Gene Logic Inc. (NASDAQ:GLGC) today reported financial results for
the second quarter ended June 30, 2005. Led by the second
consecutive profitable quarter for its genomics and toxicogenomics
business, Gene Logic today announced several strong second quarter
achievements, including a 41% reduction in its year-over-year net
loss, no decline in its cash balance and continued success in
achieving business development and scientific goals in its new drug
repositioning business. -0- *T Q2 Highlights Genomics and
Toxicogenomics Services -- The Company achieved its second
consecutive profitable quarter for its Genomics business. -- The
Company signed seven (7) new customers, including Imclone, CISRO
and Neurocrine, bringing to sixteen (16) the total number of new
customers signed in the first half of 2005. -- Shortly after the
quarter end, the Company launched the SCIANTIS(TM) System, a new
online gene expression reference database for use by academic,
government and other non-profit research organizations. In
connection with the launch of SCIANTIS, the Company signed a global
distribution agreement with GE Healthcare whereby GE will
distribute the System in 32 countries and will be exclusive
distributor in Japan. Drug Repositioning and Selection Services --
The Company commenced work on an additional ten (10) drug
candidates, all of which are candidates from discontinued clinical
programs that were stalled for reasons other than toxicity. The
current total number of drug candidates in Gene Logic's
repositioning pipeline stands at seventeen (17) as of June 30,
2005. -- Two drug candidates currently under evaluation have now
advanced to the next stage of development. In each case, the
partner agreed that the repositioning platform had presented
evidence compelling enough to warrant the performance of efficacy
animal model validation. -- The Company generated promising data
suggesting new possible indications for an additional two (2)
candidates under evaluation, bringing to four (4) the current
number of promising leads from the seventeen (17) drug candidates
under evaluation. Nonclinical Contract Research Services -- The
Company completed the expansion and upgrade of its nonclinical
services facilities, increasing its general toxicology testing
capacity by more than 50% to meet growing industry demand for
nonclinical testing. Revenue Second Quarter Ended June 30, 2005 Q2
2005 Q2 2004 % Change ------------ ------------ ------------
Genomics and toxicogenomics services $ 14,166 $ 12,663 12%
Nonclinical contract research services 5,820 5,959 -2% Drug
repositioning and selection services 147 - NA ------------
------------ ------------ Total revenue $ 20,133 $ 18,622 8%
------------ ------------ ------------ *T Total revenue for the
second quarter of 2005 was $20.1 million compared to $18.6 million
for the second quarter of 2004, an increase of 8%. Revenue for the
Company's genomics and toxicogenomics business increased $1.5
million, or 12%. Revenue for the second quarter of 2005 includes
$2.9 million for the first deliverables of a $5.5 million sale to
an existing customer, for a perpetual license for data. The balance
of the $5.5 million will be recognized as data is delivered through
December 2006. The Company is currently broadening its portfolio of
genomics services and related distribution channels as the Company
continues its strategy of increasing its sales beyond large,
multiyear subscriptions. Revenue for the Company's nonclinical
contract research services business declined slightly in 2005. -0-
*T Six Months Ended June 30, 2005 6 Months 6 Months 2005 2004 %
Change ------------ ------------ ------------ Genomics and
toxicogenomics services $ 27,405 $ 26,473 4% Nonclinical contract
research services 12,254 12,370 -1% Drug repositioning and
selection services 214 - NA ------------ ------------ ------------
Total revenue $ 39,873 $ 38,843 3% ------------ ------------
------------ *T Year-to-date total revenue was $39.9 million
compared to $38.8 million for the prior year and reflects a 4%
increase in genomics and toxicogenomics revenue and essentially
flat revenue for the Company's nonclinical contract research
services. Operating Income (Loss) -0- *T Second Quarter Ended June
30, 2005 Q2 2005 Q2 2004 % Change ------------ ------------
------------ Genomics and toxicogenomics services $ 1,669 $ (1,895)
188% Nonclinical contract research services (2,838) (2,316) -23%
Drug repositioning and selection services (2,460) - NA ------------
------------ ------------ Total operating income (loss) $ (3,629) $
(4,211) 14% ------------ ------------ ------------ *T Total
operating loss for the second quarter of 2005 was $3.6 million,
