GLGC Gene Logic Inc. (MM)

Gene Logic Inc. (NASDAQ:GLGC) today reported financial results for the first quarter ended March 31, 2007. Revenue Revenue for Gene Logic�s continuing operations is derived primarily from its Genomic Services Division. To date, no meaningful revenue for the Drug Repositioning Division has been recorded. Total revenue for Genomics for the first quarter of 2007 was $3.3 million compared to $8.7 million for the first quarter of 2006, a decline of $5.5 million, largely due to lower sales for subscriptions to the Company�s database services. This decline reflects our customers� continuing shift in research activities from early-stage drug discovery into later-stage development and validation efforts. Revenue does not include approximately $1.9 million associated with a single contract accounted for as a multi-element arrangement, with respect to which nearly all services were performed and delivered in the first quarter of 2007 and with respect to which revenue is expected to be recorded later in 2007. Operating Expenses Operating expenses from our continuing operations consist of costs for services and adding content to the Company�s Genomics databases, costs for developing and providing our Drug Repositioning Division services and sales, marketing, and general and administrative expenses associated with our continuing operations. For the first quarter of 2007, total operating expenses were $14.0 million compared to $17.2 million for the first quarter of 2006, a decrease of $3.2 million, or 19%. This reduction reflects the favorable impact of the restructuring of the Genomics Division and lower amounts spent on adding new Genomics database content. This decrease was partially offset by $0.9 million in executive severance and retention benefits and $0.3 million in fees associated with the Company�s efforts to determine strategic alternatives for its Genomics business. Segment Operating Loss Note: Management uses operating income to evaluate segment performance. To arrive at operating income, the Company has included all direct costs for providing its services and an allocation for corporate overhead applied on a consistent and reasonable basis. The Company has excluded the cost of income taxes and interest income or expense and could also exclude certain unusual or corporate related costs in the future. Segment Operating Loss: � Three Months Ended March 31, 2007� 2006� Drug Repositioning Division $ (4,594) $ (3,876) Genomics Division � (6,092) � (4,530) Total operating loss $ (10,686) $ (8,406) � Drug Repositioning Division: For the first quarter of 2007, the Company�s operating loss for its Drug Repositioning Division was $4.6 million compared to a loss of $3.9 million in the prior year period, an increase of $0.7 million. This increase largely reflects the divisions� proportional share of certain executive severance and retention expenses. Genomics Division: For the first quarter of 2007, the Genomics Division reported an operating loss of $6.1 million compared to an operating loss of $4.5 million for the first quarter of 2006, an increase of $1.6 million. The results reflect, most significantly, $5.5 million of lower sales as discussed above largely offset by reduced operating expenses associated with the favorable impact of the restructuring of the Genomics Division and lower expenses for Genomics database content. In 2006, the Company began to explore new avenues of value for its Genomics assets. The Company has reduced expenses while continuing to serve new and existing Genomics customers. The Company has engaged outside financial advisors to assist in considering strategic alternatives for the business and recorded associated expenses of $0.3 million in the first quarter of 2007. Net Loss For the first quarter of 2007, loss from continuing operations was $10.1 million or $0.32 per share, compared to a loss from continuing operations of $7.9 million, or $0.25 per share, for the first quarter of 2006. Loss from continuing operations for the first quarter of 2007 reflects primarily the impact of the revenue shortfall in the Genomics Division. Net loss for the first quarter of 2007 was $10.1 million, or $0.32 per share, compared to a net loss for the first quarter of 2006 of $11.8 million, or $0.37 per share. Net loss for the first quarter of 2006 included a $3.9 million loss related to Gene Logic Laboratories which the Company disposed of during the fourth quarter of 2006. Liquidity As of March 31, 2007, the Company had approximately $43.1 million in combined cash, cash equivalents and marketable securities available-for-sale, compared to $50.1 million as of December 31, 2006. Cash usage for the second quarter of 2007 is expected to be similar to cash usage for the first quarter of 2007. The Company does not expect the decline in cash, cash equivalents and marketable securities available-for-sale reported for the first half to be representative of cash usage for the second half of 2007. Q1 Highlights Highlights for the first quarter of 2007 included: Charles L. Dimmler, III was named Chief Executive Officer and President The Company added Mark Gabrielson, Lloyd I. Miller, III, and David Urdal, Ph.D. as Directors Thomas Barnes, Ph.D. was promoted to Senior Vice President, Discovery for the Company�s Drug Repositioning Division Conference Call and Webcast Gene Logic will host a conference call and webcast on April 27, 2007 at 10:00 a.m. Eastern to discuss the results for the first quarter of 2007. To listen to the live call and be able to ask questions, dial (800)573-4752 in the U.S.A. or (617)224-4324 internationally and use the pass code Gene Logic; alternatively, a webcast of the live call will be accessible from the Investors section of the Company�s website at www.genelogic.com. A replay of the call will be available beginning April 27, 2007 through May 11, 2007. To hear the replay, dial (888)286-8010 in the U.S.A. or (617)801-6888 internationally and use the passcode 90544565. 