SAN DIEGO, Oct. 30 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated today reported strong financial results for the third quarter of 2008 and raised its full-year guidance for earnings per share (EPS).
"Gen-Probe posted very good financial results in the third quarter of 2008, driven by solid growth in both our clinical diagnostics and blood screening businesses and substantially improved gross margins," said Henry L. Nordhoff, the Company's chairman and chief executive officer.
In the third quarter of 2008, product sales were $108.3 million, compared to $97.4 million in the prior year period, an increase of 11%. Total revenues for the third quarter of 2008 were $121.2 million, compared to $101.7 million in the prior year period, an increase of 19%. Net income was $29.1 million ($0.53 per share) in the third quarter of 2008, compared to $17.3 million ($0.31 per share) in the prior year period, an increase of 68% (71% per share).
For the first nine months of 2008, product sales were $323.5 million, compared to $278.5 million in the prior year period, an increase of 16%. Total revenues for the first nine months of 2008 were $363.6 million, compared to $304.1 million in the prior year period, an increase of 20%. Net income was $85.8 million ($1.56 per share) in the first nine months of 2008, compared to $65.7 million ($1.21 per share) in the prior year period, an increase of 31% (29% per share).
In this press release, all per share amounts are calculated on a fully diluted basis, and all results are presented on a U.S. GAAP basis. Some totals may not foot due to rounding.
Detailed Results
Gen-Probe's clinical diagnostics sales in the third quarter of 2008 benefited from continued growth of 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 increased 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 the same microorganisms, 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 2008 benefited from increased international and domestic sales of the PROCLEIX(R) ULTRIO(R) assay, and from approximately $1.8 million of foreign exchange benefit compared to the prior year. Chiron, a business unit of Novartis Vaccines and Diagnostics, markets the Company's blood screening products worldwide.
Collaborative research revenues in the third quarter of 2008 were $11.3 million, compared to $3.1 million in the prior year period. This significant increase resulted primarily from a $10 million milestone the Company earned from Chiron based on the full approval by the US Food and Drug Administration (FDA) of the PROCLEIX ULTRIO assay on the TIGRIS system. For the first nine months of 2008, collaborative research revenues were $18.5 million, compared to $11.2 million in the prior year period, an increase of 65%.
Royalty and license revenues for the third quarter of 2008 were $1.6 million, compared to $1.2 million in the prior year period, an increase of 33% that resulted primarily from higher royalties from Chiron associated with the use of Gen-Probe's technologies in the plasma screening market. For the first nine months of 2008, royalty and license revenues were $21.6 million, compared to $14.4 million in the prior year period, an increase of 50% that resulted primarily from revenue that was recorded in the first quarters of 2007 and 2008 associated with the settlement of Gen-Probe's patent infringement litigation against Bayer (now Siemens Medical Solutions Diagnostics). Specifically, Gen-Probe recorded $10.3 million of revenue from this settlement in the first quarter of 2007, and a final payment of $16.4 million in the first quarter of 2008.
Gross margin on product sales in the third quarter of 2008 was 71.7%, compared to 67.3% in the prior year period. This increase resulted primarily from increased sales of blood screening products and APTIMA(R) assays, reduced sales of lower-margin instrumentation, and operational efficiencies. For the first nine months of 2008, gross margin on product sales was 70.4%, compared to 67.3% in the prior year period.
Research and development (R&D) expenses in the third quarter of 2008 were $24.5 million, compared to $27.6 million in the prior year period, a decrease of 11% that resulted primarily from the purchase of human papillomavirus (HPV) oligonucleotides from Roche in the prior year period. For the first nine months of 2008, R&D expenses were $76.9 million, compared to $72.8 million in the prior year period, an increase of 6% that resulted primarily from costs associated with key development programs such as the post-marketing studies of the PROCLEIX ULTRIO assay in the United States, the investigational APTIMA human papillomavirus (HPV) assay, and Gen-Probe's fully automated instrument system for low- and mid-volume labs, known as PANTHER.
Marketing and sales expenses in the third quarter of 2008 were $10.7 million, compared to $9.7 million in the prior year period, an increase of 10% that resulted primarily from European market development efforts related to the Company's APTIMA Combo 2, APTIMA HPV and PROGENSATM PCA3 assays. For the first nine months of 2008, marketing and sales expenses were $34.1 million, compared to $28.6 million in the prior year period, an increase of 19%.
General and administrative (G&A) expenses in the third quarter of 2008 were $12.9 million, compared to $11.4 million in the prior year period, an increase of 13% that resulted primarily from increased compensation and legal costs. For the first nine months of 2008, G&A expenses were $38.5 million, compared to $34.7 million in the prior year period, an increase of 11%.
Total other income in the third quarter of 2008 was $2.2 million, compared to $3.3 million in the prior year period, a decrease of 33% that resulted primarily from a $1.6 million impairment charge associated with the Company's equity investment in Qualigen, Inc. The Company reviews its investments regularly and records impairment charges when an investment has experienced a decline that is expected to be other-than temporary. For the first nine months of 2008, total other income was $11.6 million, compared to $8.6 million in the prior year period, an increase of 35% that resulted primarily from higher short-term investment balances.
Gen-Probe continues to have a strong balance sheet. As of September 30, 2008, the Company had $555.5 million of cash, cash equivalents and short-term investments, and no debt. In the third quarter of 2008, the Company generated net cash of $67.3 million from its operating activities, while spending $4.8 million on property, plant and equipment. In the first nine months of 2008, Gen-Probe generated net cash of $159.0 million from its operating activities, compared to the Company's year-to-date net income of $85.8 million.
Updated 2008 Financial Guidance
"Based on our strong performance in the third quarter, we are raising our full-year 2008 EPS guidance and tightening our revenue range upward," said Herm Rosenman, the Company's senior vice president of finance and chief financial officer. Gen-Probe's 2008 financial guidance is:
Webcast Conference Call
A live webcast of Gen-Probe's third quarter 2008 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 (866) 505-9257 for domestic callers and (203) 369-1881 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 NATs that are used primarily to diagnose human diseases and screen donated human blood. Gen-Probe has approximately 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 "Updated 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 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, (iii) 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, (iv) the risk that new products or indications may not be approved by regulatory authorities or become commercially available in the time frame we anticipate, or at all, (v) we may not be able to compete effectively, (vi) we may not be able to maintain our current corporate collaborations and enter into new corporate collaborations or customer contracts, (vii) we are dependent on Novartis, Siemens (as assignee of Bayer) and other third parties for the distribution of some of our products, (viii) we are dependent on a small number of customers, contract manufacturers and single source suppliers of raw materials, (ix) changes in third-party reimbursement policies regarding our products could adversely affect sales of our products, (x) changes in government regulation affecting our diagnostic products could harm our sales and increase our development costs, (xi) the risk that our intellectual property may be infringed by third parties or invalidated, and (xii) our involvement in patent and other intellectual property and commercial litigation could be expensive, could divert management's attention, and could interfere with our ability to develop and distribute products. 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/
