Hello and welcome to the Fourth Quarter and Full Year Earnings Call. All lines will be on listen-only throughout today's presentation. There will be a question-and-answer session. (Operator Instructions). Today's conference call is being recorded for replay purposes, should you object you may disconnect at this time. I would now like to introduce the host of our call, Mr. Michael Watts, Senior Director of Investor Relations and Corporate Communications. Sir, you may begin.

Thank you Jackie and good afternoon everyone. On behalf of Hank Nordhoff, Gen-Probe's Chairman, President and CEO and Herm Rosenman, our Vice President of Finance and CFO, and the rest of the Gen-Probe team, I am pleased to welcome you to this conference call to discuss our fourth quarter and year-end 2006 business results. A press release announcing our results was issued today just after 4 pm Eastern Time and is posted on our website at www.gen-probe.com. In our call today, Hank will first provide an overview of our top line performance in the quarter and discuss progress we've made on future growth drivers. Herm will review our detailed results and 2007 guidance, then we'll take your questions. Before we begin, let me first review our Safe Harbor policy. Forward-looking guidance, financial or otherwise is only provided on conference calls or in our press releases. Any statements in this conference call about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words and phrases such as believe, will, expect, anticipate, estimate, intend, plan, foresee, could and would. For example, statements concerning 2007 financial guidance, financial condition, regulatory approvals and timelines, possible or assumed future results of operations, growth opportunities, industry rankings, and plans and objectives of management are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Factors that might cause such differences include, but aren't limited to, those discussed in our SEC filings including our report on Form 10-K for the year ended December 31, 2005 and all subsequent periodic reports. Copies are available on…

Thank you, Hank, and good afternoon everyone. As described in our press release, Gen-Probe had a strong fourth quarter. Product sales grew 10% compared to the same period in 2005, despite a tough comp generated by some one-time benefits last year, and also increased on a sequential basis establishing another record. Total revenues rose to $91.1 million and non-GAAP earnings per share increased 19%. Hank already discussed most of the drivers of product sales growth, so let me turn to collaborative research revenue, which was $1.2 million for the fourth quarter of 2006, down from $6.5 million a year ago. This decline resulted primarily from the re-classification of West Nile virus revenues into product sales. Royalty and license revenue was $4.4 million in the fourth quarter, compared to $3.5 million in the prior year period, an increase of 26%. As anticipated, this increase resulted primarily from higher revenue from our licensing agreement with bioMerieux. Please note, this will be the last quarter in which we recognize license milestones under this 2004 option agreement. Gross margin on product sales was 67.6% in the fourth quarter of 2006 on a GAAP basis and 68.7% on a non-GAAP basis compared to 65.8% in the prior-year period. The gross margin percentage benefited from higher pricing for our West Nile virus blood screening test. As you know, in 2006 we implemented commercial pricing for some West Nile customers and higher cost recovery pricing for the rest, and this began to benefit our income statement around midyear. On the negative side, selling $3.9 million of TIGRIS instruments and spare parts to Chiron in the quarter reduced our gross margin percentage. While we were pleasantly surprised by these sales which reflect strong customer interest in the system, they do hurt our margin percentage since they are made…

Thanks Herm. We are happy to take your questions now. For Q&A, we are joined by Larry Mimms, Executive Vice President of R&D; Bill Bowen, Vice President and General Counsel; Steve Kondor, Vice President of Sales and Marketing; Lynda Merrill, Vice President, Industrial Relationships; and Kevin Herde, Director of Finance. In order to ensure broad participation in the Q&A session, please be courteous and limit your questions to one plus a follow-up, then jump back into the queue. Jackie, we're ready to take the first question.

Thank you, sir. Our first question comes from Bill Quirk with Piper Jaffray.

Thanks, good afternoon.

Hi, Bill.

Hi, Bill.

A quick question on blood screening; if I normalize the results for the TIGRIS sales and then the spare parts this quarter, it does look like the results were down sequentially, somewhere between $2 million to $3 million in spite of what is presumably an increasing contribution from West Nile virus, and can you fill us in on the details here, either Larry or Herm?

Yes. I think when you normalize for the sales of equipment and spare parts, the blood screening is relatively flat.

Okay. And so there weren’t any inventory shifts or anything going on Herm? I think we've -- if number serves, I thought we've kind of gotten beyond that about three quarters ago?

I think the only inventory shifts was in the fourth quarter of last year.

Okay.

And that was about $3 million, I think Bill.

Okay. And then separately, I thought you guys were getting out of the spare parts business?

