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Gen-Probe Reports Financial Results for the First Quarter of 2011

SAN DIEGO, April 28, 2011 /PRNewswire/ -- Gen-Probe Incorporated (NASDAQ: GPRO) today reported financial results for the first quarter of 2011, highlighted by record total revenues of $143.0 million and non-GAAP earnings per share (EPS) of $0.54, 13% higher than in the prior year period.  

"Gen-Probe posted solid financial results in the first quarter of 2011, including all-time highs in product sales and total revenues, based on the acquisition of GTI and good growth from our PRODESSE influenza and APTIMA women's health products," said Carl Hull, the Company's president and chief executive officer.  "In addition, all our major pipeline initiatives remain on track, with an important new product cycle just beginning."

Key financial results for the first quarter of 2011 were ($ in millions, except EPS):Non-GAAPGAAP2011




ChangeProduct sales





+6%Total revenues





+6%Operating profit





+11%Net income










0%Revenue DetailClinical diagnostics product sales established a new record in the first quarter of 2011.  Growth of 15% was driven by sales of GTI products, which were not part of Gen-Probe in the prior year period, by the PRODESSE influenza franchise, and by the APTIMA Combo 2® assay for detecting Chlamydia and gonorrhea.  Foreign currency fluctuations had a minimal effect on clinical diagnostics sales compared to the prior year period.

In blood screening, sales declined compared to the first quarter of 2010, as expected, due mainly to lower sales of instruments to Novartis, the Company's blood screening collaborator.  Foreign currency fluctuations reduced blood screening sales by an estimated $0.3 million, or less than 1%, compared to the prior year period.

Sales of research products and services in the first quarter of 2011 were $3.1 million, down 24% compared to the prior year period due to continued weakness in pharmaceutical outsourcing.  

First quarter product sales were ($ in millions):Three Months Ended March 31,Change2011


CurrencyClinical Diagnostics



+15%Blood Screening



-5%Research Products  and Services



-25%Total Product Sales



+6%Collaborative research revenues in the first quarter of 2011 were $3.6 million, compared to $3.3 million in the prior year period, an increase of 9% that resulted primarily from increased funding from Novartis associated with the development of the fully automated PANTHER™ instrument and the PROCLEIX® ULTRIO® Plus assay for the blood screening market.

Royalty and license revenues in the first quarter of 2011 were $1.4 million, compared to $1.6 million in the prior year period, a decrease of 13% that resulted from the combined effect of several small items.  

GAAP Income Statement DetailsGross margin on product sales was 69.6% in the first quarter of 2011, compared to 67.3% in the prior year period.  This increase resulted mainly from a favorable product sales mix, namely higher sales of PRODESSE and APTIMA products, and lower sales of instrumentation.  

Acquisition-related amortization expenses were $2.8 million in the first quarter of 2011, compared to $2.2 million in the prior year period, an increase of 27% that resulted mainly from the acquisition of GTI in December of 2010.

Research and development (R&D) expenses were $29.0 million in the first quarter of 2011, compared to $29.7 million in the prior year period, a decrease of 2% that resulted primarily from lower clinical trial expenses.  

Marketing and sales expenses were $16.5 million in the first quarter of 2011, compared to $14.8 million in the prior year period, an increase of 12% that resulted primarily from the addition of GTI's cost structure, and European sales force expansion and market development efforts.  

General and administrative (G&A) expenses were $18.2 million in the first quarter of 2011, compared to $14.7 million in the prior year period, an increase of 24% that resulted primarily from the addition of GTI's cost structure and costs associated with the Company's patent infringement litigation against Becton, Dickinson.  

Total other income was $0.4 million in the first quarter of 2011, compared to $4.9 million in the prior year period.  This significant decrease resulted primarily from the absence of a non-cash gain related to a change in the fair value of contingent consideration, lower net realized gains on sales of marketable securities, lower yields on the Company's municipal bond portfolio, and lower investment balances due to cash used for share repurchases and the acquisition of GTI.

Income tax expense was $11.8 million in the first quarter of 2011, corresponding to a tax rate of 34%.  

Non-GAAP Income Statement DetailsExcluding $0.1 million of acquisition-related depreciation expense, gross margin on product sales was 69.7% in the first quarter of 2011, compared to 67.4% in the prior year period.

Excluding transaction-related and restructuring costs, G&A expenses were $16.8 million in the first quarter of 2011, compared to $14.7 million in the prior year period.

Total other income was $0.4 million in the first quarter of 2011, compared to $3.2 million in the prior year period.  The prior year amount excludes the non-cash gain related to a change in the fair value of contingent consideration.

