EXHIBIT 99.1
Gene Logic Reports Second Quarter 2006 Financial Results
GAITHERSBURG, Md.--(BUSINESS WIRE)--Aug. 4, 2006--Gene Logic Inc.
(NASDAQ: GLGC) today reported financial results for the second quarter
ended June 30, 2006.
Revenue
(Amounts in thousands)
Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
---------------------- ----------------------
% %
2006 2005 Change 2006 2005 Change
------- ------- ------ ------- ------- ------
Genomics Division $ 4,683 $14,166 -67% $13,431 $27,405 -51%
Preclinical Division 6,600 5,820 13% 10,634 12,254 -13%
Drug Repositioning
Division 9 147 -94% 29 214 -86%
------- ------- ------ ------- ------- ------
Total revenue $11,292 $20,133 -44% $24,094 $39,873 -40%
------- ------- ------ ------- ------- ------
Total revenue for the second quarter of 2006 was $11.3 million
compared to $20.1 million for the second quarter of 2005, a decline of
$8.8 million or 44%. Modest improvements in Preclinical Division
revenue were offset by a substantial decline in Genomics Division
revenue. Year-to-date total revenue was $24.1 million compared to
$39.9 million for the prior year and reflects a 40% decrease,
primarily due to lower than expected sales for the Genomics Division
in the first half of 2006 and slow sales for the Preclinical Division
in the first quarter of 2006.
The Company is currently conducting a review of its overall
business strategy with the assistance of a leading strategy consulting
firm and expects to communicate the results of the review by September
22, 2006. Using preliminary findings from this review, the Company
recently initiated a restructuring of its Genomics Division intended
to reduce its cash use. The Company gave notice of termination to
approximately 80 employees, effective October 5, 2006, which will
result in severance costs of $1.8 million. Once fully implemented, the
Company estimates that these staff reductions will reduce its annual
salary and fringe benefits costs by approximately $8 million. The
Company expects to realize additional savings in certain non-employee
costs in connection with this restructuring.
Genomics Division:
Genomics Division revenue for the second quarter of 2006 was $4.7
million, a decline of $9.5 million, or 67%, over the prior year
period. This shortfall resulted from declining subscription revenue,
the absence of anticipated sales of perpetual licenses to database
products that failed to materialize and slower than anticipated sales
growth for microarray data generation and analysis services. Genomics
Division revenue for the first six months of 2006 of $13.4 million was
lower than the $27.4 million in the comparable period of 2005, for the
same reasons.
Preclinical Division:
Preclinical Division revenue was $6.6 million for the second
quarter of 2006, an increase of $0.8 million, or 13%, over the prior
year period, reflecting increased utilization of capacity and an
increase in the number of large-animal studies conducted in 2006.
Preclinical Division revenue for the first half of 2006 was
$10.6 million compared to $12.3 million in the comparable 2005
period, a decrease of 13%. The decrease in revenue for the six-month
period is due to slow sales for the first quarter of 2006, reflecting
a trend that has reversed in the second quarter of 2006.
Operating Expenses
Operating expenses consist of database production, research and
development, and selling, general and administrative costs. Operating
expenses do not include the cost of sales for the Preclinical
Division.
For the second quarter of 2006, total operating expenses were
$16.1 million compared to $17.1 million for the second quarter of
2005, reflecting the impact of continued economies associated with
lower costs of developing additional database content, including lower
costs for agreements with third parties, lower costs for our various
employee incentive plans and general cost controls, partially offset
by increased expenses associated with the ongoing development and
commercialization of the Drug Repositioning Division and repositioning
work on customer-supplied drug candidates and a $0.7 million lower of
cost or market impairment of inventory.
Year-to-date total operating expenses were $34.7 million, an
increase of $0.4 million or 1% when compared to $34.3 million for the
prior comparative period.
Segment Operating Income (Loss)
Note: Management uses operating income (loss) to evaluate segment
performance. To arrive at operating income (loss) for each segment,
the Company has included all direct costs for providing the segment's
services and an allocation for corporate overhead on a consistent and
reasonable basis. The Company has excluded interest income or expense,
other income and expense and write-down of equity investment 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-segment
transactions, individual segments may include inter-segment
transactions. The Company does not believe such inter-segment
transactions are material and believes that their inclusion would not
impact either management's or shareholders' understanding of the
Company's various segments. For the purpose of clarity, revenue is
reported net of inter-segment transactions.
