Exhibit 99.1
Gene Logic Reports Third Quarter 2006 Financial Results
Announces Plans to Sell Preclinical Division to Further Focus Business
GAITHERSBURG, Md.--(BUSINESS WIRE)--Nov. 9, 2006--Gene Logic Inc.
(NASDAQ:GLGC) today reported financial results for the third quarter and nine
months ended September 30, 2006.
The Company also announced that it is continuing to implement its strategic
plan and is focusing its resources on those opportunities that it believes will
have the greatest potential to increase long-term shareholder value. For the
third quarter, the Company is reporting the following:
-- The Company's Drug Repositioning business continues to generate
significant interest among pharmaceutical companies as a new path to
identify drug development candidates. Leveraging its leadership
position, Gene Logic signed a new drug repositioning and development
agreement with Eli Lilly and Company, adding to its existing
partnerships with Pfizer, Roche, and Organon.
-- Gene Logic continues to offer its Genomics Services and to support
existing and new customers. The Company is implementing its previously
announced restructuring plan for the Genomics business and expects to
begin to see the results of these efforts in the fourth quarter. These
assets continue to play an important role in the Company's Drug
Repositioning efforts. In addition, Gene Logic is exploring
opportunities for these assets in areas such as clinical biomarker
development and molecular diagnostics.
-- Gene Logic is planning to sell its Preclinical business, is in
discussions regarding a sale, and has engaged an investment banking
firm to assist the Company.
Due to the Company's current plan to sell the Preclinical Division, under
applicable accounting rules, the Company is required to classify the net assets
of the Division as assets and liabilities held for sale and to report operating
results for the Division as discontinued operations. The consolidated financial
statements presented for the current and prior periods are now prepared on that
basis and the discussion of results of continuing operations below do not
include results for the Preclinical Division.
Results for Drug Repositioning and Genomics Division (continuing
operations)
Revenue
(Amounts in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
2006 2005 % Change 2006 2005 % Change
------- -------- --------- -------- -------- ---------
Genomics
Division $3,698 $11,719 -68% $17,129 $39,125 -56%
Drug
Repositioning
Division 6 102 -94% 36 316 -89%
------- -------- --------- -------- -------- ---------
Total revenue $3,704 $11,821 -69% $17,165 $39,441 -56%
------- -------- --------- -------- -------- ---------
Total revenue for the third quarter, consisting primarily of revenue from
the Genomics Division, was $3.7 million compared to $11.8 million for the third
quarter of 2005, a decline of $8.1 million, or 69%. Revenue for the first nine
months of 2006 was $17.2 million compared to $39.4 million for the prior year, a
decline of $22.3 million, or 56%. As previously disclosed, these decreases in
revenue reflect that the Company's earlier strategy, which was intended to
compensate for changing market conditions, was unable to reverse recent sales
trends. Revenue for the third quarter was consistent with our revised
expectations.
In the third quarter, the Company initiated its previously disclosed
restructuring plan for its Genomics Division. Elements of this plan included i)
the elimination of approximately 80 positions, effective October 5, 2006, and
resulting in severance costs of $1.6 million, ii) the acceleration of costs
associated with 2 facility lease obligations totaling $2.4 million and iii) an
analysis of the Genomics patent and license portfolio that resulted in an
impairment charge of $1.3 million.
Operating Expenses
Operating expenses from continuing operations consist primarily of database
production, research and development, selling, general and administrative costs,
as well as restructuring expenses.
For the third quarter of 2006, total operating expenses from continuing
operations, excluding restructuring expenses, were $13.0 million, a decrease of
$2.0 million when compared to $15.0 million for the third quarter of 2005.
Year-to-date total operating expenses, excluding restructuring expenses, were
$43.2 million, a decrease of $1.8 million when compared to $45.1 million for the
prior comparative period. These improvements reflect lower spending associated
with the Genomics Division, partially offset by increased spending associated
with evaluating an increased number of compounds for our drug repositioning
partners.
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.
Results for discontinued operations are also excluded.
