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Gen-Probe Reports Strong Financial Results for Fourth Quarter and Full Year 2008
Date:2/17/2009

- Company Posts Quarterly EPS of $0.39, Total Revenues of $109.1 Million -

- For Full Year 2008, EPS Increase by 23%, Total Revenues by 17% -

- Company Generates $178.3 Million of Operating Cash in 2008 -

SAN DIEGO, Feb. 17 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated (Nasdaq: GPRO) today reported strong financial results for the fourth quarter and full year ended December 31, 2008, including quarterly earnings per share (EPS) of $0.39(1) and total revenues of $109.1 million.

"Gen-Probe posted strong financial results in the fourth quarter of 2008, driven by healthy growth in both clinical diagnostics and blood screening sales," said Hank Nordhoff, the Company's chairman and chief executive officer. "In addition, our fourth quarter performance completed an excellent 2008 that saw top- and bottom-line growth rates exceed our long-term goals."

In the fourth quarter of 2008, product sales were $105.8 million, compared to $92.4 million in the prior year period, an increase of 15%. Total revenues for the fourth quarter of 2008 were $109.1 million, compared to $98.9 million in the prior year period, an increase of 10%. Net income in the fourth quarter of 2008 was $21.1 million ($0.39 per share), compared to $20.4 million ($0.37 per share) in the prior year period, an increase of 3% (5% per share). In the prior year period, both net income and EPS benefited from an income tax rate of approximately 22% that resulted mainly from the completion of an audit of the Company's 2003 and 2004 California state income tax returns.

For the full year 2008, product sales were $429.2 million, compared to $370.9 million in the prior year, an increase of 16%. Total revenues for 2008 were $472.7 million, compared to $403.0 million in the prior year, an increase of 17%. Net income for 2008 was $107.0 million ($1.95 per share), compared to $86.1 million ($1.58 per share) in the prior year, an increase of 24% (23% per share). In the prior year, both net income and EPS benefited from an income tax rate of approximately 23% that resulted mainly from the item noted above and the completion of an audit of the Company's 2003 and 2004 federal income tax returns, the benefit from which was recorded in the second quarter of 2007.

Detailed Results

Gen-Probe's clinical diagnostics sales in the fourth quarter of 2008 reflected the 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 fourth quarter compared to the prior year period, in line with Gen-Probe's expectations.

In blood screening, product sales in the fourth quarter of 2008 benefited mainly from increased sales of the PROCLEIX(R) ULTRIO(R) assay. In contrast to the first three quarters of 2008, foreign exchange fluctuations had a negative effect of $0.1 million on blood screening growth in the fourth quarter compared to the prior year period. Chiron, a business unit of Novartis Vaccines and Diagnostics, markets the Company's blood screening products worldwide.

    Product sales were, in millions:
                     Three Months Ended Dec. 31,      Year Ended Dec. 31,
                     2008       2007    Increase   2008      2007    Increase
    Clinical
     diagnostics     $57.7     $49.7       16%    $222.9    $199.2     12%
    Blood screening  $48.1     $42.7       13%    $206.3    $171.7     20%
    Total product
     sales          $105.8     $92.4       15%    $429.2    $370.9     16%

Collaborative research revenues in the fourth quarter of 2008 were $2.1 million, compared to $5.4 million in the prior year period, a decrease of 61% that resulted primarily from the June 2008 termination of the Company's collaboration with 3M to develop rapid tests for healthcare-associated infections. For the full year 2008, collaborative research revenues were $20.6 million, compared to $16.6 million in the prior year, an increase of 24% that resulted primarily from a $10 million milestone the Company earned from Chiron in the third quarter based on the full approval by the US Food and Drug Administration (FDA) of the PROCLEIX ULTRIO assay on the TIGRIS system.

