have many new projects underway that we anticipate will result in exciting new products in the areas of stem cells, tissues engineering, neuroscience. In Molecular Biology, we have 50 more new technology in various stages of evaluation and license negotiation. Our grant program, which we launched in January, and which would provide funding for research in focused areas that we designate, received 44 applications in the first quarter alone.

We have chosen three projects to fund this year and are evaluating four other projects. In the bioproduction area of our Cell Culture business, we had another strong quarter. We believe that this growth is due to both a robust market for these products as well as the increase in the investment we've made in marketing materials for our bioproduction business.

We also are continuing to increase our marketing efforts in other areas. Our total advertising spending in the first quarter increased substantially over last year's first quarter, and we plan to continue increasing our investments in advertising, promotions, and direct mail.

In March, Invitrogen hosted the worldwide conference on gene expression and it was an honor, and an opportunity for us to strengthen our reputation among our scientific customers, and I am particularly pleased to report that our reputations continues to be one of the strongest in the industry.

During the first quarter, we received the results of a blind survey conducted among 1,100 subscribers to Bio Techniques magazine, one of the leading publications in our industry. The survey [inaudible] #1 among 11 different companies that are offering the highest quality products, offering the best customer service, providing the most helpful technical support, and offering the useful Web sites. We also rated #1 among 11 different companies for providing the most reliable shipment, and by a wide margin, #1 for developing the most innovative products. We are also among the highest rated companies for having the most useful catalog and providing products that offer the best value for the money. We think these survey results point out many of the reasons why our customers [inaudible].

With that, I'd like to ask Eric Winzer to review the quarter and give our guidance for the rest of the year.

Eric?

Thank you, Lyle, and good afternoon. Before I review our financial performance, I'd like to talk briefly about the new accounting rules regarding intangible assets and how these new rules affect our reported numbers.

In the first quarter of 2002, we stopped amortizing goodwill and other intangible assets with definite lives as required by financial accounting standard 142. On our income statement, you will see that diluted EPS reported on the generally accepting accounting principles with $0.27 cents in the first quarter of 2002, compared with a diluted net loss per share of $0.76 in the first quarter of the previous year when goodwill was still amortized.

Our press release includes a supplemental table that shows the 2001 results, using the 2002 accounting rules so you can make a better comparison. Applying the 2002 rules to both years, diluted earnings per share rose from $0.11 cents to $0.27 cents. SFAS 142 requires that we continue to amortize intangible assets that have indefinite lives such as purchase technologies, trademarks, trade names, and the like. Our Q1 results include such amortization.

Another requirement of SFAS 142, is that we perform a transitional impairment test of the carrying value of goodwill on our books before June 30th of this year and that we make regular assessments thereafter. We intend to complete our initial assessment in the second quarter and record any required adjustment by the end of the year as required by SFAS 142.

Now let's look at our Q1 financial performance. Our reported revenues of $159.9 million were 1.0% lower than the $160.7 million reported in Q1 2001. Our revenues were down primarily because we discontinued many low-growth, low-margin products, and due to unfavorable currency effects. Discontinued products reduced our revenue growth rate by about 10% and currency took away another 3.0%.

Adjusting for these two items, our revenues grew 12%. Again we have a supplemental table on our press release to provide more detail on revenues. Our consolidated gross margins continued to improve in the first quarter of 2002, rising to 57.5%. This is the highest level obtained since the acquisition of Life Technologies and reflects our success in discontinuing low-margin products, controlling cost, and improving our average selling prices. Our operating expenses were at approximately at the same level as a year ago, except R&D, which has declined. Over the past year, we have reduced our scientific staff in Maryland as we closed our research operations there. We have replaced some, but not all, of those divisions in California. We expect to increase our R&D expenditures throughout 2002 and beyond and bring them to a substantially higher percentage of sales.

The merger-related costs in Q1 of this year were principally for retention bonuses for our Frederick workforce, who are working through the middle of this year to close various operations that are transferring to Carlsbad. This merger costs will continue near this level through the second quarter of this year. Pro forma EPS for Q1 was $0.46 cents, $0.02 cents above the high end of our EPS guidance. Again, we have included a supplemental table in our press release to reconcile the GAAP and the pro forma presentation. Our cash and investments were just under 1.1 billion at the end of March, up slightly from year-end. Days sales outstanding increased to 58 from a very low 51 at the end of 2001. Some of this increase was a normal seasonal rise, but 58 is above our target, and we expect to reduce this going forward. Inventories represented 3.5 months of sales at the end of Q1, unchanged from year-end.

We can provide additional information on Q1 results in the Q&A session. Now I'd like to turn to our revenue and earnings outlook for the remainder of the year. 0:13:45 As Lyle mentioned earlier, we believe our continuing Molecular Biology sales, excluding oligonucleotides and services will grow in the 15 to 20% range for the remainder of 2002. Our oligonucleotide and services businesses should improve throughout this year, but we expect a quarterly year-over-year growth may be flat or negative until year-end. We expect Cell Culture revenues to remain close to their current levels, while growth rates will moderate somewhat because of challenging comparables from 2001. We are assuming that exchange rates for major currencies do not change significantly. Under these circumstances, we believe 2002 revenues will be in the range of $640 to $650 million. We believe the quarterly revenues for the remainder of 2002 will range from $160 to $163 million. We believe our gross margins will continue to increase in 2002. At the same time, we plan to increase our investments in R&D and marketing to support strong sales growth beyond 2002. Lyle mentioned our plans to close our Huntsville facility and I'd like to give you our estimates for the workforce and financial impacts of this move. We expect the consolidation will reduce head count by a net of approximately 175. We are estimating a one-time charge of $14 to $19 million consisting of severance and other cash costs of $5.0 to $7.0 million and a noncash write-off of facilities and equipment of $9.0 to $12 million. These costs will be finalized and recorded principally in the second quarter resulting in an EPS charge that we currently estimate at $0.16 to $0.21 cents. We estimate the consolidation will result in annual operating cost savings of approximately $8.0 to $10 million.

