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Gen-Probe Reports Strong Financial Results for First Quarter 2008, Raises Full-Year Guidance

- Company Posts Record Quarterly EPS of $0.58, 45% Above Prior Year, Based

on Positive Operating Results and One-Time Legal Benefit - - Total Revenues Increase 21% to Establish Quarterly Record of $122.6

Million, Product Sales Rise 16% to All-Time High of $101.5 Million - - For 2008, Company Now Expects EPS of $1.72 to $1.76, Total Revenues of

$450 to $455 Million -

SAN DIEGO, April 28 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated (Nasdaq: GPRO) today reported strong financial results for the first quarter of 2008 and raised its full-year guidance for earnings per share (EPS) and total revenues.

"Gen-Probe posted excellent financial results in the first quarter of 2008, as new records in both clinical diagnostics and blood screening enabled us to exceed $100 million in quarterly product sales for the first time," said Henry L. Nordhoff, the Company's chairman and chief executive officer. "We also established new all-time highs for total revenue and net income, and made important progress in our PROCLEIX(R) ULTRIO(R), human papillomavirus (HPV) and prostate cancer development programs."

In the first quarter of 2008, product sales were $101.5 million, compared to $87.2 million in the prior year period, an increase of 16%. Total revenues for the first quarter of 2008 were $122.6 million, compared to $101.1 million in the prior year period, an increase of 21%. Net income was $31.9 million ($0.58 per share) in the first quarter of 2008, compared to $21.5 million ($0.40 per share) in the prior year period, an increase of 48% (45% per share). In this press release, all per share amounts are calculated on a fully diluted basis, and all results are presented on a US GAAP basisemployee benefits 17,929 20,997

Other accrued expenses 4,977 4,014

Income tax payable 13,957 846

Deferred revenue - short term 2,957 2,836

Total current liabilities 54,765 40,470

Non-current income tax payable 4,341 3,958

Deferred income tax - long term 75 75

Deferred revenue - long term 4,441 4,607

Deferred rent - 10

Deferred compensation plan liabilities 2,348 1,893

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, 53,992,269 and

53,916,298 shares issued and outstanding at

March 31, 2008 and December 31, 2007, respectively 5 5

Additional paid-in capital 423,452 415,229

Accumulated other comprehensive income 2,974 1,604

Retained earnings 353,147 321,202

Total stockholders' equity 779,578 738,040

Total liabilities and stockholders' equity $845,548 $789,053

Gen-Probe Incorporated

Consolidated Statements of Income

(In thousands, except per share data)

Three Months Ended

March 31,

2008 2007


Product sales $101,507 $87,152

Collaborative research revenue 2,459 2,352

Royalty and license revenue 18,597 11,547

Total revenues 122,563 101,051

Operating expenses:

Cost of product sales 32,636 29,160

Research and development 23,066 20,258

Marketing and sales 11,908 9,536

General and administrative 11,937 11,281

Total operating expenses 79,547 70,235

Income from operations 43,016 30,816

Interest income 4,207 2,675

Other income/(expense) 1,473 (130)

Total other income, net 5,680 2,545

Income before income tax 48,696 33,361

Income tax expense 16,751 11,886

Net income $31,945 $21,475

Net income per share:

Basic $0.59 $0.41

Diluted $0.58 $0.40

Weighted average shares outstanding:

Basic 53,796 52,170

Diluted 55,023 53,634

Gen-Probe Incorporated

Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended

March 31,

2008 2007

Operating activities:

Net income $31,945 $21,475

Adjustments to reconcile net income to net cash

provided by operating activities:

Depreciation and amortization 8,608 8,273

Amortization of premiums on investments, net of

accretion of discounts 1,735 1,052

Stock-based compensation charges 5,192 5,105

Stock option income tax benefits 369 58

Excess tax benefit from employee stock options (145) (1,284)

Gain on sale of stock holdings of Molecular

Profiling Institute, Inc. (1,600) -

Changes in assets and liabilities:

Accounts receivable 3,842 (2,649)

Inventories (1,796) (39)

Prepaid expenses 3,447 (2,478)

Other current assets (1,161) (1,354)

Other long term assets (743) (598)

Accounts payable 3,181 (1,549)

Accrued salaries and employee benefits (3,069) (891)

Other accrued expenses 965 (25)

Income tax payable 15,663 7,815

Deferred revenue (45) (330)

Deferred income tax 688 106

Deferred rent (10) (28)

Deferred compensation plan liabilities 454 269

Net cash provided by operating activities 67,520 32,928

Investing activities:

Proceeds from sales and maturities of short-term

investments 97,290 14,819

Purchases of short-term investments (181,546) (65,863)

Purchases of property, plant and equipment (20,033) (5,894)

Capitalization of intangible assets, including

license and manufacturing access fees (194) (1,817)

Sale of stock holdings of Molecular Profiling

Institute, Inc. 4,100 -

Other items, net 75 (352)

Net cash used in investing activities (100,308) (59,107)

Financing activities:

Repurchase and retirement of restricted stock for

payment of taxes (41) -

Excess tax benefit from employee stock options 145 1,284

Proceeds from issuance of common stock 3,027 4,402

Net cash provided by financing activities 3,131 5,686

Effect of exchange rate changes on cash and cash

equivalents (7) 16

Net decrease in cash and cash equivalents (29,664) (20,477)

Cash and cash equivalents at the beginning of

period 75,963 87,905

Cash and cash equivalents at the end of period $46,299 $67,428


As expected, Gen-Probe's total revenues and net income in the first quarter of 2008 benefited from $16.4 million of royalty and license revenue received from Bayer, representing the third and final payment due in connection with the 2006 settlement of the companies' patent infringement litigation.

Detailed Results

Gen-Probe's clinical diagnostics sales in the first 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 first quarter compared to the prior year period, in line with Gen-Probe's expectations.

In blood screening, product sales in the first quarter of 2008 benefited from continued international expansion of the PROCLEIX ULTRIO assay, from higher pricing associated with U.S. commercial sales of the PROCLEIX WNV (West Nile virus) assay on the TIGRIS system, from the timing of product shipments, and from increased sales of TIGRIS instruments to Chiron. The Company's blood screening products are marketed worldwide by Chiron, a business unit of Novartis Vaccines and Diagnostics.

Product sales were, in millions:

Three Months Ended March 31,

2008 2007 Change

Clinical diagnostics $52.5 $47.6 10 %

Blood screening $49.0 $39.6 24 %

Total product sales $101.5 $87.2 16 %

Collaborative research revenues for the first quarter of 2008 were $2.5 million, compared to $2.4 million in the prior year period, an increase of 4% that resulted primarily from two factors: increased reimbursement from Novartis of shared development expenses in the companies' blood screening collaboration; and increased reimbursement from 3M related to the companies' collaboration to develop rapid tests for healthcare-associated infections. These increases were partially offset by a reduction in funds received from the U.S. Department of Defense for prostate cancer research.

Royalty and license revenues for the first quarter of 2008 were $18.6 million, compared to $11.5 million in the prior year period. As previously discussed, this increase resulted primarily from $16.4 million of revenue from Bayer, which represents the third and final payment due in connection with the 2006 settlement of the companies' patent infringement litigation. In the prior year period, royalty and license revenues included $10.3 million from Bayer.

Gross margin on product sales in the first quarter of 2008 was 67.8%, compared to 66.5% in the prior year period. This improvement resulted primarily from increased sales of the APTIMA Combo 2 assay and from commercial pricing of the PROCLEIX WNV assay on the TIGRIS system in the United States. These benefits were partially offset by increased instrument sales, as described above.

Research and development (R&D) expenses in the first quarter of 2008 were $23.1 million, compared to $20.3 million in the prior year period, an increase of 14%. This increase 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(R) 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 first quarter of 2008 were $11.9 million, compared to $9.5 million in the prior year period, an increase of 25% that resulted primarily from European market development efforts related to the Company's APTIMA HPV and PROGENSATM PCA3 assays.

General and administrative (G&A) expenses in the first quarter of 2008 were $11.9 million, compared to $11.3 million in the prior year period, an increase of 5% that resulted primarily from higher legal costs.

Gen-Probe continues to have a strong balance sheet. As of March 31, 2008, the Company had $487.6 million of cash, cash equivalents and short-term investments, and no debt. In the first quarter of 2008, Gen-Probe generated net cash of $67.5 million from its operating activities, more than double net income of $31.9 million.

Updated 2008 Financial Guidance

"We believe our strong operating performance in the first quarter has us off to a good start in 2008, and we are therefore raising our full-year revenue and EPS guidance," said Herm Rosenman, the Company's senior vice president of finance and chief financial officer.

For the full year 2008, Gen-Probe now expects:

-- Total revenues of $450 million to $455 million.

-- Product gross margins approximating 68% to 70% of product sales.

-- R&D expenses approximating 23% to 24% of total revenues. The Company

expects quarterly R&D expenses to average more than $27 million for

the rest of 2008, with much of the increase associated with the US

clinical trial of the APTIMA HPV assay.

