SAN DIEGO, Oct. 30 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated today reported strong financial results for the third quarter of 2007 and raised its full-year guidance for earnings per share (EPS) and total revenues.
“Gen-Probe posted very good financial results in the third quarter of 2007, as both our clinical diagnostics and blood screening businesses again established new sales records,” said Henry L. Nordhoff, the Company’s chairman, president and chief executive officer.
In the third quarter of 2007, net income was $17.3 million, compared to $14.8 million in the prior year period, an increase of 17%. EPS in the third quarter of 2007 were $0.31, compared to $0.28 in the prior year period, an increase of 11%. In this press release, all per share amounts are calculated on a fully diluted basis, and all results are presented on a GAAP basis.
Product sales in the third quarter of 2007 were $97.4 million, compared to $83.5 million in the prior year period, an increase of 17%. Total revenues for the third quarter of 2007 were $101.7 million, compared to $92.2 million in the prior year period, an increase of 10%.
For the first nine months of 2007, net income was $65.7 million, compared to $42.4 million in the prior year period, an increase of 55%. EPS in the first nine months of 2007 were $1.21, compared to $0.80 in the prior year period, an increase of 51%. Product sales for the first nine months of 2007 were $278.5 million, compared to $239.8 million in the prior year period, an increase of 16%. Total revenues for the first nine months of 2007 were $304.1 million, compared to $263.7 million in the prior year period, an increase of 15%.
Gen-Probe’s net income and EPS in the third quarter of 2007 benefited from a reduction in income tax expense of approximately $0.9 million ($0.02 per share) associated with the completion of the Company’s 2006 federal tax return. In addition, the Company’s net income and EPS for the first nine months of 2007 benefited from a reduction in income tax expense of approximately $8.7 million ($0.16 per share), which was recorded in the second quarter. As previously disclosed, this benefit resulted from the completion in April of an Internal Revenue Service audit of the Company’s 2003 and 2004 federal income tax returns. Based on the results of this audit, the Company released reserves primarily associated with federal research and development tax credits generated from 1999 to 2004.
Detailed Results
Gen-Probe’s clinical diagnostics sales in the third 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 continued to grow strongly, driven by market share gains on both the Company’s semi-automated instrument platform and on the high-throughput, fully automated TIGRIS(R) system. Clinical diagnostics sales in the third quarter also benefited from increased sales of instrumentation to current and new customers. Revenue from the PACE(R) product line, the Company’s non-amplified tests for Chlamydia and gonorrhea, declined in the third quarter compared to the prior year period, in line with Gen-Probe’s expectations.
In blood screening, product sales in the third quarter of 2007 benefited from continued international expansion, and from higher pricing associated with U.S. commercial sales of the PROCLEIX(R) WNV (West Nile virus) assay on the TIGRIS system. Gen-Probe’s blood screening products are marketed worldwide by Chiron, a business unit of Novartis Vaccines and Diagnostics. Gen-Probe’s blood screening sales in the third quarter of 2007 also benefited from favorable assay ordering patterns, primarily associated with the Company’s WNV assay, and from increased sales of TIGRIS instruments to Novartis.
Collaborative research revenues in the third quarter of 2007 were $3.1 million, compared to $1.5 million in the prior year period, an increase of 107% that resulted primarily from higher reimbursement from Novartis of shared expenses in the companies’ blood screening collaboration. For the first nine months of 2007, collaborative research revenues were $11.2 million, compared to $14.7 million in the prior year period, a decrease of 24% that resulted primarily from 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 2006.
Royalty and license revenues for the third quarter of 2007 were $1.2 million, compared to $7.3 million in the prior year period. In the third quarter of 2006, royalty and license revenues were high due to $5.0 million of revenue associated with the first payment arising from the successful settlement of Gen-Probe’s patent infringement claims against Bayer HealthCare (now Siemens Medical Solutions Diagnostics). Gen-Probe also earned $1.0 million of license revenue in the prior year period under a 2004 agreement with Tosoh Corporation. For the first nine months of 2007, royalty and license revenues were $14.4 million, compared to $9.2 million in the prior year period. This 57% increase resulted primarily from $10.3 million of royalty revenue that was recorded in the first quarter of 2007 associated with the second payment arising from the Bayer patent litigation.
Gross margin on product sales in the third quarter of 2007 was 67.3%, compared to 70.9% in the prior year period. This decrease resulted primarily from an unfavorable product sales mix, namely increased sales of low-margin instrumentation to clinical diagnostics and blood screening customers. For the first nine months of 2007, gross margin on product sales was 67.3%, compared to 68.2% in the prior year period.
Research and development (R&D) expenses in the third quarter of 2007 were $27.6 million, compared to $24.2 million in the prior year period, an increase of 14%. This increase, which was expected, resulted primarily from the purchase of human papillomavirus (HPV) oligonucleotides from Roche. For the first nine months of 2007, R&D expenses were $72.8 million, compared to $63.8 million in the prior year period, an increase of 14%.
Marketing and sales expenses in the third quarter of 2007 were $9.7 million, compared to $9.5 million in the prior year period, an increase of 2%. For the first nine months of 2007, marketing and sales expenses were $28.6 million, compared to $27.5 million in the prior year period, an increase of 4%.
General and administrative (G&A) expenses in the third quarter of 2007 were $11.4 million, compared to $12.7 million in the prior year period, a decrease of 10%. In the third quarter of 2006, the Company paid its outside litigation counsel $2.0 million in connection with the Company’s successful settlement of the Bayer patent litigation. For the first nine months of 2007, G&A expenses were $34.7 million, compared to $34.1 million in the prior year period, an increase of 2%.
Gen-Probe continues to have a strong balance sheet. As of September 30, 2007, the Company had $395.1 million of cash, cash equivalents and short-term investments, and no debt. In the first nine months of 2007, Gen-Probe generated net cash of $71.2 million from its operating activities, higher than the Company’s year-to-date net income of $65.7 million.
Updated 2007 Financial Guidance
“Based on our strong performance in the third quarter, we are raising our full-year 2007 revenue and EPS guidance,” said Herm Rosenman, the Company’s senior vice president of finance and chief financial officer.
Webcast Conference Call
A live webcast of Gen-Probe’s third 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) 947-6450 for domestic callers and (203) 369-3539 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 more than 24 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 “Updated 2007 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 2007 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 and PROGENSA PCA3 assay, 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 recent 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//
