-- Company Posts Non-GAAP EPS of $0.51(1), Excluding $0.02 of Expenses
Related to Tepnel Acquisition --
-- Product Sales Increase 11%, or 15% on a Constant Currency(2) Basis --
-- Company Generates Total Revenues of $116.2 Million, Operating Cash
Flows of $52.0 Million --
SAN DIEGO, April 30 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated
(Nasdaq: GPRO) today reported financial results for the first quarter of 2009,
including non-GAAP earnings per share (EPS) of $0.51.
"Gen-Probe posted good financial results in the first quarter of 2009,
highlighted by a new record in clinical diagnostics product sales, despite
significant foreign exchange headwinds," said Henry L. Nordhoff, the Company's
chairman and chief executive officer. "In recent weeks, we also completed our
Tepnel acquisition and decided to begin a U.S. clinical trial of our PCA3
prostate cancer test, both of which we expect to drive future growth."
As expected, total revenues and net income declined in the first quarter
of 2009 compared to the prior year period because the Company recorded $16.4
million of revenue from Bayer in the first quarter of 2008. This
non-recurring revenue, which added $0.20 to EPS in the prior year period,
represented the third and final payment due to Gen-Probe in connection with
the 2006 settlement of the companies' patent infringement litigation.
In the first quarter of 2009, product sales were $112.5 million, compared
to $101.5 million in the prior year period, an increase of 11%. Compared to
the first quarter of 2008, the stronger U.S. dollar reduced product sales
growth by an estimated 4%. Total revenues for the first quarter of 2009 were
$116.2 million, compared to $122.6 million in the prior year period, a
decrease of 5%. Net income was $27.0 million ($0.51 per share) on a non-GAAP
basis in the first quarter of 2009, compared to $31.9 million ($0.58 per
share) on a GAAP basis in the prior year period, a decrease of 15% (12% per
share). Gen-Probe's non-GAAP results for the first quarter of 2009 exclude
$1.6 million ($0.02 per share) of expenses related to the Company's
acquisition of Tepnel. Including these expenses, and on a GAAP basis, net
income in the first quarter of 2009 was $25.7 million ($0.48 per share).
Detailed Results
Gen-Probe's clinical diagnostics sales in the first quarter of 2009
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 first quarter compared to the prior year
period, in line with Gen-Probe's expectations. Clinical diagnostics sales
also were negatively affected by the stronger U.S. dollar, which reduced
growth by an estimated 2% compared to the prior year period.
In blood screening, product sales in the first quarter of 2009 benefited
from $8.2 million of one-time revenue associated with the previously announced
renegotiation of the Company's collaboration agreement with Novartis Vaccines
and Diagnostics. Novartis markets the collaboration's blood screening
products worldwide. This benefit was largely offset, however, by the stronger
U.S. dollar, which reduced growth by an estimated $2.9 million, or 6%; by $3.9
million of reduced instrument sales to Novartis due to the timing of orders;
and by $1.3 million of lower West Nile virus assay shipments due to ordering
patterns.
Product sales were, in millions:
Three Months Ended March 31, Change
2009 2008 Reported Constant
Currency
Clinical
diagnostics $59.6 $52.5 14% 16%
Blood screening $52.9 $49.0 8% 14%
Total product sales $112.5 $101.5 11% 15%
Collaborative research revenues for the first quarter of 2009 were $1.7
million, compared to $2.5 million in the prior year period, a decrease of 32%
that resulted primarily from two factors: lower reimbursement from Novartis of
shared development expenses in the companies' blood screening collaboration;
and the absence of reimbursement from 3M resulting from the termination of the
companies' collaboration regarding healthcare-associated infections.
Royalty and license revenues for the first quarter of 2009 were $2.0
million, compared to $18.6 million in the prior year period. As discussed,
this significant decrease resulted primarily from $16.4 million of revenue
from Bayer that was recorded in the prior year period. This revenue
represented the third and final payment due in connection with the 2006
settlement of the companies' patent infringement litigation.
Gross margin on product sales in the first quarter of 2009 was 70.4%,
compared to 67.8% in the prior year period. This improvement resulted
primarily from the renegotiated blood screening agreement with Novartis,
increased sales of APTIMA(R) assays, and lower instrument sales. These
benefits were offset in part by the stronger U.S. dollar and by unfavorable
manufacturing variances.
