Celera decreases second-quarter net loss to $6.1 million

Aug 4 2010

Celera Corporation (NASDAQ:CRA) today reported net revenues of $32.6 million for the second quarter of 2010 that ended June 26, 2010, compared to $41.4 million for the prior year quarter. For the second quarter of 2010, Celera reported a net loss of $6.1 million, or $0.07 per share, compared to a net loss of $31.7 million, or $0.39 per share, for the prior year quarter.

“The second quarter of 2010 was a challenging period for us as revenues declined with lower than expected sample volumes at Berkeley HeartLab”

For the second quarters of 2010 and 2009, Celera recorded items that affected the comparability of results and a breakdown of these items is listed in the reconciliation table below. For the second quarter of 2010, these items decreased the net loss by $0.6 million, and included a pre-tax cash benefit of $2.8 million for legal and insurance settlements. For the second quarter of 2009, these items increased the net loss by $12.6 million, and included a pre-tax charge of $15.7 million for non-cash intangible asset impairment.

Celera's net loss on a non-GAAP basis, excluding the items listed in the reconciliation table below, was $6.7 million, or $0.08 per share, for the second quarter of 2010, compared to a net loss of $19.1 million, or $0.23 per share, for the prior year quarter.

"The second quarter of 2010 was a challenging period for us as revenues declined with lower than expected sample volumes at Berkeley HeartLab," said Kathy Ordoñez, Chief Executive Officer of Celera. "While our Products business met expectations in the quarter, a weakness in sample volume at BHL through the first half has made us more cautious about our full-year outlook, and we have reduced 2010 guidance accordingly."

Financial Highlights

Celera operates through three reporting segments: a clinical laboratory testing service business conducted through Berkeley HeartLab, or BHL (Lab Services); a molecular diagnostic products business (Products); and a segment that includes other activities under corporate management (Corporate). Most of the Company's molecular diagnostic business is conducted through distribution and royalty agreements with Abbott Molecular, a subsidiary of Abbott Laboratories. The Corporate segment includes revenues from royalties, licenses, funded collaborations and milestones related to the licensing of intellectual property and from Celera's former small molecule and proteomic programs.

• Revenue by segment for the second quarter of 2010 was as follows:
  • Lab Services revenue was $19.6 million compared to $25.2 million in the prior year quarter, due to lower sample volume, which declined approximately 23% year over year. During the second quarter, sample volumes were adversely impacted by competitive pressures, including the loss of business from accounts serviced by former BHL sales representatives identified in the now settled litigation with Health Diagnostics Laboratory, Inc. (HDL), and changes to BHL's business that were implemented in the second half of 2009. Lab Services revenue in the second quarter does not include approximately $1.9 million for additional testing performed on samples previously received and processed by BHL. The Company is reviewing the orders for this additional testing to determine whether they support payor requirements for amounts billed to, and reimbursement received from, federal health care programs and others. As part of this review, the Company will also review similar orders in earlier periods, which totaled approximately $0.1 million in the first quarter of 2010, approximately $0.6 million in 2009, and approximately $1.4 million in 2008;
  • Products revenue was $10.9 million compared to $9.7 million in the prior year quarter. The increase in revenue in the second quarter of 2010 was due to increases in both the sale of Celera manufactured products distributed by Abbott and royalties from sales of RealTime™ assays used on the m2000™ system; and
  • Corporate revenue was $2.1 million compared to $6.5 million in the prior year quarter. The reduction in revenue in the second quarter of 2010 was primarily due to lower licensing revenue, including the completion of payments from three licensees, as expected, which was partially offset by higher royalty revenue received from a licensee.
• SG&A expenses for the second quarter of 2010 were $21.9 million compared to $41.1 million in the prior year quarter. Allowance for doubtful accounts in the second quarter of 2010 was $1.4 million compared to $20.1 million in the prior year quarter. Excluding the allowance for doubtful accounts, SG&A expenses for the second quarter of 2010 were $20.5 million, or 62.9% of revenues, compared to $21.0 million, or 50.7% of revenues in the prior year quarter.
• In the second quarter of 2010, days sales outstanding were 57 compared to 60 in the first quarter of 2010.
• R&D expenses for the second quarter of 2010 were $6.4 million, compared to $7.4 million in the prior year quarter, and decreased primarily as a result of the completion of certain discovery research and development projects.
• At June 26, 2010, Celera's cash and short-term investments were approximately $323 million. This balance includes $4.2 million for an unsettled short-term investment purchase, which was subsequently settled in the third quarter. Excluding this $4.2 million transaction, Celera's cash and short-term investments at June 26, 2010 were approximately $319 million, the same as at March 27, 2010.