(Amounts in thousands)
Three Months Ended Nine Months Ended
September 30, 2006 September 30, 2006
---------------------------- ----------------------------
2006 2005 % Change 2006 2005 % Change
--------- -------- --------- --------- -------- ---------
Genomics
Division $(11,221) $27 -41659% $(21,093) $2,539 -931%
Drug Re-
positioning
Division (3,419) (3,121) -10% (10,317) (8,038) -28%
--------- -------- --------- --------- -------- ---------
Total
operating
income
(loss) $(14,640) $(3,094) -373% $(31,410) $(5,499) -471%
--------- -------- --------- --------- -------- ---------
Genomics Division:
For the third quarter of 2006, the Genomics Division reported an operating
loss of $11.2 million compared to an operating profit of less than $0.1 million
for the third quarter of 2005. This decline in operating income is primarily due
to significantly lower revenue, partially offset by lower operating expenses.
For the first nine months of 2006, the Genomics Division reported an operating
loss of $21.1 million compared to an operating profit of $2.5 million for the
same period of 2005. This decline was due primarily to significantly lower sales
in 2006. Beginning in the fourth quarter of 2006, we expect to begin to see the
positive impact of the previously discussed restructuring program.
Drug Repositioning Division:
For the third quarter and first nine months of 2006, the Company's losses
in the Drug Repositioning Division were $3.4 million and $10.3 million,
respectively, compared to losses of $3.1 million and $8.0 million, respectively,
for the third quarter and first nine months of 2005. These losses reflect
increased spending associated with evaluating an increased number of compounds
for our drug repositioning partners.
Net Loss from Continuing Operations
For the third quarter and first nine months of 2006, net losses from
continuing operations were $13.9 million, or $0.44 per share and $29.6 million,
or $0.93 per share, respectively. For the third quarter and first nine months of
2005, net losses from continuing operations were $2.3 million, or $0.07 per
share, and $3.2 million, or $0.10 per share, respectively. For both periods, the
increased net loss from continuing operations is primarily due to the impact of
lower revenue for the Genomics Division and restructuring expenses of $5.4
million in 2006.
Summarized Operating Results for Preclinical Division (now classified as
discontinued operations)
As previously discussed, because of the Company's plans to sell the
Preclinical Division, the results of operations of this division are now
classified under applicable accounting rules as discontinued operations. The
Company has also adjusted the carrying value of the net assets of the Division
to fair value less estimated costs to sell, and recorded an impairment charge of
$11.0 million during the third quarter. The Company will continue to review its
assumptions from time to time, which could result in the future recognition of
further gain or loss with respect to the value of assets of the Division.
Summarized operating results from the discontinued operations included in
the Company's Statements of Operations are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenue from discontinued
operations $8,075 $5,257 $18,708 $17,510
Loss from discontinued
operations $(12,712) $(37,180) $(20,145) $(42,970)
--------- --------- --------- ---------
Total Net Loss
For the third quarter and first nine months of 2006, total net losses were
$26.7 million, or $0.84 per share, and $49.7 million, or $1.56 per share,
respectively. For the third quarter and first nine months of 2005, total net
losses were $39.5 million, or $1.24 per share, and $46.2 million or $1.46 per
share, respectively.
Cash Position
As of September 30, 2006, the Company had approximately $45.5 million in
combined cash, cash equivalents and marketable securities available-for-sale.
Conference Call and Webcast
Gene Logic will host a conference call and webcast on November 9, 2006 at
10:00 a.m. Eastern Time to discuss the results for the third quarter of 2006.
Conference Call Details:
Dial-In: 866.800.8649 North America
617.614.2703 International
Pass code: Gene Logic
Replay Dial-In: 888.286.8010 North America
617.801.6888 International
Pass code: 14632571
Live Webcast: Please go to www.genelogic.com, Investors,
within 15 minutes prior to the call and select
the webcast link.
A replay of the call will be available beginning the afternoon of the call,
through November 23, 2006. 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 hyperlink
http://www.genelogic.com 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 subsequent 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
to sell the Preclinical Division on terms we deem satisfactory, 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
and the potential sale of the Preclinical Division; 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.
