DIGE Digene Corp (MM)

- Total Revenues up 34% to $52.5 million - GAITHERSBURG, Md., May 8 /PRNewswire-FirstCall/ -- Digene Corporation (NASDAQ:DIGE) today reported record financial results for the fiscal 2007 third quarter and nine months ended March 31, 2007. Comparison of Selected Financial Results (millions, except per share data) Three months ended Nine months ended March 31, March 31, 2007 2006 2007 2006 As reported: Total revenue $52.5 $39.1 $147.8 $109.6 Net income 5.3 1.1 16.6 5.4 Net income per diluted share 0.21 0.05 0.68 0.25 Excluding special items*: Net income 6.2 3.1 19.3 10.5 Net income per diluted share 0.25 0.13 0.80 0.48 * See "Reconciliation of GAAP Financial Information to Non-GAAP Financial Information" below Total revenues for the third quarter of fiscal 2007 increased 34% to $52.5 million from $39.1 million in the third quarter of fiscal 2006. Worldwide human papillomavirus (HPV) test revenues grew 41% to $48.3 million from $34.2 million in the third quarter of fiscal 2006. U.S. HPV test revenues increased 43% to $40.9 million from $28.6 million in last year's comparable quarter. Gross margin on product sales was 86.2% in the fiscal 2007 third quarter, compared to 85.5% in the fiscal 2006 third quarter. Net income increased to $5.3 million, or $0.21 per diluted share, in the fiscal 2007 third quarter, compared to $1.1 million, or $0.05 per diluted share, in the fiscal 2006 third quarter. Excluding special items, net income in the third quarter of fiscal 2007 was $6.2 million, or $0.25 per diluted share, compared to net income excluding special items of $3.1 million or $0.13 per diluted share, in the third quarter of fiscal 2006. Special items in the fiscal 2007 third quarter consisted of approximately $1.2 million of employee and director equity-based compensation expense and an adjustment to reflect a 38% effective tax rate. Special items in the fiscal 2006 third quarter consisted of approximately $1.4 million of employee and director equity-based compensation expense and an adjustment to reflect a 38% effective tax rate. For the nine months ended March 31, 2007, total revenues increased 35% to $147.8 million from $109.6 million in the comparable period last year. Worldwide HPV test revenues grew 42% to $135.2 million from $94.9 million in last year's comparable period. U.S. HPV test revenues increased 45% to $114.5 million from $79 million in last year's comparable period. Gross margin on product sales was 86.5% for the nine months ended March 31, 2007, compared to 85.6% in the fiscal 2006 period. Net income was $16.6 million, or $0.68 per diluted share, in the fiscal 2007 period, compared to a net income of $5.4 million, or $0.25 per diluted share, in the fiscal 2006 period. Excluding special items, net income for the nine months ended March 31, 2007 was $19.3 million, or $0.80 per diluted share, compared to net income excluding special items of $10.5 million or $0.48 per diluted share, in the comparable period last year. Special items for the nine months ended March 31, 2007 consisted of approximately $4.9 million of employee and director equity-based compensation expense and an adjustment to reflect a 38% effective tax rate. Special items in the fiscal 2006 comparable period consisted of approximately $4.2 million of employee and director equity-based compensation expense and an adjustment to reflect a 38% effective tax rate. Daryl Faulkner, President and Chief Executive Officer of Digene Corporation, commented, "Digene reported record financial results for the third quarter and nine months of fiscal 2007, with revenues increasing 34% to $52.5 million. Through the consistent execution of our proven sales and marketing model in the U.S., we increased U.S. HPV revenues by 43% to over $40 million. In addition, we have sharpened our focus on capitalizing on the large international opportunity for HPV testing." Mr. Faulkner concluded, "With strong revenue growth, significant profitability, and $193 million in cash and equivalents, Digene is well positioned for long-term success. We have an excellent, experienced leadership team coming together to leverage our strength in women's health, expertise in developing clinically superior molecular diagnostics and a framework for building global markets to become a broad-based supplier of high value medical diagnostics." Digene Outlook The following forward-looking information is being provided as a convenience to investors. The projections are based upon numerous assumptions, which Digene believes to be reasonable but