Income tax expense was $12.8 million in the first quarter of 2011, corresponding to a tax rate of 32%.

Cash Flows and Balance SheetIn the first quarter of 2011, Gen-Probe generated net cash of $40.1 million from operating activities, substantially higher than GAAP net income of $23.3 million.  The Company spent $10.8 million on property, plant and equipment in the quarter, leading to free cash flow of $29.3 million.  The Company repurchased approximately 756,000 shares of its stock in the first quarter for $48.0 million.

Gen-Probe continues to have a strong balance sheet.  As of March 31, 2011, the Company had $491.3 million of cash, cash equivalents and marketable securities, and $250 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%.  

2011 Financial GuidanceGen-Probe is reiterating its 2011 financial guidance, which was introduced on February 15.

"We continue to anticipate that 2011 will be a good year financially for Gen-Probe," said Herm Rosenman, the Company's senior vice president, finance, and chief financial officer.  "We forecast continued, high-single-digit growth in product sales.  We also expect improving gross and operating margins to drive solid earnings growth, despite increased legal expenses and substantially lower non-operating income."

Gen-Probe's 2011 financial guidance is provided in the table below:Non-GAAP

GAAPTotal revenues

$570 to $595 million

$570 to $595 millionProduct gross margins

68% to 69.5%

68% to 69.5%Acquisition-related amortization and
other transaction expense


$13 to 14 millionOperating margin

27% to 29%

25% to 27%Tax rate

32% to 33%

32% to 33%Diluted shares

48 to 49 million

48 to 49 millionEPS

$2.28 to $2.40

$2.06 to $2.20Webcast Conference CallA live webcast of Gen-Probe's first quarter 2011 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.  Call 800-839-5573 (domestic) or 402-220-2075 (international).  

About Gen-ProbeGen-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

About Non-GAAP Financial MeasuresGen-Probe's management believes that non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance by excluding certain expenses that may not be indicative of core business results.  To supplement the Company's financial results for the first quarter of 2011 and its 2011 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 marketing and sales expenses, non-GAAP G&A expenses, non-GAAP operating margin, 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.

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

Caution Regarding Forward-Looking StatementsAny statements in this news release about our expectations, beliefs, plans, objectives, assumptions or future events or performance, including those under the heading "2011 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, the development and commercialization of new products, regulatory approvals, future milestones, growth opportunities, and plans 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 2011 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 instrument system and PROGENSA PCA3, APTIMA HPV and APTIMA trichomonas assays, may not develop as expected, (iv) the enhancement of existing products and the development of new products may not proceed as planned, (v) 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, (vi) the risk that we may not be able to compete effectively, (vii) the risk that we may not be able to maintain our current corporate collaborations and enter into new corporate collaborations or customer contracts, (viii) our dependence on Novartis 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, (xi) changes in government regulation or tax policy affecting our diagnostic products could harm our sales, increase our development costs or increase our taxes, (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.  This list includes 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
Vice president, investor relations and
corporate communications
858-410-8673Gen-Probe IncorporatedConsolidated Balance Sheets - GAAP(In thousands, except share and per share data)March 31,December 31,20112010(Unaudited)AssetsCurrent assets:Cash and cash equivalents

$  93,563$  59,690Marketable securities

177,908170,648Trade accounts receivable, net of allowance for doubtful accounts
  of $405 and $355 at March 31, 2011 and December 31, 2010,

59,63354,739Accounts receivable — other


65,18066,416Deferred income tax

13,77413,634Prepaid income tax

262,993Prepaid expenses

13,83711,672Other current assets

5,6985,148Total current assets

433,167390,433Marketable securities, net of current portion

219,808259,317Property, plant and equipment, net

163,538160,863Capitalized software, net

14,01413,981Patents, net


150,639150,308Purchased intangibles, net

118,338120,270License, manufacturing access fees and other assets, net

62,42760,175Total assets

$1,174,258$1,167,797Liabilities and stockholders' equityCurrent liabilities:Accounts payable

$  11,471$  14,614Accrued salaries and employee benefits

19,06626,825Other accrued expenses

16,76813,935Income tax payable

7,649634Short-term borrowings

250,000240,000Deferred income tax

91—Deferred revenue

1,4601,166Total current liabilities

306,505297,174Non-current income tax payable

8,8648,315Deferred income tax

27,30829,775Deferred revenue, net of current portion

2,3182,500Other long-term liabilities

7,1496,654Commitments and contingenciesStockholders' 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, 47,663,833 and 47,966,156 shares issued and
  outstanding at March 31, 2011 and December 31, 2010,

