Original Source: FD (FAIR DISCLOSURE) WIRE
. Mike Watts, Gen-Probe, Senior Director, IR and Corporate Communications
. Hank Nordhoff, Gen-Probe, Chairman, President, CEO . Carl Hull, Gen-Probe, President, COO . Herm Rosenman, Gen-Probe, SVP - Finance, CFO . Jon Wood, Banc of America Securities, Analyst . Bill Quirk, Piper Jaffray & Co., Analyst . Quintin Lai, Robert W. Baird & Co., Inc., Analyst . Bruce Cranna, Leerink Swann & Co., Analyst . Imron Zafar, Deutsche Bank, Analyst . David Lewis, Morgan Stanley, Analyst
. Tycho Peterson, JPMorgan Chase & Co., Analyst . Peter Lawson, Thomas Weisel Partners, Analyst . Sara Michelmore, Cowen and Co., Analyst . Bruce Jackson, RBC Capital Markets, Analyst . Zarak Khurshid, Caris & Co., Analyst
GPRO reported 2Q08 net income of $24.8m and diluted EPS of $0.45. Expects 2008 total revenue to be $467-472m and diluted EPS to be $1.83-1.87. 3Q08 EPS guidance is in the mid $0.40 range.
A. Key Data From Call 1. 2Q08 net income = $24.8m. 2. 2Q08 diluted EPS = $0.45. 3. 2Q08 GM = 71.4%. 4. 2008 total revenue guidance = $467-472m. 5. 2008 diluted EPS guidance = $1.83-1.87. 6. 3Q08 EPS guidance = mid $0.40 range.
S1. 2Q08 Business Review (H.N.) 1. Overview: 1. In 2Q08:
1. Set new product sales record in clinical diagnostics and blood screening. 2. Posted total revenues and EPS ahead of internal
expectations. 2. Raising financial outlook for the year. 3. Launched APTIMA HPV Assay in Europe. 4. Gaining traction with PROGENSA PCA3 test overseas, and had a good productive discussions with US FDA about gaining hepatitis B screening claim for PROCLEIX ULTRIO assay. 2. Key Financials: 1. Product sales, $113.7m.
1. Representing growth of 21% vs. last year. 2. Rising on a sequential basis. 2. This robust product sales enabled to post total revenues of $119.8m, up 18% vs. 2Q07. 1. Profitable growth, despite one-time R&D charge and Innogenetics related cost.
3. GM, 71.4%. 1. Operating margin, 27.4%. 2. Net after-tax margin, 20.7%. 4. Net income, $24.8m. 5. Diluted EPS, $0.45.
1. Net income and EPS were down vs. 2Q07. 2. 2Q07 benefited from a one-time credit income tax expense of about $8.7m or $0.16 per share. 3. Tax benefit in 2Q08 totaled $1m or $0.02 of EPS.
6. Operating income and pretax income both grew 33% vs. last
year. 3. Clinical Diagnostics: 1. Sales were up to $57.2m, 14% higher than 2Q07 and acceleration over roughly 10% growth in 4Q07 and 1Q08. 1. 2Q07 was a tough comparative, with diagnostic sales exceeding $50m for the first time. 2. APTIMA franchise continues to drive growth, especially combined with benefits of fully automated TIGRIS system. 3. Clinical diagnostic customers have now installed roughly 140 TIGRIS systems around the world and sales of APTIMA assays on TIGRIS grew by about 35% vs. 2Q07.
4. APTIMA continues to gain market share. 1. Added approx. a dozen accounts from competitors in 2Q08 alone. 2. Within GPRO product family, customers continue to upgrade to APTIMA from PACE, sales at which were down 22% vs. last year as expected. 5. PROGENSA PCA3 assay picked up steam in Europe during 2Q08,
with sales of CE marked product exceeding sales of analyte
specific reagents in US for the first time. 6. Believes sales have benefited from two PCA3 articles published in Peer-Review Journal of UROLOGY in April and May. 1. There is a report on ex-US trials in press in European Journal of UROLOGY. 4. Blood Screening: 1. Sales grew to $56.5m, robust 29% increase vs. last year. 1. Higher rate of growth since 1Q06. 2. Sales were strong across the product portfolio and across geographic areas.
2. In US, GPRO and partner, Novartis continued to enjoy a leading
market share. 1. Domestic sales benefited from additional shipments of PROCLEIX ULTRIO assay for post-marketing yield studies, a large portion of which is being conducted in [close of] eight for an individual donor testing. 2. US sales were helped by full commercial pricing of West Nile Virus assay on TIGRIS. 3. Going forward, West Nile benefit will annualize and GPRO will be faced with tougher comps beginning in 3Q08. 3. Business is going steadily outside US, in large part due to success of ULTRIO assay on TIGRIS system. 1. Worldwide ULTRIO sales were basically equal to sales of duplex assay for the first time. 2. This international blood screening growth generally comes at a lower overall price point, as GPRO expands into the development world. 3. As euro and other foreign currencies have strengthened, international sales have boosted dollar denominated growth. 4. Comparing to 2Q07, estimates FX fluctuations added about $1.9m to sales. 4. Sales benefited from $2.6m one-time adjustment to service cost that Novartis had previously deducted under the collaboration. 5. Excluding this benefit and FX gains, sales would have increased by 19%. 6. Sales included about $4.1 of TIGRIS related revenues. 1. Down slightly vs. prior year period as expected. 2. For rest of 2008, expects this downward trend to continue with TIGRIS sales and Novartis declining rather sharply given their healthy 1H orders and dampening overall blood screening growth in the process. 5. Collaborative Research: 1. Revenues were $4.7m, down from $5.8m a year-ago. 1. Decline resulted primarily from non-recurring revenue in prior year period. 2. Last year's results included $2.4m of reimbursement from Novartis that trued up some past development expenses and $1.4m of funding from Department of Defense for prostate
cancer research. 1. Neither item recurred in 2Q08. 2. Revenues benefited from one-time milestone revenue associated with the termination of 3M collaboration. 1. Earned $3m milestone from 3M in 4Q07 for successfully demonstrating technical feasibility of an MRSA assay. 2. GPRO had an ongoing relationship with 3M at that time, accounting rules dictate that Co. recognized a revenue
ratably over planned development period. 3. Once collaboration was terminated, ongoing development obligation along with it, GPRO was obligated to record all revenue that it previously deferred.
4. This net amount was $2.7m. 3. With termination of 3M agreement and expected decline in reimbursement from Novartis following the completion of ULTRIO post-marketing studies, collaborative research revenues are likely to decline substantially in the future. 4. Looking ahead to 2009, currently anticipates collaborative
research revenues to be around $5m for the year. 6. Synopsis:
1. Royalty and license revenues were $1.5m vs. $1.6m in prior
year period. 1. Royalties from Chiron related to use of assays in plasma screening market continued to be largest component of this …