Marc Grodman, M.D., CEO of BRLI, stated, "We executed an Agreement today for the acquisition of GeneDx. The Closing, expected to be completed within the next two to three weeks, is subject to the obtaining of certain consents. This acquisition, when consummated, will represent a major new initiative for our company. We believe GeneDx is the country's leading laboratory for the diagnosis of rare and complex genetic disorders; it is a pure genetics laboratory that is actually run by geneticists. DNA sequencing is the current gold standard of genetic testing and GeneDx with its expansive and, what we believe to be, unrivaled roster of testing holds a preeminent position in this diagnostic testing area. Sherri Bale, Ph.D., and John Compton, Ph.D., are geneticists who worked at the National Institutes of Health (NIH) until 2000 when they left to start GeneDx. They and their company have built an outstanding reputation over the last six years for innovation, creativity and commercial success. They are leaders in their field and they have agreed to bring that leadership, innovation and success to BRLI. Genetic testing has become a critical component to many aspects of the clinical laboratory. The knowledgebase related to the genetics of human disease has exploded in recent years; There has, however, been a disconnect in bringing these new methodologies and scientific breakthroughs into clinical practice. As we expand from the diagnosis of rare diseases to the diagnosis of the genetic variants of more common diseases, GeneDx brings to BRLI the expertise and capability to become a leader in this movement. From our base as a regional laboratory, BRLI has built focused markets where we can excel. We have done this in hematopathology, correctional health care and informatics. We have stated for some time now that we have been searching for our next focused market; we are very excited to be working with Sherri and John as we move to the forefront of the genetics' revolution.
"GeneDx had revenues last year that were just short of $5 Million with EBITDA margins that surpassed 30%. This year the company has seen an increase in revenues of over 35% with equally strong EBITDA margins. The purchase price will be as much as $17 Million if all contingencies and goals are achieved. We believe that this will be accretive to BRLI by at least $.01 per share this fiscal year and at least $.06 per share during our next fiscal year.
"We also are using this time to announce our third quarter results. Sometimes events coincide and, given the importance of this acquisition to our future growth and the usual anticipation about our financial results, we felt that it was inappropriate to discuss one event without the other."
The Company recorded current quarter revenues of $49,026, the best ever quarter in terms of revenues in corporate history and an increase of 15% over the $42,723 recorded in the third quarter, fiscal year 2005. Net income after taxes in Q3FY06 were $3,679 resulting in fully diluted earnings per share (EPS) of $.27, up 48% from the prior fiscal year second quarter net income after taxes of $2,493 and EPS of $.19. Gross profits on revenues for the current quarter were $24,343 resulting in a margin for gross profit on revenues of 50%, versus the $21,170 reported for the prior fiscal year third quarter, which was also 50%. Revenue per patient for the third quarter of the current fiscal year was $61.60, an increase of 8% over the $57.17 reported for the same quarter of the prior fiscal year. The number of patients served increased 6% to 783 in the current quarter from the prior year second quarter total of 737. Esoteric business for the Company was 39% of revenues for the third quarter of the current fiscal year.
Nine month revenues increased to $139,133, an increase of 16% over the same period revenues of $119,607 in the prior fiscal year. Net income after taxes for the first nine months of the current year was $7,580 resulting in an EPS of $.56; this was an increase of 56% from the prior year same period net income after taxes of $4,845 which resulted in an EPS of $.37. The Company reported gross profit on revenues for the current nine month period of $68,455, resulting in a margin for gross profit on revenues of just over 49% compared to the prior year same period of $58,303 which resulted in a margin of just under 49%. The number of patients served increased 9% to 2,285 in the first nine months of the current year from the prior year same period total of 2,104.
