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Gen-Probe's Q4 Revenues Slide 2 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Gen-Probe announced after the close of the market on Tuesday a 2 percent decline in fourth-quarter revenues as product revenues shrank 3 percent.

The company also announced a $150 million share buyback program.

For the three months ended Dec. 31, 2010, the San Diego molecular diagnostics firm posted overall revenues of $136.7 million, down from $138.9 million a year ago, and short of consensus analyst estimates of $137.9 million.

Product revenues fell to $131.1 million in the quarter, down from $135.5 million. Within product sales, clinical diagnostic revenues rose to $80.1 million, a 3 percent increase year over year from $77.6 million.

In a statement, the company said that clinical diagnostics sales established a new record during the quarter, driven by sales of its Aptima Combo 2 assay for chlamydia and gonorrhea. Sales of the Aptima test offset lower sales of Prodesse influenza assays, which suffered from a difficult year-ago comparison because of the 2009 H1N1 pandemic.

Blood screening revenues fell 11 percent to $47.6 million from $53.4 million a year ago, and research products and services decreased 23 percent to $3.4 million from $4.4 million mainly due to the divestiture of the BioKits food testing business in late 2009 and foreign exchange effects, the company added.

The decline in the blood screening business was due to lower sales of Gen-Probe's Tigris system to Novartis, while blood screening assay sales were flat compared to a year ago, the company said.

The decline in sales to Novartis along with the effects of lower H1N1-associated sales negatively impacted revenues by about $10 million, Carl Hull, Gen-Probe's president and CEO, said during a conference call following the release of its earnings.

He added that the decline in sales of the Tigris system to Novartis was expected and is anticipated to continue to decline until its new system, the Panther platform, makes inroads into the market place. Novartis has been "very successful" in placing Tigris into high-volume blood banks, Hull said.

"Given the record number of Tigris installations in 2010, opportunities for new blood bank placements will be limited," he said. "Accordingly, we expect instrument sales to Novartis to decline from 2010 levels until Panther comes on line for blood screening applications in 2012."

The Panther system was launched in Europe in December, and Hull said today that "we are very pleased with the early days of Panther commercialization." Customer feedback on the platform is positive and the instrument is performing well in the field, he said.

Last month, Gen-Probe began its clinical trial for the platform in the US in preparation of "for what we hope will become the next several waves of Panther-related growth," Hull said.

Asked about menu expansion plans for the system, he said that Gen-Probe will be building out a complete women's health menu for Panther, starting with "derivative assays" from its Aptima line, moving to HPV, and then to trichomonas.

Beyond 2012, US launches on Panther will include the blood bank menu and quantitative assays, including for viral load.

In 2010, Gen-Probe had five regulatory submissions in the US and four product launches in Europe. In the fourth quarter, it submitted a 510(k) application for the Aptima trichomonas assay and filed a pre-market approval submission for its Aptima human papillomavirus assay. In the third quarter, it filed with the FDA for its Progensa PCA3 assay for prostate cancer.

During today's call, Hull said only that the submissions are under active review. "We are receiving and responding to FDA's questions in due course and we are pleased with current levels of engagement and dialogue," he said.

Outside of product revenues, collaborative research revenues increased 85 percent to $3.7 million from $2 million a year ago, resulting from increased funding from Novartis associated with the development of Panther and the Procleix Ultrio Plus assay for the blood screening market, the company said.

Royalty and license revenues rose 36 percent to $1.9 million from $1.4 million a year ago due to higher royalties from Novartis and Ventana.

The firm's R&D spending during the fourth quarter decreased to $26.9 million from $27.4 million, a 2 percent drop-off. Its SG&A costs inched up 1 percent to $30.6 million from $30.2 million.

Gen-Probe posted a profit of $27.2 million, or $0.56 per share, a 13 percent increase from $24.0 million, $0.48 per share.

On an adjusted basis, EPS was $0.61, compared to $0.52 a year ago, and above analysts' estimates of $0.55.

For full-year 2010, Gen-Probe brought in $543.3 million in revenues, up 9 percent from $498.3 million in 2009.

Product revenues increased 8 percent to $522.7 million from $483.8 million. Clinical diagnostics increased to $305.8 million from $274.2 million, a 12 percent jump. Blood screening brought in revenues of $203.1 million, a 3 percent increase from $197.5 million, and research products and service revenues rose 15 percent to $13.8 million from $12 million.

The company spent $111.1 million on R&D, up 5 percent from $106 million in 2009. Its SG&A spending increased less than 1 percent to $116.3 million from $115.7 million a year ago.

Gen-Probe's net income was $106.9 million, or $2.18 per share, a spike of 16 percent from $91.8 million, $1.79 per share, a year ago. On a non-GAAP basis, EPS was $2.19, up from $1.95 in 2009, and above analysts' estimates of $2.14.

For 2011, the company gave revenue guidance of between $570 million and $595 million, and EPS of between $2.06 and $2.20 per share on a GAAP basis. On a non-GAAP basis, EPS is anticipated to fall between $2.28 and $2.40.

As of Dec. 31, Gen-Probe had $489.7 million in cash, cash equivalents and marketable securities.

Peter Lawson, an analyst with Mizuho Securities, today downgraded Gen-Probe's stock to "neutral" from "outperform," and decreased first-quarter EPS estimates to $0.52 and revenue estimates to $141.3 million. He had had EPS estimates of $0.56 and revenue estimates of $142.5 million for the quarter.

In early morning trading Wednesday, Gen-Probe shares were trading on Nasdaq at $62.36, down less than 1 percent.

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