Change in Commercial Practice Lowers Sales in Japan
Company Provides Initial Guidance for 2001
TUCSON, Ariz., Dec. 15 /PRNewswire/ -- Ventana Medical Systems, Inc.
(Nasdaq: VMSI), a leading supplier of automated instrument-reagent systems to
histology and drug discovery labs worldwide, today announced fourth-quarter
revenue is anticipated to be below the company's previous expectation due to a
change in how the company recognizes revenue in Japan. Ventana now expects
sales for the fourth quarter to be $17 million to $18 million, or $3 million
to $4 million less than the low end of the previous expectation. At this
lower sales level, the company would report a net loss in a range of
$1.6 million to $2.6 million, and a loss per share of around $0.11 to $0.17.
"We examined our revenue recognition practices in recent months in
anticipation of the fourth-quarter implementation of SEC Staff Accounting
Bulletin No.101 dealing with revenue recognition," commented Christopher
Gleeson, Ventana's president and chief executive officer. "In connection with
this review, we have decided to modify our commercial practices in Japan for
consistency with our practices in the North American and European markets.
The impact of this decision will be to reduce fourth-quarter sales in Japan.
North America and Europe remain broadly on track to achieve their original
forecasts."
With respect to Japan, Ventana noted that while the company sells its
instruments through a direct sales organization, the instruments move through
local distributors with whom the ultimate customers choose to do business.
These distributors take title to the instruments and invoice the customers.
Previously, Ventana had recognized sales in Japan when an instrument shipped
to the distributor.
"We have subsequently discovered that normal business practice in the
Japanese research market is that customers do not normally accept payment
obligation until they are fully satisfied that the instrument meets their
needs in their research setting. As a consequence, we have decided that
revenue will not be recognized until we have verified that the instrument
system meets the customer's specific research protocol and has been shipped
from the distributor to the customer," Gleeson said.
Fourth-Quarter Outlook
Ventana's current expectations for the fourth quarter are impacted by the
commercial practice changes in Japan as follows:
-- Sales for the fourth quarter of 2000 will be $3 million to $4 million
lower than the current $21 million expected.
-- Gross margins for the fourth quarter are expected to be around
63 percent, down from the 67 percent reported in the third quarter due
to lower high-margin Discovery instrument sales in Japan.
-- Operating loss is expected to be in a range of $2.0 million to
$3.0 million.
-- The net loss for the fourth quarter is expected to be around
$1.6 million to $2.6 million.
Calendar Year 2001 Outlook
Ventana also provided preliminary guidance for 2001. "Next year is a
pivotal year for Ventana," noted Gleeson. "We anticipate increasing sales
velocity from our recently launched BenchMark product focused on our core
histology market where we hold a leading position in automating
immunohistochemistry (IHC) and in-situ hybridization (ISH) slide staining. At
the same time, we expect significant growth in 2001 from our new Molecular
Discovery Systems group, which concentrates on automating an emerging market
for ISH & IHC slide staining in drug discovery labs."
Gleeson noted that the company anticipates sales growth of approximately
28 percent over the expected level for 2000. Further, the company expects a
return to profitability on a consolidated basis while simultaneously
committing to a significant research and development investment to support the
growth in the core histology business as well as exploit the drug discovery
market opportunity. Ventana does not expect to report an income tax accrual
for 2001 due to tax-loss carryforwards.
Conference Call
Ventana will hold a conference call to discuss management's outlook for
the fourth quarter and next year at 11 a.m. EST on Friday, December 15, 2000.
The call can be accessed live and will be available for replay over the
Internet via http://www.streetevents.com .
This news release contains certain "forward-looking" statements and
information within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements, by their very nature, include risks and uncertainties.
Accordingly, the company's actual results could differ materially from those
discussed in this release. A wide variety of factors could cause or
contribute to such differences and could adversely impact revenues,
profitability, cash flows and capital needs. Such factors, many of which are
beyond the control of the company, include the following: market acceptance of
new automated histology products, continued success in asset management,
continued improvements in our manufacturing efficiencies, on-schedule launches
of our new products, currency exchange rate variability, competition and
competitive pressures on pricing and general economic conditions in the United
States and in the regions served by the company. A more complete listing of
cautionary statements and risk factors is contained in the company's report on
Form 10-K for the year ended Dec. 31, 1999, filed with the Securities and
Exchange Commission.
Ventana develops, manufactures and markets instrument/reagent systems that
automate tissue preparation and slide staining in clinical histology and drug
discovery laboratories worldwide. Ventana's clinical systems are important
tools used in the diagnosis and treatment of cancer and infectious diseases.
Ventana's drug discovery systems are used to accelerate the discovery of new
drug targets and evaluate the safety of new drug compounds.
For more information on Ventana Medical Systems, Inc. via facsimile at no
additional cost, simply dial 1-800-PRO-INFO and enter the stock symbol "VMSI."
Visit the Ventana Medical Systems, Inc. website at http://www.ventanamed.com
The Molecular Discovery Systems Division has its own website
at http://www.ventanadiscovery.com
SOURCE Ventana Medical Systems, Inc.
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Related links:
http://www.ventanamed.com
CONTACT:
Christopher Gleeson, President and Chief
Executive Officer, 520-887-2155, or Nicholas Malden, Chief
Financial Officer, 520-690-2794, both of Ventana Medical Systems;
or Analyst, Kathy Brunson, 312-640-6696, General, Marilyn
Windsor, 312-640-6692, or Media, Cindy Martin, 312-266-7800, all
of The Financial Relations Board
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