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Gen-Probe Q4 Revenues Grow 16 Percent

NEW YORK (GenomeWeb News) – Gen-Probe's fourth-quarter revenues rose 16 percent year over year as its blood screening business rose 30 percent, the company said after the close of the market on Monday.

For the three months ended Dec. 31, 2011, the San Diego company posted revenues of $158.2 million, up from $136.7 million a year ago, just short of analyst estimates calling for $158.6 million.

Product revenues totaled $155.2 million, up 18 percent from $131.1 million a year ago, with blood screening products increasing to $62.1 million from $47.6 million in the fourth quarter of 2010. Clinical diagnostics rose 13 percent to $90.6 million from $80.1 million a year ago, while research products and services revenues dropped 29 percent to $2.4 million from $3.4 million, the company said.

Collaborative research revenues in the quarter slid 62 percent year over year to $1.4 million from $3.7 million, primarily from an expected decrease in funding from Novartis associated with the development of a fully automated Panther instrument for blood screening, Gen-Probe said. However, it added that it continues to expect the launch of the platform into the international blood screening market this year.

Royalty and license revenues contracted 16 percent to $1.6 million during the quarter from $1.9 million a year ago.

The firm's R&D costs increased 5 percent year over year to $28.2 million from $26.9 million mostly from the addition of GTI's R&D programs, the company said. Gen-Probe bought GTI in December 2010 for $53 million in cash.

Its SG&A expenses increased 9 percent to $33.3 million from $30.6 million a year ago.

For the quarter, Gen-Probe posted a profit of $19.9 million, or $.42 per share, compared to a profit of $27.2 million, or $.56 per share, in the year-ago period.

On a non-GAAP basis, the company had a profit of $33.7 million, or $.72 per share, compared to $29.4 million, or $.61 per share a year ago. Wall Street had an EPS estimate of $.69.

On the conference call following the release of Gen-Probe's earnings, Chairman and CEO Carl Hull said that product revenue growth in the quarter was led by the company's Aptima Combo 2 assay for detecting chlamydia and gonorrhea, which grew at a low double-digit rate during the quarter "as a result of continued market share gains."

Hull also noted the continued strength of the Tigris system. Since its launch in early 2004, 275 Tigris platforms have been placed with clinical diagnostic customers "and the sustained level of interest from potential new customers continues to surprise us," he said.

He also said that the average annual revenue pull-through from consumables from a diagnostic Tigris placement is about $575,000, "a number you won't find anywhere else in the molecular diagnostic industry."

Looking ahead, Gen-Probe has applications with the US Food and Drug Administration for its Progensa PCA3 assay for prostate cancer and the Panther platform. Hull said that he believes the firm is "close" to approval on Progensa PCA3, and on Panther, "our best guess" is that clearance will arrive in the first half of this year.

The company is also seeking to increase the depth of its menu on Panther and is currently developing viral load assays for the system. Hull described that effort as "our largest assay development program over the next couple of years, utilizing many of the dollars that we're allocating to HPV."

The assays are early in development with the first product expected to be launched "around 2014," he said.

The company also is looking to add real-time PCR capabilities to the Panther system. Initially this effort will provide a proprietary platform for Gen-Probe's Prodesse respiratory assays in the 2015 timeframe, Hull said.

"Strategically, we believe that adding viral load assays and PCR chemistries to Panther will provide important sources of organic growth over the medium term," he said.

For full-year 2011 Gen-Probe reported revenues of $576.2 million, a 6 percent increase from $543.3 million in 2010, missing analyst estimates of $576.8 million. Product sales ticked up 8 percent to $562.6 million from $522.7 million, collaborative research revenue slid 47 percent to $7.7 million from $14.5 million, and royalty and licensing revenue dipped slightly to $6.0 million from $6.1 million.

The company increased R&D spending 1 percent year over year to $112.7 million in 2011 from $111.1 million. Herm Rosenman, CFO for Gen-Probe, said on the conference call that R&D spending is anticipated to grow 10 percent in 2012 from 2011 levels as the company adds PCR capabilities to Panther and develops a new instrument to further automate molecular testing from liquid-based cytology specimens.

Growth in R&D costs will further be driven by its viral load assay development program and efforts aimed at developing additional women's health assays, he added.

The firm's SG&A spending rose 20 percent to $139.8 million from $116.3 million a year ago. Rosenman reiterated that SG&A spending will "grow faster than revenue" in 2012 as the company invests in European commercial expansion and launches of its new products.

Gen-Probe recorded $50.1 million, or $1.04 per share, in net income for 2011, compared to $106.9 million, or $2.18 per share, a year ago. On a non-GAAP basis, the company posted a profit of $113.1 million, or $2.34 per share for 2011, beating analyst estimates of $2.31.

In 2010, the firm had non-GAAP profit of $107.5 million, or $2.19 per share.

Gen-Probe finished 2011 with $305.8 million in cash, cash equivalents, and marketable securities.

The company provided guidance of $630 million to $655 million in revenues for full-year 2012, and non-GAAP EPS of between $2.50 and $2.68. Organic revenue growth is expected in the low double-digit range based on new product launches that are still in the early stages, Rosenman said.

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