Michael Watts - Senior Director of IR Hank Nordhoff - Chairman, President and CEO Herm Rosenman - Vice President of Finance and CFO Larry Mimms - EVP of R&D Steve Kondor - VP of Sales and Marketing

Bill Quirk - Piper Jaffray David Lewis - Morgan Stanley Lee Brown - Merrill Lynch Bruce Cranna - Leerink Swann Sara Michelmore - Cowen and Company Zarak Khurshid - Caris & Company Jason Weiss - Robert W. Baird Benner Ulrich - UBS Dave Khtikian - J.P. Morgan David Chung - Leman Brothers Spencer Nam - Summer Street Research Peter Larson - Thomas Weisel Partners Jeff Frelick - Lazard

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 our website at www.sec.gov and on request from our Investor Relations' department. Gen-Probe assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or occurrences after the date of this call or to reflect the occurrence of unanticipated events. With that administrative detail out of the way, I will turn the call over to Hank Nordhoff, Gen-Probe's CEO.

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Thank you Mike, and good afternoon everyone. As described in our press release, our fourth quarter results capped off another strong year for Gen-Probe. We showed an impressive top-line growth including a new record for product sales, which enabled us to increase earnings per share by 19% on a non-GAAP basis. While our quarterly results were once again healthy, I'd like to focus more on the company's annual financial performance today, since we're reporting our year-end results. In short, 2006 was a year of innovation and execution for Gen-Probe. I know, we've talked about these things before, but I'd like use them again this afternoon, to structure my comments and frame the company’s performance. Herm has a lot to cover in the financial section today, so I will be relatively brief. Gen-Probe's 2006 financial performance once again demonstrated our ability to execute against our stated financial objectives. Product sales were $325.3 million for the year, a new record that represents robust growth of 20% compared to 2005. Growth was balanced between our two businesses, with blood screening up 19% and clinical diagnostics up 21%, ahead of our internal projections. This strong growth and the products sales helped drive total revenues for 2006 up 16% versus last year to $354.8 million and non-GAAP net income up 22% to $73.1 million. It's worth noting that on a non-GAAP basis our net after-tax profit margin was nearly 21% in 2006, a pretty remarkable performance considering we invested 22% of revenues back into innovative R&D for the future. Gen-Probe's financial performance in 2006 illustrates the extent to which execution and innovation permeate our business. I'd like to highlight two areas where our ability to execute has helped create shareholder value and which we believe will drive growth in 2007 and beyond. Let me start with our APTIMA STD franchise, which produce much of the strength in our numbers this year. APTIMA sales exceeded $100 million for the year and grew by more than 40% compared to 2005. I am not sure if there is a generally accepted definition for blockbuster in the diagnostics industry but if there is I think APTIMA makes the cut. And don’t forget that APTIMA grew to be a $100 million product in only five years. The rapid growth of APTIMA sales speaks volumes about our ability to establish our products as best-in-class and gives me confidence in our ability to launch some of our new products like our APTIMA HPV Assay a few years down the road. Four factors were behind the growth of APTIMA in 2006. First, we accelerated the planned conversion from PACE, our older non-amplified STD test to APTIMA. PACE declined about 14% in 2006 versus 2005 compared to roughly 12.5% in 2005 versus 2004. But at the same time, our STD franchise as a whole gained about 600 basis points of market share during 2006, reflecting competitive share gains for APTIMA. Second, several independent peer preview publications demonstrated the superior sensitivity and specificity of APTIMA in head-to-head studies versus competitors. These studies left little doubt about APTIMA's position as the gold standard. Third, our sales force educated the market effectively about the convenience of testing for STDs from non-invasive specimen types including urine for men and women, self-collected vaginal swabs, and the Cytyc Liquid Pap vial. In most cases, our competitors are not approved of the tests from these sample types, and when they are, their performance can't match APTIMA's. Last, but certainly not least, installations on TIGRIS accelerated in 2006. In fact, half of all our TIGRIS placements for clinical diagnosis occurred in the last year. As the only fully automated high-throughput testing system for molecular diagnostics, TIGRIS sale boost testing volumes and efficiency at our higher volume customers. This leads me to the second major example of execution in 2006. A year ago, I told you our goal was to roughly double our installed base of TIGRIS system by the end of 2006, encompassing both clinical diagnostics and blood screening. Well, I am happy to report that TIGRIS installations actually increased by more than that in 2006, with more than a 160 instruments now installed around the world. This installed base shows that we are rapidly evolving from an assay developer into a complete diagnostic systems company, with increasing expertise in software development and engineering. At blood banks outside the US, these TIGRIS instruments help drive