- Earnings Per Share Increase to $0.31, 41% Growth From Prior Year -
- Product Sales Establish New Quarterly Record of $68.9 Million, Up 22% -
- Total Revenues Rise 20% to $76.3 Million -
SAN DIEGO, Nov. 2 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated
(Nasdaq: GPRO) today reported strong financial results for the third quarter
and nine months ended September 30, 2005. Net income for the third quarter of
2005 was $16.4 million ($0.31 per share), compared to net income of
$11.1 million ($0.22 per share) in the prior year period, an increase of
41% per share. All per share amounts are calculated on a diluted basis.
Product sales established a new record of $68.9 million in the third
quarter of 2005, compared to $56.4 million in the prior year period, an
increase of 22%. Total revenues for the third quarter of 2005 were
$76.3 million, compared to $63.5 million in the prior year period, an increase
of 20%.
For the first nine months of 2005, net income was $43.3 million ($0.83 per
share), compared to net income of $42.6 million ($0.83 per share) in the prior
year period. Total revenues in the first nine months of 2005 were
$218.0 million, compared to $201.2 million in the prior year period, an
increase of 8%. As previously disclosed, in the first quarter of 2004
Gen-Probe earned royalty and license revenue from Tosoh and a contract
milestone from Chiron that together added $13.5 million to total revenues, and
$0.17 to earnings per share. Product sales in the first nine months of 2005
were $193.7 million, compared to $164.1 million in the prior year period, an
increase of 18%.
"Both our clinical diagnostics and blood screening businesses grew solidly
in the third quarter of 2005, driven by continued strength across our major
product lines," said Henry L. Nordhoff, chairman, president and chief
executive officer of Gen-Probe. "Not only did we execute well in our base
business, we also took steps that we believe will drive our future growth,
such as forming a collaboration with Millipore to develop rapid molecular
tests for the biopharmaceutical manufacturing industry."
Detailed Results
Compared to the prior year period, Gen-Probe's sales growth in the third
quarter of 2005 was led by the APTIMA COMBO 2(R) and PROCLEIX(R) ULTRIO(R)
assays, and by the TIGRIS(R) system for blood screening in Europe.
Gen-Probe's blood screening products are marketed worldwide by Chiron.
Sales of the APTIMA COMBO 2 assay, Gen-Probe's amplified nucleic acid test
(NAT) for simultaneously detecting Chlamydia trachomatis (CT) and Neisseria
gonorrhoeae (GC), continued to grow strongly in the third quarter. This sales
growth was driven by market share gains on both the Company's semi-automated
instrument platform and on the high-throughput, fully automated TIGRIS system.
Revenue from the PACE(R) product line, the Company's non-amplified tests for
the same microorganisms, declined compared to the prior year period, in line
with Gen-Probe's expectations.
In blood screening, product sales benefited from growth of the PROCLEIX
ULTRIO assay in Europe. The PROCLEIX ULTRIO assay simultaneously detects HIV-
1, hepatitis C virus and hepatitis B virus in donated blood. Blood screening
sales in the third quarter also benefited from sales of TIGRIS instruments and
spare parts to Chiron, which totaled $3.5 million, and from the recognition of
approximately $1.7 million of previously deferred blood screening revenue.
This revenue recognition resulted from Chiron's decision to establish its own
warehouse for U.S. blood screening inventory.
Product sales for the third quarter and first nine months of 2005 and 2004
were, in millions:
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
2005 2004 Increase 2005 2004 Increase
Clinical
diagnostics $36.1 $32.2 12% $104.3 $94.3 11%
Blood screening $32.9 $24.2 36% $89.3 $69.8 28%
Total product
sales $68.9 $56.4 22% $193.7 $164.1 18%
Collaborative research revenues for the third quarter of 2005 were
$6.3 million, compared to $5.5 million in the prior year period, an increase
of 15%. This increase resulted primarily from higher reimbursement by Chiron
of blood screening development expenses. For the first nine months of 2005,
collaborative research revenues were $19.4 million, compared to $19.3 million
in the prior year period.
Royalty and license revenues for the third quarter of 2005 were
$1.0 million, compared to $1.5 million in the prior year period, a decrease of
33% that resulted primarily from lower royalties from Bayer. For the first
nine months of 2005, royalty and license revenues were $5.0 million, compared
to $17.9 million in the prior year period. As discussed, royalty and license
revenues were unusually high in the first quarter of 2004 due to revenues
earned through the Company's agreements with Tosoh and Chiron.
