Gen-Probe Reports Financial Results for the Fourth Quarter of 2011 - Total Revenues Establish New Quarterly Record of $158.2 Million, Up 16% -

- Non-GAAP Earnings Per Share Set New High of $0.72, Up 18%, While GAAP Earnings Per Share Total $0.42 -

SAN DIEGO, Feb. 13, 2012 /PRNewswire/ -- Gen-Probe Incorporated (NASDAQ: GPRO) today reported financial results for the fourth quarter of 2011.  Total revenues in the quarter grew 16%, to a new record of $158.2 million, while non-GAAP earnings per share (EPS) increased 18%, to a new high of $0.72.

"Gen-Probe finished 2011 strong, as blood screening sales rebounded in the fourth quarter while clinical diagnostics revenues continued their solid growth," said Carl Hull, the Company's chairman and chief executive officer.  "We enter 2012 with excellent momentum based on several new product launches that are off to good starts."

Key financial results for the fourth quarter of 2011 were ($ in millions, except EPS):



Non-GAAP


GAAP


2011

2010

Change


2011

2010

Change

Total revenues

$158.2

$136.7

+16%


$158.2

$136.7

+16%

Product sales

$155.2

$131.1

+18%


$155.2

$131.1

+18%

Operating profit

$45.8

$40.1

+14%


$29.4

$36.8

-20%

Net income

$33.7

$29.4

+15%


$19.9

$27.2

-27%

EPS

$0.72

$0.61

+18%


$0.42

$0.56

-25%




Gen-Probe's GAAP results for the fourth quarter of 2011 were negatively affected by impairment charges of $12.7 million related to acquired goodwill and intangible assets.  

Revenue Detail

In the fourth quarter of 2011, clinical diagnostics product sales grew by 13% compared to the prior year period.  This increase was driven primarily by domestic and international growth of the APTIMA Combo 2® assay for detecting Chlamydia and gonorrhea, and by the inclusion of sales from the former GTI Diagnostics (GTI), which the Company acquired in December of 2010.  Foreign currency fluctuations reduced clinical diagnostics sales by an estimated $0.1 million compared to the prior year period.

In blood screening, fourth-quarter sales increased by 30% compared to the prior year period, as expected, mainly due to greater shipments of assays and TIGRIS® instruments to Novartis, the Company's blood screening collaboration partner.  Foreign currency fluctuations increased blood screening sales by an estimated $0.2 million compared to the prior year period.  

Sales of research products and services in the fourth quarter of 2011 were $2.4 million, down 29% compared to the prior year period.  Foreign currency fluctuations had an immaterial effect on sales of research products and services compared to the prior year period.

Fourth quarter product sales were ($ in millions):



Three Months Ended Dec. 31,


Change


2011

2010


As
Reported

Constant
Currency

Clinical Diagnostics

$90.6

$80.1


+13%

+13%

Blood Screening

$62.1

$47.6


+30%

+30%

Research Products

and Services

$2.4

$3.4


-29%

-29%

Total Product Sales

$155.2

$131.1


+18%

+18%




Collaborative research revenues in the fourth quarter of 2011 were $1.4 million, compared to $3.7 million in the prior year period, a decrease of 62% 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 fourth quarter of 2011 were $1.6 million, compared to $1.9 million in the prior year period, a decrease of 16%.  

GAAP Income Statement Details

Gross margin on product sales was 66.7% in the fourth quarter of 2011, compared to 69.4% in the prior year period.  This decrease resulted mainly from higher sales of low-margin instrumentation to Novartis, which are generally a precursor to future assay sales.

Acquisition-related amortization expenses were $2.8 million in the fourth 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.

Research and development (R&D) expenses were $28.2 million in the fourth quarter of 2011, compared to $26.9 million in the prior year period, an increase of 5% that resulted primarily from the addition of GTI's R&D programs.  

Marketing and sales expenses were $17.1 million in the fourth quarter of 2011, compared to $15.0 million in the prior year period, an increase of 14% that resulted primarily from the addition of GTI's cost structure and ongoing European commercial expansion.  

General and administrative (G&A) expenses were $16.2 million in the fourth quarter of 2011, compared to $15.6 million in the prior year period, an increase of 4% that resulted mainly from the addition of GTI's cost structure.    

Goodwill and asset impairment charges totaled $12.7 million in the fourth quarter of 2011.  Of this charge, $8.7 million related to goodwill associated with the Company's research products and services business, which was acquired as part of the Tepnel acquisition in April of 2009, and $4.0 million related to in-process research and development intangible assets of GTI.

