Solexa Announces Second Quarter 2006 Financial Results; Provides Update on Early Access Program for Solexa Genome Analysis System.HAYWARD Hayward, city (1990 pop. 111,498), Alameda co., W Calif.; settled 1851, inc. 1876. It is an important commercial and distribution center for farm products. Manufactures include wire, plastics, metal and paper products, textiles, machinery, and motor vehicles. , Calif. & CAMBRIDGE Cambridge, city, Canada Cambridge (kām`brĭj), city (1991 pop. 92,772), S Ont., Canada, on the Grand River, NW of Hamilton. It was formed in 1973 with the amalgamation of Galt, Hespeler, and Preston, all founded in the early 19th cent. , England England, the largest and most populous portion of the United Kingdom of Great Britain and Northern Ireland (1991 pop. 46,382,050), 50,334 sq mi (130,365 sq km). It is bounded by Wales and the Irish Sea on the west and Scotland on the north. -- Solexa, Inc. (Nasdaq:SLXA) today announced its financial results for the quarter ended June 30, 2006. The Company also provided an update on the Early Access program for its first-generation Solexa Genome genome: see genetics. genome all the genetic content contained within an organism. An organism's genome is made up of molecules of deoxyribonucleic acid (DNA) that form long strands that are tightly wound into chromosomes, which are found in the Analysis System. "We began shipping the Solexa Genome Analysis System on schedule during the second quarter, marking the achievement of a major milestone," said John West, chief executive officer of Solexa. "To date, we have placed multiple Early Access instrument systems in leading genome centers. We are pleased with the enthusiastic response we have received from our customers, including the decision by one customer, after working with the system for approximately one month, to take delivery of a second unit. We will invoice An itemized statement or written account of goods sent to a purchaser or consignee by a vendor that indicates the quantity and price of each piece of merchandise shipped. A consular invoice is one used in foreign trade. customers when we have met the Early Access product specifications, which we anticipate will occur later this year. "Our Early Access program is designed to better prepare us for broad commercial launch of the Solexa Genome Analysis System," added Mr. West. "We are gaining valuable customer feedback that we expect to use to further enhance our System's performance and robustness, and we are honing Honing could refer to
The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. ." Other significant progress in Solexa's preparations for full commercialization includes the hiring of key management positions in sales, manufacturing and genomics services operations, as well as entering into 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. supply arrangements with Invitrogen and New England Biolabs New England Biolabs (NEB) produces and supplies reagents for the life science industry. NEB offers a large selection of recombinant and native enzymes for genomic research. It also offers products in the areas related to proteomics and drug discovery. . Solexa remains focused on key activities necessary for broad commercial release of the product, including further refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar the technical performance of the system, ramping up instrument and consumable A material that is used up and needs continuous replenishment, such as paper and toner. "The low-tech end of the high-tech field!" manufacturing capacity and building out field operations to provide sales and technical support. Financial Results Revenue for the quarter ended June 30, 2006 was $1.1 million, compared with $1.4 million for the quarter ended June 30, 2005. Revenue during the quarter was derived primarily from services fees generated from Solexa's legacy MPSS MPSS Massively Parallel Signature Sequencing MPSS Methylprednisolone Sodium Succinate MPSS Multiple Page Size Support MPSS Ministry of Public Safety and Security (Canada) MPSS Mainz Pain Staging System (TM) technology and does not yet reflect any contribution from the Solexa Genome Analysis System, Solexa's reversible-terminator chemistry and Clonal clonal referring to a clone. clonal expansion occurs, for example, when B cells, under the influence of T cell interleukins, differentiate into two separate populations and, after several transformations produce sensitized B Single Molecule Array(TM) DNA sequencing DNA sequencing The determination of the sequence of nucleotides in a sample of DNA. platform. Solexa intends to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: performing MPSS services in 2006, and the decrease in revenues is primarily due to the wind-down of these activities. Other revenue in the second quarter of 2006 was related to a government grant. Cost of service revenue for the 2006 second quarter was $917,000, compared with $1.7 million for the 2005 second quarter. The decrease reflects the wind-down of the MPSS services business, which resulted in a decrease in labor, materials and supply costs. In addition, in the three months ended June 30, 2006, the Company