Gross margin on product sales was 69% in the third quarter of 2005,
compared to 73% in the prior year period. This decrease resulted primarily
from the sale of TIGRIS instruments for blood screening to Chiron. These
sales occur contractually at cost, and are expected to be a precursor to
higher margin sales of the PROCLEIX ULTRIO assay. For the first nine months
of 2005, gross margin on product sales was 70%, compared to 74% in the prior
year period. The decrease resulted primarily from the sale of TIGRIS
instruments to Chiron, and from the amortization of capitalized software costs
related to the TIGRIS system.
Research and development (R&D) expenses were $17.5 million in the third
quarter of 2005, compared to $15.6 million in the prior year period, an
increase of 12% that resulted primarily from costs associated with the
Company's prostate cancer and human papillomavirus (HPV) programs. For the
first nine months of 2005, R&D expenses were $53.6 million, compared to
$50.0 million in the prior year period, an increase of 7% that was driven by
the factors above, and by costs related to the PROCLEIX ULTRIO and West Nile
virus (WNV) assays for blood screening.
Marketing and sales expenses were $7.6 million in the third quarter of
2005, compared to $6.6 million in the prior year period, an increase of 15%.
For the first nine months of 2005, marketing and sales expenses were
$22.4 million, compared to $20.0 million in the prior year period, an increase
of 12%. These increases resulted primarily from the costs of supporting the
TIGRIS system and investing in new market opportunities.
General and administrative (G&A) expenses were $7.8 million in the third
quarter of 2005, compared to $9.1 million in the prior year period, a decrease
of 14% that resulted primarily from lower legal expenses, as well as a
non-cash compensation charge in the prior year period. For the first nine
months of 2005, G&A expenses were $22.8 million, compared to $23.8 million in
the prior year period, a decrease of 4% that also resulted primarily from the
factors described above.
Gen-Probe continues to have a strong balance sheet. As of
September 30, 2005, the Company had $220.7 million of cash, cash equivalents
and short-term investments, and no debt. Gen-Probe generated net cash of
$68.2 million from its operating activities in the first nine months of 2005.
Updated 2005 Financial Guidance
Gen-Probe is updating its 2005 financial guidance based on the Company's
strong performance in the third quarter of 2005. For the full year, Gen-Probe
now expects:
* Total revenues of $292 million to $297 million, including
collaborative research revenues of about $25 million and royalty and
license revenue of $7 million to $8 million. As previously disclosed,
Gen-Probe no longer expects to earn in the fourth quarter the
$10 million milestone payment from Chiron associated with U.S.
regulatory approval for the PROCLEIX ULTRIO assay on the TIGRIS
system.
* Product gross margins approximating 71% of product sales.
* R&D expenses approximating 25% of total revenues. R&D expense is
expected to increase significantly in the fourth quarter of 2005 based
primarily on development lot production of the WNV blood screening
assay.
* Marketing and sales expenses approximating 10% to 11% of total
revenues.
* General and administrative expenses approximating 10% of total
revenues.
* Earnings per share of between $1.10 and $1.12, based on a fully
diluted share count of 52.5 million for the year and a tax rate of
approximately 34% to 35%.
Recent Events
* PROCLEIX ULTRIO BLA. In mid-October, the U.S. Food and Drug
Administration (FDA) verbally advised the Company that it will have
additional questions regarding Gen-Probe's Biologics License
Application (BLA) for the PROCLEIX ULTRIO assay. Gen-Probe has since
received these questions, and is working with the FDA to address them.
The Company continues to believe the assay will be approved to help
increase blood safety in the United States, as it is in other
countries around the world, but eventual approval cannot be
guaranteed.
* 510(k) for PROCLEIX TIGRIS System. In early October, the FDA notified
Gen-Probe that it considers the PROCLEIX TIGRIS system "not
substantially equivalent" to the PROCLEIX enhanced semi-automated
system (eSAS) for screening donated human blood with the PROCLEIX
ULTRIO assay. The FDA made this determination in response to
Gen-Probe's 510(k) application for the TIGRIS system. Gen-Probe
continues to believe the instrument will be cleared to help increase
blood safety in the United States, as it is in other countries around
the world, but eventual clearance cannot be guaranteed.
* Millipore Agreement. In late August, Gen-Probe and Millipore formed a
collaboration to develop, manufacture and commercialize on an
exclusive basis NAT products for rapid microbiological and virus
monitoring in the biopharmaceutical manufacturing industry.
