##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended June 30, 2005ORo
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  GEN-PROBE INCORPORATED
  Delaware
    
    33-0044608(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification Number)10210 Genetic Center DriveSan Diego, CA
    
    92121(Address of Principal Executive Offices)
    
    (Zip Code)
 (858) 410-8000
 þ o
 þ o
    1




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GEN-PROBE INCORPORATED
TABLE OF CONTENTS
FORM 10-Q
  
 PagePART IItem 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    35PART IIItem 1. Legal Proceedings
    
    
    36Item 4. Submission of Matters to a Vote of Security HoldersItem 6. ExhibitsSIGNATURESEXHIBIT 10.84EXHIBIT 10.85EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



GEN-PROBE INCORPORATED
 CONSOLIDATED BALANCE SHEETS
  June 30,
    
    
    December 31,2005
    
    
    2004(unaudited)Current assets:Cash and cash equivalents
    
    $
    32,502
    
    
    $
    25,498Short-term investments
    
    
    170,354
    
    
    
    168,328Trade accounts receivable, net of
allowance for doubtful accounts of $730 at
June 30, 2005 and $664 at December 31,
2004, respectively
    
    
    29,627
    
    
    
    21,990Accounts receivable  other
    
    
    1,177
    
    
    
    3,136Inventories
    
    
    31,851
    
    
    
    27,308Deferred income taxes
    
    
    7,951
    
    
    
    7,725Prepaid expenses
    
    
    15,408
    
    
    
    11,910Other current assets
    
    
    2,267
    
    
    
    2,054Total current assets
    
    
    291,137
    
    
    
    267,949Property, plant and equipment, net
    
    
    88,736
    
    
    
    76,651Capitalized software
    
    
    22,209
    
    
    
    23,466Goodwill
    
    
    18,621
    
    
    
    18,621License and manufacturing access fees
    
    
    44,360
    
    
    
    24,395Total assets
    
    $
    465,063
    
    
    $
    411,082Current liabilities:Accounts payable
    
    
    13,292
    
    
    
    6,729Accrued salaries and employee benefits
    
    
    10,741
    
    
    
    11,912Other accrued expenses
    
    
    4,341
    
    
    
    4,451Income tax payable
    
    
    5,261
    
    
    
    1,188Deferred revenue
    
    
    12,481
    
    
    
    9,467Total current liabilities
    
    
    46,116
    
    
    
    33,747Deferred income taxes
    
    
    9,187
    
    
    
    9,187Deferred revenue
    
    
    4,667
    
    
    
    5,000Deferred rent
    
    
    280
    
    
    
    309Minority interest
    
    
    
    
    
    
    1,810Commitments and contingenciesStockholders equity:Preferred stock, $.0001 par value per
share; 20,000,000 shares authorized, none
issued and outstanding
    
    
    
    
    
    
    Common stock, $.0001 par value per share;
200,000,000 shares authorized, 50,665,626
and 50,035,490 shares issued and
outstanding at June 30, 2005 and December
31, 2004, respectively
    
    
    5
    
    
    
    5Additional paid-in capital
    
    
    267,113
    
    
    
    248,767Deferred compensation
    
    
    (1,777
    )
    
    
    (1,104
    )Accumulated other comprehensive income
    
    
    1
    
    
    
    807Retained earnings
    
    
    139,471
    
    
    
    112,554Total stockholders equity
    
    
    404,813
    
    
    
    361,029Total liabilities and stockholders equity
    
    $
    465,063
    
    
    $
    411,082
  3




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GEN-PROBE INCORPORATED
 CONSOLIDATED STATEMENTS OF INCOME
 
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenues:Product sales
    
    $
    65,131
    
    
    $
    52,600
    
    
    $
    124,710
    
    
    $
    107,630Collaborative research revenue
    
    
    6,678
    
    
    
    7,007
    
    
    
    13,022
    
    
    
    13,738Royalty and license revenue
    
    
    1,085
    
    
    
    1,618
    
    
    
    3,990
    
    
    
    16,343Total revenues
    
    
    72,894
    
    
    
    61,225
    
    
    
    141,722
    
    
    
    137,711Operating expenses:Cost of product sales
    
    
    20,350
    
    
    
    13,164
    
    
    
    35,848
    
    
    
    27,028Research and development
    
    
    17,408
    
    
    
    15,896
    
    
    
    36,091
    
    
    
    34,315Marketing and sales
    
    
    7,384
    
    
    