We are trying.

You are trying, okay. So, there still was obviously a contribution in the quarter. Herm any additional color just, TIGRIS split versus spare parts split, was it similar to what we saw in the third quarter?

Similar.

Similar, okay. I am guessing that's the most close as I am going to get, so I will jump back into queue.

That's as close as you are going to get Bill.

Thanks guys.

Thanks Bill.

Thank you. (Operator Instructions). Our next question is from David Lewis with Morgan Stanley.

Good afternoon guys.

Hi David.

Hi, Dave.

Couple of quick questions, one on guidance and the other on gonorrhea and Chylamdia, obviously as the growth driver here; just really quick on 2007 guidance. Can you just review the contribution from industrial, I think you talked about doing de minimus the de minimis or zero? And on Quest and United, just giving United's very aggressive tactics on converting faster, what expectations do you have in the first half of the year as it relates to gonorrhea and Chylamdia coming from Quest? And then just one quick follow-up after that.

Okay, David. We avoid giving revenue on specific products and certainly specific products in specific quarters. But we said all along that there was going to be a very small contribution in year 2006 from industrial and we even said in the prepared comments that it was likely to be fairly small in 2007 as well. Your second question again quickly?

Why don't you let Steve handle the second one? Yes, a little more color on that one. We expect to see some small revenues from the Millipore collaboration in late this year in the STDs.

David, this is Steve. With regard to your questions about Quest and United, we don't give specific account information. However, having said that, it's still early in the game with regard to LabCorp and United in their relationship. It's too early in the game to determine what kind of impact that will have and when during the year.

Okay and then in terms just accessing visibility for gonorrhea and Chylamdia in 2007. Can you just update us on what percent you are penetrated in liquid cytology for gonorrhea and Chylamdia and then I am assuming close to 90% or 100% of those samples are actually amplified?

The answer to your question is yes, that's right. With regard LPT about 10% of our APTIMA growth is coming from LPT and I can't recall you had another question there; 2007 we have about somewhere between 55% and 60% market share for CT and GC in the United State so. That's obviously a pretty strong position and we'll certainly impact that as well in '07.

And after third quarter I think you were 10% of the growth, I don’t know the metrics are equivalent, it was coming from LPT. Where would you expect that to be? It sounds like it's sort of flattish into the fourth quarter. Where would you expect that to be in terms of the percentage of business coming from LPT by the end of 2007?

Well probably in the order of 2% to 4% increase above that.

Okay. Thank you very much.

Thank you. Our next question is from Lee Brown with Merrill Lynch.

Hi good afternoon gentlemen. How are you?

Hello Lee, How are you.

Doing well, sir. Just a quick question on blood screening; I know there was that $3.6 million recorded last year tied to the Chiron establishment of the warehouse. But I'm still kind of pressed to figure out what drove the decline, you have been excluding that, I think it's down 10%. I was expecting a bit more of a contribution from commercial West Nile virus. Can you help me out understanding what happened in this particular case this quarter that might have just been a blip on the road or is there something more systemic?

We don’t think it is; the blood screening is business is pretty solid and it's going to continue to grow. I think it was probably just some disruptions in ordering patterns from Chiron and inventory balancing.

Okay, sounds good. And then my second question is, what drove, I think you might have mentioned it but I apologize for missing it; the tax rate that was lower, what drove that in the quarter?

It was the re-initiation of the federal R&D tax credits.

Okay, and very well. And one last question, it's just one on the adjusted gross margin; I came up with something around 70.9% for once you back out, adjust for the Chiron spare parts and TIGRIS, does that sound about right, on the product side?

We don't adjust for that, it's included in there. But, depending upon what your assumption is on the level of sales of TIGRIS and spare parts, it's going to higher, obviously to back it out.

Great, okay. Very well, I appreciate it Herm.

Thank you.

Thank you, our next question is from Bruce Cranna with Leerink Swann.

Good afternoon.

Hello Bruce.

Hi Bruce.

I want to make sure I heard you correctly on revenue guidance. The collaborative line we think about of '07, did you say basically the same on year-over-year basis from '06?

Yes.

And, so am I missing something, or I mean does that the -- I guess current run-rate if I look at, trending that into '07, you are suggesting there's some up tick in the second half of the year for Millipore, is that correct?

That's right.

Which looks to be on the magnitude of $10 million in the back-half of the year?

We haven’t given specific amounts for those milestones.

But it looks like that's the way the math will work everyday, if you just finish this year at $16 million?

