Affymetrix Reports Second Quarter 2008 Results

2008-07-24 15:00:00

Affymetrix Reports Second Quarter 2008 Results

Announces Manufacturing Restructuring to Improve Gross Margins

Acquires New Platform to Enter Low to Mid-Multiplex Markets

SANTA CLARA, Calif.–(EMWPresswire)–Affymetrix Inc., (Nasdaq:AFFX) today reported its operating results for

the second quarter of 2008. Total revenue for the quarter was $86.9

million, as compared to total revenue of $88.3 million in the second

quarter of 2007.

Product revenue was $75.0 million, which consists of array and reagent

revenue of $68.9 million and instrument revenue of $6.1 million. Service

revenue was $9.0 million, and royalties and other revenue were $2.9

million for the second quarter of 2008. This compares to second quarter

2007 product revenue of $68.4 million. Service revenue was $12.0

million, and royalties and other revenue were $7.9 million for the

second quarter of 2007. Affymetrix shipped 22 GeneChip®

systems in the quarter, bringing its cumulative systems shipped to 1,761

at the end of the second quarter.

The Company reported net loss of approximately $3.6 million or $0.05 per

diluted share in the second quarter of 2008, which includes a pretax

restructuring charge of $0.9 million or $0.01 per diluted share, as

compared to net income of $1.2 million or $0.02 per diluted share in the

second quarter of 2007, which included a pretax restructuring charge of

$1.8 million or $0.03 per diluted share.

Cost of product sales was $32.3 million in the second quarter of 2008

compared to $25.7 million in the same period of 2007. Cost of services

was $6.7 million compared to $10.8 million in the second quarter of

2007. Product gross margin was 57.0 percent in the second quarter of

2008 compared to 62.4 percent in the second quarter of 2007.

Operating expenses were $50.1 million for the second quarter of 2008,

which includes restructuring charges of $0.9 million, as compared to

$54.8 million in the second quarter of 2007, which includes

restructuring charges of $1.8 million.

Updated Financial Outlook for 2008

Due to predicted ongoing weakness in the Company’s pharmaceutical

revenue, the Company now expects 2008 revenue to be in the range of $455

million to $460 million, including a one-time $90 million payment. Total

gross margin is expected to be approximately 65 percent, of which 9

points is expected to be attributable to the one-time $90 million

payment. The Company expects total operating expenses between $262

million to $267 million, including total restructuring charges of

approximately $32 million and acquisition related charges of $21 million.

Operations

  • Affymetrix announces its plan to consolidate manufacturing to three

    locations. These manufacturing consolidations are expected to improve

    capacity utilization, increase operational efficiencies and expand the

    Companys product gross margin.

Acquisitions

  • In July, Affymetrix completed an acquisition of a privately held San

    Francisco-based company that develops digitally encoded microparticle

    technology for approximately $25 million in cash. This high

    performance and flexible platform technology will enable the Company

    to enter low to mid-multiplex markets and compete with bead-based

    platforms. In addition, this technology is applicable to the research,

    applied, and diagnostic markets.

Recent Highlights

DNA Analysis

  • The Wellcome Trust of Great Britain has awarded Affymetrix the second

    phase of its Case Control Consortium (WTCCC) project. The project will

    analyze the genetic information of 60,000 additional individuals,

    30,000 of them with the Affymetrix Genome-Wide Human SNP Array 6.0,

    plus 6,000 common controls.

  • The Company announced that the Republic of Korea’s National Institute

    of Health (NIH) and Center for Disease Control and Prevention is

    expanding the Korean Association Resource project from its original

    10,000 samples to include an additional 13,000 samples, which will use

    the Affymetrix Genome-Wide Human SNP Array 6.0.

  • Affymetrix announced that Case Western Reserve University and the

    Translational Genomics Research Institute will run 10,000 samples with

    the Affymetrix Genome-Wide Human SNP Array 6.0 to discover genetic

    pathways associated with diabetic nephropathy.

  • The Company announced that the Center for Inherited Disease Research

    (CIDR) has adopted its Genome-Wide Human SNP Array 6.0 for large-scale

    genotyping and copy number projects. CIDR is making Affymetrix-based

    genotyping available to supporting members of the National Institutes

    of Health.

  • Affymetrix and LineaGen Inc. announced that a team of prominent

    researchers at the University of Utah and Vanderbilt University are

    leveraging Utah’s deep domain expertise in human genetic research and

    the Affymetrix Genome-Wide Human SNP Array 6.0 to discover genetic

    markers associated with multiple sclerosis and autism.