55Additional paid-in capital

172,133195,820Accumulated other comprehensive (loss) income

(177)678Retained earnings

650,153626,876Total stockholders' equity

822,114823,379Total liabilities and stockholders' equity

$1,174,258$1,167,797Gen-Probe IncorporatedConsolidated Statements of Income - GAAP(In thousands, except per share data)

(Unaudited)Three Months EndedMarch 31,20112010Revenues:Product sales

$138,112$130,569Collaborative research revenue

3,5683,264Royalty and license revenue

1,3581,586Total revenues

143,038135,419Operating expenses:Cost of product sales (excluding acquisition-related intangible

41,94342,661Acquisition-related intangible amortization

2,8052,216Research and development

28,96329,681Marketing and sales

16,52214,781General and administrative

18,15314,679Total operating expenses

108,386104,018Income from operations

34,65231,401Other income (expense):Investment and interest income

7353,898Interest expense

(503)(546)Gain on contingent consideration

—1,745Other income (expense), net

177(159)Total other income, net

4094,938Income before income tax

35,06136,339Income tax expense

11,78412,146Net income

$  23,277$24,193Net income per share:Basic

$  0.49$  0.49Diluted

$  0.48$  0.48Weighted average shares outstanding:Basic


49,00449,739Gen-Probe IncorporatedConsolidated Statements of Income – Non-GAAP Reconciliations(In thousands, except per share data)

(Unaudited)Three Months EndedThree Months EndedMarch 31, 2011March 31, 2010Non-GAAPAdjustmentsGAAPNon-GAAPAdjustmentsGAAPRevenues:Product sales


$  —


$  —

$130,569Collaborative research revenue



3,264Royalty and license revenue



1,586Total revenues



135,419Operating expenses:Cost of product sales
(excluding acquisition-
related intangible





42,661Acquisition-related intangible




2,216Research and development



29,681Marketing and sales



14,781General and administrative





14,679Total operating expenses





104,018Income from operations





31,401Other income (expense):Investment and interest income



3,898Interest expense



(546)Gain on contingent consideration



1,745Other income (expense), net



(159)Total other income, net




4,938Income before income tax





36,339Income tax expense





12,146Net income

$  26,554


$  23,277$  23,971


$  24,193Net income per share:Basic

$  0.55

$  (0.06)

$  0.49$  0.49

$  —

$  0.49Diluted

$  0.54

$  (0.06)

$  0.48$  0.48

$  —

$  0.48Weighted average shares






49,739Gen-Probe IncorporatedConsolidated Statements of Cash Flows - GAAP(In thousands)

(Unaudited)Three Months EndedMarch 31,20112010Operating activities:Net income

$  23,277$  24,193Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization

11,34511,308Amortization of premiums on investments, net of accretion of discounts

2,6732,216Stock-based compensation

6,0365,902Excess tax benefit from employee stock-based compensation

(1,425)(1,596)Deferred revenue

97(833)Deferred income tax

(615)(1,360)Gain on contingent consideration

—(1,745)Loss on disposal of property and equipment

2447Changes in assets and liabilities:Trade and other accounts receivable


3,4201,110Prepaid expenses

(2,116)(2,200)Other current assets

(536)(95)Other long-term assets

(132)(257)Accounts payable

(3,196)(8,065)Accrued salaries and employee benefits

(7,847)(5,256)Other accrued expenses

(40)(1,630)Income tax payable

11,50011,827Other long-term liabilities

456(575)Net cash provided by operating activities

40,10540,687Investing activities:Proceeds from sales and maturities of marketable securities

30,460139,425Purchases of marketable securities

(5,731)(71,390)Purchases of property, plant and equipment

(10,762)(7,828)Purchases of capitalized software

(780)(1,089)Purchases of intangible assets, including licenses and manufacturing access fees


501(310)Net cash provided by investing activities

12,76558,086Financing activities:Repurchase and retirement of common stock

(47,972)(10,961)Proceeds from issuance of common stock and employee stock purchase plan

17,39016,912Repurchase and retirement of restricted stock for payment of taxes

(358)(39)Excess tax benefit from employee stock-based compensation

1,4251,596Borrowings, net

10,000—Net cash (used in) provided by financing activities

(19,515)7,508Effect of exchange rate changes on cash and cash equivalents

518(1,620)Net increase in cash and cash equivalents

33,873104,661Cash and cash equivalents at the beginning of period

59,69082,616Cash and cash equivalents at the end of period

$  93,563$  187,277

SOURCE Gen-Probe Incorporated
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