- New Quarterly Record for Product Sales ($113.7 Million, Up 21%) Drives Total
Revenues Up 18% Over Prior Year, to $119.8 Million -
- Pre-Tax Income Growth of 33% Leads to Quarterly EPS of $0.45 -
- Company Expects Full-Year EPS of $1.83 to $1.87, Revenues of $467 Million to
$472 Million -
SAN DIEGO, Calif., July 31 /PRNewswire-FirstCall/ -- Gen-Probe
Incorporated (Nasdaq: GPRO) today reported strong financial results for the
second quarter of 2008 and raised its full-year guidance for earnings per
share (EPS) and total revenues.
"Gen-Probe posted excellent financial results in the second quarter of
2008," said Henry L. Nordhoff, the Company's chairman and chief executive
officer. "Growth in our clinical diagnostics and blood screening businesses
accelerated compared to recent quarters, leading to new product sales records
in both areas."
In the second quarter of 2008, product sales were $113.7 million, compared
to $93.9 million in the prior year period, an increase of 21%. Total revenues
for the second quarter of 2008 were $119.8 million, compared to $101.3 million
in the prior year period, an increase of 18%.
Net income was $24.8 million ($0.45 per share) in the second quarter of
2008, compared to $27.0 million ($0.50 per share) in the prior year period, a
decrease of 8% (10% per share) attributable to an unusually low tax rate in
the prior year period. As previously disclosed, Gen-Probe's net income and
EPS in the prior year period benefited from a reduction in income tax expense
of approximately $8.7 million ($0.16 per share). This benefit resulted from
the completion of an Internal Revenue Service (IRS) audit of the Company's
2003 and 2004 federal income tax returns. By comparison, Gen-Probe's net
income and EPS in the second quarter of 2008 benefited from a reduction in
income tax expense of approximately $1.0 million ($0.02 per share), which
resulted from the completion of an IRS audit of the Company's 2005 federal
income tax return.
For the first six months of 2008, product sales were $215.2 million,
compared to $181.0 million in the prior year period, an increase of 19%.
Total revenues for the first six months of 2008 were $242.4 million, compared
to $202.3 million in the prior year period, an increase of 20%. Net income
was $56.7 million ($1.03 per share) in the first six months of 2008, compared
to $48.5 million ($0.90 per share) in the prior year period, an increase of
17% (14% per share).
In this press release, all per share amounts are calculated on a fully
diluted basis, and all results are presented on a U.S. GAAP basis.
Detailed Results
Gen-Probe's clinical diagnostics sales in the second quarter of 2008
benefited from continued growth of 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 increased 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 the same
microorganisms, declined in the second quarter compared to the prior year
period, in line with Gen-Probe's expectations.
In blood screening, product sales in the second quarter of 2008 benefited
from continued international expansion of the PROCLEIX ULTRIO assay, from
higher pricing associated with U.S. commercial sales of the PROCLEIX WNV (West
Nile virus) assay on the TIGRIS system, and from a one-time payment of $2.6
million related to historical revenue adjustments made in the Company's blood
screening collaboration with Chiron. Quarterly blood screening sales also
included approximately $1.9 million of foreign exchange benefit compared to
the prior year. Chiron, a business unit of Novartis Vaccines and Diagnostics,
markets the Company's blood screening products worldwide.
Product sales were, in millions:
Three Months Ended June 30, Six Months Ended June 30,
2008 2007 Increase 2008 2007 Increase
Clinical diagnostics $57.2 $50.1 14 % $109.7 $97.6 12 %
Blood screening $56.5 $43.8 29 % $105.5 $83.4 26 %
Total product sales $113.7 $93.9 21 % $215.2 $181.0 19 %
Collaborative research revenues in the second quarter of 2008 were $4.7
million, compared to $5.8 million in the prior year period, a decrease of 19%.