Research and development (R&D) expenses in the first quarter of 2009 were
$25.0 million, compared to $23.1 million in the prior year period, an increase
of 8%. This increase resulted primarily from costs associated with U.S.
clinical trials of the investigational APTIMA(R) human papillomavirus (HPV)
assay and the development of a fully automated instrument system for low- and
mid-volume labs, known as PANTHER.
Marketing and sales expenses in the first quarter of 2009 were $11.1
million, compared to $11.9 million in the prior year period, a decrease of 7%
that resulted primarily from the timing of specific studies associated with
the Company's ongoing European market development efforts for the APTIMA Combo
2, APTIMA HPV and PROGENSA(TM) PCA3 assays.
General and administrative (G&A) expenses in the first quarter of 2009
were $13.8 million, compared to $11.9 million in the prior year period, an
increase of 16% that resulted primarily from $1.6 million of expenses
associated with the acquisition of Tepnel. As described above, these
transaction-related costs have been excluded from the Company's non-GAAP
results for the first quarter. Gen-Probe expects to record additional
Tepnel-related charges in the second quarter, which also will be excluded from
the Company's non-GAAP results.
Total other income in the first quarter of 2009 was $4.6 million, compared
to $5.7 million in the prior year period, a decrease of 19% that resulted
primarily from the $1.6 million gain recorded in the first quarter of 2008
related to the Company's sale of its equity investment in Molecular Profiling
Institute.
Gen-Probe continues to have a strong balance sheet. As of March 31, 2009,
the Company had $652.6 million of cash, cash equivalents and marketable
securities, and $170.0 million outstanding under a revolving credit facility.
The Company currently pays interest on funds borrowed under the credit
facility at a floating rate 0.6 percent above the one-month London Interbank
Offered Rate (LIBOR), which was recently 0.5 percent.
In the first quarter of 2009, Gen-Probe generated net cash of $52.0
million from its operating activities, more than double the Company's net
income. The Company also repurchased approximately 0.9 million shares of its
common stock for $35.6 million during the quarter.
Updated 2009 Financial Guidance
"We are updating our guidance based on our solid first-quarter performance
and our Tepnel acquisition," said Herm Rosenman, the Company's senior vice
president of finance and chief financial officer. "We continue to expect
solid growth from our STD franchise, new products and recently acquired
business, although we anticipate that blood screening growth will be pressured
by the strong dollar and increasing competitive pressures."
In the table below, Gen-Probe's non-GAAP guidance excludes certain
expenses related to the Tepnel acquisition, namely transaction costs and the
increase in non-cash depreciation and amortization expense required under the
rules of purchase accounting. These expenses are forecast to total between $8
million and $10 million in 2009, equating to between ($0.10) and ($0.13) of
EPS on a GAAP basis.
Current Current Guidance Previous
Guidance (GAAP) Guidance
(non-GAAP) (GAAP)*
Total revenues $490 to $510 $490 to $510 $460 to $490
million million million
Product gross
margins 68% to 70% 68% to 70% 69% to 72%
R&D expenses 21% to 23% 21% to 23% 20% to 22%
Marketing and
sales expenses 10% to 11% 11% to 12% 10% to 11%
G&A expenses 10% to 11% 11% to 12% 10% to 11%
Tax rate 33% to 34% 33% to 34% 34%
Diluted shares
outstanding 52 million 52 million 52 to 54
million
EPS $1.85 to $2.00 $1.72 to $1.90 $1.80 to $2.05
* Did not include revenues or expenses associated with the acquisition of
Tepnel.
Recent Events
-- Carl Hull Elected CEO. On March 23, Gen-Probe announced that its
board of directors had elected Carl W. Hull the Company's new chief
executive officer (CEO), effective May 18, 2009. Mr. Hull, currently
the Company's president and chief operating officer, will become CEO
following the retirement of current CEO Henry L. Nordhoff. Mr. Hull
also is expected to join the Company's board of directors at that
time.