adoptions of the PROCLEIX ULTRIO assay during 2006, and in the US TIGRIS systems have been installed at blood banks under an I&D for West Nile virus testing. This has us well positioned for the conversion to commercial pricing when our BLA supplement is approved we believe in the next couple of months. Now I'd like to spend a moment on Gen-Probe's innovation in 2006. As everybody knows Gen-Probe spends a lot of money in R&D relative to our diagnostic peers, but we believe it is money well spent. We see tremendous opportunities ahead of us and our investing in these opportunities will continuing to return more than 20% of revenues to the bottom line after tax on a non-GAAP basis. At the same time, we are growing EPS by nearly 20% a year. During 2006, our R&D investments helped advance many of the six major shots on goal that could drive significant shareholder value over our strategic planning horizon, which is 3 to 5 years. These six key projects in alphabetical order are: biopharmaceutical testing with Millipore, food testing with 3M, human papillomavirus, the Panther instrument for low-to-mid volume labs, prostate cancer, and water testing with GE. We believe these projects, which we have a mass based on a very deliberate combination of internal development, in-licensing and partnering, collectively represent one of the most robust and diverse R&D pipelines in the diagnostics industry. We are not so optimistic to believe that all will be successful, but we expect that some will, and combined with the success of our existing businesses gives us great confidence in our future. The progress that we have made on these opportunities is not always visible to the outside world, but our R&D organizations working hard behind the scenes and is focused on bringing the right products to market as quickly as possible. Nonetheless, it is important to keep in mind that these are all long-term opportunities and as we have said in the past, we do not expect them to generate significant revenues in 2007. When we think about this year and next however, we are encouraged by the innovation embedded in the nine FDA product approvals or clearances and the four additional product launches that have occurred since the beginning of 2006. Although we have certainly had some regulatory disappointments over the last 18 months, we believe these clearances and launches demonstrate that our track record is improving. And at the same time we are introducing innovative first-in-class products that solve important customer problems and meet unmet medical needs. For example, our qualitative HIV 1 assay is the first nucleic acid test to be approved to diagnose acute infection and to replace the cumbersome Western blot that is used today for confirmatory testing. We believe our PCA3 test which has been launched in Europe is the first molecular test to provide men valuable information to help guide their decision to undergo repeat biopsies and search prostate cancer. And our various Liquid Pap approvals offer physicians and labs a convenience of testing for Chlamydia, gonorrhea, or both, on a fully automated system thereby improving patient care without the hassle of collecting a second sample. Before I turn the call over to Herm, let me highlight the second press release we issued early today on the hiring of Carl Hull, as our Chief Operating Officer. I am very excited to have Carl join our already strong management team and I think all of you in the investment community will be impressed with him as well. Carl has a wealth of operational experience in his 25-year career, most recently, as a General Manager at Applied Biosystems. And I believe his experience, intelligent, insight, and judgment will be invaluable to Gen-Probe as we look to enhance our leadership position in molecular diagnostics. Carl's first day is tomorrow and as the table implies, he will oversee our major operating functions, sales and marketing, R&D, and operations. As COO, Carl is obviously the lead candidate to succeed me as CEO someday although I'm in no great rush to retire. The succession plan we will follow is a gradual one and one that was actually suggested by John Brown of Stryker, who is a recent member of the Board of Gen-Probe. John was sitting on the Succession Planning Committee and in discussions, I said, John what did you do at Stryker? John said he brought in Steve MacMillan, told him that, the first year you're there it will be my year, the second year will be our year, and if everything goes well the third year is yours. I think this is a good plan and we are going to follow that at Gen-Probe. So I plan to stick around for awhile, both to ensure that we extend the success we have had and to facilitate a smooth leadership transition. I feel great, lot of energy. I am rather fond of Gen-Probe and the people here and once the CEO transitions, I expect to be the non-Executive Chairman for a long time to come. So, in summary, 2006 was a very good year for Gen-Probe. APTIMA sales and TIGRIS placements accelerated and we believe both developments will benefit us further in 2007. We launched our approved West Nile virus test on our semi-automated system and eagerly await the same opportunity on TIGRIS. We innovated for the short-term with nice product approvals and 13 product launches and innovated for the long-term by advancing six major drivers in R&D. Our 2006, financial results reflect our success and we anticipate another year of growth in 2007. With that preface, I'll turn the call over to Herm.

