Affymetrix Reports Profitable Quarter
Total Revenue Increased 89% over Q3 1999 Levels
SANTA CLARA, Calif., Oct. 24 /PRNewswire/ -- Affymetrix, Inc., (Nasdaq: AFFX) today reported results for the third quarter of 2000. For the quarter ended September 30, 2000, total revenue increased 89% to $55.8 million, up from revenue of $29.5 million for the quarter ended September 30, 1999. For the first nine months of 2000, total revenue increased 91% to $141.4 million, up from revenue of $74.1 million for the first nine months of 1999. Product sales increased 74% to $45.4 million for the quarter ended September 30, 2000 compared to $26.1 million in the comparable period of 1999. For the nine months ended September 30, 2000, product revenues were $122.2 million, an increase of 86% over the comparable period in 1999. The increase in product sales during the quarter and nine months ended September 30, 2000 over the comparable periods in 1999 was the result of increased sales of GeneChip(R) probe arrays, increased placements of instruments (primarily the GeneChip system and components, the 417 Arrayer(TM) and the 418 Scanner(TM)) and increased subscription fees earned under EasyAccess(TM) contracts. Other revenues, which include license fees, royalties and research revenue, were $10.4 million for the quarter ended September 30, 2000 and $19.2 million for the nine months ended September 30, 2000, compared to $3.4 million and $8.4 million in the corresponding periods of 1999. The increase in other revenues was attributable primarily to the expansion of licensing initiatives.
Total costs and expenses increased to $57.7 million for the quarter ended September 30, 2000, from $36.0 million for the comparable period in 1999. For the first nine months of 2000, total costs and expenses increased to $158.7 million, compared to $97.6 million for the same period in 1999. The increase in operating expenses for the three and nine month periods ended September 30, 2000 compared to the respective periods in 1999, resulted primarily from the Company's expansion of commercial activities and increased legal costs arising from ongoing patent litigation.
The Company reported net income attributable to common stockholders of $0.3 million, or $0.01 of basic earnings per share for the quarter ended September 30, 2000, compared to a net loss attributable to common stockholders of $5.8 million, or $0.11 of basic earnings per share, for the comparable period in 1999.
"The third quarter was a tremendous period of growth and progress for Affymetrix," said Susan E. Siegel, President of Affymetrix. "We will continue strategic initiatives such as those made during the third quarter in order to position Affymetrix for continued growth."
During the third quarter, Affymetrix continued its market expansion by entering into many GeneChip array supply agreements with pharmaceutical, biotechnology and academic customers, further demonstrating the continued demand from the genomics community for the Company's technology. At the end of the quarter, Affymetrix had sold over 350 GeneChip systems and over 550 Affymetrix spotted Arrayers and Scanners. Notable in the quarter were EasyAccess Silver agreements with the Janssen Research Foundation (JRF) and The R.W. Johnson Pharmaceutical Research Institute (PRI), both members of the Johnson & Johnson family of companies and Schering AG of Germany. The company also signed BiotechAccess(TM) agreements with deCODE genetics and Exelixis, Inc. as well as numerous AcademicAccess(TM) supply agreements, bringing the total number of participating institutions to over 125 at the end of the quarter.
In addition to signing new supply agreements in the third quarter of 2000, Affymetrix also entered into a partnership with the Cystic Fibrosis Foundation to develop a custom GeneChip expression array based on Pseudomonas aeruginosa, the most common cause of respiratory infections in cystic fibrosis patients. It is anticipated that these custom arrays will be developed for use by cystic fibrosis researchers worldwide to further study the genome and develop new treatments to ease the suffering of those with cystic fibrosis.
Affymetrix also continued to enable the DNA array field in the quarter through its licensing program. Notable in the quarter was a commercial use license granted to Takara Shuzo Co., Ltd. that allows Takara to manufacture, use and sell low and medium density pre-spotted DNA arrays. At the end of the quarter, Affymetrix had over 20 licensees.
During the quarter, Affymetrix also made several announcements of strategic importance. First was the agreement to acquire Neomorphic, Inc., a privately held computational genomics company known for its best in class ability to analyze, assemble and annotate multiple sources of raw sequence information. This acquisition will strengthen Affymetrix by enhancing the company's ability to offer scientists an unparalleled view of the genome, along with powerful new tools to interpret and understand the assembled genomic information. Also during the quarter, Affymetrix formed a new genomics subsidiary called Perlegen Sciences, Inc. Perlegen Sciences will focus on revolutionizing biological and pharmaceutical research by using the latest technology from Affymetrix to scan 50 genomes and identify the millions of genetic variations between individuals -- a technological feat that is now cost-effective using Affymetrix technology. Finally, Affymetrix, in cooperation with SmithKline Beecham, Merck & Co., the National Institutes of Health, the National Cancer Institute and the Wellcome Trust, announced a public-private initiative to provide $58 million over the next six months to decipher the mouse sequence, an important model organism for biomedical research. As a result of this effort, it is anticipated that the mouse sequence will be broadly available and Affymetrix will use the sequence to provide new chips to ensure that all researchers have access to tools that allow for further medical breakthroughs. These and other data will be extremely valuable for their link to human health and disease and Affymetrix intends to make this information broadly available to researchers worldwide via GeneChip probe arrays.
