-- Company Posts Non-GAAP EPS of $0.45(1), Excluding $0.07 of Expenses Related to Tepnel Acquisition, and GAAP EPS of $0.38 --

-- Record Quarterly STD Sales, Tepnel Acquisition Drive New Highs for Clinical Diagnostics and Total Product Revenues --

SAN DIEGO, July 30 /PRNewswire-FirstCall/ -- Gen-Probe Incorporated (Nasdaq: GPRO) today reported financial results for the second quarter of 2009, including non-GAAP earnings per share (EPS) of $0.45 and record sexually transmitted disease (STD), clinical diagnostics and total product sales.

"Gen-Probe posted solid earnings in the second quarter of 2009 as a good performance from our core STD franchise, the inclusion of initial revenues from our Tepnel acquisition, and portfolio gains outweighed lower-than-expected blood screening sales," said Carl Hull, the Company's president and chief executive officer. "In addition, the key R&D projects that we expect to boost future growth - including our PANTHER instrument and new tests for human papillomavirus (HPV), prostate cancer and trichomonas - remain on track."

In the second quarter of 2009, product sales were $116.8 million, compared to $113.7 million in the prior year period, an increase of 3%. Compared to the second quarter of 2008, the stronger U.S. dollar reduced product sales growth by an estimated 4%(2). Total revenues for the second quarter of 2009 were $120.5 million, compared to $119.8 million in the prior year period, an increase of 1%.

Net income was $23.2 million ($0.45 per share) on a non-GAAP basis in the second quarter of 2009, compared to $24.8 million ($0.45 per share) in the prior year period, a decrease of 6%. Including $4.4 million ($0.07 per share) of expenses related to the Company's acquisition of Tepnel, which closed on April 8, 2009, net income in the second quarter of 2009 was $19.8 million ($0.38 per share) on a GAAP basis.

For the first six months of 2009, product sales were $229.3 million, compared to $215.2 million in the prior year period, an increase of 7%. Compared to the first half of 2008, the stronger U.S. dollar reduced product sales growth by an estimated 4%. Total revenues for the first six months of 2009 were $236.7 million, compared to $242.4 million in the prior year period, a decrease of 2%.

Net income was $50.2 million ($0.96 per share) on a non-GAAP basis in the first six months of 2009, compared to $56.7 million ($1.03 per share) in the prior year period, a decrease of 11% (7% per share). Including $6.0 million ($0.09 per share) of expenses related to the Company's acquisition of Tepnel, net income in the first six months of 2009 was $45.6 million ($0.87 per share) on a GAAP basis.

As previously disclosed, Gen-Probe's total revenues, net income and EPS in the first six months of 2008 benefited from a number of non-recurring items, most notably $16.4 million of royalty and license revenue ($0.20 of EPS) that was recorded in the first quarter associated with the settlement of Gen-Probe's patent infringement litigation against Bayer (now Siemens Healthcare Diagnostics). By comparison, the Company's product sales, total revenues, net income and EPS in the first six months of 2009 benefited from $8.2 million of one-time revenue ($0.10 of EPS) recorded in the first quarter associated with the previously announced renegotiation of the Company's collaboration agreement with Novartis Diagnostics.

Detailed Results

Gen-Probe's clinical diagnostics sales in the second quarter of 2009 benefited from revenue associated with Tepnel's transplant diagnostics and genetic testing products, and continued growth of the APTIMA Combo 2(R) assay, an amplified nucleic acid test (NAT) for simultaneously detecting Chlamydia trachomatis and Neisseria gonorrhoeae. Sales of our market-leading assay increased based on market share gains on both the Company's semi-automated instrument platform and on the high-throughput, fully automated TIGRIS(R) system. Revenue from the PACE(R) product line, the Company's non-amplified tests for the same microorganisms, declined in the second quarter compared to the prior year period, in line with Gen-Probe's expectations. Clinical diagnostics sales were negatively affected by the stronger U.S. dollar, which reduced growth by an estimated 2% compared to the prior year period.

In blood screening, product sales in the second quarter of 2009 were negatively affected by $8.8 million of lower product shipments to the Company's commercial partner, Novartis Diagnostics. This reduction resulted primarily from: lower West Nile virus assay shipments due to previously discussed ordering patterns; lower U.S. shipments of the PROCLEIX ULTRIO assay due to the post-marketing study that was underway in the prior year period; and lower U.S. shipments of the PROCLEIX HIV-1/HCV assay as customers prepared to adopt the PROCLEIX ULTRIO assay. Blood screening sales growth also was negatively affected by the stronger U.S. dollar, which reduced growth by an estimated 6%, and by a one-time payment of $2.6 million in the prior year period related to historical revenue adjustments made in the Novartis collaboration.

"Blood screening sales were lower than expected in the second quarter, as ordering patterns that were more negative than forecast outweighed a low-single-digit percentage increase in underlying donations tested and stable market shares," Mr. Hull said.

Sales of research products and services in the second quarter of 2009 were $3.2 million. These sales, which were associated with the Tepnel acquisition, were not included in Gen-Probe's prior year results.

