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Gen-Probe Reports Financial Results for the First Quarter of 2012

Date : 04/30/2012 @ 6:31AM
Source : PR Newswire (US)
Stock : Hologic, Inc. (MM) (HOLX)
Quote : 24.64  0.5 (2.07%) @ 12:05PM
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Gen-Probe Reports Financial Results for the First Quarter of 2012

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SAN DIEGO, April 30, 2012 /PRNewswire/ -- Gen-Probe Incorporated (NASDAQ: GPRO) today reported financial results for the first quarter of 2012, highlighted by total revenues of $153.4 million and non-GAAP earnings per share (EPS) of $0.55.

(Logo: http://photos.prnewswire.com/prnh/20120312/LA68580LOGO)

"Gen-Probe is off to a strong start in 2012 driven by the continued growth of our women's health franchise," said Carl Hull, the Company's chairman and chief executive officer.  "We plan to build on that momentum as our new products gain further traction in the marketplace and as we anticipate launching our PANTHER system in the U.S."

Also today, Gen-Probe and Hologic, Inc. (NASDAQ: HOLX) announced that they have entered into a definitive agreement pursuant to which Hologic will acquire Gen-Probe for $82.75 per share in cash, or a total of approximately $3.7 billion.  Please refer to a joint press release issued by the parties today for additional details regarding the transaction.

Financial Results

Key financial results for the first quarter of 2012 were ($ in millions, except EPS):



Non-GAAP



GAAP



2012



2011



Change



2012



2011



Change

Product sales

$

150.1



$

138.1



+9%



$

150.1



$

138.1



+9%

Total revenues

$

153.4



$

143.0



+7%



$

153.4



$

143.0



+7%

Operating profit

$

35.6



$

38.9



-8%



$

31.7



$

34.7



-9%

Net income

$

25.2



$

26.6



-5%



$

22.5



$

23.3



-3%

EPS

$

0.55



$

0.54



+2%



$

0.49



$

0.48



+2%

Revenue Detail

In the first quarter of 2012, clinical diagnostics product sales grew by 7% compared to the prior year period.  This increase was driven primarily by domestic and international sales growth in our women's health franchise, which includes the APTIMA Combo 2® assay for detecting Chlamydia and gonorrhea, the APTIMA Trichomonas assay for detecting Trichomonas vaginalis, and the APTIMA HPV assay for detecting high-risk strains of the human papillomavirus (HPV).  Foreign currency fluctuations reduced clinical diagnostics sales by an estimated $0.5 million compared to the prior year period.

In blood screening, first-quarter sales increased by 12% compared to the prior year period, mainly due to greater shipments of TIGRIS® instruments to Novartis, the Company's blood screening collaboration partner.  Foreign currency fluctuations decreased blood screening sales by an estimated $0.1 million compared to the prior year period. 

Sales of research products and services in the first quarter of 2012 were $2.7 million, down 13% compared to the prior year period.  Foreign currency fluctuations had an immaterial effect on these sales compared to the prior year period.

First quarter product sales were ($ in millions):



Three Months Ended March 31,



Change





2012





2011



As

Reported



Constant

Currency

Clinical Diagnostics

$

94.9



$

88.3



+7%



+8%

Blood Screening

$

52.5



$

46.7



+12%



+13%

Research Products and Services

$

2.7



$

3.1



-13%



-13%

Total Product Sales

$

150.1



$

138.1



+9%



+9%

Collaborative research revenue in the first quarter of 2012 was $1.4 million, compared to $3.6 million in the prior year period, a decrease of 61% 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 first quarter of 2012 were $1.9 million, compared to $1.4 million in the prior year period, an increase of 36%. 

GAAP Income Statement Details

Gross margin on product sales was 65.1% in the first quarter of 2012, compared to 69.6% in the prior year period.  This decrease resulted primarily from higher sales of low-margin instrumentation to Novartis, which are generally a precursor to future assay sales, and lower sales of higher margin PRODESSE influenza products.

Acquisition-related amortization expenses were $2.8 million in both the first quarters of 2012 and 2011.

