AFFX beats by a penny; guidance looks OK. A deal with affiliate Perlegen allows AFFX to commercialize jointly developed technologies earlier in return for up front consideration to Perlegen. So we need to keep an eye on how those products, detailed in this PR, do in the future . . .
>>SANTA CLARA, Calif., Jan. 29 /PRNewswire-FirstCall/ -- Affymetrix, Inc., (Nasdaq: AFFX - News) today reported record revenue and profits for its fourth quarter and fiscal year ended December 31, 2002. The Company reported net income of approximately $2.9 million or $0.05 per basic and diluted share in the fourth quarter of 2002 compared to a net loss of $8.4 million or $0.15 per basic and diluted share in the fourth quarter of 2001. Excluding non-cash stock compensation expense and amortization of purchased intangible assets, Affymetrix reported pro forma net income of $4.0 million, or $0.07 per basic and diluted share for the quarter ended December 31, 2002. Except as expressly noted in this press release, all numbers are presented in accordance with U.S. Generally Accepted Accounting Principles ("GAAP").
For the year, the Company recorded a net loss of $1.6 million or $0.03 per basic and diluted share compared to a net loss of $33.1 million or $0.58 per basic and diluted share for the year ended December 31, 2001. Excluding non-cash stock compensation expense and amortization of purchased intangible assets for both 2002 and 2001 and a litigation settlement occurring in 2001, Affymetrix reported a pro forma profit of $7.9 million, or $0.14 per basic share and $0.13 per diluted share for the year ended December 31, 2002, which compares to a pro forma net loss of $9.7 million or $0.17 per basic and diluted share for the year ended December 31, 2001.
Product revenue grew more than 26% to $69.7 million for the fourth quarter of 2002 from $55.2 million for the comparable period of 2001. In 2002, total product revenue grew more than 27% to $248.5 million compared to $194.9 million in 2001. The increases in product revenue for the quarter and the year were primarily the result of strong demand related to the Company's GeneChip® probe array business. Fourth quarter product revenue included the shipment of more than 115,000 GeneChip arrays, which represented unit growth of 58% and revenue growth of 64% over the comparable quarter in 2001. For the year, GeneChip array shipments grew 41% to approximately 405,000 and GeneChip array revenue grew by 52% compared to 2001. In addition, during 2002, Affymetrix shipped over four GeneChip systems per week on average, bringing cumulative shipments since the launch of the GeneChip system to nearly 800. All product revenue and unit data in this release excludes sales to Perlegen Sciences, Inc.
Other revenues, which include licensing fees, royalties and research revenue, were $3.4 million for the fourth quarter of 2002 compared to $4.3 million in the fourth quarter of 2001. For the year ended December 31, 2002, other revenues were $19.8 million compared to $18.4 million in 2001.
Total revenue for the quarter was $78.3 million, of which $5.1 million was related to the sale of wafers to Perlegen, compared to total revenue of $65.1 million in the fourth quarter of 2001. Total revenue for the year was $289.9 million, of which $21.6 million was related to the sale of wafers to Perlegen, compared to total revenue of $224.9 million in 2001. Excluding the sale of wafers to Perlegen, total revenue grew approximately 23% during the quarter and 26% for the year when compared to the same periods in 2001.
Total costs and expenses for the quarter ended December 31, 2002 were $73.6 million compared to $73.3 million in the fourth quarter of 2001. In 2002, total costs and expenses were $284.6 million compared to $265.5 million in 2001.
Costs of product revenues were $24.4 million in the fourth quarter of 2002 compared to $20.1 million in the same period of 2001. Product gross margin was 65.1% in the fourth quarter compared to 63.5% in the fourth quarter of 2001. In 2002, costs of product revenues were $88.3 million compared to $72.5 million in 2001. Product gross margin for 2002 was 64.5% compared to 62.8% in 2001.
Research and development expenses were $18.8 million during the fourth quarter of 2002 compared to $15.8 million in the fourth quarter of 2001. In 2002, research and development expenses were $69.5 million compared to $68.2 million in 2001.
Selling, general and administrative expenses were $24.8 million for the fourth quarter compared to $27.1 million in the fourth quarter of 2001. For the year, selling, general and administrative expenses were $96.3 million compared to $94.4 million in 2001.
In addition, the Company's President, Susan E. Siegel, has returned on a full-time basis.
Perlegen Sciences Completes Private Financing
On January 27, 2003, Perlegen Sciences announced that it completed a private financing round led by Maverick Capital, raising an aggregate of approximately $30 million. As a result of this financing, Affymetrix' equity ownership now stands at approximately 43%, which allows Affymetrix to eliminate the voting trust in which a portion of Affymetrix' interest in Perlegen was held. Affymetrix will continue to report any sales to Perlegen as a separate line item, as long as Perlegen is considered an affiliate of the company.