many of which Digene cannot control. Consequently, actual results may differ materially from the guidance and objectives described below. Further, the guidance and objectives provided below assume the continued growth and success of Digene's existing business, including sales of its HPV test products. Please refer to the disclosure notice below. (See "Reconciliation of GAAP Financial Information to Non-GAAP Financial Information" below.) For the fiscal year ending June 30, 2007, Digene expects: -- Total revenues of approximately $202 million. -- Gross margin of approximately 86%. -- Expenses - Research and Development expenses of approximately 12% to 13% of total revenues. - General and Administrative expenses of approximately 18% to 19% of total revenues. - Sales and Marketing expenses of approximately 35% to 36% of total revenues. - Total royalty and technology fees of approximately 5% to 6% of product sales. -- Net income, as adjusted, to exclude special items of approximately $1.11 per diluted share, based on an estimated 24.3 million diluted weighted average shares outstanding. Special items in fiscal year 2007 are expected to consist of the exclusion of approximately $6.5 million in equity-based employee and director compensation expense and an adjustment to reflect a 38% effective tax rate. For the fiscal 2007 fourth quarter ending June 30, 2007, Digene expects: -- Total revenues of approximately $54.5 million. -- Net income, as adjusted, to exclude special items of approximately $0.30 per diluted share, based on an estimated 24.9 million diluted weighted average shares outstanding. Special items in the third quarter 2007 are expected to consist of the exclusion of approximately $1.6 million in equity-based employee and director compensation expense and an adjustment to reflect a 38% effective tax rate. Conference Call Digene management will host a conference call to discuss results for the fiscal 2007 third quarter on Tuesday, May 8, 2007, at 4:30 pm (Eastern). The call will be broadcast live over the Internet and can be accessed at Digene's website, http://www.digene.com/. In addition, a telephonic replay of the call will be available through August 8, 2007, and may be accessed by dialing (800) 642-1687 or (706) 645-9291. Reconciliation of GAAP Financial Information to Non-GAAP Financial Information To supplement the Company's consolidated financial statements presented in accordance with GAAP, Digene uses non-GAAP measures of certain components of financial performance, including income before income taxes, net income and earnings per share, which are adjusted from results based on GAAP. Although "as adjusted" financial measures are non-GAAP financial measures, the Company believes that the presentation of "as adjusted" financial measures calculated to exclude "special items" are useful adjuncts to the GAAP "as reported" financial measures. "Special items" consist of: -- an adjustment to reflect a 38% effective tax rate for each completed period and the guidance regarding the fiscal 2007 fourth quarter ending June 30, 2007 and the full fiscal year ending June 30, 2007, and -- an adjustment for equity-based employee and director compensation expense for each completed period and the guidance regarding the fiscal 2007 fourth quarter ending June 30, 2007, and full fiscal year ending June 30, 2007. The extent and timing of each of our international subsidiaries' ability to become profitable will have a material impact on our income tax expense. These events are difficult to accurately predict and, as a result, we are not providing guidance on "net income" prepared in accordance with GAAP for forthcoming periods because we cannot reasonably estimate our future period- to-period GAAP-based income tax expense, virtually all of which is a non-cash expense. The presentation of "net income, as adjusted" and "net income per diluted share, as adjusted" in each reported and future period reflects adjustments for the "special items" detailed above. These non-GAAP measures are provided to enhance investors' overall understanding of the Company's current financial performance and the Company's prospects for the future. Because the extent of each of our international subsidiaries' profitability has a material impact on our income tax expense, our tax rate can fluctuate significantly from period to period. Therefore, we believe providing a non-GAAP measure that adjusts for an effective tax rate is useful to investors because it allows comparison of our core operations from period to period. Our