SAN DIEGO, Feb. 13, 2012/PRNewswire/ -- Gen-Probe Incorporated (NASDAQ: GPRO) today reported financial results for the fourth quarter of 2011. Total revenues in the quarter grew 16%, to a new record of $158.2 million, while non-GAAP earnings per share (EPS) increased 18%, to a new high of $0.72.
“Gen-Probe finished 2011 strong, as blood screening sales rebounded in the fourth quarter while clinical diagnostics revenues continued their solid growth,” said Carl Hull, the Company’s chairman and chief executive officer. “We enter 2012 with excellent momentum based on several new product launches that are off to good starts.”
Key financial results for the fourth quarter of 2011 were ($ in millions, except EPS): | ||||||||
Non-GAAP | GAAP | |||||||
2011 | 2010 | Change | 2011 | 2010 | Change | |||
Total revenues | $158.2 | $136.7 | +16% | $158.2 | $136.7 | +16% | ||
Product sales | $155.2 | $131.1 | +18% | $155.2 | $131.1 | +18% | ||
Operating profit | $45.8 | $40.1 | +14% | $29.4 | $36.8 | -20% | ||
Net income | $33.7 | $29.4 | +15% | $19.9 | $27.2 | -27% | ||
EPS | $0.72 | $0.61 | +18% | $0.42 | $0.56 | -25% | ||
Gen-Probe’s GAAP results for the fourth quarter of 2011 were negatively affected by impairment charges of $12.7 million related to acquired goodwill and intangible assets.
Revenue Detail
In the fourth quarter of 2011, clinical diagnostics product sales grew by 13% 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 sales from the former GTI Diagnostics (GTI), which the Company acquired in December of 2010. Foreign currency fluctuations reduced clinical diagnostics sales by an estimated $0.1 million compared to the prior year period.
In blood screening, fourth-quarter sales increased by 30% compared to the prior year period, as expected, mainly due to greater shipments of assays and TIGRIS® instruments to Novartis, the Company’s blood screening collaboration partner. Foreign currency fluctuations increased blood screening sales by an estimated $0.2 million compared to the prior year period.
Sales of research products and services in the fourth quarter of 2011 were $2.4 million, down 29% compared to the prior year period. Foreign currency fluctuations had an immaterial effect on sales of research products and services compared to the prior year period.
Fourth quarter product sales were ($ in millions): | ||||||
Three Months Ended Dec. 31, | Change | |||||
2011 | 2010 | As | Constant | |||
Clinical Diagnostics | $90.6 | $80.1 | +13% | +13% | ||
Blood Screening | $62.1 | $47.6 | +30% | +30% | ||
Research Products and Services | $2.4 | $3.4 | -29% | -29% | ||
Total Product Sales | $155.2 | $131.1 | +18% | +18% | ||
Collaborative research revenues in the fourth quarter of 2011 were $1.4 million, compared to $3.7 million in the prior year period, a decrease of 62% 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. The PANTHER system remains on track to be launched into international blood screening markets this year.
Royalty and license revenues in the fourth quarter of 2011 were $1.6 million, compared to $1.9 million in the prior year period, a decrease of 16%.
GAAP Income Statement Details
Gross margin on product sales was 66.7% in the fourth quarter of 2011, compared to 69.4% in the prior year period. This decrease resulted mainly from higher sales of low-margin instrumentation to Novartis, which are generally a precursor to future assay sales.
Acquisition-related amortization expenses were $2.8 million in the fourth 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.
Research and development (R&D) expenses were $28.2 million in the fourth quarter of 2011, compared to $26.9 million in the prior year period, an increase of 5% that resulted primarily from the addition of GTI’s R&D programs.
Marketing and sales expenses were $17.1 million in the fourth quarter of 2011, compared to $15.0 million in the prior year period, an increase of 14% that resulted primarily from the addition of GTI’s cost structure and ongoing European commercial expansion.
General and administrative (G&A) expenses were $16.2 million in the fourth quarter of 2011, compared to $15.6 million in the prior year period, an increase of 4% that resulted mainly from the addition of GTI’s cost structure.
Goodwill and asset impairment charges totaled $12.7 million in the fourth quarter of 2011. Of this charge, $8.7 million related to goodwill associated with the Company’s research products and services business, which was acquired as part of the Tepnel acquisition in April of 2009, and $4.0 million related to in-process research and development intangible assets of GTI.
Total other income, net, was $0.4 million in the fourth quarter of 2011, compared to total other income, net, of $1.2 million in the prior year period, a decrease of 67%. This decrease resulted primarily from a non-cash gain in the prior year period and unfavorable exchange rate effects.
Income tax expense was $10.0 million in the fourth quarter of 2011, corresponding to an effective tax rate of 33%.
Non-GAAP Income Statement Details
In the fourth quarter of 2011, non-GAAP gross margin on product sales, R&D expenses, marketing and sales expenses, and total other income, net, were similar to the corresponding GAAP results.
Excluding transaction-related expenses and restructuring costs, non-GAAP G&A expenses were $15.6 million in the fourth quarter of 2011, compared to $14.7 million in the prior year period, an increase of 6%.
Non-GAAP income tax expense was $12.4 million in the fourth quarter of 2011, corresponding to an effective tax rate of 27%. Income tax expense was less than expected in the fourth quarter due to the utilization of foreign losses and higher ex-US sales.
Cash Flows and Balance Sheet
In the fourth quarter of 2011, Gen-Probe generated net cash of $53.4 million from operating activities, and spent $7.2 million on property, plant and equipment, leading to free cash flow of $46.2 million, a new quarterly record.
Gen-Probe continues to maintain a strong balance sheet. As of December 31, 2011, the Company had $368.0 million of cash, cash equivalents and marketable securities, and $248.0 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%.
During the fourth quarter of 2011, Gen-Probe repurchased 1.7 million shares of Company stock for $100 million, corresponding to an average purchase price of $58.83 per share. This completed the $100 million repurchase plan that was announced in November of 2011.
2012 Financial Guidance
“We anticipate returning to low double-digit organic revenue growth in 2012 based on multiple new product launches that are still in their early stages,” said Herm Rosenman, Gen-Probe’s senior vice president, finance, and chief financial officer. “We forecast a similar rate of bottom-line growth in 2012 as we invest in these launches and in a series of R&D projects that extend our lead in assay and instrument performance. We believe that these investments position us well for solid, sustainable growth over the next several years.”