Royalty and license revenues for the fourth quarter of 2008 were $1.3 million, compared to $1.1 million in the prior year period, an increase of 18%. For the full year 2008, royalty and license revenues were $22.9 million, compared to $15.5 million in the prior year, an increase of 48% 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 fourth quarter of 2008 was 69.6%, compared to 69.2% in the prior year period. This increase resulted primarily from increased sales of blood screening products and APTIMA(R) assays. In the fourth quarter of 2008, gross margin on product sales was negatively affected by costs associated with the voluntary recall of certain AccuProbe(R) culture identification kits, which increased cost of product sales by $0.9 million and reduced gross margin on product sales by approximately 0.9%. For the full year 2008, gross margin on product sales was 70.2%, compared to 67.7% in the prior year. This increase resulted primarily from the factors discussed above.

Research and development (R&D) expenses in the fourth quarter of 2008 were $24.2 million, essentially unchanged from $24.3 million in the prior year period. For the full year 2008, R&D expenses were $101.1 million, compared to $97.1 million in the prior year, an increase of 4% 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 fourth quarter of 2008 were $11.8 million, compared to $11.3 million in the prior year period, an increase of 4% that resulted primarily from European market development efforts related to the Company's APTIMA Combo 2, APTIMA HPV and PROGENSA(TM) PCA3 assays. For the full year 2008, marketing and sales expenses were $45.9 million, compared to $39.9 million in the prior year, an increase of 15% that also resulted from European market development efforts.

General and administrative (G&A) expenses in the fourth quarter of 2008 were $13.8 million, compared to $12.3 million in the prior year period, an increase of 12% that resulted primarily from increased business development, legal and compensation costs. For the full year 2008, G&A expenses were $52.3 million, compared to $47.0 million in the prior year, an increase of 11% that resulted primarily from the factors described above.

Total other income in the fourth quarter of 2008 was $3.8 million, compared to $3.7 million in the prior year period, an increase of 3% that resulted primarily from higher short-term investment balances. For the full year 2008, total other income was $15.5 million, compared to $12.3 million in the prior year period, an increase of 26% that also resulted from higher short-term investment balances.

Gen-Probe continues to have a strong balance sheet. As of December 31, 2008, the Company had $505.2 million of cash, cash equivalents and short-term investments, and no debt. In the fourth quarter of 2008, the Company repurchased approximately 1.5 million shares of its common stock for $65 million. For the full year 2008, Gen-Probe generated net cash of $178.3 million from its operating activities, compared to the Company's net income of $107.0 million.

2009 Financial Guidance

Gen-Probe provided its initial 2009 financial guidance via a press release issued on January 27, 2009.

"We expect 2009 to be another year of solid underlying earnings growth for Gen-Probe, although previously disclosed non-recurring items that added approximately $32 million of revenue and $0.34 of EPS will make comparisons to 2008 difficult," said Herm Rosenman, the Company's senior vice president of finance and chief financial officer.

Gen-Probe's 2009 guidance excludes revenue and expense associated with the pending Tepnel acquisition, which is expected to close in the second quarter, as well as any incremental revenue from the PROCLEIX ULTRIO assay in the United States. For the full year 2009, the Company expects the following on a GAAP basis:

                                        2009 Guidance
    Total revenues              $460 million to $490 million
    Product gross margins                   69-72%
    R&D expenses                            20-22%
    Marketing and sales expenses            10-11%
    G&A expenses                            10-11%
    Tax rate                                  34%
    Diluted shares outstanding          52-54 million
    EPS                                $1.80 to $2.05


This guidance incorporates foreign exchange rate fluctuations approximately 10% higher and lower than recent levels. The Company recorded approximately $90 million of non-U.S.-dollar-denominated revenue in 2008.