non-GAAP measures also exclude equity-based employee and director compensation expense. On July 1, 2005, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)"), which requires us to expense the cost of employee services received in exchange for an award of equity instruments based on the grant- date fair value of the award. However, many of our competitors did not adopt SFAS 123(R) until January 1, 2006 and, as a result, their quarterly financial results from calendar 2005 do not include the equity-based employee and director compensation expense required by SFAS 123(R). Therefore, we believe providing a measure that excludes equity-based employee and director compensation is useful to investors for comparison of our results with the results of our competitors that do not include such expense. These non-GAAP measures should be considered in addition to results prepared in accordance with generally accepted accounting principles, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measures included in this press release have been reconciled to the most directly comparable GAAP measure, where available. About Digene A leader in molecular diagnostics, Digene develops, manufactures and markets proprietary DNA and RNA tests, with a focus on women's health. The company's flagship product, the Digene(R) HPV Test, is the only FDA-approved and CE-marked test for the detection of human papillomavirus, the cause of essentially all cervical cancers. Digene's product portfolio also includes tests for the detection of other sexually transmitted infections, including chlamydia and gonorrhea. Digene tests are marketed in more than 40 countries worldwide. Headquartered in Gaithersburg, MD, Digene is traded on NASDAQ under the symbol DIGE. For more information, visit http://www.digene.com/ and http://www.thehpvtest.com/. Digene(R), Hybrid Capture(R), hc2 High-Risk HPV DNA Test(R) and DNAwithPap(R) are registered trademarks of Digene Corporation. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of the future as there are a number of meaningful factors that could cause the Company's actual results to vary materially from those indicated by such forward-looking statements. Meaningful factors, which could cause actual results to differ from expectations include, but are not limited to, risk that other companies may develop and market HPV tests competitive with our own; our ability to scale up our manufacturing to the extent demand for our products increases; ability to develop new products; ability to execute and integrate strategic transactions; uncertainty related to changes in our senior management; and uncertainty of market acceptance of our products by the worldwide medical community, as well as other factors discussed in the Company's Securities and Exchange Commission filings. For other factors, reference is made to the Company's annual and quarterly reports filed with the Securities and Exchange Commission. DIGENE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except net income per share and shares) Three Months Ended Three Months Ended March 31, 2007 March 31, 2006 As Adjust- As As Adjust- As Reported ment(1) Adjusted Reported ment(1) Adjusted Revenues: Product sales $52,068 $- $52,068 $38,533 $- $38,533 Other 455 - 455 597 - 597 Total revenues 52,523 - 52,523 39,130 - 39,130 Costs and expenses: Cost of product sales 7,169 (115) 7,054 5,585 (123) 5,462 Royalty and technology 2,738 - 2,738 1,562 - 1,562 Research and development 7,238 (178) 7,060 5,641 (185) 5,456 Selling and marketing 18,507 (529) 17,978 16,343 (335) 16,008 General and administrative 9,922 (361) 9,561 7,472 (768) 6,704 Income from operations 6,949 1,183 8,132 2,527 1,411 3,938 Other income (expense): Interest income 2,298 - 2,298 1,277 - 1,277 Interest expense (349) - (349) (318) - (318) Other income 95 - 95 35 - 35 Income before minority interest and income taxes 8,993 1,183 10,176 3,521 1,411 4,932 Minority interest (131) - (131) 5 - 5 Income before income taxes 8,862 1,183 10,045 3,526 1,411 4,937 Provision for (benefit from) income taxes 3,529 288 3,817 2,421 (545) 1,876 Net income $5,333 $895 $6,228 $1,105 $1,956 $3,061 Basic net income per share $0.22 $0.04 $0.26 $0.05 $0.08 $0.13 Diluted net income per share $0.21 $0.04 $0.25 $0.05 $0.08 $0.13 Weighted average shares outstanding Basic 24,156,989 - 24,156,989 22,737,199 - 22,737,199 Diluted 24,835,893 - 24,835,893 23,379,712 - 23,379,712 (1) See "Reconciliation of GAAP Financial Information to Non-GAAP Financial Information - Three Months Ended March 31, 2007 and March 