- Company Posts Fourth Quarter EPS of $0.37, Up 16% -
- For Full Year 2007, Strong Operating Earnings and Tax Benefits Drive
EPS Up 41%; Total Revenues and Product Sales Both Grow 14% -
- In 2008, Gen-Probe Expects Highest Pre-Tax Income Growth in Four Years,
Driving Anticipated EPS of $1.64 to $1.72 -
SAN DIEGO, Feb. 13 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated
(Nasdaq: GPRO) today reported strong financial results for the fourth quarter
and full year ended December 31, 2007, including quarterly earnings per share
(EPS) of $0.37.
"Gen-Probe once again posted good financial results in the fourth quarter
of 2007, led by the continued growth of our clinical diagnostics business,"
said Henry L. Nordhoff, the Company's chairman and chief executive officer.
"In addition, our fourth quarter performance completed an excellent 2007 in
which strong operating earnings and tax benefits combined to drive EPS up
41%."
In the fourth quarter of 2007, product sales were $92.4 million, compared
to $85.5 million in the prior year period, an increase of 8%. Total revenues
for the fourth quarter of 2007 were $98.9 million, compared to $91.1 million
in the prior year period, an increase of 9%. Net income in the fourth quarter
of 2007 was $20.4 million, compared to $17.1 million in the prior year period,
an increase of 19%. EPS in the fourth quarter of 2007 were $0.37, compared to
$0.32 in the prior year period, an increase of 16%. In this press release,
all per share amounts are calculated on a fully diluted basis, and all results
are presented in US GAAP.
For the full year 2007, product sales were $370.9 million, compared to
$325.3 million in the prior year, an increase of 14%. Total revenues for 2007
were $403.0 million, compared to $354.8 million in the prior year, an increase
of 14%. Net income for 2007 was $86.1 million, compared to $59.5 million in
the prior year, an increase of 45%. EPS in 2007 were $1.58, compared to $1.12
in the prior year, an increase of 41%.
Gen-Probe's net income and EPS in the fourth quarter of 2007 benefited
from an income tax rate of approximately 22% that resulted primarily from the
completion of an audit of the Company's 2003 and 2004 California state income
tax returns and additional research and development credits earned in 2007.
Net income and EPS for the full year 2007 benefited from an income tax rate of
approximately 23% that resulted primarily from the items noted above and the
completion of an audit of the Company's 2003 and 2004 federal income tax
returns (benefit recorded in the second quarter).
Detailed Results
Gen-Probe's clinical diagnostics sales in the fourth quarter of 2007 were
again led by the APTIMA Combo 2(R) assay, an amplified nucleic acid test (NAT)
for simultaneously detecting Chlamydia trachomatis (CT) and Neisseria
gonorrhoeae (GC). Sales of this assay grew based on market share gains on
both the Company's semi-automated instrument platform and on the
high-throughput, fully automated TIGRIS(R) system. Revenue from the PACE(R)
product line, the Company's non-amplified tests for Chlamydia and gonorrhea,
declined in the fourth quarter compared to the prior year period, in line with
Gen-Probe's expectations.
In blood screening, product sales in the fourth quarter of 2007 benefited
from continued international expansion, and from higher pricing associated
with US commercial sales of the PROCLEIX(R) WNV (West Nile virus) assay on the
TIGRIS system. Gen-Probe's blood screening sales in the fourth quarter of
2007 were negatively affected by the timing of shipments. The Company's blood
screening products are marketed worldwide by Chiron, a business unit of
Novartis Vaccines and Diagnostics.
Product sales were, in millions:
Three Months Ended Dec. 31, Year Ended Dec. 31,
2007 2006 Increase 2007 2006 Increase
Clinical diagnostics $49.7 $45.4 10 % $199.2 $171.2 16 %
Blood screening $42.7 $40.1 6 % $171.7 $154.1 11 %
Total product sales $92.4 $85.5 8 % $370.9 $325.3 14 %
Collaborative research revenues in the fourth quarter of 2007 were
$5.4 million, compared to $1.2 million in the prior year period. This
increase resulted from several factors, including:
-- Research reimbursement and milestone payments from 3M related to the
companies' collaboration to develop rapid tests for
healthcare-associated infections.