    6,578
    
    
    
    14,810
    
    
    
    13,390General and administrative
    
    
    7,780
    
    
    
    7,476
    
    
    
    14,971
    
    
    
    14,759Total operating expenses
    
    
    52,922
    
    
    
    43,114
    
    
    
    101,720
    
    
    
    89,492Income from operations
    
    
    19,972
    
    
    
    18,111
    
    
    
    40,002
    
    
    
    48,219Total other income, net
    
    
    1,001
    
    
    
    21
    
    
    
    2,082
    
    
    
    698Income before income taxes
    
    
    20,973
    
    
    
    18,132
    
    
    
    42,084
    
    
    
    48,917Income tax expense
    
    
    7,517
    
    
    
    6,371
    
    
    
    15,167
    
    
    
    17,428Net income
    
    $
    13,456
    
    
    $
    11,761
    
    
    $
    26,917
    
    
    $
    31,489Net income per share:Basic
    
    $
    0.27
    
    
    $
    0.24
    
    
    $
    0.53
    
    
    $
    0.64Diluted
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.51
    
    
    $
    0.62Weighted average shares outstanding:Basic
    
    
    50,550
    
    
    
    49,302
    
    
    
    50,414
    
    
    
    49,103Diluted
    
    
    52,315
    
    
    
    51,402
    
    
    
    52,339
    
    
    
    51,200
  4




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GEN-PROBE INCORPORATED
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Six Months EndedJune 30,2005
    
    
    2004Operating activitiesNet income
    
    $
    26,917
    
    
    $
    31,489Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    11,038
    
    
    
    8,361Stock compensation charges
    
    
    266
    
    
    
    199Loss on disposal of property and equipment
    
    
    59
    
    
    
    27Stock option income tax benefits
    
    
    6,451
    
    
    
    2,220Changes in assets and liabilities:Accounts receivable
    
    
    (5,760
    )
    
    
    (6,460
    )Inventories
    
    
    (4,549
    )
    
    
    (10,114
    )Prepaid expenses
    
    
    (3,498
    )
    
    
    (5,740
    )Other current assets
    
    
    (213
    )
    
    
    612Accounts payable
    
    
    6,574
    
    
    
    1,565Accrued salaries and employee benefits
    
    
    (1,171
    )
    
    
    (1,091
    )Other accrued expenses
    
    
    (72
    )
    
    
    (1,412
    )Income tax payable
    
    
    4,093
    
    
    
    8,066Deferred revenue
    
    
    2,681
    
    
    
    3,760Deferred income taxes
    
    
    (275
    )
    
    
    1,662Deferred rent
    
    
    (29
    )
    
    
    (10
    )Minority interest
    
    
    
    
    
    
    249Net cash provided by operating activities
    
    
    42,512
    
    
    
    33,383Investing activitiesProceeds from sales and maturities of short-term investments
    
    
    51,532
    
    
    
    108,958Purchases of short-term investments
    
    
    (53,647
    )
    
    
    (153,173
    )Cash paid for acquisition of minority interest in Molecular Light Technology
    
    
    (1,539
    )
    
    
    Purchases of property, plant and equipment
    
    
    (20,162
    )
    
    
    (8,824
    )Capitalization of intangible assets, including manufacturing and license fees
    
    
    (21,822
    )
    
    
    (554
    )Other assets
    
    
    (583
    )
    
    
    (394
    )Net cash used in investing activities
    
    
    (46,221
    )
    
    
    (53,987
    )Financing activitiesProceeds from issuance of common stock
    
    
    10,956
    
    
    
    12,269Net cash provided by financing activities
    
    
    10,956
    
    
    
    12,269Effect of exchange rate changes on cash and cash equivalents
    
    
    (243
    )
    
    
    314Net increase (decrease) in cash and cash equivalents
    
    
    7,004
    
    
    
    (8,021
    )Cash and cash equivalents at the beginning of the period
    
    
    25,498
    
    
    
    35,973Cash and cash equivalents at the end of the period
    
    $
    32,502
    
    
    $
    27,952Supplemental disclosure of cash flow information:Cash paid for:Income taxes
    
    $
    4,253
    
    
    $
    6,587Interest
    
    $
    148
    
    
    $
    9
  5




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Notes to the Consolidated Financial Statements (unaudited)
       Recent accounting pronouncement
     6




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##### Table of Contents



Contingencies
  Principles of consolidation
   Use of estimates
  Foreign currencies
  Reclassifications
     7