Total other income, net, was $0.4 million in the fourth quarter of 2011, compared to total other income, net, of $1.2 million in the prior year period, a decrease of 67%.  This decrease resulted primarily from a non-cash gain in the prior year period and unfavorable exchange rate effects.

Income tax expense was $10.0 million in the fourth quarter of 2011, corresponding to an effective tax rate of 33%.

Non-GAAP Income Statement Details

In the fourth quarter of 2011, 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 $15.6 million in the fourth quarter of 2011, compared to $14.7 million in the prior year period, an increase of 6%.

Non-GAAP income tax expense was $12.4 million in the fourth quarter of 2011, corresponding to an effective tax rate of 27%.  Income tax expense was less than expected in the fourth quarter due to the utilization of foreign losses and higher ex-US sales.

Cash Flows and Balance Sheet

In the fourth quarter of 2011, Gen-Probe generated net cash of $53.4 million from operating activities, and spent $7.2 million on property, plant and equipment, leading to free cash flow of $46.2 million, a new quarterly record.  

Gen-Probe continues to maintain a strong balance sheet.  As of December 31, 2011, the Company had $368.0 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%.  

During the fourth quarter of 2011, Gen-Probe repurchased 1.7 million shares of Company stock for $100 million, corresponding to an average purchase price of $58.83 per share.  This completed the $100 million repurchase plan that was announced in November of 2011.

2012 Financial Guidance

"We anticipate returning to low double-digit organic revenue growth in 2012 based on multiple new product launches that are still in their early stages," said Herm Rosenman, Gen-Probe's senior vice president, finance, and chief financial officer.  "We forecast a similar rate of bottom-line growth in 2012 as we invest in these launches and in a series of R&D projects that extend our lead in assay and instrument performance.  We believe that these investments position us well for solid, sustainable growth over the next several years."

Gen-Probe's 2012 financial guidance is provided below:



Non-GAAP

GAAP

Total revenues

$630 to $655 million

$630 to $655 million

Product gross margins

68% to 69.5%

68% to 69.5%

Acquisition-related amortization,
restructuring and other transaction
expense

N/A

~ $15 million

Operating margin

26.5% to 28%

24.5% to 26%

Tax rate

30.5% to 32.5%

30.5% to 32.5%

Diluted shares

~ 47 million

~ 47 million

EPS

$2.50 to $2.68

$2.30 to $2.48




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 fourth quarter of 2011 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.  Certain prior year amounts have been reclassified to conform to the current year presentation.  

Webcast Conference Call

A live webcast of Gen-Probe's fourth quarter 2011 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.  Call 866-501-7043 (domestic) or 203-369-1846 (international).  

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.

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," 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, and management plans 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 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 or enter into new ones, (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 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 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:

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

Gen-Probe Incorporated

Consolidated Balance Sheets - GAAP

(In thousands, except share and per share data)



December 31,


December 31,


2011


2010

Assets

(Unaudited)



Current assets:




Cash and cash equivalents, including restricted cash of $38 and $16 at December 31, 2011 and December 31, 2010, respectively

$  87,021


$  59,690

Marketable securities

218,789


170,648

Trade accounts receivable, net of allowance for doubtful accounts of $320 and $355 at December 31, 2011 and December 31, 2010, respectively

57,767


54,739

Accounts receivable — other

3,446


5,493

Inventories

77,886


66,416

Deferred income tax

8,188


13,634

Prepaid expenses

11,555


14,665

Other current assets

4,967


5,148

Total current assets

469,619


390,433

Marketable securities, net of current portion

62,237


259,317

Property, plant and equipment, net

176,081


160,863

Capitalized software, net

16,992


13,981

Patents, net

11,758


12,450

Goodwill

140,404


150,308

Purchased intangibles, net

106,619


120,270

License, manufacturing access fees and other assets, net

61,738


60,175

Total assets

$1,045,448


$1,167,797





Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$  12,000


$  14,614

Accrued salaries and employee benefits

28,795


26,825

Other accrued expenses

12,846


13,935

Income tax payable

1,857


634

Short-term borrowings

248,000


240,000

Deferred revenue

1,238


1,166

Total current liabilities

304,736


297,174

Non-current income tax payable

10,019


8,315

Deferred income tax

19,283


29,775

Deferred revenue, net of current portion

3,237


2,500

Other long-term liabilities

7,831


6,654

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, 45,008,879 and 47,966,156 shares issued and outstanding at December 31, 2011 and December 31, 2010, respectively

5


5

Additional paid-in capital

23,650


195,820

Accumulated other comprehensive income (loss)