In the second quarter of 2007, collaborative research revenues included $2.4
million of reimbursement from Chiron associated with previously incurred
development expenses, as well as $1.4 million of funding received from the
U.S. Department of Defense for prostate cancer research. The absence of this
revenue in the second quarter of 2008 was partially offset by the recognition
of $2.7 million of previously deferred milestone revenue that the Company
earned based on the termination of its collaboration with 3M regarding
healthcare-associated infections. For the first six months of 2008,
collaborative research revenues were $7.1 million, compared to $8.1 million in
the prior year period, a decrease of 12%.
Royalty and license revenues for the second quarter of 2008 were $1.5
million, compared to $1.6 million in the prior year period, a decrease of 6%.
For the first six months of 2008, royalty and license revenues were $20.1
million, compared to $13.2 million in the prior year period, an increase of
52% that resulted primarily from revenue that was recorded in the first
quarters of 2007 and 2008 associated with the settlement of Gen-Probe's patent
infringement litigation against Bayer (now Siemens Medical Solutions
Diagnostics). Specifically, Gen-Probe recorded $10.3 million of revenue from
this settlement in the first quarter of 2007, and a final payment of $16.4
million in the first quarter of 2008.
Gross margin on product sales in the second quarter of 2008 was 71.4%,
compared to 67.9% in the prior year period. This increase resulted primarily
from a favorable product sales mix, namely increased sales of APTIMA(R)
assays, and commercial pricing of the PROCLEIX WNV assay on the TIGRIS system
in the United States. Gross margin on product sales also benefited from the
$2.6 million adjustment to blood screening sales described above. For the
first six months of 2008, gross margin on product sales was 69.7%, compared to
67.2% in the prior year period.
Research and development (R&D) expenses in the second quarter of 2008 were
$29.4 million, compared to $25.0 million in the prior year period, an increase
of 18%. This increase resulted primarily from a $3.5 million write-off of
previously capitalized expenses associated with intellectual property acquired
in 2005 from Corixa. R&D expenses also increased in the second quarter of
2008 due to costs associated with key development programs such as the
post-marketing studies of the PROCLEIX ULTRIO assay in the United States, the
investigational APTIMA human papillomavirus (HPV) assay, and Gen-Probe's fully
automated instrument system for low- and mid-volume labs, known as PANTHER.
For the first six months of 2008, R&D expenses were $52.4 million, compared to
$45.2 million in the prior year period, an increase of 16%.
Marketing and sales expenses in the second quarter of 2008 were $11.5
million, compared to $9.4 million in the prior year period, an increase of 22%
that resulted primarily from European market development efforts related to
the Company's APTIMA HPV and PROGENSATM PCA3 assays. For the first six months
of 2008, marketing and sales expenses were $23.4 million, compared to $18.9
million in the prior year period, an increase of 24%.
General and administrative (G&A) expenses in the second quarter of 2008
were $13.7 million, compared to $12.1 million in the prior year period, an
increase of 13% that resulted primarily from costs associated with the
Company's offer to acquire Innogenetics, which was later withdrawn. For the
first six months of 2008, G&A expenses were $25.6 million, compared to $23.4
million in the prior year period, an increase of 9%.
Gen-Probe continues to have a strong balance sheet. As of June 30, 2008,
the Company had $499.2 million of cash, cash equivalents and short-term
investments, and no debt. In the first six months of 2008, Gen-Probe
generated net cash of $91.7 million from its operating activities.
