Gene Logic Reports Second Quarter 2007 Financial Results

  
    
  
  
    
      Gene Logic Inc. (NASDAQ: GLGC) today reported financial results for the 
      second quarter ended June 30, 2007.
    
    
      Q2 Highlights
    
    
      Highlights for the second quarter of 2007 included:
    
    
      
        Gene Logic and Abbott Laboratories established a collaboration to 
        discover new development paths for multiple clinical drug candidates.
      
      
        A Company collaboration with the Mayo Clinic revealed genomic 
        predictors of Parkinson’s disease. Although 
        the Company does not expect revenue from subsequent products as a 
        result of this study, the findings augment Gene Logic’s 
        intellectual property position around a growing set of useful markers 
        for Parkinson’s disease and other complex 
        diseases.
      
      
        Gene Logic signed an agreement with H. Lundbeck A/S to discover new 
        development paths for clinical drug candidates. In a separate 
        agreement unrelated to its drug repositioning partnerships, Gene Logic 
        announced that it will receive approximately $2.5 million in net fees 
        in July 2007 from Lundbeck for a license to certain technology rights 
        controlled by Gene Logic. The associated revenue will be recognized 
        over the coming year.
      
    
    
      Genomics Initiative
    
    
      
        Following consideration of various strategic alternatives for its 
        Genomics Division, the Company is concentrating its efforts on 
        investigating the possibility of a sale of all or parts of its 
        Genomics business. Such a transaction is likely to require shareholder 
        approval. The Company is being assisted in this process by an 
        investment bank, Aquilo Partners. The Company has reduced expenses of 
        its Genomics Division while continuing to serve new and existing 
        Genomics customers.
      
    
    
      More Recent News
    
    
      
        In a separate announcement, Gene Logic reported today that it has 
        launched an effort to secure a development partner for its first 
        proprietary drug candidate, GL1001, a compound acquired from 
        Millennium Pharmaceuticals. Using an in vivo model, the Company 
        has validated its hypothesis that this compound could be used for 
        treatment of inflammatory bowel disease.
      
    
    
      Revenue
    
    
      Revenue for Gene Logic’s continuing operations 
      is derived primarily from its Genomics Division. To date, no meaningful 
      revenue for the Drug Repositioning Division has been recorded. Revenue 
      for Genomics services for the second quarter of 2007 was $5.4 million 
      compared to $4.7 million for the second quarter of 2006, an increase of 
      $0.7 million. Year-to-date revenue for Genomics was $8.7 million 
      compared to $13.4 million for the same period of 2006, a decrease of 
      $4.7 million. The decrease is primarily due to lower sales for 
      subscriptions to the Company’s database 
      services.
    
    
      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 second quarter of 2007, total operating expenses were $13.9 
      million compared to $15.0 million for the second quarter of 2006, a 
      decrease of $1.1 million, or 8%. This reduction reflects the favorable 
      impact of the restructuring of the Genomics Division and lower amounts 
      spent on adding new Genomics database content, partially offset by 
      increased selling, general and administrative expenses. Year-to-date 
      total operating expenses were $27.8 million compared to $32.2 million 
      for the comparable period in 2006, a reduction of $4.4 million or 14%. 
      This reduction also reflects the favorable impact of the restructuring 
      of the Genomics Division and lower amounts spent on adding new Genomics 
      database content.
    
    
      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
        
        
        
        
          Six Months Ended
        
      
      
        
        
        
        
        
          June 30,
        
        
        
        
          June 30,
        
      
      
        
        
        
        
        
          2007
        
        
        
        
          
            2006
          
        
        
        
        
          2007
        
        
        
        
          2006
        
      
      
        
          Drug Repositioning Division
        
        
        
        
          $
        
        
          (4,571)
        
        
        
        
          $
        
        
          (3,654)
        
        
        
        
          $
        
        
          (9,165)
        
        
        
        
          $
        
        
          (7,530)
        
      
      
        
          Genomics Division
        
        
        
        
           
        
        
          (3,841)
        
        
        
        
           
        
        
          (6,680)
        
        
        
        
           
        
        
          (9,933)
        
        
        
        
           
        
        
          (11,210)
        
      
      
        
          Total operating loss
        
        
        
        
          $
        
        
          (8,412)
        
        
        
        
          $
        
        
          (10,334)
        
        
        
