Gen-Probe Incorporated (Gen-Probe) has reported total revenues of $472.6 million for the full year of 2008, compared with the total revenues of $403 million in the previous year-end. It has reported net income of $107 million, or $1.95 per diluted share, for the full year of 2008, compared with net income of $86.14 million, or $1.58 per diluted share, in the previous year-end.
“Gen-Probe posted strong financial results in the fourth quarter of 2008, driven by healthy growth in both clinical diagnostics and blood screening sales,” said Hank Nordhoff, the company’s chairman and chief executive officer. “In addition, our fourth quarter performance completed an excellent 2008 that saw top- and bottom-line growth rates exceed our long-term goals.”
In the fourth quarter of 2008, product sales were $105.8 million, against $92.4 million in the prior year period, an increase of 15%. Total revenues for the fourth quarter of 2008 were $109.1 million, against $98.9 million in the prior year period, an increase of 10%. Net income in the fourth quarter of 2008 was $21.1 million ($0.39 per share), against $20.4 million ($0.37 per share) in the prior year period, an increase of 3% (5% per share). In the prior year period, both net income and EPS benefited from an income tax rate of approximately 22% that resulted mainly from the completion of an audit of the company’s 2003 and 2004 California state income tax returns.
For the full year 2008, product sales were $429.2 million, against $370.9 million in the prior year, an increase of 16%. In the prior year, both net income and EPS benefited from an income tax rate of approximately 23% that resulted mainly from the item noted above and the completion of an audit of the company’s 2003 and 2004 federal income tax returns, the benefit from which was recorded in the second quarter of 2007.
Collaborative research revenues in the fourth quarter of 2008 were $2.1 million, against $5.4 million in the prior year period, a decrease of 61% that resulted primarily from the June 2008 termination of the company’s collaboration with 3M to develop rapid tests for healthcare-associated infections. For the full year 2008, collaborative research revenues were $20.6 million, against $16.6 million in the prior year, an increase of 24% that resulted primarily from a $10 million milestone the company earned from Chiron in the third quarter based on the full approval by the US Food and Drug Administration (FDA) of the PROCLEIX ULTRIO assay on the TIGRIS system.
Royalty and license revenues for the fourth quarter of 2008 were $1.3 million, against $1.1 million in the prior year period, an increase of 18%. For the full year 2008, royalty and license revenues were $22.9 million, against $15.5 million in the prior year, an increase of 48% that resulted primarily from revenue that was recorded in the first quarters of 2007 and 2008 associated with the settlement of Gen-Probe’s patent infringement litigation against Bayer (now Siemens Medical Solutions Diagnostics). Specifically, Gen-Probe recorded $10.3 million of revenue from this settlement in the first quarter of 2007, and a final payment of $16.4 million in the first quarter of 2008.
Gross margin on product sales in the fourth quarter of 2008 was 69.6%, against 69.2% in the prior year period. This increase resulted primarily from increased sales of blood screening products and APTIMA(R) assays. In the fourth quarter of 2008, gross margin on product sales was negatively affected by costs associated with the voluntary recall of certain AccuProbe(R) culture identification kits, which increased cost of product sales by $0.9 million and reduced gross margin on product sales by approximately 0.9%. For the full year 2008, gross margin on product sales was 70.2%, against 67.7% in the prior year. This increase resulted primarily from the factors discussed above.
Research and development (R&D) expenses in the fourth quarter of 2008 were $24.2 million, essentially unchanged from $24.3 million in the prior year period. For the full year 2008, R&D expenses were $101.1 million, against $97.1 million in the prior year, an increase of 4% that resulted primarily from costs associated with key development programs such as the post-marketing studies of the PROCLEIX ULTRIO assay in the United States, the investigational APTIMA human papillomavirus (HPV) assay, and Gen-Probe’s fully automated instrument system for low- and mid-volume labs, known as PANTHER.
Marketing and sales expenses in the fourth quarter of 2008 were $11.8 million, against $11.3 million in the prior year period, an increase of 4% that resulted primarily from European market development efforts related to the company’s APTIMA Combo 2, APTIMA HPV and PROGENSA(TM) PCA3 assays. For the full year 2008, marketing and sales expenses were $45.9 million, against $39.9 million in the prior year, an increase of 15% that also resulted from European market development efforts.
General and administrative (G&A) expenses in the fourth quarter of 2008 were $13.8 million, against $12.3 million in the prior year period, an increase of 12% that resulted primarily from increased business development, legal and compensation costs. For the full year 2008, G&A expenses were $52.3 million, against $47.0 million in the prior year, an increase of 11% that resulted primarily from the factors described above.
Total other income in the fourth quarter of 2008 was $3.8 million, against $3.7 million in the prior year period, an increase of 3% that resulted primarily from higher short-term investment balances. For the full year 2008, total other income was $15.5 million, against $12.3 million in the prior year period, an increase of 26% that also resulted from higher short-term investment balances.
Gen-Probe continues to have a strong balance sheet. As of December 31, 2008, the company had $505.2 million of cash, cash equivalents and short-term investments, and no debt. In the fourth quarter of 2008, the company repurchased approximately 1.5 million shares of its common stock for $65 million. For the full year 2008, Gen-Probe generated net cash of $178.3 million from its operating activities, against the company’s net income of $107.0 million.
2009 financial outlook
“We expect 2009 to be another year of solid underlying earnings growth for Gen-Probe, although previously disclosed non-recurring items that added approximately $32 million of revenue and $0.34 of EPS will make comparisons to 2008 difficult,” said Herm Rosenman, the company’s senior vice president of finance and chief financial officer.