Research and development (R&D) expenses were $28.6 million in the first quarter of 2012, compared to $29.0 million in the prior year period, a decrease of 1%.

Marketing and sales expenses were $19.0 million in the first quarter of 2012, compared to $16.5 million in the prior year period, an increase of 15% that resulted primarily from the expansion of our women's health commercial operations and other marketing activities.  

General and administrative (G&A) expenses were $19.0 million in the first quarter of 2012, compared to $18.2 million in the prior year period, an increase of 4% that resulted mainly from increases in costs relating to ongoing litigation.

Operating profit was $31.7 million during the first quarter of 2012, compared to $34.7 million in the prior year period, a decline of 9% attributable to product mix and the higher level of marketing and sales expenditures.

Total other income, net, was $2.1 million in the first quarter of 2012, compared to total other income, net, of $0.4 million in the prior year period, an increase of $1.7 million primarily attributed to higher net realized gains on sales of marketable securities. 

Income tax expense was $11.3 million in the first quarter of 2012, corresponding to an effective tax rate of 34%.

Non-GAAP Income Statement Details

In the first quarter of 2012, 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 $17.8 million in the first quarter of 2012, compared to $16.8 million in the prior year period, an increase of 6%.

Non-GAAP operating profit was $35.6 million in the first quarter of 2012, compared to $38.9 million in the prior year period, a decline of 8%.

Non-GAAP income tax expense was $12.5 million in the first quarter of 2012, corresponding to an effective tax rate of 33%. 

Cash Flows and Balance Sheet

In the first quarter of 2012, Gen-Probe generated net cash of $31.7 million from operating activities, and spent $9.3 million on property, plant and equipment, leading to free cash flow of $22.4 million.

Gen-Probe continues to maintain a strong balance sheet.  As of March 31, 2012, the Company had $401.3 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%. 

2012 Financial Guidance

Based on the pending acquisition by Hologic, Gen-Probe is simplifying its 2012 financial guidance.         

"The Company remains on track to achieve the full-year revenue and earnings targets we outlined in February," said Herm Rosenman, Gen-Probe's senior vice president, finance, and chief financial officer.  "For the second quarter, we expect a sequential improvement in total revenues of a couple million dollars.  On the bottom line, we expect second quarter earnings between 55 and 58 cents per share on a non-GAAP basis, which corresponds to between 51 and 54 cents on a GAAP basis."

About Non-GAAP Financial Measures

Gen-Probe's management believes that non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance by excluding certain expenses and other items that may not be indicative of core business results.  To supplement the Company's financial results for the first quarter of 2012 and its 2012 financial guidance, in each case presented in accordance with GAAP, Gen-Probe uses the following financial measures defined as non-GAAP by the SEC: non-GAAP net income, non-GAAP gross margin, non-GAAP R&D expenses, non-GAAP marketing and sales expenses, non-GAAP G&A expenses, non-GAAP operating profit, non-GAAP income tax rate, and non-GAAP EPS.  Gen-Probe's management does not, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared and presented in accordance with GAAP.  Gen-Probe believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing Gen-Probe's performance and when planning, forecasting and analyzing future periods.  These non-GAAP financial measures also facilitate management's internal comparisons to Gen-Probe's historical performance and our competitors' operating results.  Gen-Probe believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making.  Further, our reconciliations of non-GAAP to GAAP operating results, which are included on the attached tables, are presented in the format of consolidated statements of income solely to assist a reader in understanding the impact of the various adjustments to our GAAP operating results, individually and in the aggregate, and are not intended to place any undue prominence on our non-GAAP operating results.

Notes on Presentation

In this news release, all per share amounts are calculated on a diluted basis.  Some totals may not foot due to rounding. 

Conference Call and Webcast

Hologic and Gen-Probe management will host a conference call at 8:15 a.m. (Eastern) to discuss today's announcement, Hologic's second fiscal quarter of 2012 results and Gen-Probe's first quarter 2012 results. Interested participants may listen to the call by dialing 877-856-1962 (for callers within the U.S.) or 719-325-4863 (for international callers) and referencing code 4975261 approximately 15 minutes prior to the call. The webcast and accompanying slides can be accessed at www.hologic.com or www.gen-probe.com.