Affymetrix Gains Broadened Access to Valuable Whole Genome Technologies
Affymetrix also announced the licensing of Perlegen technologies that are expected to significantly accelerate Affymetrix' plan to design and commercialize microarrays for whole genome and candidate region DNA analysis. In addition to broadening its access to Perlegen technologies, the agreement advances by approximately three years Affymetrix' prior commercialization rights to the Perlegen single nucleotide polymorphism (SNP) database for development of chip-based products.
The licensing deal gives Affymetrix access and commercialization rights to some 248,000 long-range PCR assays Perlegen developed to screen 50 haploid human genomes. Each PCR assay was optimized by Perlegen for GeneChip-based genetic analysis. Initially, Affymetrix plans to make these reactions available to customers through its GeneChip brand CustomSeq(TM) program, which offers high-quality arrays for large-scale resequencing of the human genome.
Under the terms of the licensing agreement, Affymetrix will pay Perlegen a total of $15 million in cash and $3 million in other compensation. The new agreement eliminates any future royalty obligations for array products Affymetrix commercializes based on information contained in Perlegen's SNP database.
Associated with this agreement, Affymetrix expects to record an in-process research and development charge in the first quarter of fiscal 2003 of approximately $10 million, and will amortize the remaining $5 million over the useful life of the acquired intangible assets which ranges from five to eight years. The $3 million in other compensation will be expensed by Affymetrix as incurred.
Annual Highlights for 2002
-- The Company achieved GAAP profitability in both the third and
fourth quarters.
-- The Company added new pharmaceutical customers including Amgen/Immunex,
Organon, Monsanto and Schering.
-- Affymetrix launched the flagship GeneChip Human Genome U133 array set,
first-generation whole genome DNA Analysis products, and shipped the
first GeneChip Scanner 3000.
-- Affymetrix entered into numerous strategic relationships designed to
accelerate the Company's clinical genomics efforts.
-- The technological strength and quality of the Company's intellectual
property portfolio was ranked number one in the pharmaceutical and
biotech sector by MIT's Technology Review.
-- Affymetrix and the National Cancer Institute published the first
observation of large-scale transcriptional activity into the public
databases.
-- The Company was internationally recognized for its pioneering
leadership in the field of DNA microarrays.
Financial Outlook for 2003
The Company expects to achieve product revenue growth of approximately 28% in 2003. The Company expects that product revenue for the first quarter of 2003 will range between $71-73 million.
Affymetrix' management team will host a conference call to review its operating results for the fourth quarter and 2002 and provide financial guidance for 2003. Investors and other interested parties can listen by dialing domestic: 888-737-3798, international: 706-643-2578 on January 29 at 2:00 p.m. PT. A replay of this call will be available until 5:00 p.m. PT on February 5 at the following numbers: domestic: 800-642-1687, international: 706-645-9291, passcode: 7153062#. To access a webcast of the conference call, please visit www.affymetrix.com.
The use of the term "pro forma" in this news release refers to amounts calculated by removing costs associated with certain acquisition related non-cash charges associated with stock compensation expense and the amortization of purchased intangibles, as well as one-time charges associated with litigation settlements. These measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from pro forma measures used by other companies.
About Affymetrix:
Affymetrix is a pioneer in creating breakthrough tools that are driving the genomic revolution. By applying the principles of semiconductor technology to the life sciences, Affymetrix develops and commercializes systems that enable scientists to improve the quality of life. The Company's customers include pharmaceutical, biotechnology, agrochemical, diagnostics and consumer products companies as well as academic, government and other non-profit research institutes. Affymetrix offers an expanding portfolio of integrated products and services, including its integrated GeneChip platform, to address growing markets focused on understanding the relationship between genes and human health. Additional information on Affymetrix 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, including Affymetrix' financial outlook for 2003, 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, personnel retention, uncertainties relating to the Company's ability to develop and commercialize products based on the licensed technology from Perlegen discussed in this press release, 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' Form 10-K for the year ended December 31, 2001 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.
PLEASE NOTE:
Affymetrix, the Affymetrix logo and GeneChip are trademarks owned or used by Affymetrix, Inc. CustomSeq is a trademark of Affymetrix, Inc.
