Agilent Technologies Completes Stratagene Acquisition; Raises Q3 Revenue Outlook - Update

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Thursday morning, Agilent Technologies Inc. (A), a manufacturer of bio-analytical and electronic measurement devices, revealed that it completed the acquisition of La Jolla, California-based Stratagene Corp. (STGN), a maker of life science research and diagnostic products. Further, the company said that it expects the acquisition to accelerate its growth in life sciences through a complementary product portfolio and strong market reach into academia as well as government. In addition, the company raised its revenue outlook for the third quarter and said that the completion of the acquisition would have no impact on its third-quarter earnings outlook.

Accordingly, for the third quarter, the company raised its outlook for revenues to a range of $1.38-$1.42 billion from the prior forecast in a range of $1.36-$1.40 billion, which the company provided while reporting its financial results for the second quarter. On average, seven analysts polled by First Call/Thomson Financial expect the company to report revenues of $1.38 billion for the quarter.

Along with its second quarter results, the company had also provided adjusted earnings outlook for the third quarter in a range of $0.46-$0.50 per share. Analysts expect the company to earn $0.49 per share for the quarter. On April 6, 2007, Santa Clara, California-based Agilent revealed a definitive agreement to acquire Stratagene for $250 million or $10.94 per share of common stock. Under the terms of the agreement, Stratagene will operate as a division within Agilent's Life Sciences Solutions Unit. Also, Stratagene's 450 employees have now joined Agilent.

Agilent said that it believes the total addressable life science market to be $14 billion, with an estimated compounded annual growth rate of 7-9% over the next three years.

Commenting on the deal, Nick Roelofs, vice president and general manager of Agilent's Life Sciences Solutions Unit said, With our combined product portfolios, technology, R&D expertise and employees, we will serve a wider customer base with more comprehensive workflow solutions. This acquisition is truly an example of one-plus-one is greater than two because of the workflow leverage we anticipate from combining our two companies.

Agilent said that the acquisition of Stratagene is the largest that it made in several years and underscored the company's commitment to life sciences. Further, the company noted that since 1984, Stratagene's products have been used throughout the academic, industry and government research sectors in fields spanning molecular biology, genomics, proteomics, drug discovery and toxicology.

Agilent noted that that Stratagene's extensive portfolio of PCR enzymes and instrument capabilities, which include quantitative PCR, combined with Agilent's range of product platforms, software and data management capabilities, would provide full workflow solutions to both academic and pharmaceutical customers. Stratagene's product portfolio includes reagents for life science research and instruments, in addition to diagnostic products that include applications for allergy testing and urinalysis.

Agilent said that Stratagene's life science reagent and instrument manufacturing facility in Cedar Creek, Texas and diagnostics facilities in Garden Grove, California as well as Edinburgh, Scotland are all registered to the ISO 13485 standard. In addition, the diagnostic facilities are licensed medical device manufacturers, compliant with the U.S. Food and Drug Administration's Quality System Regulation or QSR. Stratagene's other locations are in California, Tokyo and Amsterdam.

Agilent and Stratagene also revealed the sale of certain assets of Stratagene for $6.6 million to Decisive Diagnostics, an entity formed by Dr. Joseph Sorge, former chairman, CEO and founder of Stratagene. Decisive Diagnostics is a subsidiary of Catalyst Assets LLC, and was formed to pursue molecular diagnostic applications. The company will also license certain molecular diagnostic technologies of Stratagene from Agilent.

Last month, Agilent said that it entered into an agreement to acquire Germany-based Adaptif Photonics GmbH, a privately held company, for undisclosed financial terms. The closing of deal, is expected to occur later this month. Adaptif provides key technology and products used for advanced polarization analysis and control for the test of optical components and systems in telecommunications, as well as in the sensors and laser market.

For the recent second quarter, Agilent reported a net income that increased on strong performance across its bio-analytical measurement portfolio. The company's GAAP net income increased to $123 million or $0.30 per share from $115 million or $0.26 per share in the year-ago quarter. Excluding stock-based compensation expenses and other items, adjusted net income from continuing operations for the second quarter was $176 million or $0.43 per share, compared to $157 million or $0.36 per share in the last year's second quarter.

Adjusted net income for the second quarter after adding net income for the semiconductor test solutions segment in the year-ago quarter results, was $176 million or $0.43 per share, compared to $178 million or $0.40 per share a year ago. Revenues for the second quarter increased 7% to $1.32 billion from $1.24 billion in the same quarter last year. Life sciences revenues for the second quarter grew 20% to $194 million from a year ago.

Stratagene reported a net income for the first quarter that increased to $1.4 million or $0.06 per share from $1.1 million or $0.05 per share in the year-ago quarter. Revenues for the quarter improved to $24.4 million from $24.3 million in the prior-year quarter.

A closed Wednesday's regular trading session at $38.37, down $0.10 on a volume of 2.13 million shares. In the 52-week period, the stock has been trading in a range of $26.96-$38.97.

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