These cost savings will begin after the consolidation is complete in late 2002. Before I leave this topic, I would like to review the expected cash return on the Huntsville closure. As I mentioned a moment ago, we expect cash cost of $5.0 to $7.0 million to close the operations in Huntsville, while we expect to incur noncash asset layoffs principally for facilities. We expect to receive net proceeds from the sale of our Huntsville facilities of $6.0 to $9.0 million depending on local real estate conditions. These two cash items are close to offsetting each other, so we expect net out of pocket cash to be very small and possibly positive. We expect to realize annual cost savings of $8.0 to $10 million beginning in the next two to three quarters, so our payback is expected to be vary quick and quite substantial. Much of this cost savings will be redirected to activities that facilitate growth such as R&D and marketing. Turning to our earnings outlook, we are projecting quarterly pro forma EPS of $0.44 to $0.46 cents in each of the remainder quarters of 2002. The total pro forma EPS estimated to range from $1.78 cents to $1.84 cents. Our pro forma EPS numbers do not include amortization of merger related intangibles, any potential goodwill impairment, or restructuring charges, including the Huntsville restructuring charge which again we estimate will range from $0.16 to $0.21 cents per share.

That concludes my comments.

Lyle?

Thank you, Eric.

I'd like to make few comments and observations before we open the call for questions. Overall, our business is strong. We believe we have fit in place effective plans to address the issues we face in oligos and services. Our Molecular Biology products, other than oligos and genomic services, are showing solid growth, and are projected to continue growing at 15 to 20%. Our Cell Culture business continues to report very solid growth and its gross margins are now in the high 40's. Our businesses are providing strong operating profits, which give strong cash flows from operations. We're not only doing well now, we put in place key elements for continuing our growth and further improving our profitability. We are increasing our in-license and R&D activity, which will drive revenues and earnings from future new product introduction, increasing our activity in advertising, promotion, and direct mail. We're leveraging the premiere position we hold in the minds of our customers. We have a strong balance sheet with the financial strength to make the right acquisition at the right price with the means to further our leadership and accelerate our growth. It is for all these reasons that I continue to believe that no other company is better positioned than Invitrogen to benefit from the growth and profitability potential in this industry.

With that, I'd like to open up the call for questions.

Operator, will you please explain the procedure for our listeners to ask questions?

Our first question is coming from Mirov Hovov [phonetics], please announce your affiliation.

DAVE WHISKY [phonetic]: Hi. Actually Dave Whisky at CSFB [phonetic]. Hi, guys. A few question. First, can you comment on pricing issues and any pushback you've seen from pharma, and if you had to re-price any products such as Gateway?

Yes. I can comment on that. This is Lyle. We have not had to re-price any product. One always experiences pushback on pricing but everything that we have seen reinforces the hard work and analysis we did to price all of our products fairly, so we haven't seen any deterioration of our ability to price appropriately.

DAVE WHISKY [phonetic]: Okay. But no loss of sharing in key product areas?

That's correct.

DAVE WHISKY [phonetic]: All right. And can you update us on negotiations with Flexsteen [phonetic] and Harvard [phonetic]. Did you decide to go your own way, or is there some upside in the numbers on Gateway?

I don't think those things have finished yet, and so the best of my knowledge, that's still an open issue.

DAVE WHISKY [phonetic]: Okay. And how about new product update on Lux primers [phonetic] and whether - how that low ride [phonetic] is going?

I'm going to have Scott Trovose [phonetic] answer that question. He's the business unit manager for that group.

SCOTT TROVOSE [phonetic]: Yes, so the Lux Primers [phonetic] we're anticipating bringing those out some time in Q2.

DAVE WHISKY [phonetic]: Okay.

Our next question is coming from Cherry Walker [phonetic]. Please announce your affiliation.

CHERRY WALKER [phonetic]: Deutsche Bank. Good afternoon. Could you give some more color on the Cell Culture business? It looks like another great quarter, and I'm interested in what's driving the gross margin expansion? Is it manufacturing, the pricing?

This is Vic talking. The growth in Cell Culture is driven primarily by the bioproduction business, which was up 38% in the first quarter. We're finding that it the growth within bioproduction is all volume. There is a little bit of mix change as well as we try to get our customers to move away from more of the commodity-like products into some of our specialty media products.

CHERRY WALKER [phonetic]: Okay. Is that moving away to [indiscernible] free media and things like that?

Yes, free media and chemically defined media.

CHERRY WALKER [phonetic]: Okay. And what should we expect going forward both in growth rate and gross margin? It looked like it was 48% gross margins.

We expect that the gross margins will continue to on their upward trend. We expect that we will probably get up into the high 40's with gross margins overall in the Cell Culture business. As far as revenue are concerned, we expect that we'll maintain the current revenue levels, although the growth rate will probably show some reduction because of comparables to 2001.

CHERRY WALKER [phonetic]: Great. And can you give some more color on the overall macro environment? You know, there's been a lot of discussion about what's going on with pharma versus academic and biotech and just some flavor on the macro environment?

This is Lyle. Are you talking the macro environment for the Cell Culture products or just for research products? CHERRY WALKER [phonetic]: For research products in general.

We give a lot more in depth analysis of the trend in the United States in the last two months since our last call, and we don't see a general trend in reduction in spending in the pharmaceutical area. The reduction appeared to be just from two - primarily in two product areas. I think that's - and biotech is very strong for us. We have - for the last call had both of those groups …

CHERRY WALKER [phonetic]: Right.

in one pot. And so I couldn't differentiate the two but since then we've broken out the pharma and smaller companies, and contrary to what I thought were the facts of the last phone, biotech looks stronger than it was before, and big pharma has the only deterioration we've seen in a couple of product lines.

