SAN DIEGO, Feb. 13 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated today reported strong financial results for the fourth quarter and full year ended December 31, 2007, including quarterly earnings per share (EPS) of $0.37.
“Gen-Probe once again posted good financial results in the fourth quarter of 2007, led by the continued growth of our clinical diagnostics business,” said Henry L. Nordhoff, the Company’s chairman and chief executive officer. “In addition, our fourth quarter performance completed an excellent 2007 in which strong operating earnings and tax benefits combined to drive EPS up 41%.”
In the fourth quarter of 2007, product sales were $92.4 million, compared to $85.5 million in the prior year period, an increase of 8%. Total revenues for the fourth quarter of 2007 were $98.9 million, compared to $91.1 million in the prior year period, an increase of 9%. Net income in the fourth quarter of 2007 was $20.4 million, compared to $17.1 million in the prior year period, an increase of 19%. EPS in the fourth quarter of 2007 were $0.37, compared to $0.32 in the prior year period, an increase of 16%. In this press release, all per share amounts are calculated on a fully diluted basis, and all results are presented in US GAAP.
For the full year 2007, product sales were $370.9 million, compared to $325.3 million in the prior year, an increase of 14%. Total revenues for 2007 were $403.0 million, compared to $354.8 million in the prior year, an increase of 14%. Net income for 2007 was $86.1 million, compared to $59.5 million in the prior year, an increase of 45%. EPS in 2007 were $1.58, compared to $1.12 in the prior year, an increase of 41%.
Gen-Probe’s net income and EPS in the fourth quarter of 2007 benefited from an income tax rate of approximately 22% that resulted primarily from the completion of an audit of the Company’s 2003 and 2004 California state income tax returns and additional research and development credits earned in 2007. Net income and EPS for the full year 2007 benefited from an income tax rate of approximately 23% that resulted primarily from the items noted above and the completion of an audit of the Company’s 2003 and 2004 federal income tax returns (benefit recorded in the second quarter).
Detailed Results
Gen-Probe’s clinical diagnostics sales in the fourth quarter of 2007 were again led by the APTIMA Combo 2(R) assay, an amplified nucleic acid test (NAT) for simultaneously detecting Chlamydia trachomatis (CT) and Neisseria gonorrhoeae (GC). Sales of this assay grew based on market share gains on both the Company’s semi-automated instrument platform and on the high-throughput, fully automated TIGRIS(R) system. Revenue from the PACE(R) product line, the Company’s non-amplified tests for Chlamydia and gonorrhea, declined in the fourth quarter compared to the prior year period, in line with Gen-Probe’s expectations.
In blood screening, product sales in the fourth quarter of 2007 benefited from continued international expansion, and from higher pricing associated with US commercial sales of the PROCLEIX(R) WNV (West Nile virus) assay on the TIGRIS system. Gen-Probe’s blood screening sales in the fourth quarter of 2007 were negatively affected by the timing of shipments. The Company’s blood screening products are marketed worldwide by Chiron, a business unit of Novartis Vaccines and Diagnostics.
Collaborative research revenues in the fourth quarter of 2007 were $5.4 million, compared to $1.2 million in the prior year period. This increase resulted from several factors, including:
For the full year 2007, collaborative research revenues were $16.6 million, compared to $15.9 million in the prior year, an increase of 4% that resulted primarily from the factors described above. These increases were partially offset by the reclassification of revenue associated with investigational use of the PROCLEIX WNV assay. Beginning in the third quarter of 2006, the Company began recording all revenue associated with this assay in product sales, rather than in collaborative research revenues. The assay was approved by the US Food and Drug Administration (FDA) for use on Gen-Probe’s enhanced semi-automated instrument system (eSAS) in December of 2005, and for use on the TIGRIS system in March of 2007.
Royalty and license revenues for the fourth quarter of 2007 were $1.1 million, compared to $4.4 million in the prior year period, a decrease of 75%. This decrease resulted primarily from the final installment of license revenue under the Company’s collaboration with bioMerieux, which was recognized in the prior year period. For the full year 2007, royalty and license revenues were $15.5 million, compared to $13.5 million in the prior year, an increase of 15% that resulted primarily from $10.3 million of royalty revenue that was recorded in the first quarter of 2007 associated with the successful settlement of Gen-Probe’s patent infringement claims against Bayer HealthCare (now Siemens Healthcare Diagnostics).