Microbiological monitoring of manufacturing processes is critical to
ensuring patient safety and meeting regulatory requirements. The
companies expect to launch the first of a series of new rapid
biological testing products in 2007.
* Molecular Profiling Agreement. Last week, Gen-Probe formed a
non-exclusive collaboration with the Molecular Profiling
Institute Inc., a private, specialty reference laboratory, to
accelerate market development for Gen-Probe's pipeline of novel cancer
diagnostics.
* Cytyc Liquid Pap Approval. In early August, the FDA granted marketing
clearance to use Gen-Probe's APTIMA Combo 2 assay to test for
Chlamydia trachomatis and Neisseria gonorrhoeae from liquid Pap
specimens collected and processed with Cytyc's ThinPrep(R) 2000
System.
* AABB Meeting. In mid-October, scientists from Gen-Probe and several
blood bank customers presented research that demonstrated the
sensitivity and specificity of the PROCLEIX ULTRIO and WNV blood
screening assays, and the potential of the TIGRIS instrument to
increase laboratory productivity and enable individual donor testing.
* Enzo Lawsuit. In late September, the United States Court of Appeals
for the Federal Circuit affirmed the summary judgment in favor of
Gen-Probe in the patent infringement lawsuit initiated by Enzo
Biochem, Inc. Enzo did not file a petition for rehearing within the
time allowed.
Webcast Conference Call
A live webcast of Gen-Probe's third quarter 2005 conference call for
investors can be accessed at http://www.gen-probe.com beginning at 4:30 p.m.
Eastern Time on November 2, 2005. 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) 873-5569 for domestic
callers and (203) 369-3995 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 markets a broad portfolio of products that use the Company's
patented technologies to detect infectious microorganisms, including those
causing sexually transmitted diseases, tuberculosis, strep throat, pneumonia
and fungal infections. The Company also developed and manufactures the only
FDA-approved blood screening assay for the simultaneous detection of HIV-1 and
HCV, which is marketed by Chiron Corporation. In addition, Gen-Probe's TIGRIS
instrument is the only fully automated, high-throughput NAT system for
diagnostics and blood screening. Gen-Probe has more than 20 years of NAT
expertise, and its products are used daily in clinical laboratories and blood
collection centers worldwide. Gen-Probe is headquartered in San Diego and
employs approximately 900 people. For more information, go to
www.gen-probe.com.
TIGRIS, APTIMA, APTIMA COMBO 2 and PACE are trademarks of Gen-Probe
Incorporated.
ULTRIO and PROCLEIX are trademarks of Chiron Corporation.
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 2005 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 future results of operations, regulatory approvals, 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 by any forward-looking
statement. Some of the risks, uncertainties and assumptions that could cause
actual results to differ materially from estimates or projections contained in
the forward-looking statements include but are not limited to: (i) the risk
that we may not achieve our expected 2005 growth, revenue, earnings or other
financial targets, (ii) the risk that Bayer may successfully appeal the
arbitration decision that favored us, (iii) the risk that we may not earn or
receive milestone payments from our collaborators, (iv) the possibility that
the market for the sale of our new products, such as our TIGRIS system, APTIMA
Combo 2 assay and PROCLEIX ULTRIO assay, may not develop as expected, (v) 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, (vi) the risk that our PROCLEIX
ULTRIO and WNV assays may not be approved by regulatory authorities and
commercially available in the time frames we anticipate, or at all, (vii) we
may not be able to compete effectively, (viii) we may not be able to maintain
our current corporate collaborations and enter into new corporate
collaborations or customer contracts, (ix) we are dependent on Chiron, Bayer
and other third parties for the distribution of some of our products, (x) we
are dependent on a small number of customers, contract manufacturers and
single source suppliers of raw materials, (xi) changes in third-party
reimbursement policies regarding our products could adversely affect sales of
our products, (xii) changes in government regulation affecting our diagnostic
products could harm our sales and increase our development costs, (xiii) the
risk that our intellectual property may be infringed by third parties or
invalidated, and (xiv) 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 any forward-looking statement 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
858-410-8673