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Risk-free interest rate
    
    
    3.79
    %
    
    
    3.60
    %
    
    
    3.72
    %
    
    
    3.19
    %Volatility
    
    
    54
    %
    
    
    64
    %
    
    
    56
    %
    
    
    66
    %Expected life (years)
    
    
    5.2
    
    
    
    4.0
    
    
    
    4.8
    
    
    
    4.0Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Resulting average fair value
    
    $
    22.44
    
    
    $
    20.68
    
    
    $
    22.85
    
    
    $
    18.64
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Risk-free interest rate
    
    
    2.60
    %
    
    
    1.0
    %
    
    
    2.60
    %
    
    
    1.0
    %Volatility
    
    
    59
    %
    
    
    66
    %
    
    
    59
    %
    
    
    59
    %Expected life (years)
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.5Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Resulting average fair value
    
    $
    7.63
    
    
    $
    6.33
    
    
    $
    7.63
    
    
    $
    5.46
  8




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income:As reported
    
    $
    13,456
    
    
    $
    11,761
    
    
    $
    26,917
    
    
    $
    31,489Stock-based
employee
compensation
expense included in
reported net
income, net of
related tax effects
    
    
    65
    
    
    
    33
    
    
    
    119
    
    
    
    55Total stock based
employee
compensation
expense determined
under fair value
based method for
all awards, net of
related tax effects
    
    
    (4,274
    )
    
    
    (2,397
    )
    
    
    (7,869
    )
    
    
    (4,289
    )Pro forma net income
    
    $
    9,247
    
    
    $
    9,397
    
    
    $
    19,167
    
    
    $
    27,255Net income per share:As reportedBasic
    
    $
    0.27
    
    
    $
    0.24
    
    
    $
    0.53
    
    
    $
    0.64Diluted
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.51
    
    
    $
    0.62Pro formaBasic
    
    $
    0.18
    
    
    $
    0.19
    
    
    $
    0.38
    
    
    $
    0.56Diluted
    
    $
    0.18
    
    
    $
    0.18
    
    
    $
    0.37
    
    
    $
    0.53
      Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    13,456
    
    
    $
    11,761
    
    
    $
    26,917
    
    
    $
    31,489Weighted average
shares outstanding 
Basic
    
    
    50,550
    
    
    
    49,302
    
    
    
    50,414
    
    
    
    49,103Effect of dilutive
common stock options
outstanding
    
    
    1,765
    
    
    
    2,100
    
    
    
    1,925
    
    
    
    2,097Weighted average
shares outstanding 
Diluted
    
    
    52,315
    
    
    
    51,402
    
    
    
    52,339
    
    
    
    51,200Net income per share:Basic
    
    $
    0.27
    
    
    $
    0.24
    
    
    $
    0.53
    
    
    $
    0.64Diluted
    
    $
    0.26
    
    
    $
    0.23
    
    
    $
    0.51
    
    
    $
    0.62
  9




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    13,456
    
    
    $
    11,761
    
    
    $
    26,917
    
    
    $
    31,489Foreign currency
translation
adjustment
    
    
    (508
    )
    
    
    (412
    )
    
    
    (318
    )
    
    
    504Change in
unrealized gain
(loss) on
investments
    
    
    337
    
    
    
    (196
    )
    
    
    (488
    )
    
    
    (373
    )Comprehensive income
    
    $
    13,285
    
    
    $
    11,153
    
    
    $
    26,111
    
    
    $
    31,620
   June 30, 2005
    
    
    December 31, 2004Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedGross
    
    
    Amortization
    
    
    Net
    
    
    Gross
    
    
    Amortization
    
    
    NetIntangible assets
subject to amortization:Capitalized software
    
    $
    25,142
    
    
    $
    2,933
    
    
    $
    22,209
    
    
    $
    25,142
    
    
    $
    1,676
    
    
    $
    23,466Patents
    
    
    15,527
    
    
    
    14,427
    
    
    
    1,100
    
    
    
    15,305
    
    
    
    14,062
    
    
    
    1,243Purchased intangible assets
    
    
    33,636
    
    
    
    32,162
    
    
    
    1,474
    
    
    
    33,636
    
    
    
    31,994
    
    
    
    1,642License and manufacturing
access fees
    
    
    43,626
    
    
    
    2,068
    
    
    
    41,558
    
    
    
    22,026
    
    
    
    752
    
    
    