        
          $
        
        
          (19,098)
        
        
        
        
          $
        
        
          (18,740)
        
      
    
    
      Drug Repositioning Division:
    
    
      For the second quarter of 2007, the Drug Repositioning Division reported 
      an operating loss of $4.6 million compared to a loss of $3.7 million in 
      the prior year period, an increase of $0.9 million. This increase 
      largely reflects increased expenses for in vivo validation of 
      alternative therapeutic hypotheses and increased employee costs. 
      Year-to-date operating loss for the Drug Repositioning Division was $9.2 
      million compared to a loss of $7.5 million in the prior year period, an 
      increase of $1.7 million. This increase reflects increased employee 
      costs, increased expenses for in vivo validation of alternative 
      therapeutic hypotheses and the division’s 
      proportional share of certain executive severance and retention expenses.
    
    
      Genomics Division:
    
    
      For the second quarter of 2007, the Genomics Division reported an 
      operating loss of $3.8 million compared to an operating loss of $6.7 
      million for the second quarter of 2006, a decrease of $2.9 million. The 
      results reflect higher revenue, reduced operating expenses due to the 
      restructuring of the Genomics Division and lower expenses for Genomics 
      database content, partially offset by increased selling, general and 
      administrative expenses. Year-to-date operating loss for the Genomics 
      Division was $9.9 million compared to $11.2 million in the prior year 
      period, a decrease of $1.3 million. This decrease reflects reduced 
      operating expenses due to the restructuring of the Genomics Division and 
      lower expenses for Genomics database content, partially offset by lower 
      revenue and increased selling, general and administrative expenses.
    
    
      Net Loss
    
    
      For the second quarter of 2007, loss from continuing operations was $7.9 
      million or $0.25 per share, compared to a loss from continuing 
      operations of $9.7 million, or $0.30 per share, for the second quarter 
      of 2006. The decrease in the loss from continuing operations for the 
      second quarter of 2007 as compared to 2006 reflects primarily the 
      favorable impact of the restructuring of the Genomics Division. 
      Year-to-date net loss from continuing operations for 2007 was $18.0 
      million, or $0.56 per share, compared to a net loss from continuing 
      operations for the comparable period of 2006 of $17.6 million, or $0.56 
      per share. Net loss for each of the second quarter and year-to-date 2006 
      was $11.3 million, or $0.35 per share, and $23.1 million, or $0.73 per 
      share, respectively.
    
    
      Liquidity
    
    
      As of June 30, 2007, the Company had approximately $36.7 million in 
      combined cash, cash equivalents and marketable securities 
      available-for-sale, compared to $43.1 million as of March 31, 2007. The 
      Company expects cash usage for the second half of 2007 to be lower than 
      for the first half of 2007.
    
    
      Conference Call and Webcast
    
    
      Gene Logic will host a conference call and webcast on July 27, 2007 at 
      10:00 a.m. Eastern to discuss the results for the second 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 July 27, 2007 through 
      August 10, 2007. To hear the replay, dial [phone] in the U.S.A. or 
      [phone] internationally and use the passcode 65805860. 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. Following consideration of various 
      strategic alternatives for its Genomics Division, the Company is 
      concentrating its efforts on investigating the possibility of a sale of 
      all or parts of its Genomics business while continuing to serve new and 
      existing Genomics customers.
    
    
      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 realizing the value of our 
      Genomics business, including through a sale of all or part of the Company’s 
      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.
    
    
      
        
          Gene Logic Inc.
        
      
      
        
          Consolidated Statements of Operations
        
      
      
        
          (in thousands, except per share amounts)
        
      
      
        
          (unaudited)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
          Three Months Ended
        
        
        
        
          Six Months Ended
        
      
      
        
        
        
        
        
        
        
        
        
          June 30,
        
        
        
        
          June 30,
        
      
      
        
        
        
        
        
        
        
        
        
          2007
        
        
        
        
          2006
        
        
        
        
          2007
        
        
        
        
          2006
        
      
      
        
          Revenue:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Genomics services
        
        
        
        
          $
        
        
          5,403
        
        
        
        
          $
        
        
          4,683
        
        
        
        
          $
        
        
          8,672
        
        
        
        
          $
        
        
          13,431
        
      
      
        
          Drug repositioning services
        
        
        
        
           
        
        
          38
        
        
        
        
           
        
        
          9
        
        
        
