Ventana Reports Third Quarter Results

Business Wire, Oct 18, 2007

* Net sales increased 28% to $75.7 million; company receives 20 Symphony orders in the third quarter

* GAAP net income, including previously announced litigation developments, advisory costs related to the Roche unsolicited offer and the Spring BioScience acquisition was $0.3 million or $0.01 per diluted share

* Non-GAAP net income was $7.9 million or $0.22 per diluted share

* Company raises full year 2007 revenue and non-GAAP EPS guidance; affirms 2008 and 2009 guidance

TUCSON, Ariz. -- Ventana Medical Systems, Inc. (NASDAQ: VMSI), the global leader in tissue-based cancer diagnostics, today reported a 28% increase in year-over-year third quarter net sales, to $75.7 million for the quarter ended September 30, 2007. Net income and diluted earnings per share for the quarter were $0.3 million and $0.01, respectively, including special charges for previously announced litigation developments, acquisitions and advisory costs related to the Roche unsolicited offer. The charges included a $5.9 million after-tax charge resulting from litigation with CytoLogix, Inc., a $4.0 million after-tax charge associated with ongoing advisory expenses and a $0.6 million after-tax charge related to the acquisition of Spring BioScience. GAAP net income also includes a one-time, after-tax gain of $2.9 million related to a litigation settlement with Vision Systems.

Non-GAAP net income for the quarter, excluding the special charges and one time gain, was $7.9 million, or $0.22 per diluted share as compared to net income of $7.8 million, or $0.22 per diluted share, in the third quarter of 2006.

Ventana noted third quarter net income was negatively impacted by approximately $4.3 million in pre-tax legal expenses, due to litigation, most of which are not expected to recur in 2008. These expenses are in addition to the litigation costs included in the third quarter special charges.

Reagents and other revenue grew 29% compared to the third quarter of 2006, while instrument revenues increased by 24% versus the comparable period in 2006. Gross margin for the quarter was 75.3% compared to 76.6% in the third quarter of 2006. Ventana had 20 Symphony orders in the third quarter.

MANAGEMENT COMMENTS

"Ventana achieved exceptional operating performance and accelerating top-line growth in the third quarter," said Christopher Gleeson, Ventana's President and Chief Executive Officer. "Our sales momentum reflects strong performance in our core advanced staining business and increasing penetration of the large and robust primary staining market, as evidenced by growing demand for Symphony. This quarter's results illustrate the strength of our market leadership and the long-term growth opportunity within our installed base and beyond. Reflecting the strong quarter, we are raising our revenue and non-GAAP earnings guidance for 2007."

"The third quarter was also important strategically," Gleeson continued. "We resolved long-standing legal disputes in a favorable way, and we acquired Spring BioScience Corporation, an industry-leading developer of next generation rabbit monoclonal antibodies and other reagents. Ventana's continuing momentum overall and the Spring acquisition enabled us in September to increase our financial performance outlook for 2008 and 2009, and we are reaffirming that guidance today. I am extremely proud of the focus and dedication of our employees who have contributed to our strong and continuing momentum in advanced and primary staining and in the rapidly emerging field of companion diagnostics where we now have 30 projects ongoing with 10 pharmaceutical partners."

Gleeson concluded, "Ventana is an outstanding and highly innovative company that continues to perform exceedingly well on behalf of all its stakeholders including investors, employees, partners and most importantly, the patients who rely on our groundbreaking and life saving technology. Our leadership remains focused on continuing to execute our strategy, achieving our strong growth trajectory in 2008 and beyond, and on delivering value to shareholders."

YEAR-TO-DATE 2007

Net sales for the nine months ended September 30th, 2007, were $211.9 million, a 23% increase over the same period in 2006. Year-to-date net income, including special charges, was $25.3 million or $0.71 per diluted share compared to $20.1 million, or $0.55 per diluted share during the same period in 2006. Non-GAAP net income, which excludes special charges, for the first nine months of 2007 was $33.6 million, a 67% increase over the same period in 2006. On a per share basis, non-GAAP net income was $0.94, compared to $0.55 during the same period in 2006. Year-to-date special charges include the previously mentioned third-quarter charges in addition to the net $0.7 million in advisory charges from the second quarter related to the unsolicited Roche tender offer.

CALENDAR YEAR 2007, 2008 and 2009 OUTLOOK

The Company's outlook for 2007 has increased, with expected revenues in the range of $296 million to $300 million while non-GAAP earnings expectations have been increased to approximately $1.34 per diluted share. Revenues for 2007 were previously expected to be in the range of $292 million to $296 million, and non-GAAP earnings per diluted share were expected to be approximately $1.31 per diluted share.