Product sales for the first nine months of 2009 were $348.3 million, compared to $323.5 million in the same period of the prior year, an increase of 8%. Total revenues for the first nine months of 2009 were $359.4 million, compared to $363.6 million in the same period of the prior year, a decrease of 1%. Net income for the first nine months of 2009 was $67.8 million ($1.31 per diluted share), compared to $85.8 million ($1.56 per diluted share) in the same period of the prior year, a decrease of 21%.
Our total revenues, net income and fully diluted earnings per share in the first nine months of 2009 included $8.2 million of additional one-time revenue associated with the renegotiation of our collaboration agreement with Novartis, as well as Tepnel's results of operations which were not included in the comparable prior year period. In contrast, the first nine months of 2008 included $16.4 million in royalty and license revenue associated with a third and final settlement payment from Bayer (now Siemens Healthcare Diagnostics) which was recorded in the first quarter of 2008, and a $10.0 million development milestone paid by Novartis, which was recorded in the third quarter of 2008.
Acquisition of Prodesse, Inc.
On October 6, 2009, we entered into a merger agreement with Prodesse, Inc., or Prodesse, a privately held Wisconsin corporation. Under the terms of the merger agreement, we acquired Prodesse on October 21, 2009 for approximately $60.0 million. A portion of the closing payment was set aside in an escrow account that will be available for 18 months following the acquisition to indemnify us for various matters, including for breaches of representations and warranties and covenants by Prodesse included in the merger agreement. We may also be required to make additional cash payments to former Prodesse securityholders of up to an aggregate of $25.0 million in the event certain milestones set forth in the merger agreement are achieved. As a result of the acquisition, Prodesse (which is now known as Gen-Probe Prodesse, Inc.) has become a wholly owned subsidiary of Gen-Probe. We financed the acquisition through existing cash on hand.
Spin-off of Industrial Testing Assets to Roka Bioscience, Inc. In September 2009, we announced the spin-off of our industrial testing assets, including the Closed Unit Dose Assay, or CUDA system, to Roka Bioscience, Inc., or Roka, a newly formed private company. In consideration for our contribution of assets, we received shares of preferred stock representing 19.9% of Roka's capital stock on a fully diluted basis. In connection with the transaction, 18 of our former employees accepted employment with Roka. We will provide contract manufacturing and certain other services to Roka on a transitional basis and have agreed to lease a portion of our San Diego headquarters facility to Roka on a temporary basis. Concurrently with the transaction, we entered into an agreement to license certain rights to Roka in order for Roka to develop, manufacture and commercialize the CUDA system and related nucleic acid tests for biopharmaceutical production, water and food safety testing, and veterinary, environmental and bioterrorism testing. Roka will also have rights to develop certain infection control tests for use on the CUDA system. Under this license agreement, we will receive royalties on any potential Roka product sales that incorporate Gen-Probe licensed technology. As part of the spin-off transaction, our industrial testing collaboration agreements with GE Water (a division of GE Energy, a business unit of General Electric) and Millipore Corporation were transferred to Roka.
Stock Repurchase Program
In August 2008, our Board of Directors authorized the repurchase of up to $250.0 million of our common stock over the two years following adoption of the program, through negotiated or open market transactions. There is no minimum or maximum number of shares to be repurchased under the program. During the three months ended September 30, 2009, we repurchased and retired approximately 1,806,000 shares under this program at an average price of $38.35, or approximately $69.3 million in total. From its inception through September 30, 2009, we have repurchased and retired approximately 5,989,000 shares under this program at an average price of $41.72, or approximately $249.8 million in total. As a result, our stock repurchase program was substantially complete as of September 30, 2009.