RNA Analysis

  • The Company announced that a team of researchers at the Fraunhofer

    Institute in Germany is using Affymetrix’ Whole Transcript gene

    expression technology to better understand the molecular basis of

    drug-induced liver injury.

Molecular Diagnostics

  • Affymetrix and Asuragen Inc., a leading molecular biology diagnostic

    company and service provider, announced an agreement to license,

    develop and manufacture in vitro transcription (IVT) reagent kits for

    molecular diagnostic applications.

  • Affymetrix announced that its technology powers the Ipsogen MapQuant Dx

    Genomic Grade, the first genomic test designed to provide a more

    precise measurement of tumor grade than previous techniques.

Affymetrix’ management team will host a conference call on July 24, 2008

at 2:00 p.m. PT to review its operating results for the second quarter

of 2008. A live webcast can be accessed by visiting the Investor

Relations section of the Companys 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 July 24,

2008 until 8:00 p.m. PT on July 31, 2008 at the following numbers:

domestic: (800) 642-1687, international: (706) 645-9291. The passcode

for both replays is 55629576. 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 12,000

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

relating 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, risks associated with manufacturing and product development,

including risks relating to the relocation of a substantial portion of

our manufacturing to Singapore; personnel retention; uncertainties

relating 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, 2007, 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)

June 30,
2008

December 31,
2007

(Note 1)

ASSETS:

Current assets:

Cash and cash equivalents

$

325,728

$

288,644

Restricted cash

4,000

Available-for-sale securities short-term

portion

263,948

205,718

Accounts receivable, net ($67 in 2008 and $389 in 2007 from Perlegen

Sciences)

77,889

81,941

Inventories

49,296

42,912

Deferred tax assets current portion

15,322

28,584

Notes receivable from employees current

portion

135

1,376

Prepaid expenses and other current assets

10,275

17,933

Total current assets

746,593

667,108

Available-for-sale securities long-term

portion

19,658

89,912

Property and equipment, net

126,639

143,884

Acquired technology rights, net

57,717

46,797

Goodwill

174,129

125,050

Deferred tax assets long-term portion

38,942

18,426

Notes receivable from employees

long-term portion

487

Other assets

35,151

41,927

Total assets

$

1,198,829

$

1,133,591

LIABILITIES AND STOCKHOLDERS EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

60,609

$

61,543

Deferred revenue current portion

18,024

22,498

Total current liabilities

78,633

84,041

Deferred revenue long-term portion

3,754

3,922

Other long-term liabilities

10,587

10,971

Convertible notes

436,250

436,250

Stockholders equity:

Common stock

702

692

Additional paid-in capital

734,658

704,189

Accumulated other comprehensive income

100

1,998

Accumulated deficit

(65,855

)

(108,472

)

Total stockholders equity

669,605

598,407

Total liabilities and stockholders equity

$

1,198,829

$

1,133,591

Note 1: The condensed consolidated balance sheet at December 31, 2007

has been derived from the audited consolidated financial statements at

that date included in the Companys Form 10-K

for the fiscal year ended December 31, 2007.

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

Three Months Ended June 30,

Six Months Ended June 30,

2008

2007

2008

2007

Revenue:

Product sales ($6 and $797 in 2008 and $4,423 and $11,101 in 2007

from Perlegen Sciences)

$

75,022

$

68,409

$

137,828

$

132,894

Services

9,005

12,031

17,425

20,788

Royalties and other revenue

2,884

7,867

101,233

15,060

Total revenue

86,911

88,307

256,486

168,742

Costs and expenses:

Cost of product sales ($0 and $442 in 2008 and $1,907 and $4,328 in

2007 from Perlegen Sciences)

32,257

25,726

58,234

47,871

Cost of services

6,691

10,760

12,369

17,166

Cost of royalties and other revenue

52

80

52

146

Research and development

19,591

19,427

38,359

38,654

Selling, general and administrative

29,640

33,643

64,373

69,501

Acquired in-process technology

800

Restructuring charges

898

1,771

14,808

7,142

Total costs and expenses

89,129

91,407

188,995

180,480

Loss (income) from operations

(2,218

)

(3,100

)

67,491

(11,738

)

Interest income and other, net

2,286

5,340

9,158

Affymetrix Inc.
Doug Farrell, 408-731-5285
Vice President of

Investor Relations & Treasury

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