8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report: October 18, 2007

(Date of earliest event reported)

Ventana Medical Systems, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	000-20931	94-2976937
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)

1910 E. Innovation Park Drive, Tucson	85755
(Address of Principal Executive Offices)	(Zip Code)

520-887-2155

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On October 18, 2007, Ventana Medical Systems, Inc. issued a press release announcing its financial results for the fiscal quarter ended September 30, 2007 and providing earnings guidance for the balance of 2007, 2008 and 2009. A copy of the press release is furnished as Exhibit 99.1 to this report.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits

(a) Financial statements:

None

(b) Pro forma financial information:

None

(c) Shell company transactions:

None

(d) Exhibits

(d) The following items are filed as exhibits to this report:

99.1     Press Release dated October 18, 2007 issued by Ventana Medical Systems, Inc.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 18, 2007	VENTANA MEDICAL SYSTEMS, INC.
	By:	/s/ Mark D. Tucker
		Mark D. Tucker
		Senior Vice President and General Counsel

3

Exhibit Index

Exhibit No.	Description
99.1	Press Release dated October 18, 2007 issued by Ventana Medical Systems, Inc.

4

EX-99.1

Exhibit 99.1

VENTANA MEDICAL SYSTEMS, INC. 1910 E. Innovation Park Drive Tucson, Arizona 85755 (520) 887-2155 Contact: Anna Cordasco/Jonathan Doorley Sard Verbinnen & Co 212-687-8080

VENTANA REPORTS THIRD QUARTER RESULTS

• Net sales increased 28% to $75.7 million; company receives 20 Symphony orders in the third quarter

• GAAP net income, including previously announced litigation developments, advisory costs related to the Roche unsolicited offer and the Spring BioScience acquisition was $0.3 million or $0.01 per diluted share

• Non-GAAP net income was $7.9 million or $0.22 per diluted share

• Company raises full year 2007 revenue and non-GAAP EPS guidance; affirms 2008 and 2009 guidance

Tucson, Arizona, October 18, 2007 – Ventana Medical Systems, Inc. (NASDAQ: VMSI), the global leader in tissue-based cancer diagnostics, today reported a 28% increase in year-over-year third quarter net sales, to $75.7 million for the quarter ended September 30, 2007. Net income and diluted earnings per share for the quarter were $0.3 million and $0.01, respectively, including special charges for previously announced litigation developments, acquisitions and advisory costs related to the Roche unsolicited offer. The charges included a $5.9 million after-tax charge resulting from litigation with CytoLogix, Inc., a $4.0 million after-tax charge associated with ongoing advisory expenses and a $0.6 million after-tax charge related to the acquisition of Spring BioScience. GAAP net income also includes a one-time, after-tax gain of $2.9 million related to a litigation settlement with Vision Systems.

Non-GAAP net income for the quarter, excluding the special charges and one time gain, was $7.9 million, or $0.22 per diluted share as compared to net income of $7.8 million, or $0.22 per diluted share, in the third quarter of 2006.

Ventana noted third quarter net income was negatively impacted by approximately $4.3 million in pre-tax legal expenses, due to litigation, most of which are not expected to recur in 2008. These expenses are in addition to the litigation costs included in the third quarter special charges.

Reagents and other revenue grew 29% compared to the third quarter of 2006, while instrument revenues increased by 24% versus the comparable period in 2006. Gross margin for the quarter was 75.3% compared to 76.6% in the third quarter of 2006. Ventana had 20 Symphony orders in the third quarter.

MANAGEMENT COMMENTS

“Ventana achieved exceptional operating performance and accelerating top-line growth in the third quarter,” said Christopher Gleeson, Ventana’s President and Chief Executive Officer. “Our sales momentum reflects strong performance in our core advanced staining business and

increasing penetration of the large and robust primary staining market, as evidenced by growing demand for Symphony. This quarter’s results illustrate the strength of our market leadership and the long-term growth opportunity within our installed base and beyond. Reflecting the strong quarter, we are raising our revenue and non-GAAP earnings guidance for 2007.”

“The third quarter was also important strategically.” Gleeson continued. “We resolved long-standing legal disputes in a favorable way, and we acquired Spring BioScience Corporation, an industry-leading developer of next generation rabbit monoclonal antibodies and other reagents. Ventana’s continuing momentum overall and the Spring acquisition enabled us in September to increase our financial performance outlook for 2008 and 2009, and we are reaffirming that guidance today. I am extremely proud of the focus and dedication of our employees who have contributed to our strong and continuing momentum in advanced and primary staining and in the rapidly emerging field of companion diagnostics where we now have 30 projects ongoing with 10 pharmaceutical partners.”