-- Research reimbursement and milestone payments from 3M related to the
companies' collaboration for food testing, which was terminated in the
fourth quarter.
-- Funds received from the US Department of Defense for prostate cancer
research.
For the full year 2007, collaborative research revenues were
$16.6 million, compared to $15.9 million in the prior year, an increase of 4%
that resulted primarily from the factors described above. These increases
were partially offset by the reclassification of revenue associated with
investigational use of the PROCLEIX WNV assay. Beginning in the third quarter
of 2006, the Company began recording all revenue associated with this assay in
product sales, rather than in collaborative research revenues. The assay was
approved by the US Food and Drug Administration (FDA) for use on Gen-Probe's
enhanced semi-automated instrument system (eSAS) in December of 2005, and for
use on the TIGRIS system in March of 2007.
Royalty and license revenues for the fourth quarter of 2007 were
$1.1 million, compared to $4.4 million in the prior year period, a decrease of
75%. This decrease resulted primarily from the final installment of license
revenue under the Company's collaboration with bioMerieux, which was
recognized in the prior year period. For the full year 2007, royalty and
license revenues were $15.5 million, compared to $13.5 million in the prior
year, an increase of 15% that resulted primarily from $10.3 million of royalty
revenue that was recorded in the first quarter of 2007 associated with the
successful settlement of Gen-Probe's patent infringement claims against Bayer
HealthCare (now Siemens Healthcare Diagnostics).
Gross margin on product sales in the fourth quarter of 2007 was 69.2%,
compared to 67.6% in the prior year period. This increase resulted primarily
from reduced sales of lower-margin instrumentation compared to the prior year
period. For the full year 2007, gross margin on product sales was 67.7%,
compared to 68.1% in the prior year.
Research and development (R&D) expenses in the fourth quarter of 2007 were
$24.3 million, compared to $20.7 million in the prior year period, an increase
of 17%. This increase resulted primarily from increased labor costs and the
timing of major R&D projects. These projects include assays for human
papillomavirus (HPV) and healthcare-associated infections, a fully automated
instrument system for low- and mid-volume laboratory customers, and the
post-marketing studies for the PROCLEIX ULTRIO(R) assay in the United States.
For the full year 2007, R&D expenses were $97.1 million, compared to
$84.5 million in the prior year, an increase of 15% that was due primarily to
the factors described above.
Marketing and sales expenses in the fourth quarter of 2007 were
$11.3 million, compared to $9.6 million in the prior year period, an increase
of 18%. This increase resulted primarily from European market development
efforts related to the Company's investigational APTIMA HPV assay. For the
full year 2007, marketing and sales expenses were $39.9 million, compared to
$37.1 million in the prior year, an increase of 8% that resulted primarily
from European market development efforts.
General and administrative (G&A) expenses in the fourth quarter of 2007
were $12.3 million, compared to $10.8 million in the prior year period, an
increase of 14% that resulted primarily from increased compensation costs.
For the full year 2007, G&A expenses were $47.0 million, compared to
$44.9 million in the prior year, an increase of 5%.
Gen-Probe continues to have a strong balance sheet. As of December 31,
2007, the Company had $433.5 million of cash, cash equivalents and short-term
investments, and no debt. In 2007, Gen-Probe generated net cash of
$109.6 million from its operating activities, higher than the Company's net
income of $86.1 million.
Initial 2008 Financial Guidance
"We expect 2008 to be another year of double-digit revenue growth and high
profitability for Gen-Probe, even as we continue to invest in attractive R&D
projects to drive our long-term prospects," said Herm Rosenman, the Company's
senior vice president of finance and chief financial officer. "Although we
expect our tax rate to increase to a normalized level in 2008, our guidance
anticipates pre-tax income growing at its fastest pace since 2004."