CHERRY WALKER [phonetic]: And what about the academic market? AVI [phonetic] mentioned some weakness there. Are you seeing that?

Not really, no.

CHERRY WALKER [phonetic]: Great, thanks.

Thank you. Our next question is coming from Scott Greenstone [phonetic]. Please state your affiliation.

SCOTT GREENSTONE [phonetic]: Thomas Weisel Partners. Congratulations on a nice quarter. I had a couple of questions. One is could you just breakout how much the oligos and services represented as a percentage of your business in the quarter?

It's consistent with our prior quarters. They tend to be about 5.0% overall of our business.

SCOTT GREENSTONE [phonetic]: The combined business, okay.

Well, primers is 5.0% and services 5.0%.

SCOTT GREENSTONE [phonetic]: Oh, I see. Okay. Great. And then, I may have missed this, but did you discuss why R&D went down to so significantly from the fourth quarter?

Yes, we did talk about it in the discussions primarily because of the final head count reduction associated with closing the R&D facilities in Maryland.

SCOTT GREENSTONE [phonetic]: Okay. And then, as you - you say that it's going to ramp-up as you in-license more technologies going forward. Where will that be recorded, that in-licensing of technology?

The initial cost of the license are captured in R&D. The royalties on those license are captured in cost of goods sold.

SCOTT GREENSTONE [phonetic]: So there's no intangibles added to the balance sheet?

No. Not usually, no.

SCOTT GREENSTONE [phonetic]: And how quickly do you expect the R&D to ramp up, or this is a level where it will just be moderate increases from here?

We have moderate increases as a percent through the rest of this year, because we are continuing to have, I think, there's some additional head count reductions in Maryland in the second quarter.

That's correct.

That's accurate. And as we - and then there's some - but it ramps up a little bit faster in the third and fourth quarter on a dollar basis and - but we're still a long ways from our target, but we have doubled the size of our R&D group in Carlsbad and we're trying to add people in a way that keeps them productive rather than just throwing money at the problem.

I think that we're targeting about 6.0% R&D by the end of the year.

That's our objective, yes. Six percent of sales by the end of the year.

And we hope to increase the percentage on R&D in 2003. SCOTT GREENSTONE [phonetic]: Do you have a number of, you know, what percent of your sales are coming from products introduced in the last couple of years, and how has that been trending?

I don't think we have that number right now, Scott. I should have that number in my head, and I can get that for you, and I will make a point of having that for the next call.

SCOTT GREENSTONE [phonetic]: Okay. Great. Also, I guess, finally, did you get any large orders in Cell Culture in the quarter or actually in Molecular Biology as well, either - you know, large or lumpy orders?

The only thing that was significant on the Cell Culture side was we did have one large order for about $600,000 that we expected to take in the second quarter that the customer asked for early.

SCOTT GREENSTONE [phonetic]: Okay. And how frequently would you expect that order to be, you know, reordered?

Well, it depends on whether or not they are scaling up. If they're scaling up production of a biomolecule, it could be that we'll actually see incremental business there.

SCOTT GREENSTONE [phonetic]: Okay. Great. Thank you.

Thank you. Our next question is coming from Tim Wilson. Please state your affiliation.

Indiscernible]. Well done, guys. A couple of questions. First of all, I'm struck, and I'm sure everybody is, by the markedly differently turn in this call versus the last call, and in particular the apparent recovery of orders strengths from the pharmaceutical industry, and I'm taking that particularly in the U.S. you're talking about. Why - is that because you have a better understanding of what went wrong last time and you have better data now, or has there been a return of the customer?

I believe it's primarily because we had the opportunity to pull apart the numbers that we were using for the last call. Some of that is the reporting system just improving following the integration. Some of it is taking the time to sort out those numbers. So what I had reported last time was it looked at there was weakness generally in pharm, big pharma, and biotech, and it looked like if you pulled the numbers apart they are on the key products of the lead products. The growth rate, I believe, in the first quarter was about 0.1% higher than it was in the prior two quarters and there was no weakness in the lead products. There was some weakness in some of the commodity products but the primary problem was in services and primers, and it was just so big that it made everything look weak, and then as you pull biotech out of big pharma, then you saw the biotech was very strong, and there were a few large accounts in big pharma of large companies that accounted for all that problem.

And second question, on the Cell Culture side in the impressive performances, you're bioproduction business again - I asked you this every time. I guess we're all scared that you'll have a great quarter and then everybody will [indiscernible] and then we'll fall off the edge of the cliff. How will best quarter to quarter if that rather lumpy business going forward? How do you see the order in patents developing?

We're very confident with the revenue level we're at right now. I mentioned that earlier. We're less concerned about lumpiness in the industrial business today than we were two years ago and that's due primarily to the fact that we have been investing quite a bit of time and effort in expanding the number of accounts that we have in our portfolio and it's important to point out that compared to where we were about 16 months ago, we've increased the number of accounts in our portfolio by about 60%, so we have well over 200 accounts now and we're confident that that will begin to significantly buffer the lumpiness of the industrial production business.

And how is the dynamic [inaudible] account? What are same store sales like?

Are we talking bioproduction now?

Yes, just on bioproduction.

What would it be if you looked at each individual account? Do you see a trend in increasing revenues from individual accounts, or is your growth coming from the addition of these new accounts that you talked about?

It's coming primarily in increased volume, and it's really both. We're getting a lot more orders from new accounts and we're getting more orders from the larger accounts, so the revenue dollars per order are not increasing significantly, but there are more of them coming, if that make sense?