which included $2.5 million in losses from our investment in our
new drug repositioning and selection services business. This
compares to $4.2 million for the second quarter of 2004. This
improvement of 14% reflects the positive impact of increased sales
volume of $1.5 million and reduced database production expenses,
offset by higher facility, labor and support costs associated with
expansion of the Company's nonclinical contract research services
capacity, as well as the investment in the Company's new drug
repositioning and selection business. -0- *T Six Months Ended June
30, 2005 6 Months 6 Months 2005 2004 % Change ------------
------------ ------------ Genomics and toxicogenomics services $
2,504 $ (4,560) 155% Nonclinical contract research services (5,840)
(4,859) -20% Drug repositioning and selection services (4,919) - NA
------------ ------------ ------------ Total operating income
(loss) $ (8,255) $ (9,419) 12% ------------ ------------
------------ *T Year-to-date total operating loss was $8.3 million,
which included $4.9 million related to our investment in our new
drug repositioning and selection services business. This compares
to $9.4 million for the first six months of 2004. This improvement
of 12% 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. -0-
*T 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. *T Operating Expenses Operating
expenses, excluding the cost of nonclinical contract research
services, for the second quarter of 2005 were $17.1 million
compared to $16.7 million for the second quarter of 2004. These
results reflect the impact of lower costs associated with
developing additional database content, including costs for
microarrays, tissues, amortization and agreements with third
parties, offset by $2.6 million in increased expenses associated
with the ongoing development and commercialization of the Company's
new drug repositioning and selection services business.
Year-to-date operating expenses, excluding the cost of nonclinical
contract research services, were $34.3 million, a decrease of $1.3
million or 4% when compared to $35.7 million for the prior
comparative period. Gross Margin The gross margin in the Company's
nonclinical contract research services business for the second
quarter of 2005 was negative $0.8 million or negative 14%. Gross
margins reflect the impact of higher facility, labor and support
charges largely associated with and in advance of our recently
announced 50% increase in nonclinical contract research capacity.
We expect margins to increase as we begin to utilize this
additional capacity. Income Tax Expense Income tax expense for the
second quarter of 2005 was zero compared to $0.5 million for the
second quarter of 2004, reflecting the impact of the implementation
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
second quarter of 2005 was $2.6 million, or $0.08 per share,
compared to $4.4 million, or $0.14 per share, for the second
quarter of 2004, and reflects an improvement of 41%. Year-to-date
net loss was $6.7 million, or $0.21 per share, compared to $9.9
million, or $0.32 per share, for the prior year, and reflects an
improvement of 32%. Backlog As of June 30, 2005, Gene Logic had a
backlog for nonclinical contract research services of approximately
$15 million, which comprises commitments under signed task orders
(or other written firm commitments), excluding any amounts
thereunder recognized as revenue. Cash As of June 30, 2005, Gene
Logic had approximately $98.0 million in combined cash, cash
equivalents and marketable securities available-for-sale, which
compares to $97.8 million as of March 31, 2005 and $102.9 million
as of December 31, 2004. 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 Wednesday, July 20 at 9:00
a.m. Eastern Time. -0- *T Conference Call Details: Dial-In:
800/322-2803 Domestic 617/614-4925 International Replay Dial-In:
888/286-8010 Domestic 617/801-6888 International Passcode: 21115816
Webcast: Please go to www.genelogic.com, Investors, within 15
minutes prior to the call and select the webcast link. *T The
conference call replay will be available through August 3, 2005.
The webcast will be archived on Gene Logic's website. Gene Logic
Overview Gene Logic is leading the transformation of pharmaceutical
research and development with its extensive gene expression
databases, pioneering efforts in toxicogenomics, sophisticated
bioinformatics expertise, specialty nonclinical testing
capabilities and cutting edge technology program for drug
repositioning. Gene Logic technologies and services are used by
many of the world's top pharmaceutical and biotechnology companies.