Gleeson concluded, “Ventana is an outstanding and highly innovative company that continues to perform exceedingly well on behalf of all its stakeholders including investors, employees, partners and most importantly, the patients who rely on our groundbreaking and life saving technology. Our leadership remains focused on continuing to execute our strategy, achieving our strong growth trajectory in 2008 and beyond, and on delivering value to shareholders.”

YEAR-TO-DATE 2007

Net sales for the nine months ended September 30^th, 2007, were $211.9 million, a 23% increase over the same period in 2006. Year-to-date net income, including special charges, was $25.3 million or $0.71 per diluted share compared to $20.1 million, or $0.55 per diluted share during the same period in 2006. Non-GAAP net income, which excludes special charges, for the first nine months of 2007 was $33.6 million, a 67% increase over the same period in 2006. On a per share basis, non-GAAP net income was $0.94, compared to $0.55 during the same period in 2006. Year-to-date special charges include the previously mentioned third-quarter charges in addition to the net $0.7 million in advisory charges from the second quarter related to the unsolicited Roche tender offer.

CALENDAR YEAR 2007, 2008 and 2009 OUTLOOK

The Company’s outlook for 2007 has increased, with expected revenues in the range of $296 million to $300 million while non-GAAP earnings expectations have been increased to approximately $1.34 per diluted share. Revenues for 2007 were previously expected to be in the range of $292 million to $296 million, and non-GAAP earnings per diluted share were expected to be approximately $1.31 per diluted share.

For 2008 and 2009, the Company is reiterating its revenue guidance in the range of $377 to $392 million in 2008, and $480 to $500 million in 2009. Earnings per diluted share is expected to be within the range of $1.91 to $2.01 for 2008, and $2.71 to $2.85 in 2009.

USE OF NON-GAAP FINANCIAL MEASURES

The Company excludes the effects of the previously announced litigation developments, the Spring BioScience acquisition and the Roche unsolicited offer described above from its internal operating forecasts and models and is providing here non-GAAP net income and non-GAAP diluted earnings per share to permit additional analysis of Company performance. The Company believes these non-GAAP measures are useful to investors because they enhance the understanding of historical financial performance and comparability between periods. The Company uses these non-GAAP measures to manage and assess the profitability of its business and does not focus on special charges in managing the operational aspects of its business. The determination of the above non-GAAP measures might not be the same as similarly titled measures used by other companies, and it should not be construed as a substitute for operating income; net income and diluted earnings per share are determined in accordance with GAAP. There are limitations associated with using non-GAAP measures, including that they exclude financial information that some may consider important in evaluating our performance. The Company compensates for this by presenting information on both a GAAP and non-GAAP basis for investors and providing reconciliations of the GAAP and non-GAAP results.

INVESTOR CONFERENCE CALL

Ventana will hold a conference call to discuss third quarter results at 5:30p.m. Eastern on October 18, 2007. The conference call can be accessed by dialing (866) 578-5788 (U.S. and Canada callers) or (617) 213-8057 (international callers) and entering the passcode 63478761 approximately 10 minutes prior to the call. The call can be accessed live and will be available for replay over the Internet via http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=79080&eventID=1668626. (Due to its length, this URL may need to be copied/pasted into your Internet browser’s address field. Remove the extra space if one exists).

ABOUT VENTANA MEDICAL SYSTEMS, INC.

Ventana develops, manufactures, and markets instrument/reagent systems that automate tissue preparation and slide staining in clinical histology and drug discovery laboratories worldwide. The Company’s clinical systems are important tools used in the diagnosis and treatment of cancer and infectious diseases. Ventana’s drug discovery systems are used to accelerate the discovery of new drug targets and evaluate the safety of new drug compounds.