charged certain operating costs operating costs npl → gastos mpl operacionales against a forward loss contingency contingency n. an event that might not occur. for unprofitable MPSS contracts in its genomics services business; the reserve balance was $28,000 at June 30, 2006. The Company incurred manufacturing start up costs of $724,000 during the 2006 second quarter as it began to ramp the manufacturing of its next-generation instrument system. This ramp is expected to continue through 2006. There were no manufacturing start up costs in the corresponding prior-year period. Research and development expenses for the 2006 second quarter were $5.5 million, compared with approximately $4.7 million during the corresponding quarter in 2005. The increase for the 2006 quarter is due to increased spending on personnel and materials including the production and operation of multiple prototype instruments for use in research and development as well stock-based compensation in conjunction with SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R. Sales, general and administrative expenses for the 2006 second quarter were $4.8 million, compared with approximately $4.1 million during the corresponding quarter in 2005. The increase for the 2006 quarter is due to increased spending on personnel, professional fees and stock-based compensation in conjunction with SFAS 123R. Solexa recognized an income tax benefit attributable to a U.K. research and development tax credit of approximately $438,000 for the 2006 second quarter. The Company did not report an income tax benefit for the 2005 second quarter. The net loss attributable to common shareholders for the 2006 second quarter was $9.8 million, or $0.27 per share, which included stock-based compensation of $952,000, or $0.03 per share, in conjunction with the SFAS 123R. The net loss for the 2005 second quarter was $9.4 million, or $0.48 per share. Solexa's reported results of operations for the six months ended June 30, 2005 reflect those of Solexa Limited, to which the operations of Lynx lynx, name given to several related small, ferocious members of the cat family. All have small heads, tufted ears, and heavy bodies with long legs and short tails. All are primarily terrestrial, although they are able to climb trees. Therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. , Inc. have been added following March 4, 2005, the date of the consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the business combination between Solexa Limited and Lynx. For the six months ended June 30, 2006, revenue was $1.9 million, compared with $2.0 million for the six months ended June 30, 2005. Total operating costs and expenses for the first six months of 2006 were $23.0 million, compared with $16.7 million for first six months of 2005. The net loss attributable to common shareholders was $19.1 million for the first six months of 2006, or $0.53 per share, which included stock-based compensation of $1.8 million, or $0.05 per share, in conjunction with SFAS 123R. The net loss attributable to common shareholders for the six months ended June 30, 2005 was $15.2 million, or $1.19 per share. As of June 30, 2006, Solexa reported cash and cash equivalents of $58.0 million, compared with $38.4 million on December 31, 2005. In January 2006, Solexa completed a private placement of common stock and warrants for gross proceeds of $40 million. Second Quarter and Recent Highlights Preparation for Broad Release In preparation for the broader commercialization of the Solexa Genome Analysis System expected during the 2006 fourth quarter, Solexa strengthened its leadership with the following appointments: --Richard Lussier was appointed as vice president, sales and field operations. Mr. Lussier, a 20-year industry veteran, is responsible for building and managing Solexa's field organization, including sales, field application support and field service. His experience includes management positions at Applied Biosystems Applied Biosystems, Inc. (formerly NASDAQ: ABIO) is the original name of a pioneer biotechnology company founded in 1981 in Foster City, California, among the Silicon Valley cities of the southern San Francisco Bay Area. , Celera Genomics and Fluidigm. --Brock Siegel was appointed as chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . Dr. Siegel is responsible for all manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. , including supply chain management and product distribution, for the Solexa Genome Analysis System and related consumables. He has brings 26 years of industry experience, including the past 15 years at Applied Biosystems. --Frank Oaks was appointed as vice president, DNA sequencing services. Dr. Oaks is responsible for Solexa's genomics services operation, which offers sequencing, gene expression and small RNA RNA: see nucleic acid. RNA in full ribonucleic acid One of the two main types of nucleic acid (the other being DNA), which functions in cellular protein synthesis in all living cells and replaces DNA as the carrier of genetic discovery services See service discovery. . He was most recently with Applied Biosystems. In addition, Solexa implemented OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and supply arrangements with leading life sciences companies Invitrogen and New England Biolabs to secure commercial-scale production of key enzymes Enzymes Organic substances (proteins) composed of amino acids that trigger and regulate chemical reactions in the body. There are over 700 identified human enzymes. Mentioned in: Interactions, Nutritional Supplements and other reagents for the Solexa Genome Analysis System. Other Highlights --Joseph Whitters joined Solexa's board of directors. Mr. Whitters has nearly 20 years of experience in the healthcare industry, including serving for nearly two decades as chief financial officer at First Health Group Corporation. Mr. Whitters was deeply involved with a broad spectrum of First Health's financial activities, including mergers and acquisitions, new ventures and Sarbanes-Oxley compliance. --Solexa was added to the NASDAQ Biotechnology Index The NASDAQ Biotechnology Index includes securities of NASDAQ-listed companies classified according to the Industry Classification Benchmark as either Biotechnology or Pharmaceuticals which also meet other eligibility criteria. (R) and the Russell 3000(R) Index. Conference Call Solexa has scheduled a conference call for 5:00 p.m. Eastern Time (2:00 p.m. PT) today to discuss the Company's financial results for the second quarter. To access the conference call, please dial (800) 218-8862. International participants can call +1 (303) 262-2130. The call will also be webcast live on the web at www.solexa.com. An audio replay of the call will be available for 48 hours following the call at (800) 405-2236 for domestic callers or +1 (303) 590-3000 for those calling outside the U.S. The password required to access the replay is 11067697#. An audio archive will also be available at www.solexa.com. About Solexa Solexa, Inc. is developing and commercializing the Solexa Genome Analysis System, which will be used to perform a range of analyses including whole genome resequencing, gene expression analysis and small RNA analysis. Solexa expects its first-generation instrument, the 1G Genome Analyzer analyzer /ana·ly·zer/ (an´ah-li?zer) 1. a Nicol prism attached to a polarizing apparatus which extinguishes the ray of light polarized by the polarizer. 2. , to generate over a billion bases of DNA sequence DNA sequence Genetics The precise order of bases–A,T,G,C–in a segment of DNA, gene, chromosome, or an entire genome. See Base pair, Base sequence analysis, Chromosome, Gene, Genome. per run and to enable human genome The human genome is the genome of Homo sapiens, which is composed of 24 distinct pairs of chromosomes (22 autosomal + X + Y) with a total of approximately 3 billion DNA base pairs containing an estimated 20,000–25,000 genes. resequencing below $100,000 per sample, making it the first platform to reach this important milestone. Solexa's longer-term goal is to reduce the cost of human re-sequencing to a few thousand dollars for use in a wide range of applications from basic research through clinical diagnostics (1) Software routines that test hardware components (memory, keyboard, disks, etc.). Diagnostics are often stored in ROM chips and activated on startup. (2) Error messages in a programmer's source code that refer to statements or syntax that the compiler or assembler . For further information, please visit www.solexa.com. This press release contains "forward-looking" statements, including statements related to the current views of Solexa management as to future products, product development, the commercial introduction of the Company's novel genetic analysis technology including the timing of meeting performance specifications and of invoicing in·voice n. 1. A detailed list of goods shipped or services rendered, with an account of all costs; an itemized bill. 2. The goods or services itemized in an invoice. tr.v. customers under the Early Access program, the expansion and success of Solexa's commercial application of its genomics technologies. Any statements contained in this press release that are not statements of historical fact may be deemed to be 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. . Words such as "believes," "anticipates," "plans," "predicts," "expects," "envisions," "hopes," "estimates," "intends," "will," "continue," "may," "potential," "should," "confident," "could" and similar expressions are intended to identify forward-looking statements. There can be no assurance that such expectations of any of the forward-looking statements will prove to be correct, and actual results could differ materially from those projected or assumed in the forward-looking statements. There are a number of important factors that could cause the results of Solexa to differ materially from those indicated by these forward-looking statements including, among others, risks detailed from time to time in the Company's SEC reports, including its Annual Report on 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 31, 2005 and its Form 10-Q Form 10-Q See 10-Q. for the quarter ended June 30, 2006. Solexa does not undertake any obligation to update forward-looking statements.