It should be a lot less than that. We expect and hope to obtain about $3 million milestone from them in the latter part of the year.

Okay, but so that collaborative line still should look something like $15 or $16 million for the year? And so product sales, it looks like we're looking at 350 to 360 or something, which my math tells me is something like, maybe 8% to 9% growth. Can you give us some sense as to how you look at the two pieces, clinical versus blood screening and what might, I guess should we anticipate the rate of growth of those two pieces to be similar to '06?

They should be comparable, blood screening about the same rate of growth as the diagnostics business.

Okay and then one last one from me, Hank, I guess this is for you. When you listed, I guess the forward-looking pieces if you will, sort of Millipore, 3M HPV etcetera, GE came down at the bottom of that list, does that mean anything or I mean--

It was alphabetized first and it started out with W for water. So, it's not a ranking anything at all. We figured that the best way to avoid a question like your own, and you were thinking G as in GE as opposed to W as in water.

Well I couldn't figure out that.

Sorry for that.

Last thing, I'm sorry, Herm, other income you mentioned FX, but it looked a little bit bigger, was anything else in that?

That was all FX.

About 900k?

It was, yes.

Yes, thank you.

Thank you. Our next question is from Sara Michelmore with Cowen and Company.

Hi, good evening.

Hi, Sara.

Hi, Sara.

I guess another question on the guidance for '07. I know you don't want to breakout specific products that are small. But can you just talk about, I assume that there are at least modest contributors that qualitatively what you expect for the qualitative HIV test as well as PCA3 in Europe and ASR in the US? And lastly in terms of US, ULTRIO if you expect to pick up any revenue from the product on eSAS or because you are in a clinical trial you just would expect to book the revenue there, when you got the TIGRIS approval? Thank you.

Sara, this is Steve. I think I can answer most of your questions with regard to the clinical diagnostic side of things. HIV Qual and PCA3 are relatively small contributors of course in '07. We are still early as you know you. You were at the analyst meeting in December with us, and we are still early in the stages with regard to market development for PCA3. We have two ASR customers in the United States last year, we are adding some more as we speak in '07. And so we like what we see with regard to PCA3, but it still early in the game. Similarly with regards to the HIV Qual assays, we haven't received approval as Hank mentioned for Western Blot alternative and we believe that those are small markets that we will be able to do quite well with the HIV Qual assay, but relatively small contributions in '07.

And in terms of US ULTRIO?

We don't think much is going to happen with ULTRIO until we get the approval on TIGRIS with the blood screening claim and that won't happen until next year.

Okay. And in terms of the product sales and I apologize I got on the call late, just to follow-on TIGRIS question, in terms of, if I back out for collaborative research revenue and license revenue, I just want to understand, it looks like -- are the products revenue expectations that those products would be high single-digit or double-digit or low double-digit, can you just kind of flush that out for me?

Yes, as Hank mention, they are both about the same, both businesses low double-digit.

Okay. That's helpful. Thank you.

Thanks Sara.

Thank you. Our next question is from Zarak Khurshid with Caris & Company. Zarak Khurshid - Caris & Company: Hi, guys. Thanks for taking my question.

You are welcome. Zarak Khurshid - Caris & Company: Fine quarter, fine year; you mentioned higher R&D in Q4 probably on account of HPV development. Can you give us some color there as to what is happening and what has changed in development over the prior quarter, again what is your current estimate for launch of HPV? Thanks.

Larry?

Yes, this is Larry. We've got a significant spending in R&D this year again and HPV is a significant component of the R&D expenditure this year as is Panther. And the engineering associated with that will be ramped up this year. So, those are the two major new contributors to R&D expenditures.

Probably also many hospital acquired inflection, work on MRSA is new, and that will be a lot more this year than last year. Zarak Khurshid - Caris & Company: Okay. Great. And then with respect to PCA3, have you learned anything from the EU launch that is changing your strategy in the US and maybe just an update on the market development for the US submission? Thanks.

It's still early days in Europe Zarak. We haven't really learned anything to change our mind. We are still looking at a second generation product probably containing three specific markers and we are still developing ThinPrep and still looking forward to the possibility that ThinPrep will be able to be used to differentiate between the indolent prostrate cancers and the very aggressive ones which would be a tremendous contribution to oncology. And we think that combination of different price variants may enable us to do that. But again still early days there and nothing significant to report. Zarak Khurshid - Caris & Company: Very good, thank you.

Thank you.

Thank you. Our next question is from Jason Weiss with Robert W. Baird.

Good afternoon.

Hi, Jason.

