An Innovative Growth Company
in Molecular Diagnostics
September 2009
SAFE HARBOR
Safe Harbor Statement
Any statements in this presentation about our expectations, beliefs, plans, objectives, assumptions or
future events or performance are not historical facts and are forward-looking statements. These
statements are often, but not always, made through the use of words or phrases such as believe, will,
expect, anticipate, estimate, intend, plan and would. For example, statements concerning proposed
acquisitions, financial guidance, macroeconomic conditions, possible or assumed future results of
operations, growth opportunities, product development, regulatory timelines and approvals, industry
ranking, plans and objectives of management, markets for our common stock, and future management
and organizations structure are all forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve known and unknown risks, uncertainties and assumptions
that may cause actual results, levels of activity, performance or achievements to differ materially from
those expressed or implied by any forward-looking statements. Gen-Probe assumes no obligation and
expressly disclaims any duty to update any forward-looking statements based on events after the date
of this presentation or to reflect subsequent events. For more information about the risks and
uncertainties inherent in our business, see our recent SEC filings, which can be found in the investor
relations section of our website at www.gen-probe.com.
2
REGULATION G
About Non-GAAP Financial Measures
To supplement Gen-Probe’s financial results presented in accordance with GAAP, Gen-Probe uses
non-GAAP measures for COGS, sales and marketing expense, G&A expense, operating income, pretax income, income tax rate, net income and diluted EPS. Gen-Probe’s management does not itself,
nor does it suggest that investors should, consider such non-GAAP financial measures in isolation
from, or as a substitute for, financial information prepared and presented in accordance with GAAP.
Gen-Probe’s management believes that these non-GAAP financial measures provide meaningful
supplemental information regarding the Company’s performance by excluding certain expenses that
may not be indicative of core business results. Gen-Probe believes that both management and
investors benefit from referring to these non-GAAP financial measures in assessing Gen-Probe’s
performance and when planning, forecasting and analyzing future periods. These non-GAAP
financial measures also facilitate management’s internal comparisons to Gen-Probe’s historical
performance and our competitors’ operating results. Gen-Probe believes these non-GAAP financial
measures are useful to investors in allowing for greater transparency with respect to supplemental
information used by management in its financial and operational decision making.
3
OUTLINE
Presentation Outline
Gen-Probe
overview
Markets and products
–IVD and NAT markets
–Sexually transmitted diseases (STDs)
–Blood screening
–Tepnel
Key
development projects
–PANTHER
–HPV
–Prostate cancer
–Trichomonas
Financials
and milestones
4
OVERVIEW
An Established Leader in Nucleic Acid Testing (NAT)
Broad,
innovative, proprietary technologies
Proven ability to commercialize best-in-class assays
–Clinical diagnostics: PACE®, APTIMA Combo 2®
–Blood screening: PROCLEIX®, PROCLEIX ULTRIO®, PROCLEIX WNV
–Tepnel acquisition adds growth opportunities
Unique
capabilities in automation
–TIGRIS® and PANTHER
Robust
R&D pipeline
Solid financial position
–Revenues of $497 million, net profit margin of ~20% expected in 2009*
–Strong balance sheet with $328 million net cash*
–Well-positioned in tough economy
* Based on midpoints of guidance provided by press release and 8-K on July 30, 2009. Presentation here is not, and
should not be construed as, reaffirmation of the guidance. In compliance with SEC Reg. FD, Gen-Probe provides
guidance only through broad, non-exclusionary means. Cash position net of $241 million of short-term debt.