Critical accounting policies and estimates Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, the collectability of accounts receivable, and the valuation of the following: stock-based compensation; marketable securities; equity investments in publicly and privately held companies; income tax; liabilities associated with employee benefit costs; inventories; and goodwill and long-lived assets, including patent costs, capitalized software, purchased intangibles and licenses and manufacturing access fees. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, which form the basis for making judgments about the carrying values of assets and liabilities. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of our Board of Directors. Actual results may differ from these estimates.
We believe there have been no significant changes during the third quarter of 2009 to the items that we disclosed as our critical accounting policies and estimates in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2008, except for the items discussed below.
Marketable securities
The primary objectives of our marketable security investment portfolio are liquidity and safety of principal. Investments are made with the goal of achieving the highest rate of return consistent with these two objectives. Our investment policy limits investments to certain types of debt and money market instruments issued by institutions primarily with investment grade credit ratings and places restrictions on maturities and concentration by type and issuer.
We periodically review our marketable securities for other-than-temporary declines in fair value below the cost basis, or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. When assessing marketable securities for other-than-temporary declines in value, we consider factors including: the significance of the decline in value compared to the cost basis; the underlying factors contributing to a decline in the prices of securities in a single asset class; how long the market value of the investment has been less than its cost basis; any market conditions that impact liquidity; the views of external investment managers; any news or financial information that has been released specific to the investee; and the outlook for the overall industry in which the investee operates.
We do not consider our investments in marketable securities with a current unrealized loss position to be other-than-temporarily impaired at September 30, 2009 because we do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost. However, investments in an unrealized loss position deemed to be temporary at September 30, 2009 that have a contractual maturity of greater than 12 months have been classified as non-current marketable securities under the caption "Marketable securities, net of current portion," reflecting our current intent and ability to hold such investments to maturity. We have determined that our investments in municipal securities should be classified as available-for-sale.
Adoption of recent accounting pronouncements
FASB ASC 105
Effective September 30, 2009, we adopted Financial Accounting Standards Board, or FASB, guidance which establishes the FASB Accounting Standards Codification, or ASC or the Codification. The Codification supersedes all existing accounting standard documents and became the single source of authoritative non-governmental U.S. GAAP. All other accounting literature not included in the Codification is considered non-authoritative. Because this statement relates specifically to disclosure requirements, there was no impact on our consolidated financial statements as a result of the adoption of the Codification.
FASB ASC 855
Effective June 30, 2009, we adopted FASB guidance requiring disclosure of the date through which subsequent events have been evaluated for disclosure and recognition. Because this guidance relates specifically to disclosure requirements, there was no impact on our consolidated financial statements as a result of the adoption of this guidance.

Results of Operations
Product sales

(Dollars in millions)                  Three Months Ended September 30,                                  Nine Months Ended September 30,
                            2009             2008          $ Change        % Change           2009            2008          $ Change        % Change
Clinical diagnostics      $    69.6        $   55.6       $     14.0              25 %      $   196.6        $ 165.3       $     31.3              19 %
Blood screening                45.4            52.7             (7.3 )           (14 )%         144.1          158.2            (14.1 )            (9 )%
Research products and
services                        4.0               -              4.0             N/M              7.6              -              7.6             N/M

Product sales             $   119.0        $  108.3       $     10.7              10 %      $   348.3        $ 323.5       $     24.8               8 %

As a percent of total
revenues                         97 %            89 %                                              97 %           89 %

Our primary source of revenue comes from product sales, which consist primarily of the sale of clinical diagnostic and blood screening products in the United States and throughout the world. Our clinical diagnostic product sales consist primarily of our APTIMA, PACE, AccuProbe and Amplified Mycobacterium Tuberculosis Direct Test product lines, as well as sales of transplant diagnostics and genetic testing products acquired as part of our acquisition of Tepnel, which are primarily sold under the LIFECODES and Elucigene trademarks. The principal customers for our clinical diagnostics products include reference laboratories, public health institutions and hospitals. The blood screening assays and instruments we manufacture are marketed and distributed worldwide through our collaboration with Novartis under the Procleix and Ultrio trademarks.
We recognize product sales from the manufacture and shipment of tests for screening donated blood at the contractual transfer prices specified in our collaboration agreement with Novartis for sales to end-user blood bank facilities located in countries where our products have obtained governmental approvals. Blood screening product sales are then adjusted monthly corresponding to Novartis' payment to us of amounts reflecting our ultimate share of net revenue from sales by Novartis to the end user, less the transfer price revenues previously recorded. Net sales are ultimately equal to the sales of the assays by Novartis to third parties, less freight, duty and certain other adjustments specified in our collaboration agreement with Novartis multiplied by our share of the net revenue.
Product sales increased by 10% and 8% in the three and nine months ended September 30, 2009, respectively, as compared to the same periods of 2008. In each case, the increase was primarily attributed to additional product sales as a result of our acquisition of Tepnel and higher APTIMA assay sales, partially offset by lower blood screening sales, primarily due to lower shipments and unfavorable exchange rate impacts.
Diagnostic product sales
The increase in diagnostic product sales in the three and nine months ended September 30, 2009 compared to the same periods of the prior year is primarily attributed to the addition of transplant diagnostic and genetic testing product sales resulting from our acquisition of Tepnel, volume gains in our APTIMA product line as the result of PACE conversions, market share gains we attribute to the superior clinical performance of our APTIMA assays, and the availability of our fully automated TIGRIS instrument.
In general, the price of our amplified APTIMA test is twice that of our non-amplified PACE product, thus the conversion from PACE to APTIMA drives an overall increase in product sales even if underlying testing volumes remain the same.
During the three and nine months ended September 30, 2009, diagnostic product sales were negatively affected as compared to the prior year period by unfavorable estimated exchange rate impacts of $0.8 million and $3.5 million, respectively, due to a stronger United States dollar.