(313)


678

Retained earnings

677,000


626,876

Total stockholders' equity

700,342


823,379

Total liabilities and stockholders' equity

$1,045,448


$1,167,797




Gen-Probe Incorporated

Consolidated Statements of Income - GAAP

(In thousands, except per share data)

(Unaudited)



Three Months Ended


Twelve Months Ended


December 31,


December 31,


2011


2010


2011


2010

Revenues:








Product sales

$155,162


$131,093


$562,588


$522,709

Collaborative research revenue

1,369


3,708


7,682


14,518

Royalty and license revenue

1,644


1,893


5,964


6,100

Total revenues

158,175


136,694


576,234


543,327









Operating expenses:








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

51,742


40,104


173,645


169,222

Acquisition-related intangible amortization

2,760


2,231


11,061


8,847

Research and development

28,202


26,885


112,742


111,103

Marketing and sales

17,056


15,016


68,396


59,492

General and administrative

16,240


15,610


71,394


56,818

Goodwill and asset impairment charges

12,746



12,746


Total operating expenses

128,746


99,846


449,984


405,482

Income from operations

29,429


36,848


126,250


137,845

Other income (expense):








Investment and interest income

1,317


1,401


8,695


11,765

Interest expense

(546)


(535)


(2,070)


(2,216)

Gain on contingent consideration


399



7,994

Other-than-temporary impairment loss on equity investment



(39,482)


Other income (expense), net

(364)


(95)


(236)


(177)

Total other income (expense), net

407


1,170


(33,093)


17,366









Income before income tax

29,836


38,018


93,157


155,211

Income tax expense

9,977


10,780


43,033


48,274

Net income

$  19,859


$  27,238


$  50,124


$106,937









Net income per share:








Basic

$  0.43


$  0.57


$  1.06


$  2.20

Diluted

$  0.42


$  0.56


$  1.04


$  2.18









Weighted average shares outstanding:








Basic

46,117


47,827


47,254


48,560

Diluted

46,944


48,455


48,387


49,033




Gen-Probe Incorporated

Consolidated Statements of Income – Non-GAAP Reconciliations

(In thousands, except per share data)

(Unaudited)



Three Months Ended


Three Months Ended


December 31, 2011


December 31, 2010


Non-GAAP

Adjustments

GAAP


Non-GAAP

Adjustments

GAAP

Revenues:








Product sales

$155,162

$  —

$155,162


$131,093

$  —

$131,093

Collaborative research revenue

1,369

1,369


3,708

3,708

Royalty and license revenue

1,644

1,644


1,893

1,893

Total revenues

158,175

158,175


136,694

136,694









Operating expenses:








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

51,626

116

51,742


40,013

91

40,104

Acquisition-related intangible amortization

2,760

2,760


2,231

2,231

Research and development

28,160

42

28,202


26,885

26,885

Marketing and sales

17,042

14

17,056


15,016

15,016

General and administrative

15,570

670

16,240


14,670

940

15,610

Goodwill and asset impairment charges

12,746

12,746


Total operating expenses

112,398

16,348

128,746


96,584

3,262

99,846

Income from operations

45,777

(16,348)

29,429


40,110

(3,262)

36,848

Other income (expense):








Investment and interest income

1,317

1,317


1,401

1,401

Interest expense

(546)

(546)


(535)

(535)

Gain on contingent consideration


399

399

Other income (expense), net

(364)

(364)


(95)

(95)

Total other income, net

407

407


771

399

1,170










Income before income tax

46,184

(16,348)

29,836


40,881

(2,863)

38,018

Income tax expense

12,441

(2,464)

9,977


11,437

(657)

10,780

Net income

$  33,743

$(13,884)

$  19,859


$  29,444

$  (2,206)

$  27,238









Net income per share:








Basic

$  0.73

$  (0.30)

$  0.43


$  0.61

$  (0.04)

$  0.57

Diluted

$  0.72

$  (0.30)

$  0.42


$  0.61

$  (0.05)

$  0.56









Weighted average shares  outstanding:








Basic

46,117


46,117


47,827


47,827

Diluted

46,944


46,944


48,455


48,455




Gen-Probe Incorporated

Consolidated Statements of Income – Non-GAAP Reconciliations

(In thousands, except per share data)

(Unaudited)



Twelve Months Ended


Twelve Months Ended


December 31, 2011


December 31, 2010


Non-GAAP

Adjustments

GAAP


Non-GAAP

Adjustments

GAAP

Revenues:








