Gen-Probe Reports Financial Results for the Second Quarter of 2011
- Company Posts Non-GAAP EPS of $0.51 and GAAP EPS of $0.45 -
- Total Revenues of $135.9 Million Driven by Record Sales of APTIMA Women's Health Products -
SAN DIEGO, July 28, 2011 /PRNewswire via COMTEX/ --
Gen-Probe Incorporated (NASDAQ: GPRO) today reported financial results for the second quarter of 2011, with total revenues of $135.9 million and non-GAAP earnings per share (EPS) of $0.51.
"Gen-Probe posted record sales of APTIMA women's health products in the second quarter of 2011, while supply chain fluctuations caused blood screening revenue to decline compared to strong sales a year ago," said Carl Hull, the Company's president and chief executive officer. "In addition, we are off to a good start with the first of several new product launches in the United States, and with our PANTHER® introduction in Europe."
Key financial results for the second quarter of 2011 were ($ in millions, except EPS):
In the second quarter of 2011, clinical diagnostics product sales grew by 18% compared to the prior year period. This increase was driven primarily by domestic and international growth of the APTIMA Combo 2® assay for detecting Chlamydia and gonorrhea, and by the inclusion of GTI product sales, which were not part of Gen-Probe in the prior year period. Foreign currency fluctuations increased clinical diagnostics sales by an estimated $1.3 million compared to the prior year period.
In blood screening, sales declined compared to the second quarter of 2010, as expected, due to lower shipments of assays and instruments to Novartis, the Company's blood screening partner. Although total blood screening assay revenue for the joint business increased compared to the prior year period, Gen-Probe's assay shipments to Novartis decreased by nearly $6 million, instrument shipments declined by nearly $5 million, and additional supply chain fluctuations reduced sales by approximately $3 million.
"We believe the decrease in blood screening sales resulted mainly from reductions in our partner's inventory levels and lower instrument revenues," said Hull. "The underlying fundamentals of our blood screening business remain healthy, evidenced by the solid donation volumes, market share and profitability we experienced in the second quarter."
The percentage decline in blood screening sales in the second quarter of 2011 was magnified when compared to strong sales in the prior year period, which were more than $5 million higher than in any other quarter last year. Finally, foreign currency fluctuations increased blood screening sales by an estimated $1.1 million compared to the prior year period.
Sales of research products and services in the second quarter of 2011 were $2.3 million, down 28% compared to the prior year period due to continued market weakness affecting contract research organizations. Foreign currency fluctuations increased sales of research products and services by an estimated $0.2 million compared to the prior year period.
Second quarter product sales were ($ in millions):
Collaborative research revenues in the second quarter of 2011 were $1.6 million, compared to $4.1 million in the prior year period, a decrease of 61% that resulted primarily from an expected decrease in funding from Novartis associated with the development of the fully automated PANTHER instrument for the blood screening market.
Royalty and license revenues in the second quarter of 2011 were $1.4 million, compared to $1.8 million in the prior year period.
GAAP Income Statement Details
Gross margin on product sales was 70.3% in the second quarter of 2011, compared to 66.6% in the prior year period. This increase resulted mainly from a favorable product sales mix, namely higher sales of APTIMA products and lower sales of instrumentation to Novartis.
Acquisition-related amortization expenses were $2.7 million in the second quarter of 2011, compared to $2.2 million in the prior year period, an increase of 23% that resulted mainly from the acquisition of GTI in December of 2010.
Research and development (R&D) expenses were $27.7 million in the second quarter of 2011, compared to $27.1 million in the prior year period, an increase of 2% that resulted primarily from the addition of GTI's R&D programs.
Marketing and sales expenses were $17.5 million in the second quarter of 2011, compared to $15.8 million in the prior year period, an increase of 11% that resulted primarily from the addition of GTI's cost structure, and ongoing European commercial expansion.
General and administrative (G&A) expenses were $18.7 million in the second quarter of 2011, compared to $15.0 million in the prior year period, an increase of 25% that resulted from the addition of GTI's cost structure, increased legal expenses, and higher stock-based compensation.
Total other income, net, was $3.8 million in the second quarter of 2011, compared to $6.9 million in the prior year period, a decrease of 45% that resulted primarily from a non-cash gain in the prior year period related to a change in the fair value of contingent consideration in connection with the acquisition of PRODESSE.