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 is transforming into a pharmaceutical development company through partnerships with pharmaceutical companies. Our partners provide Gene Logic with access to their drug candidates that have been assessed as safe in human clinical trials but discontinued for other reasons. Gene Logic applies its drug indication platform to find new therapeutic uses for the drug candidates. Gene Logic expects to receive milestone payments and royalties on drug candidates that our partners choose to develop based on the indications we find or, if the partner elects not to pursue such new indications, Gene Logic may receive ownership and development rights. Gene Logic has also developed proprietary genomics databases and services to enable customers worldwide to discover and prioritize drug targets, identify biomarkers, predict toxicity and understand mechanisms of toxicity, and obtain insights into the efficacy of specific compounds. We continue to offer customers these services and licenses to the databases. Such databases, services and expertise are also a vital part of our drug indication platform. We are now seeking strategic alternatives to also use our Genomics assets capabilities and expertise for molecular diagnostics. Founded in 1994, Gene Logic is headquartered in Gaithersburg, Md., with additional research and development facilities in Cambridge, Mass. The Company currently has about 150 employees worldwide. For more information, visit 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 and 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 Genomics business, whether repositioned compounds are successfully returned to our customers� pipelines and generate sales, resulting in milestone payments and royalties for the Company or whether we acquire on acceptable terms rights to repositioned compounds that our partners decline to develop and are able to derive revenue from these compounds through licensing or otherwise, whether we can enter into agreements to develop sufficient compounds to fulfill our plans for the Drug Repositioning Division; whether there will be any claims associated with the sale of the Pre-Clinical Division, whether we will be able successfully to manage our existing cash and have access to financing on sufficiently favorable terms to maintain our businesses and effect our strategies, including development of repositioned compounds; whether we will be able to recruit and retain qualified personnel, particularly in light of our restructuring efforts; 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; the possibility of further write-down of the value of certain intangible assets of the Company, including goodwill associated with the Genomics Division; 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. Consolidated Statements of Operations (in thousands, except per share amounts) � � Three Months Ended March 31, 2007� 2006� (unaudited) Revenue: Genomics services $ 3,269� $ 8,748� Drug repositioning services � -� � 20� Total revenue 3,269� 8,768� � Expenses: Database production 5,298� 7,795� Research and development 2,436� 2,440� Selling, general and administrative � 6,221� � 6,939� Total expenses 13,955� 17,174� Loss from operations (10,686) (8,406) Interest (income), net (615) (773) Other (income) expense 35� (3) Write-down of equity investment � -� � 275� Loss from continuing operations (10,106) (7,905) Loss from discontinued operations � -� � (3,892) Net loss $ (10,106) $ (11,797) Basic and diluted net loss per share: Loss from continuing operations $ (0.32) $ (0.25) Loss from discontinued operations � -� � (0.12) Net loss $ (0.32) $ (0.37) Shares used in computing basic and diluted net loss per share � 31,837� � 31,788� � � Gene Logic Inc. Consolidated Condensed Balance Sheets (in thousands) � � March 31, December 31, 2007� 2006� � ASSETS (unaudited) Current assets: Cash and cash equivalents $ 27,405� $ 25,700� Marketable securities available-for-sale 15,681� 24,410� Accounts receivable, net of allowance of $45 as of March 31, 2007 and December 31, 2006 943� 3,327� Unbilled services 764� 589� Inventory, net 2,022� 2,180� Prepaid expenses 1,446� 1,260� Other current assets � 2,681� � 3,551� Total current assets 50,942� 61,017� Property and equipment, net 12,345� 12,829� Long-term investments 2,964� 2,964� Goodwill 2,677� 2,677� Other intangibles, net 8,978� 10,060� Other assets � 665� � 726� Total assets $ 78,571� $ 90,273� � LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,334� $ 3,703� Payable to Bridge Pharmaceuticals 666� 1,727� Accrued compensation and employee benefits 3,803� 2,883� Other accrued expenses 2,986� 3,751� Accrued restructuring costs 1,342� 1,941� Current portion of long-term debt 500� 499� Deferred revenue � 4,626� � 3,299� Total current liabilities 16,257� 17,803� Deferred revenue -� 228� Long-term debt, net of current portion 66� 78� Deferred rent � 1,010� � 1,074� Total liabilities � 17,333� � 19,183� Stockholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; and no shares issued and outstanding as of March 31, 2007 and December 31, 2006 -� -� Common stock, $0.1 par value; 60,000,000 shares authorized; 31,983,139 and 31,820,273 shares issued and outstanding as of March 31, 2007 and December 31, 2006, respectively 320� 318� Additional paid-in capital 386,762� 386,530� Accumulated other comprehensive loss (58) (78) Accumulated deficit � (325,786) � (315,680) Total stockholders' equity � 61,238� � 71,090� Total liabilities and stockholders' equity $ 78,571� $ 90,273� �