Gen-Probe Incorporated
Consolidated Balance Sheets
(In thousands, except share and per share data)
September 30, December 31,
2005 2004
(unaudited)
Assets
Current assets:
Cash and cash equivalents $45,590 $25,498
Short-term investments 175,095 168,328
Trade accounts receivable, net of
allowance for doubtful accounts of
$730 at September 30, 2005 and $664
at December 31, 2004, respectively 29,159 21,990
Accounts receivable - other 1,405 3,136
Inventories 34,109 27,308
Deferred income taxes 7,081 7,725
Prepaid expenses 12,277 8,517
Other current assets 7,480 5,447
Total current assets 312,196 267,949
Property, plant and equipment, net 94,175 76,651
Capitalized software 21,580 23,466
Goodwill 18,621 18,621
License, manufacturing and
other access fees 44,009 24,395
Total assets $490,581 $411,082
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $12,237 $6,729
Accrued salaries and employee benefits 16,678 11,912
Other accrued expenses 3,225 4,451
Income tax payable 7,625 1,188
Deferred revenue 15,220 9,467
Total current liabilities 54,985 33,747
Deferred income taxes 6,403 9,187
Deferred revenue 4,500 5,000
Deferred rent 262 309
Minority interest -- 1,810
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value
per share, 20,000,000 shares
authorized, none issued and outstanding -- --
Common stock, $.0001 par value per
share; 200,000,000 shares authorized,
50,812,945 and 50,035,490 shares issued
and outstanding at September 30, 2005
and December 31, 2004, respectively 5 5
Additional paid-in capital 270,651 248,767
Deferred compensation (1,632) (1,104)
Accumulated other comprehensive
income (loss) (481) 807
Retained earnings 155,888 112,554
Total stockholders' equity 424,431 361,029
Total liabilities and stockholders' equity $490,581 $411,082
Gen-Probe Incorporated
Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
(unaudited)
Revenues:
Product sales $68,941 $56,447 $193,651 $164,077
Collaborative
research revenue 6,336 5,532 19,358 19,270
Royalty and
license revenue 994 1,508 4,984 17,851
Total revenues 76,271 63,487 217,993 201,198
Operating expenses:
Cost of product
sales 21,399 15,272 57,247 42,300
Research and
development 17,506 15,646 53,597 49,961
Marketing and sales 7,555 6,568 22,365 19,958
General and
administrative 7,822 9,058 22,793 23,817
Total operating
expenses 54,282 46,544 156,002 136,036
Income from
operations 21,989 16,943 61,991 65,162
Total other
income, net 1,318 769 3,400 1,467
Income before
income taxes 23,307 17,712 65,391 66,629
Income tax expense 6,890 6,602 22,057 24,030
Net income $16,417 $11,110 $43,334 $42,599
Net income per share:
Basic $0.32 $0.22 $0.86 $0.86
Diluted $0.31 $0.22 $0.83 $0.83
Weighted average
shares outstanding:
Basic 50,726 49,654 50,518 49,284
Diluted 52,464 51,516 52,381 51,302
Gen-Probe Incorporated
Consolidated Statements of Cash Flows
(in thousands)
Nine Months Ended
September 30,
2005 2004
(unaudited)
Operating activities:
Net income $43,334 $42,599
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 16,694 12,988
Stock compensation charges 445 1,051
Loss on disposal of property and equipment 262 58
Stock option income tax benefits 6,948 9,639
Changes in assets and liabilities:
Accounts receivable (5,562) (5,775)
Inventories (6,809) (15,710)
Prepaid expenses (3,760) (3,734)
Other current assets (2,033) (1,903)
Accounts payable 5,525 4,694
Accrued salaries and employee benefits 4,767 976
Other accrued expenses (1,169) (291)
Income tax payable 6,467 (3,393)
Deferred revenue 5,253 2,468
Deferred income taxes (2,134) 2,755
Deferred rent (47) (10)
Minority interest -- (27)
Net cash provided by operating activities 68,181 46,385
Investing activities:
Proceeds from sales and maturities
of short-term investments 98,693 148,444
Purchases of short-term investments (105,672) (188,644)
Cash paid for acquisition of minority
interest in Molecular Light Technology (1,539) (376)
Purchases of property, plant and equipment (29,894) (15,572)
Capitalization of intangible assets,
including manufacturing and license fees (22,450) (23,180)
Other assets (821) (182)
Net cash used in investing activities (61,683) (79,510)
Financing activities:
Proceeds from issuance of common stock 13,963 15,819
Net cash provided by financing activities 13,963 15,819
Effect of exchange rate changes on cash
and cash equivalents (369) 679
Net increase (decrease) in cash and
cash equivalents 20,092 (16,627)
Cash and cash equivalents at the
beginning of the period 25,498 35,973
Cash and cash equivalents at the
end of the period $45,590 $19,346
Supplemental disclosure of cash
flow information:
Cash paid for:
Income taxes $10,187 $15,692
Interest expense $149 $33
SOURCE
Gen-Probe Incorporated
11/02/2005
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
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