    21,274Total
    
    $
    117,931
    
    
    $
    51,590
    
    
    $
    66,341
    
    
    $
    96,109
    
    
    $
    48,484
    
    
    $
    47,625Goodwill
    
    $
    26,298
    
    
    $
    7,677
    
    
    $
    18,621
    
    
    $
    26,298
    
    
    $
    7,677
    
    
    $
    18,621
     June 30,
    
    
    December 31,2005
    
    
    2004Raw materials and supplies
    
    $
    4,796
    
    
    $
    5,345Work in process
    
    
    15,159
    
    
    
    10,429Finished goods
    
    
    11,896
    
    
    
    11,534$
    31,851
    
    
    $
    27,308
 10




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Balance at December 31, 2004
    
    $
    361,029Net income
    
    
    26,917Other comprehensive income
    
    
    (806
    )Net proceeds from the issuance of common stock
    
    
    9,509Purchase of common shares through ESPP
    
    
    1,447Issuance of common stock to board members
    
    
    68Amortization of deferred compensation
    
    
    198Tax benefit from the exercise of stock options
    
    
    6,451Balance at June 30, 2005
    
    $
    404,813
      11




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Enzo Biochem, Inc.
 Neisseria gonorrhoeae Neisseria gonorrhoeae
 Bayer Corporation
      12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
   Recent Events
 Financial Results
   Corporate Collaborations
  13




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##### Table of Contents



Licensing
   Supply Agreement
  Product Development
  Arbitration Award
  14




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##### Table of Contents



Revenues
  Product sales
   Collaborative research revenue
    15




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##### Table of Contents



Royalty and license revenue
   Cost of product sales
    Research and development
    16




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##### Table of Contents



Critical accounting policies and estimates
   Future Accounting Requirements
  Results of Operations
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Total revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Product sales
    
    
    89
    %
    
    
    86
    %
    
    
    88
    %
    
    
    78
    %Collaborative research revenue
    
    
    9
    %
    
    
    11
    %
    
    
    9
    %
    
    
    10
    %Royalty and license revenue
    
    
    2
    %
    
    
    3
    %
    
    
    3
    %
    
    
    12
    %Operating expenses:Cost of product sales
    
    
    28
    %
    
    
    22
    %
    
    
    25
    %
    
    
    19
    %Research and development
    
    
    24
    %
    
    
    26
    %
    
    
    26
    %
    
    
    25
    %Marketing and sales
    
    
    10
    %
    
    
    11
    %
    
    
    10
    %
    
    
    10
    %General and administrative
    
    
    11
    %
    
    
    12
    %
    
    
    11
    %
    
    
    11
    %Total operating expenses
    
    
    73
    %
    
    
    71
    %
    
    
    72
    %
    
    
    65
    %Income from operations
    
    
    27
    %
    
    
    29
    %
    
    
    28
    %
    
    
    35
    %Total other income, net
    
    
    2
    %
    
    
    0
    %
    
    
    2
    %
    
    
    1
    %Income before income taxes
    
    
    29
    %
    
    
    29
    %
    
    
    30
    %
    
    
    36
    %Income tax expense
    
    
    10
    %
    
    
    10
    %
    
    
    11
    %
    
    
    13
    %Net income
    
    
    19
    %
    
    
    19
    %
    
    
    19
    %
    
    
    23
    %
 17




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2004
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    % Change(in millions, except per share data)Statement of income:Revenues:Product sales
    
    $
    65.1
    
    
    $
    52.6
    
    
    
    24
    %
    
    $
    124.7
    
    
    $
    107.6
    
    
    
    16
    %Collaborative research revenue
    
    
    6.7
    
    
    
    7.0
    
    
    
    (5
    %)
    
    
    13.0
    
    
    
    13.7
    
    
    
    (5
    %)Royalty and license revenue
    
    
    1.1
    
    
    
    1.6
    
    
    
    (33
    %)
    
    
    4.0
    
    
    
    16.4
    
    
    
    (76
    %)Total revenues
    
    
    72.9
    
    
    
    61.2
    
    
    
    19
    %
    
    
    141.7
    
    
    
    137.7
    
    
    
    3
    %Operating expenses:Cost of product sales
    
    
    20.3
    
    
    
    13.2
    
    
    
    55
    %
    
    
    35.8
    
    
    
    27.0
    
    
    
    33
    %Research and development
    
    
    17.4
    
    
    
    15.9
    
    
    
    10
    %
    
    
    36.1
    
    
    