For the full year 2008, Gen-Probe expects the following on a GAAP basis:
-- Total revenues of $443 million to $453 million, representing growth of
10% to 12% over 2007. Product sales growth is expected to be led by
continued market share gains for the APTIMA Combo 2 assay, by
commercial pricing of the PROCLEIX WNV assay on the TIGRIS system in
the United States, and by ongoing international expansion of the
PROCLEIX ULTRIO assay on the TIGRIS system. Although Gen-Probe
believes the US Food and Drug Administration (FDA) will approve a
hepatitis B "screening claim" for the PROCLEIX ULTRIO assay during
2008, the Company has not included any US product sales revenue for
this assay in its guidance, based on the time needed to commercialize
the new indication. Non-product revenues in 2008 are expected to
benefit from an approximately $16 million final payment associated
with the successful settlement of Gen-Probe's patent infringement
claims against Bayer HealthCare (now Siemens Healthcare Diagnostics),
and from a $10 million milestone the Company expects to earn from
Novartis if and when the PROCLEIX ULTRIO assay is fully approved on
the TIGRIS system in the United States.
-- Product gross margins approximating 68% to 70% of product sales. This
improvement over 2007 is expected to result primarily from continued
conversion of PACE customers to the APTIMA Combo 2 assay, from
commercial pricing of the PROCLEIX WNV assay on the TIGRIS system, and
from the leverage inherent in rising manufacturing volumes. These
benefits are expected to be partially offset by continued growth of
the PROCLEIX ULTRIO assay in developing markets, where pricing is less
robust.
-- R&D expenses approximating 23% to 24% of total revenues, down slightly
from 2007 as a percentage of revenues. The Company's highest priority
R&D projects for 2008 include the post-marketing HBV yield studies for
the PROCLEIX ULTRIO assay in the United States, development of the
APTIMA human papillomavirus assay, and development of the Panther
instrument platform for low- and mid-volume laboratory customers.
-- Marketing and sales expenses approximating 9% to 10% of total
revenues, similar to 2007 as a percentage of revenues.
-- G&A expenses approximating 11% of total revenues, down slightly
from 2007 as a percentage of revenues.
-- EPS of between $1.64 and $1.72, based on approximately 56 million
fully diluted shares outstanding for the year and a tax rate of 35%.
Recent Events
-- PROCLEIX ULTRIO Post-Marketing Study. Gen-Probe believes the Company
has met its goal of identifying a second case of hepatitis B "yield"
in the post-marketing study for the PROCLEIX ULTRIO assay. Yield is
defined as an HBV-infected blood donation that was intercepted by the
PROCLEIX ULTRIO assay, but that was initially negative based on
traditional serology tests. To date, participating blood banks have
screened approximately 500,000 blood donations in the study. The FDA
has approved the PROCLEIX ULTRIO assay to screen donated blood for
HIV-1 and hepatitis C virus (HCV), but not to screen for HBV, as the
initial clinical studies were not designed to, and did not,
demonstrate HBV yield. Within a month, Gen-Probe intends to submit a
supplemental Biologics License Application (BLA) to the US Food and
Drug Administration in hopes of gaining a donor screening claim for
HBV.
-- Carl Hull Named President and COO. On February 11, Gen-Probe
announced that Carl Hull was named the Company's president and chief
operating officer, effective March 1, 2008. Mr. Hull joined Gen-Probe
in February of 2007 as executive vice president and chief operating
officer. He oversees the Company's major operating functions,
including research and development, manufacturing, and sales and
marketing.
-- New Operations Executive. On November 19, Gen-Probe announced that
Jorgine Ellerbrock joined the Company as senior vice president,
operations. She joined the Company from Invitrogen Corporation, where
she had been vice president, operations, since 2004, most recently for
the Molecular Biology Business.
