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Orchid Cellmark Reports Third Quarter 2007 Financial Results

Friday, November 2, 2007 General News J E 4
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PRINCETON, N.J., Nov. 1 Orchid Cellmark Inc.(Nasdaq: ORCH), a leading worldwide provider of identity DNA testing services,today reported its financial results for the third quarter of 2007.

Total revenues were $15.6 million for the third quarter of 2007, comparedto $15.7 million for the third quarter of 2006, a decrease of 1%. Thedecrease in revenues was primarily due to lower U.K. agriculture sampletesting and to a lesser extent lower U.S. paternity revenues. The overalldecrease was essentially offset by higher forensic testing service revenues inthe U.S. and U.K.

Service revenues gross margin for the third quarter of 2007 was 35%,compared to gross margin of 36% for the corresponding quarter of 2006. Thedecrease in gross margin in the third quarter of 2007 as compared to the sameperiod of 2006 resulted from decreased revenues of approximately 49% from ourU.K. agriculture testing services. That decrease was partially offset byimproved operating leverage resulting from increased volumes from our U.S. andU.K. forensic business coupled with increased laboratory efficiencies and costreduction programs implemented over the last 15 months.

Total operating expenses, excluding cost of service revenues, for thethird quarter of 2007 were $6.0 million, compared to $6.3 million for thethird quarter of 2006. General and administrative and research anddevelopment expenses for the third quarter of 2007 decreased from the thirdquarter of 2006 by $276 thousand while marketing and sales expenses wereessentially unchanged. The third quarter of 2007 also included a $75 thousandrestructuring benefit, while the third quarter of 2006 included $41 thousandof restructuring costs.

Operating loss for the third quarter of 2007 was $466 thousand, comparedto an operating loss of $638 thousand for the third quarter of 2006, adecrease of 27%.

Orchid Cellmark reported a 47% decrease in net loss for the third quarterof 2007 compared to the third quarter of 2006. The company incurred a netloss of $707 thousand, or $(0.02) per share, for the third quarter of 2007,compared to a net loss of $1.3 million, or $(0.05) per share, for the thirdquarter of 2006.

Total revenues for the nine months ended September 30, 2007 were $45.3million compared to $41.9 million for the same period last year, an increaseof 8%. Operating loss decreased by $8.3 million or 75% from $11.1 million forthe nine months ended September 30, 2006 to $2.8 million for the nine monthsended September 30, 2007. This significant reduction in operating loss is dueto increased gross margins coupled with overall expense reductions. Net lossfor the nine month period was $3.1 million, or $(0.11) per share, as comparedto $12.2 million, or $(0.50) per share, for the same period in 2006.

At September 30, 2007, cash and cash equivalents were $24.5 million, anincrease of $650 thousand for the quarter, and restricted cash was $958thousand. In the third quarter of 2007, cash generated by operations was $744thousand and cash used for capital expenditures was $297 thousand. The effectof foreign currency translation also favorably impacted the cash balance by$275 thousand in the quarter. The company had no short or long term debt as ofSeptember 30, 2007.

Orchid Cellmark's President and Chief Executive Officer, Thomas Bologna,commented, "The third quarter results reflect our focus on forensics andpaternity revenues, reducing expenses and generating positive cash flows.Largely for reasons beyond our control, our agriculture business, which istypically strong in the third quarter, did not materialize as anticipatedprimarily due to a decision made by the U.K. Department for Environmental Foodand Rural Affairs (DEFRA) to limit scrapie testing to male sheep. Alsocontributing to the reduced revenues in our U.K. agricultural business was anoutbreak of foot and mouth disease in August w
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