No, that does answer the question well. Final question: Last quarter you - on the call you mentioned a quality control issue which involved - I think you mentioned the FDA. Is that completely resolved and can you give us more color on that?

It is completely resolved from a service standpoint. We've revalidated that process. We began putting IVD [phonetic] products back into inventory in the middle of January. That is complete. We now have our IVD [phonetic] products in stock and available to customers.

Thank you very much.

You're welcome.

Our next question comes from Aaron Deist [phonetic]. Please state your affiliation.

AARON DEIST [phonetic]: Good afternoon. Robert W. Bear [phonetic]. Can you outline your strategy for recapturing market share in the oligonucleotide market?

Sure, Aaron. This is Lyle. We did outline it in the presentation but primarily we're, right now, we're tracking it at about 60% of capacity in the oligos business. We stopped advertising and stopped promoting it and we stopped letting our salespeople talk about that product line when we were unable to fill the number of order that were coming in. We added capacity and we have excess capacity now, we have reengaged our promotional efforts. We have introduced a program for the salespeople to sell them. Our program is very closely monitored by the production people so that we don't exceed our capacity again. We're targeting this 95% on time delivery area and we know exactly the GAAP and units, and we are slowly - we have slowly been letting out promotional activities. It's salespeople, it's direct mail pieces, and it is a telesales group that are all working to fill up that capacity. The market is growing rapidly. We have a strong reputation for a quality product, and we believe that all we have to do is turn on the promotional activity and we can fill up that excess capacity.

AARON DEIST [phonetic]: Well the nature of my question really is in the time that you've lost some of your customers, because certainly in the last quarter some of those customers continued to do their experiments and transition to some of the other oligos hazards [phonetic] which have seen growth and haven't seen that drop off in demand. My question for you is are you going to entice those customers back through pricing production, through quality enhancement guaranteed of deliver that differentiate you from some of the other oligo hazards [phonetic]?

I think I'll let Scott talk about how the product line is differentiated, but I can assure you that I am not encouraging doing this through discounting.

SCOTT TROVOSE [phonetic]: That's right. That isn't the plan. This - one of the things that we've looked at a lot in the past several months has been what are the key drivers for customers making the decision about where they go, and the number one thing always seem to come around to quality. That's the one thing they won't compromise on.

The second thing that they care the most about is on-time delivery. We were probably missing most of the problems on delivery. We have never had an issue with quality, in fact, they would easily show up as very high-quality performance products for our oligo users. So at this point, the position that we're taking is continuing to slide the high quality oligos with 95% or better on time delivery.

AARON DEIST [phonetic]: Okay. And you think that will be sufficient to pull back some of the customers that have moved over to some of the other suppliers?

SCOTT TROVOSE [phonetic]: We've actually already started to experience people coming back, specifically because of quality issues.

AARON DEIST [phonetic]: Okay. A second question: Can you give us an idea of the average order size in the Molecular Biology? You answered previously for the Cell Culture market, but in terms of the Molecular Biology side, I am curious to know if you're seeing a growth or pickup or size of each of the orders?

I think somebody's question earlier was about same store sales.

AARON DEIST [phonetic]: That was on the Cell Culture side, I believe.

Yes, and you're not talking about average order, you're talking about growth in purchase from individual accounts, right?

AARON DEIST [phonetic]: Absolutely.

I don't have that in my head or at my fingertips. Does anyone else here? It has not been a part of what we were pulling apart. We did analyze that for large accounts in the pharma area, and I can tell you this, the few that I've looked, and that was that there was what I considered to be a normal distribution of accounts that were growing rapidly. Growing in the 10 to 11% range and some that we're going down. So I don't see any trend in that. Some accounts are doing extremely well. They are ramping up their projects or programs and some are discontinuing programs and I couldn't see a trend overall in those numbers.

AARON DEIST [phonetic]: One final question: Can you give us an idea of geographic growth? Before on the call you mentioned weakness in North America. I think that was specific to the oligo business. Can you give us an idea of growth geographically?

Yes, we experienced extremely high growth outside the United States last year as we consolidated Invitrogen's activities into Life Technologies, direct sales through its subsidiaries. So I think virtually every segment of the non-U.S. sales was up in the 30 to 40% range, is that accurate, [indiscernible].

Yes, it's 30 or so, yes.

This year that has trailed off as we have reduced the impact from the change over from wholesale to retail, so I believe that in general that is in the 20 to 25% range?

That's right. It's about 5 points above our [indiscernible] business. So it's 17 to 25.

Does that help?

AARON DEIST [phonetic]: Very much. Thank you.

Thank you. Our next question is coming from Paul Kelly [phonetic]. Please state your affiliation.

PAUL KELLY [phonetic]: Merrill Lynch.

Hi, Paul.

How are you?

Real well.

PAUL KELLY [phonetic]: I'm sorry. I missed what you said you expected to do with the R&D over the course of the year and what the goal would be to have it as a percent of revenues for the total year?

We didn't give a number for the total year. We said we wanted to work it up to 6.0% by the end of the year. I'm not sure what that comes out to - in the 5's for the year on average.

PAUL KELLY [phonetic]: And you would walk that up gradually quarter by quarter from here on out?

That's right. PAUL KELLY [phonetic]: And I didn't get the total or the percentage or the breakdown of sales by geographic area. Do you have it by U.S. up in the rest of the world in total sales or sales by product category?

When you say total sales, do you mean the growth rates or the absolute percentages?

PAUL KELLY [phonetic]: In the absolute dollars. Percent of sales revenues brought from the U.S., from Europe, and from the rest of the world? LYLE TURNER (?): On the Cell Culture side, Paul, about 58% of the revenues are done in the America's region, about 25% in Europe, 17% in Asia Pacific region.

PAUL KELLY [phonetic]: Okay.

On the Molecular Biology side, we're about 60% in the U.S. and about 40% internationally.