5
OVERVIEW
Gen-Probe Core Competencies
Excellent
underlying technology covering
all aspects of molecular testing process
–More than 500 patents worldwide
Unique
capabilities in automation
–TIGRIS
–PANTHER
Proven
ability to deliver IVD products to
market
–Best-in-class assays with broad claims
Outstanding
sales and customer service
6
OUTLINE
Presentation Outline
Gen-Probe
overview
Markets and products
–IVD and NAT markets
–Sexually transmitted diseases (STDs)
–Blood screening
–Tepnel
Key
development projects
–PANTHER
–HPV
–Prostate cancer
–Trichomonas
Financials
and milestones
7
MARKETS AND PRODUCTS
Growing Importance of In Vitro Diagnostics
Diagnostics
comprise <5% of hospital costs and 1.6% of Medicare costs,
yet influence 60-70% of healthcare decision-making*
Expanding role of diagnostics
–Early detection, intervention lead to better medical, economic outcomes
–Important role for industry to play in healthcare reform
IVD
investment thesis
–Favorable scientific and demographic trends
–Less development and regulatory risk than pharma or biotech
–Favorable growth and cash flow profiles in a volatile market
–Increasing attention from Wall Street and industry consolidators
* Lewin report, “The Value of Diagnostics,” prepared for AdvaMed.
8
MARKETS AND PRODUCTS
The Case for Investing in Molecular Diagnostics
NAT
is changing the IVD paradigm,
medically and economically
–Growing, highly profitable segment of ~$40
billion IVD market
–Genomics enables monitoring, genotyping,
customizing therapy
Significant
untapped opportunities
–Most revenue from “big 5”: CT, GC, HPV,
HIV/HCV viral load
–Future growth from oncology, HCAIs,
genetic testing
–Gen-Probe share <20% of current market
* Piper Jaffray, April 2009.
$3.6 Billion NAT Market*
$715
$1,100
$890
$940
Blood screening
Infectious disease
Viral load
Genetic/cancer
9
MARKETS AND PRODUCTS
STD Market Overview
Chlamydia (CT), gonorrhea (GC)
most common bacterial STDs
– CDC reported new records in 2007
2009 estimated market sizes
– $291 million US, +5%
– $116 million ex-US, +10%
Major customer segments
– Reference labs
– Hospitals
– Public health
$300
$250
$200
Gen-Probe Extending
US Market Leadership
$291
$276
6%
7%
29%
27%
$150
$100
61%
64%
$50
$0
Note: All data are year-end 2009 internal estimates for US CT/GC
market. Other includes Abbott, Qiagen, Third Wave, EIA, culture, etc.
2008
Gen-Probe
BD
2009
Roche
Other
10
MARKETS AND PRODUCTS
APTIMA Combo 2: The Growth Driver
Launched in 2001
Amplified nucleic acid test to
detect chlamydia and gonorrhea
Most sensitive and specific NAT
test available
–Up to 99% chlamydia detection,
versus <67% for competitors*
Sales growing rapidly
Approved to run on semiautomated DTS systems and fully
automated TIGRIS system
* Chernesky (McMaster University) et al. “High Analytical Sensitivity
and Low Rates of Inhibition May Contribute to Detection of Chlamydia
trachomatis in Significantly More Women by the APTIMA Combo 2
Assay. Journal of Clinical Microbiology, Feb. 2006, p 400-405.
11
MARKETS AND PRODUCTS
Unique TIGRIS System Drives Market Share
Launched with APTIMA Combo 2
in first quarter 2004
– New sample types cleared in 2006
Cumulative Dx TIGRIS Placements
160
120
Integrated, high-throughput
80
instrument that automates sample
prep, amplification, results analysis
40
– Broad IP with >70 patents,
0
including 7 new ones
2004
2005
2006
2007
2008
Helps address chronic labor
shortages faced by labs
– One operator can process 1,000 samples in ~14 hours, with ~2 hours of
hands-on time
12
MARKETS AND PRODUCTS
Blood Screening Overview
Profitable,
cash-generating market
with low-single-digit growth and high
barriers to entry
Gen-Probe and Novartis maintain
leading share of current market
–83 million donations worldwide, ~ 40%
not NAT tested*
Key
Gen-Probe products
–PROCLEIX ULTRIO assay
–US roll-out underway, customers in ~ 30 countries worldwide
–WNV assay has intercepted thousands of infected donations since 2003
–PROCLEIX TIGRIS system enables testing in small pool sizes
* Source: Gen-Probe 2008 estimates.
