Affymetrix Reports Third Quarter 2005 Results.SANTA CLARA Santa Clara, city, Cuba Santa Clara (sän`tä klä`rä), city (1994 est. pop. 217,000), capital of Villa Clara prov., central Cuba. , Calif. -- Affymetrix Affymetrix (NASDAQ: AFFX) is a manufacturer of DNA microarrays, based in Santa Clara, California, United States. The company was co-founded by Dr. Stephen Fodor in 1992. The company was begun as a unit in Affymax N.V. , Inc., (Nasdaq:AFFX) today reported its results for the third quarter of 2005. The Company reported net income of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $8.7 million or $0.13 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share in the third quarter of 2005, as compared to net income of $15.4 million or $0.24 per diluted share in the third quarter of 2004. Total revenue for the quarter was $83.4 million, of which $2.2 million was related to the sale of products to Perlegen Sciences, Inc., as compared to total revenue of $79.9 million in the third quarter of 2004, of which $0.9 million was related to the sale of products to Perlegen. Product and product related revenue increased to $79.5 million for the third quarter of 2005, compared to $76.2 million in the same period in 2004. Third quarter product sales included GeneChip See micro array. (R) array revenue of $44.6 million, reagent reagent /re·a·gent/ (re-a´jent) a substance used to produce a chemical reaction so as to detect, measure, produce, etc., other substances. re·a·gent n. revenue of $10.6 million, and instrument revenue of $13.8 million. Affymetrix shipped approximately 45 GeneChip Systems in the quarter, increasing the cumulative systems shipped to more than 1,300. Royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. and other revenue were $1.7 million for the third quarter of 2005 compared to $2.7 million in the third quarter of 2004. Total operating costs operating costs npl → gastos mpl operacionales and expenses were $75.1 million for the third quarter of 2005 compared to $65.1 million in the third quarter of 2004. Cost of product and product related revenue was $23.4 million in the third quarter of 2005 compared to $19.5 million in the same period of 2004. Product and product related gross margin was 70.6 percent in the third quarter of 2005 compared to 74.5 percent in the third quarter of 2004. Research and development expenses were $19.8 million during the third quarter of 2005 compared to $17.8 million in the third quarter of 2004. Selling, general and administrative expenses were $30.4 million for the third quarter of 2005 compared to $27.0 million in the third quarter of 2004.
Quarterly Highlights
-- Affymetrix enabled genome-wide association studies of an
unprecedented scale with the launch of its GeneChip(R) Mapping
500K Array Set.
-- Affymetrix enabled large scale standardization and automation
of target preparation with the launch of its GeneChip Array
Station (GCAS).
-- Affymetrix enabled researchers to study the splice variants of
known genes and the protein products they produce with the
launch of its Human Exon 1.0 ST, facilitating exon-level
expression profiling on a single array for the first time.
-- GlaxoSmithKline is planning to perform whole-genome
association studies across tens of thousands of samples to
understand the genetic variations associated with numerous
diseases utilizing the Affymetrix GeneChip Human Mapping 500K
Array Set.
-- Affymetrix expanded its Powered by Affymetrix molecular
diagnostics program, signing agreements with PathWork
Informatics, Inc., and ArraDx, for cancer diagnostics.
-- The Jeffrey Modell Foundation and the NHGRI, in collaboration
with Affymetrix, are developing newborn DNA screening tests.
This joint research project focuses on early detection of
primary immunodeficiencies, including the "Bubble Boy"
syndrome, which are genetic disorders that lead to an
increased susceptibility to infections.
-- Underscoring the broad adoption of Affymetrix genotyping
products, there has been several of the largest ever
genotyping efforts to study the impacts of genetic variations
on human health including:
-- The Wellcome Trust Case Control Consortium (WTCCC) and the
Wellcome Trust Sanger Institute (WTSI) will collaborate
with Perlegen and Affymetrix to genotype 15,000
individuals in one of the largest whole-genome association
programs ever conducted, searching for genes associated
with ten complex diseases.
-- The Broad Institute of MIT and Harvard plans to use the
Mapping 500K set to genotype 12,000 individuals to find
the genetic markers associated with major diseases
including cancer, neuropsychiatric, metabolic and
cardiovascular disease.
-- RIKEN and Perlegen intend to conduct high resolution,
whole genome association studies in Japan to identify the
genetic causes of up to 47 common diseases, including
atherosclerosis, rheumatoid arthritis, epilepsy, and many
types of cancer.
-- Merck plans to collaborate with Perlegen to conduct
high-density whole-genome analysis of more than 1,000
individuals with important clinical characteristics.
-- Perlegen announced that it has expanded its relationship
with GlaxoSmithKline to include a third whole-genome
genetic study.
