Affymetrix Reports Third Quarter 2012 Results

  Affymetrix Reports Third Quarter 2012 Results

Business Wire

SANTA CLARA, Calif. -- November 05, 2012

Affymetrix, Inc., (NASDAQ: AFFX) today reported its operating results for the
third quarter of 2012. Total revenue for the quarter was $79.6 million,
including approximately $17.6 million in revenue from eBioscience during the
third quarter of 2012. This compares to total revenue of $64.0 million for the
same period of 2011.

The Company reported a net loss of approximately $17.9 million, or $0.25 per
diluted share, in the third quarter of 2012, which included the following
one-time items: (1) acquisition-related and integration costs of $1.9 million
and (2) impairment of the West Sacramento facility of $4.0 million. Excluding
these one-time items and recurring amortization of acquired intangible assets
of $5.0 million and release of step-up in inventory fair value of $4.5
million, the Company would have reported a net loss of $2.4 million, or $0.03
per diluted share. This compares to a net loss of $9.8 million, or $0.14 per
diluted share, in the same period of 2011, which included one-time impairment
charges on investments totaling $0.7 million and a reserve on a note
receivable from a private biotechnology company of $2.2 million, and recurring
amortization of acquired intangible assets of $1.5 million. Excluding these
charges, net loss was $5.3 million, or $0.08 per diluted share, for the third
quarter of 2011.

Revenue for the third quarter of 2012 was comprised of product revenue of
$72.7 million and service and other revenue of $6.9 million. Product revenue
included consumable revenue of $50.5 million excluding eBioscience, instrument
revenue of $4.6 million and revenue from eBioscience of $17.6 million. This
compares to total revenue of $64.0 million in the third quarter of 2011,
comprised of product revenue of $57.0 million and service and other revenue of
$7.0 million. Product revenue included consumable revenue of $52.9 million and
instrument revenue of $4.1 million in the third quarter of 2011.

For the third quarter of 2012, cost of product sales, including eBioscience,
was $34.0 million, as compared to $24.6 million in the same period of 2011.
Product gross margin was 53%, as compared to 57% in the same period of 2011,
the decrease is due primarily to the amortization of the step-up in inventory
fair value of $4.5 million. Excluding the inventory step-up amortization,
product gross margin for the third quarter of 2012 was 57%. Cost of services
and other was $4.0 million compared to $3.0 million in the same period of
2011.

For the third quarter of 2012, operating expenses were $52.8 million,
including acquisition- and integration-related non-recurring costs of $1.9
million, and recurring amortization of acquired intangible assets of $3.4
million and eBioscience operating expense of approximately $7.5 million. This
compared to operating expenses of $42.2 million in the same period of 2011.

“For the third quarter of 2012 we’ve continued to make steady progress in
stabilizing our business. On a constant currency basis, our revenue excluding
eBioscience for the third quarter of 2012 was down by about 2% as compared to
the same period in the previous year,” said Frank Witney, president and CEO.
“In the third quarter of 2012, we generated revenue growth of more than 16% as
compared to the third quarter of 2011 in our Genetic Analysis business, which
was offset by continued headwinds in our Gene Expression unit. With the
addition of eBioscience, we have further diversified our revenues and added
important capabilities to provide customers in translational medicine and
clinical diagnostics with a comprehensive set of tools to improve healthcare
outcomes.”

Third quarter highlights:

  *The Company signed a Powered by Affymetrix (PbA) agreement with PathGEN Dx
    Pte. Ltd., a spin-off molecular diagnostics company founded by researchers
    from the Genome Institute of Singapore. Under this PbA agreement, PathGEN
    Dx will develop an in-vitro diagnostic kit for comprehensive pathogen
    detection using their PathGEN® PathChip and is based on a patented,
    efficient, and accurate microarray-based protocol and analysis method. The
    kit will be comprised ofPathGEN Dx’s proprietary reagents, an automated
    software package, and a contract manufactured GeneChip® microarray from
    Affymetrix. It will detect the presence of more than 70,000 viral and
    bacterial genomes from a wide variety of human samples, annotate the
    genomic information, and identify co-infecting pathogens.
  *The Company announced the availability of SensationPlus™ FFPE
    Amplification and 3’ IVT Labeling Kit (SensationPlus™ FFPE Reagent Kit),
    consisting of RNA amplification and labeling modules, to enable gene
    expression profiling of formalin-fixed, paraffin-embedded (FFPE) samples
    on GeneChip 3’ IVT arrays and Almac Xcel™ Array for disease clinical
    research and retrospective studies. SensationPlus^TM FFPE Reagent Kit is
    an advanced version of the Genisphere® technology Affymetrix licensed last
    year.
  *The Company announced the expansion of its license agreement with Siemens
    Healthcare Diagnostics for the company’s branched DNA (bDNA) technology
    whereby Affymetrix is the exclusive licensee for in situ products,
    including in vitro diagnostics. This expanded license grants Affymetrix
    rights to develop and sell in situ QuantiGene® ViewRNA products, currently
    for research use only, in the in vitro diagnostic market. Additionally,
    this license includes exclusive rights to alkaline phosphatase conjugated
    oligonucleotides and their use in bDNA methods for in situ detection
    utilizing Fast Red substrates.