Financial tables follow.
Gene Logic Inc.
Statement of Operations
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Revenue:
Genomics services $3,698 $11,719 $17,129 $39,125
Drug repositioning services 6 102 36 316
--------- --------- --------- ---------
Total revenue 3,704 11,821 17,165 39,441
Expenses (1):
Database production 5,978 7,340 21,277 23,543
Research and development 2,618 1,818 7,599 4,659
Selling, general and
administrative 4,373 5,823 14,357 16,864
Restructuring 5,377 - 5,377 -
--------- --------- --------- ---------
Total expenses 18,346 14,981 48,610 45,066
--------- --------- --------- ---------
Loss from operations (14,642) (3,160) (31,445) (5,625)
Interest (income), net (633) (727) (2,162) (1,844)
Other (income) expense (66) (133) 35 (560)
Write-down of equity
investment - - 275 -
--------- --------- --------- ---------
Loss from continuing
operations (13,943) (2,300) (29,593) (3,221)
Loss from discontinued
operations (1) (12,712) (37,180) (20,145) (42,970)
--------- --------- --------- ---------
Net loss $(26,655) $(39,480) $(49,738) $(46,191)
========= ========= ========= =========
Basic and diluted net loss per
share:
Loss from continuing
operations $(0.44) $(0.07) $(0.93) $(0.10)
Loss from discontinued
operations (0.40) (1.17) (0.63) (1.36)
--------- --------- --------- ---------
Net loss $(0.84) $(1.24) $(1.56) $(1.46)
========= ========= ========= =========
Shares used in computing basic
and diluted net loss per
share 31,810 31,756 31,802 31,736
(1) Line items include non-
cash stock compensation
expense as follows:
Database production $25 $- $126 $-
Research and development 16 - 79 -
Selling, general and
administrative 49 - 242 -
Loss from discontinued
operations 49 - 242 -
--------- --------- --------- ---------
Total non-cash stock
compensation expense $139 $- $689 $-
========= ========= ========= =========
Gene Logic Inc.
Consolidated Condensed Balance Sheets
(in thousands)
September 30, December 31,
2006 2005
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $24,115 $43,946
Marketable securities available-for-sale 21,401 38,179
Accounts receivable, net of allowance of
$45 and $255 as of September 30, 2006
and December 31, 2005, respectively 373 1,779
Unbilled services 329 3,001
Inventory, net 2,531 3,091
Prepaid expenses 1,830 1,548
Other current assets 959 839
Assets of discontinued operations held
for sale 19,735 32,889
------------- -------------
Total current assets 71,273 125,272
Property and equipment, net 13,636 15,603
Long-term investments 2,964 3,239
Goodwill 2,677 2,677
Other intangibles, net 10,351 13,399
Other assets 819 529
------------- -------------
Total assets $101,720 $160,719
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,344 $4,802
Accrued compensation and employee
benefits 4,040 6,277
Accrued restructuring costs 3,905 -
Other accrued expenses 2,630 3,554
Current portion of long-term debt 498 497
Acquired technologies payable - 3,492
Deferred revenue 3,917 9,613
Liabilities of discontinued operations
held for sale 6,513 5,084
------------- -------------
Total current liabilities 23,847 33,319
Deferred revenue 214 -
Long-term debt, net of current portion 91 127
Deferred rent 1,635 2,417
------------- -------------
Total liabilities 25,787 35,863
------------- -------------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $.01 par value;
10,000,000 shares authorized; and no
shares issued and outstanding as of
September 30, 2006 and December 31,
2005 - -
Common stock, $.01 par value; 60,000,000
shares authorized; 31,810,471 and
31,771,835 shares issued and
outstanding as of September 30, 2006
and December 31, 2005, respectively 318 318
Additional paid-in-capital 386,420 385,586
Accumulated other comprehensive loss (97) (78)
Accumulated deficit (310,708) (260,970)
------------- -------------
Total stockholders' equity 75,933 124,856
------------- -------------
Total liabilities and stockholders'
equity $101,720 $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