-- Tepnel Acquisition Completed. On April 8, Gen-Probe announced that
the Company had completed its acquisition of Tepnel Life Sciences plc,
a rapidly growing molecular diagnostics and pharmaceutical services
company based in the United Kingdom. The acquisition brings Gen-Probe
new growth opportunities in transplant diagnostics, genetic testing
and pharmaceutical services, and accelerates the Company's European
expansion strategy.
-- New Credit Facility. On March 2, Gen-Probe announced it was borrowing
$170.0 million under a newly issued credit facility to finance its
pending acquisition of Tepnel and for other general corporate
purposes, including its existing share repurchase program. The
maximum amount that may be borrowed under the facility was increased
in April to $250.0 million, under which the Company has borrowed
$240.0 million.
-- U.S. Clinical Trial for PCA3. On April 29, Gen-Probe announced that
it intends to initiate a U.S. clinical trial for its investigational
PCA3 assay. The trial is expected to begin in the third quarter of
2009 and take approximately a year to complete. The Company also
announced that it had amended its PCA3 license agreement with
DiagnoCure, and will acquire $5 million of newly issued DiagnoCure
convertible preferred stock.
-- Victory in HPV Arbitration. On April 1, Gen-Probe announced that the
Company, along with its co-respondents F. Hoffmann-La Roche Ltd. and
Roche Molecular Systems, Inc., had prevailed in its arbitration with
Digene (now Qiagen) concerning the Company's supply and purchase
agreement with Roche for HPV products.
Webcast Conference Call
A live webcast of Gen-Probe's first quarter 2009 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 866-454-1437 for domestic callers and
203-369-1239 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 more than 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 1,200 people. For more
information, go to www.gen-probe.com.
Trademarks
APTIMA, APTIMA COMBO 2, PACE, PROGENSA and TIGRIS are trademarks of
Gen-Probe Incorporated. ULTRIO and PROCLEIX are trademarks of Chiron, a
business unit of Novartis Vaccines and Diagnostics. All other trademarks are
the property of their owners.
About Non-GAAP Financial Measures
To supplement Gen-Probe's financial results for the first quarter of 2009
and its updated 2009 financial guidance, in each case presented in accordance
with GAAP, Gen-Probe uses the following financial measures defined as non-GAAP
by the SEC: non-GAAP net income, non-GAAP G&A expenses, non-GAAP effective
income tax rate, and non-GAAP EPS. Gen-Probe's management does not itself,
nor does it suggest that investors should, consider such non-GAAP financial
measures in isolation from, or as a substitute for, financial information
prepared and presented in accordance with GAAP. Gen-Probe's management
believes that these non-GAAP financial measures provide meaningful
supplemental information regarding the Company's performance by excluding
certain expenses that may not be indicative of core business results.
Gen-Probe believes that both management and investors benefit from referring
to these non-GAAP financial measures in assessing Gen-Probe's performance and
when planning, forecasting and analyzing future periods. These non-GAAP
financial measures also facilitate management's internal comparisons to
Gen-Probe's historical performance and our competitors' operating results.
Gen-Probe believes these non-GAAP financial measures are useful to investors
in allowing for greater transparency with respect to supplemental information
used by management in its financial and operational decision making.
