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Biosite Incorporated Announces Results For The Second Quarter Of 2006

Published: Jul 27, 2006

SAN DIEGO, July 26 /PRNewswire-FirstCall/ -- Biosite(R) Incorporated today reported financial results for the second quarter of 2006. The quarter was marked by a 45 percent increase in sales of Biosite's non-BNP cardiovascular products, compared with the same quarter of 2005, and by continued market leadership of the Triage(R) BNP Test, which is primarily used to aid in the diagnosis of heart failure. The Company also announced that it has resolved all outstanding patent litigation with Roche Diagnostics and several of its affiliates (Roche).

Under the terms of a settlement agreement announced today, Biosite and Roche have each agreed to file appropriate requests to dismiss their respective complaints pending in Federal District Courts in Indianapolis and San Diego. In addition to dismissal of the legal actions, the settlement involves a worldwide, royalty-free, non-exclusive cross-license of the patents involved in the two pending cases. As part of the cross-license agreement Biosite has also agreed to make a one-time license payment to Roche of $8.5 million.

The Company noted that second quarter GAAP and Non-GAAP earnings and operating income included expense of $2.9 million, or $0.10 per diluted share, related to the portion of the license payment to Roche pertaining to prior sales. The remainder of the license payment will be recognized in the future based on actual sales of the affected products through 2013.

Key Financial Results * Revenues for the second quarter of 2006 totaled $77.8 million, a 5 percent increase from $73.8 million in the comparable period of 2005. The increase in revenues was primarily attributed to growth in sales unit volumes of the Triage BNP Tests and Triage Profiler Panels. The Company also benefited from a lower-than-expected decline in the average sales price of the Triage BNP Tests in the second quarter of 2006. In addition, sales from international operations for the second quarter of 2006 increased 32 percent, compared with the second quarter of 2005, and accounted for 15 percent of total product sales. * For the second quarter of 2006, GAAP diluted earnings per share was $0.43, and Non-GAAP diluted earnings per share was $0.70, including in each case the $0.10 effect of the one-time license payment to Roche. By comparison, in the second quarter of 2005 the Company's diluted earnings per share was $0.76. * Non-GAAP results in the first half of 2006 exclude the impact of FAS 123R, Share-Based Payment, which relates to the expensing of non-cash stock-based compensation, such as stock options. The Company adopted FAS 123R as of January 1, 2006 on a modified prospective basis. See the tables included at the end of this release for a reconciliation of Non-GAAP financial results to GAAP financial results. See also "About Non-GAAP Financial Measures" below. * GAAP operating income for the second quarter of 2006 was $13.2 million. Non-GAAP operating income for the second quarter of 2006 was $19.6 million. In the comparable period of 2005, operating income was $21.7 million. * Cash generated from operations was $6.6 million for the second quarter of 2006, a decline from the second quarter of 2005. The decrease was primarily related to fluctuations in accounts receivables resulting from the timing of distributor orders and to higher payments of estimated taxes in the second quarter of 2006 compared with 2005.

Following are financial highlights pertaining to revenues and cash flow for the quarters ended June 30, 2006 and 2005:

($ in 000's) Three months ended Six months ended 6/30/06 6/30/05 Change 6/30/06 6/30/05 Change Triage(R) BNP Test sales $50,678 $49,058 3% $103,242 $98,829 4% Other cardiovascular product sales 13,266 9,146 45% 25,372 17,208 47% Other product sales 12,428 13,694 (9%) 25,915 26,357 (2%) Total product sales 76,372 71,898 6% 154,529 142,394 9% Total revenues 77,767 73,764 5% 157,099 145,610 8% Cash flow from operations $6,566 26,752 (75%) $37,590 $58,394 (36%) Cash used for stock repurchases --- --- 30,000 --- 6/30/06 12/31/05 Change Cash and marketable securities balance $138,844 $132,412 5%

"The second quarter was on track with our expectations," said Kim Blickenstaff, Biosite chairman and chief executive officer. "We are pleased with the continued solid performance and stability in our BNP franchise and with growth in our other cardiovascular products.

"As for our litigation with Roche, we believe the settlement is a reasonable trade-off against the expense and management time that would have been required to prevail over an opponent with far greater resources than ours."