PAUL KELLY [phonetic]: And it looks just from putting the numbers back into the model that the oligo and custom services business is off by about 70%. And what is your objective? You said to get that back to still being down to flat by the end of the year, but do you think it will be a second half of the year phenomenon that most of that recovery takes place to give you some time for the sales effort to kick in?

Let me take a couple of seconds to clarify that. First of all, primers and services, I believe, are off 20% in the United States from first quarter last - first quarter 2002 is off 20% from first quarter 2001. That's a worldwide number.

PAUL KELLY [phonetic]: Okay.

And the second part of your question was - the explanation of the answer of the second part of your question was that we expect the revenues from those products to be flat to slightly increasing through the course of the year as the promotional activities come online and show their results. So I think we're at the bottom of the trough in the first quarter. I may be flat in the second quarter and then increasing in the third and fourth. But as a percentage, they will continue to be negative from last year because last was at such high level. Does that answer your question?

PAUL KELLY [phonetic]: Oh, yes, it does. Thanks.

Percentages are going to continue to be negative throughout the year, because we're working off of a much larger number last year, but the dollars will be flat, and then increasing in the third and fourth quarter.

PAUL KELLY [phonetic]: Okay. Thank you.

Thank you. Our next question is coming from Yow Aclair [phonetic]. Please state your affiliation.

YOW ACLAIR [phonetic]: UBS Warburg. Good afternoon. Just a few questions here. In terms of the Cell Culture business, how much is the academic industrials, the nonbioproduction component, how much did that grow this quarter over last - or for the comparable period, sorry.

It grew at 13%.

YOW ACLAIR [phonetic]: Okay. And I just want to circle back on the gross margin question that was asked earlier on Cell Culture. It looks like in Q4 you had almost comparable level of sales, about 51 million and 42% margin, and then in Q1 were at 52 million and 48% gross margins. Could you provide some color as to what's driving the increase margin in that business?

Yes, I'll take that. There's a couple items in there. First of all, between the fourth quarter and the first quarter, we discontinued a number of products in the Cell Culture business. They were resell plastic products that we handled internationally mostly, and they were products with fairly low margins. So when you take those out of our mix, we got a benefit from that. Also, in the fourth quarter we did have some scrap and related costs for the FDA issue that was mentioned earlier, the quality issue, I guess, and when you combine those two, that's how the revenues went from 42 to about 48.

YOW ACLAIR [phonetic]: Okay. So were about 48 going forward? Could you also give us an update on the relocation activities out of the Maryland facility and particular on the R&D side? I believe there's around 100 R&D people, and like the last call, 15 or 20 had made the move. How that relocation is taking place and what are still the hiring needs for that business?

I thought that we had explained that in the text, but I'll go over it again. I - there was a - since the second half of last year, we have been slowly eliminating about 100 positions from the Maryland R&D workforce. A large number of those happened in the first quarter. That makes - and we've been steadily hiring through the third and fourth quarter of last year, and the first quarter of this year to bring the Carlsbad R&D group up to the level that was comparable for the merger. I believe we have 100 people now in Carlsbad R&D. We have 14 open positions, and we are have additional laboratory space to open up, as we empty out some of the manufacturing space and move that into the new building that we've built, then we'll be bringing in additional R&D people through the course of the year.

So that process is nearly complete, it sounds like?

We have the addition of the 14 that are on the open positions. We expect to bring in another 30 to 40 through the course of the year.

Okay. And in terms of the ResGen business, how many people are you actually planning to move from Alabama - Carlsbad and how many have already signed on?

I'm going to let Jim Renchy [phonetic], the head of HR, answer that question. He's got those number at his fingertips.

JIM RENCHY [phonetic]: Yes, we'll be offering the relocation to about 25 different folks in Huntsville, and we would expect to be working 5 to 10 of those to accept the relocation. Certainly, we hope that they all accept the relocation. Very solid people, but realistically 5 to 10 people making the move is about what we expect.

YOW ACLAIR [phonetic]: And are these the same people besides the custom - the genomic services business?

JIM RENCHY [phonetic]: Yes.

No the - most of the contracts negotiations are being handled either by the sales force that is specific for that business, the services sales force, or in some cases where the contracts involve a collaboration, they'll be handled by the business development group here. But both of those groups are managed or headquartered here in Carlsbad. So we don't lose anything in that on a contract for sales side of that equation.

YOW ACLAIR [phonetic]: And are they - how important is it to your customer that that R&D person who is providing the service is there, or is this more of a commodity services that can be provided by, you know, if that person does not move to Carlsbad, that it could be picked up from someone else in the Carlsbad facility?

We believe - I won't tell you that we don't think that there are no revenues at risk, but the at-risk revenues have been calculated into the numbers that we've given you for objections for the rest of the year.

YOW ACLAIR [phonetic]: Okay.

But having said that, we believe that the risk is fairly small because if the access to Invitrogen's proprietary technology had the value and not the name of the person in the laboratory that is performing service.

YOW ACLAIR [phonetic]: Okay. All right. Thank you.

Our next question is coming from Matthew Buton [phonetic]. Please state your affiliation.

MATTHEW BUTON [phonetic]: Hi. Argis Partners [phonetic]. A couple of questions. Last quarter - well, last time you talked to us about this quarter, you had talked about Molecular Biology price increases and you weren't sure where those were going to end up. What percentage pricing did you get in Q1 in terms of increases and what do you expect to get for the balance of the year and how far along with your commercial customer base are you in terms of negotiating those.

And then on the Cell Culture side, we provided guidance at the end of last year. You had growth ranging from 7.0% to 18%. So fairly lumpy. What kind of visibility do you have over the next couple of quarters, which I guess are the tougher quarters in order to get that 16% growth. And assuming that 16% growth is feasible for the full year, I think I end up coming up with something like 6.0% all in for the Molecular Bio, in terms of continuing product, that you assume 16% growth in the Cell Culture. Is that kind of what you're thinking about once you've factored in the decline from the oligos and service business?