Recent Events

  • Tepnel Acquisition. On January 30, 2009, Gen-Probe announced an offer to acquire all the outstanding and to-be-issued shares of Tepnel Life Sciences, PLC (AIM: TED), a rapidly growing molecular diagnostics and research services company based in the United Kingdom, for 27.1 pence per share in cash, or approximately 92.8 million pounds in total.
  • New Novartis Agreement. On January 27, 2009, Gen-Probe announced an agreement to extend and expand its blood screening collaboration with Chiron, a Novartis (NYSE: NVS) business, ensuring the companies will work together to develop and commercialize molecular technologies that safeguard the world's donated blood supply until the year 2025.
  • New R&D Leader. On February 3, 2009, Gen-Probe announced that Eric Lai, Ph.D., had joined the Company as senior vice president, research and development. Dr. Lai was most recently vice president, pharmacogenetics experimental project coordination and analysis, at GlaxoSmithKline.
  • New Strategy Executive. On January 13, 2009, Gen-Probe announced that Eric Tardif had joined the Company as senior vice president, corporate strategy. Mr. Tardif was formerly a managing director in Morgan Stanley's healthcare investment banking group.
  • APTIMA HPV Data. On November 21, 2008, Gen-Probe announced that promising data on the Company's CE-marked APTIMA HPV assay was presented in nine oral presentations and two scientific posters at the international conference of the European Research Organization on Genital Infection and Neoplasia in Nice, France.

Webcast Conference Call

A live webcast of Gen-Probe's fourth 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 800-873-5860 for domestic callers and 203-369-3996 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 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 www.gen-probe.com.

Trademarks

AccuProbe, 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 "2009 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, financial guidance, regulatory approvals, future milestone payments, growth opportunities, proposed acquisition of Tepnel Life Sciences, PLC, 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 2009 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) the risk that we may not be able to compete effectively, (vi) the risk that we may not be able to maintain our current corporate collaborations and enter into new corporate collaborations or customer contracts, (vii) the risk that our proposed acquisition of Tepnel may not be completed on the expected timeline, or at all, (viii) our dependence on Novartis, Siemens (as assignee of Bayer) and other third parties for the distribution of some of our products, (ix) our dependence 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, 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.

(1) In this press release, all per share amounts are calculated on a fully diluted basis, and all results are presented in US GAAP. Some totals may not foot due to rounding.

    Contact:

    Michael Watts
    Vice president, investor relations and
    corporate communications
    858-410-8673



                             Gen-Probe Incorporated
                          Consolidated Balance Sheets
                 (In thousands, except share and per share data)


                                                   December 31,  December 31,
                                                       2008         2007
    Assets
    Current assets:
       Cash and cash equivalents                      $60,122     $75,963
       Short-term investments                         445,056     357,531
       Trade accounts receivable, net of
        allowance for doubtful accounts of $700
        and $719 at December 31, 2008 and
        December 31, 2007, respectively                33,397      32,678
       Accounts receivable - other                      2,900      11,044
       Inventories                                     54,406      48,540
       Deferred income tax - short term                 7,269       8,825
       Prepaid income tax                               2,306       2,390
       Prepaid expenses                                15,094      17,505
       Other current assets                             6,135       4,402
    Total current assets                              626,685     558,878

    Property, plant and equipment, net                141,922     129,493
    Capitalized software, net                          13,409      15,923
    Goodwill                                           18,621      18,621
    Deferred income tax - long term                    12,286       7,942
    License, manufacturing access fees and
     other assets, net                                 56,608      58,196
    Total assets                                     $869,531    $789,053

    Liabilities and stockholders' equity
    Current liabilities:
      Accounts payable                                $16,050     $11,777
      Accrued salaries and employee benefits           25,093      20,997
      Other accrued expenses                            4,027       4,024
      Income tax payable                                    -         846
      Deferred revenue - short term                     1,278       2,836
    Total current liabilities                          46,448      40,470

    Non-current income tax payable                      4,773       3,958
    Deferred income tax - long term                        55          75
    Deferred revenue - long term                        2,333       4,607
    Deferred compensation plan liabilities              2,162       1,893

    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,
        52,920,971 and 53,916,298 shares issued
        and outstanding at December 31, 2008 and
        December 31, 2007, respectively                     5           5
       Additional paid-in capital                     382,544     415,229
       Accumulated other comprehensive income           3,055       1,604
       Retained earnings                              428,156     321,202
       Total stockholders' equity                     813,760     738,040
    Total liabilities and stockholders' equity       $869,531    $789,053



                           Gen-Probe Incorporated
                      Consolidated Statements of Income
                     (In thousands, except per share data)