SOLEXA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2006 2005 2006 2005
--------- -------- --------- ---------
Service revenue $ 963 $ 1,399 $ 1,731 $ 2,004
Other revenue 134 -- 134 --
--------- -------- --------- ---------
Total revenue 1,097 1,399 1,865 2,004
Operating costs and expenses:
Cost of service revenue 917 1,738 1,828 2,278
Manufacturing start up costs 724 -- 724 --
Research and development 5,485 4,653 11,818 7,646
Sales, general and
administrative 4,797 4,130 8,614 6,463
Restructuring charge -- 333 -- 333
--------- -------- --------- ---------
Total operating costs and
expenses 11,923 10,854 22,984 16,720
Loss from operations (10,826) (9,455) (21,119) (14,716)
Interest income 699 91 1,354 227
Interest expense (161) (432) (317) (564)
Other income (expense), net -- (4) -- (7)
Gain (loss) on foreign exchange 67 415 117 415
--------- -------- --------- ---------
Loss from operations (10,221) (9,385) (19,965) (14,645)
Income tax benefit related to
research and development tax
credit (438) -- (849) --
--------- -------- --------- ---------
Net loss (9,783) (9,385) (19,116) (14,645)
Dividends to 'A' ordinary and
'B' preferred shares -- -- -- (522)
--------- -------- --------- ---------
Net loss attributable to common
shareholders $ (9,783) $(9,385) $(19,116) $(15,167)
========= ======== ========= =========
Basic and diluted net loss per
common share $ (0.27) $ (0.48) $ (0.53) $ (1.19)
========= ======== ========= =========
Weighted average shares used to
compute basic and diluted net
loss per share 36,491 19,354 35,806 12,717
========= ======== ========= =========
SOLEXA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2006 2005
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 58,085 $ 38,403
Accounts receivable 377 539
Inventory 2,262 754
Other current assets 4,453 2,422
--------- ---------
Total current assets 65,177 42,118
Property and equipment, net 4,636 4,378
Intangible assets, net 3,338 3,510
Goodwill 22,529 22,529
Other non-current assets 470 482
--------- ---------
Total assets $ 96,150 $ 73,017
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,940 $ 2,235
Accrued compensation 3,177 2,067
Accrued professional fees 893 705
Equipment financing, current portion 30 31
Forward loss contingency 28 1,028
Deferred revenue - current portion 727 1,518
Deferred rent and lease obligations 929 801
Other accrued liabilities 301 529
--------- ---------
Total current liabilities 9,025 8,914
Deferred revenues, net of current portion 2,213 1,905
Equipment financing, net of current portion 30 44
Deferred rent and lease obligations, net of
current portion 1,885 2,381
Stockholders' equity:
Preferred stock -- --
Common stock 365 300
Additional paid-in capital 150,574 109,575
Deferred compensation -- (326)
Accumulated other comprehensive income 3,014 2,064
Accumulated deficit (70,956) (51,840)
--------- ---------
Total stockholders' equity 82,997 59,773
--------- ---------
Total liabilities and stockholders' equity $ 96,150 $ 73,017
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