CORRECTING and REPLACING Gene Logic Reports First Quarter 2005 Financial Results; Net Loss Narrows by 26%, Genomics Achieves Profitability
Q1 2005 Q1 2004 % Change
-------- -------- ---------
Genomics and toxicogenomics services $ 833 $(2,666) 131%
Preclinical contract research services (3,002) (2,543) -18%
Drug repositioning and selection services (2,457) - NA
-------- -------- ---------
Total operating income (loss) $(4,626) $(5,209) 11%
-------- -------- ---------
The corrected release reads:
GENE LOGIC REPORTS FIRST QUARTER 2005 FINANCIAL RESULTS; NET LOSS NARROWS BY 26%, GENOMICS ACHIEVES PROFITABILITY
Gene Logic Inc. (NASDAQ:GLGC) today reported financial results for the first quarter ended March 31, 2005.
Led by the first time ever profitability of its genomics and toxicogenomics business, Gene Logic today announced several strong quarter one achievements that include a 26% reduction in its year-over-year net loss and excellent success in entering into new agreements with both existing and new customers.
Q1 Highlights
Genomics and Toxicogenomics Services
-- The Company reported its first ever quarterly operating profit for its genomics and toxicogenomics services business.
-- The Company signed multi-year database subscription agreements on renegotiated terms from all three (3) of the subscription customers--Takeda (BioExpress(R)), Daiichi (BioExpress(R)), and Pfizer (ToxExpress(R))--whose agreements were due to expire in the first four months of 2005, and signed renewed ASCENTA(R) subscriptions with Sanofi-Aventis, Biogen Idec and Celgene. In addition, the Company signed nine (9) new customers, including Becton-Dickinson, Schering-Plough and Otsuka.
-- The Company launched multiple new products and services, including the Microarray Data Generation and Analysis Service, the ToxShield(TM) Suite and updates to the ASCENTA(R) System and the Genesis Enterprise System(TM) software.
Preclinical Contract Research Services
-- The Company further strengthened its management team with the hiring of V.W. Brinkerhoff as General Manager for Gene Logic Laboratories.
-- A significant expansion program was nearly complete that will add 50% new capacity to the Company's preclinical facilities, which is anticipated to become operational in the third quarter of 2005.
Drug Repositioning and Selection Services
-- The Company commenced work on seven (7) drug candidates, all of which are candidates from discontinued clinical programs.
-- The Company generated promising data suggesting new possible indications for two (2) of the seven compounds currently under evaluation.
Revenue
Total revenue for the first quarter of 2005 was $19.7 million compared to $20.2 million for the first quarter of 2004. This reflects a slight decline in genomics and toxicogenomics services revenue and unchanged revenue for preclinical contract research services.
Q1 2005 Q1 2004 % Change
-------- -------- ---------
Genomics and toxicogenomics services $13,239 $13,810 -4%
Preclinical contract research services 6,434 6,411 0%
Drug repositioning and selection services 67 - NA
-------- -------- ---------
Total revenue $19,740 $20,221 -2%
-------- -------- ---------
Operating Income (Loss)
Total operating loss for the first quarter of 2005 was $4.6 million, which included $2.5 million related to our investment in our new drug repositioning and selection services business. This compares to $5.2 million for the first quarter of 2004. This improvement of 11% reflects the positive impact of reduced database production expenses and achievement of other operational efficiencies, offset by increases in cost of sales and research and development expenses, which now include the development and commercialization of the Company's new drug repositioning and selection business.
Q1 2005 Q1 2004 % Change
-------- -------- ---------
Genomics and toxicogenomics services $ 833 $(2,666) 131%
Preclinical contract research services (3,002) (2,543) -18%
Drug repositioning and selection services (2,457) - NA
-------- -------- ---------
Total operating income (loss) $(4,626) $(5,209) 11%
Note: Management uses operating income to evaluate segment
performance. To arrive at operating income, the Company has included
all direct costs for providing its services and an allocation for
corporate overhead applied on a consistent and reasonable basis. The
Company has excluded the cost of income taxes and interest income or
expense and could also exclude certain unusual or corporate related
costs in the future. In addition, while the Company's consolidated
results of operation include adjustments to reflect the elimination of
inter-company transactions, individual segments may include these
types of transactions. The Company does not believe these transactions
are material and believes that their inclusion would not impact either
management's or shareholders' understanding of our various segments.