13
MARKETS AND PRODUCTS
New Blood Screening Partnership with Novartis
Successful
collaboration extended until 2025
–Enables both companies to focus on investments to grow business
–Reduces potential risks and costs
Improved
economics for Gen-Probe
–Shared responsibility for costs of goods sold
–Revenue share escalates until 2015
Other
benefits
–Funding to customize PANTHER for blood screening use
–Closer collaboration on commercial strategies
–Exploratory pharmacogenomics collaboration
14
MARKETS AND PRODUCTS
Tepnel Acquisition Adds Growth Opportunities
Transaction
closed on schedule in April
–Total price of £92.8 million pounds sterling (~$137.1 million)
–Roughly break-even to 2009 non-GAAP EPS, accretive thereafter
Strategic
rationale
–Access to growth opportunities in transplant diagnostics, genetic testing and
pharmaceutical services
–$260 million human leukocyte antigen (HLA) testing market growing at
low-double-digit rate
–Accelerates European commercial expansion
Integration
proceeding according to plan
–Solid performance in first quarter as part of Gen-Probe
15
OUTLINE
Presentation Outline
Gen-Probe
overview
Markets and products
–IVD and NAT markets
–Sexually transmitted diseases (STDs)
–Blood screening
–Tepnel
Key
development projects
–PANTHER
–HPV
–Prostate cancer
–Trichomonas
Financials
and milestones
16
KEY DEVELOPMENT PROJECTS
Key Development Project: PANTHER
Builds
on success of unique TIGRIS system
Fully automated instrument for low- to midvolume customers
Opens up potential $700 million market
Broad menu of qualitative and quantitative
assays
Testing prototype instruments now
On track for European launch in late 2010,
US launch about one year later
17
KEY DEVELOPMENT PROJECTS
Key Development Project: Human Papillomavirus (HPV)
Rapidly
growing market for cervical cancer screening
APTIMA HPV assay targets disease progression markers, runs on TIGRIS
Initiated US clinical trial in March 2008
Launched CE-marked APTIMA HPV assay in Europe mid-year 2008
Presented promising early data from multiple European studies
–Cuschieri study of 775 women presented at 2009 IPV conference in Malmo
HC2
APTIMA HPV
Sensitivity
94.9% (166/175)
95.4% (167/175)
Specificity
54.0% (324/600)
60.0% (360/600)
Sensitivity and specificity versus CIN 2 or worse histology (N=175). In study, 494 normal or not indicated, 106
CIN1. No statistically significant difference in sensitivity (P=0.804). APTIMA showed higher specificity (P=0.035).
18
KEY DEVELOPMENT PROJECTS
Key Development Project: Prostate Cancer
Major
unmet medical need
–Urine-based NATs with different clinical utilities
PCA3
is foundation
–Much more specific than PSA
–More than 20 peer-reviewed publications
–Correlations with tumor volume, stage
–CE-marked PROGENSA PCA3 assay growing
strongly in Europe, ASR available in US
–US clinical trial began in August
Gene
fusions
–Growing body of evidence suggests correlation with disease aggressiveness
–Good performance from prototype quantitative assay
19
KEY DEVELOPMENT PROJECTS
Key Development Project: Trichomonas
Trichomonas
vaginalis is common parasitic STD
–Causes vaginitis, urethritis, premature membrane rupture, low birth weights
–CDC estimates prevalence may be higher than CT / GC
Similar
market development opportunity
–Serious complications not well understood
–About 12 million tests worldwide, market exceeds $50 million today
–Current tests are insensitive, slow, or difficult to do
Investigational
APTIMA trichomonas assay
–Builds on US sales of ASR product
–Extends women’s health franchise
–Leverages large installed base of TIGRIS instruments
–US clinical trial began in August
20
OUTLINE
Presentation Outline
Gen-Probe
overview
Markets and products
–IVD and NAT markets
–Sexually transmitted diseases (STDs)
–Blood screening
–Tepnel
Key
development projects
–PANTHER
–HPV
–Prostate cancer
–Trichomonas
Financials
and milestones
21
FINANCIALS AND MILESTONES
2009 Financial Guidance (Non-GAAP)
Total Revenues
$490-$503
$120-$125m in Q3
Product GM%
68-69%
Lower Tepnel margins
R&D
~ 22%
~ $30m in Q3 (PCA3, HPV, trich)
Sales/Marketing
10-11%
Expanding in Europe
G&A
10-11%
Tight controls
Tax Rate
~ 34%
Slightly higher due to Q2 actual
Share Count
~ 52 million
Continuing repurchases
Non-GAAP EPS
$1.85-$1.95
~ $0.40 in Q3
Note: Non-GAAP excludes $8-9 million of expenses ($0.10 - $0.12) associated with Tepnel acquisition. Percentages are of total revenues.