Affymetrix will host a conference call on November 5, 2012 at 2:00 p.m. PT to
review its operating results for the third quarter of 2012. 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: (877) 407-8291, international: (201)
689-8345.

A replay of this call will be available from 5:00 p.m. PT on November 5, 2012
until 8:00 p.m. PT on November 12, 2012 at the following numbers: domestic:
(877) 660-6853, international: (201) 612-7415. The conference call passcode to
access the replay is 401334. 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. More than 2,200 systems have been shipped
around the world and almost 26,000 peer-reviewed papers have been published
using the technology. Affymetrix is headquartered in Santa Clara, California,
and has manufacturing facilities in Cleveland, Ohio, and Singapore.
eBioscience is headquartered in San Diego, California and has manufacturing
facilities in San Diego and Vienna, Austria. Including eBioscience, the
Company has about 1,200 employees worldwide and maintains sales and
distribution operations across Europe, Asia and Latin America.

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's "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: Affymetrix's ability to timely and successfully
integrate and realize the anticipated strategic benefits and costs savings or
other synergies of the acquisition of eBioscience in a cost-effective manner
while minimizing the disruption to its business; risks that eBioscience’s
future performance may not be consistent with its historical performance;
risks relating to Affymetrix's ability to make scheduled payments of the
principal of, to pay interest on or to refinance its indebtedness; risks
relating to Affymetrix's ability to successfully develop and commercialize new
products, including its ability to successfully develop and commercialize
novel molecular solutions based on eBioscience’s portfolio of reagents; risks
relating to past and future acquisitions, including the ability of Affymetrix
to successfully integrate such acquisitions into its existing business; risks
of Affymetrix's ability to achieve and sustain higher levels of revenue,
higher gross margins and reduced operating expenses; risks relating to
Affymetrix’s ability to generate cash in the second half of 2012 after
interest and principal payments; 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's Annual Report on Form 10-K for the year
ended December 31, 2011, and other SEC reports. 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's expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are based.

In addition to providing financial measures based on generally accepted
accounting principles in the United States (GAAP), Affymetrix has disclosed in
this press release its net loss and net loss per share as well as its gross
margins for the third quarter of 2012 excluding specified one-time items.
Reconciliation of non-GAAP net loss to GAAP net loss can be found in the
tables included in this press release. Affymetrix has determined to disclose
this financial information to investors because it believes it will be useful,
as a supplement to GAAP measures, in comparing Affymetrix’s operating
performance in the third quarter of 2012 to the prior-year period. These
non-GAAP financial measures should not be considered in isolation from, or as
a substitute for, financial information prepared in accordance with GAAP.

PLEASE NOTE:
Affymetrix, the Affymetrix logo, GeneChip, and all other trademarks are the
property of Affymetrix, Inc.

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)
                                                       
                                    September 30,          December 31,
                                        2012                 2011       
                                     (Unaudited)            (See Note 1)
ASSETS:
Current assets:
Cash and cash equivalents            $   29,026             $   201,937
Restricted cash                          691                    692
Available-for-sale                       2,575                  7,937
securities—short-term portion
Accounts receivable, net                 52,534                 44,021
Inventories—short-term portion           74,891                 42,851
Deferred tax assets—short-term           379                    364
portion
Property and equipment,                  5,000                  9,000
net—held for sale
Prepaid expenses and other              15,078               7,785      
current assets
Total current assets                     180,174                314,587
Available-for-sale                       7,337                  54,501
securities—long-term portion
Property and equipment, net              30,988                 30,583
Inventories—long-term portion            14,668                 -
Goodwill                                 159,420                -
Intangible assets, net                   157,930                29,525
Deferred tax assets—long-term            3,445                  450
portion
Other long-term assets                  16,224               8,369      
Total assets                         $   570,186           $   438,015    
                                                            