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 contractually at cost. In addition the fourth quarter gross margin percentage was negatively affected by two non-cash accounting charges. FAS 123R added $900,000 to cost of goods sold plus Staff Accounting Bulletin number 108 contributed another $0.5 million charge. In a minute I'll give you all the details on SAB 108. Research and development expenses for the fourth quarter of 2006 were $20.7 million on a GAAP basis and $19.1 million on a non-GAAP basis compared to $18.2 million in the prior year period. FAS 123R therefore added almost $1.7 million of non-cash expense to R&D. Marketing and sales expenses in the fourth quarter of 2006 were $9.6 million on a GAAP basis and $9.1 million on a non-GAAP basis compared to $8.8 million in the prior-year period. FAS 123R added $0.5 million non-cash charge to marketing and sales expenses. Excluding these costs, non-GAAP marketing and sales expenses were up only 3%. It's a compliment to the quality of our products as well as to the productivity and effectiveness of our sales force that clinical diagnostic sales grew 22% on only a 3% increase in real expenses. To pick up Hank's theme, I think this is impressive execution by Steve and his team. General and administrative expenses were $10.8 million in the fourth quarter of 2006 on a GAAP basis and $8.8 million on a non-GAAP basis compared to $9.3 million in the prior year period. Excluding roughly $2 million of FAS 123R expenses, G&A expenses decreased by 5% compared to the prior year period. This reduction resulted from lower legal expenses as well as tight expense controls across our administrative functions. Before we get to earnings per share, it's worth mentioning that fourth quarter earnings also benefited from some distinct non-operating items. First, our effective tax rate for the quarter was a little less than 34% since the Federal R&D tax credit was reinstated. And second, we enjoyed a one-time foreign exchange benefit of about $900,000 associated with our operation in Wales. All this nets out to fourth quarter earnings per share of $0.32 on a GAAP basis. On a non-GAAP basis excluding solely the effects of FAS 123R, earnings per share was $0.38, an increase of 19% compared to the fourth quarter of 2005. Further, we achieved these good fourth quarter results despite the non-cash addition of $0.5 million to cost of goods sold that resulted from our adoption of SAB No. 108. Let me give you the background so you understand completely what's happening. Back in 2001 shortly after joining Gen-Probe, I commissioned an in-depth study to determine the appropriate levels of labor and overhead to be included in our costs of inventory. This analysis was completed in March of 2003. We concluded that inventory had been understated and cost of product sales therefore overstated by approximately $11.4 million over a period of several years, primarily due to the substantial growth of the company's blood screening manufacturing operations. More specifically the analysis concluded that costs such as quality control, quality assurance, and manufacturing equipment support, which historically had been included in cost of product sales as period expenses, should have first been capitalized into inventory. In short, we had an inventory write-up, not a write-down to account for. Rather than recording a one-time benefit to our income statement which would have materially overstated the company's net income, which shows to set up a reserve and amortize the increase in inventory value over six years. This time period was chosen because the inventory undervaluation had accumulated over many years, because some of the inventory involved had a long economic life, and to ensure that increasing the inventory value would not materially affect earnings in any future quarter. We determined that gradually writing up the inventory in this manner was immaterial to our financial statements under then current GAAP and our auditor Ernst & Young concurred. Now on our Staff Accounting Bulletin 108. This new accounting standard required us to assess the materiality of the inventory revaluation using each of two methods. The first method called