Guidance provided by press release and 8-K on July 30, 2009. Presentation here is not, and should not be construed as, reaffirmation of the
guidance. In compliance with SEC Reg. FD, Gen-Probe provides guidance only through broad, non-exclusionary means.
22
FINANCIALS AND MILESTONES
A More Detailed Look at Expected 2009 EPS Growth
One-time
items add ~$0.34 to 2008 EPS
–Bayer legal payment ($16.4m in Q1)
–ULTRIO/TIGRIS milestone ($10m in Q3)
–MRSA deferred revenue ($2.7m in Q2)
–Novartis adjustment ($2.6m in Q2)
–Federal tax credit ($1.0m in Q2)
–Corixa charge (-$3.5m in Q2)
–Qualigen charge (-$1.6m in Q3)
Excluding
these items, 2009 EPS
guidance contemplates ~18% growth
Non-GAAP EPS Growth
$2.00
$1.80
$0.34
$1.60
$1.40
+18% $1.90
$1.61
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
2008
2009E
* All items previously disclosed. Based on midpoints of guidance provided by press release and 8-K on July 30, 2009. Presentation here is not,
and should not be construed as, reaffirmation of the guidance. In compliance with SEC Reg. FD, Gen-Probe provides guidance only through
broad, non-exclusionary means. Cash position net of $241 million of short-term debt.
23
FINANCIALS AND MILESTONES
$600
$12
$500
$10
$400
$8
$300
$6
$200
$4
$100
$2
$0
$0
2007
2008*
Cash and ST Investments
Per Share
Millions
Strong Balance Sheet: $11/Share in Cash, Securities*
Q2 2009
Cash and ST per Share
* Note: $569 million of cash and marketable securities at Q209 includes $241 million of short-term debt (1-month LIBOR + 60 bps).
Repurchased 1.7 million shares of stock for $75 million in 2008, and 2.5 million shares for $106 million in 2009 YTD.
24
FINANCIALS AND MILESTONES
Putting the Balance Sheet to Work
1.
Acquisitions to build business
–
Current priorities
– Additional products for our sales force
– European commercial infrastructure
– New technologies
– Financial criteria
– Clear, rapid path to accretion
– Prefer to use cash on balance sheet
2.
Share repurchase
–
–
–
$250 million over 2 years
Open market and 10b5-1 purchases
Program active since September, 2008
25
FINANCIALS AND MILESTONES
Strategic Priorities in 2009
9
9
9
9
9
9
Extend leadership in global STD market
Increase European commercial presence
Complete at least one acquisition
Finalize new blood screening agreement with Novartis
Begin US sales of PROCLEIX ULTRIO assay
Substantially complete enrollment of US clinical trial of HPV
Accelerate PANTHER development
Advance oncology business
Continue optimizing cost structure
26
An Innovative Growth Company
in Molecular Diagnostics
For more information:
Michael Watts, VP of IR
858-410-8673
[email protected]