Financial Outlook The Company continues to experience low production yields on certain array products and expects that this will continue in the fourth quarter. As a result, the Company anticipates that product and product related revenue for the fourth quarter will be at least $10 million below previous guidance. Therefore, for the fourth quarter of 2005, the Company now expects product and product related revenue of $120 million and total revenue of about $123 million. In connection with the completion of its pending acquisition of ParAllele, the Company expects to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. fourth quarter merger-related charges for in-process research and development of approximately $15 million or $0.19 per share, and ParAllele operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of approximately $3 million or $0.04 per share. These operational charges exclude non-cash amortization currently estimated to be around $1.5 million or $0.01 per share. These merger-related charges are subject to change pending the completion of the merger. As a result of these anticipated merger and operational related charges, the Company expects fourth quarter net income per diluted share of approximately $0.19, which includes the merger-related charges of $0.24, net of taxes. For fiscal year 2005, the Company now expects product and product related revenue of around $365 million, total revenue of about $380 million and net income per diluted share for fiscal year 2005 of $0.66, including the $0.24 in ParAllele charges referred to above. Affymetrix' management team will host a conference call on October October: see month. 20, 2005 at 2:00 p.m. PT to review its operating results for the third quarter of 2005 and to provide financial guidance for the fourth quarter and full-year 2005. A live webcast can be accessed by visiting the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Company's website at www.affymetrix.com. In addition, investors and other interested parties can listen by dialing domestic: (800) 399-7505, international: (706) 643-3963. A replay of this call will be available from 5:00 p.m. PT on October 20, 2005 until 5:00 p.m. PT on October 27, 2005 at the following numbers: domestic: (800) 642-1687; international: (706) 645-9291. The passcode for both is 9918940. An archived webcast of the conference call will be available under the Investor Relations section of the Company's website at www.affymetrix.com. About Affymetrix Affymetrix scientists invented the world's first microarray See micro array. microarray - A technique for performing many DNA experiments in parallel. Nothing to do with computers. in 1989 and began selling the first commercial microarray in 1994. Since then, Affymetrix GeneChip(R) technology has become the industry standard in molecular biology molecular biology, scientific study of the molecular basis of life processes, including cellular respiration, excretion, and reproduction. The term molecular biology was coined in 1938 by Warren Weaver, then director of the natural sciences program at the Rockefeller research. Affymetrix technology is used by the world's top pharmaceutical, diagnostic and biotechnology companies Top 100 Biotechnology Companies The following is a list of the top 100 biotechnology companies ranked by revenue. The first nine companies qualify for the list of the top 50 pharmaceutical companies. as well as leading academic, government and not-for-profit Not-for-profit An organization established for charitable, humanitarian, or educational purposes that is exempt from some taxes and in which no one in profits or losses. research institutes. More than 1,300 systems have been shipped around the world and more than 3,000 peer-reviewed papers have been published using the technology. Affymetrix' patented photolithographic pho·to·li·thog·ra·phy n. A planographic printing process using plates made according to a photographic image. pho manufacturing process provides the most information capacity available today on an array, enabling researchers to use a whole-genome approach to analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. the relationship between genetics genetics, scientific study of the mechanism of heredity. While Gregor Mendel first presented his findings on the statistical laws governing the transmission of certain traits from generation to generation in 1856, it was not until the discovery and detailed study of and health. Headquartered in Santa Clara, Calif., Affymetrix has subsidiaries in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Asia in
addition to manufacturing facilities in Sacramento Sacramento, city, United StatesSacramento (săkrəmĕn`tō), city (1990 pop. 369,365), state capital and seat of Sacramento co., central Calif. , Calif. and Bedford Bedford, town, England Bedford, town (1991 pop. 75,632), county seat of Bedfordshire, central England, on the Ouse River. It is an important industrial center; diesel engines, pumps, turbines, agricultural machinery, electrical equipment, and transistors , Mass. The company has about 950 employees worldwide. For more information about Affymetrix, please visit the company's website at www.affymetrix.com All statements in this press release that are not historical are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of Section 21E of the Securities Exchange Act as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , including statements regarding Affymetrix' "expectations," "beliefs," "hopes," "intentions," "strategies," or the like. Such statements, including Affymetrix' financial outlook for the fourth quarter of 2005 and fiscal year 2005, are subject to risks and uncertainties that could cause actual results to differ materially for Affymetrix from those projected, including, but not limited to: risks of the Company's ability to achieve and