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 "Updated 2009 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 2009 financial targets, (ii) the risk
that we may not integrate acquisitions such as Tepnel successfully, (iii) the
possibility that the market for the sale of our new products, such as our
TIGRIS system, 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 industrial
collaborations, may not proceed as planned, (v) the risk that products,
including the investigational PROGENSA PCA3 assay for which we expect to begin
clinical trials shortly, may not be approved by regulatory authorities or
commercially available in the time frame we anticipate, or at all, (vi) the
risk that we may not be able to compete effectively, (vii) the risk that we
may not be able to maintain our current corporate collaborations and enter
into new corporate collaborations or customer contracts, (viii) our dependence
on Novartis, Siemens (as assignee of Bayer) and other third parties for the
distribution of some of our products, (ix) our dependence 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. This
list includes 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)
March 31, December 31,
2009 2008
(unaudited)
Assets
Current assets:
Cash and cash equivalents $286,195 $60,122
Marketable securities 366,395 445,056
Trade accounts receivable, net of allowance
for doubtful accounts of $600 and $700 at
March 31, 2009 and December 31, 2008,
respectively 35,206 33,397
Accounts receivable - other 1,886 2,900
Inventories 52,175 54,406
Deferred income tax - short term 5,965 7,269
Prepaid income tax - 2,306
Prepaid expenses 14,144 15,094
Other current assets 5,699 6,135
Total current assets 767,665 626,685
Marketable securities 32,677 -
Property, plant and equipment, net 142,799 141,922
Capitalized software, net 12,780 13,409
Goodwill 18,621 18,621
Deferred income tax - long term 12,286 12,286
Licenses, manufacturing access fees and other
assets, net 56,483 56,608
Total assets $1,043,311 $869,531
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $15,788 $16,050
Accrued salaries and employee benefits 19,434 25,093
Other accrued expenses 6,239 4,027
Income tax payable 8,491 -
Short-term borrowings 170,000 -
Deferred revenue - short term 1,592 1,278
Total current liabilities 221,544 46,448
Non-current income tax payable 4,671 4,773
Deferred income tax - long term 54 55
Deferred revenue - long term 2,167 2,333
Deferred compensation plan liabilities 2,244 2,162
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, 52,068,633
and 52,920,971 shares issued and outstanding
at March 31, 2009 and December 31, 2008,
respectively 5 5
Additional paid-in capital 353,304 382,544
Accumulated other comprehensive income 5,419 3,055
Retained earnings 453,903 428,156
Total stockholders' equity 812,631 813,760
Total liabilities and stockholders' equity $1,043,311 $869,531
Gen-Probe Incorporated
Consolidated Statements of Income - GAAP
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2009 2008
Revenues:
Product sales $112,522 $101,507
Collaborative research revenue 1,675 2,459
Royalty and license revenue 1,986 18,597
Total revenues 116,183 122,563
Operating expenses:
Cost of product sales 33,314 32,636
Research and development 24,998 23,066
Marketing and sales 11,055 11,908
General and administrative 13,846 11,937
Total operating expenses 83,213 79,547
Income from operations: 32,970 43,016
Other income/(expense)
Interest income 4,882 4,207
Interest expense (151) -
Other income/(expense) (142) 1,473
Total other income, net 4,589 5,680
Income before income tax 37,559 48,696
Income tax expense 11,812 16,751
Net income $25,747 $31,945
Net income per share:
Basic $0.49 $0.59
Diluted $0.48 $0.58
Weighted average shares outstanding:
Basic 52,407 53,796
Diluted 53,126 55,023
Gen-Probe Incorporated
Consolidated Statements of Income
(In thousands, except per share data)
(Unaudited)
Three Months Ended Three Months Ended
March 31, 2009 March 31, 2008
Non- Adjustments GAAP Non- Adjustments GAAP
GAAP GAAP
Revenues:
Product sales $112,522 $ - $112,522 $101,507 $- $101,507
Collaborative
research
revenue 1,675 - 1,675 2,459 - 2,459
Royalty and
license revenue 1,986 - 1,986 18,597 - 18,597
Total revenues 116,183 - 116,183 122,563 - 122,563
Operating expenses:
Cost of product
sales 33,314 - 33,314 32,636 - 32,636
Research and
development 24,998 - 24,998 23,066 - 23,066
Marketing and
sales 11,055 - 11,055 11,908 - 11,908
General and
administrative 12,244 1,602 13,846 11,937 - 11,937
Total operating