Updated 2008 Financial Guidance
"Based on our strong performance in the second quarter, we are raising our
full-year 2008 revenue and EPS guidance," said Herm Rosenman, the Company's
senior vice president of finance and chief financial officer. Gen-Probe's
current and previous 2008 financial guidance is outlined in the table below:
Current Guidance Previous Guidance
Total revenues $467 million to $450 million to
$472 million $455 million
Product gross margins 69% to 70% 68% to 70%
R&D expenses 22% to 23% 23% to 24%
Marketing and sales expenses 9% to 10% 9% to 10%
G&A expenses 11 % 11 %
Tax rate 34 % 34% to 35%
Diluted shares
outstanding 55 million to 56 million 55 million to 56 million
EPS $1.83 to $1.87 $1.72 to $1.76
Recent Events
-- Lucy Shapiro Elected to Board. On May 19, Gen-Probe announced that
Lucy Shapiro, Ph.D., a renowned molecular microbiologist at Stanford
University, had been elected to its board of directors. Gen-Probe's board now
has eight members, including seven who are not Gen-Probe employees.
-- Gen-Probe Withdraws Offer to Acquire Innogenetics. On July 9,
Gen-Probe withdrew its conditional tender offer to acquire 100% of the
outstanding shares, warrants and convertible bonds of Innogenetics, a Belgian
molecular diagnostics company. Gen-Probe had offered to acquire the company
on June 3 for EUR 6.10 per share, after which Solvay Pharmaceuticals SA made
an offer of EUR 6.50 per share.
-- APTIMA HPV Assay Launched in Europe. On May 28, Gen-Probe announced
that the Company had launched in Europe its APTIMA HPV assay, a highly
specific molecular diagnostic test to detect high-risk strains of the human
papillomavirus, which causes cervical cancer. The APTIMA HPV assay has been
CE-marked and is currently available for sale in 13 European Union countries.
-- 3M Collaboration Terminated. On June 16, 3M and Gen-Probe announced
that 3M had discontinued the companies' collaboration to develop rapid
molecular tests for healthcare-associated infections (HCAIs). The
collaboration was discontinued due to current technical incompatibilities
between Gen-Probe's nucleic acid testing technologies and 3M's proprietary
microfluidics instrument platform.
Webcast Conference Call
A live webcast of Gen-Probe's second quarter 2008 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 866-447-7331 for domestic callers or 203-369-1162
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 NATs that are used
primarily to diagnose human diseases and screen donated human blood.
Gen-Probe has approximately 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, PROGENSA 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 "Updated 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, 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, (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 and PROGENSA PCA3 assay, 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 recent industrial collaborations, may not proceed as planned, (v) the risk
that products including our PROCLEIX ULTRIO assay or TIGRIS instrument for
blood screening 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.
Michael Watts
Sr. director, investor relations and
corporate communications
858-410-8673
Gen-Probe Incorporated
Consolidated Balance Sheets
(In thousands, except share and per share data)
June 30, December 31,
2008 2007
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $33,462 $75,963
Short-term investments 465,778 357,531
Trade accounts receivable, net of allowance for
doubtful accounts of $700 and $719 at June 30,
2008 and December 31, 2007, respectively 36,781 32,678
Accounts receivable - other 3,648 11,044
Inventories 51,454 48,540
Deferred income tax - short term 9,646 8,825
Prepaid income tax 358 2,390
Prepaid expenses 12,174 17,505
Other current assets 6,208 4,402
Total current assets 619,509 558,878
Property, plant and equipment, net 141,721 129,493
Capitalized software, net 14,666 15,923
Goodwill 18,621 18,621
Deferred income tax - long term 7,942 7,942
License, manufacturing access fees and other
assets, net 60,240 58,196
Total assets $862,699 $789,053
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $15,756 $11,777
Accrued salaries and employee benefits 19,265 20,997
Other accrued expenses 4,005 4,014
Income tax payable - 846