                                     Three Months Ended  Twelve Months Ended
                                        December 31,        December 31,
                                       2008      2007      2008      2007
    Revenues:
      Product sales                 $105,759   $92,426  $429,220  $370,877
      Collaborative research
       revenue                         2,128     5,380    20,581    16,619
      Royalty and license revenue      1,254     1,143    22,894    15,518
    Total revenues                   109,141    98,949   472,695   403,014

    Operating expenses:
      Cost of product sales           32,202    28,493   128,029   119,641
      Research and development        24,158    24,331   101,099    97,144
      Marketing and sales             11,780    11,348    45,850    39,928
      General and administrative      13,806    12,265    52,322    47,007
    Total operating expenses          81,946    76,437   327,300   303,720

    Income from operations            27,195    22,512   145,395    99,294
    Interest income                    4,527     3,837    16,801    12,772
    Other income/(expense)              (683)     (144)   (1,333)     (469)
    Total other income, net            3,844     3,693    15,468    12,303
    Income before income tax          31,039    26,205   160,863   111,597

    Income tax expense                 9,899     5,793    53,909    25,457
    Net income                       $21,140   $20,412  $106,954   $86,140

    Net income per share:
      Basic                            $0.40     $0.38     $1.99     $1.63
      Diluted                          $0.39     $0.37     $1.95     $1.58

    Weighted average shares
     outstanding:
      Basic                           53,159    53,769    53,708    52,975
      Diluted                         53,808    55,310    54,796    54,522



                                  Gen-Probe Incorporated
                           Consolidated Statements of Cash Flows
                                     (In thousands)


                                                      Twelve Months Ended
                                                          December 31,
                                                       2008          2007
    Operating activities:
       Net income                                    $106,954       $86,140
       Adjustments to reconcile net income to net
        cash provided by operating activities:
         Depreciation and amortization                 34,715        34,159
         Amortization of premiums on investments,
          net of accretion of discounts                 6,908         4,576
         Stock-based compensation charges              20,663        19,651
         Stock option income tax benefits               3,276         2,596
         Excess tax benefit from employee stock
          options                                      (2,493)      (14,606)
         Gain on sale of investment in Molecular
          Profiling Institute, Inc.                    (1,600)            -
         Loss on property and equipment dispositions
          and other                                        55           703
         Impairment of long-lived assets                5,086             -
         Changes in assets and liabilities:
           Trade and other accounts receivable          7,421       (16,180)
           Inventories                                 (5,367)        3,588
           Prepaid expenses                             2,325        (6,141)
           Other current assets                        (1,260)       (2,307)
           Other long term assets                        (173)       (1,131)
           Accounts payable                             4,377        (1,818)
           Accrued salaries and employee benefits       4,125         4,273
           Other accrued expenses                         101           679
           Income tax payable                            (499)         (397)
           Deferred revenue                            (3,831)        2,855
           Deferred income tax                         (2,788)       (7,621)
           Deferred rent                                  (10)         (118)
           Deferred compensation plan liabilities         268           683
    Net cash provided by operating activities         178,253       109,584

    Investing activities:
    Proceeds from sales and maturities of
     short-term investments                           105,994       140,988
    Purchases of short-term investments              (198,691)     (298,824)
    Purchases of property, plant and equipment        (39,348)      (23,096)
    Capitalization of intangible assets,
     including license and manufacturing access
     fees                                             (11,970)       (2,213)
    Proceeds from sale of investment in
     Molecular Profiling Institute, Inc.                4,100             -
    Other assets                                           27          (279)
    Net cash used in investing activities            (139,888)     (183,424)

    Financing activities:
    Excess tax benefit from employee stock
     options                                            2,493        14,606
    Repurchase and retirement of restricted
     stock for payment of taxes                        (1,529)       (1,474)
    Buyback of common stock                           (74,970)            -
    Proceeds from issuance of common stock             20,472        48,680
    Net cash (used in) / provided by financing
     activities                                       (53,534)       61,812
    Effect of exchange rate changes on cash and
     cash equivalents                                    (672)           86
    Net decrease in cash and cash equivalents         (15,841)      (11,942)
    Cash and cash equivalents at the beginning
     of period                                         75,963        87,905
    Cash and cash equivalents at the end of
     period                                           $60,122       $75,963


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