        
           
        
        
          38
        
        
        
        
           
        
        
          29
        
      
      
        
          Total revenue
        
        
        
        
        
        
          5,441
        
        
        
        
        
        
          4,692
        
        
        
        
        
        
          8,710
        
        
        
        
        
        
          13,460
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Expenses:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Database production
        
        
        
        
        
        
          5,401
        
        
        
        
        
        
          7,629
        
        
        
        
        
        
          10,699
        
        
        
        
        
        
          15,424
        
      
      
        
          Research and development
        
        
        
        
        
        
          2,674
        
        
        
        
        
        
          2,541
        
        
        
        
        
        
          5,110
        
        
        
        
        
        
          4,981
        
      
      
        
          Selling, general and administrative
        
        
        
        
           
        
        
          5,778
        
        
        
        
           
        
        
          4,856
        
        
        
        
           
        
        
          11,999
        
        
        
        
           
        
        
          11,795
        
      
      
        
          Total expenses
        
        
        
        
        
        
          13,853
        
        
        
        
        
        
          15,026
        
        
        
        
        
        
          27,808
        
        
        
        
        
        
          32,200
        
      
      
        
          Loss from operations
        
        
        
        
        
        
          (8,412)
        
        
        
        
        
        
          (10,334)
        
        
        
        
        
        
          (19,098)
        
        
        
        
        
        
          (18,740)
        
      
      
        
          Interest (income), net
        
        
        
        
        
        
          (517)
        
        
        
        
        
        
          (755)
        
        
        
        
        
        
          (1,132)
        
        
        
        
        
        
          (1,528)
        
      
      
        
          Other (income) expense
        
        
        
        
        
        
          (22)
        
        
        
        
        
        
          103
        
        
        
        
        
        
          13
        
        
        
        
        
        
          100
        
      
      
        
          Write-down of equity investment
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          275
        
      
      
        
          Loss from continuing operations
        
        
        
        
        
        
          (7,873)
        
        
        
        
        
        
          (9,682)
        
        
        
        
        
        
          (17,979)
        
        
        
        
        
        
          (17,587)
        
      
      
        
          Loss from discontinued operations
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          (1,604)
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          (5,496)
        
      
      
        
          Net loss
        
        
        
        
          $
        
        
          (7,873)
        
        
        
        
          $
        
        
          (11,286)
        
        
        
        
          $
        
        
          (17,979)
        
        
        
        
          $
        
        
          (23,083)
        
      
      
        
          Basic and diluted net loss per share:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Loss from continuing operations
        
        
        
        
          $
        
        
          (0.25)
        
        
        
        
          $
        
        
          (0.30)
        
        
        
        
          $
        
        
          (0.56)
        
        
        
        
          $
        
        
          (0.56)
        
      
      
        
          Loss from discontinued operations
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          (0.05)
        
        
        
        
           
        
        
          -
        
        
        
        
           
        
        
          (0.17)
        
      
      
        
          Net loss
        
        
        
        
          $
        
        
          (0.25)
        
        
        
        
          $
        
        
          (0.35)
        
        
        
        
          $
        
        
          (0.56)
        
        
        
        
          $
        
        
          (0.73)
        
      
      
        
          Shares used in computing basic and diluted net loss per share
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
           
        
        
          31,865
        
        
        
        
           
        
        
          31,809
        
        
        
        
           
        
        
          31,851
        
        
        
        
           
        
        
          31,798
        
      
    
    
      
        
          Gene Logic Inc.
        
      
      
        
          Consolidated Condensed Balance Sheets
        
      
      
        
          (in thousands)
        
      
      
        
        
        
        
        
        
        
        
        
          June 30,
        
        
        
        
          December 31,
        
      
      
        
        
        
        
        
        
        
        
        
          
            2007
          
        
        
        
        
          2006
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          ASSETS
        
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
          Current assets:
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          20,848
        
        
        
        
          $
        
        
          25,700
        
      
      
        
          Marketable securities available-for-sale
        
        
        
        
        
        
          15,834
        
        
        
        
        
        
          24,410
        
      
      
        
          Accounts receivable, net of allowance of $49 and $45 as of June 30, 
          2007 and December 31, 2006, respectively
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
          566
        
        
        
        
        
        
          3,327
        
      
      
        
          Unbilled services
        
        
        
        
        
        
          712
        
        
        
