- Earnings Per Share Increase to $0.26, 13% Growth From Prior Year -
- Product Sales Establish New Quarterly Record of $65.1 Million, Up 24% -
- Company Increases Full-Year Earnings Per Share Guidance to $1.20-$1.24 -
SAN DIEGO, Aug. 1 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated
(Nasdaq: GPRO) today reported strong financial results for the second quarter
and six months ended June 30, 2005. Net income for the second quarter of 2005
was $13.5 million ($0.26 per share), compared to net income of $11.8 million
($0.23 per share) in the prior year period, an increase of 13% per share. All
per share amounts are calculated on a fully diluted basis.
Product sales for the second quarter of 2005 were a record $65.1 million,
compared to $52.6 million in the prior year period, an increase of 24%. Total
revenues for the second quarter of 2005 were $72.9 million, compared to $61.2
million in the prior year period, an increase of 19%.
For the first six months of 2005, net income was $26.9 million ($0.51 per
share), compared to net income of $31.5 million ($0.62 per share) in the prior
year period, a decrease of 18% per share. As previously disclosed, in the
first quarter of 2004 Gen-Probe earned royalty and license revenue from Tosoh
and a contract milestone from Chiron that together added $13.5 million to
total revenues, and $0.17 to earnings per share. Product sales in the first
six months of 2005 were $124.7 million, compared to $107.6 million in the
prior year period, an increase of 16%. Total revenues in the first six months
of 2005 were $141.7 million, compared to $137.7 million in the prior year
period, an increase of 3%.
"Both our clinical diagnostics and blood screening businesses grew solidly
in the second quarter of 2005, driven by continued strength across our major
product lines," said Henry L. Nordhoff, chairman, president and chief
executive officer of Gen-Probe. "Not only did we execute well in our base
business, we also took steps to drive our future growth, such as forming a
collaboration with General Electric in July to enter the attractive industrial
microbiology market."
Detailed Results
Gen-Probe's sales growth in the second quarter of 2005 was led by the
APTIMA Combo 2(R) and Procleix(R) Ultrio(TM) assays, and by the TIGRIS(R)
system for blood screening in Europe. Gen-Probe's blood screening products
are marketed worldwide by Chiron.
Sales of the APTIMA Combo 2 assay, Gen-Probe's amplified test for
simultaneously detecting Chlamydia trachomatis (CT) and Neisseria gonorrhoeae
(GC), continued to grow strongly in the second quarter. This sales growth was
driven by market share gains on both the Company's semi-automated instrument
platform and on the high-throughput, fully automated TIGRIS system.
In blood screening, product sales benefited from rapid growth of the
Procleix Ultrio assay in Europe. The Procleix Ultrio assay simultaneously
detects HIV-1, hepatitis C virus and hepatitis B virus in donated blood.
Gen-Probe's product sales in the second quarter also benefited from sales of
TIGRIS instruments to Chiron.
Product sales for the second quarter and first half of 2005 and 2004 were,
in millions:
Three Months Ended June 30, Six Months Ended June 30,
2005 2004 Increase 2005 2004 Increase
Clinical
diagnostics $34.0 $30.2 13% $68.3 $62.0 10%
Blood screening $31.1 $22.4 39% $56.4 $45.6 24%
Total product
sales $65.1 $52.6 24% $124.7 $107.6 16%
Collaborative research revenues for the second quarter of 2005 were $6.7
million, compared to $7.0 million in the prior year period, a decrease of 4%.
For the first six months of 2005, collaborative research revenues were $13.0
million, compared to $13.7 million in the prior year period, a decrease of 5%.
The decreases resulted primarily from the completion of funding from the
Company's National Institutes of Health contract for development of the West
Nile virus (WNV) assay for blood screening.
Royalty and license revenues for the second quarter of 2005 were $1.1
million, compared to $1.6 million in the prior year period, a decrease of 31%
that resulted primarily from lower royalties owed by Bayer. For the first six
months of 2005, royalty and license revenues were $4.0 million, compared to
$16.3 million in the prior year period. As discussed, royalty and license
revenues were unusually high in the first quarter of 2004 due to revenues
earned through the Company's agreements with Tosoh and Chiron.
Gross margin on product sales was 69% in the second quarter of 2005,
compared to 75% in the prior year period. The decrease in gross margin
resulted primarily from the sale of TIGRIS instruments for blood screening to
Chiron, which contractually occur at cost. These instrument sales, which
totaled $3.9 million in the quarter, reflect strong international demand for
the TIGRIS system and Procleix Ultrio assay. Gross margin was also negatively
affected by the amortization of capitalized software costs related to the
TIGRIS system, which began midway through the second quarter of 2004. For the
first six months of 2005, gross margin on product sales was 71%, compared to
75% in the prior year period. The decrease resulted primarily from the
factors described above.