    34.3
    
    
    
    5
    %Marketing and sales
    
    
    7.4
    
    
    
    6.6
    
    
    
    12
    %
    
    
    14.8
    
    
    
    13.4
    
    
    
    11
    %General and administrative
    
    
    7.8
    
    
    
    7.5
    
    
    
    4
    %
    
    
    15.0
    
    
    
    14.8
    
    
    
    1
    %Total operating expenses
    
    
    52.9
    
    
    
    43.2
    
    
    
    23
    %
    
    
    101.7
    
    
    
    89.5
    
    
    
    14
    %Income from operations
    
    
    20.0
    
    
    
    18.0
    
    
    
    10
    %
    
    
    40.0
    
    
    
    48.2
    
    
    
    (17
    %)Net income
    
    $
    13.5
    
    
    $
    11.8
    
    
    
    14
    %
    
    $
    26.9
    
    
    $
    31.5
    
    
    
    (15
    %)Net income per shareBasic
    
    $
    0.27
    
    
    $
    0.24
    
    
    
    12
    %
    
    $
    0.53
    
    
    $
    0.64
    
    
    
    (17
    %)Diluted
    
    $
    0.26
    
    
    $
    0.23
    
    
    
    12
    %
    
    $
    0.51
    
    
    $
    0.62
    
    
    
    (16
    %)Weighted average shares outstandingBasic
    
    
    50.6
    
    
    
    49.3
    
    
    
    
    
    
    
    50.4
    
    
    
    49.1Diluted
    
    
    52.3
    
    
    
    51.4
    
    
    
    
    
    
    
    52.3
    
    
    
    51.2
 
  Product sales
    Collaborative research revenue
    18




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##### Table of Contents



Royalty and license revenue
    Cost of product sales
    Research and development
   19




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##### Table of Contents



Marketing and sales
   General and administrative
   Total other income, net
  Income tax expense
  Liquidity and capital resources
 June 30,
    
    
    December 31,2005
    
    
    2004Cash, cash equivalents and short-term investments
    
    $
    202,856
    
    
    $
    193,826Working capital
    
    
    245,021
    
    
    
    234,202
 Six Months EndedJune 30,2005
    
    
    2004Cash provided by (used in):Operating activities
    
    $
    42,512
    
    
    $
    33,383Investing activities
    
    
    (46,221
    )
    
    
    (53,987
    )Financing activities
    
    
    10,956
    
    
    
    12,269Purchases of property, plant and equipment (included in investing activities above)
    
    
    (20,162
    )
    
    
    (8,824
    )
  20




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##### Table of Contents



Contractual obligations and commercial commitments
  
    
    DiagnoCure.As part of our collaboration to develop a molecular
diagnostic test that detects a new gene marker for prostate cancer,
approximately $5.4 million remains to be paid to DiagnoCure pursuant
to this obligation.
    
    Corixa.As part of our license to develop molecular diagnostic tests
for 46 potential genetic markers in the areas of prostate, ovarian,
cervical, kidney, lung and colon cancer, approximately $5.2 million
remains to be paid to Corixa.
    
    Qualigen.If we exercise our option to develop a point-of-use NAT
instrument, we will purchase an equity interest in Qualigen for $6.5
to $7.0 million. In addition, we may pay Qualigen up to $3.0 million
based on development milestones.
    
    AdnaGen.As part of our license to technology that may help increase
the accuracy of molecular diagnostic tests for prostate and other
cancers, we may pay AdnaGen up to $3.0 million based on achievement of
certain milestones.
    
    GlaxoSmithKline.As part of our agreement to access GSKs clinical
trial samples and data related to GSKs trial of Dutasteride for
reducing the risk of prostate cancer in men at increased risk of this
disease, up to $1.75 million remains to be reimbursed to GSK for
future sample collection and related processes.
 21




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##### Table of Contents




    
    Roche.As part of our HPV DNA probes supply and purchase agreement, we
paid Roche $20.0 million in May 2005 and agreed to pay $10.0 million
upon achievement of certain commercial events. In addition, we have
agreed to pay Roche transfer fees for the HPV products.
    
    Vendors.The Company is obligated to purchase raw materials used in manufacturing and
instrumentation from two key vendors during 2005. The minimum purchase commitment is approximately
$3.2 million as of June 30, 2005.
  