Financial Guidance Update

Commenting on expectations for 2006, Biosite management updated its 2006 total revenue target to $316 million from $318 million, citing a mild softness in its drugs of abuse testing business and revisions to launch timelines for its potential myeloperoxidase (MPO) products. The Company has also updated its Non-GAAP diluted earnings per share target from $3.34 to approximately $3.30 to reflect the net effect of its settlement with Roche. Biosite's GAAP diluted earnings per share target remains at $2.30.

See the Biosite Incorporated Guidance Data table included at the end of this release for additional details regarding the Company's financial guidance data, a reconciliation of Non-GAAP financial guidance to GAAP financial guidance and a description of certain factors that could affect the Company's actual financial results. See also "About Non-GAAP Financial Measures" below.

Research and Development

In the area of research and development, the Company confirmed that it continues to make progress in development of a sepsis panel and has initiated activities aimed at enrolling clinical trial sites to commence a study that is intended to support a future regulatory submission. The Company also continued to advance projects related to the development of a test for protein-C and acute kidney injury panel.

Biosite also presented selected data on its MPO assay earlier today at the American Association of Clinical Chemistry meeting currently underway in Chicago. The data demonstrate that Biosite's assay performs consistently in blood or plasma samples and can detect elevated levels of MPO which are associated with major adverse cardiac events within 30 days of presentation. Biosite filed a 510(k) premarket notification for its MPO assay with the U.S. Food and Drug Administration earlier this year.

Litigation Background

In November 2004, Roche Diagnostics Corporation, together with certain of its affiliates, filed a complaint in the United States District Court, Southern District of Indiana, Indianapolis Division alleging Biosite is infringing two patents, U.S. Patent 5,366,609 and U.S. Patent 4,816,224, owned by Roche and/or its affiliates. Also, in November 2004, Biosite filed a complaint in the United States District Court, Southern District of California alleging that Roche Diagnostics Corporation and Roche Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S. Patent 5,795,725, owned by Biosite. Biosite later amended its complaint to also allege infringement of one additional patent owned by Biosite, U.S. Patent 6,939,678.

About Biosite(R) Incorporated

Biosite Incorporated is a leading bio-medical company commercializing proteomics discoveries for the advancement of medical diagnosis. The Company's products contribute to improvements in medical care by aiding physicians in the diagnosis of critical diseases and health conditions. Biosite's Triage(R) rapid diagnostics are used in more than 50 percent of U.S. hospitals and in more than 60 international markets. Information on Biosite can be found at www.biosite.com.

Investor Conference Call

Biosite will host an investor conference call to discuss financial results and research and development progress. The call will take place today, July 26, 2006, at 1:30 p.m. PDT. A live webcast of the call can be accessed via the Internet at www.biosite.com. The phone number for U.S. and international callers is (617) 614-3529. The conference call code for the live call is 40366532. The call will be archived on the Biosite website for at least 21 days. The phone replay number is (888) 286-8010. International callers, please dial (617) 801-6888. Please reference the conference call code 42427503.

About Non-GAAP Financial Measures

This press release contains financial results and guidance that excludes the effects of FAS 123R, Share-Based Payment, which relates to stock-based compensation, and is not in accordance with U.S. generally accepted accounting principles (GAAP). The Company believes that this non-GAAP financial measure provides meaningful supplemental information to both management and investors that is indicative of the Company's core operating results and facilitates comparison of operating results across reporting periods. The Company uses this non-GAAP measure when evaluating its financial results as well as for internal resource management, planning and forecasting purposes. This non-GAAP measure should not be viewed in isolation from or as a substitute for the Company's financial results or guidance in accordance with GAAP. Assumptions regarding the valuation of stock-based compensation and the timing of events, such as the issuance of new stock-based compensation awards and the realization of tax benefits, may differ from actual results. For more information, please see the guidance table included at the end of this release.