I think, Matt, I'll let Vic or Eric talk about the last two parts of your question on Cell Culture first, and then we'll come back and talk about the pricing.

Cell Culture meant we're expecting over the next couple of quarters that we'll probably - total business will be something in the 12% range, and we'll probably net out for the year around 15 to 20%.

And your second part of that, I think, that encompasses his range issue, right?

I hope so, didn't it?

MATTHEW BUTON [phonetic]: Well, yes - I mean, when you get - yes. And when you get to that level for the full year, does that then imply about 6.0% to 7.0% from the Molecular Bio on a continuing basis?

Yes, without currency adjustments.

MATTHEW BUTON [phonetic]: Yes, okay. And then can you tell me on the pricing?

Oh, sure. As you may or may not remember, we rolled out our new catalog and the new pricing structure in February this year, and so in the first quarter, we had approximately two months of that pricing increase. In general, across all products, we had about a 6.0% price increase. A part of that - a fairly substantial part, about half of that we don't we don't expect to spics [phonetic] - no spic [phonetic] is not the right word. We don't expect to see an impact of that price increase in the first quarter, partially because we're going two months, but secondarily because a number of our customers have pricing contracts, and I think as of the end of April, approximately 50% of those have it already rippen [phonetic] through their system. They'll work through the system a little more slowly through the rest of this year, and so we - that's one of the reasons why we project having continued improvement in margins through the rest of the year.

MATTHEW BUTON [phonetic]: Okay. Thank you.

Thank you. Our next question is coming from David Zimbalus [phonetic]. Please state your affiliation.

DAVID ZIMBALUS [phonetic]: Hi. Morgan Stanley. I was wondering if you - well, one point of order, if I use your numbers and a growing up to 6.0%. I'm looking at R&D dollars spending for the year between 33 and 35 million, is that a reasonable number to use?

I think that sounds a little bit low, David.

DAVID ZIMBALUS [phonetic]: Okay.

I was [indiscernible] 36.5 to 38.

DAVID ZIMBALUS [phonetic]: Okay. That's helpful. And could you talk a little bit about the markets that you're serving in terms of the product. We've seen Sigma, Clone Tech [phonetic], and others have softer sales in molecular biology in the quarter. Can you talk a little bit about if the markets are actually slowing down for those products overall? And then, also, in your remarks about big pharma, you know, overall, do you have a growth rate for U.S.-based continuing Molecular Biology products in big pharma?

The overall - in the U.S. the target on the growth rates for us - we include a number of things in big pharma. We actually include a lot of our commercial accounts. So, you know, we include some small core profits in there as well. But we see some Molecular Biology, excluding primers and services, we see that segment growth about 15 to 20% in the U.S. Now I'm not sure I- DAVID ZIMBALUS [phonetic]: Well it's a more an issue in the first quarter because there had been a lot of uncertainties, and now you've said you peeled back the onion a bit. Is that consistent with what you saw in the first quarter, or is that a little bit better than the first quarter rate?

Actually the first quarter rate is at the high end of that range.

DAVID ZIMBALUS [phonetic]: Okay. And so to the extent that Clone Tech [phonetic] and Sigma may not be [indiscernible] competitors, but smaller competitors are seeing slowing. Do you think it's market share gains? Do you think you're seeing the market overall slow in the gain share or are there some third-tier folks who are starting to also gain some share at the expense of some of these middle-tier folks? Your thoughts.

Yes. Unfortunately - yes, I think some of this I have tried to explain earlier in our - and so I'll go back and take another cut at it. Large - our large commercial customers in the first quarter had a growth rate that was about 0.1% higher in the first quarter than it had been in the prior three quarters. So if you look at outside of our services and primers area, I can't say that area that the large companies were weak. They were, in fact, level or slightly above the prior three quarters. The biotech companies, the smaller areas of business were, in fact, stronger than we had seen them historically, and so they weren't weak. But once you pull out those two big product lines that we saw damaged. So I can't - I can't tell you what the problems are at some of the other companies and I can't talk too much about whether we're gaining market share - I can't say that there's a big change there outside of the two product areas where we talked about having problems.

DAVID ZIMBALUS [phonetic]: Well then just let me ask it differently. You discussed the fourth quarter kind of growth rate for these core Molecular Biology products as being north of 20% and the current quarter being in the sort of the 16, 17% range, and so smaller biotechs were stronger, and large commercial customers were a little bit faster, what was slowing down?

David, when you compare the fourth quarter with the first quarter, the driver of the slowdown in the growth rate really was slower international growth. International growth last year was pretty torrid, we think, you know, 30-something percent. And it's come down into the upper 20's, but that effect has brought down the overall growth rate, specifically for the worldwide business. So when we look at our U.S. business, we're not seeing so much slowdown that the growth rates we're seeing in the first quarter are fairly comparable with what we saw in the second half of the year.

DAVID ZIMBALUS [phonetic]: Okay. Great. One last question. If you could - are there any specific sources of the higher DSOs? Is it more concentrated in Molecular Biology or in Cell Culture? Are there any singular accounts that are in issue, and how quickly should we expect you to work this off?

David, that's really less of a segment issue, because when we bill our customers, we bill for both products one invoice. It's more of an international issue, largely in Europe, again some of that has a normal rise where DSOs tend to be very low at the end of the year. Of course, you know, it's higher than we'd like to see, and we expect to get that down a few days by mid year.

DAVID ZIMBALUS [phonetic]: Okay.

Although, I don't see 51 as a sustainable quarter-after-quarter rate for DSOs.