SAFE HARBOR STATEMENT

This press release contains certain forward-looking statements within the meaning of the Federal Securities laws. These forward-looking statements relate to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements in this press release may include, but are not limited to, statements regarding projected operating results, revenue, earnings per share, market growth, operating margins, anticipated products, technology development and placement and that certain legal expenses will not recur in future periods. These forward-looking statements are subject to numerous risks and uncertainties, and actual results may vary materially. We may not achieve projected future operating results, or market share, and product and technology development activities may not be as successful as we expect, in terms of the

timing of product availability to the market or customer rates of adoption. Ventana’s projections, while presented with numerical specificity, are necessarily based on a variety of estimates and assumptions which, though considered reasonable by Ventana, may not be realized and are inherently subject to significant business, economic, competitive, industry, regulatory, market and financial uncertainties and contingencies, many of which are and will be beyond Ventana’s control. Ventana cautions that no representations can be made or are made as to the accuracy of the projections or to Ventana’s ability to achieve the projected results. Other risks and uncertainties include risks associated with the development, manufacturing, marketing, and sale of medical products, risks and uncertainties concerning FDA approval of our products, competitive factors, general economic conditions, legal disputes, and government actions, and those other risks and uncertainties contained in our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and all subsequent SEC filings, and other factors that Ventana is currently unable to identify or quantify, but that may exist in the future. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis retrieval system (EDGAR) at www.sec.gov. We undertake no obligation following the date of this press release to update or revise our forward-looking statements or to update the reasons actual results could differ materially from those anticipated in forward-looking statements. We caution you not to place undue reliance upon any such forward-looking statements, which speak only as today’s date. Past performance is not indicative of future results. We cannot guarantee any future operating results, activity, performance, or achievement.

Visit the Ventana Medical Systems, Inc., website at www.ventanamed.com.

VENTANA’S STOCKHOLDERS SHOULD READ THE COMPANY’S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9, WHICH WAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) ON JULY 11, 2007, AND ANY AMENDMENTS OR SUPPLEMENTS THERETO. THE COMPANY’S SOLICITATION/RECOMMENDATION STATEMENT SETS FORTH THE REASONS FOR THE RECOMMENDATION OF THE VENTANA BOARD AND RELATED INFORMATION. THE SOLICITATION/RECOMMENDATION STATEMENT AND OTHER PUBLIC FILINGS MADE FROM TIME TO TIME BY THE COMPANY WITH THE SEC ARE AVAILABLE WITHOUT CHARGE FROM THE SEC’S WEBSITE AT WWW.SEC.GOV, AT VENTANA’S WEBSITE AT WWW.VENTANAMED.COM OR FROM VENTANA’S INFORMATION AGENT, INNISFREE M&A INCORPORATED AT (888) 750-5834

FINANCIAL TABLES FOLLOW:

VENTANA MEDICAL SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	September 30,			December 31,
	2007			2006
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	29,835		$	31,761
Short-term investments		12,954			68,325
Trade accounts receivable, net of allowance for doubtful accounts of $1,996 and $1,716, respectively		56,261			47,455
Inventories, net		26,755			18,277
Deferred tax assets		10,089			2,502
Prepaids and other current assets		3,404			5,646
Total current assets		139,298			173,966
Property and equipment, net		88,713			65,405
Deferred tax assets, net of current portion		22,379			14,195
Goodwill		12,296			2,804
Intangible assets, net		20,092			6,349
Capitalized software development costs, net		4,572			3,131
Other assets		12,893			2,780
Total assets	$	300,243		$	268,630
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	25,082		$	15,634
Accrued legal settlement		14,718			5,000
Other current liabilities		40,691			31,487
Total current liabilities		80,491			52,121
Long-term debt		1,951			2,069
Other long-term liabilities		4,539			661
Commitments and Contingencies
Stockholders’ equity
Common stock—$.001 par value; 100,000 shares authorized, 38,665 and 37,490 shares issued at September 30, 2007 and December 31, 2006, respectively		39			37
Additional paid-in-capital		277,537			234,149
Retained earnings		67,181			43,206
Accumulated other comprehensive income		496			10,252
Treasury stock—4,002 and 2,570 shares, at cost, at September 30, 2007 and December 31, 2006, respectively		(131,991	)		(73,865	)
Total stockholders’ equity		213,262			213,779
Total liabilities and stockholders’ equity	$	300,243		$	268,630
The number of shares of common stock issued and outstanding at September 30, 2007 and December 31, 2006 was 34,663 and 34,920, respectively