the roll-over method, assesses materiality based on the income statement. We applied this method in early 2003, resulting in an insignificant effect on future quarters. However, SAB 108 also required us to assess the materiality of the write-up using a technique known as the 'iron curtain' method. This method assesses materiality based on fixing the undervaluation in the balance sheet all at once, regardless of when it originated. Using the 'iron curtain' method, we concluded that the undervaluation was material to our balance sheet. As a result, as required by Staff Accounting Bulletin 108, we adjusted the 2006 beginning balances of several of our balance sheet accounts. Specifically, we increased inventory by approximately $6.5 million, representing the unamortized balance of the reserve at the beginning of the year. We also increased retained earnings by approximately $3.9 million, essentially recording at once the unamortized benefit that otherwise would have continued to triple through our income statement for the next couple of years. Finally, we decreased our current deferred income tax assets by approximately $2.5 million, an increase income taxes payable by about $100,000. SAB 108 also required us to reverse the favorable effects of the inventory amortization on prior quarterly results in 2006. As a result, when we filed our 2006 10-K, we will add approximately $0.5 million to cost of product sales for each of the first three quarters of the year. Based on rounding, this quarterly impact of less than a penny a share will lower diluted earnings per share for the second quarter by one penny, but will not change earnings per share for the first or third quarters. The additional non-cash charge and cost of sales for the fourth quarter has already been incorporated into the results we're reporting today. Obviously Staff Accounting Bulletin 108 has no effect on the underlying economics or operations of our business. In addition, a new standard does not require us to restate prior year's audited financial statements. I apologize for that lengthy explanation, but I want to be completely transparent about the effects of this new accounting rule. I'd also be happy to answer any questions during our Q&A session. Now let me turn to our 2007 guidance. We expect this year to be characterized by solid top line growth, appropriate R&D investment to support long-term innovation, healthy profitability consistent with our long-term goals and strong earning's growth. Like in 2006 we expect product sales growth to be driven by continued market share gains of the APTIMA Combo 2 assay and by commercial pricing of our West Nile virus assay in the United States, both on our semi-automated system and on the TIGRIS. Hank already discussed APTIMA, so let me highlight West Nile. If we gain approval for our West Nile virus test on TIGRIS in the next couple of months, which we feel good about, we can expect to see an increase in price beginning in the third quarter. The increase inhibit our income statement immediately because Chiron will need a couple of months to transition customers over to the new price. In addition, we record donation related revenue two months after Chiron does as most of you know. I also would like to remind everyone that we implemented a higher cost recovery price for our West Nile test in the middle of 2006, for those customers with the TIGRIS system. In other words even for TIGRIS customers we already have captured some of the upside associated with higher West Nile virus pricing. Also in 2007, we foresee continued international growth of the PROCLEIX ULTRIO assay, although we are conservatively assuming more moderate growth in 2006, since Chiron has already penetrated most major markets and is now entering smaller less developed countries where pricing is not as strong. Compared to last year and consistent with comments we have made in the last few quarters, we anticipate 2007 blood screening sales to be negatively affected by reduced sales of TIGRIS instruments and spare parts to Chiron, which totaled more than $15 million in 2006. Overall, we expect total revenues of $380 million to $390 million in 2007, including collaborative research revenue