Investors may listen to Affymetrix' management discuss this announcement by dialing domestic: 888-732-8927; international: 212-346-6409; passcode -- 1959 on Tuesday, October 24, from 2:00 - 3:00 p.m. PDT. A replay of this call will be available for 4 days, domestic: 800-633-8284; international: 858-812-6440; reservation number -- 16616321. To access a Webcast of the conference call, go to www.affymetrix.com/news/index.html and then click on the "Press Releases" tab.
Affymetrix is a leader in developing and commercializing systems to acquire, analyze and manage complex genetic information in order to improve the quality of life. The Company's GeneChip system consists of disposable DNA probe arrays containing gene sequences on a chip, reagents for use with the probe arrays, a scanner and other instruments to process the probe arrays and software to analyze and manage genetic information. The Company's spotted array system enables individual researchers to create and analyze custom microarrays on an easy-to-use, cost-efficient platform. Additional information on Affymetrix and GeneChip technology can be found at www.affymetrix.com.
All statements in this press release that are not historical are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act as amended, including statements regarding Affymetrix' "expectations," "beliefs," "hopes," "intentions," "strategies" or the like. Such statements are subject to risks and uncertainties that could cause actual results to differ materially for Affymetrix from those projected, including, but not limited to, uncertainties relating to technological approaches, product development, manufacturing, market acceptance, personnel retention, equity dilution, uncertainties related to the ability to realize benefits from acquisitions, uncertainties related to cost and pricing of Affymetrix products, dependence on collaborative partners, uncertainties relating to sole source suppliers, uncertainties relating to FDA and other regulatory approvals, competition, risks relating to intellectual property of others and the uncertainties of patent protection and litigation. These and other risk factors are discussed in Affymetrix' Annual Report on Form 10-K for the year ended December 31, 1999 and other SEC reports, including its Quarterly Reports on Form 10-Q for subsequent quarterly periods. Affymetrix expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Affymetrix' expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based.
NOTE: Affymetrix, GeneChip and the Affymetrix logo are registered trademarks used by Affymetrix, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Product $45,372 $26,137 $122,227 $65,713
Research 1,855 2,420 4,729 6,736
License fees and royalties 8,542 962 14,455 1,698
Total revenue 55,769 29,519 141,411 74,147
Costs and expenses:
Cost of product revenue 18,400 11,578 49,117 28,718
Research and development 13,730 10,477 38,890 31,128
Selling, general and
administrative 25,533 13,908 68,334 37,752
Merger acquisition costs -- -- 2,395 --
Total costs and expenses 57,663 35,963 158,736 97,598
Loss from operations (1,894) (6,444) (17,325) (23,451)
Interest income, net 2,189 1,105 5,259 3,496
Net income (loss) 295 (5,339) (12,066) (19,955)
Preferred stock dividends -- (429) -- (2,055)
Net income (loss) attributable
to common stockholders $295 $(5,768) $(12,066) $(22,010)
Basic earnings (loss)
per common share $.01 $(0.11) $(0.22) $(0.44)
used in computing basic
per common share 55,319 51,914 54,928 50,255
Diluted earnings (loss)
per common share $ 0.00 $(0.11) $(0.22) $(0.44)
used in computing diluted
per common share 61,145 51,914 54,928 50,255
Note: Certain prior year balances have been reclassified to conform with the current year presentations.
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, December 31,
Cash and cash equivalents $3,770 $12,677
Available-for-sale securities 425,292 213,763
Accounts receivable 47,697 24,646
Inventories 17,599 12,792
Other current assets 2,893 4,159
Total current assets 497,251 268,037
Net property and equipment 52,730 40,775
Acquired technology rights 10,224 8,965
Notes receivable from stockholders 1,319 1,074
Other assets 47,759 7,736
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and
accrued liabilities $41,534 $29,926
Deferred revenue 19,627 6,468
Current portion of capital
lease obligation 68 261
Total current liabilities 61,229 36,655
Obligation to Beckman Coulter, Inc. 5,000 5,000
Convertible subordinated notes 375,000 150,000
Common stock purchase rights 3,000 3,000
Common stock 555 543
Additional paid-in-capital 270,485 256,467
Accumulated deficit (136,269) (124,203)
Other 30,283 (875)
Total stockholders' equity 165,054 131,932
Note: The balance sheet at December 31, 1999 has been derived from the supplemental audited consolidated financial statements at that date included in the Company's Form 8-K filed on April 7, 2000, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.