LIABILITIES AND STOCKHOLDERS’
EQUITY:
Current liabilities:
Accounts payable and accrued         $   56,852             $   44,774
liabilities
Convertible notes—short-term             3,855                  -
portion
Term loan—short-term portion             6,375                  -
Deferred revenue—short-term             10,749               9,852      
portion
Total current liabilities                77,831                 54,626
Deferred revenue—long-term               3,453                  3,959
portion
Convertible notes—long-term              105,000                95,469
portion
Term loan—long-term portion              76,500                 -
Other long-term liabilities              22,345                 9,127
Stockholders’ equity:
Common stock                             707                    704
Additional paid-in capital               757,051                750,332
Accumulated other comprehensive          4,420                  2,492
income
Accumulated deficit                     (477,121   )          (478,694   )
Total stockholders’ equity              285,057              274,834    
Total liabilities and                $   570,186           $   438,015    
stockholders’ equity
                                                                           
Note 1: The condensed consolidated balance sheet at December 31, 2011 has been
derived from the audited consolidated
financial statements at that date included in the Company’s Annual Report on
Form 10-K for the fiscal year ended
December 31, 2011.

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)
                                                  
                          Three Months Ended         Nine Months Ended
                          September 30,              September 30,
                           2012       2011       2012       2011    
REVENUE:
Product sales             $ 72,685      $ 57,001     $ 189,681     $ 182,608
Services and other         6,939       6,986      21,593      19,762  
Total revenue              79,624      63,987     211,274     202,370 
COSTS AND EXPENSES:
Cost of product sales       33,979        24,647       81,907        70,913
Cost of services and        3,959         3,001        11,057        9,627
other
Research and                16,498        15,328       43,417        46,894
development
Selling, general and       36,302      26,915     104,752     80,802  
administrative
Total costs and            90,738      69,891     241,133     208,236 
expenses
Loss from operations        (11,114 )     (5,904 )     (29,859 )     (5,866  )
Interest income and         (3,933  )     (2,154 )     (1,631  )     (3,549  )
other, net
Interest expense           2,993       991        4,191       2,866   
Loss before income          (18,040 )     (9,049 )     (35,681 )     (12,281 )
taxes
Income tax (benefit)       (181    )    740        (37,254 )    1,141   
provision
Net (loss) income         $ (17,859 )   $ (9,789 )   $ 1,573      $ (13,422 )
                                                                   
Basic net (loss) income   $ (0.25   )   $ (0.14  )   $ 0.02       $ (0.19   )
per common share
Diluted net (loss)        $ (0.25   )   $ (0.14  )   $ 0.02       $ (0.19   )
income per common share
                                                                   
Shares used in
computing basic net        70,403      69,719     70,181      70,790  
(loss) income per
common share
Shares used in
computing diluted net      70,403      69,719     70,610      70,790  
(loss) income per
common share

AFFYMETRIX, INC.

ITEMIZED RECONCILIATION BETWEEN GAAP AND NON-GAAP NET (LOSS) INCOME

(IN THOUSANDS)

(UNAUDITED)
                                                  
                          Three Months Ended         Nine Months Ended
                          September 30,             September 30,
                           2012       2011      2012       2011    
GAAP net (loss) income    $ (17,859 )  $ (9,789 )   $ 1,573      $ (13,422 )
- diluted
Amortization of
inventory fair value        4,536         -            4,855         -
adjustment
Amortization of
acquired intangible         5,016         1,544        7,919         4,632
assets
Acquisition-related         326           -            6,093         -
transaction costs
Acquisition-related         1,541         -            1,541         -
integration costs
Share-based
compensation charge         -             -            8,265         -
related to acquisition
Provision (recovery) of     -             2,215        (2,215  )     2,215
notes receivable
Impairment of
non-marketable              -             743          -             1,900
investments
Impairment of               4,000         -            4,000         -
held-for-sale property
Income tax benefit         -          -         (37,462 )   -       
related to acquisition
Non-GAAP net loss -       $ (2,440  )  $ (5,287 )  $ (5,431  )  $ (4,675  )
diluted
                                                                   
Basic net loss per        $ (0.03   )  $ (0.08  )  $ (0.08   )  $ (0.07   )
common share
Diluted net loss per      $ (0.03   )  $ (0.08  )  $ (0.08   )  $ (0.07   )
common share
                                                                   
Shares used in
computing basic net        70,403     69,719    70,181     70,790  
loss per common share
Shares used in
computing diluted net      70,403     69,719    70,610     70,790  
loss per common share

Contact:

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