comparable to 2006 levels, and royalty and license revenue slightly above 2006 levels. Collaborative research revenue include shared funding from Millipore and 3M and is expected to be higher in the second half of the year than the first, based on earning milestone payments from 3M in the back half. In contrast, royalty and license revenue is expected to spike in the first quarter based on the $10 million payment from Bayer associated with the settlement of our patent infringement litigation. Now let's turn to guidance for the expense lines. I will give our guidance on a GAAP basis, which includes non-cash costs associated with FAS 123R. We expect gross margin on product sales to improve to approximately 69% to 70%. On the positive side, we expect the gross margin percentage to benefit from commercial pricing of our West Nile virus assay both on eSAS and on TIGRIS and from lower sales of TIGRIS instruments and spare parts to Chiron. Assuming West Nile is approved on TIGRIS in the next couple of months, the increase in price should begin to benefit our product gross margins in the third quarter. Consistent with comments we have made at our analyst stay in December, we expect R&D expenses to range from 24% to 25% of total revenues, slightly higher than 2006 levels on a percentage basis in support of the projects Hank discussed. Let me remind you that two of our industrial partners Millipore and 3M helped fund our R&D activities. We believe that partner support of our R&D activities is an endorsement of our technology and development capabilities and a very income statement efficient way to fund the innovation for future growth. Moving on to marketing and sales expenses, we expect them to be about 10% of total revenues, consistent with 2006 levels on a percentage basis and indication of our ability to leverage the considerable talents of our sales and field service force. We expect G&A expenses of 11% to 12% of total revenues, which is down slightly on a percentage basis compared to 2006, reflecting lower anticipated legal expenses and tight cost controls across administrative functions. This leads to our 2007 earnings per share guidance of between $1.26 and $1.34 on a fully diluted GAAP basis. The mid-point of our range represents 16% earnings per share growth over 2006, consistent with our long-term goals, despite the investment in R&D for the future Our earnings per share guidance is based on a weighted average share count of 54 million shares, and a full year tax rate of approximately 37%. We expect expenses related to FAS 123R to be comparable to 2006 levels. We expect cash from operating activities to continue outpacing net income, the deprecation and amortization in the range of $30 million to $35 million in 2007. In addition, free cash flows should be stronger this year than in 2006, since we have completed the expansion of our headquarters campus in San Diego. We expect CapEx of $40 million to $45 million in 2007 compared to $51 million in 2006. In terms of the quarterly earnings per share splits for 2007, let me remind you that our fourth quarter results benefited from some one-time items in license revenue and other income plus a lower effective tax rate. When we normalize for these non-recurring items, adjust for higher salaries beginning in January, and add the $10 million we expect to receive from Bayer through the settlement of our patent infringement lawsuit, we expect earnings per share for the first quarter to be a couple of pennies above the level of the fourth quarter of 2006. Beyond that, earnings per share is expected to decline in the second quarter on a sequential basis, based on the absence of the Bayer payment, before increasing gradually in the third and fourth quarters. So to summarize the financial section of our conference call, our fourth quarter results capped off a record year in terms of product sales, total revenues, and non-GAAP earnings per share. And in 2007 we anticipate that solid top line gains will enable us to make significant investments in R&D while maintaining high levels of profitability and increasing earnings per share in line with our long-term goals. Now, I'd like to turn the call back over to Mike.

