Affymetrix (NASDAQ:AFFX)
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Affymetrix Inc. (Nasdaq:AFFX) today reported its operating results for
the fourth quarter and fiscal year ended December 31, 2007. Total
revenue for the fourth quarter was $107.6 million, as compared to total
revenue of $104.2 million in the fourth quarter of 2006. For the full
year, total revenue was $371.3 million as compared to $355.3 million for
2006.
Product and product related revenue was $100.0 million, product sales to
Perlegen Sciences Inc. were $0.6 million and royalties and other revenue
were $7.0 million for the fourth quarter of 2007. For the full year,
product and product related revenue was $337.6 million as compared to
$323.8 million for 2006.
The Company reported net income of approximately $12.8 million or $0.17
per diluted share in the fourth quarter of 2007, which includes a pretax
restructuring charge of $2.4 million or $0.03 per diluted share, as
compared to net income of $8.7 million or $0.13 per diluted share in the
fourth quarter of 2006, which includes a pretax restructuring charge of
$3.5 million or $0.05 per diluted share. Fiscal year 2007 net income was
$12.6 million or $0.17 per diluted share, which includes a pretax
restructuring charge of $15.3 million or $0.18 per diluted share, as
compared to net loss of $13.7 million or $0.20 per diluted share for
2006, which includes a pretax restructuring charge of $13.5 million or
$0.20 per diluted share.
“Driven by the introduction of innovative new
genetic products and a focus on improved operations, in 2007 we
delivered improved operating results and laid the foundation for long
term growth and continued profitability,” said
Kevin King, president of Affymetrix. “We enter
2008 with a strengthened organization, a solid product portfolio, and
are well positioned to take advantage of the high growth market
opportunity for genetic analysis.”
Fourth quarter sales included GeneChip®
consumable revenue of $79.9 million, consisting of array revenue of
$61.6 million, reagent revenue of $16.3 million, genotyping services
revenue of $1.4 million and $0.6 million of Perlegen revenue.
Additionally, the Company reported instrument revenue of $10.7 million
in the fourth quarter of 2007. For the year, consumable revenue was
$272.5 million, as compared to $251.2 in fiscal year 2006. Affymetrix
shipped 44 GeneChip systems in the quarter, bringing its cumulative
systems shipped to around 1,722 at the end of the fourth quarter.
Cost of product sales and product related revenue were $37.7 million in
the fourth quarter of 2007 compared to $38.7 million in the same period
of 2006. Product and product related gross margin was 62.3 percent in
the fourth quarter of 2007 compared to 59.3 percent in the fourth
quarter of 2006. In 2007, cost of product sales and product related
revenue were $133.9 million as compared to $123.7 million in 2006,
resulting in product and product related gross margin of 60.3% in 2007
as compared to 61.8% in 2006.
Operating expenses were $55.7 million for the fourth quarter of 2007,
which includes restructuring charges of $2.4 million, as compared to
$54.1 million in the fourth quarter of 2006, which includes
restructuring charges of $3.5 million. In 2007, operating expenses were
$226.5 million, which includes restructuring charges of $15.3 million,
as compared to $244.9 million in 2006, which includes restructuring
charges of $13.5 million.
Financial Outlook for 2008
For fiscal 2008, the Company expects total revenue to be in the range of
$505 million to $525 million. Total revenue includes a one-time $90
million intellectual property payment in the first quarter. Total gross
margin is expected to be approximately 69 percent, of which 7 percent is
expected to be attributable to the one-time $90 million payment. The
Company expects total operating expenses between $225 million to $230
million, including total restructuring and intangible amortization costs
of approximately $8 million.
Recent Highlights
DNA Analysis
Scientists at University of Ottawa Heart Institute (UOHI) will use the
Affymetrix Genome-Wide Human SNP Array 6.0 for its whole-genome
association study on coronary artery disease (CAD). Over the next
three years, researchers at UOHI will use the array to screen the DNA
of more than 12,000 individuals to not only confirm their previous
findings, but also to identify new associations that provide
scientists with a better understanding of how to identify and develop
personalized treatments for the causes of CAD.
Affymetrix announced the Coriell Institute for Medical Research will
use the Affymetrix Genome-Wide Human SNP Array 6.0 for a series of
whole-genome association studies for the Delaware Valley Personalized
Medicine Project. The goal of the project is to identify genes that
affect the risk of developing cancer, heart and blood vessel diseases,
lung disease, as well as stroke and other complex health conditions.
Scientists at Coriell will conduct studies on DNA samples from 10,000
individuals initially, with the ultimate goal of reaching 100,000
participants.
Researchers at Massachusetts General Hospital and Harvard Medical
School used the Affymetrix 500K array set and a modified protocol to
examine expression levels of maternally and paternally derived
alleles. Published in the November 16, 2007 issue of Science,
scientists found in a genome-wide scan of 4000 human genes that in
over 300 only the maternal or paternal allele was expressed. Termed
monoallelic expression, the relatively high occurrence of this genetic
phenomenon may be a source of human diversity.
