Financial Results

Consolidated net product revenues for the quarter increased 6%, primarily as a result of the higher sales of the Company's molecular collection systems, infectious disease testing, and substance abuse testing products. These increases were partially offset by lower sales of the Company's cryosurgical systems and insurance risk assessment products.

Consolidated licensing and product development revenues for the first quarter of 2013 decreased to $202,000 from $1.2 million in the first quarter of 2012. This decrease was primarily attributed to the absence of a $1.0 million milestone payment received in the first quarter of 2012 under the Company's HCV collaboration agreement with Merck. No similar payment was received in the first quarter of 2013.

Consolidated gross margin for the three months ended March 31, 2013 was 57% compared to 66% for the three months ended March 31, 2012. The current quarter gross margin was negatively impacted by a change in product mix, the absence in the current quarter of the $1.0 milestone payment received in the first quarter of 2012, higher royalties paid on sales of the Company's OraQuick® products, and an increase in scrap, spoilage, and unabsorbed overhead costs as a result of production issues that were identified and corrected in the current quarter.  

Consolidated operating expenses increased to $22.6 million for the first quarter of 2013, from $17.4 million in the comparable period of 2012. This increase was primarily the result of higher promotional and advertising expense associated with the Company's OraQuick® In-Home HIV test. The current quarter expenses included $6.9 million of promotional and advertising costs related to this product compared to $1.0 million spent on launch preparation costs in the first quarter of 2012.

For the three months ended March 31, 2013 and 2012, the Company recorded an income tax benefit of $410,000 and $521,000, respectively, associated with the loss before income taxes and certain Canadian research and development and investment tax credits at DNAG. 

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