Gene Logic Reports Fourth Quarter and Full Year 2004 Financial Results

    Business Editors/Health/Medical Writers
    BIOWIRE2K

    GAITHERSBURG, Md.--(BUSINESS WIRE)--Feb. 18, 2005--

-- Fourth Quarter Shows 18% Reduction in Loss

-- Full Year Record Revenue

-- Company Provides Date for Announcement of 2005 Guidance and Company Strategy

    Gene Logic Inc. (NASDAQ:GLGC) today reported financial results for the fourth quarter and full year ended December 31, 2004.

    Revenue

    Total revenue for the fourth quarter of 2004 increased 2% to $20.1 million compared to $19.7 million for the fourth quarter of 2003 and reflects a 9% increase in contract study services revenue while the level of information service revenue remained unchanged.
    Total revenue for 2004 increased 9% to $75.9 million from $69.5 million for the prior year. Information services revenue in 2004 and 2003 remained relatively unchanged at approximately $52.0 million in both years. Contract study services revenue increased $6.2 million for 2004 due to the April 1, 2003 acquisition of the contract study services business.

    Expenses

    Operating expenses for the fourth quarter of 2004 were $18.7 million compared to $18.7 million for the fourth quarter of 2003, and include $1.2 million in expense associated with the development of the Horizon technology we acquired in July of 2004 from Millennium Pharmaceuticals, Inc.
    Operating expenses for 2004, excluding expenses related to the acquisition of the Horizon technology from Millennium were $72.7 million compared to $74.4 million for the prior year and included $1.8 million in expenses associated with the development of the Horizon technology.
    Contract study services revenue for the fourth quarter was $6.3 million and gross margins were $0.2 million or 3.5%. Gross margins reflect the impact of facility renovations and preparations for increased capacity in the second quarter of 2005. We expect margins to be similar in the first quarter of 2005, followed by improvements throughout the balance of 2005.
    Contract study services revenue for the full year of 2004 was $23.8 million and gross margins were a negative $0.3 million, reflecting third quarter 2004 adjustments totaling $1.4 million for a credit to a single customer, a write-down of fixed assets acquired in the TherImmune acquisition and the loss of revenue resulting from a particular customer's inability to pay.

    Income Tax Expense

    Income tax expense for the fourth quarter and full year of 2004 was zero and $0.3 million, respectively, compared to $0.6 million and $2.2 million, respectively, for the fourth quarter and full year of 2003, reflecting the impact of the enactment of a new income tax treaty between the United States and Japan, effectively eliminating withholding taxes on payments made between the countries after July 1, 2004.

    Net Loss

    The net loss for the fourth quarter of 2004 was $4.0 million, or $0.13 per share, compared to $4.9 million, or $0.16 per share, for the fourth quarter of 2003, and reflects an 18% improvement.
    The net loss for the full year of 2004 was $28.5 million, or $0.91 per share, compared to $24.8 million, or $0.82 per share, for the prior year. Included in the net loss for 2004 is an $8.8 million, non-cash expense for Purchased Research and Development as a result of the Company's acquisition of the Horizon technology. Included in the net loss for the full year of 2003 is a $4.3 million non-cash write-down of one of the Company's equity investments. Excluding the purchased R&D expense in 2004 and the equity write-down in 2003, the net loss for the full year of 2004 was $19.7 million, or $0.63 per share, compared to $20.5 million, or $0.68 per share, for the full year of 2003, an improvement of $0.8 million, or $0.03 per share.

    Backlog

    As of December 31, 2004, Gene Logic had a backlog for contract study services of approximately $17.9 million, which comprises commitments under signed task orders (or other written firm commitments), excluding any amounts thereunder recognized as revenue.

    Cash

    As of December 31, 2004, Gene Logic had approximately $102.9 million in cash, cash equivalents and marketable securities available-for-sale.

    Gene Logic Guidance

    Gene Logic will provide Company strategy and guidance for 2005 in a conference call on March 17, 2005.

    2004 Highlights

Conference Call Details:

Dial-In: 800-901-5213 Domestic 617/786-2962 International Replay Dial-In: 888-286-8010 Domestic 617-801-6888 International Passcode: 92348611 Webcast: Please go to www.genelogic.com, Investors, within 15 minutes prior to the call and select the webcast link.

    The conference call replay will be available through Thursday, March 3, 2005. The webcast will be archived on Gene Logic's website for 30 days.

    Gene Logic Overview

    Gene Logic's mission is to be the most valued drug development partner for pharmaceutical and biotechnology companies, with an emphasis on helping customers find and develop drugs faster and at lower cost. Gene Logic applies its unique mix of technologies, talent and methodologies to work on behalf of its partners to enable these companies to make more informed, more reliable and more predictive decisions at each point in the highly complex and costly drug development process. For more information, visit www.genelogic.com or call toll-free - 1-800-GENELOGIC.