sustain higher levels of revenue, higher gross margins, reduced operating expenses, market acceptance and personnel retention; risks related to the Company's ability to achieve hoped-for adj. 1. expected and desired. Contrasted with Adj. 1. hoped-for - expected hopefully anticipated, awaited expected - considered likely or probable to happen or arrive; "prepared for the expected attack" manufacturing yields for the 500K Mapping Array Set and other products, including the ability to identify and resolve manufacturing problems; global economic conditions; the fluctuations in overall capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. in the academic and biotechnology biotechnology, the use of biological processes, as through the exploitation and manipulation of living organisms or biological systems, in the development or manufacture of a product or in the technological solution to a problem. sectors; changes in government funding policies; unpredictable fluctuations in quarterly revenues; uncertainties related to cost and pricing of Affymetrix products; dependence on collaborative col·lab·o·rate intr.v. col·lab·o·rat·ed, col·lab·o·rat·ing, col·lab·o·rates 1. To work together, especially in a joint intellectual effort. 2. partners; uncertainties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc sole source suppliers; uncertainties relating to FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. , and other regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals; risks relating to intellectual property of others; and the uncertainties of patent protection and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . These and other risk factors are discussed in Affymetrix' Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2004 and other SEC reports, including its Quarterly Reports on Form 10-Q Form 10-Q See 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 there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. or any change in events, conditions, or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or on which any such statements are based. PLEASE NOTE: Affymetrix, the Affymetrix logo and GeneChip are trademarks owned or used by Affymetrix, Inc. CustomExpress is a trademark of Affymetrix, Inc. --Financial Charts to Follow --
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September December
30, 31,
2005 2004
----------- ---------
(Unaudited) (Note 1)
ASSETS:
Current assets:
Cash and cash equivalents $ 51,701 $ 42,595
Available-for-sale securities 223,767 163,120
Accounts receivable 65,157 89,441
Accounts receivable from Perlegen Sciences 2,260 3,964
Inventories 34,640 17,997
Prepaid expenses and other current assets 17,979 5,833
----------- ---------
Total current assets 395,504 322,950
Property and equipment, net 67,365 64,179
Acquired technology rights, net 59,168 64,334
Goodwill 18,601 18,601
Notes receivable from employees 1,964 1,900
Other assets 26,816 27,807
----------- ---------
$569,418 $499,771
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued liabilities $ 55,481 $ 62,963
Deferred revenue -- current portion 33,458 33,776
----------- ---------
Total current liabilities 88,939 96,739
Deferred revenue -- long-term portion 18,780 29,463
Other long-term liabilities 3,858 4,382
Convertible notes 120,000 120,000
Stockholders' equity:
Common stock 640 616
Additional paid-in capital 462,593 407,258
Deferred stock compensation (6,192) (4,265)
Accumulated other comprehensive loss (891) (3,371)
Accumulated deficit (118,309) (151,051)
----------- ---------
Total stockholders' equity 337,841 249,187
----------- ---------
$569,418 $499,771
=========== =========
Note 1: The condensed consolidated balance sheet at December 31, 2004
has been derived from the audited consolidated financial
statements at that date included in the Company's Form 10-K
for the fiscal year ended December 31, 2004.
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months
Ended Nine Months Ended
September 30, September 30,
----------------- -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Revenue:
Product sales $69,044 $62,318 $211,808 $185,073
Product related revenue 10,456 13,928 32,707 40,961
-------- -------- --------- ---------
Total product and product
related revenue 79,500 76,246 244,515 226,034
Royalties and other revenue 1,727 2,742 5,280 8,300
Revenue from Perlegen
Sciences 2,220 879 6,318 3,920
-------- -------- --------- ---------
Total revenue 83,447 79,867 256,113 238,254
-------- -------- --------- ---------
Costs and expenses:
Cost of product sales 20,755 17,107 57,986 57,227
Cost of product related
revenue 2,655 2,367 7,619 7,299
Cost of revenue from Perlegen
Sciences 1,359 569 4,351 3,039
Research and development 19,835 17,791 57,724 52,892
Selling, general and
administrative 30,362 26,989 92,499 85,212
Stock-based compensation 141 267 257 915
-------- -------- --------- ---------
Total costs and expenses 75,107 65,090 220,436 206,584
-------- -------- --------- ---------
Income from operations 8,340 14,777 35,677 31,670
Interest income and other, net 2,294 1,638 3,961 1,773
Interest expense (413) (437) (1,129) (10,675)
-------- -------- --------- ---------
Income before income taxes 10,221 15,978 38,509 22,768
Income tax provision (1,508) (601) (5,767) (2,215)
-------- -------- --------- ---------
Net income $ 8,713 $15,377 $ 32,742 $ 20,553
======== ======== ========= =========
Basic net income per share $ 0.14 $ 0.25 $ 0.52 $ 0.34
======== ======== ========= =========
Diluted net income per share $ 0.13 $ 0.24 $ 0.49 $ 0.33
======== ======== ========= =========
Shares used in computing basic
net income per share 63,787 60,617 63,112 60,300
======== ======== ========= =========
Shares used in computing
diluted net income per share 70,463 66,632 69,966 66,699
======== ======== ========= =========
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