Gene Logic revenue down for second quarter; says drop due to shortfall in genomics division

By Jennifer Lanning Drey

Eugene, Ore., Aug. 4 - Gene Logic, Inc.'s genomics division experienced a significant shortfall in revenues during the second quarter, causing the company's overall revenues to also fall short of expectations, said Mark D. Gessler, chief executive officer of Gene Logic, during a conference call held Friday.

The company reported $11.3 million in total revenue for the second quarter, compared to $20.1 million for the second quarter of 2005, according to a news release.

The genomics division posted second quarter revenues of $4.7 million, a 67% decline from 2005, according to the release.

The net loss for the second quarter was $11.29 million, or $0.35 per basic and diluted share, compared to a net loss of $2.61, or $0.08 per basic and diluted share, in the second quarter of 2005.

"Our results for the second quarter of 2006 reflect a significant shortfall from what we projected earlier this year," said Gessler.

The company believes the shortfall in the genomics division was the result of declining subscription revenues, the absence of anticipated sales of perpetual licenses to database providers and slower than anticipated sales growth for microarray data generation and analysis services.

"We have seen a faster than anticipated drop off in subscription revenue for data base products and a slower than anticipated ramp up of revenue from data generation services," he said.

Gene Logic has hired a consulting firm to assess its genomics division and refocus its strategic direction.

"This is a critical time for the company's history. We are addressing the issues in our genomics division with the utmost urgency and attention," Gessler said.

The company plans to report on the strategic review in September, and the results will determine the company's next steps with regard to its genomics business, he said.

Preclinical division improves

Gessler said Gene Logic is encouraged by growth shown by its preclinical division, which has demonstrated improvements during the second quarter and first half of the year.

The preclinical division reported revenue of $6.6 million in the second quarter, which was a 13% increase over the second quarter of 2005, according to the release.

Gene Logic also believes its drug repositioning division has the opportunity to increase the value of the company through partnerships such as one signed during the second quarter with Organon, Gessler said.

"We are encouraged that our two other divisions - preclinical services and drug repositioning - have shown positive progress and believe we have a solid value foundation from which our reformulated strategy can be launched, he said.

Gene Logic is a Gaithersburg, Md., biotechnology company that focuses on the transformation of pharmaceutical research and development with gene expression databases, toxicogenomics, bioinformatics, specialty nonclinical services testing capabilities and technology program for drug repositioning.

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