    
    Chiron.We are obligated to manufacture and supply our blood screening
assay to Chiron, and Chiron is obligated to purchase all of the
quantities of this assay specified on a 90-day demand forecast, due 90
days prior to the date Chiron intends to take delivery, and certain
quantities determined on a rolling 12-month forecast.
    Stock Options
 Option program description
   General option and equity compensation plan information
  Summary of Option and Equity Compensation Activity
 Shares
    
    
    Options OutstandingRemaining
    
    
    Number of
    
    
    Weighted
    
    
    DeferredAvailable
    
    
    Shares to be
    
    
    Average
    
    
    Issuance
    
    
    Directorfor Future
    
    
    Issued Upon
    
    
    Exercise
    
    
    Restricted
    
    
    StockIssuance
    
    
    Exercise
    
    
    Price
    
    
    Stock Award
    
    
    PurchasesDecember 31, 2003
    
    
    3,647
    
    
    
    5,473
    
    
    $
    18.10
    
    
    
    20
    
    
    
    Grants
    
    
    (2,084
    )
    
    
    2,061
    
    
    
    37.21
    
    
    
    20
    
    
    
    3Exercises
    
    
    
    
    
    
    (1,178
    )
    
    
    14.15
    
    
    
    
    
    
    
    (3
    )Cancellations
    
    
    352
    
    
    
    (352
    )
    
    
    24.97
    
    
    
    
    
    
    
    December 31, 2004
    
    
    1,915
    
    
    
    6,004
    
    
    $
    25.03
    
    
    
    40
    
    
    
    Grants
    
    
    (420
    )
    
    
    399
    
    
    
    45.35
    
    
    
    20
    
    
    
    1Exercises
    
    
    
    
    
    
    (582
    )
    
    
    16.34
    
    
    
    
    
    
    
    (1
    )Cancellations
    
    
    240
    
    
    
    (240
    )
    
    
    31.75
    
    
    
    
    
    
    
    June 30, 2005
    
    
    1,735
    
    
    
    5,581
    
    
    $
    27.10
    
    
    
    60
    
    
    
    
 22




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##### Table of Contents



In-the-Money and Out-of-the-Money Option Information
 Exercisable
    
    
    Unexercisable
    
    
    TotalWtd. Avg.
    
    
    
    
    
    
    Wtd. Avg.
    
    
    
    
    
    
    Wtd. Avg.Exercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseAs of June 30, 2005
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceIn-the-Money
    
    
    2,159
    
    
    $
    17.42
    
    
    
    1,457
    
    
    $
    24.94
    
    
    
    3,616
    
    
    $
    20.45Out-of-the-Money(1)
    
    
    177
    
    
    
    41.14
    
    
    
    1,788
    
    
    
    39.17
    
    
    
    1,965
    
    
    
    39.34Total Options Outstanding
    
    
    2,336
    
    
    
    
    
    
    
    3,245
    
    
    
    
    
    
    
    5,581
 
 (1)
    
    Out-of-the-money options are those options
with an exercise price equal to or greater
than the fair market value of Gen-Probe
Common Stock, $36.23, at the close of
business on June 30, 2005. Risk Factors
  Our quarterly revenue and operating results may vary significantly in future periods and our
stock price may decline.
  We are dependent on Chiron and other third parties for the distribution of some of our products.
If any of our distributors terminates its relationship with us or fails to adequately perform,
our product sales will suffer.
   23




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##### Table of Contents



If we cannot maintain our current corporate collaborations and enter into new corporate
collaborations, our product development could be delayed. In particular, any failure by us to
maintain our collaboration with Chiron with respect to blood screening would have a material
adverse effect on our business.
   24




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##### Table of Contents



If our TIGRIS instrument reliability does not meet market expectations, we may be unable to
retain our existing customers and attract new customers.
  We face intense competition, and our failure to compete effectively could decrease our revenues
and harm our profitability and results of operations.
     25




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##### Table of Contents



Our profit margin percentage on the sale of blood screening assays may decrease upon the
implementation of individual donor testing.
  Because we depend on a small number of customers for a significant portion of our total revenues,
the loss of any of these customers or any cancellation or delay of a large purchase by any of
these customers could significantly reduce our revenues.
  Intellectual property rights on which we rely to protect the technologies underlying our products
may be inadequate to prevent third parties from using our technologies or developing competing
products.
    26




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##### Table of Contents



The diagnostic products industry has a history of patent and other intellectual property
litigation, and we have been and may continue to be involved in costly intellectual property
lawsuits.
   We may be subject to future product liability claims that may exceed the scope and amount of our
insurance coverage, which would expose us to liability for uninsured claims.
  We are exposed to risks associated with acquisitions and other long-lived and intangible assets
that may become impaired and result in an impairment charge.
  27