A replay of the call will be available through May 18, 2012 at 888-203-1112 (for callers within the U.S.) or 719-457-0820 (for international callers), access code 4975261, and at www.hologic.com or www.gen-probe.com.

Supporting materials for the conference call, including a presentation, will be available on the Investor Relations sections of Hologic's and Gen-Probe's websites at http://investors.hologic.com and www.gen-probe.com, respectively.

Gen-Probe's first quarter earnings conference call, originally scheduled for Thursday, May 3, is canceled.

About Gen-Probe

Gen-Probe is a global leader in the development, manufacture and marketing of rapid, accurate and cost-effective molecular diagnostic products and services that are used primarily to diagnose human diseases, screen donated human blood, and ensure transplant compatibility.  Gen-Probe is headquartered in San Diego and employs approximately 1,400 people. For more information, go to www.gen-probe.com.

Trademarks

APTIMA, APTIMA COMBO 2, PANTHER and TIGRIS are trademarks of Gen-Probe.  All other trademarks are the property of their owners.

Where You Can Find Additional Information

In connection with Gen-Probe's pending acquisition by Hologic, Gen-Probe will file a proxy statement and other materials with the Securities and Exchange Commission (the "SEC"). GEN-PROBE URGES INVESTORS TO READ THE PROXY STATEMENT AND THESE OTHER MATERIALS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY AND THE PROPOSED TRANSACTION. Investors may obtain free copies of the proxy statement (when available) as well as other filed documents containing information about Gen-Probe at http://www.sec.gov, the SEC's free internet site. Free copies of Gen-Probe's SEC filings including the proxy statement (when available) are also available on Gen-Probe's website at http://www.gen-probe.com/.

Gen-Probe and its executive officers and directors may be deemed, under SEC rules, to be participants in the solicitation of proxies from Gen-Probe's stockholders with respect to the proposed transaction.  Information regarding Gen-Probe's officers and directors is included in Gen-Probe's Definitive Proxy Statement on Schedule 14A filed with the SEC on April 5, 2012 with respect to its 2012 Annual Meeting of Stockholders.  More detailed information regarding the identity of the potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with SEC in connection with the proposed transaction.

Caution Regarding Forward-Looking Statements

Any statements in this news release about our expectations, beliefs, plans, objectives, assumptions or future events or performance, including those under the heading "2012 Financial Guidance," or regarding Gen-Probe's pending acquisition by Hologic 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, the development and commercialization of new products, regulatory approvals, future milestones, growth opportunities, market trends, management plans, and the pending acquisition by Hologic are 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 2012 financial targets, (ii) the risk that we may not integrate acquisitions, such as Tepnel, Prodesse and GTI, successfully, (iii) the possibility that the market for the sale of our new products, such as our PANTHER system and PROGENSA PCA3, APTIMA HPV and APTIMA trichomonas assays, may not develop as expected, (iv) the ability of the parties to obtain regulatory approvals or clearance for Gen-Probe's acquisition by Hologic on the proposed terms and schedule; (v) the potential that the closing conditions of the acquisition may not be satisfied; (vi) the risk that Gen-Probe's stockholders may not approve the transaction; (vii) the risk that the businesses will not be integrated successfully; (viii) the transaction may involve unexpected costs or unexpected liabilities; (ix) the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; (x) the enhancement of existing products and the development of new products may not proceed as planned, (xi) the risk that investigational products, including those now in US clinical trials, may not be approved by regulatory authorities or become commercially available in the time frame we anticipate, or at all, (xii) the risk that we may not be able to compete effectively, (xiii) the risk that we may not be able to maintain our current corporate collaborations or enter into new ones, (xiv) our dependence on Novartis and other third parties for the distribution of some of our products, (xv) our dependence on a small number of customers, contract manufacturers and single source suppliers of raw materials, (xvi) changes in third-party reimbursement policies regarding our products could adversely affect sales, (xvii) changes in government regulation or tax policy affecting our diagnostic products could harm our sales, increase our development costs or increase our taxes, (xviii) the risk that our intellectual property may be infringed or invalidated, and (xix) our involvement in patent and other intellectual property and commercial litigation could be expensive and could divert management's attention. This list includes some, but not all, of the factors that could affect our ability to achieve results described in 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:



Al Kildani

Sr. director, investor relations and

corporate communications

858-410-8653

 

Gen-Probe Incorporated

Consolidated Balance Sheets - GAAP

(In thousands, except share and per share data)











March 31,

2012



December 31,

2011



(Unaudited)





ASSETS







Current assets







Cash and cash equivalents

$

138,774





$

87,021



Marketable securities

174,409





218,789



Trade accounts receivable, net of allowance for doubtful accounts of $293 and $320 as of

March 31, 2012 and December 31, 2011, respectively

67,199





57,767



Accounts receivable—other

2,317





3,446



Inventories

81,331





77,886



Deferred income tax

8,707





8,188



Prepaid expenses

15,792





11,555



Other current assets

3,732





4,967



Total current assets

492,261





469,619



Marketable securities, net of current portion

88,101





62,237



Property, plant and equipment, net

180,270





176,081



Capitalized software, net

17,961





16,992



Patents, net

11,486





11,758



Goodwill

140,385





140,404



Purchased intangibles, net

104,553





106,619



License, manufacturing access fees and other assets, net

61,246





61,738



Total assets

$

1,096,263





$

1,045,448



LIABILITIES AND STOCKHOLDERS' EQUITY







Current liabilities







Accounts payable

$

14,260





$

12,000



Accrued salaries and employee benefits

21,533





28,795



Other accrued expenses

17,584





12,846



Income tax payable

6,428





1,857



Short-term borrowings

248,000





248,000



Deferred revenue

1,413





1,238



Total current liabilities

309,218





304,736



Non-current income tax payable

10,044





10,019



Deferred income tax

19,283





19,283



Deferred revenue, net of current portion

3,644





3,237



Other long-term liabilities

7,910





7,831



Commitments and contingencies







Stockholders' equity







Preferred stock, $0.0001 par value per share; 20,000,000 shares authorized, none issued and

outstanding







Common stock, $0.0001 par value per share; 200,000,000 shares authorized, 45,342,898 and

45,008,879 shares issued and outstanding as of March 31, 2012 and December 31, 2011,

respectively

5





5



Additional paid-in capital

43,954





23,650



Accumulated other comprehensive income (loss)

2,745





(313)



Retained earnings

699,460





677,000



Total stockholders' equity

746,164





700,342



Total liabilities and stockholders' equity

$

1,096,263





$

1,045,448









Gen-Probe Incorporated

Consolidated Statements of Income - GAAP

(In thousands, except per share data)

(Unaudited)











Three Months Ended March 31,





2012



2011

Revenues









Product sales



$

150,117





$

138,112



Collaborative research revenue



1,351





3,568



Royalty and license revenue



1,914





1,358



Total revenues



153,382





143,038



Operating expenses









Cost of product sales (excluding acquisition-related intangible amortization)



52,371





41,943



Acquisition-related intangible amortization



2,759





2,805



Research and development



28,586





28,963



Marketing and sales



19,045





16,522



General and administrative



18,954





18,153



Total operating expenses



121,715





108,386



Income from operations



31,667





34,652



Other income (expense)









Investment and interest income



2,538





735



Interest expense



(543)





(503)



Other income, net



128





177



Total other income, net



2,123





409



Income before income tax



33,790





35,061



Income tax expense



11,330





11,784



Net income



$

22,460





$

23,277



Net income per share









Basic



$

0.50





$

0.49



Diluted



$

0.49





$

0.48



Weighted average shares outstanding









Basic



45,124





47,861



Diluted



46,204





49,004



 

Gen-Probe Incorporated

Consolidated Statements of Income- Non-GAAP Reconciliations

(In thousands, except per share data)

(Unaudited)















Three Months Ended



Three Months Ended





March 31, 2012



March 31, 2011





Non-GAAP

Adjustments

GAAP



Non-GAAP

Adjustments

GAAP

Revenues:

