Blood screening related sales
The decrease in blood screening sales in the three and nine months ended September 30, 2009 compared to the same periods of the prior year is primarily attributed to test demand fluctuations from our partner Novartis and the unfavorable impact of foreign currency exchange rates. In the third quarter of 2009, blood screening shipments to Novartis were $7.9 million lower than the third quarter of 2008, primarily associated with lower U.S. shipments of the Procleix HIV-1/HCV assay as customers began to adopt the Procleix Ultrio assay, lower U.S. shipments of the Procleix Ultrio assay due to the post-marketing yield study which concluded at the end of 2008, and lower WNV test shipments. In addition to these factors, the decrease in blood screening sales for the first nine months of the year was also caused by a $2.6 million historical revenue adjustment that was recorded in the prior year period.
During the three and nine months ended September 30, 2009, blood screening related product sales were negatively affected as compared to the prior year period by unfavorable estimated exchange rate impacts of $1.7 million and $7.6 million, respectively, due to a stronger United States dollar.
Research products and services
As a result of our acquisition of Tepnel, we have a new category of product sales, which we refer to as "Research products and services." These sales represent outsourcing services for pharmaceutical, biotechnology, and healthcare industries, including nucleic acid purification and analysis services, as well as the sale of monoclonal antibodies and food testing kits. These sales totaled $4.0 million and $7.6 million, respectively, for the three and nine months ended September 30, 2009.
Collaborative research revenue

(Dollars in millions)                  Three Months Ended September 30,                                   Nine Months Ended September 30,
                            2009            2008            $ Change        % Change           2009            2008          $ Change        % Change
Collaborative
research revenue          $    2.0        $    11.3        $     (9.3 )           (82 )%     $    5.9        $   18.5       $    (12.6 )           (68 )%

As a percent of total
revenues                         2 %              9 %                                               2 %             5 %

We recognize collaborative research revenue over the term of various collaboration agreements, as negotiated monthly contracted amounts are earned, in relative proportion to the performance required under the contracts, or as reimbursable costs are incurred related to those agreements. Non-refundable license fees are recognized over the related performance period or at the time that we have satisfied all performance obligations. Milestone payments are recognized as revenue upon the achievement of specified milestones. In addition, we record as collaborative research revenue shipments of blood screening products in the United States and other countries in which the products have not received regulatory approval. This is done because restrictions apply to these products prior to FDA marketing approval in the United States and similar approvals in foreign countries.
The costs associated with collaborative research revenue are based on fully burdened full-time equivalent rates and are reflected in our consolidated statements of income under the captions "Research and development," "Marketing and sales" and "General and administrative," based on the nature of the costs. We do not separately track all of the costs applicable to collaborations and, therefore, are not able to quantify all of the direct costs associated with collaborative research revenue.
Collaborative research revenue decreased 82% in the third quarter of 2009 compared to the third quarter of 2008. This decrease was primarily due to a non-recurring $10.0 million milestone payment received from Novartis in the prior year period.
Collaborative research revenue decreased 68% in the nine months ended September 30, 2009 compared to the same period of the prior year. This decrease was primarily due to a non-recurring $10.0 million milestone payment received from Novartis in the prior year period and $4.1 million of revenue received from 3M Corporation, or 3M, related to our healthcare-associated infection collaboration which ended in September 2008. These decreases were partially offset by increased reimbursements from Novartis for shared development expenses, primarily attributable to development efforts for the Panther . . .