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##### Table of Contents



Our future success will depend in part upon our ability to enhance existing products and to
develop and introduce new products.
   We expect to continue to incur significant research and development expenses, which may make it
difficult for us to maintain profitability.
  We may not have financing for future capital requirements, which may prevent us from addressing
gaps in our product offerings or improving our technology.
   
    
    for research and development to successfully develop our new technologies and products,
    
    to conduct clinical trials,
    
    to obtain regulatory approval for new products,
    
    to file and prosecute patent applications and defend and assert patents to protect our technologies,
    
    to manufacture additional products ourselves or through third parties,
    
    to market different products to different markets, either through building our own sales and
distribution capabilities or relying on third parties, and
    
    to acquire new technologies, products or companies.
 28




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##### Table of Contents



We have only one third-party manufacturer for each of our instrument product lines, which exposes
us to increased risks associated with delivery schedules, manufacturing capability, quality
control, quality assurance and costs.
    If we or our contract manufacturers are unable to manufacture our products in sufficient
quantities, on a timely basis, at acceptable cost and in compliance with regulatory requirements,
our ability to sell our products will be harmed.
    29




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##### Table of Contents



Our products are subject to recalls even after receiving FDA approval or clearance.
  Our sales to international markets are subject to additional risks.
   
    
    the imposition of government controls,
    
    export license requirements,
    
    economic and political instability,
    
    price controls,
    
    trade restrictions and tariffs,
    
    differing local product preferences and product requirements, and
    
    changes in foreign medical reimbursement and coverage policies and programs.
  30




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##### Table of Contents



If third-party payors do not reimburse our customers for the use of our products or if they
reduce reimbursement levels, our ability to sell our products will be harmed.
    Disruptions in the supply of raw materials from our single source suppliers, including the Roche
Molecular Biochemicals division of Roche Diagnostics GmbH, which is an affiliate of one of our
primary competitors, could result in a significant disruption in sales and profitability.
  We are dependent on technologies we license, and if we fail to license new technologies and
rights to particular nucleic acid sequences for targeted diseases in the future, we may be
limited in our ability to develop new products.
  31




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##### Table of Contents



If we fail to attract, hire and retain qualified personnel, we may not be able to design,
develop, market or sell our products or successfully manage our business.
    We may acquire other businesses or form joint ventures that could decrease our profitability,
result in dilution to stockholders or cause us to incur debt or significant expense.
   We and our customers are subject to various governmental regulations, and we may incur
significant expenses to comply with these regulations and develop products compatible with these
regulations.
   32




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##### Table of Contents



If a natural or man-made disaster strikes our manufacturing facilities, we will be unable to
manufacture our products for a substantial amount of time and our sales will decline.
  If we use biological and hazardous materials in a manner that causes injury or violates laws, we
may be liable for damages.
  The anti-takeover provisions of our certificate of incorporation and by-laws, provisions of
Delaware law and our rights plan could delay or prevent a change of control that our stockholders
may favor.
  
    
    divide our board of directors into three classes, with members of each class to be elected for staggered three-year terms,
    
    limit the right of stockholders to remove directors,
    
    regulate how stockholders may present proposals or nominate directors for election at annual meetings of stockholders, and
    
    authorize our board of directors to issue preferred stock in one or more series, without stockholder approval.
  33




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##### Table of Contents



We may not successfully integrate acquired businesses or technologies.
  
    
    the inability to retain or replace key employees of any acquired businesses or hire enough qualified personnel to
staff any new or expanded operations;
    
    the impairment of relationships with key customers of acquired businesses due to changes in management and
ownership of the acquired businesses;
    
    the exposure to federal, state, local and foreign tax liabilities in connection with any acquisition or the
integration of any acquired businesses;
    
    the exposure to unknown liabilities;
    
    higher than expected acquisition and integration costs that could cause our quarterly and annual operating results
to fluctuate;
    
    increased amortization expenses if an acquisition results in significant goodwill or other intangible assets;
    
    combining the operations and personnel of acquired businesses with our own, which could be difficult and costly; and
    
    integrating or completing the development and application of any acquired technologies, which could disrupt our
business and divert our managements time and attention.
 If we do not effectively manage our growth, it could affect our ability to pursue opportunities
and expand our business.
  Future changes in financial accounting standards or practices or existing taxation rules or
practices may cause adverse unexpected revenue fluctuations and affect our reported results of
operations.
  34




