Shares of Digene Corp. took a dive yesterday after the Gaithersburg biotechnology company fell short of analysts' fourth-quarter forecasts and offered guidance for the next quarter that was below analysts' estimates.
Watching the stock price fall so dramatically -- it closed down 34 percent at $21.08 -- company executives said they were puzzled because the results were within their previous guidance.
In addition, the company reported its first profitable year. It had earnings of $21.5 million ($1.04 per share) on revenue of $90.2 million for fiscal 2004, which ended June 30. That compares with a loss of $4.3 million (24 cents) on revenue of $63.1 million in fiscal 2003.
The company reported fourth-quarter earnings of $17.4 million (83 cents) on revenue of $25.9 million, compared with $260,000 (1 cent) on revenue of $19.1 million in the same period last year.
"If you had told me this morning when I woke up that we'd report record quarterly revenue and make our guidance, and then the stock would go down 33 percent, I may have been forced to believe you, but I wouldn't have done so willingly," said Charles M. Fleischman, Digene's president and chief financial officer.
But analysts apparently had higher expectations.
Wade King of Wells Fargo Securities said the company's fourth-quarter revenue fell short of his $27.2 million estimate. The company's net income figure included tax benefits of 70 cents per diluted share. Not counting those benefits, Digene had earnings per share of 13 cents, falling one cent short of other analysts' estimates.
The company maintained its previous revenue predictions for the first quarter of fiscal 2005 -- between $26 million and $28 million. For the first time, it offered earnings per share forecasts, which were 4 cents to 7 cents, below Wells Fargo's estimate of 9 cents.
King said it was encouraging, however, that the company hit $17.3 million in revenue for its DNA test to detect cervical cancer. The revenue was a 46 percent increase over the fourth quarter of 2003.
"That shows the nuts and the bolts of the business are working," King said.
Asked whether he thought his company was being picked on, Fleischman said: "It's not for me to say we're getting picked on; it's for me to deal with reality. We are growing at 45 percent. We're a growing company."
He said his job was to "put out a guidance and make it."
Digene said it plans to spend upwards of $50 million on sales and marketing for fiscal 2005. The company sells the only federally approved test for the human papillomavirus, the virus that causes 99 percent of cervical cancer cases.