By Ben Butkus
Gen-Probe this week reported record clinical diagnostic sales in the fourth quarter of 2010, but a decrease in Q4 blood screening revenues, resulting in an overall 2 percent decline in fourth-quarter revenues.
The company also updated investors on the uptake of its recently launched Panther molecular diagnostics platform in Europe, and on plans for US commercialization and test menu build-out for the instrument.
For the fourth quarter of 2010, Gen-Probe logged clinical diagnostic product sales of $80.1 million in 2010, up 4 percent from the prior year.
Gen-Probe said that this growth was powered by its Aptima Combo 2 assay for detecting chlamydia and gonorrhea. In a conference call discussing the company's financial results, President and CEO Carl Hull noted that "despite persistent sluggishness in healthcare utilization, Aptima's year-over-year growth rate increased in Q4 compared to Q2 and Q3, which was encouraging."
In addition, Hull noted that Aptima's international sales "again grew at about twice the North American rate, which keeps us enthusiastic about the European Panther launch." Gen-Probe launched Panther with the CE Mark for IVD use in December with hopes that the platform will help it capture molecular testing market share in mid- and low-volume clinical laboratories, clinics, and physicians' offices (PCR Insider, 12/2/10).
"Although macroeconomic conditions will remain a headwind, we believe that the Panther launch, plus some additional market share gain, and pace conversions in the US can keep our STD business growing at a healthy rate in 2011," Hull said this week.
In addition, Aptima's growth during the fourth quarter, combined with a "nice performance" from Gen-Probe's Lifecodes transplant diagnostic business, "more than overcame a $5 million headwind from lower sales of our Prodesse respiratory products," Hull said.
Gen-Probe said that its Prodesse influenza assays suffered from a difficult year-over-year comparison because of the 2009 H1N1 pandemic, which was expected.
Meantime, blood screening sales at the company in Q4 totaled $47.6 million, an 11 percent drop from $53.4 million in the year-ago period, with flat underlying sales of blood screening assays in the quarter.
"Overall blood screening sales declined 10 percent on a constant currency basis, based on reduced shipments of our Tigris instruments to our commercial partner, Novartis," Hull said during the conference call. "More specifically, Tigris sales to Novartis were down about $4.5 million, compared to the exceptionally strong prior-year period."
This decrease was also expected, Hull said, as Novartis has been "very successful in placing Tigris in high-volume blood banks, with more than 300 in the field today." Given that the company saw a record number of installations in 2010, "opportunities for additional blood bank sales will be limited," Hull said. "Accordingly, we expect instrument sales to Novartis to decline from 2010 levels until Panther comes online for blood-screening applications in 2012."
Despite these weak results, Hull noted that total blood screening revenues were up 3 percent for full-year 2010, reflecting the "stable, slow-growing, and highly profitable business we have described to you in the past." Assay sales also increased by about the same amount, which was "better than the flat growth rate reported by our primary competitor earlier this month," Hull added, without elaborating.
Hull also discussed the early days of Panther's uptake, and how it complements the company's flagship Tigris instrument, already on the market in both the US and Europe. He said that currently, there are more than 250 Tigris instruments running in molecular diagnostic labs around the world, and that Gen-Probe was "leveraging the same capabilities with Panther."
Specifically, Panther uses the same core suite of technologies as Tigris, including a proprietary "target capture" technique based on capture oligomers and magnetic microparticles; and transcription-mediated amplification, which the company says can produce billions of RNA amplicons from a single target molecule in less than one hour.
"We are very pleased with the early days of Panther commercialization," Hull said. "We held our formal European launch meeting in January, which was attended by about 60 potential Panther customers … and feedback remains positive."
As such, he said, Gen-Probe "remain comfortable with instrument placement forecasts for the year." The company had previously forecast a few dozen placements of the instrument in 2011.
In response to an investor's question regarding whether certain factors could drive this expectation up, Hull said that while Gen-Probe sees a lot of upside with Panther over the life of the instrument, "we recognize that we're doing our first major instrument launch outside of our home market, that being Europe … and I think we've planned conservatively in light of that fact.
"Time will tell, especially as we get toward the middle of the year, and we'll get a better feeling for the uptake of the instrument," Hull added. He said that word of mouth and continued positive feedback could accelerate Panther uptake in the second half of the year, but that instrument placements might not even be as crucial as the increased assay volume and resulting sales that might occur as a result of Panther sales.
As such, the company is planning to slowly build out the test menu for the instrument, Hull said.
"You can expect us to build out a complete women's health menu on Panther, which makes logical sense," Hull said. This process has already started with the company's, APTIMA chlamydia and gonorrhea and Combo 2 assays, "and then we will move over time to the addition of [human papillomavirus] and then trichomonas, which will give us the core menu we think is right for women's health," he added.
Both the HPV and trich assays are currently under regulatory review with the US Food and Drug Administration, and Gen-Probe declined to provide a potential timeline for approval.
Then, as Gen-Probe moves into 2012, "you're going to see us getting into the US launches of some of the assays that we may launch first in Europe. Beyond 2012, we will begin to add quantitative assays that would be necessary, such as viral load."
Finally, Hull said that the company began US clinical trials for Panther in January, "as we prepare for what we hope will become the next of several waves of Panther-related growth. Panther is clearly an important part of our medium- and long-term growth strategy; but, our fourth quarter results also demonstrated that our established franchises can still deliver good growth and profitability even in the face of utilization pressures."
Overall, for the three months ended Dec. 31, 2010, Gen-Probe posted revenues of $136.7 million, down from $138.9 million a year ago, and short of consensus analysts' estimates of $137.9 million. Product revenues fell to $131.1 million in the quarter, down from $135.5 million.
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.
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.
For full-year 2010, Gen-Probe brought in $543.3 million in revenues, up 9 percent from $498.3 million in 2009.
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