Segment Operating Income (Loss):
(Amounts in thousands)
Three Months Ended Six Months Ended
June 30, 2006 June 30, 2006
------------------------- -------------------------
% %
2006 2005 Change 2006 2005 Change
--------- -------- ------ --------- ------- ------
Genomics
Division $(6,064) $1,669 -463% $(9,873) $2,504 -494%
Preclinical
Division (2,502) (2,838) 12% (7,466) (5,840) -28%
Drug
Repositioning
Division (3,372) (2,460) -37% (6,897) (4,919) -40%
--------- -------- ------ --------- -------- ------
Total operating
income (loss) $(11,938) $(3,629) -229% $(24,236) $(8,255) -194%
--------- -------- ------ --------- -------- ------
Genomics Division:
For the second quarter of 2006, the Genomics Division reported an
operating loss of $6.1 million compared to an operating profit of $1.7
million for the second quarter of 2005. The results are primarily due
to significantly lower revenue, partially offset by lower operating
expenses. Operating expenses also include a $0.7 million lower of cost
or market impairment of inventory. For the first half of 2006, the
Genomics Division reported an operating loss of $9.9 million compared
to an operating profit of $2.5 million for the first half of 2005.
Operating loss for the division increased by $12.4 million, due
primarily to lower than expected sales in 2006.
Preclinical Division:
For the second quarter of 2006, the Preclinical Division reported
an operating loss of $2.5 million compared to an operating loss of
$2.8 million for the second quarter of 2005, an improvement of 12%.
The results reflect increased revenue, higher gross margins, and a
slight reduction in operating expenses. Preclinical Division operating
losses for the first six months of 2006 were $7.5 million, compared to
$5.8 million in the 2005 period, an increase of 28% when compared to
the same period of 2005, reflecting lower sales volume in the first
quarter, lower gross margins, and increased operating expenses.
Drug Repositioning Division:
For the second quarter and first six months of 2006, the Company's
losses in the Drug Repositioning Division were $3.4 million and $6.9
million, respectively, compared to losses of $2.5 million and $4.9
million, respectively, for the second quarter and first six months of
2005. These losses reflect continuing investment in 2006 in the
scale-up and development of the Drug Repositioning Division and
increasing repositioning work on customer-supplied drug candidates.
Net Loss
For the second quarter of 2006, total consolidated net losses were
$11.3 million, or $0.35 per share, compared to $2.6 million, or $0.08
per share, for the second quarter of 2005. Net losses for the second
quarter of 2006 reflect primarily the impact of the revenue shortfall
in the Genomics Division. Total consolidated net losses for the second
quarter of 2006 include non-cash compensation expense under SFAS
123(R) of $0.2 million.
For the first six months of 2006, total consolidated net losses
were $23.1 million, or $0.73 per share, compared to $6.7 million, or
$0.21 per share for the same period in 2005. Net losses for the first
six months reflect revenue shortfall in the Genomics Division over the
first and second quarters of 2006, revenue shortfall in the
Preclinical Division in the first quarter of 2006 and continuing
investment in 2006 in the Drug Repositioning Division, including
increasing repositioning work on customer-supplied drug candidates.
Total consolidated net losses for the second quarter of 2006 include
non-cash compensation expense under SFAS 123(R) of $0.6 million.
Backlog
As of June 30, 2006, Gene Logic had a backlog for its Preclinical
Division of approximately $23 million, an increase of $7 million when
compared to the backlog as of December 31, 2005. The Company's backlog
consists of commitments under signed task orders and other written
obligations, including government contracts as to which funding has
been committed but not yet assigned to a specific project.
Liquidity
As of June 30, 2006, the Company had approximately $59.5 million
in combined cash, cash equivalents and marketable securities
available-for-sale, compared to $63.9 million as of March 31, 2006.
Mark D. Gessler, Chief Executive Officer and President commented,
"We are encouraged with the results of our Preclinical and Drug
Repositioning Divisions. We have taken decisive actions to control
costs within our Genomics Division. We are now midway through a
strategic review of our business and look forward to reporting on our
conclusions in September."
Conference Call and Webcast
Gene Logic will host a conference call and webcast on August 4,
2006 at 10:00 a.m. Eastern Time to discuss the results for the second
quarter of 2006. Participants in the live call should dial
800.510.9836 in North America, or 617.614.3670 internationally. The
pass code for both numbers is 15769358. Alternatively, a webcast of
the live call will be accessible from the Investors section of the
Company's website at www.genelogic.com.
A replay of the call will be available beginning the afternoon of
the call, through August 18, 2006. To access the replay, please dial
888.286.8010 domestically or 617.801.6888 internationally, using the
pass code 87422957. An archived webcast of the conference call will
also be available under the Investors section of the Company's website
at www.genelogic.com.
Gene Logic Overview
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,
Maryland, conducts additional research and development in facilities
in Cambridge, Massachusetts, and has customer support operations in
the U.S., Europe, and Asia. For more information, visit
www.genelogic.com or call toll-free - 1/800/GENELOGIC.
