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Reports Surrounding Possible Gen-Probe Sale Nothing New


President and CEO: Carl Hull.

Revenue: $543.3 million in 2010; $498.3 million in 2009.

Net income: $106.9 million in 2010; $91.8 million in 2009.

No. of local employees: 1,100.

Headquarters: San Diego, near Sorrento Mesa area.

Year founded: 1983.

Stock symbol and exchange: GPRO on Nasdaq.

Company description: Maker of molecular diagnostics products used in detecting diseases in humans and screening human blood as well as in biomedical research.

There are rumors swirling around that Gen-Probe Inc. is putting itself up for sale, but that’s nothing new.

Bloomberg L.P. reported April 28 that the high-profile maker of diagnostic test kits for AIDS and other sexually transmitted diseases is apparently shopping itself to interested buyers, with bids due in mid-May. The story, which quoted an unnamed executive at Wall Street investment banker Morgan Stanley, is one of many such reports about Gen-Probe in recent years.

Neither Gen-Probe nor Morgan Stanley was commenting at press time, though the matter was discussed briefly during an investors conference call April 28.

“We are aware of the Bloomberg story this morning that discussed rumored business development activities surrounding Gen-Probe” said President and Chief Executive Officer Carl Hull. “As a matter of policy we never comment on marketplace rumors or speculation such as this.”

Carlsbad-based Life Technologies Corp. is among the bidders, said Bloomberg, but Life Technologies wasn’t commenting, either.

‘Off to a Good Start’

Gen-Probe reported first-quarter 2011 net income of $23.3 million, or 48 cents a share, on sales of $143 million, compared with net income of $24.2 million, or 48 cents a share, on sales of $135.4 million in the year-ago period.

“Gen-Probe is off to a good start in 2011, both financially and strategically. Financially, we exceeded our goals for the first quarter and are in a good position to achieve those same goals for the year,” Hull said during the conference call. “We continue to expect total revenues of between $570 and $595 million in 2011.”

The 52-week high for the stock was set $84.99 on May 2, compared with the 52-week low of $42, with the run-up in the price attributed to the speculation of a sale.

Swiss-based firm Novartis AG was also cited by Bloomberg as a possible buyer, and the most likely one. That’s because Gen-Probe sells blood screening equipment to Novartis, with the relationship generating about 40 percent of sales for Gen-Probe.

Gen-Probe commands 80 percent of the U.S. market for blood screening and sexually transmitted disease diagnostics, and the U.S. Food and Drug Administration is considering a new test from the company for the human papillomavirus, among other products, which could help the company increase sales and grow in the coming years.

HPV is the most common form of sexually transmitted virus, according to the Centers for Disease Control and Prevention. At least half of all sexually active adults pick up the virus at some point.

Company Worth Billions

Equity analysts say the company could be worth in excess of $5.3 billion, or more than $100 a share.

Peter Lawson, an analyst at Mizuho Securities USA Inc. in New York City, said rumors about a deal between Novartis and Gen-Probe have been floating around in the five years he’s been covering the company.

“It’s been on the cards for some time, given their relationship with Novartis,” he said, “in the blood screening business. So from time to time, you get that kind of chatter. And some of the chatter is adamant that it’s going to happen.”

“However, this report seems a lot more firm, given the reputable news source,” he added. “The bankers release it to the press to help the whole process.”

He said Gen-Probe is “the last man standing” among four competitors in the same business, with the other three, including San Diego-based Biosite Inc., having been acquired in recent years.

A Possible Scenario

Paul Li of Advisory Holdings Inc. in Baltimore, said he would favor sale of the company “at the right price.”

He pointed to the 2007 acquisition of Ventana Medical Systems Inc. by F. Hoffmann-La Roche Ltd. as a case study in how he’d like to see a sale handled.

Li said that like Gen-Probe, Ventana was a platform company, which developed instrumentation platforms featuring hardware and software for use in laboratories.

“That was a company acquired at a very high valuation and premium, and I think there are a lot of similarities between Ventana and Gen-Probe,” he said. “Both companies are platform technology companies, so I think the acquisition price should be north of $100 (a share).”

“The investments are finally yielding some fruits,” said Li. “If you look at their pipeline, they have a couple of products pending FDA approval, so I guess there are interested buyers out there trying to snatch up the company before the products get approved.”

Tom York is a contributing editor for the San Diego Business Journal.


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