Gen-Probe reports total revenues of $135.4M for first-quarter 2010

Gen-Probe Incorporated (Nasdaq: GPRO) today reported financial results for the first quarter of 2010, highlighted by $135.4 million of total revenues and earnings per share (EPS) of $0.48 on both a non-GAAP and GAAP basis.  

"Gen-Probe posted strong financial results in the first quarter of 2010 based on balanced performance across our key product areas: women's health, infectious diseases, blood screening and transplant diagnostics," said Carl Hull, the Company's president and chief executive officer.  

Key financial results for the first quarter of 2010 were ($ in millions, except EPS):

In the prior year period, Gen-Probe's financial results benefited from $8.2 million of non-recurring revenue and pre-tax income associated with the renegotiation of the Company's blood screening collaboration with Novartis.  Excluding this benefit, non-GAAP total revenues and EPS would have increased by 25% and 17%, respectively, in the first quarter of 2010.

Revenue Detail

Clinical diagnostics sales growth in the first quarter of 2010 was driven by transplant diagnostics and influenza products, which were not part of Gen-Probe in the prior year period, and by the APTIMA Combo 2® assay for detecting Chlamydia and gonorrhea.  Clinical diagnostics sales also benefited from the weaker US dollar, which added an estimated $0.9 million, or 1%, to growth.

In blood screening, sales declined compared to the first quarter of 2009 due to the $8.2 million of non-recurring revenue that was recorded in the prior year period.  Excluding this benefit, blood screening sales would have increased by 11%, mainly due to the contractual increase in the share of revenues received from Novartis, the Company's blood screening collaborator, and increased sales of TIGRIS instruments to Novartis.  These instrument sales are generally a precursor to future assay sales.  Blood screening sales also benefited from the weaker US dollar, which added an estimated $1.2 million, or more than 2%, to growth.

Sales of research products and services in the first quarter of 2010 were $4.1 million.  These sales, resulting from the Tepnel acquisition, were not included in Gen-Probe's prior year results.

First quarter product sales were ($ in millions):

Collaborative research revenues in the first quarter of 2010 were $3.3 million, compared to $1.7 million in the prior year period, an increase of 94% that resulted primarily from increased funding from Novartis associated with the development of the fully automated PANTHER™ instrument for the blood screening market.

Royalty and license revenues in the first quarter of 2010 were $1.6 million, compared to $2.0 million in the prior year period, a decrease of 20% that resulted mainly from lower royalties from Novartis associated with the use of Gen-Probe's technologies in the plasma screening market.  

Expense Detail

Gross margin on product sales in first quarter of 2010 was 67.4% on a non-GAAP basis, compared to 70.4% in the prior year period.  This decrease resulted mainly from the 2.3% gross margin benefit associated with the $8.2 million of non-recurring blood screening revenue in the prior year period, and from increased sales of low-margin TIGRIS instruments to Novartis in the first quarter of 2010.  On a GAAP basis, including $0.1 million of acquisition-related depreciation expense, gross margin on product sales was 67.3% in the first quarter of 2010.

Acquisition-related amortization expenses were $2.2 million in the first quarter of 2010, compared to $0 in the prior year period.

Research and development (R&D) expenses in the first quarter of 2010 were $29.7 million, compared to $25.0 million in the prior year period, an increase of 19% that resulted primarily from expenses associated with the Company's development programs for PANTHER, HPV, PCA3 and trichomonas, and from the addition of Tepnel's and Prodesse's R&D activities.  

Marketing and sales expenses in the first quarter of 2010 were $14.8 million, compared to $11.1 million in the prior year period, an increase of 33% that resulted primarily from the addition of Tepnel's cost structure, and European sales force expansion and market development efforts.  

General and administrative (G&A) expenses in the first quarter of 2010 were $14.7 million on a non-GAAP basis, compared to $12.2 million in the prior year period, an increase of 20% that resulted primarily from the addition of Tepnel's cost structure and costs associated with the Company's patent infringement litigation against Becton, Dickinson.  On a GAAP basis, including acquisition-related costs, G&A expenses were $14.7 million in the first quarter of 2010, compared to $13.8 million in the prior year period.

Total other income in the first quarter of 2010 was $3.2 million on a non-GAAP basis, compared to $4.6 million in the prior year period, a decrease of 30% that resulted primarily from lower yields on the Company's municipal bond portfolio, and lower investment balances due to share repurchases and the acquisitions of Tepnel and Prodesse.  Other income for the first quarter of 2010 did, however, benefit from $2.2 million of net realized gains on sales of marketable securities.  On a GAAP basis, including a $1.7 million non-cash gain on a change in the fair value of potential contingent payments related to the acquisition of Prodesse, total other income was $4.9 million in the first quarter of 2010.

In the first quarter of 2010, Gen-Probe generated net cash of $40.7 million from operating activities, substantially higher than GAAP net income of $24.2 million.  The Company spent $7.8 million on property, plant and equipment in the quarter, leading to free cash flow of $32.9 million, and repurchased 233,200 shares of its stock for $11.0 million.

Gen-Probe continues to have a strong balance sheet.  As of March 31, 2010, the Company had $534.3 million of cash, cash equivalents and marketable securities, and $240.8 million of short-term debt.  The Company pays interest on substantially all this debt at a rate 0.6% above the one-month London Interbank Offered Rate (LIBOR), which was recently below 0.3%.  

SOURCE Gen-Probe Incorporated