    Safe Harbor Statement

    This news release contains forward-looking statements that involve significant risks and uncertainties, including those discussed below and others that can be found in our Annual Report on Form 10-K for the year ended December 31, 2003 and in subsequent filings made with the Securities and Exchange Commission. Gene Logic is providing this information as of the date of this news release and does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.
    No forward-looking statement can be guaranteed and actual results may differ materially from those we project. The Company's results may be affected by: the extent of utilization of genomic information by the pharmaceutical and biotechnology industry in research and product development; our ability to retain existing and obtain additional domestic and international customers in a timely manner; capital markets and other economic conditions adversely affecting the purchasing patterns of pharmaceutical and biotechnology companies; levels of industry research and development spending; risks relating to the development of genomic information services and their use by existing and potential customers and ultimate consumers; our reliance on sole source suppliers; our ability to limit our losses and become profitable; our ability to timely supply customers with additional data as required under some of our information services contracts; our ability to continue to successfully manage growth of Gene Logic Labs' operations, including increasing facility capacity and achieving optimal use of facilities and facility capacity and adequate quality of studies; our ability to comply with and to provide studies that are compliant with regulatory requirements, including those of the FDA and GLP; the potentially depressive effect of sales of Gene Logic stock issued to the former TherImmune shareholders in the merger; our ability to attract and retain key employees; our continued access to necessary human and animal tissue samples; the availability of large animals for clinical testing; the impact of technological advances and competition; our ability to enforce our intellectual property rights and the impact of intellectual property rights of others; outsourcing trends in the pharmaceutical and biotechnology industries; competition within the drug development services outsourcing industry; our ability to limit losses from certain fixed price contracts for study services; rapid technological advances that may make our drug discovery and development services less competitive; risks associated with valuation of assets representing acquired businesses; and our ability to successfully develop and commercialize the Horizon technologies acquired from Millennium Pharmaceuticals. Note: Gene Logic, GeneExpress, ToxExpress and the Gene Logic logo are registered trademarks used by Gene Logic Inc.

Financial tables follow.

Gene Logic Inc. Statement of Operations (in thousands, except per share amounts)

Three Months Ended Twelve Months Ended December 31, December 31, ------------------ ------------------- 2004 2003 2004 2003 ------------------ ------------------- (Unaudited) Revenue: Information services $ 13,777 $13,888 $ 52,171 $ 51,960 Contract study services 6,291 5,767 23,766 17,559 --------- -------- --------- --------- Total revenue 20,068 19,655 75,937 69,519

Expenses: Cost of contract study services 6,078 5,603 24,080 15,399 Database production 10,545 12,027 44,675 50,067 Research and development 967 491 2,317 2,091 Selling, general and administrative 7,162 6,160 25,676 22,198 Purchased research and development (266) - 8,817 - --------- -------- --------- --------- Total expenses 24,486 24,281 105,565 89,755 --------- -------- --------- ---------

Loss from operations (4,418) (4,626) (29,628) (20,236) Interest (income), net (409) (339) (1,395) (1,979) Write-down of equity investment - - - 4,268 --------- -------- --------- ---------

Net loss before income tax expense (4,009) (4,287) (28,233) (22,525)

Income tax expense - 602 287 2,246 --------- -------- --------- ---------

Net loss $ (4,009) $(4,889) $(28,520) $(24,771) ========= ======== ========= =========

Basic and diluted net loss per share $ (0.13) $ (0.16) $ (0.91) $ (0.82) ========= ======== ========= =========

Shares used in computing basic and diluted net loss per share 31,654 31,128 31,493 30,112 ========= ======== ========= =========

Gene Logic Inc. Consolidated Condensed Balance Sheets (in thousands)

December 31, December 31, 2004 2003 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 53,237 $ 48,718 Marketable securities available-for-sale 49,678 63,105 Accounts receivable, net 4,953 8,484 Unbilled services 6,406 4,745 Inventory, net 1,683 4,980 Prepaid expenses 2,210 1,966 Other current assets 2,185 1,480 ------------ ------------ Total current assets 120,352 133,478 Property and equipment, net 23,034 23,911 Long-term investments 4,239 4,239 Goodwill 45,707 45,707 Intangibles and other assets, net 13,749 20,031 ------------ ------------ Total assets $ 207,081 $ 227,366 ============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,096 $ 6,676 Accrued expenses 6,779 6,541 Current portion of capital lease obligations 136 124 Current portion of long-term debt 494 492 Deferred revenue 9,788 8,630 ------------ ------------ Total current liabilities 24,293 22,463 Deferred revenue 3,595 2,346 Capital lease obligations, net of current portion 204 340 Long-term debt, net of current portion 174 218 Acquired technologies payable 3,347 - Other noncurrent liabilities 2,640 2,410 ------------ ------------ Total liabilities 34,253 27,777 ------------ ------------ Stockholders' equity: Common stock 317 311 Additional paid-in capital 385,313 383,377 Accumulated other comprehensive income (136) 47 Accumulated deficit (212,666) (184,146) ------------ ------------ Total stockholders' equity 172,828 199,589 ------------ ------------ Total liabilities and stockholders' equity $ 207,081 $ 227,366 ============ ============

--30--JM/ph*

CONTACT: Gene Logic Inc. Investors/Media: Robert G. Burrows, 301-987-1824 rburrows@genelogic.com or Investors: Philip L. Rohrer, Jr., 301-987-1700 prohrer@genelogic.com

KEYWORD: MARYLAND INDUSTRY KEYWORD: MEDICAL PHARMACEUTICAL BANKING BIOTECHNOLOGY EARNINGS CONFERENCE CALLS SOURCE: Gene Logic Inc.

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