Oro Valley-based Ventana Medical Systems Inc. reported a 28 percent increase in third-quarter revenue Thursday on strong sales of its core tissue-testing products, beating analysts' expectations amid a hostile takeover bid by a Swiss drugmaker.
But the company posted third-quarter net income of just $263,000, or 1 cent per share, after racking up $12.5 million in special charges.
Those charges included $5.9 million to pay damages in a patent lawsuit and $4 million in legal and advisory expenses related to the company's resistance to a takeover bid by Roche Holding AG.
In the same quarter a year ago, Ventana reported net income of $7.8 million, or 22 cents per share.
In the most recent third quarter, Ventana also reported an after-tax gain of $2.9 million from a patent-lawsuit settlement with Australia-based Vision Systems Ltd.
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Excluding the special charges and one-time gain, net income for the third quarter was $7.9 million, or 22 cents per share.
Analysts had expected earnings of 19 cents per share.
Ventana is Tucson's biggest biotech employer, with about 660 workers at the company's headquarters and manufacturing campus at 1910 E. Innovation Park Drive.
Ventana said third-quarter sales of instruments increased 24 percent compared with the same period last year, while sales of reagents and other revenue grew 29 percent.
Ventana said it took orders for 20 of its Symphony slide-staining systems in the third quarter.
The Symphony instrument prepares microscope slides for primary, or initial, analysis of tissue for diagnosis of cancer or other diseases; Ventana's earlier instruments are used for secondary, or advanced, analysis of tissue after an abnormality has been found.
"Our sales momentum reflects strong performance in our core advanced-staining business and increasing penetration of the large and robust primary-staining market, as evidenced by growing demand for Symphony," Ventana CEO Christopher Gleeson said in a prepared statement.
The special after-tax charges included included $4 million in advisory expenses related to the Roche bid and $600,000 related to Ventana's acquisition of California-based Spring BioScience Corp.
The company also posted a $5.9 million after-tax charge related to litigation with Massachusetts-based CytoLogix Inc.
In August, Ventana was found liable for $10.8 million in damages in a suit brought by CytoLogix alleging Ventana had infringed on patents for a slide-staining instrument. Ventana last year recorded a $5 million charge for potential damages in the case.
Ventana upped its forecast for 2007 revenues to a range of $296 million to $300 million, from $292 million to $296 million previously, and increased its earnings outlook for the year to about $1.34 per share, up from $1.31.
Ventana shares closed Thursday at $88.32, up 74 cents, in Nasdaq trading before the earnings release.
Roche has bid $75 per share for the company. Ventana has steadfastly opposed the offer, which it views as inadequate.