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Affymetrix Reports Second Quarter 2010 Results

^{Published on 2010-07-21 13:10:42 - Market Wire}
 

SANTA CLARA, Calif.--([ BUSINESS WIRE ])--Affymetrix, Inc., (NASDAQ:AFFX) today reported its operating results for the second quarter of 2010. Total revenue for the quarter was $71.7 million, in line with previously announced expectations, as compared to total revenue of $81.6 million in the second quarter of 2009.

"Since the beginning of the second quarter, we have bought back approximately $96 million of our 3.5% convertible notes, strengthening our balance sheet and significantly reducing future interest payments"

For the second quarter of 2010, product revenue was $65.1 million, service revenue was $4.7 million, and royalties and other revenue were $1.9 million. This compares to second quarter 2009 product revenue of $67.2 million, service revenue of $12.2 million, and royalties and other revenue of $2.2 million.

The Company reported a net loss of approximately $5.5 million, or $0.08 per diluted share, in the second quarter of 2010, which includes a $1.7 million, or $0.02 per diluted share, gain on debt repurchase from the convertible notes buyback of $26.7 million of aggregate principal amount. This compares to a net income of $7.3 million, or $0.11 per diluted share, in the second quarter of 2009, which included a $17.4 million, or $0.25 per diluted share, gain on debt repurchase from the convertible notes buyback.

For the second quarter of 2010, cost of product sales was $27.5 million compared to $29.9 million in the same period of 2009, which included $4.6 million of manufacturing consolidation-related costs. Cost of services and other was $3.6 million compared to $7.6 million in the same period of 2009.

Product gross margin was 57.7 percent, as compared to 55.5 percent in the same period of 2009.

For the second quarter of 2010, operating expenses were $46.2 million as compared to operating expenses of $52.3 million in the second quarter of 2009.

aDespite the market and commercial challenges that impacted our second quarter results, we continued to make significant operational improvements, including expanding product gross margins and reducing our operating expenses by 12% year-over-year,a stated Kevin M. King, president and CEO. aWe remain confident and are committed to our strategy of expanding the business in the large and growing validation and routine testing markets.a

aSince the beginning of the second quarter, we have bought back approximately $96 million of our 3.5% convertible notes, strengthening our balance sheet and significantly reducing future interest payments,a said Tim Barabe, executive vice president and CFO. aOur balance sheet remains strong, with approximately $120 million in net cash, and we continue to be cash-flow positive from operations.a

Since the beginning of the second quarter, the Company repurchased a total of $95.8 million of its 3.5% convertible notes maturing in January 2013 for $88.9 million. During the second quarter, the Company repurchased $26.7 million of notes at face value for $24.6 million, and since June 30, 2010, it repurchased an additional $69.1 million face value of notes for $64.3 million. At the end of the second quarter, the Company had approximately $220 million of outstanding convertible debt, and, as of July 15, 2010, following the additional notes repurchases, the Company had approximately $151 million of outstanding convertible debt.

Quarterly Highlights

• The launch of the Axioma" Genome-Wide ASI Array, the first commercial product to provide maximum power for genome-wide association studies (GWAS) in East Asian populations. This array is the second catalog release for the Axiom Genotyping Solution, which includes a suite of population-optimized arrays for genomic studies that will be delivered in the next year.
• The launch of the Family Finder DNA test for connecting family members across all ancestral lines by Family Tree DNA, the first and largest genealogical DNA testing company. The test utilizes Affymetrixa™ Axiom genotyping technology and the GeneTitan^®System to confidently match a wide range of family relationships within five generations.
• The delivery of the first custom array designed for a 100,000-sample genotyping project to be performed using the Axiom Genotyping Solution. The array, optimized for European populations, was developed in conjunction with researchers from the Kaiser Permanente Division of Research and University of California, San Francisco (UCSF) as part of an NIH-funded project to create a new resource for studying disease, health, and aging.
• The signing of a Powered by Affymetrixa" (PbA) agreement by Signature Diagnostics, under which Signature obtains a worldwide license to use Affymetrix microarray technology to develop and commercialize diagnostic and prognostic colorectal cancer (CRC) tests. Signature plans to launch two microarray-based in vitro diagnostic (IVD) products by the fourth quarter of this year to enable earlier diagnosis and improved prognosis for CRC. Approximately 396,000 people are diagnosed with CRC annually in the five major European countries and the US, and millions more go undetected because of limitations in current diagnosis methods. Signature will launch the tests in Europe and plans to seek US regulatory approval in the future.
• The launch of Axiom custom genotyping arrays, the newest addition to the Axiom Genotyping Solution. Researchers can now leverage Affymetrixa™ Axiom Genomic Database, the worlda™s largest collection of validated common and rare SNPs, to create custom arrays containing tens of thousands to up to 2.6 million SNPs. In the near future, this capability will expand to support custom array designs containing more than 5 million SNPs. This inherent flexibility allows researchers to conduct genome-wide association, replication, fine mapping, and candidate gene studies on a single platform.
• Launched QuantiGene^® ViewRNA Assayformats, which enable a new era of ain situ multiplex gene expression analysisa by allowing drug screening of native cells and advancing the pace of biomarker disease research and stem cell studies. QuantiGene ViewRNA Assays reliably quantitate gene expression while precisely localizing RNA trafficking within the cell at the single-copy level. The assaysa™ high specificity, bright signals, multiplex capability, and use across broad sample types, including tissues and blood, provide researchers with a new level of in situ gene expression analysis.

Affymetrix's management team will host a conference call on July 21, 2010 at 2:00 p.m. PT to review its operating results for the second quarter of 2010. A live webcast can be accessed by visiting the Investor Relations section of the Companya™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 July 21, 2010 until 8:00 p.m. PT on July 28, 2010 at the following numbers: domestic: (800) 642-1687, international: (706) 645-9291. The passcode for both replays is 85766840. An archived webcast of the conference call will be available under the Investor Relations section of the Company's website.

About Affymetrix

Affymetrix technology is used by the world's top pharmaceutical, diagnostic, and biotechnology companies, as well as leading academic, government, and nonprofit research institutes. Almost 2,000 systems have been shipped around the world and almost 22,000 peer-reviewed papers have been published using the technology. Affymetrix is headquartered in Santa Clara, Calif., and has manufacturing facilities in Cleveland, Ohio, and Singapore. The Company has about 1,000 employees worldwide and maintains sales and distribution operations across Europe and Asia. For more information about Affymetrix, please visit the Company's website.

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 the Companya™s ability to successfully commercialize new products, risk relating to past and future acquisitions, including the ability of the Company to successfully integrate such acquisitions into its existing business; 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; 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' Annual Report on Form 10-K for the year ended December 31, 2009, 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, GeneChip, and all other trademarks are the property of Affymetrix, Inc.

Note1: The condensed consolidated balance sheet at December31, 2009 has been derived from the audited consolidated financial statements at that date included in the Companya™s Annual Report on Form10-K for the fiscal year ended December31, 2009.