DAVID ZIMBALUS [phonetic]: Okay. Thanks.

Thank you. Our next question is coming from Carl Brown. Please state your affiliation.

Hi. It's Kramer Rosenthal [phonetic]. On the Cell Culture, within bioproduction, given that most of what we've been hearing in terms of biotech approvals so far this year has been pretty disappointing. There's been a lot of pushouts. Where do you see the unit strength coming from? Is a decent portion of this business going into smaller scale batches that are used in clinical trials and maybe even research, you know, nonacademic research, and perhaps are we running more and more batches of drugs that have already been approved?

We see it pretty much across the board. I should let you know that when we state research, we include industrial accounts in our research numbers. So when we're talking about production performance, we're talking about process developing and final production of biomolecules.

Okay. And what - within bioproduction, what do you think the percentage breakout would be between process development and actual production?

Hard for us to say, because generally the purchasing departments are placing orders that are covering the gamut. We don't have any real hard data that we can use to confidently tell you what the breakout is between process development and production.

So it's hard to breakout the growth as well?

Yes.

Okay.

Excuse me?

That's why we just reported as the lump sum number.

Okay.

In all of production.

And what's the breakout between the academic and bioproduction?

The mix, yes. How much is academic and how much is bioproduction?

Seventy percent of our revenue on the Cell Culture side is research, and 30% is production.

Thanks.

Our next question is coming from Jason Melines. Please state your affiliation.

JASON MELINES [phonetic]: Babcock Brown Asset Management [phonetic]. I just had a few cash flow questions.

Cash flow from operating activities was in the high 20's, about $28 million. Cap ex was about $14 million.

Depreciation and amortization - let's make sure I get this right, it's about - depreciation is about 4.5. Actually, some of this is in our press release, so I can refer to that real quickly. I think it was about $4.5 million on depreciation. Other amortization of intangibles, excluding all the merger intangibles, was about 800,000.

JASON MELINES [phonetic]: Okay. And then, finally, do you have just a sense of where you guys think cash flow from operations, as well as cap ex might come out for the entire year?

Cap ex for the year in the 40's, although that's 40 million, although that will be somewhat offset by the sales from assets during the year. Net of that, it could be in, you know, in the 20's even. And cash flow from operating activities should be 150 million or so.

JASON MELINES [phonetic]: Great. Thanks so much.

Our next question is coming from Karen Brenner [phonetic]. Please state your affiliation.

KAREN BRENNER [phonetic]: I'm with Shaker Investment [phonetic]. I just missed your guidance for sales and marketing and G&A, and I was wondering if you could repeat that for the year?

We didn't give any specific guidance on sales and marketing and G&A spending. We did mention, though, that as our margin improved throughout the year, we expect to increase our spending on R&D and on marketing. So you should see a sequential increase throughout the year in marketing as well as R&D.

KAREN BRENNER [phonetic]: Do you expect that marketing to be quite as dramatic as the increase in research?

Well, certainly not as a percentage and not too far away in dollar terms.

KAREN BRENNER [phonetic]: And G&A? Are you looking for it to be about flat or?

Not much of an increase, no. Nothing substantial.

KAREN BRENNER [phonetic]: All right. Thank you.

Thank you. Our next question is coming from Shawn Shriller [phonetic]. Please state your affiliation.

SHAWN SHRILLER [phonetic]: Hi. It's [indiscernible] Capital. Just a housekeeping item on the tax rate. What is in the pro forma tax rate for the $0.46 or $0.47 cents a share for this quarter? What would be effective tax rate? And in the guidance that you've provided for the year and earnings, what is the effective tax rate you're assuming there?

Thirty five point five in both those periods.

SHAWN SHRILLER [phonetic]: Okay. Thank you very much.

Our next question is coming from John Nicholas. Please state your affiliation.

William Blair & Company. Could you give me a feel if you push out probably 18 months when Carlsbad is fully open and operating and you're done with the relocation of the other facilities. How might some of the metrics in your income statement and what is either the target or the opportunity, not a forecast or guidance of where gross margin can be and where - what your R&D plan might be in the second half of '03 or whatever time period you want?

I can't give you our thoughts on what that's going to be right now. As I said, we expect the continued improvement in gross margins through the rest of the year up to the mid 58's by the end of the year, and I believe that we'll see continued improvement into the low 60's and by the end of '03.

Then, on the R&D side, what Eric said earlier, we're looking at about 6.0% by the fourth quarter on R&D, and I expect that what I call the outside edge of what, I believe, is possible about 33% improvement in R&D. So that would put up, in terms of dollars, dollar grow in the R&D budget for next year, put up into about 7.0% maybe [indiscernible] at 7.5% in 2003. Not where we want to be, but I think that's where we can expect to be and investing money wisely.

Thank you.

We do have a question coming from Jim Neisberger [phonetic].

We apologize. His line has just disconnected.

We do have a question coming from Drew Malik [phonetic] of First Analysis.

DREW MALIK [phonetic]: Hi. I'ts Drew Malik [phonetic]. Just a couple of quick questions. I'm sorry if you've discussed this already. Did you have any locked sales due to the holiday at the end of March, which you normally would have seen in the first week of April?

None that we know of.

DREW MALIK [phonetic]: None that you know of?

No, I mean, it's something I'm - no, nothing relevant. We had a really nice finish to the month.

DREW MALIK [phonetic]: All right. Then the next is just a general question. Over the years you guys have done a really good job in coming up with new products and license and technology or using it in-house and in your catalog I have last seen over the last couple of years has grown substantially. Just wondering whether when you look out a few years from now, what do see as being drivers of top line growth in Molecular Biology?