Product sales

$562,588

$  —

$562,588


$522,709

$  —

$522,709

Collaborative research revenue

7,682

7,682


14,518

14,518

Royalty and license revenue

5,964

5,964


6,100

6,100

Total revenues

576,234

576,234


543,327

543,327









Operating expenses:








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

173,216

429

173,645


168,860

362

169,222

Acquisition-related intangible amortization

11,061

11,061


8,847

8,847

Research and development

112,633

109

112,742


111,103

111,103

Marketing and sales

68,359

37

68,396


59,492

59,492

General and administrative

66,170

5,224

71,394


54,491

2,327

56,818

Goodwill and asset impairment charges

12,746

12,746


Total operating expenses

420,378

29,606

449,984


393,946

11,536

405,482

Income from operations

155,856

(29,606)

126,250


149,381

(11,536)

137,845

Other income (expense):








Investment and interest income

8,695

8,695


11,765

11,765

Interest expense

(2,070)

(2,070)


(2,216)

(2,216)

Gain on contingent consideration


7,994

7,994

Other-than-temporary impairment loss on equity investment

(39,482)

(39,482)


Other income (expense), net

(236)

(236)


(177)

(177)

Total other income (expense), net

6,389

(39,482)

(33,093)


9,372

7,994

17,366









Income before income tax

162,245

(69,088)

93,157


158,753

(3,542)

155,211

Income tax expense

49,226

(6,193)

43,033


51,303

(3,029)

48,274

Net income

$113,019

$  (62,895)

$  50,124


$107,450

$  (513)

$106,937









Net income per share:








Basic

$  2.39

$  (1.33)

$  1.06


$  2.21

$  (0.01)

$  2.20

Diluted

$  2.34

$  (1.30)

$  1.04


$  2.19

$  (0.01)

$  2.18









Weighted average shares outstanding:








Basic

47,254


47,254


48,560


48,560

Diluted

48,387


48,387


49,033


49,033




Gen-Probe Incorporated

Consolidated Statements of Cash Flows - GAAP

(In thousands)

(Unaudited)



Twelve Months Ended


December 31,


2011


2010

Operating activities:




Net income

$  50,124


$  106,937

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




Depreciation and amortization

46,569


44,529

Amortization of premiums on investments, net of accretion of discounts

9,592


9,573

Stock-based compensation

24,741


24,075

Excess tax benefit from employee stock-based compensation

(5,080)


(3,692)

Deferred revenue

850


(1,808)

Deferred income tax

(4,220)


(3,745)

Other-than-temporary impairment loss on equity investment

39,482


Goodwill and asset impairment charges

12,746


Gain on contingent consideration


(7,994)

Loss on disposal of property and equipment

364


1,065

Changes in assets and liabilities:




Trade and other accounts receivable

(1,112)


2,649

Inventories

(11,168)


(1,154)

Prepaid expenses

408


3,055

Other current assets

384


(360)

Other long-term assets

7,164


(559)

Accounts payable

(2,698)


(6,265)

Accrued salaries and employee benefits

2,981


(133)

Other accrued expenses

(1,398)


(4,417)

Income tax payable

10,313


7,688

Other long-term liabilities

1,211


122

Net cash provided by operating activities

181,253


169,566





Investing activities:




Proceeds from sales and maturities of marketable securities

489,241


427,821

Purchases of marketable securities

(395,190)


(401,434)

Purchases of property, plant and equipment

(41,664)


(30,716)

Purchase of capitalized software

(6,053)


(3,891)

Purchases of intangible assets, including licenses and manufacturing access fees

(5,259)


(2,513)

Net cash paid for business combinations


(53,000)

Cash paid for investment in Roka Bioscience

(3,980)


Cash paid for investment in Pacific Biosciences


(50,000)

Other

(209)


(738)

Net cash provided by (used in) investing activities

36,886


(114,471)





Financing activities:




Repurchase and retirement of common stock

(250,000)


(99,935)

Proceeds from issuance of common stock and employee stock purchase plan

49,932


31,830

Payment of contingent consideration


(10,000)

Repurchase and retirement of restricted stock for payment of taxes

(1,615)


(1,257)

Excess tax benefit from employee stock-based compensation

5,080


3,692

Borrowings, net

8,000


(228)

Net cash used in financing activities

(188,603)


(75,898)

Effect of exchange rate changes on cash and cash equivalents

(2,205)


(2,123)

Net increase (decrease) in cash and cash equivalents

27,331


(22,926)

Cash and cash equivalents at the beginning of period

59,690


82,616

Cash and cash equivalents at the end of period

$  87,021


$  59,690




SOURCE Gen-Probe Incorporated



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