Forward Looking Statements

This press release contains forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Examples of forward-looking statements are financial targets and growth objectives and also include but are not limited to statements that are preceded by, followed by, or that include the words "will"; "believes"; "should"; "intend"; "anticipates"; "plans"; "expects"; "estimates"; or similar statements. Forward-looking statements in this press release include statements regarding the Company's expected financial performance for the 2006 fiscal year, such as anticipated revenues and earnings per share, and the Company's plans to complete the development of a sepsis panel and commence a clinical trial for a potential sepsis product. Risks and uncertainties include risks associated with Biosite's ability to commence and complete clinical trials as currently planned; Biosite's ability to adequately respond to the FDA's questions regarding the pending 510(k) filing for MPO; Biosite's ability to complete the development of a satisfactory Protein C test; Biosite's ability to obtain regulatory approvals and complete other pre-market activities needed to launch new products as currently planned, including the MPO test, a sepsis panel, a panel for acute kidney injury and a Protein C test; Biosite's ability to effectively promote and market acceptance of any new products; the continued growth of the BNP market generally, including the physician office market; and other risks associated with changing market conditions and the effect of competition from companies with greater capital and resources. Other risks that should be considered are detailed in the Company's most recent Annual Report on Form 10-K and other SEC filings. The Company disclaims, however, any intent or obligation to update these forward-looking statements. Copies of the Company's SEC filings are available from the Investor Relations department or from the Company's website.

Biosite(R), Cardio Profiler(R), Triage(R) and New Dimensions in Diagnosis(R) are registered trademarks of Biosite Incorporated.

Biosite Incorporated Unaudited Statements of Income Data - GAAP (in thousands, except per share data and margins) Three months ended Six months ended June 30, June 30, 2006 2005 % Change 2006 2005 % Change Total revenues: Product sales $76,372 $71,898 6% $154,529 $142,394 9% Contract revenue 1,395 1,866 (25%) 2,570 3,216 (20%) Total revenues 77,767 73,764 5% 157,099 145,610 8% Gross margin on product sales 69% 68% 70% 70% Operating expenses: Cost of product sales 23,437 23,015 2% 46,542 43,255 8% Selling, general and administrative 24,836 18,515 34% 48,802 37,072 32% Research and development 13,144 10,192 29% 26,842 20,960 28% License and patent disputes 3,101 343 804% 3,142 552 469% Total operating expenses 64,518 52,065 24% 125,328 101,839 23% Operating income 13,249 21,699 (39%) 31,771 43,771 (27%) Operating income as % of total revenue 17% 29% 20% 30% Interest and other income, net 994 515 93% 2,242 574 291% Income before provision for income taxes 14,243 22,214 (36%) 34,013 44,345 (23%) Provision for income taxes (6,321) (8,242) (23%) (13,534) (16,581) (18%) Net income $7,922 $13,972 (43%) $20,479 $27,764 (26%) Diluted earnings per share $0.43 $0.76 (43%) $1.11 $1.52 (27%) Diluted shares used in calculating per share amounts 18,275 18,343 18,434 18,282 Share-based compensation expense for stock options and the employee stock purchase plan recorded in accordance with FAS 123R for continuing operations: Cost of product sales $781 $-- $1,003 $-- Selling, general and administrative 3,827 -- 7,849 -- Research and development 1,787 -- 3,597 -- Subtotal $6,395 $-- $12,449 $-- Tax benefit (1,778) -- (3,417) -- Total $4,617 $-- $9,032 $-- Biosite Incorporated Unaudited Statements of Income Data - Non-GAAP (in thousands, except per share data and margins) NOTE: Non-GAAP results exclude the impact of FAS 123R, which relates to the expensing of non-cash stock-based compensation Three months ended Six months ended June 30, June 30, 2006 2005 % Change 2006 2005 % Change Total revenues: Product sales $76,372 $71,898 6% $154,529 $142,394 9% Contract revenue 1,395 1,866 (25%) 2,570 3,216 (20%) Total revenues 77,767 73,764 5% 157,099 145,610 8% Gross margin on product sales 70% 68% 71% 70% Operating expenses: Cost of product sales 22,656 23,015 (2%) 45,539 43,255 5% Selling, general and administrative 21,009 18,515 13% 40,953 37,072 10% Research and development 11,357 10,192 11% 23,245 20,960 11% License and patent disputes 3,101 343 804% 3,142 552 469% Total operating expenses 58,123 52,065 12% 112,879 101,839 11% Operating income 19,644 21,699 (9%) 44,220 43,771 1% Operating income as % of total revenue 25% 29% 28% 30% Interest and other income, net 994 515 93% 2,242 574 291% Income before provision for income taxes 20,638 22,214 (7%) 46,462 44,345 5% Provision for income taxes (8,099) (8,242) (2%) (16,951) (16,581) 2% Net income $12,539 $13,972 (10%) $29,511 $27,764 6% Diluted earnings per share $0.70 $0.76 (8%) $1.62 $1.52 7% Diluted shares used in calculating per share amounts 18,023 18,343 18,231 18,282 Biosite Incorporated