Over 150 organizations and government agencies have benefited from
Gene Logic's diverse portfolio of drug development services,
enabling them to make more informed, more reliable and more
predictive decisions at each point in the highly complex and costly
drug development process. Founded in 1994, Gene Logic is
headquartered in Gaithersburg, Md., with additional research and
development facilities in Cambridge, Mass. and Berkeley, Calif. The
Company maintains customer support operations in Europe and Asia
and currently has about 450 employees worldwide. 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, nonclinical 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
nonclinical 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; 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; 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 nonclinical
contract research services; technological advances or alternative
technologies, methodologies and services that may make our genomics
and toxicogenomics services, nonclinical 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 and the Gene Logic logo are registered
trademarks used by Gene Logic Inc. Financial tables follow. -0- *T
Gene Logic Inc. Statement of Operations (in thousands, except per
share amounts) (unaudited) Three Months Ended Six Months Ended June
30, June 30, --------------------- --------------------- 2005 2004
2005 2004 ---------- ---------- ---------- ---------- Revenue:
Genomics and toxicogenomics services $ 14,166 $ 12,663 $ 27,405 $
26,473 Nonclinical contract research services 5,820 5,959 12,254
12,370 Drug repositioning and selection services 147 - 214 -
---------- ---------- ---------- ---------- Total revenue 20,133
18,622 39,873 38,843 Expenses: Cost of nonclinical contract
research services 6,618 6,115 13,808 12,605 Database production
8,021 10,498 16,203 22,609 Research and development 1,380 357 2,841
719 Selling, general and administrative 7,743 5,863 15,276 12,329
---------- ---------- ---------- ---------- Total expenses 23,762
22,833 48,128 48,262 ---------- ---------- ---------- ----------
Loss from operations (3,629) (4,211) (8,255) (9,419) Interest
(income), net (617) (308) (1,117) (618) Other (income) expense
(402) - (427) - ---------- ---------- ---------- ---------- Net
loss before income tax expense (2,610) (3,903) (6,711) (8,801)
Income tax expense - 489 - 1,101 ---------- ---------- ----------
---------- Net loss $ (2,610) $ (4,392) $ (6,711) $ (9,902)
========== ========== ========== ========== Basic and diluted net
loss per share $ (0.08) $ (0.14) $ (0.21) $ (0.32) ==========
========== ========== ========== Shares used in computing basic and
diluted net loss per share 31,742 31,449 31,725 31,358 ==========
========== ========== ========== 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) June 30, December 31, 2005
2004 ------------ ------------ (unaudited) ASSETS Current assets:
Cash and cash equivalents $ 68,981 $ 53,237 Marketable securities
available-for-sale 29,002 49,678 Accounts receivable, net 7,828
4,953 Unbilled services 6,214 6,406 Inventory, net 2,975 1,683
Prepaid expenses 2,439 2,210 Other current assets 1,576 2,185
------------ ------------ Total current assets 119,015 120,352
Property and equipment, net 29,722 23,034 Long-term investments
4,239 4,239 Goodwill 45,707 45,707 Intangibles and other assets,
net 11,387 13,749 ------------ ------------ Total assets $ 210,070
$ 207,081 ============ ============ LIABILITIES AND STOCKHOLDERS'
EQUITY Current liabilities: Accounts payable $ 3,500 $ 5,256
Accrued compensation and employee benefits 6,152 3,990 Other
accrued expenses 5,095 4,629 Current portion of capital lease
obligations 142 136 Current portion of long-term debt 495 494
Acquired technologies payable 3,419 - Deferred revenue 16,623 9,788
------------ ------------ Total current liabilities 35,426 24,293
Deferred revenue 4,350 3,595 Capital lease obligations, net of
current portion 132 204 Long-term debt, net of current portion 151
174 Acquired technologies payable - 3,347 Other noncurrent
liabilities 3,633 2,640 ------------ ------------ Total liabilities
43,692 34,253 ------------ ------------ Stockholders' equity:
Common stock 318 317 Additional paid-in capital 385,499 385,313
Accumulated other comprehensive loss (62) (136) Accumulated deficit
(219,377) (212,666) ------------ ------------ Total stockholders'
equity 166,378 172,828 ------------ ------------ Total liabilities
and stockholders' equity $ 210,070 $ 207,081 ============
============ *T
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