-- 3M Food Collaboration. On November 8, Gen-Probe announced that 3M
informed the Company it no longer intends to fund the companies'
collaboration to develop rapid molecular assays for the food testing
industry. The collaboration has since been formally terminated.
Despite the termination, Gen-Probe received milestone payments of
$2 million in the fourth quarter of 2007 associated with achieving
technological feasibility for potential food testing assays.
Gen-Probe retains the rights to commercialize these assays.
-- First MilliPROBE(TM) Test. On January 8, Millipore and Gen-Probe
announced the launch of the first product from their collaboration to
create faster, sensitive, more robust tests for detecting contaminants
in pharmaceutical and biotechnology manufacturing processes. The
MilliPROBE system is the first solution of its kind for
biopharmaceutical manufacturing. It combines Millipore's leading,
industry-accepted sample prep methodologies with Gen-Probe's advanced,
proven nucleic acid technologies to deliver both speed and sensitivity
in one microbial screening tool. The MilliPROBE system uses Real-Time
Transcription-Mediated Amplification (RT TMA) technology to detect
targeted microbial contamination within hours compared to the days or
weeks usually required to generate results using traditional
culture-based methods. The collaboration's first MilliPROBE assay
targets the bacterium Pseudomonas aeruginosa and is designed as an
in-process, early warning system to provide faster, more effective
detection of the bacterium in purified water used during drug
production.
-- Purchase of Blood Screening Manufacturing Plant. On February 1,
Gen-Probe purchased for $15.7 million its blood screening
manufacturing facility located in Rancho Bernardo, California. The
Company had leased the 94,000-square-feet facility since late 1997.
The transaction is expected to have an immaterial effect on
Gen-Probe's income statement in 2008, but is expected to be accretive
to earnings over the long term, based on rent increases that would
have been associated with renewing the Company's lease. "The purchase
of our state-of-the-art blood screening manufacturing facility on
attractive financial terms reflects our long-term commitment to
providing innovative nucleic acid tests that safeguard the world's
supply of donated blood," said Mr. Hull.
Webcast Conference Call
A live webcast of Gen-Probe's fourth quarter 2007 conference call for
investors can be accessed at http://www.gen-probe.com beginning at 4:30 p.m.
Eastern Time today. The webcast will be archived for at least 90 days. A
telephone replay of the call also will be available for approximately 24
hours. The replay number is (800) 308-7858 for domestic callers and
(402) 220-3841 for international callers.
About Gen-Probe
Gen-Probe Incorporated is a global leader in the development, manufacture
and marketing of rapid, accurate and cost-effective nucleic acid tests (NATs)
that are used primarily to diagnose human diseases and screen donated human
blood. Gen-Probe has 25 years of NAT expertise, and received the 2004
National Medal of Technology, America's highest honor for technological
innovation, for developing NAT assays for blood screening. Gen-Probe is
headquartered in San Diego and employs approximately 1,000 people. For more
information, go to http://www.gen-probe.com.
Trademarks
APTIMA, APTIMA COMBO 2, PACE and TIGRIS are trademarks of Gen-Probe.
ULTRIO and PROCLEIX are trademarks of Novartis. All other trademarks are the
property of their owners.