Product sales



$

150,117



$



$

150,117





$

138,112



$



$

138,112



Collaborative research revenue



1,351





1,351





3,568





3,568



Royalty and license revenue



1,914





1,914





1,358





1,358



Total revenues



153,382





153,382





143,038





143,038





















Operating expenses:

















Cost of product sales (excluding acquisition-related intangible amortization)



52,281



90



52,371





41,852



91



41,943



Acquisition-related intangible amortization





2,759



2,759







2,805



2,805



Research and development



28,586





28,586





28,963





28,963



Marketing and sales



19,045





19,045





16,522





16,522



General and administrative



17,847



1,107



18,954





16,800



1,353



18,153



Total operating expenses



117,759



3,956



121,715





104,137



4,249



108,386



Income from operations



35,623



(3,956)



31,667





38,901



(4,249)



34,652



Other income (expense)

















Investment and interest income



2,538





2,538





735





735



Interest expense



(543)





(543)





(503)





(503)



Other income, net



128





128





177





177



Total other income, net



2,123





2,123





409





409



Income before income tax



37,746



(3,956)



33,790





39,310



(4,249)



35,061



Income tax expense



12,519



(1,189)



11,330





12,756



(972)



11,784



Net income



$

25,227



$

(2,767)



$

22,460





$

26,554



$

(3,277)



$

23,277





















Net income per share

















Basic



$

0.56



$

(0.06)



$

0.50





$

0.55



$

(0.06)



$

0.49



Diluted



$

0.55



$

(0.06)



$

0.49





$

0.54



$

(0.06)



$

0.48





















Weighted average shares outstanding

















Basic



45,124





45,124





47,861





47,861



Diluted



46,204





46,204





49,004





49,004



 

Gen-Probe Incorporated

Consolidated Statements of Cash Flows - GAAP

(In thousands)

(Unaudited)











Three Months Ended March 31,







2012





2011



Operating activities









Net income



$

22,460





$

23,277



Adjustments to reconcile net income to net cash provided by operating activities









Depreciation and amortization



11,448





11,345



Amortization of premiums on investments, net of accretion of discounts



2,037





2,673



Stock-based compensation



6,152





6,036



Excess tax benefit from employee stock-based compensation



(1,246)





(1,425)



Deferred revenue



477





97



Deferred income tax



(245)





(615)



Loss on disposal of property and equipment



52





24



Changes in assets and liabilities









Trade and other accounts receivable



(8,117)





(2,816)



Inventories



(3,506)





3,420



Prepaid expenses



(4,062)





(2,116)



Other current assets



1,161





(536)



Other long-term assets



199





(132)



Accounts payable



2,228





(3,196)



Accrued salaries and employee benefits



(7,725)





(7,847)



Other accrued expenses



4,566





(40)



Income tax payable



5,902





11,500



Other long-term liabilities



(49)





456



Net cash provided by operating activities



31,732





40,105



Investing activities









Proceeds from sales and maturities of marketable securities



144,227





30,460



Purchases of marketable securities



(127,119)





(5,731)



Purchases of property, plant and equipment



(9,265)





(10,762)



Purchases of capitalized software



(1,738)





(780)



Purchases of intangible assets, including licenses and manufacturing access fees



(825)





(923)



Other



408





501



Net cash provided by investing activities



5,688





12,765



Financing activities









Repurchase and retirement of common stock







(47,972)



Proceeds from issuance of common stock and employee stock purchase plan shares



14,232





17,390



Repurchase and retirement of restricted stock for payment of taxes



(1,124)





(358)



Excess tax benefit from employee stock-based compensation



1,246





1,425



Borrowings







10,000



Net cash provided by (used in) financing activities



14,354





(19,515)



Effect of exchange rate changes on cash and cash equivalents



(21)





518



Net increase in cash and cash equivalents



51,753





33,873



Cash and cash equivalents at the beginning of period



87,021





59,690



Cash and cash equivalents at the end of period



$

138,774





$

93,563



SOURCE Gen-Probe Incorporated

Copyright 2012 PR Newswire



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