Dr. Grodman commented, "We continued to enjoy our sustained 15-20% growth rate this quarter, albeit at the lower end of that range. During certain weeks in June and July, our activities were less than those of other weeks, perhaps related to record breaking heat in the NorthEast or unrelated economic conditions. We saw unusually low volume toward the end of June and especially early July. The slower weeks' activity was not skewed toward any one segment of our business, and we have enjoyed resumption of our strong growth trends toward the end of quarter. We have continued to grow and set up new accounts. Our Woman's Health Initiative continues to gain traction. Now that the summer months are coming to a close, we have seen firming of our revenues and the continued stabilization of our expenses. Based on our nine-month volume, results and current business, we affirm our guidance for the year of at least 15% revenue growth and 40% increase in operating income."
Dr. Grodman further noted: "The increase of our stock price over the past few months resulted in the exercise of a number of stock options; this, in turn, created a tax benefit, lowering our tax rate for the current third quarter to 25% and thereby boosting our net income. At this time we expect that the tax rate for the fourth quarter will be somewhere around 32%."
Concerning GeneDx, Dr. Sherri Bale stated: "We have seen our business grow dramatically over the past six years. Before we left the NIH, we knew that there would be a huge demand for the services that we established GeneDx to provide. We have been in discussions with BRLI for some time now and we are absolutely certain that together with BRLI we can make a difference in gene-based testing. We need the support and strength that BRLI has agreed to offer us in order to take our business to the next plateau. Every day there are new developments, new discoveries and new needs for the testing that we perform. BRLI will enable John and me to focus on our core expertise: genetics. Our discussions with BRLI over the last few months have been encouraging and enlightening. We believe that together we will be able to lead the diagnostic market into the new era of gene-based testing."
Dr. John Compton added: "Sherri and I have developed a reputation for expertise and professionalism. We would never have considered joining forces with anyone that did not share that same interest in quality and excellence. Dr. Grodman and the entire BioReference team have demonstrated tremendous insight into and concern for the science of genetics. They clearly recognize what Sherri and I believe in: the next revolution of diagnostic testing will be led by gene-based clinical testing. We are pioneers in a new frontier of science and we believe that BRLI will be a great partner in exploring this new world."
Dr. Grodman observed: "BRLI is a great company with a strong vision and compelling corporate culture. For several years, we have been searching for a next venture that will propel us forward the way our focused marketing efforts in hematopathology, correctional healthcare and informatics have done. We have believed for some time that gene-based testing is that next market. We have traveled far and wide searching for the right opportunity and we knew that it was GeneDx immediately when we first met with the principals. We will only get involved with companies that have the same standards of excellence, professionalism and desire to grow that we have made the core of all of our corporate endeavors. GeneDx was an immediate match and we have pursued the opportunity relentlessly since our first meeting. We intend to leverage what John and Sherri have begun into the industry leader that we have become in our other franchise opportunities. Each segment of our total corporate package has been purposefully crafted into a segment leader and our hope is that GeneDx will enable us to imprint the entire industry as it gravitates more and more toward gene-based testing."
The Company's third quarter earnings conference call has been re-scheduled to take place this afternoon, August 29th, 2006 at 4:00 p.m. Eastern Standard Time. The live audio Web cast will be available at the Company's corporate Web site, www.bioreference.com and through www.streetevents.com. To listen to the call please go to either Web site ten minutes before the conference call is scheduled to begin. You will need to register as well as download and install any necessary audio software. The Web cast will be archived, on both Web sites, for 30 days following the call.
About Bio-Reference Laboratories, Inc.
The Company is the largest independent regional clinical laboratory in the Northeast and has major market positions in physician offices, nursing homes and correctional institutions. The Company is a full service clinical laboratory with specialty capability, especially in the areas of genomics, oncology, correctional health, and complimentary medicine. PSIMedica, a business unit of the Company, is a clinical knowledge management (CKM) organization offering an array of information solutions for reducing healthcare costs and improving quality performance that are based on a flexible, scalable software analytical engine that utilizes all available source information, including claims data, enrollment data, prescription data and laboratory data. The Company provides a comprehensive connectivity solution to physicians as well as other laboratories, which includes laboratory reporting and ordering, as well as laboratory to physician communications and cumulative reporting, through CareEvolve, its web-based healthcare portal.