Unaudited Reconciliation of Consolidated Statements of Income Data - Non-GAAP

to Consolidated Statements of Income Data - GAAP (in thousands, except per share data and margins) Three months ended Three months ended June 30, 2006 June 30, 2005 Non-GAAP Adjmts GAAP Non-GAAP Adjmts GAAP Total revenues: Product sales $76,372 $-- $76,372 $71,898 $-- $71,898 Contract revenue 1,395 -- 1,395 1,866 -- 1,866 Total revenues 77,767 -- 77,767 73,764 -- 73,764 Gross margin on product sales 70% (1%) 69% 68% 0% 68% Operating expenses: Cost of product sales 22,656 781 [a] 23,437 23,015 -- 23,015 Selling, general and administrative 21,009 3,827 [a] 24,836 18,515 -- 18,515 Research and development 11,357 1,787 [a] 13,144 10,192 -- 10,192 License and patent disputes 3,101 -- 3,101 343 -- 343 Total operating expenses 58,123 6,395 64,518 52,065 -- 52,065 Operating income 19,644 (6,395) 13,249 21,699 -- 21,699 Operating income as % of total revenue 25% (8%) 17% 29% 0% 29% Interest and other income, net 994 -- 994 515 -- 515 Income before provision for income taxes 20,638 (6,395) 14,243 22,214 -- 22,214 Provision for income taxes (8,099) 1,778 [a] (6,321) (8,242) -- (8,242) Net income $12,539 $(4,617) $7,922 $13,972 $-- $13,972 Diluted earnings per share $0.70 $(0.27) $0.43 $0.76 $-- $0.76 Diluted shares used in calculating per share amounts 18,023 252 18,275 18,343 -- 18,343 [a] - Adjustments to exclude from Non-GAAP financial measures the impact of FAS 123R, which relates to the expensing of non-cash stock-based compensation, beginning the first quarter of 2006 Biosite Incorporated

