Gene Logic Reports Preliminary Fourth-Quarter and Year-End Results
GAITHERSBURG, Md., March 8 /PRNewswire/ -- Gene Logic Inc. (Nasdaq: GLGC) had revenues of $4.6 million in the fourth quarter of 1998, compared to $1.3 million reported for the fourth quarter of 1997 and $2.7 million for the third quarter of 1998. Revenues for the year ended December 31, 1998, were $13.2 million, versus $2.0 million in 1997.
This increase in revenues was the result of the addition of new collaborative agreements and the expansion of existing collaborations. The company had two collaborators when it went public in November 1997; it now has agreements with nine major firms, including five of the top 20 pharmaceutical companies.
"We are in an excellent position for further revenue growth," said Michael J. Brennan, M.D., Ph.D., Gene Logic's Chief Executive Officer. "We expect 1999 revenues to exceed 1998 revenues based on our existing agreements alone. Beyond that, we are in discussions with several potential new collaborators. And later in the year, we plan to launch the first of our new GeneExpress(R) databases."
Announced in January 1999, the GeneExpress product line will consist of a set of databases of gene expression in a wide range of healthy, diseased, and drug-treated tissues. The company is in the process of building the first of these databases, using Affymetrix Inc.'s GeneChip(R) probe arrays.
Preliminary operating expenses in the fourth quarter were $7.9 million, versus $4.1 million for the comparable period in 1997. Preliminary operating expenses for the year were $24.2 million, compared to $9.9 million in 1997. The increase in operating expenses was attributable to expansion of the company's target discovery and bioinformatic software businesses and development of its Flow-thru Chip(TM) microarray device.
The company had a preliminary fourth-quarter net loss of $3.1 million, or $0.16 per share, compared to a net loss of $2.8 million, or $0.43 per share, during the same period in 1997. The preliminary net loss for the year was $9.3 million, or $0.59 per share, versus $8.5 million, or $3.97 per share, in 1997.
The expense and loss numbers are preliminary because they do not include amortization of goodwill in the fourth quarter or a third-quarter charge for in-process research and development obtained through the acquisition of Oncormed Inc. As reported in its Form 10-Q for the third quarter of 1998, Gene Logic allocated $35.2 million of the purchase price of Oncormed to in-process R&D. This write-off was based on a valuation provided by independent appraisers made in accordance with the standards of the Securities and Exchange Commission in effect at the time.
The SEC has recently made announcements regarding a new interpretation of these standards. Gene Logic is in discussions with the SEC to determine the impact of this new interpretation on the accounting treatment of the Oncormed transaction. The company may be required to reduce the amount allocated to in-process R&D and restate its third-quarter financial results. Once this issue has been resolved, the company will release full financial results for the fourth quarter and full year 1998. Any restatement will have no impact on revenue, cash flow, cash position, or any other fundamentals of the operations of the company.
Review of Fourth-Quarter Milestones
During the fourth quarter, Gene Logic expanded its collaborations with three companies. It enlarged its relationship with Procter & Gamble Pharmaceuticals to include development of a gene expression database for drug target discovery for osteoporosis. It broadened its collaboration with Japan Tobacco Inc. to include development of an expression database for target discovery for an undisclosed major disease. And it extended its agreement with Rhone-Poulenc Rorer Inc., under which Gene Logic is conducting genetic analysis of tissue samples from clinical trials.
In December, the U.S. Patent and Trademark Office issued Patent Number 5,843,767 for the Flow-thru Chip, which may have broad application in drug discovery, genomics, and proteomics (the molecular characterization of an organism's proteins). Gene Logic holds exclusive, worldwide rights to this patent under a license from Oak Ridge National Laboratory.
Gene Logic combines genomic technologies and bioinformatic expertise to provide pharmaceutical companies with products designed to reduce the time, cost, and risk associated with drug discovery and development. These products include proprietary databases of gene expression for drug target discovery and toxicology, a novel screening technology for identifying new drug leads, and a pharmacogenomic technology for improving drug effectiveness. The company's Data Logic division, based in Berkeley, Calif., develops and markets bioinformatic software for managing and integrating genomic data.
Gene Logic has established alliances with Wyeth-Ayerst Laboratories, a division of American Home Products Corp.; Procter & Gamble; Japan Tobacco; NV Organon, a unit of Akzo Nobel NV; Rhone-Poulenc Rorer; Schering-Plough Corp.; Merck & Company Inc.; and Hoechst Schering AgrEvo GmbH, one of the world's largest agricultural product manufacturers. The Data Logic division has a collaborative agreement with SmithKline Beecham PLC, under which it is installing its bioinformatic software to enable that company to build proprietary genomic databases and integrate them with information from public databases.
This press release contains forward-looking information, including statements about expected revenue growth, potential new collaborations, marketing of a new gene expression database, and the SEC's review of the third-quarter charge for in-process R&D. Such statements reflect management's current views of future events. Actual results may differ materially from these projections because of a number of risk factors, including uncertainties associated with competition, technological advances, the company's ability to enforce its intellectual property rights, the impact of the intellectual property rights of others, and the company's reliance on collaborators for development and commercialization of products that may result from discovery programs. There is no assurance that collaborations will continue or be renewed or that revenues will continue to grow. The success of the new database will depend in part on the ability of Affymetrix to supply adequate quantities of high-quality GeneChip arrays. If Gene Logic is required to reduce the amount allocated to in-process R&D in the third quarter, there will be a corresponding increase in goodwill that will result in accounting charges against future earnings.
These risk factors and others are more fully described in the company's Annual Report on Form 10-K for the year ended December 31, 1997, the Form S-4 filed in connection with the Oncormed acquisition, and other documents filed with the Securities and Exchange Commission.
For the company's fourth-quarter conference call, dial 800-633-8755 in the United States and Canada or +1 212-346-0190 elsewhere at 8:55 a.m. EST, March 8. For a replay of the call, dial 800-633-8284 or +1 619-812-6440(*) between noon, March 8, and noon, March 10. The reservation number is 11921358.
(*) New number for international access GENE LOGIC INC.
Preliminary Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
1998 1997 1998 1997(b)
(unaudited)
Revenues $4,580 $1,274 $13,197 $2,047
Expenses:
Research and development 5,371 2,723 16,605 6,061
General and
administrative (a) 2,561 1,383 7,552 3,826
Acquired in-process
research and
development (a) -- -- -- --
Total expenses 7,932 4,106 24,157 9,887
Loss from operations (3,352) (2,832) (10,960) (7,839)
Interest Income, net 317 390 1,844 745
Other Expense -- -- (80) --
Income Tax Expense (100) -- (100) (100)
Net loss (3,135) (2,442) (9,296) (7,194) Accretion of Mandatory
Redemption Value of
Preferred Stock -- 377 -- 1,286
Net loss attributable
to common stockholders $(3,135) $(2,819) $(9,296) $(8,480)
Basic and Diluted Net
Loss Per Common Share $(0.16) $(0.43) $(0.59) $(3.97)
COPYRIGHT © 1998 REUTERS LIMITED. ALL RIGHTS RESERVED.
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