Research and development (R&D) expenses were $17.4 million in the second
quarter of 2005, compared to $15.9 million in the prior year period, an
increase of 9% that resulted primarily from costs associated with the
Company's prostate cancer and human papillomavirus (HPV) programs. For the
first six months of 2005, R&D expenses were $36.1 million, compared to $34.3
million in the prior year period, an increase of 5% that was driven by the
factors above, and by costs related to the registrations of the Procleix
Ultrio and WNV assays for blood screening.
Marketing and sales expenses were $7.4 million in the second quarter of
2005, compared to $6.6 million in the prior year period, an increase of 12%.
For the first six months of 2005, marketing and sales expenses were $14.8
million, compared to $13.4 million in the prior year period, an increase of
10%. The increases resulted primarily from the costs of supporting the TIGRIS
system and investing in new market opportunities.
General and administrative (G&A) expenses were $7.8 million in the second
quarter of 2005, compared to $7.5 million in the prior year period, an
increase of 4%. For the first six months of 2005, G&A expenses were $15.0
million, compared to $14.8 million in the prior year period, an increase of
1%.
Gen-Probe continues to have a strong balance sheet. As of June 30, 2005,
the Company had $202.9 million of cash, cash equivalents and short-term
investments, and no debt. Gen-Probe generated net cash of $42.5 million from
its operating activities in the first six months of 2005. The Company's cash
balance declined slightly during the second quarter because of a $20.0 million
payment related to the Roche HPV agreement, and $20.2 million of capital
spending, primarily to expand the Company's headquarters campus.
Updated 2005 Financial Guidance
Based on Gen-Probe's continued strong performance in the second quarter of
2005, the Company is raising its 2005 financial guidance. For the full year,
Gen-Probe now expects:
* Total revenues of $292 million to $300 million, including
collaborative research revenues of $23 to $25 million and royalty and
license revenue of $16 to $17 million. As previously disclosed, the
estimate for royalty and license revenue includes a $10 million
milestone the Company anticipates earning from Chiron if U.S.
regulatory approval is obtained for the Procleix Ultrio assay on the
TIGRIS system.
* Product gross margins approximating 70% to 72% of product sales. The
change in gross margin guidance is due primarily to
greater-than-expected sales of TIGRIS instruments to Chiron at cost.
* R&D expenses approximating 24% to 25% of total revenues.
* Marketing and sales expenses approximating 10% of total revenues.
* General and administrative expenses approximating 10% of total
revenues.
* Earnings per share of between $1.20 and $1.24, based on a fully
diluted share count of 52.5 million for the year and a tax rate of
approximately 35% to 36%. This estimate does not include the effect
of expensing stock options. In accordance with Securities and
Exchange Commission regulations, Gen-Probe intends to expense stock
options beginning on January 1, 2006.
Recent Events
* GE Water Collaboration. Gen-Probe and GE Infrastructure, Water &
Process Technologies, a unit of General Electric Company, announced
that the companies will work together on an exclusive basis to
develop, manufacture and commercialize nucleic acid testing (NAT)
technologies that are designed to detect the unique genetic sequences
of microorganisms in selected water applications.
* New VP of Sales and Marketing. Stephen Kondor has joined Gen-Probe as
vice president, sales and marketing. He was formerly vice president
and general manager of the genetic analysis business at Applied
Biosystems (Applera). Before joining Applera, he held a variety of
senior management positions at Fisher Scientific, Igen, Becton
Dickinson and Abbott. He will report to Hank Nordhoff, chairman,
president and chief executive officer.
* Procleix Ultrio Data. At the XV Regional Congress of the
International Society of Blood Transfusion, Gen-Probe researchers
presented a study that added to the body of evidence demonstrating
that the Procleix Ultrio assay can detect HIV-1, HCV and HBV earlier
than serology testing. In the study, compared to the most sensitive
surface antigen test, the Procleix Ultrio assay detected HBV a median
of 7 days earlier when testing pools of 16 blood donations, a median
of 11.5 days earlier in pools of 8, and a medium of 17 days earlier
when testing individual blood donations. Gen-Probe researchers
presented similar data at a meeting of the U.S. Food and Drug
Administration's (FDA) Blood Products Advisory Committee in July.
* TIGRIS Patent. Gen-Probe was issued U.S. Patent No. 6,890,742, which
broadly claims an automated process for isolating and amplifying a
target nucleic acid sequence within a closed system. The new patent
complements nine others previously issued to Gen-Probe related to
automated nucleic acid testing systems and components.