With regard to the Chlamydia, gonorrhea test for APTIMA Combo, are you seeing any change in the sales cycle in terms of contract renewals with your existing customers?

Jason, no, there has been on change at all.

Okay. And just one question then, could you talk a little bit about what you might see for uses of cash in 2007?

We don't usually break that cash flow down at this point in time, but we still have spending to do on our first building, where we are redoing some of the labs and some of the other space. So, we have some fixed asset additions for buildings as well as totally completing building No. 2. We have additional TIGRIS instruments of course, as that program continues to roll-out for clinical diagnostics, where they go up on our balance sheet. We have additional investments in infrastructure, particularly in information systems and that would probably be in the bulk of it.

There is always the possibility Jason of doing another in-licensing deal, another collaboration and possibly another acquisition. I know we can't say we're close to any of those right now.

Okay. Terrific, well, congratulations on a terrific quarter.

Thank you, sir.

Thank you. Our next question is from Benner Ulrich with UBS.

Hi, guys.

Hi, Benn.

Hi Ben.

Most of my questions have been answered. I know you talked about--

Then why are you on the phone?

I got in the queue a little early and you guys didn't let me in until now.

Okay.

But I know you talked about some of the moving parts in R&D and what's going to contribute to the level of spend next year. As I look at some of the other items like sales and marketing and G&A. I guess at least as a percentage of revenue a little higher than I had modeled, maybe I was just wrong. But wondering if there's anything else that's happening there that would result in just higher level of spending next year?

I think we all like to get raises and things like that. We don’t have high headcount, anticipated additions or anything like that, so I think it's pretty much similar percentages to last year, but on higher base.

Okay. Fair enough. And then just quickly on all the different programs that you have and products in development; are there or will there be any milestones that you might talk to or update us on over the course of the year that we should look out for?

We will probably update you on the status of the milestone with Chiron. I always sit with that as time goes on.

Right.

And then we have other milestone possibilities with 3M that we talked about in the prepared comments, so there are likely to be certainly updates.

Okay, fair enough. Thanks.

Thanks, Benner.

Thank you, sir. Our next question is from Tycho Peterson with J.P. Morgan.

Hi, guys, it is actually Dave Khtikian calling in for Tycho, how are you?

Hi, how are you.

How are you?

Good. Couple of quick questions, one on the guidance, it says the FAS-123 impact comparable to '06, is that on a EPS basis or on a sort of pre-tax charge basis?

No it's not all that different, but yes, it’s a similar, using EPS basis it'd be fine.

And for modeling should we assume similar impact by line items, say for instance gross margin, R&D and sales and marketing.

Certainly a similar to say, they are all about the same relative balance in the income statement.

Okay, and then just a clarify out of 3M; did we hear you wrong, are you saying there will be some impact in '07 from 3M or is that longer term?

No, we talked about Millipore.

Okay.

Or, at least we intended to talk about Millipore getting some revenues in the later parts of this year, but not being significant.

Is it the mile steered milestones.

We talked about the milestones too, it wouldn't be in product revenue, it would be in collaborative research revenue based on development work that we are doing.

Okay.

And that’s, what, 3 million potential.

Okay, thanks for taking for taking the questions.

You are welcome sir.

Thank you, our next question is from David Chung with Leman Brothers.

Hi, thanks for taking the question.

You are welcome David.

Hi, how are you? Just as we look into 2007, we are just wondering what your expectations for the installed based for TIGRIS. You made some comments that there was some nice growth, I was wondering what your expectations were?

We'll let Steve address that.

Yes, David we did have a very good year as Hank pointed out in his opening remarks. We don't expect to continue with that pace as far as TIGRIS installed base is concerned. But we'll do well, in United States we've got there some more upside in terms of high volume CT, GC customers and also a growing base outside the United States in the clinical diagnostic side.

And of course David it's Mike, on the blood screening side we've talked before about the fact that TIGRIS sales to Chiron would likely be declining in 2007 relative to 2006 levels and obviously that affects the top line as well as the margin.

Okay. Thank you.

Thank you, David.

Thank you. Our next question is from Spencer Nam with Summer Street Research.

Hey thanks for taking my questions. I just have a couple of quick follow-up questions. On the PCA3 trial in the US, any thoughts on when you guys would give us a little additional details on that?

We have a number of studies underway Spencer. We expect these to be published and I think we expect publication, roughly any time line Steve?

Yes that will be at both the EAU conference in Berlin which is in March as well as the American Urology Association which is in May. There will be several papers, publications, posters, abstracts that will be presented showing this data. We obviously can't reveal that to you now because of the content needs to be private until it shows.