Safe Harbor Statement
This press release contains "forward-looking statements," as such
term is used in the Securities Exchange Act of 1934, as amended. Such
forward looking statements include the Company's ability to identify
strategies for making its businesses successful and the impact of such
strategies on our business and financial performance and on
shareholder value. Forward-looking statements typically include the
words "expect," "anticipate," "believe," "estimate," "intend," "may,"
"will," and similar expressions as they relate to Gene Logic or its
management. Forward-looking statements are based on our current
expectations and assumptions, which are subject to risks and
uncertainties. They are not guarantees of our future performance or
results. Our actual performance and results could differ materially
from what we project in forward-looking statements for a variety of
reasons and circumstances, including particularly such risks and
uncertainties that may affect the Company's operations, financial
condition and financial results and that are discussed in detail in
the Company's Annual Report on Form 10-K and our other filings with
the Securities Exchange Commission. They include, but are not limited
to: whether we will be able to identify and successfully implement
strategies, on favorable terms or at all, for improving the
performance and value of our businesses and improving the value of our
businesses to shareholders; whether we will be able successfully to
manage our existing cash adequately and whether we will have access to
financing on sufficiently favorable terms to maintain our businesses
and effect our strategies; whether we will be able to recruit and
retain qualified personnel, particularly in light of our restructuring
efforts; potential negative effects on our operations and financial
results from workforce reductions, other restructuring activities, and
the evaluation of strategic options; the potential loss of significant
customers; and the possibility of delisting from NASDAQ Global
Markets, which could have an adverse effect on the value of our stock.
Gene Logic undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Gene Logic Inc.
Statement of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2006 2005 2006 2005
--------- -------- --------- --------
Revenue:
Genomics division $ 4,683 $14,166 $ 13,431 $27,405
Preclinical division 6,600 5,820 10,634 12,254
Drug repositioning division 9 147 29 214
--------- -------- --------- --------
Total revenue 11,292 20,133 24,094 39,873
Expenses: (* see note below)
Cost of preclinical division
services 7,172 6,618 13,580 13,808
Database production 7,566 8,021 15,299 16,203
Research and development 2,541 1,380 4,981 2,841
Selling, general and
administrative 5,951 7,743 14,470 15,276
--------- -------- --------- --------
Total expenses 23,230 23,762 48,330 48,128
--------- -------- --------- --------
Loss from operations (11,938) (3,629) (24,236) (8,255)
Interest (income), net (755) (617) (1,528) (1,117)
Other (income) expense 103 (402) 100 (427)
Write-down of equity investment - - 275 -
--------- -------- --------- --------
Net loss $(11,286) $(2,610) $(23,083) $(6,711)
========= ======== ========= ========
Basic and diluted net loss per
share $ (0.35) $ (0.08) $ (0.73) $ (0.21)
========= ======== ========= ========
Shares used in computing basic
and diluted net loss per share 31,809 31,742 31,798 31,725
========= ======== ========= ========
- --------------------------------
* Line items include non-cash stock compensation as follows:
Cost of preclinical division
services $ 43 $ - $ 101 $ -
Database production 43 - 101 -
Research and development 27 - 63 -
Selling, general and
administrative 122 - 285 -
--------- -------- --------- --------
Total $ 235 $ - $ 550 $ -
========= ======== ========= ========
Gene Logic Inc.
Consolidated Condensed Balance Sheets
(in thousands)
June 30, Dec. 31,
2006 2005
----------- ----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 24,824 $ 43,946
Marketable securities available-for-sale 34,669 38,179
Accounts receivable, net 1,822 3,544
Unbilled services 4,827 7,779
Inventory, net 2,830 3,117
Prepaid expenses 3,197 2,403
Other current assets 986 961
---------- ----------
Total current assets 73,155 99,929
Property and equipment, net 28,667 30,682
Long-term investments 2,964 3,239
Goodwill 12,913 12,913
Intangibles and other assets, net 12,680 13,956
---------- ----------
Total assets $ 130,379 $ 160,719
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,996 $ 5,630
Accrued compensation and employee benefits 4,504 6,702
Other accrued expenses 3,708 4,269
Current portion of capital lease obligations 132 144
Current portion of long-term debt 498 497
Acquired technologies payable 3,500 3,492
Deferred revenue 9,633 11,595
---------- ----------
Total current liabilities 24,971 32,329
Capital lease obligations, net of current
portion - 57
Long-term debt, net of current portion 103 127
Deferred rent 2,938 3,350
---------- ----------
Total liabilities 28,012 35,863
---------- ----------
Stockholders' equity:
Common stock 318 318
Additional paid-in capital 386,281 385,586
Accumulated other comprehensive loss (179) (78)
Accumulated deficit (284,053) (260,970)
---------- ----------
Total stockholders' equity 102,367 124,856
---------- ----------
Total liabilities and stockholders' equity $ 130,379 $ 160,719
========== ==========
CONTACT: Gene Logic Inc.
Investors:
Christopher Culotta, 301-987-1752
cculotta@genelogic.com
or
Media:
Lynn Kieffer, 301-987-1762
lkieffer@genelogic.com