* PCA3 Program. Gen-Probe entered into a research agreement with
GlaxoSmithKline (GSK) under which the Company will provide its PCA3
assay to test up to 6,800 clinical samples obtained from patients in
GSK's REDUCE clinical trial, which is evaluating whether GSK's drug
dutasteride reduces the risk of prostate cancer.
* Bayer Arbitration. As previously reported, in April the arbitrator in
the dispute between the Company and Bayer HealthCare, LLC, determined
that the Company is entitled to distribute its qualitative HIV and HCV
assays co-exclusively with Bayer. The arbitrator has more recently
ordered that a brief additional hearing must be held to determine
whether the Company is obligated to pay a royalty on sales of the
qualitative HIV and HCV assays, and if so, the amount of such
royalties and whether they should be paid to Chiron or Bayer. The
additional hearing has been scheduled for September 14 and 15. In
addition, in Gen-Probe's separate patent infringement lawsuit against
Bayer, the Company has filed a motion to amend its complaint to allege
that Bayer's HIV and HCV bDNA tests also infringe two additional U.S.
patents owned by the Company relating to branched nucleic acid probes.
* ASM Meeting. At the 105th general meeting of the American Society for
Microbiology, several Gen-Probe customers presented posters that
demonstrated the superiority of the APTIMA Combo 2 assay compared to
competitive assays, and the ability of APTIMA Combo 2 to deliver
excellent results from a variety of sample types, including Cytyc
liquid Pap samples. This application is currently under review by the
FDA.
* AACC Meeting. At the annual meeting of the American Association for
Clinical Chemistry, Gen-Probe researchers presented a poster that
demonstrated that the APTIMA CT and APTIMA GC standalone assays
generated equivalent results on both Gen-Probe's semi-automated
instrument platform and on the fully automated TIGRIS system.
Webcast Conference Call
A live webcast of Gen-Probe's second quarter 2005 conference call for
investors can be accessed at http://www.gen-probe.com beginning at 4:30 p.m.
Eastern Time on August 1, 2005. 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) 403-7094 for domestic callers and (203)
369-0566 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)
used to diagnose human diseases and screen donated human blood. Gen-Probe
markets a broad portfolio of products that use the Company's patented
technologies to detect infectious microorganisms, including those causing
sexually transmitted diseases, tuberculosis, strep throat, pneumonia and
fungal infections. The Company also developed and manufactures the only FDA-
approved blood screening assay for the simultaneous detection of HIV-1 and
HCV, which is marketed by Chiron Corporation. In addition, Gen-Probe's TIGRIS
instrument is the only fully automated, high-throughput NAT system for
diagnostics and blood screening. Gen-Probe has more than 20 years of NAT
expertise, and its products are used daily in clinical laboratories and blood
collection centers worldwide. Gen-Probe is headquartered in San Diego and
employs approximately 900 people. For more information, go to
www.gen-probe.com.
TIGRIS, APTIMA, APTIMA COMBO 2 and PACE are trademarks of Gen-Probe
Incorporated.
ULTRIO and PROCLEIX are trademarks of Chiron Corporation.
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 2005 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 future results of operations, 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 by any forward-looking statement. Some of the risks,
uncertainties and assumptions that could cause actual results to differ
materially from estimates or projections contained in the forward-looking
statements include but are not limited to: (i) the risk that we may not
achieve our expected 2005 growth, revenue or earnings targets, (ii) the risk
that Bayer may successfully appeal the arbitration decision that favored us,
(iii) the risk that we may not earn or receive milestone payments from our
collaborators, (iv) the possibility that the market for the sale of our new
products, such as our TIGRIS system, APTIMA Combo 2 assay and Procleix Ultrio
assay, may not develop as expected, (v) the enhancement of existing products
and the development of new products may not proceed as planned, (vi) the risk
that our Procleix Ultrio and WNV assays may not be approved by regulatory
authorities and commercially available in the time frames we anticipate, or at
all, (vii) we may not be able to compete effectively, (viii) we may not be
able to maintain our current corporate collaborations and enter into new
corporate collaborations or customer contracts, (ix) we are dependent on
Chiron, Bayer and other third parties for the distribution of some of our
products, (x) we are dependent on a small number of customers, contract
manufacturers and single source suppliers of raw materials, (xi) changes in