RNA Analysis
Scientists at the Salk Institute used GeneChip Exon 1.0ST arrays to
study human embryonic stem cells and neural progenitor cells.
Published in the October 3, 2007 issue of PLoS Computational Biology,
researchers introduced a new methodology for Exon Array analysis,
leading to new insights into the complexity of alternative splicing in
human embryonic stem cells and their transition to neural stem cells.
Researchers at McGill University and collaborators used GeneChip Exon
1.0ST arrays to examine correlations between SNPs and expression of
transcript isoforms. Published in the January 13, 2008 issue of Nature
Genetics, scientists detected 324 genes with significant associations
between flanking SNPs and transcript levels. The study results
indicate that regulatory effects of genetic variation in a normal
human population may be far more complex than previously observed,
which could account for natural phenotypic variation and disease
susceptibility.
Drug Metabolism
Affymetrix announced the availability of its Drug Metabolizing Enzymes
and Transporters (DMET) Early Access solution, currently the world's
most comprehensive method for assaying the genetics of drug
metabolism. The DMET offering profiles more than 1,069 drug metabolism
biomarkers, including 172 "core" genetic markers, enabling pharma
researchers to assess all clinically relevant ADME markers in a single
assay.
Targeted Arrays
Affymetrix announced the launch of the MyGeneChip(TM) Program, which
offers custom gene expression and genotyping arrays for plant and
animal genomes. MyGeneChip Custom Arrays utilize the same proven
GeneChip technology that has been the industry standard in microarray
research for the past decade. In addition to whole-genome 3' in vitro
transcript expression and resequencing arrays, researchers may now
order custom whole-transcript expression, tiling and genotyping arrays
to explore plant and animal genomes in greater detail than ever before.
Molecular Diagnostics
The Company announced that its GeneChip technology will form the
foundation of the new molecular cytogenetic service offering by
Laboratory Corporation of America. The new service will correlate
deletions, gains and other chromosomal rearrangements with congenital
diseases such as autism, mental retardation and developmental delay in
children. Affymetrix’ genotyping technology
will enable high resolution analysis of copy number changes and loss
of heterozygosity (LOH) not possible with traditional karyotype or
FISH technologies.
Affymetrix partner Navigenics, Inc. announced their official corporate
launch, naming a team of advisers and investors from leading
communities in science, medicine, technology and public policy who are
supporting the company. Navigenics educates and empowers customers
with knowledge of their genetic predispositions, and then motivates
them to act on the information to prevent the onset of disease,
achieve earlier diagnosis, appropriately manage disease, or otherwise
lessen its impact. The company has a signed agreement with Affymetrix
to provide lab services via its CLIA-certified laboratory in
Sacramento, California.
Software
Affymetrix announced the availability of its Genotyping Console(TM)
2.0 (GTC 2.0) Software, an easy-to-use analysis tool for determining
single nucleotide polymorphism (SNP) genotypes and chromosomal copy
number changes in whole-genome association and cytogenetic studies.
GTC 2.0 works together with the Genome-Wide Human SNP Array 6.0 to
offer researchers up to 10 times the sensitivity for detecting copy
number changes than competing platforms. The new features of GTC 2.0
make it easier for researchers to extract and interpret both inherited
and novel copy number changes.
The Company announced the full commercial launch of Affymetrix
GeneChip Command Console ® Software, which
in conjunction with Expression Console(TM) and Genotyping Console,
provides scientists with integrated laboratory and data analysis
workflows to suit their growing research requirements. The Command
Console offers customers a new paradigm in instrument control and
genomic data organization software.
Acquisitions
The Company acquired USB Corporation for approximately $75 million in
cash. USB corporation is a privately held Cleveland, Ohio-based
company that develops, manufactures and markets an extensive line of
molecular biology and biochemical reagent products. The acquisition
will enable Affymetrix to accelerate the development and
commercialization of new genetic analysis solutions and increase the
value of its current product portfolio.
Financing
Affymetrix closed its registered offering of $316.50 million aggregate
principal amount of unsecured 3.50% Senior Convertible Notes due 2038.
Affymetrix intends to use the net proceeds from the offering for
working capital and general corporate purposes, which may include
funding its operations, capital expenditures, potential acquisitions
of businesses, product or technologies it believes to be of strategic
importance and repurchases or redemption of all or a portion of its
0.75% Senior Convertible Notes due 2033.
Litigation
Affymetrix and Illumina, Inc. entered into an agreement to resolve
their intellectual property dispute. Under the terms of the agreement,
Illumina made a one-time payment in January to Affymetrix of $90
million. Affymetrix agreed to dismiss with prejudice all lawsuits it
had brought against Illumina and granted to Illumina certain covenants
not to sue.
Affymetrix' management team will host a conference call on January 31,
2008 at 2:00 p.m. PT to review its operating results for the fourth
quarter and fiscal year 2007. A live webcast can be accessed by visiting
the Investor Relations section of the Company’s
website at www.affymetrix.com.
