Celera Corporation (CRA) reported a net loss per share of 10 cents in the third quarter of fiscal 2010, compared to the year-ago quarter’s loss of 9 cents. Excluding one-time items, net loss was 7 cents, missing the Zacks Consensus Estimate by two cents. In the third quarter of 2009, the company reported an adjusted net loss of $0.3 million or break-even on a per share basis.

The company reported a huge 21.3% year-over-year decline in revenue to $31.5 million, which missed the Zacks Consensus Estimate of $36 million. The primary reason for the huge decline in revenues was 22% lower sample volume and the associated decline in lab services revenue, Celera’s largest segment.

Celera operates through three segments: clinical lab testing services business conducted through Berkeley HeartLab (BHL), products and corporate, which recorded revenues of $20.4 million (down 16% annually), $9.1 million (down 9%) and $2 million (down 66%), respectively. Sample volume declined due to competitive pressures and the loss of business from accounts serviced by former BHL employees. However, the lab services business benefited from higher average price per sample as higher value genetic tests were ordered by physicians.

Products revenue declined due to lower sales of the products manufactured, which are distributed by Abbott (ABT). This was partially offset by increased royalties from sales of RealTime assays used on the m2000 system. Lower licensing revenue led to the decline in the corporate segment.

Subsequent to a dismal performance in the third quarter, Celera announced a number of initiatives to streamline the company. The company has announced a restructuring program under which headcount will be reduced by 50 persons.

Gross margin declined 510 basis points to 63.2% in the reported quarter due to lower revenues. Selling, general and administrative (SG&A) expenses declined 8.9% while research and development (R&D) expenses remained almost unchanged at $6.1 million. Celera exited the third quarter with cash and short-term investments of $316 million compared with $323 million at the end of June 2010.

Guidance Lowered

Celera lowered its revenue guidance to $129–$134 million from the previous guidance of $135–$145 million. The company now expects adjusted net loss per share of 30–34 cents, lower than the previous guidance of 25–30 cents. The expectation for gross margin remains unchanged at 63% to 67%. Expectation for both SG&A and R&D expenses have been lowered to $85–$90 million (previous guidance of $85–$95 million) and $25–$27 million ($25–$30 million), respectively. Cash and short-term investment guidance range was reiterated at $310 to $320 million.

We are currently Neutral on the stock for the long term.

 
CELERA CORP (CRA): Free Stock Analysis Report
 
Zacks Investment Research