Gene Logic Reports First Quarter 2007 Financial Results

  
    
  
  
    
      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 
      [phone] in the U.S.A. or [phone] 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 [phone] in the U.S.A. or 
      [phone] 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