For the purpose of clarity, revenue is reported net of inter-company
transactions.
Operating Expenses
Operating expenses, which do not include the cost of preclinical contract research services, for the first quarter of 2005 were $17.2 million compared to $18.9 million for the first quarter of 2004. This improvement of 9% reflects the impact of lower costs associated with developing additional database content, including costs for acquiring tissues and certain agreements with third parties, partially offset by $2.5 million in increased expenses associated with the ongoing development and commercialization of the Company's new drug repositioning and selection services business.
Gross Margin
The gross margin in the Company's preclinical contract research services business for the first quarter of 2005 was a negative $0.8 million or negative 12%. Gross margins reflect the impact of i) additional costs due to a one-time operational issue associated with a single study; and ii) facility renovations and preparations for increased capacity in the third quarter of 2005. We expect margins to improve throughout the balance of 2005.
Income Tax Expense
Income tax expense for the first quarter of 2005 was zero compared to $0.6 million for the first quarter of 2004, reflecting the impact of the enactment of a new income tax treaty between the United States and Japan, effectively eliminating withholding taxes on payments made between the countries after July 1, 2004.
Net Loss
The net loss for the first quarter of 2005 was $4.1 million, or $0.13 per share, compared to $5.5 million, or $0.18 per share, for the first quarter of 2004, and reflects a 26% improvement.
Backlog
As of March 31, 2005, Gene Logic had a backlog for contract study services of approximately $17 million, which comprises commitments under signed task orders (or other written firm commitments), excluding any amounts thereunder recognized as revenue.
Cash
As of March 31, 2005, Gene Logic had approximately $97.8 million in combined cash, cash equivalents and marketable securities available-for-sale.
Gene Logic Guidance
The Company is reaffirming its previous guidance issued on March 17, 2005.
Conference Call and Webcast
Gene Logic will host a conference call and webcast to discuss these results on Friday, April 22 at 9:00 a.m. Eastern Time.
Conference Call Details:
Dial-In: 866/800-8652 Domestic
617/614-2705 International
Replay Dial-In: 888/286-8010 Domestic
617/801-6888 International
Passcode: 44285100
Webcast: Please go to www.genelogic.com, Investors,
within 15 minutes prior to the call and select
the webcast link.
The conference call replay will be available through Friday, May 6, 2005. The webcast will be archived on Gene Logic's website.
Gene Logic Overview
Gene Logic aspires to be the most valued drug development partner for the pharmaceutical industry. Gene Logic applies its broad and unique mix of technologies, talent and methodologies to work on behalf of its partners to enable pharmaceutical and biotechnology companies to make more informed, more reliable and more predictive decisions at each point in the highly complex and costly drug development process. For more information, visit www.genelogic.com or call toll-free - 1/800/GENELOGIC.