31, 2006." Reconciliation of GAAP Financial Information to Non-GAAP Financial Information Three Months Ended March 31, 2007 and March 31, 2006 ($ in thousands, except net income per share and shares) Three Months Ended Three Months Ended March 31, 2007 March 31, 2006 Income before income tax Income before income tax - as reported $8,862 $3,526 Special item(s): -Exclude equity-based employee and director compensation expense 1,183 1,411 Income before income tax- as adjusted $10,045 $4,937 Net income Net income - as reported $5,333 $1,105 Special item(s): -Adjustment to reflect 38% tax rate (288) 545 -Exclude equity-based employee and director compensation expense 1,183 1,411 Net income - as adjusted $6,228 $3,061 Diluted net income per share Diluted net income per share - as Reported $0.21 $0.05 Special item(s): -Adjustment to reflect 38% tax rate (0.01) 0.02 -Exclude equity-based employee and director compensation expense 0.05 0.06 Diluted net income per share - as adjusted $0.25 $0.13 Diluted weighted average shares outstanding 24,835,893 23,379,712 DIGENE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except net income per share and shares) Nine Months Ended Nine Months Ended March 31, 2007 March 31, 2006 As Adjust- As As Adjust- As Reported ment(1) Adjusted Reported ment(1) Adjusted Revenues: Product sales $146,196 $- $146,196 $107,915 $- $107,915 Other 1,619 - 1,619 1,661 - 1,661 Total revenues 147,815 - 147,815 109,576 - 109,576 Costs and expenses: Cost of product sales 19,756 (348) 19,408 15,569 (356) 15,213 Royalty and technology 7,555 - 7,555 5,515 - 5,515 Research and development 18,113 (473) 17,640 13,258 (309) 12,949 Selling and marketing 52,718 (1,480) 51,238 44,770 (1,105) 43,665 General and administrative 28,281 (2,575) 25,706 19,335 (2,423) 16,912 Income from operations 21,392 4,876 26,268 11,129 4,193 15,322 Other income (expense): Interest income 6,109 - 6,109 2,248 - 2,248 Interest expense (1,231) - (1,231) (482) - (482) Other income (expense) 136 - 136 (10) - (10) Income before minority interest and income taxes 26,406 4,876 31,282 12,885 4,193 17,078 Minority interest (126) - (126) (111) - (111) Income before income taxes 26,280 4,876 31,156 12,774 4,193 16,967 Provision for (benefit from) income taxes 9,717 2,122 11,839 7,345 (897) 6,448 Net income $16,563 $2,754 $19,317 $5,429 $5,090 $10,519 Basic net income per share $0.70 $0.11 $0.81 $0.25 $0.24 $0.49 Diluted net income per share $0.68 $0.12 $0.80 $0.25 $0.23 $0.48 Weighted average shares outstanding Basic 23,796,579 - 23,796,579 21,296,624 - 21,296,624 Diluted 24,296,155 - 24,296,155 21,741,564 - 21,741,564 (1) See "Reconciliation of GAAP Financial Information to Non-GAAP Financial Information - Nine Months Ended March 31, 2007 and March 31, 2006." Reconciliation of GAAP Financial Information to Non-GAAP Financial Information Nine Months Ended March 31, 2007 and March 31, 2006 ($ in thousands, except net income per share and shares) Nine Months Nine Months Ended Ended March 31, March 31, 2007 2006 Income before income tax Income (loss) before income tax - as reported $26,280 $12,774 Special item(s): -Exclude equity-based employee and director compensation expense 4,876 4,193 Income before income tax- as adjusted $31,156 $16,967 Net income Net income - as reported $16,563 $5,429 Special item(s): -Adjustment to reflect 38% tax rate (2,122) 897 -Exclude equity-based employee and director compensation expense 4,876 4,193 Net income - as adjusted $19,317 $10,519 Diluted net income per share Diluted net income per share - as Reported $0.68 $0.25 Special item(s): -Adjustment to reflect 38% tax rate (0.08) 0.04 -Exclude equity-based employee and director compensation expense 0.20 0.19 Diluted net income per share - as adjusted $0.80 $0.48 Diluted weighted average shares outstanding 24,296,155 21,741,564 DIGENE CORPORATION SELECTED CONSOLIDATED BALANCE SHEET DATA (in thousands) March 31, June 30, 2007 2006 ASSETS Current assets: Cash, cash equivalents and short term investments $192,764 $139,257 Total current assets 238,029 181,222 Total assets 298,992 231,886 LIABILITIES AND STOCKHOLDERS' EQUITY Total current liabilities $38,192 $34,381 Long-term liabilities 23,612 20,459 Total stockholders' equity 237,188 177,046 Total liabilities and stockholders' equity $298,992 $231,886 DATASOURCE: Digene Corporation CONTACT: Albert Fleury, Investor Relations, +1-301-944-7000, media, Pam Rasmussen, +1-301-944-7196, both of Digene Corporation Web site: http://www.digene.com/

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