Unaudited Reconciliation of Consolidated Statements of Income Data - Non-GAAP

to Consolidated Statements of Income Data - GAAP (in thousands, except per share data and margins) Six months ended Six months ended June 30, 2006 June 30, 2005 Non-GAAP Adjmts GAAP Non-GAAP Adjmts GAAP Total revenues: Product sales $154,529 $-- $154,529 $142,394 $-- $142,394 Contract revenue 2,570 -- 2,570 3,216 -- 3,216 Total revenues 157,099 -- 157,099 145,610 -- 145,610 Gross margin on product sales 71% (1%) 70% 70% 0% 70% Operating expenses: Cost of product sales 45,539 1,003 [a] 46,542 43,255 -- 43,255 Selling, general and administrative 40,953 7,849 [a] 48,802 37,072 -- 37,072 Research and development 23,245 3,597 [a] 26,842 20,960 -- 20,960 License and patent disputes 3,142 -- 3,142 552 -- 552 Total operating expenses 112,879 12,449 125,328 101,839 -- 101,839 Operating income 44,220 (12,449) 31,771 43,771 -- 43,771 Operating income as % of total revenue 28% (8%) 20% 30% 0% 30% Interest and other income, net 2,242 -- 2,242 574 -- 574 Income before provision for income taxes 46,462 (12,449) 34,013 44,345 -- 44,345 Provision for income taxes (16,951) 3,417 [a] (13,534) (16,581) -- (16,581) Net income $29,511 $(9,032) $20,479 $27,764 $-- $27,764 Diluted earnings per share $1.62 $(0.51) $1.11 $1.52 $-- $1.52 Diluted shares used in calculating per share amounts 18,231 203 18,434 18,282 -- 18,282 [a] - Adjustments to exclude from Non-GAAP financial measures the impact of FAS 123R, which relates to the expensing of non-cash stock-based compensation, beginning the first quarter of 2006 Biosite Incorporated Selected Product Data (in thousands, except margins and %'s) Sales by Product: Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Triage(R) Drugs of Abuse Products $10,283 $11,341 $12,408 $11,018 $11,547 $10,464 Triage Cardiac Panel l5,985 6,439 7,142 6,629 6,616 7,188 Triage BNP Tests 49,771 49,058 43,892 46,893 52,564 50,678 Triage Profiler Products 1,946 2,226 2,852 3,465 4,036 4,598 Triage D-Dimer Test 131 481 757 1,489 1,417 1,450 Triage Parasite Panel 255 283 355 269 286 337 Triage C. difficile Panel 1,349 1,377 942 988 1,029 1,088 Triage Meter 776 693 538 724 625 539 Triage Stroke Panel (EU) -- -- 2 15 37 30 Total Product Sales $70,496 $71,898 $68,888 $71,490 $78,157 $76,372 International Sales: Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 International Sales as % of Product Sales 13% 12% 12% 13% 14% 15% BNP International Sales as % of BNP Total Sales 10% 9% 9% 10% 11% 11% Margin by Product Type (a), (b): Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Triage Drugs of Abuse Product Line 82% 78% 82% 81% 79% 77% Triage Cardiovascular Product Line (incl. BNP) 72% 69% 69% 70% 71% 70% (a) These margins do not include all products. The Triage Meter, Triage Micro Product Line and Triage Stroke Panel are not included. (b) Includes the impact of FAS 123R, which relates to the expensing of non-cash stock-based compensation, beginning the first quarter of 2006 Biosite Incorporated Unaudited Balance Sheet Data - GAAP (in thousands) June 30, 2006 December 31, 2005 Unaudited Assets Cash, cash equivalents & marketable securities $138,844 $132,412 Accounts receivable 35,589 30,303 Inventories 32,097 32,627 Other current assets 8,602 9,422 Total current assets 215,132 204,764 Property, equipment and leasehold improvements, net 152,483 151,018 Patents and license rights, net 4,941 4,764 Other assets 10,994 7,380 Total assets $383,550 $367,926 Liabilities and Stockholders' Equity Current liabilities $39,091 $39,104 Long-term liabilities 10,800 13,457 Stockholders' equity 333,659 315,365 Total liabilities and stockholders' equity $383,550 $367,926 Biosite Incorporated Guidance Data (in thousands, except per share data, margins and %'s) The financial guidance provided below is an estimate based on information available as of July 26, 2006. The Company's future performance and financial results are subject to risks and uncertainties, and actual results could differ materially from the guidance set forth below. Some of the factors that could affect the Company's actual financial results are stated above in the section entitled "Forward Looking Statements" and in the Company's filings with the SEC. The Company assumes no obligation to update the guidance set forth below. Three months ended September 30, 2006 Non-GAAP Estimate Adjustments (a) GAAP Estimate BNP product sales $49,500 -- $49,500 Total product sales $76,000 -- $76,000 Total revenues $77,000 -- $77,000 International product sales % of Total product sales 15.0% -- 15.0% Gross margin on product sales 69.5% (1.0%) (b) 68.5% Operating expenses (excl. Cost of sales) % of Revenue 41.0% 7.0% (b) 48.0% Operating income as % of total revenues 29.0% (8.0%) (b) 21.0% Diluted earnings per share $0.80 $(0.26) (b) $0.54 Income tax rate 38.4% 4.0% (b) 42.4% Cash flow from operations $20,000 -- $20,000 Year ended December 31, 2006 Non-GAAP Estimate Adjustments (a) GAAP Estimate BNP product sales $203,000 -- $203,000 Total product sales $311,000 -- $311,000 Total revenues $316,000 -- $316,000 International sales % of total sales 15.0% -- 15.0% Gross margin on product sales 70.0% (1.0%) (b) 69.0% Operating expenses (excl. Cost of sales) % of Revenue 41.5% 7.0% (b) 48.5% Operating income as % of total revenues 29.0% (8.0%) (b) 21.0% Diluted earnings per share $3.30 $(1.00) (b) $2.30 Income tax rate 37.5% 3.5% (b) 41.0% Cash flow from operations $80,000 -- $80,000 (a) These adjustments reconcile the Company's non-GAAP financial guidance to its GAAP financial guidance for the next quarter and full year 2006. See the section entitled "About Non-GAAP Financial Measures" above. (b) Reflects the estimated non-cash compensation expense attributable to stock-based compensation awards including stock options and employee stock purchase plan shares and their estimated impact on income taxes and diluted shares used in calculating EPS. This amount reflects the total estimated expense from the application of FAS 123R, which the Company adopted in the first quarter of 2006.

Biosite Incorporated

CONTACT: Nadine Padilla, VP, Corporate & Investor Relations of BiositeIncorporated, +1-858-805-2820, npadilla@biosite.com

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