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##### Table of Contents



Systems implementation issues could disrupt our internal operations and adversely affect our
financial results.
  Our forecasts and other forward looking statements are based upon various assumptions that are
subject to significant uncertainties that may result in our failure to achieve our forecasted
results.
  Compliance with changing corporate governance and public disclosure regulations may result in
additional expenses.
  Available Information
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
   
 Item 4. Controls and Procedures
   35




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  36




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  (1)
    
    To elect three (3) directors to hold office until the 2008 Annual Meeting of
Stockholders.
 
 
 
 (2)
    
    To ratify the selection by the Audit Committee of our Board of Directors of Ernst
& Young LLP as our independent auditors for the fiscal year ending December 31, 2005.
The number of votes were as follows:




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description2.1(1)
    
    Separation and Distribution Agreement, dated and effective as of May 24, 2002, and amended and restated as
of August 6, 2002, by and between Chugai Pharmaceutical Co., Ltd. and Gen-Probe Incorporated.3.1(1)
    
    Form of Amended and Restated Certificate of Incorporation of Gen-Probe Incorporated.3.2(5)
    
    Certificate of Amendment of Amended and Restated Certificate of Incorporation of Gen-Probe Incorporated.3.3(1)
    
    Form of Amended and Restated Bylaws of Gen-Probe Incorporated.3.4(5)
    
    Certificate of Designations of the Series A Junior Participating Preferred Stock of Gen-Probe Incorporated.4.1(1)
    
    Specimen common stock certificate.4.2(2)
    
    Rights Agreement, dated as of September 16, 2002, between Gen-Probe Incorporated and Mellon Investor
Services LLC, which includes the form of Certificate of Designations of the Series A Junior Participating
Preferred Stock of Gen-Probe Incorporated as Exhibit A, the form of Right Certificate as Exhibit B and the
Summary of Rights to Purchase Preferred Shares as Exhibit C.4.3(3)
    
    First Amendment to Rights Agreement, dated October 9, 2002, between Gen-Probe Incorporated and Mellon
Investor Services LLC.4.4(4)
    
    Second Amendment to Rights Agreement, dated November 20, 2003.10.83(6)
    
    Employment Offer Letter, dated
July 15, 2005, between Gen-Probe Incorporated and Stephen J. Kondor.10.84 
    
    Gen-Probe Incorporated Deferred Compensation Plan effective as of June 30, 2005.10.85 
    
    Deferred Issuance Restricted Stock Award Grant Notice and Agreement between Gen-Probe Incorporated and
Henry L. Nordhoff, dated May 20, 2005.31.1
    
    Certification dated August 4, 2005, of Principal Executive Officer required pursuant to 18 USC. Section
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification dated August 4, 2005, of Principal Financial Officer required pursuant to 18 USC. Section
1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification dated August 4, 2005, of Principal Executive Officer required pursuant to 18 USC. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification dated August 4, 2005, of Principal Financial Officer required pursuant to 18 USC. Section
1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
 
 
    
    Filed herewith.
    
    Indicates management contract or compensatory plan, contract or arrangement.(1)
    
    Incorporated by reference to Gen-Probes Amendment No. 2 to Registration Statement on Form 10 filed with the
SEC on August 14, 2002.(2)
    
    Incorporated by reference to Gen-Probes Report on Form 8-K filed with the SEC on September 17, 2002.(3)
    
    Incorporated by reference to Gen-Probes Quarterly Report on Form 10-Q filed with the SEC on November 14, 2002.(4)
    
    Incorporated by reference to Gen-Probes Report on Form 8-K filed with the SEC on November 21, 2003.(5)
    
    Incorporated by reference to Gen-Probes Quarterly Report on Form 10-Q filed with the SEC on August 9, 2004.(6)
    
    Incorporated by reference to Gen-Probes Report on Form 8-K filed with the SEC on August 1, 2005.




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##### Table of Contents



SIGNATURES
  DATE: August 4, 2005
    By:
    /s/ Henry L. NordhoffHenry L. NordhoffChairman, President and Chief Executive
Officer (Principal Executive Officer)DATE: August 4, 2005
    By:
    /s/ Herm RosenmanHerm RosenmanVice President  Finance and Chief
Financial Officer (Principal Financial
Officer and Principal Accounting Officer)