Safe Harbor Statement
This news release contains forward-looking statements that involve significant risks and uncertainties, including those discussed below and others that can be found in our Annual Report on Form 10-K for the year ended December 31, 2004 (filed on March 16, 2005) and in subsequent filings made with the Securities and Exchange Commission. Gene Logic is providing this information as of the date of this news release and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
No forward-looking statement can be guaranteed and actual results may differ materially from those we project. The Company's results may be affected by: the extent of utilization of genomics, toxicogenomics, bioinformatics, preclinical contract research and drug repositioning and selection by the pharmaceutical and biotechnology industry in research and product development; our ability to retain existing and obtain additional domestic and international customers in a timely manner; capital markets and other economic conditions adversely affecting the purchasing patterns of pharmaceutical and biotechnology companies; levels of industry research and development spending; risks relating to the development of genomics and toxicogenomics-based services and their use by existing and potential customers; our reliance on sole source suppliers; our ability to limit our losses and become profitable; our ability to timely supply customers with additional data as required under some of our genomics and toxicogenomics services contracts; risks relating to the fact that our contracts with our Japanese customers are payable in foreign currency beginning in 2005 and may be subject to fluctuations due to changes in currency exchange rates; our ability to continue to successfully manage growth of our preclinical contract research operations, including increasing facility capacity and achieving optimal use of facilities and facility capacity and adequate quality of studies; our ability to comply with, and to provide studies that are compliant with, regulatory requirements, including those of the FDA, DEA, and AAALAC; the potentially depressive effect of sales of Gene Logic stock issued to the former TherImmune shareholders in the merger; our ability to attract and retain key employees; our continued access to necessary human and animal tissue samples; the availability of large animals for clinical testing; the impact of technological advances and competition; our ability to enforce our intellectual property rights and the impact of intellectual property rights of others; outsourcing trends in the pharmaceutical and biotechnology industries; competition within the drug development services outsourcing industry; our ability to limit losses from certain fixed price contracts for preclinical contract research services; technological advances or alternative technologies, methodologies and services that may make our genomics and toxicogenomics services, preclinical contract research services and/or drug repositioning and selection services less competitive; risks associated with valuation of assets representing acquired businesses; our ability to successfully develop and commercialize the Horizon technologies acquired from Millennium Pharmaceuticals, Inc., and our related drug repositioning and selection services, and our ability to successfully develop new indications for compounds, and to realize value from such results of our services. Note: Gene Logic, BioExpress, ToxExpress, ASCENTA and the Gene Logic logo are registered trademarks used by Gene Logic Inc.
Financial tables follow.
Gene Logic Inc.
Statement of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
-------------------
2005 2004
--------- ---------
Revenue:
Genomics and toxicogenomics services $ 13,239 $ 13,810
Preclinical contract research services 6,434 6,411
Drug repositioning and selection services 67 -
--------- ---------
Total revenue 19,740 20,221
Expenses:
Cost of preclinical contract research services 7,190 6,490
Database production 8,182 12,231
Research and development 1,461 362
Selling, general and administrative 7,533 6,347
--------- ---------
Total expenses 24,366 25,430
--------- ---------
Loss from operations (4,626) (5,209)
Interest (income), net (500) (311)
Other (income) expense (25) -
--------- ---------
Net loss before income tax expense (4,101) (4,898)
Income tax expense - 612
--------- ---------
Net loss $ (4,101) $ (5,510)
========= =========
Basic and diluted net loss per share $ (0.13) $ (0.18)
========= =========
Shares used in computing basic and diluted
net loss per share 31,708 31,268
========= =========
Note: Certain reclassifications have been made to the prior years'
financial statements to conform to the current year presentation.
Gene Logic Inc.
Consolidated Condensed Balance Sheets
(in thousands)
March 31, December 31,
2005 2004
-------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 64,695 $ 53,237
Marketable securities available-for-
sale 33,062 49,678
Accounts receivable, net 3,598 4,953
Unbilled services 6,614 6,406
Inventory, net 3,346 1,683
Prepaid expenses 2,505 2,210
Other current assets 1,575 2,185
-------------- --------------
Total current assets 115,395 120,352
Property and equipment, net 27,141 23,034
Long-term investments 4,239 4,239
Goodwill 45,707 45,707
Intangibles and other assets, net 12,101 13,749
-------------- --------------
Total assets $ 204,583 $ 207,081
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,404 $ 5,256
Accrued compensation and employee
benefits 5,193 3,990
Other accrued expenses 3,770 4,629
Current portion of capital lease
obligations 139 136
Current portion of long-term debt 495 494
Acquired technologies payable 3,382 -
Deferred revenue 11,410 9,788
-------------- --------------
Total current liabilities 29,793 24,293
Deferred revenue 2,964 3,595
Capital lease obligations, net of
current portion 169 204
Long-term debt, net of current portion 162 174
Acquired technologies payable - 3,347
Other noncurrent liabilities 2,566 2,640
-------------- --------------
Total liabilities 35,654 34,253
-------------- --------------
Stockholders' equity:
Common stock 318 317
Additional paid-in capital 385,498 385,313
Accumulated other comprehensive loss (120) (136)
Accumulated deficit (216,767) (212,666)
-------------- --------------
Total stockholders' equity 168,929 172,828
-------------- --------------
Total liabilities and
stockholders' equity $ 204,583 $ 207,081
============== ==============
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