In addition, investors and other interested parties can listen by
dialing domestic: (866) 500-AFFX, international: (706) 643-2771.
A replay of this call will be available from 5:00 p.m. PT on January 31,
2008 until 8:00 p.m. PT on February 6, 2008 at the following numbers:
domestic: (800) 642-1687, international: (706) 645-9291. The passcode
for both replays is 30994152. 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 GeneChip® microarray technology is
the industry-standard tool for analyzing complex genetic information.
After inventing microarray technology in the late 1980s, Affymetrix
scientists have been dedicated to developing innovative products that
provide researchers with a more complete view of the genome. These
products continue to accelerate genetic research and enable scientists
to develop diagnostics and tailor treatments for individual patients by
identifying and measuring the genetic information associated with
complex diseases.
Today, Affymetrix technology is used by the world's top pharmaceutical,
diagnostic and biotechnology companies, as well as leading academic,
government and not-for-profit research institutes. More than 1,700
systems have been shipped around the world and more than 11,000
peer-reviewed papers have been published using the technology.
Affymetrix is headquartered in Santa Clara, Calif., and has
manufacturing facilities in Sacramento, Calif., Cleveland, Ohio and
Singapore. The company has about 1,100 employees worldwide and maintains
sales and distribution operations across Europe and Asia. For more
information about Affymetrix, please visit: 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: risk
related to past and future acquisitions; risks of the company's ability
to achieve and sustain higher levels of revenue, higher gross margins
and reduced operating expenses; uncertainties relating to technological
approaches, manufacturing and product development; personnel retention;
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, 2006, 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.
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
December 31,2007
December 31,2006
(Note 1)
ASSETS:
Current assets:
Cash and cash equivalents
$
288,644
$
119,063
Available-for-sale securities –
short-term portion
205,718
118,088
Accounts receivable, net
81,552
75,553
Accounts receivable from Perlegen Sciences
389
2,290
Inventories
42,912
46,506
Deferred tax assets – current portion
28,584
13,534
Notes receivable from employees – current
portion
1,376
—
Prepaid expenses and other current assets
17,933
8,858
Total current assets
667,108
383,892
Available-for-sale securities – long term
portion
89,912
10,601
Property and equipment, net
143,884
141,322
Acquired technology rights, net
46,797
55,125
Goodwill
125,050
124,916
Deferred tax assets – long-term portion
18,426
29,170
Notes receivable from employees – long
term portion
487
2,186
Other assets
41,927
34,003
Total assets
$
1,133,591
$
781,215
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
61,543
$
62,893
Deferred revenue – current portion
22,498
30,697
Total current liabilities
84,041
93,590
Deferred revenue – long-term portion
3,922
9,562
Other long-term liabilities
10,971
5,100
Convertible notes
436,250
120,000
Stockholders’ equity:
Common stock
692
679
Additional paid-in capital
704,189
674,428
Accumulated other comprehensive income (loss)
1,998
(1,717
)
Accumulated deficit
(108,472
)
(120,427
)
Total stockholders’ equity
598,407
552,963
Total liabilities and stockholders’ equity
$
1,133,591
$
781,215
Note 1:
The condensed consolidated balance sheet at December 31, 2006 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, 2006.
AFFYMETRIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2007
2006
2007
2006
Revenue:
Product sales
$
88,617
$
77,589
$
279,783
$
260,743
Product related revenue
11,351
17,419
57,804
63,040
Total product and product related revenue
99,968
95,008
337,587
323,783
Royalties and other revenue
7,034
6,577
21,687
16,840
Revenue from Perlegen Sciences
590
2,603
12,046
14,694
Total revenue
107,592
104,188
371,320
355,317
Costs and expenses:
Cost of product sales
32,501
32,238
104,137
94,576
Cost of product related revenue
5,166
6,437
29,811
29,149
Cost of revenue from Perlegen Sciences
274
914
4,768
5,218
Research and development
17,597
19,559
72,740
86,296
Selling, general and administrative
35,688
31,019
138,488
145,126
Restructuring charges
2,417
3,489
15,296
13,497
Total costs and expenses
93,643
93,656
365,240
373,862
Income (loss) from operations
13,949
10,532
6,080
(18,545
)
Interest income and other, net
7,038
3,129
15,420
14,078
Interest expense
(1,972
)
(426
)
(3,218
)
(1,600
)
Income (loss) before income taxes
19,015
13,235
18,282
(6,067
)
Income tax provision
(6,239
)
(4,555
)
(5,689
)
(7,637
)
Net income (loss)
$
12,776
$
8,680
$
12,593
$
(13,704
)
Basic net income (loss) per common share
$
0.19
$
0.13
$
0.18
$
(0.20
)
Diluted net income (loss) per common share
$
0.17
$
0.13
$
0.17
$
(0.20
)
Shares used in computing basic net income (loss) per share
68,457
67,562
68,242
67,386
Shares used in computing diluted net income (loss) per share
83,055
71,905
83,064
67,386