expenses 81,611 1,602 83,213 79,547 - 79,547
Income from
operations 34,572 (1,602) 32,970 43,016 - 43,016
Other income/
(expense)
Interest income 4,882 - 4,882 4,207 - 4,207
Interest expense (151) - (151) - - -
Other income/
(expense) (142) - (142) 1,473 - 1,473
Total other income,
net 4,589 - 4,589 5,680 - 5,680
Income before
income tax 39,161 (1,602) 37,559 48,696 - 48,696
Income tax
expense 12,187 (375) 11,812 16,751 - 16,751
Net income $ 26,974 $ (1,227) $ 25,747 $31,945 $- $ 31,945
Net income
per share:
Basic $ 0.51 $ (0.02) $ 0.49 $ 0.59 $- $ 0.59
Diluted $ 0.51 $ (0.02) $ 0.48 $ 0.58 $- $ 0.58
Weighted average
shares
outstanding:
Basic 52,407 52,407 52,407 53,796 - 53,796
Diluted 53,126 53,126 53,126 55,023 - 55,023
Gen-Probe Incorporated
Consolidated Statements of Income - Non-GAAP
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2009 2008
Revenues:
Product sales $112,522 $101,507
Collaborative research revenue 1,675 2,459
Royalty and license revenue 1,986 18,597
Total revenues 116,183 122,563
Operating expenses:
Cost of product sales 33,314 32,636
Research and development 24,998 23,066
Marketing and sales 11,055 11,908
General and administrative 12,244 11,937
Total operating expenses 81,611 79,547
Income from operations 34,572 43,016
Other income/(expense)
Interest income 4,882 4,207
Interest expense (151) -
Other income/(expense) (142) 1,473
Total other income, net 4,589 5,680
Income before income tax 39,161 48,696
Income tax expense 12,187 16,751
Net income $ 26,974 $ 31,945
Net income per share:
Basic $ 0.51 $0.59
Diluted $ 0.51 $0.58
Weighted average shares outstanding:
Basic 52,407 53,796
Diluted 53,126 55,023
Gen-Probe Incorporated
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
2009 2008
Operating activities:
Net income $25,747 $31,945
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,748 8,608
Amortization of premiums on investments,
net of accretion of discounts 1,523 1,735
Stock-based compensation charges 5,758 5,192
Stock-based compensation income tax
benefits 126 369
Excess tax benefit from stock-based
compensation (127) (145)
Gain on sale of investment in Molecular
Profiling Institute, Inc. - (1,600)
Changes in assets and liabilities:
Trade and other accounts receivable (784) 3,842
Inventories 2,223 (1,796)
Prepaid expenses 945 3,447
Other current assets 436 (1,161)
Other long term assets (1,161) (743)
Accounts payable (219) 3,181
Accrued salaries and employee benefits (5,657) (3,069)
Other accrued expenses 2,217 965
Income tax payable 10,709 15,663
Deferred revenue 147 (45)
Deferred income tax 1,305 688
Deferred rent - (10)
Deferred compensation plan liabilities 82 454
Net cash provided by operating activities 52,018 67,520
Investing activities:
Proceeds from sales and maturities of
marketable securities 84,008 97,290
Purchases of marketable securities (37,124) (181,546)
Purchases of property, plant and equipment (7,525) (20,033)
Purchases of intangible assets, including
licenses and manufacturing access fees (205) (194)
Proceeds from sale of investment in
Molecular Profiling Institute, Inc. - 4,100
Other assets (13) 75
Net cash provided by (used in) investing
activities 39,141 (100,308)
Financing activities:
Excess tax benefit from stock-based
compensation 127 145
Repurchase and retirement of restricted
stock for payment of taxes (34) (41)
Repurchases of common stock (35,627) -
Proceeds from issuance of common stock 534 3,027
Borrowings under credit facility 170,000 -
Net cash provided by financing activities 135,000 3,131
Effect of exchange rate changes on cash and
cash equivalents (86) (7)
Net increase (decrease) in cash and cash
equivalents 226,073 (29,664)
Cash and cash equivalents at the beginning
of period 60,122 75,963
Cash and cash equivalents at the end of
period $286,195 $46,299
Michael Watts
Vice president, investor relations and
corporate communications
858-410-8673
(1) In this press release, all per share amounts are calculated on a fully
diluted basis. Non-GAAP EPS excludes $1.6 million ($0.02) of expenses related
to the Company's acquisition of Tepnel. Some totals may not foot due to
rounding.
(2) In this press release, "constant currency" revenue growth rates assume
that average foreign exchange rates in the first quarter of 2009 were equal to
those in the first quarter of 2008.
SOURCE Gen-Probe Incorporated
04/30/2009
CONTACT: Michael Watts, Vice president, investor relations and
corporate communications, Gen-Probe Incorporated, +1-858-410-8673
Web Site: http://www.gen-probe.com
(GPRO)
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