Deferred revenue - short term 1,611 2,836
Total current liabilities 40,637 40,470
Non-current income tax payable 3,376 3,958
Deferred income tax - long term 75 75
Deferred revenue - long term 2,667 4,607
Deferred rent - 10
Deferred compensation plan liabilities 2,507 1,893
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value per share,
20,000,000 shares authorized, none issued
and outstanding - -
Common stock, $0.0001 par value per share;
200,000,000 shares authorized, 54,186,979 and
53,916,298 shares issued and outstanding at
June 30, 2008 and December 31, 2007, respectively 5 5
Additional paid-in capital 435,331 415,229
Accumulated other comprehensive income 163 1,604
Retained earnings 377,938 321,202
Total stockholders' equity 813,437 738,040
Total liabilities and stockholders' equity $862,699 $789,053
Gen-Probe Incorporated
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenues:
Product sales $113,701 $93,897 $215,208 $181,049
Collaborative research
revenue 4,651 5,769 7,110 8,121
Royalty and license revenue 1,462 1,615 20,059 13,162
Total revenues 119,814 101,281 242,377 202,332
Operating expenses:
Cost of product sales 32,510 30,178 65,146 59,338
Research and development 29,368 24,973 52,434 45,231
Marketing and sales 11,453 9,393 23,361 18,929
General and administrative 13,671 12,081 25,608 23,362
Total operating expenses 87,002 76,625 166,549 146,860
Income from operations 32,812 24,656 75,828 55,472
Interest income 3,900 2,933 8,107 5,608
Interest expense (2) 30 (2) 30
Other income/(expense) (191) (231) 1,282 (361)
Total other income, net 3,707 2,732 9,387 5,277
Income before income tax 36,519 27,388 85,215 60,749
Income tax expense 11,728 386 28,479 12,272
Net income $24,791 $27,002 $56,736 $48,477
Net income per share:
Basic $0.46 $0.51 $1.05 $0.93
Diluted $0.45 $0.50 $1.03 $0.90
Weighted average shares
outstanding:
Basic 53,907 52,504 53,859 52,347
Diluted 55,147 54,051 55,093 53,852
Gen-Probe Incorporated
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2008 2007
Operating activities:
Net income $56,736 $48,477
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 17,233 16,802
Amortization of premiums on investments, net of
accretion of discounts 3,504 2,271
Stock-based compensation charges 9,228 9,187
Stock-based compensation income tax benefits 1,294 841
Excess tax benefit from stock-based compensation (614) (5,272)
Gain on sale of stock holdings of Molecular Profiling
Institute, Inc. (1,600) -
Impairment of intangible assets 3,496 -
(Gain)/loss on disposal of property and equipment (1) 224
Changes in assets and liabilities:
Accounts receivable 3,290 (10,754)
Inventories (2,749) 1,338
Prepaid expenses 5,333 (1,807)
Other current assets (1,322) (2,051)
Other long term assets (909) (821)
Accounts payable 3,992 (288)
Accrued salaries and employee benefits (1,732) 1,208
Other accrued expenses (9) 427
Income tax payable (72) (13,214)
Deferred revenue (3,165) (239)
Deferred income tax (821) (302)
Deferred rent (10) (58)
Deferred compensation plan liabilities 613 419
Net cash provided by operating activities 91,715 46,388
Investing activities:
Proceeds from sales and maturities of short-term
investments 205,283 25,885
Purchases of short-term investments (318,558) (130,132)
Purchases of property, plant and equipment (25,717) (14,223)
Capitalization of intangible assets, including
license and manufacturing access fees (315) (1,924)
Sale of stock holdings of Molecular Profiling
Institute, Inc. 4,100 -
Cash paid for Roche manufacturing access fees (10,000) -
Other items, net 114 (263)
Net cash used in investing activities (145,093) (120,657)
Financing activities:
Repurchase and retirement of restricted stock for
payment of taxes (479) -
Excess tax benefit from stock-based compensation 614 5,272
Proceeds from issuance of common stock 10,814 20,383
Net cash provided by financing activities 10,949 25,655
Effect of exchange rate changes on cash and cash
equivalents (72) 138
Net decrease in cash and cash equivalents (42,501) (48,476)
Cash and cash equivalents at the beginning of period 75,963 87,905
Cash and cash equivalents at the end of period $33,462 $39,429
SOURCE Gen-Probe Incorporated
07/31/2008
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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