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 (800)679-8018 in the U.S.A. or
(617)213-4845 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
(888)286-8010 in the U.S.A. or (617)801-6888 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
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