Income tax expense was $11.2 million in the second quarter of 2011, leading to a tax rate of 33%.
Non-GAAP Income Statement Details
Excluding $0.1 million of acquisition-related depreciation expense, gross margin on product sales was 70.4% in the second quarter of 2011, compared to 66.7% in the prior year period.
Excluding transaction-related and restructuring costs, G&A expenses were $17.3 million in the second quarter of 2011, compared to $14.3 million in the prior year period.
Income tax expense was $12.5 million in the second quarter of 2011, leading to a tax rate of 33%.
Cash Flows and Balance Sheet
In the second quarter of 2011, Gen-Probe generated net cash of $45.4 million from operating activities, more than double GAAP net income of $22.3 million. The Company spent $12.5 million on property, plant and equipment in the quarter, leading to free cash flow of $32.9 million.
Gen-Probe continues to have a strong balance sheet. As of June 30, 2011, the Company had $529.4 million of cash, cash equivalents and marketable securities, and $248 million of short-term debt. The Company pays interest on this debt at a rate 0.6% above the one-month London Interbank Offered Rate (LIBOR), which was recently below 0.2%.
Updated 2011 Financial Guidance
"We are tightening our 2011 revenue guidance based on our first-half performance," said Herm Rosenman, the Company's senior vice president, finance, and chief financial officer. "We also are adjusting our EPS guidance based on the higher share count and stock compensation expense resulting from the recent increase in our share price, the effects of which are partially offset by higher gross margins." Gen-Probe's updated 2011 financial guidance is provided below:
Notes on Presentation
In this news release, all per share amounts are calculated on a fully diluted basis. Some totals may not foot due to rounding. Certain prior year amounts have been reclassified to conform to the current year presentation. Estimates of "constant currency" results exclude currency fluctuations associated with revenue from GTI, which was not part of Gen-Probe in the second quarter of 2010.
About Non-GAAP Financial Measures
Gen-Probe's management believes that 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. To supplement the Company's financial results for the second quarter of 2011 and its updated 2011 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 gross margin, non-GAAP marketing and sales expenses, non-GAAP G&A expenses, non-GAAP operating profit, non-GAAP income tax rate, and non-GAAP EPS. Gen-Probe's management does not, 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 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. Further, our reconciliations of non-GAAP to GAAP operating results, which are included on the attached tables, are presented in the format of consolidated statements of income solely to assist a reader in understanding the impact of the various adjustments to our GAAP operating results, individually and in the aggregate, and are not intended to place any undue prominence on our non-GAAP operating results.
Webcast Conference Call
A live webcast of Gen-Probe's second quarter 2011 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. Call 866-415-2341 (domestic) or 203-369-0686 (international).
Gen-Probe is a global leader in the development, manufacture and marketing of rapid, accurate and cost-effective molecular diagnostic products and services that are used primarily to diagnose human diseases, screen donated human blood, and ensure transplant compatibility. Gen-Probe is headquartered in San Diego and employs approximately 1,400 people. For more information, go to http://www.gen-probe.com/.
APTIMA, APTIMA COMBO 2, PANTHER and PRODESSE are trademarks of Gen-Probe. All other trademarks are the property of their owners.
Caution Regarding Forward-Looking Statements
Any statements in this news release about our expectations, beliefs, plans, objectives, assumptions or future events or performance, including those under the heading "Updated 2011 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, the development and commercialization of new products, regulatory approvals, future milestones, growth opportunities, market trends, and plans 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 2011 financial targets, (ii) the risk that we may not integrate acquisitions, such as Tepnel, PRODESSE and GTI, successfully, (iii) the possibility that the market for the sale of our new products, such as our PANTHER instrument system and PROGENSA PCA3, APTIMA HPV and APTIMA trichomonas assays, may not develop as expected, (iv) the enhancement of existing products and the development of new products may not proceed as planned, (v) the risk that investigational products, including those now in US clinical trials, may not be approved by regulatory authorities or become 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 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, (xi) changes in government regulation or tax policy affecting our diagnostic products could harm our sales, increase our development costs or increase our taxes, (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.
Contact:Michael Watts Vice president, investor relations and corporate communications 858-410-8673
SOURCE Gen-Probe Incorporated