VENTANA MEDICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Sales:
Reagents and other	$	65,373		$	50,623		$	186,954		$	149,612
Instruments		10,362			8,355			24,967			22,509
Total net sales		75,735			58,978			211,921			172,121
Cost of goods sold		18,741			13,807			52,050			40,975
Gross profit		56,994			45,171			159,871			131,146
Operating expenses:
Research and development		10,849			7,717			30,699			23,539
Selling, general and administrative		34,407			25,840			96,650			76,782
Amortization of intangible assets		683			596			1,862			1,838
Special charges, net		12,517			—			13,588			—
(Loss) income from operations		(1,462	)		11,018			17,072			28,987
Interest and other income		811			592			21,101			2,149
(Loss) income before taxes		(651	)		11,610			38,173			31,136
Benefit (provision) for income taxes		914			(3,779	)		(12,904	)		(11,060	)
Net income	$	263		$	7,831		$	25,269		$	20,076
Net income per common share:
—Basic	$	0.01		$	0.23		$	0.74		$	0.59
—Diluted	$	0.01		$	0.22		$	0.71		$	0.55
Shares used in computing net income per common share:
—Basic		34,465			34,472			33,951			34,225
—Diluted		36,540			36,350			35,790			36,184

VENTANA MEDICAL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(Unaudited)

	Nine Months Ended September 30,
	2007			2006
Net income	$	25,269		$	20,076
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		14,721			12,267
Share-based compensation expense related to employee stock options and employee stock purchases		5,074			3,797
Acquired in-process research and development		1,000			—
Deferred income taxes		(7,289	)		(3,439	)
Tax benefit from employee stock option plans		12,174			7,487
Excess tax benefits from share-based compensation		(2,918	)		(7,607	)
Change in operating assets and liabilities:
Accounts receivable		(8,125	)		(5,765	)
Inventory		(5,178	)		(6,627	)
Other assets		1,206			(1,073	)
Accounts payable		5,778			5,587
Other liabilities		20,344			4,342
Net cash provided by operating activities		62,056			29,045
Cash flows from investing activities:
Purchase of property and equipment		(32,776	)		(17,630	)
Spring BioScience acquisition, net of cash acquired		(40,940	)		—
Purchase of intangible assets		(503	)		(736	)
Purchases of investments		(228,930	)		(188,865	)
Proceeds from sale of investments		267,453			171,568
Net cash used in investing activities		(35,696	)		(35,663	)
Cash flows from financing activities:
Issuance of common stock		25,570			11,382
Purchases of common stock for treasury		(57,634	)		(13,394	)
Excess tax benefits from share-based compensation		2,918			7,607
Repayments of debt		(446	)		(350	)
Net cash (used in) provided by financing activities		(29,592	)		5,245
Effect of exchange rate change on cash and cash equivalents		1,306			443
Net decrease in cash and cash equivalents		(1,926	)		(930	)
Cash and cash equivalents, beginning of period		31,761			17,519
Cash and cash equivalents, end of period	$	29,835		$	16,589
Supplemental cash flow information:
Income taxes paid	$	2,731		$	6,171
Interest paid	$	99		$	76
Non-cash investing and financing activities:
Tendered common stock for stock option exercises	$	492		$	466
Purchases of property and equipment	$	3,303		$	—

Adjusted Financial Results – Non – GAAP Measures Reconciliation

Reconciliation of (Loss) Income from Operations to Non-GAAP Income from Operations

	Three Months Ended September 30,					Nine Months Ended September 30,
	2007			2006		2007		2006
(Loss) Income from operations, as reported	$	(1,462	)	$	11,018	$	17,072	$	28,987
Special charges		12,517			—		13,588		—
Non-GAAP Income from operations	$	11,055		$	11,018	$	30,660	$	28,987

Reconciliation of Net Income and Diluted Earnings Per Share to Non-GAAP Net Income and Non-GAAP Diluted Earnings Per Share

	Three Months Ended September 30,					Nine Months Ended September 30,
	2007			2006		2007			2006
Net income, as reported	$	263		$	7,831	$	25,269		$	20,076
Adjustments to reconcile net income to non-GAAP net income:
Special charges		12,517			—		13,588			—
Income tax effects		(4,907	)		—		(5,273	)		—
Non-GAAP net income	$	7,873		$	7,831	$	33,584		$	20,076
Diluted earnings per share, as reported	$	0.01		$	0.22	$	0.71		$	0.55
Adjustments to reconcile diluted earnings per share to non-GAAP diluted earnings per share:
Impact of special charges, net of tax effect		0.21			—		0.23			—
Non-GAAP diluted earnings per share	$	0.22		$	0.22	$	0.94		$	0.55