Well, Drew, we had a discussion about this just this afternoon with the business development group and some were reporting of our licensing activities. And we are seeing a different type of technology licensing opportunity. Maybe not in the same exact product categories that we had in the past, but I think as scientists move further towards proteomics there are a number of other product categories beside just straight [indiscernible] expression and amplification in some of those areas. But there is - right now, I think we have about 70 different technologies in various stages of evaluation and license negotiations, and that's a strong pipeline for us, and so the summary from our business development people today was that this continues to be a growth [indiscernible] for the company and a growth opportunity. The products that we're licensing may not look exactly like they have in the past, but I think that's a reflection of the way that research is changing and that should be our job and follow those trends and provide cutting edge tools.

DREW MALIK [phonetic]: Great. Thanks very much.

Our next question is coming from David Zimbalus [phonetic].

DAVID ZIMBALUS [phonetic]: Hi. Just if you can give me a quick update on your freezer program? Is that something you are investing incrementally in this year and how's it going?

No, David, we - part of the financial analysis that we've been bringing to this freezer program is to start paying a lot more attention to which of those freezers is profitable for us. And so we're driven more in managing these things effectively than we are in increasing the numbers of them out there and that really should be expected, because we try to put these freezers in these warehouses in our top customers, and we're very well represented around the world now. Virtually everybody in this business is buying something from us, so I think that we have pretty good penetration into the top customers right now and now it's just a question - I think, the most important thing for us to do, is to manage those relationships effectively, to make sure that we're actually making money from them. So I'm not as driven by the numbers of those freezers as we are in the quality of those freezer programs.

DAVID ZIMBALUS [phonetic]: Thanks.

Our next question is coming from Hans Rigels [phonetic]. Please state your affiliation.

HANS RIGELS [phonetic]: Hi. U.S. Bancorp Piper Jaffray. I'm wondering if you could just comment on your timelines for sowing off the Serva business? Thanks.

We expect to have that completed within the next 60 days.

HANS RIGELS [phonetic]: Okay. Thanks.

Thank you. We do have a followup question coming from Rio [phonetic].

RIO [phonetic]: Just a couple of followup questions. Can you update us on a number of licenses that were signed this quarter versus last given the expanded business development group?

Let me think for a second, because I think I did - I don't think I saw it for the fourth - a report for the fourth quarter in this presentation I just heard this afternoon, but I-

RIO [phonetic]: Or quarter over quarter in Q1?

No, I didn't ask them for a quarter over quarter of growth rate. I'm afraid I can't answer that question for you.

RIO [phonetic]: Okay.

I mean, I'm not trying to be difficult. I thought I could pull it out of memory, and I can't do it accurately so I'm not going to try.

RIO [phonetic]: In terms of the - you mentioned the 70 different technologies at various stages with internal development. How many of the products will be introduced this year from the 70?

I saw that number in the report too. I didn't bring that with me.

RIO [phonetic]: Okay.

I think it was about 25 and the rest was really past 2003.

RIO [phonetic]: Okay. So the 25 we'll see some time later this year. And, you know, what - are these products replacing existing products that are already offered by Invitrogen kind of next-generation products, or are you expanding into new markets?

Both.

RIO [phonetic]: Both. Okay. And last but not least, can you give some sense of what the market opportunity is for these products? Are these large products - I mean, blockbuster kind of products? I know there's a large product base, but are these million-dollar products [indiscernible] sense of what the opportunity [indiscernible] potential?

Yes, they - the products introduced in 2002 from licenses signed in 2002 were expected to have revenues of about $6.0 million this year and normally that is about a third of the revenues that you see in the products from the following year. So that $6.0 million represents the 20, $25 million value of those products. RIO [phonetic]: And given that there's what 22 introduced this year, and we're expecting around 25, we can expect another sixish from the additional products being introduced or maybe half that?

No, don't add those twice. What I said was that we're expecting about $6.0 million in revenues from the products that were signed in 2001. I don't have a calculation for revenues from the stuff that we licensed in 2002. I didn't see that report, so I don't want to see you double counting, but I think it's about $25 million worth of value in things that are being introduced this year. RIO [phonetic]: Of which half are replacing the existing product, half are a new products. Does the 20 to 25 kind of additional revenue or is that going to replace existing revenue?

That's a little more detail even than what we have.

RIO [phonetic]: Okay.

So it's a mixture of product improvement and new products, and I don't know the exact percentage of the mixture.

RIO [phonetic]: Okay. Thank you.

Thank you. Our next question is coming from Lavina Talipter [phonetic]. Please state your affiliation.

LAVINA TALIPTER [phonetic]: Hi. State Street Global Advisors. I guess this is a follow on to your previous question in that I'm trying to figure out how many of the products that you will be introducing on more downstream applications and/or if you could just give us your sense if you're focusing there away from like genomics and more into like proteomics or even clinical trial applications, and if not, are you looking to acquire maybe downstream applications?

I'm sorry. I'm a little bit tongue-tied. I think the answer to your question is that the research programs, the expansion of research programs is a lot of its function on functional genomics and proteomics and so we have see a lot of new technology and licensing opportunities [indiscernible] laboratories that are doing functional genomics and proteomics work. And we have been licensing some of those things. I mean, I think, a majority of our products can be used in all research applications, whether it's basic research or in clinical research and we can't track - as Vic said earlier, we can't track the type of research they are being used in. So our products aren't licensed specifically for clinical applications. And then we are targeted at just the research arena and not thinking about clinicals or diagnostics or other parts of that.

LAVINA TALIPTER [phonetic]: Okay. Great. Thank you.

At this time, there are no further questions. I'd like to turn the floor back to Lyle Turner.

I want to thank everyone for participating in today's phone call. If you missed any portions of the call today, a replay will be available until May 2. Details for accessing the replay was presented in our April 9 press release, and again in our earnings release today which are both available on our Web site. I'd like to thank you again for joining us. Good bye.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for participating and have a good day.