-- Marketing and sales expenses approximating 9% to 10% of total


-- G&A expenses approximating 11% of total revenues.

-- EPS of between $1.72 and $1.76, based on 55 million to 56 million

fully diluted shares outstanding for the year and a tax rate of

34% to 35%.

Recent Events

-- Regulatory Application for PROCLEIX ULTRIO Assay Submitted. On

February 21, Gen-Probe announced that the Company had submitted to the

U.S. Food and Drug Administration (FDA) a supplemental regulatory

application for the additional use of the PROCLEIX ULTRIO assay to

screen donated blood for hepatitis B virus (HBV). The FDA approved the

assay to screen donated blood for HIV-1 and hepatitis C virus in late

2006. The Company is seeking approval to use the assay to screen for

HBV on both its semi-automated instrument platform and on the fully

automated, high-throughput TIGRIS system.

-- HPV Clinical Trial Begins. On March 31, Gen-Probe announced that the

Company had begun a pivotal U.S. clinical trial of its investigational

APTIMA assay to detect HPV, which causes cervical cancer. The

investigational APTIMA HPV assay is an amplified nucleic acid test that

is designed to detect 14 high-risk HPV types that are associated with

cervical cancer. More specifically, the assay is designed to detect two

messenger RNAs (mRNAs), E6 and E7, which are produced in higher amounts

when HPV infections progress toward cervical cancer. Gen-Probe expects

to enroll approximately 7,000 women in the study. Actual enrollment,

however, may vary based on the prevalence of cervical disease among

women in the trial. The trial enrollment and testing are expected to

take approximately two years.

-- Two PCA3 Studies Published. The leading peer-reviewed Journal of

Urology(R) published two important articles that the Company believes

illustrate the value of Gen-Probe's prostate cancer marker PCA3. In

the first article, "PCA3: A Molecular Urine Assay for Predicting

Prostate Biopsy Outcome" (Volume 179, Issue 4, Pages 1587-1592,

April 2008), researchers from the Urological Sciences Research

Foundation, The Johns Hopkins University, the University of Washington,

DiagnoCure and Gen-Probe conclude that PCA3 is a useful adjunct to

current methods for prostate cancer diagnosis. The researchers found

that PCA3 scores correlate with the probability of positive prostate

biopsies, and that PCA3 scores are independent of prostate volume,

serum PSA level and number of prior biopsies. In the second article,

"PCA3 Molecular Urine Assay Correlates With Prostate Cancer Tumor

Volume: Implication in Selecting Candidates for Active Surveillance"

(Volume 179, Issue 5, Pages 1804-1810, May 2008), researchers from the

MD Anderson Cancer Center and Gen-Probe conclude that PCA3 scores

correlate with both tumor volumes and prostatectomy Gleason scores,

both of which are measures of prostate cancer aggressiveness. As a

result, they suggest that PCA3 may have clinical applicability in

identifying men who have low-volume or low-grade prostate cancer.

Webcast Conference Call

A live webcast of Gen-Probe's first quarter 2008 conference call for investors can be accessed at 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) 421-6934 for domestic callers and (203) 369-0825 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 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


APTIMA, APTIMA COMBO 2, PACE, PROGENSA and TIGRIS are trademarks of Gen-Probe Incorporated. ULTRIO and PROCLEIX are trademarks of Chiron, a business unit of Novartis Vaccines and Diagnostics. 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, 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, (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 industrial collaborations, may not proceed as planned, (v) the risk that products including our PROCLEIX ULTRIO assay for blood screening 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.


Michael Watts

Sr. director, investor relations and corporate communications


Gen-Probe Incorporated

Consolidated Balance Sheets

(In thousands, except share and per share data)

March 31, December 31,

2008 2007


Current assets:

Cash and cash equivalents $46,299 $75,963

Short-term investments 441,330 357,531

Trade accounts receivable, net of allowance for

doubtful accounts of $700 and $719 at

March 31, 2008 and December 31, 2007,

respectively 36,759 32,678

Accounts receivable - other 3,118 11,044

Inventories 50,448 48,540

Deferred income tax - short term 8,137 8,825

Prepaid income tax - 2,390

Prepaid expenses 14,056 17,505

Other current assets 6,056 4,402

Total current assets 606,203 558,878

Property, plant and equipment, net 142,662 129,493

Capitalized software, net 15,295 15,923

Goodwill 18,621 18,621

Deferred income tax - long term 7,942 7,942

License, manufacturing access fees and other

assets, net 54,825 58,196

Total assets $845,548 $789,053

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $14,945 $11,777

Accrued salaries and

SOURCE Gen-Probe Incorporated
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