Caution Regarding Forward-Looking Statements
Any statements in this press release about our expectations, beliefs,
plans, objectives, assumptions or future events or performance, including
those under the heading "Initial 2008 Financial Guidance," are not historical
facts and are forward-looking statements. These statements are often, but not
always, made through the use of words or phrases such as believe, will,
expect, anticipate, estimate, intend, plan and would. For example, statements
concerning Gen-Probe's financial condition, possible or expected results of
operations, updated financial guidance, regulatory approvals, future milestone
payments, growth opportunities, and plans and objectives of management are all
forward-looking statements. Forward-looking statements are not guarantees of
performance. They involve known and unknown risks, uncertainties and
assumptions that may cause actual results, levels of activity, performance or
achievements to differ materially from those expressed or implied. Some of
these risks, uncertainties and assumptions include but are not limited to: (i)
the risk that we may not achieve our expected 2008 growth, revenue, earnings
or other financial targets, (ii) the risk that we may not earn or receive
milestone payments from our collaborators, including Novartis and 3M, (iii)
the possibility that the market for the sale of our new products, such as our
TIGRIS system, APTIMA Combo 2 assay, PROCLEIX ULTRIO assay, PROGENSA PCA3
assay and industrial products, may not develop as expected, (iv) the
enhancement of existing products and the development of new products,
including products, if any, to be developed under our industrial
collaborations, may not proceed as planned, (v) the risk that new products or
indications, such as the HBV screening claim for our PROCLEIX ULTRIO assay in
the United States, may not be approved by regulatory authorities or
commercially available in the time frame we anticipate, or at all, (vi) we may
not be able to compete effectively, (vii) we may not be able to maintain our
current corporate collaborations and enter into new corporate collaborations
or customer contracts, (viii) we are dependent on Novartis, Siemens (as
assignee of Bayer) and other third parties for the distribution of some of our
products, (ix) we are dependent on a small number of customers, contract
manufacturers and single source suppliers of raw materials, (x) changes in
third-party reimbursement policies regarding our products could adversely
affect sales of our products, (xi) changes in government regulation affecting
our diagnostic products could harm our sales and increase our development
costs, (xii) the risk that our intellectual property may be infringed by third
parties or invalidated, and (xiii) our involvement in patent and other
intellectual property and commercial litigation could be expensive and could
divert management's attention. The foregoing list sets forth some, but not
all, of the factors that could affect our ability to achieve results described
in any forward-looking statements. For additional information about risks and
uncertainties we face and a discussion of our financial statements and
footnotes, see documents we file with the SEC, including our most recent
annual report on Form 10-K and all subsequent periodic reports. We assume no
obligation and expressly disclaim any duty to update forward-looking
statements to reflect events or circumstances after the date of this news
release or to reflect the occurrence of subsequent events.
Gen-Probe Incorporated
Consolidated Balance Sheets
(In thousands, except share and per share data)
December 31, December 31,
2007 2006
Assets
Current assets:
Cash and cash equivalents $75,963 $87,905
Short-term investments 357,531 202,008
Trade accounts receivable, net of
allowance for doubtful accounts of
$719 and $670 at December 31, 2007
and December 31, 2006, respectively 32,678 25,880
Accounts receivable - other 11,044 1,646
Inventories 48,540 52,056
Deferred income tax - short term 8,825 7,247
Prepaid income tax 2,390 -
Prepaid expenses 17,505 11,362
Other current assets 4,402 2,583
Total current assets 558,878 390,687
Property, plant and equipment, net 129,493 134,614
Capitalized software 15,923 18,437
Goodwill 18,621 18,621
Deferred income tax - long term 7,942 2,064
License, manufacturing access fees and
other assets 58,196 59,416
Total assets $789,053 $623,839