third-party reimbursement policies regarding our products could adversely
affect sales of our products, (xii) changes in government regulation affecting
our diagnostic products could harm our sales and increase our development
costs, (xiii) the risk that our intellectual property may be infringed by
third parties or invalidated, and (xiv) 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 any forward-looking statement 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,
2005 2004
(unaudited)
Assets
Current assets:
Cash and cash equivalents $32,502 $25,498
Short-term investments 170,354 168,328
Trade accounts receivable, net of
allowance for doubtful accounts of
$730 at June 30, 2005 and $664 at
December 31, 2004, respectively 29,627 21,990
Accounts receivable - other 1,177 3,136
Inventories 31,851 27,308
Deferred income taxes 7,951 7,725
Prepaid expenses 15,408 11,910
Other current assets 2,267 2,054
Total current assets 291,137 267,949
Property, plant and equipment, net 88,736 76,651
Capitalized software 22,209 23,466
Goodwill 18,621 18,621
License and manufacturing access fees 44,360 24,395
Total assets $465,063 $411,082
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $13,292 $6,729
Accrued salaries and employee benefits 10,741 11,912
Other accrued expenses 4,341 4,451
Income tax payable 5,261 1,188
Deferred revenue 12,481 9,467
Total current liabilities 46,116 33,747
Deferred income taxes 9,187 9,187
Deferred revenue 4,667 5,000
Deferred rent 280 309
Minority interest -- 1,810
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, 50,665,626
and 50,035,490 shares issued
and outstanding at June 30, 2005
and December 31, 2004, respectively 5 5
Additional paid-in capital 267,113 248,767
Deferred compensation (1,777) (1,104)
Accumulated other comprehensive income 1 807
Retained earnings 139,471 112,554
Total stockholders' equity 404,813 361,029
Total liabilities and stockholders' equity $465,063 $411,082
Gen-Probe Incorporated
Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
(unaudited)
Revenues:
Product sales $65,131 $52,600 $124,710 $107,630
Collaborative research
revenue 6,678 7,007 13,022 13,738
Royalty and license revenue 1,085 1,618 3,990 16,343
Total revenues 72,894 61,225 141,722 137,711
Operating expenses:
Cost of product sales 20,350 13,164 35,848 27,028
Research and development 17,408 15,896 36,091 34,315
Marketing and sales 7,384 6,578 14,810 13,390
General and administrative 7,780 7,476 14,971 14,759
Total operating expenses 52,922 43,114 101,720 89,492
Income from operations 19,972 18,111 40,002 48,219
Total other income, net 1,001 21 2,082 698
Income before income taxes 20,973 18,132 42,084 48,917
Income tax expense 7,517 6,371 15,167 17,428
Net income $13,456 $11,761 $26,917 $31,489
Net income per share:
Basic $0.27 $0.24 $0.53 $0.64
Diluted $0.26 $0.23 $0.51 $0.62
Weighted average shares
outstanding:
Basic 50,550 49,302 50,414 49,103
Diluted 52,315 51,402 52,339 51,200
Gen-Probe Incorporated
Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
June 30,
2005 2004
(unaudited)
Operating activities:
Net income $26,917 $31,489
Adjustments to reconcile net income to net cash
provided by operating
activities:
Depreciation and amortization 11,038 8,361
Stock compensation charges 266 199
Loss on disposal of property and equipment 59 27
Stock option income tax benefits 6,451 2,220
Changes in assets and liabilities:
Accounts receivable (5,760) (6,460)
Inventories (4,549) (10,114)
Prepaid expenses (3,498) (5,740)
Other current assets (213) 612
Accounts payable 6,574 1,565
Accrued salaries and employee benefits (1,171) (1,091)
Other accrued expenses (72) (1,412)
Income tax payable 4,093 8,066
Deferred revenue 2,681 3,760
Deferred income taxes (275) 1,662
Deferred rent (29) (10)
Minority interest -- 249
Net cash provided by operating activities 42,512 33,383
Investing activities:
Proceeds from sales and maturities of short-term
investments 51,532 108,958
Purchases of short-term investments (53,647) (153,173)
Cash paid for acquisition of minority interest in
Molecular Light Technology (1,539) --
Purchases of property, plant and equipment (20,162) (8,824)
Capitalization of intangible assets (21,822) (554)
Other assets (583) (394)
Net cash used in investing activities (46,221) (53,987)
Financing activities:
Proceeds from issuance of common stock 10,956 12,269
Net cash provided by financing activities 10,956 12,269
Effect of exchange rate changes on cash and cash
equivalents (243) 314
Net increase (decrease) in cash and cash
equivalents 7,004 (8,021)
Cash and cash equivalents at the beginning of the
period 25,498 35,973
Cash and cash equivalents at the end of the period $32,502 $27,952
Supplemental disclosure of cash flow information:
Cash paid for:
Income taxes $4,253 $6,587
Interest expense $148 $9
SOURCE
Gen-Probe Incorporated
08/01/2005
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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