Gross margin on product sales in the fourth quarter of 2007 was 69.2%, compared to 67.6% in the prior year period. This increase resulted primarily from reduced sales of lower-margin instrumentation compared to the prior year period. For the full year 2007, gross margin on product sales was 67.7%, compared to 68.1% in the prior year.
Research and development (R&D) expenses in the fourth quarter of 2007 were $24.3 million, compared to $20.7 million in the prior year period, an increase of 17%. This increase resulted primarily from increased labor costs and the timing of major R&D projects. These projects include assays for human papillomavirus (HPV) and healthcare-associated infections, a fully automated instrument system for low- and mid-volume laboratory customers, and the post-marketing studies for the PROCLEIX ULTRIO(R) assay in the United States. For the full year 2007, R&D expenses were $97.1 million, compared to $84.5 million in the prior year, an increase of 15% that was due primarily to the factors described above.
Marketing and sales expenses in the fourth quarter of 2007 were $11.3 million, compared to $9.6 million in the prior year period, an increase of 18%. This increase resulted primarily from European market development efforts related to the Company’s investigational APTIMA HPV assay. For the full year 2007, marketing and sales expenses were $39.9 million, compared to $37.1 million in the prior year, an increase of 8% that resulted primarily from European market development efforts.
General and administrative (G&A) expenses in the fourth quarter of 2007 were $12.3 million, compared to $10.8 million in the prior year period, an increase of 14% that resulted primarily from increased compensation costs. For the full year 2007, G&A expenses were $47.0 million, compared to $44.9 million in the prior year, an increase of 5%.
Gen-Probe continues to have a strong balance sheet. As of December 31, 2007, the Company had $433.5 million of cash, cash equivalents and short-term investments, and no debt. In 2007, Gen-Probe generated net cash of $109.6 million from its operating activities, higher than the Company’s net income of $86.1 million.
Initial 2008 Financial Guidance
“We expect 2008 to be another year of double-digit revenue growth and high profitability for Gen-Probe, even as we continue to invest in attractive R&D projects to drive our long-term prospects,” said Herm Rosenman, the Company’s senior vice president of finance and chief financial officer. “Although we expect our tax rate to increase to a normalized level in 2008, our guidance anticipates pre-tax income growing at its fastest pace since 2004.”
Webcast Conference Call
A live webcast of Gen-Probe’s fourth quarter 2007 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. The replay number is (800) 308-7858 for domestic callers and (402) 220-3841 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) that are used primarily to diagnose human diseases and screen donated human blood. Gen-Probe has 25 years of NAT expertise, and received the 2004 National Medal of Technology, America’s highest honor for technological innovation, for developing NAT assays for blood screening. Gen-Probe is headquartered in San Diego and employs approximately 1,000 people. For more information, go to http://www.gen-probe.com.
Trademarks
APTIMA, APTIMA COMBO 2, PACE and TIGRIS are trademarks of Gen-Probe. ULTRIO and PROCLEIX are trademarks of Novartis. All other trademarks are the property of their owners.
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 “Initial 2008 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, updated financial guidance, regulatory approvals, future milestone payments, 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. Some of these risks, uncertainties and assumptions include but are not limited to: (i) the risk that we may not achieve our expected 2008 growth, revenue, earnings or other financial targets, (ii) the risk that we may not earn or receive milestone payments from our collaborators, including Novartis and 3M, (iii) the possibility that the market for the sale of our new products, such as our TIGRIS system, APTIMA Combo 2 assay, PROCLEIX ULTRIO assay, PROGENSA PCA3 assay and industrial products, may not develop as expected, (iv) the enhancement of existing products and the development of new products, including products, if any, to be developed under our industrial collaborations, may not proceed as planned, (v) the risk that new products or indications, such as the HBV screening claim for our PROCLEIX ULTRIO assay in the United States, may not be approved by regulatory authorities or commercially available in the time frame we anticipate, or at all, (vi) we may not be able to compete effectively, (vii) we may not be able to maintain our current corporate collaborations and enter into new corporate collaborations or customer contracts, (viii) we are dependent on Novartis, Siemens (as assignee of Bayer) and other third parties for the distribution of some of our products, (ix) we are dependent 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 of our products, (xi) changes in government regulation affecting our diagnostic products could harm our sales and increase our development costs, (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. 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 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, Sr. director, investor relations and corporate
communications of Gen-Probe Incorporated, +1-858-410-8673
Web site: http://www.gen-probe.com/
