Gen-Probe hires Morgan Stanley to seek buyer: sources

PHILADELPHIA Thu Apr 28, 2011 6:28pm EDT

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PHILADELPHIA (Reuters) - Diagnostic test maker Gen-Probe Inc (GPRO.O) hired Morgan Stanley (MS.N) to seek a buyer for the company, sources familiar with the situation said on Thursday.

Gen-Probe shares rose 13.5 percent to close at $79.61 after news of the potential sale was first reported by Bloomberg. The San Diego-based maker of blood-screening and sexually transmitted disease tests also reported a flat profit for the first quarter.

"Gen-Probe has been a potential acquisition target for the past five years in our view, given its leading diagnostic franchises in infectious disease testing, blood screening and well established track record," said Mizuho Securities analyst Peter Lawson.

Carl Hull, the company's chief executive, declined, during a conference call with analysts and investors, to discuss "rumored business development activities surrounding Gen-Probe."

Initial bids for the company, which has a market capitalization of about $3.8 billion, are due in the next couple of weeks, one source said.

Possible bidders include Novartis AG (NOVN.VX) Thermo Fisher Scientific Inc (TMO.N), Danaher Corp (DHR.N) and Life Technologies Corp LIFE.O, Bloomberg reported.

Novartis and Gen-Probe are partnered in blood screening, making Novartis a potential buyer, Lawson said.

Other companies with diagnostic businesses include Abbott Laboratories (ABT.N), Roche Holding AG (ROG.VX), Siemens AG (SIEGn.DE) and Johnson & Johnson (JNJ.N), Lawson said.

Gen-Probe said it still expects full-year 2011 earnings of $2.28 to $2.40 per share on revenue of $570 million to $595 million. That is in line with average analyst estimates of $2.35 per share on revenue of $581.7 million, according to Thomson Reuters I/B/E/S.

For the second quarter, the company forecast earnings of 47 cents to 49 cents per share, below the average analyst estimate of 58 cents. It cited lower shipments to and research revenue from Novartis, as well as the end of the flu season.

"We forecast continued, high-single-digit growth in product sales," Herm Rosenman, the company's chief financial officer, said in a statement. "We also expect improving gross and operating margins to drive solid earnings growth, despite increased legal expenses and substantially lower nonoperating income."

For the first quarter, Gen-Probe earned $23.3 million, or 48 cents a share, compared with $24.2 million, or 48 cents a share, a year earlier. Excluding items, it earned 54 cents a share, beating the average analyst estimate of 52 cents a share.

Revenue for the quarter rose 5.6 percent to $143 million. Analysts had expected $141.3 million.

(Reporting by Anand Basu in Bangalore, Jessica Hall in Philadelphia, Soyoung Kim in New York and Deena Beasley in Los Angeles; editing by Tim Dobbyn, Andre Grenon and Steve Orlofsky)

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