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Revenue:
Product $69,748 $55,194 $248,538 $194,936
Revenue from Perlegen 5,105 5,563 21,559 11,491
Research 1,686 963 7,282 4,728
License fees and
royalties 1,760 3,353 12,495 13,719
Total revenue 78,299 65,073 289,874 224,874
Costs and expenses:
Cost of product revenue 24,360 20,145 88,315 72,522
Cost of Perlegen revenue 4,546 5,563 21,000 11,491
Research and development 18,773 15,810 69,520 68,197
Selling, general and
administrative 24,846 27,121 96,260 94,374
Amortization of deferred
stock compensation 781 3,155 8,388 12,663
Amortization of
purchased
intangibles (A) 281 1,535 1,125 6,223
Total costs and
expenses 73,587 73,329 284,608 265,470
Income (loss) from
operations 4,712 (8,256) 5,266 (40,596)
Interest and other
(expense) income, net (1,696) (90) (6,195) 7,775
Income (loss) before
income taxes 3,016 (8,346) (929) (32,821)
Income tax provision (100) (100) (701) (300)
Net income (loss) $2,916 $(8,446) $(1,630) $(33,121)
Basic earnings (loss)
per common share $0.05 $ (0.15) $ (0.03) $ (0.58)
Diluted earnings (loss)
per common share $0.05 $ (0.15) $ (0.03) $ (0.58)
Shares used in computing
basic earnings (loss)
per
common share 58,265 57,683 58,018 57,382
Shares used in computing
diluted earnings
(loss) per
common share 60,460 57,683 58,018 57,382
Certain prior period balances have been reclassified to conform
with current year presentation.
(A) For the three and twelve month periods ended December 31, 2001 the
Company recorded $1.2 million and $4.7 million, respectively, of
goodwill amortization. Upon the adoption of sFAS 142 effective
January 1, 2002, the Company ceased amortizing goodwill.
AFFYMETRIX, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING ACQUISITION-RELATED CHARGES AND LITIGATION SETTLEMENT*
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
Revenue:
Product $69,748 $55,194 $248,538 $194,936
Revenue from Perlegen 5,105 5,563 21,559 11,491
Research 1,686 963 7,282 4,728
License fees and
royalties 1,760 3,353 12,495 13,719
Total revenue 78,299 65,073 289,874 224,874
Costs and expenses:
Cost of product
revenue 24,360 20,145 88,315 72,522
Cost of Perlegen
revenue 4,546 5,563 21,000 11,491
Research and
development 18,773 15,810 69,520 68,197
Selling, general and
administrative 24,846 22,621 96,260 89,874
Total costs and
expenses 72,525 64,139 275,095 242,084
Income (loss) from
operations 5,774 934 14,779 (17,210)
Interest and other
(expense) income, net (1,696) (90) (6,195) 7,775
Income (loss) before
income taxes 4,078 844 8,584 (9,435)
Income tax provision (100) (100) (701) (300)
Net income (loss) $3,978 $744 $7,883 $(9,735)
Basic earnings (loss)
per common share $0.07 $ 0.01 $ 0.14 $ (0.17)
Diluted earnings (loss)
per common share $0.07 $ 0.01 $ 0.13 $ (0.17)
Shares used in computing
basic earnings (loss)
per
common share 58,265 57,683 58,018 57,382
Shares used in computing
diluted earnings
(loss) per
common share 60,460 60,621 60,154 57,382
* The above Pro Forma Condensed Consolidated Statements of Operations are
presented for illustrative purposes only and are not prepared in
accordance with generally accepted accounting principles. These Pro
Forma Condensed Consolidated Statements of Operations are intended to
illustrate the Company's operating results excluding certain non-cash
charges associated with stock compensation expense and the amortization
of purchased intangibles associated with the acquisition of Neomorphic,
Inc. in 2000. In addition, the 2001 Statements of Operations exclude a
litigation settlement of $4.5 million. These measures may be
different from Pro Forma measures used by other companies.
Certain prior year balances have been reclassified to conform with
current year presentation.
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
December 31, December 31,
2002 2001
(Note 1)
ASSETS
Current assets:
Cash and cash equivalents $67,888 $58,795
Available-for-sale securities 293,570 310,028
Accounts receivable 65,986 44,812
Inventories 26,739 28,812
Prepaid expenses and other current assets 3,770 3,276
Total current assets 457,953 445,723
Net property and equipment 72,836 72,728
Acquired technology rights 23,039 17,636
Goodwill 18,601 18,601
Other intangible assets 938 2,062
Notes receivable from employees 1,674 1,404
Other assets 26,362 21,861
$ 601,403 $ 580,015
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 66,864 $ 53,428
Deferred revenue 19,381 19,577
Total current liabilities 86,245 73,005
Convertible subordinated notes 368,900 370,000
Other long-term liabilities 8,322 5,000
Common stock purchase rights 3,000 3,000
Stockholders' equity 134,936 129,010
$ 601,403 $ 580,015
Note 1: The condensed consolidated balance sheet at December 31, 2001
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, 2001.<<
Cheers, Tuck |