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $11,777 $13,586
Accrued salaries and employee benefits 20,997 16,723
Other accrued expenses 4,014 3,320
Income tax payable 846 14,075
Deferred revenue 2,836 921
Total current liabilities 40,470 48,625
Non-current income tax payable 3,958 -
Deferred income tax - long term 75 -
Deferred revenue 4,607 3,667
Deferred rent 10 128
Deferred compensation plan liabilities 1,893 1,211
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value per share,
20,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.0001 par value per share;
200,000,000 shares authorized,
53,916,298 and 52,233,656 shares issued and
outstanding at December 31, 2007 and
December 31, 2006, respectively 5 5
Additional paid-in capital 415,229 334,184
Accumulated other comprehensive income (loss) 1,604 (5)
Retained earnings 321,202 236,024
Total stockholders' equity 738,040 570,208
Total liabilities and stockholders' equity $789,053 $623,839
Gen-Probe Incorporated
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
Revenues:
Product sales $92,426 $85,496 $370,877 $325,307
Collaborative research revenue 5,380 1,194 16,619 15,937
Royalty and license revenue 1,143 4,369 15,518 13,520
Total revenues 98,949 91,059 403,014 354,764
Operating expenses:
Cost of product sales 28,493 27,675 119,641 103,882
Research and development 24,331 20,712 97,144 84,545
Marketing and sales 11,348 9,563 39,928 37,096
General and administrative 12,265 10,832 47,007 44,936
Total operating expenses 76,437 68,782 303,720 270,459
Income from operations 22,512 22,277 99,294 84,305
Interest income 3,837 2,755 12,772 8,301
Interest expense - (1) 30 (63)
Other income / expense (144) 854 (499) 451
Total other income, net 3,693 3,608 12,303 8,689
Income before income tax 26,205 25,885 111,597 92,994
Income tax expense 5,793 8,751 25,457 33,496
Net income $20,412 $17,134 $86,140 $59,498
Net income per share:
Basic $0.38 $0.33 $1.63 $1.15
Diluted $0.37 $0.32 $1.58 $1.12
Weighted average
shares outstanding:
Basic 53,769 51,835 52,975 51,538
Diluted 55,310 53,305 54,522 53,101
Gen-Probe Incorporated
Consolidated Statements of Cash Flows
(In thousands)
Twelve Months Ended
December 31,
2007 2006
Operating activities:
Net income $86,140 $59,498
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 34,159 27,496
Amortization of premiums on investments, net
of accretion of discounts 4,576 3,204
Stock-based compensation charges 19,651 23,723
Stock option income tax benefits 2,596 191
Excess tax benefit from employee stock options (14,606) (9,187)
Loss on disposal of property and equipment 201 99
Impairment of fixed assets 502 -
Changes in assets and liabilities:
Accounts receivable (16,180) 6,544
Inventories 3,588 (7,798)
Prepaid expenses (6,141) (595)
Other current assets (2,307) 1,683
Other long-term assets (1,131) (2,147)
Accounts payable (1,818) (471)
Accrued salaries and employee benefits 4,273 2,063
Other accrued expenses 679 (27)
Income tax payable (397) 9,970
Deferred revenue 2,855 (7,516)
Deferred income tax (7,621) (6,559)
Deferred rent (118) (112)
Deferred compensation plan liabilities 683 961
Net cash provided by operating activities 109,584 101,020
Investing activities:
Proceeds from sales and maturities of
short-term investments 140,988 132,657
Purchases of short-term investments (298,824) (149,012)
Purchases of property, plant and equipment (23,096) (50,760)
Purchase of intangible assets, including
license and manufacturing access fees (2,213) (11,460)
Other assets (279) (633)
Net cash used in investing activities (183,424) (79,208)
Financing activities:
Excess tax benefit from employee stock options 14,606 9,187
Repurchase and retirement of restricted stock
for payment of taxes (1,474) (429)
Proceeds from issuance of common stock 48,680 24,395
Net cash provided by financing activities 61,812 33,153
Effect of exchange rate changes on cash and
cash equivalents 86 612
Net (decrease) increase in cash and cash
equivalents (11,942) 55,577
Cash and cash equivalents at the beginning
of year 87,905 32,328
Cash and cash equivalents at the end of year $75,963 $87,905
Contact:
Michael Watts
Sr. director, investor relations and
corporate communications
858-410-8673
SOURCE Gen-Probe Incorporated
02/13/2008
CONTACT: Michael Watts, Sr. director, investor relations and corporate
communications of Gen-Probe Incorporated, +1-858-410-8673
Web site: http://www.gen-probe.com
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