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. Bill Quirk - Piper Jaffray: Thanks, good afternoon.

Hi, Bill.

Hi, Bill. Bill Quirk - Piper Jaffray: 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. Bill Quirk - Piper Jaffray: 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. Bill Quirk - Piper Jaffray: Okay.

And that was about $3 million, I think Bill. Bill Quirk - Piper Jaffray: Okay. And then separately, I thought you guys were getting out of the spare parts business?

We are trying. Bill Quirk - Piper Jaffray: 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. Bill Quirk - Piper Jaffray: 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. Bill Quirk - Piper Jaffray: Thanks guys.

Thanks Bill.

Thank you. (Operator Instructions). Our next question is from David Lewis with Morgan Stanley. David Lewis - Morgan Stanley: Good afternoon guys.

Hi David.

Hi, Dave. David Lewis - Morgan Stanley: 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. David Lewis - Morgan Stanley: 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. David Lewis - Morgan Stanley: 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. David Lewis - Morgan Stanley: Okay. Thank you very much.

Thank you. Our next question is from Lee Brown with Merrill Lynch. Lee Brown - Merrill Lynch: Hi good afternoon gentlemen. How are you?

Hello Lee, How are you. Lee Brown - Merrill Lynch: 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. Lee Brown - Merrill Lynch: 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. Lee Brown - Merrill Lynch: 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. Lee Brown - Merrill Lynch: Great, okay. Very well, I appreciate it Herm.

Thank you.

Thank you, our next question is from Bruce Cranna with Leerink Swann. Bruce Cranna - Leerink Swann: Good afternoon.

Hello Bruce.

Hi Bruce. Bruce Cranna - Leerink Swann: 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. Bruce Cranna - Leerink Swann: 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. Bruce Cranna - Leerink Swann: 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. Bruce Cranna - Leerink Swann: 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. Bruce Cranna - Leerink Swann: 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. Bruce Cranna - Leerink Swann: 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. Bruce Cranna - Leerink Swann: Well I couldn't figure out that.

Sorry for that. Bruce Cranna - Leerink Swann: 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. Bruce Cranna - Leerink Swann: About 900k?

It was, yes. Bruce Cranna - Leerink Swann: Yes, thank you.

Thank you. Our next question is from Sara Michelmore with Cowen and Company. Sara Michelmore - Cowen and Company: Hi, good evening.

Hi, Sara.

Hi, Sara. Sara Michelmore - Cowen and Company: 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. Sara Michelmore - Cowen and Company: 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. Sara Michelmore - Cowen and Company: 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. Sara Michelmore - Cowen and Company: 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. Jason Weiss - Robert W. Baird: Good afternoon.

Hi, Jason. Jason Weiss - Robert W. Baird: 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. Jason Weiss - Robert W. Baird: 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. Jason Weiss - Robert W. Baird: Okay. Terrific, well, congratulations on a terrific quarter.

Thank you, sir.

Thank you. Our next question is from Benner Ulrich with UBS. Benner Ulrich - UBS: Hi, guys.

Hi, Benn.

Hi Ben. Benner Ulrich - UBS: Most of my questions have been answered. I know you talked about--

Then why are you on the phone? Benner Ulrich - UBS: I got in the queue a little early and you guys didn't let me in until now.

Okay. Benner Ulrich - UBS: 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. Benner Ulrich - UBS: 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. Benner Ulrich - UBS: 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. Benner Ulrich - UBS: Okay, fair enough. Thanks.

Thanks, Benner.

Thank you, sir. Our next question is from Tycho Peterson with J.P. Morgan. Dave Khtikian - J.P. Morgan: Hi, guys, it is actually Dave Khtikian calling in for Tycho, how are you?

Hi, how are you.

How are you? Dave Khtikian - J.P. Morgan: 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. Dave Khtikian - J.P. Morgan: 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. Dave Khtikian - J.P. Morgan: 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. Dave Khtikian - J.P. Morgan: 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. Dave Khtikian - J.P. Morgan: Okay.

And that’s, what, 3 million potential. Dave Khtikian - J.P. Morgan: Okay, thanks for taking for taking the questions.

You are welcome sir.

Thank you, our next question is from David Chung with Leman Brothers. David Chung - Leman Brothers: Hi, thanks for taking the question.

You are welcome David. David Chung - Leman Brothers: 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. David Chung - Leman Brothers: Okay. Thank you.

Thank you, David.

Thank you. Our next question is from Spencer Nam with Summer Street Research. Spencer Nam - 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. Spencer Nam - Summer Street Research: 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. Spencer Nam - Summer Street Research: 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. Spencer Nam - Summer Street Research: 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. Peter Larson - 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. Peter Larson - Thomas Weisel Partners: 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? Peter Larson - Thomas Weisel Partners: 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. Peter Larson - Thomas Weisel Partners: 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. Peter Larson - Thomas Weisel Partners: 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. Peter Larson - Thomas Weisel Partners: 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. Jeff Frelick - Lazard: Good afternoon guys.

Hi Jeff. Jeff Frelick - Lazard: 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. Jeff Frelick - Lazard: 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. Jeff Frelick - Lazard: Okay, early '08?

Yes, early '08. Jeff Frelick - Lazard: 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.

Thank you for participating in today's teleconference call. You may now disconnect.

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