Second quarter product sales were, in millions:

                   Three Months Ended June 30,        Change
                   -------------------------          ------
                                                  As         Constant
                        2009(3)    2008(4)     Reported      Currency
                        -------    -------     --------      --------
    Clinical
     Diagnostics         $67.8      $57.2         19%            21%
    Blood Screening      $45.8      $56.5        -19%           -13%
    Research Products
     and Services         $3.2        N/A         N/A            N/A
    -----------------    -----        ---         ---            ---
    Total Product
     Sales              $116.8     $113.7          3%             7%

First half product sales were, in millions:

                        Six Months Ended June 30,           Change
                        ------------------------            ------
                                                       As        Constant
                            2009         2008        Reported    Currency
                            ----         ----        --------    --------
    Clinical
     Diagnostics          $127.4       $109.7           16%          19%
    Blood Screening        $98.7       $105.5           -6%          -1%
    Research Products
       and Services         $3.2          N/A           N/A          N/A
    -----------------       ----          ---           ---          ---
    Total Product
     Sales                $229.3       $215.2            7%          11%

Collaborative research revenues for the second quarter of 2009 were $2.2 million, compared to $4.7 million in the prior year period, a decrease of 53%. This decrease resulted mainly from $2.7 million of previously deferred milestone revenue that the Company recognized in the prior year period based on the termination of its collaboration with 3M regarding healthcare-associated infections. For the first six months of 2009, collaborative research revenues were $3.9 million, compared to $7.1 million in the prior year period, a decrease of 45%.

Royalty and license revenues for the second quarter of 2009 were $1.5 million, compared to $1.5 million in the prior year period. For the first six months of 2009, royalty and license revenues were $3.5 million, compared to $20.1 million in the prior year period. As previously discussed, this significant decrease resulted primarily from $16.4 million of royalty and license revenue that was recorded in the first quarter of 2008 associated with the settlement of Gen-Probe's patent infringement litigation against Bayer. This revenue represented the third and final payment due in connection with the 2006 settlement of the companies' litigation.

Gross margin on product sales in the second quarter of 2009 was 67.3% on a non-GAAP basis that excludes $0.1 million of acquisition-related depreciation expense, compared to 71.4% in the prior year period. This decrease resulted primarily from the stronger U.S. dollar, the addition of Tepnel's generally lower-margin revenues, and the previously discussed $2.6 million payment in the prior year period related to historical revenue adjustments in the Novartis collaboration. For the first six months of 2009, gross margin on product sales was 68.8% on a non-GAAP basis that excludes $0.1 million of acquisition-related depreciation expense, compared to 69.7% in the prior year period. On a GAAP basis, gross margin on product sales was 67.2% in the second quarter of 2009, and 68.8% for the first six months of the year.

Acquisition-related intangible amortization expenses in each of the second quarter and first six months of 2009 were $1.1 million, compared to $0 in the comparable prior year periods.

Research and development (R&D) expenses in the second quarter of 2009 were $26.1 million, compared to $29.4 million in the prior year period, a decrease of 11%. This decrease resulted primarily from a non-recurring charge in the prior year period, namely a $3.5 million write-off of previously capitalized expenses associated with intellectual property acquired in 2005 from Corixa. For the first six months of 2009, R&D expenses were $51.1 million, compared to $52.4 million in the prior year period, a decrease of 2%. R&D expenses are expected to increase significantly in the third quarter of 2009, to approximately $30 million, based on clinical trials of the Company's HPV, PCA3 and trichomonas assays.

Marketing and sales expenses in the second quarter of 2009 were $14.0 million, compared to $11.5 million in the prior year period, an increase of 22% that resulted primarily from the addition of Tepnel's cost structure, and European sales force expansion and market development efforts. For the first six months of 2009, marketing and sales expenses were $25.1 million, compared to $23.4 million in the prior year period, an increase of 7%.

General and administrative (G&A) expenses in the second quarter of 2009 were $14.6 million on a non-GAAP basis that excludes $3.2 million of acquisition-related expense, compared to $13.7 million in the prior year period, an increase of 7% that resulted primarily from the addition of Tepnel's cost structure. For the first six months of 2009, G&A expenses were $26.9 million on a non-GAAP basis that excludes $4.8 million of acquisition-related expense, compared to $25.6 million in the prior year period, an increase of 5%. On a GAAP basis, G&A expenses were $17.8 million in the second quarter of 2009, up 30% compared to the prior year period, and $31.7 million for the first six months of the year, up 24% compared to the prior year period.

Total other income in the second quarter of 2009 was $8.5 million, compared to $3.7 million in the prior year period, an increase of 130% that resulted primarily from the Company's previously communicated decision to sell portions of its municipal bond portfolio, and to use the proceeds to repurchase stock. For the first six months of 2009, total other income was $13.1 million, compared to $9.4 million in the prior year period, an increase of 39%.

In the second quarter of 2009, Gen-Probe generated net cash of $22.8 million from its operating activities, and repurchased approximately 1.6 million shares of its stock for approximately $70 million.

Gen-Probe continues to have a strong balance sheet. As of June 30, 2009, the Company had $569.2 million of cash, cash equivalents and marketable securities, and $240.9 million of short-term debt. The Company currently pays interest on funds borrowed under its credit facility at a rate 0.6 percent above the one-month London Interbank Offered Rate (LIBOR), which was recently 0.3 percent.

Updated 2009 Financial Guidance

"We continue to expect solid growth in our clinical diagnostics business in 2009 as well as industry-leading profitability on the bottom line," said Herm Rosenman, Gen-Probe's senior vice president, finance, and chief financial officer. "However, we are lowering the top end of our full-year revenue and EPS guidance slightly to account for lower-than-expected blood screening revenues in the second quarter and slower anticipated blood screening growth going forward."

In the table below, Gen-Probe's non-GAAP guidance excludes certain expenses related to the Tepnel acquisition, namely transaction costs and the amortization of purchased intangibles.