Business and Scientific Developments

• Business Developments
  • In July, BHL launched a laboratory developed test for Cytochrome 2C19 (CYP2C19) that identifies carriers of genetic variants that may impact the effectiveness of the anti-platelet drug, Plavix® (or clopidogrel). Effectiveness of Plavix depends on its activation by the CYP2C19 gene in the cytochrome P450 system, which converts the drug to its active form. Depending on the presence of certain 2C19 genetic variants, a person may be more or less effective at converting Plavix into its active (or usable) form. The Food and Drug Administration recently placed a warning on the Plavix label to inform clinicians that they should consider an alternative treatment depending on a person's 2C19 genotype. BHL's new test identifies 8 variants known to be associated with Plavix metabolism.
  • In June, Celera extended its research collaboration with Ipsen (Euronext: IPN; ADR: IPSEY) to use next-generation sequencing technology to identify genetic biomarkers for pharmacogenomic tests for growth failure patients. This followed the completion of the first phase of this project that was started in November, 2007.
  • In June, Celera signed a Declaration of Conformity and applied the CE mark to a real-time PCR (polymerase chain reaction) test for detection of a variant in the KIF6 gene, allowing the test to be marketed in the European Union and other geographic areas that recognize the CE Mark.
• Scientific Developments
  • In July, Celera and Horizon Discovery, Cambridge, United Kingdom, presented data at the Translational Cancer Conference in San Francisco, CA, describing the dose-dependent change in the result obtained in Celera's metastasis risk score in precisely engineered cultured cell lines treated with a phase II phosphatidylinositol 3-kinase (PI3K) drug for breast cancer.
  • In June, Celera and its collaborators at the University of California at San Francisco published data in the journal Atherosclerosis, confirming the association of an increased risk of coronary heart disease and two variants of the LPA gene. The two LPA single nucleotide polymorphisms are Ile4399Met, a polymorphism in the protease-like domain of LPA, and rs10455872, a SNP located in a non-coding region of the LPA gene.

Outlook for 2010

Celera anticipates that its 2010 financial performance may be affected by a number of factors, including acceptance and utilization of its testing services and diagnostic products, reimbursement practices, economic pressures and the healthcare system generally, and competitive pressures, including disruption to the business as a result of the departure of sales representatives identified in the now settled HDL litigation. Subject to the additional inherent risks and uncertainties that may affect Celera's financial performance, which are detailed in the Forward-Looking Statements section of this release, Celera expects the following for 2010:

• Total revenues are anticipated to be $135 - $145 million, compared to the prior outlook of $145 - $155 million.
• Gross margin, as a percentage of revenue, is anticipated to be 63% - 67%, unchanged from the prior outlook.
• SG&A expenses are anticipated to be $85 - $95 million, compared to the prior outlook of $90 - $100 million, and R&D expenses are anticipated to be $25 - $30 million, unchanged from the prior outlook.
• Celera anticipates a net loss of $20 - $25 million, or $0.25 - $0.30 per share, on a non-GAAP basis, compared to the prior outlook of a net loss of $12 - $17 million, or $0.15 - $0.21 per share, on a non-GAAP basis.
• Amortization of intangibles relating to acquisitions and the non-cash accretion of discount recorded in interest income, which are excluded in the determination of non-GAAP earnings per share, are expected to be approximately $10 million and $1 million, respectively.
• Expense associated with equity awards is expected to be approximately $5.3 million, which represents approximately $0.06 per share included in the determination of Celera's expected non-GAAP loss per share.
• Celera expects its cash and short-term investments to be between $310 and $320 million at the end of 2010, unchanged from the prior outlook.

The comments in the "Outlook for 2010" section of this press release reflect management's current outlook. The Company does not have any current intention to update this outlook and plans to revisit the outlook for its businesses only once each quarter when financial results are announced.

SOURCE Celera Corporation