        
        
        
          589
        
      
      
        
          Inventory, net
        
        
        
        
        
        
          1,968
        
        
        
        
        
        
          2,180
        
      
      
        
          Prepaid expenses
        
        
        
        
        
        
          1,513
        
        
        
        
        
        
          1,260
        
      
      
        
          Other current assets
        
        
        
        
           
        
        
          2,591
        
        
        
        
           
        
        
          3,551
        
      
      
        
          Total current assets
        
        
        
        
        
        
          44,032
        
        
        
        
        
        
          61,017
        
      
      
        
          Property and equipment, net
        
        
        
        
        
        
          11,390
        
        
        
        
        
        
          12,829
        
      
      
        
          Long-term investments
        
        
        
        
        
        
          2,964
        
        
        
        
        
        
          2,964
        
      
      
        
          Goodwill
        
        
        
        
        
        
          2,677
        
        
        
        
        
        
          2,677
        
      
      
        
          Other intangibles, net
        
        
        
        
        
        
          7,804
        
        
        
        
        
        
          10,060
        
      
      
        
          Other assets
        
        
        
        
           
        
        
          657
        
        
        
        
           
        
        
          726
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          69,524
        
        
        
        
          $
        
        
          90,273
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LIABILITIES AND STOCKHOLDERS' EQUITY
        
        
        
        
        
        
        
        
        
      
      
        
          Current liabilities:
        
        
        
        
        
        
        
        
        
      
      
        
          Accounts payable
        
        
        
        
          $
        
        
          2,233
        
        
        
        
          $
        
        
          3,703
        
      
      
        
          Payable to Bridge Pharmaceuticals
        
        
        
        
        
        
          752
        
        
        
        
        
        
          1,727
        
      
      
        
          Accrued compensation and employee benefits
        
        
        
        
        
        
          4,105
        
        
        
        
        
        
          2,883
        
      
      
        
          Other accrued expenses
        
        
        
        
        
        
          2,658
        
        
        
        
        
        
          3,751
        
      
      
        
          Accrued restructuring costs
        
        
        
        
        
        
          818
        
        
        
        
        
        
          1,941
        
      
      
        
          Current portion of long-term debt
        
        
        
        
        
        
          500
        
        
        
        
        
        
          499
        
      
      
        
          Deferred revenue
        
        
        
        
           
        
        
          3,971
        
        
        
        
           
        
        
          3,299
        
      
      
        
          Total current liabilities
        
        
        
        
        
        
          15,037
        
        
        
        
        
        
          17,803
        
      
      
        
          Deferred revenue
        
        
        
        
        
        
          -
        
        
        
        
        
        
          228
        
      
      
        
          Long-term debt, net of current portion
        
        
        
        
        
        
          52
        
        
        
        
        
        
          78
        
      
      
        
          Deferred rent
        
        
        
        
           
        
        
          946
        
        
        
        
           
        
        
          1,074
        
      
      
        
          Total liabilities
        
        
        
        
           
        
        
          16,035
        
        
        
        
           
        
        
          19,183
        
      
      
        
          Stockholders' equity:
        
        
        
        
        
        
        
        
        
      
      
        
          Preferred stock, $.01 par value; 10,000,000 shares authorized; and 
          no shares issued and outstanding as of June 30, 2007 and December 
          31, 2006
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
          -
        
        
        
        
        
        
          -
        
      
      
        
          Common stock, $0.1 par value; 60,000,000 shares authorized; 
          31,974,805 and 31,820,273 shares issued and outstanding as of June 
          30, 2007 and December 31, 2006, respectively
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          320
        
        
        
        
        
        
          318
        
      
      
        
          Additional paid-in capital
        
        
        
        
        
        
          386,873
        
        
        
        
        
        
          386,530
        
      
      
        
          Accumulated other comprehensive loss
        
        
        
        
        
        
          (45)
        
        
        
        
        
        
          (78)
        
      
      
        
          Accumulated deficit
        
        
        
        
           
        
        
          (333,659)
        
        
        
        
           
        
        
          (315,680)
        
      
      
        
          Total stockholders' equity
        
        
        
        
           
        
        
          53,489
        
        
        
        
           
        
        
          71,090
        
      
      
        
          Total liabilities and stockholders' equity
        
        
        
        
          $
        
        
          69,524
        
        
        
        
          $
        
        
          90,273