SAN DIEGO, April 28, 2011/PRNewswire/ -- Gen-Probe Incorporated (NASDAQ: GPRO) today reported financial results for the first quarter of 2011, highlighted by record total revenues of $143.0 million and non-GAAP earnings per share (EPS) of $0.54, 13% higher than in the prior year period.
“Gen-Probe posted solid financial results in the first quarter of 2011, including all-time highs in product sales and total revenues, based on the acquisition of GTI and good growth from our PRODESSE influenza and APTIMA women’s health products,” said Carl Hull, the Company’s president and chief executive officer. “In addition, all our major pipeline initiatives remain on track, with an important new product cycle just beginning.”
Key financial results for the first quarter of 2011 were ($ in millions, except EPS):
Non-GAAP | GAAP | |||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||
Product sales | $138.1 | $130.6 | +6% | $138.1 | $130.6 | +6% | ||
Total revenues | $143.0 | $135.4 | +6% | $143.0 | $135.4 | +6% | ||
Operating profit | $38.9 | $33.7 | +15% | $34.7 | $31.4 | +11% | ||
Net income | $26.6 | $24.0 | +11% | $23.3 | $24.2 | -4% | ||
EPS | $0.54 | $0.48 | +13% | $0.48 | $0.48 | 0% | ||
Revenue Detail
Clinical diagnostics product sales established a new record in the first quarter of 2011. Growth of 15% was driven by sales of GTI products, which were not part of Gen-Probe in the prior year period, by the PRODESSE influenza franchise, and by the APTIMA Combo 2® assay for detecting Chlamydia and gonorrhea. Foreign currency fluctuations had a minimal effect on clinical diagnostics sales compared to the prior year period.
In blood screening, sales declined compared to the first quarter of 2010, as expected, due mainly to lower sales of instruments to Novartis, the Company’s blood screening collaborator. Foreign currency fluctuations reduced blood screening sales by an estimated $0.3 million, or less than 1%, compared to the prior year period.
Sales of research products and services in the first quarter of 2011 were $3.1 million, down 24% compared to the prior year period due to continued weakness in pharmaceutical outsourcing.
First quarter product sales were ($ in millions):
Three Months Ended March 31, | Change | |||||
2011 | 2010 | As | Constant | |||
Clinical Diagnostics | $88.3 | $76.9 | +15% | +15% | ||
Blood Screening | $46.7 | $49.6 | -6% | -5% | ||
Research Products and Services | $3.1 | $4.1 | -24% | -25% | ||
Total Product Sales | $138.1 | $130.6 | +6% | +6% | ||
Collaborative research revenues in the first quarter of 2011 were $3.6 million, compared to $3.3 million in the prior year period, an increase of 9% that resulted primarily from increased funding from Novartis associated with the development of the fully automated PANTHER instrument and the PROCLEIX® ULTRIO® Plus assay for the blood screening market.
Royalty and license revenues in the first quarter of 2011 were $1.4 million, compared to $1.6 million in the prior year period, a decrease of 13% that resulted from the combined effect of several small items.
GAAP Income Statement Details
Gross margin on product sales was 69.6% in the first quarter of 2011, compared to 67.3% in the prior year period. This increase resulted mainly from a favorable product sales mix, namely higher sales of PRODESSE and APTIMA products, and lower sales of instrumentation.
Acquisition-related amortization expenses were $2.8 million in the first quarter of 2011, compared to $2.2 million in the prior year period, an increase of 27% that resulted mainly from the acquisition of GTI in December of 2010.
Research and development (R&D) expenses were $29.0 million in the first quarter of 2011, compared to $29.7 million in the prior year period, a decrease of 2% that resulted primarily from lower clinical trial expenses.
Marketing and sales expenses were $16.5 million in the first quarter of 2011, compared to $14.8 million in the prior year period, an increase of 12% that resulted primarily from the addition of GTI’s cost structure, and European sales force expansion and market development efforts.
General and administrative (G&A) expenses were $18.2 million in the first quarter of 2011, compared to $14.7 million in the prior year period, an increase of 24% that resulted primarily from the addition of GTI’s cost structure and costs associated with the Company’s patent infringement litigation against Becton, Dickinson.
Total other income was $0.4 million in the first quarter of 2011, compared to $4.9 million in the prior year period. This significant decrease resulted primarily from the absence of a non-cash gain related to a change in the fair value of contingent consideration, lower net realized gains on sales of marketable securities, lower yields on the Company’s municipal bond portfolio, and lower investment balances due to cash used for share repurchases and the acquisition of GTI.
Income tax expense was $11.8 million in the first quarter of 2011, corresponding to a tax rate of 34%.
Non-GAAP Income Statement Details
Excluding $0.1 million of acquisition-related depreciation expense, gross margin on product sales was 69.7% in the first quarter of 2011, compared to 67.4% in the prior year period.
Excluding transaction-related and restructuring costs, G&A expenses were $16.8 million in the first quarter of 2011, compared to $14.7 million in the prior year period.
Total other income was $0.4 million in the first quarter of 2011, compared to $3.2 million in the prior year period. The prior year amount excludes the non-cash gain related to a change in the fair value of contingent consideration.
Income tax expense was $12.8 million in the first quarter of 2011, corresponding to a tax rate of 32%.
Cash Flows and Balance Sheet
In the first quarter of 2011, Gen-Probe generated net cash of $40.1 million from operating activities, substantially higher than GAAP net income of $23.3 million. The Company spent $10.8 million on property, plant and equipment in the quarter, leading to free cash flow of $29.3 million. The Company repurchased approximately 756,000 shares of its stock in the first quarter for $48.0 million.
Gen-Probe continues to have a strong balance sheet. As of March 31, 2011, the Company had $491.3 million of cash, cash equivalents and marketable securities, and $250 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 0.3%.
2011 Financial Guidance
Gen-Probe is reiterating its 2011 financial guidance, which was introduced on February 15.
“We continue to anticipate that 2011 will be a good year financially for Gen-Probe,” said Herm Rosenman, the Company’s senior vice president, finance, and chief financial officer. “We forecast continued, high-single-digit growth in product sales. We also expect improving gross and operating margins to drive solid earnings growth, despite increased legal expenses and substantially lower non-operating income.”
Gen-Probe’s 2011 financial guidance is provided in the table below:
Non-GAAP | GAAP | ||
Total revenues | $570 to $595 million | $570 to $595 million | |
Product gross margins | 68% to 69.5% | 68% to 69.5% | |
Acquisition-related amortization and | N/A | $13 to 14 million | |
Operating margin | 27% to 29% | 25% to 27% | |
Tax rate | 32% to 33% | 32% to 33% | |
Diluted shares | 48 to 49 million | 48 to 49 million | |
EPS | $2.28 to $2.40 | $2.06 to $2.20 | |
Webcast Conference Call
A live webcast of Gen-Probe’s first 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 800-839-5573 (domestic) or 402-220-2075 (international).
About Gen-Probe
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 www.gen-probe.com.
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 first quarter of 2011 and its 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 margin, 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.
Trademarks
APTIMA, APTIMA COMBO 2, TIGRIS and PANTHER 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 “2011 Financial Guidance,” are not historical facts and are forward-looking statements. These statements are often,