And to review.

And to review.

So, the post those data presentations, you guys probably will comment more on how you plan to do the US trial?

These data that we are talking about and the studies we are talking about are not studies that are used for the IBD submission. We still are determining whether or not the IBDs -- we will have an IBD submission certainly in prostrate cancer. But as Hank pointed out, we are taking a look at the value of incremental markers to our PCA3 test today.

Right, got it. And then on the ULTRIO timeline, I just wanted to get a little bit of sense of how you guys are thinking about the early 2008 approval timeframe. Is that kind of the middle of the line to conservative way of looking at it or I think Hank at some point in the comment, in your Q&A comments that you actually sounded very definitive that it won't be before 2008. Are you pretty set on 2008 target and that we should really model it that way, or is it something that management feels comfortable with 2008, but it's something that could get expedited if certain things happen properly and so forth. How should we really think about the 2008 target?

Wow, you gave me a lot of options on that. Spencer, I think that we expect to have the ULTRIO approved on the TIGRIS instrument this year without the blood screening claim. We will initiate a study and we expect to collect enough data with yield to support the blood screening claim and we expect that that will be turned in probably around the end of this year, in the first quarter of next year, and it's probably another four months or so for review by the FDA. And if everything goes well, we would expect that we would have that approval around the middle of next year.

Got you. Great, that's it. Thank you.

Thank you, Spencer.

Thank you, sir. Our next question is from Peter Larson with Thomas Weisel Partners.

Hello. I wonder if you could just take me through, what was in the interest income line?

Interest income, entirely, off of our portfolio; we have a portfolio of roughly round numbers $225 million to $230 million invested in short-term investments of various types, so is entirely that.

Okay, but that blip in the non-operating income around $3.6 million?

Well, the blip was really, you found the blip in the fourth quarter?

Yes.

Yes. That 900,000 addition based on the gain in foreign exchange and we had two other items actually where the impact as Hank mentioned of the reinstatement of the R&D tax credit, that was roughly the same about $800,000 to $900,000. And we had from not in other income BMX, that was up top. So those were the basic items.

Okay. Thank you. And then the fall off in R&D for the fourth quarter, what was behind that?

That's pretty much more comparison or comp to the third quarter where we had almost $2 million of HPV oligos that we purchased from Roche. So, it was more a spike in the third than a drop off.

Okay, and then, I am thinking out beyond 2007, what numbers there you're thinking about R&D. That's what, 25% of sales is that a comfortable level or will it fall below that.

I am sure Larry is thinking along those lines but what we said, on the long-term basis we said we did want to reduce the percentage of total revenues attributable to R&D down in to the 15% to 20% range. So, that's a long-term goal but it's not now because we have these six shots on goal, we are going to spend that for our shareholders.

It's hard to do imagine and it's going to grow as a percentage next year or where its going to be this year.

Okay, thank you so much.

Thank you. I think we have time for one more question and then we'll just have some very brief closing remarks.

Thank you sir, our last question is from Jeff Frelick with Lazard. You may begin.

Good afternoon guys.

Hi Jeff.

Hank, you had mentioned I think in your opening comments about the PACE declining around 12% for the year. What are the expectation for that product this year and how many sites are now using APTIMA?

I think it'll probably increase a little bit Jeff, this year. How many sites are using APTIMA.

I don't have the exact numbers of sites, but I can give a little bit more color on that perhaps Jeff. We have about 70% of our STD revenues as we've indicated before come from APTIMA. However, on a unit basis it's still about 50-50 between PACE and APTIMA. So, we still have room for continued growth for conversations.

Okay, and then just one quick follow-up. Timing on the HPV clinical trial in the US, I think it in which quarter should that begin?

The clinical trial, I think we have talk about 2008 and perhaps collecting samples at the end of this year.

Okay, early '08?

Yes, early '08.

Okay. Thanks guys.

Thanks, Jeff. And thank you for all of your questions. To wrap up, Gen-Probe executed well in the fourth quarter and full year 2006 generating robust growth on both our clinical diagnostics and blood screening businesses. Its product sales growth in turn grow significant increases in non-GAAP earnings per share. At the same time, we invested heavily in innovation for both the short-term and the long-term. As a result, we head in to 2007 on very solid footing. Over the balance of this year, we anticipate delivering growth and EPS in line with our long-term goals, while also investing heavily on R&D and achieving healthy profit margins. Thank you for your time and attention today and please contact us if you have any follow-up questions.

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