Affymetrix, Inc. (Nasdaq:AFFX), today reported its operating
results for the first quarter of 2006. On a GAAP basis the Company
reported net income of approximately $1.8 million or $0.03 per
diluted share in the first quarter of 2006, as compared to net
income of $16.2 million or $0.24 per diluted share in the first
quarter of 2005. On January 1, 2006, the Company adopted FAS 123R
and is reporting employee stock-based compensation expense in its
GAAP results. Excluding the impact of FAS 123R, the Company
reported non-GAAP net income of approximately $4.2 million or $0.06
per diluted share in the first quarter of 2006. Total revenue for
the quarter was $86.4 million, of which $5.3 million was related to
the sale of products to Perlegen Sciences, Inc., as compared to
total revenue of $88.6 million in the first quarter of 2005, of
which $2.2 million was related to the sale of products to Perlegen.
Product and product related revenue was $79.2 million for the first
quarter of 2006, compared to $84.9 million in the same period in
2005. First quarter sales included GeneChip(R) consumable revenue
of $62.7 million, consisting of array revenue of $43.2 million,
reagent revenue of $10.5 million, services revenue of $3.7 million
and $5.3 million of Perlegen revenue. Additionally, the Company
reported instrument revenue of $12.3 million. Affymetrix shipped 43
GeneChip Systems in the quarter, increasing the cumulative systems
shipped to approximately 1420. Royalties and other revenue were
$1.9 million for the first quarter of 2006 compared to $1.6 million
in the first quarter of 2005. Total operating costs and expenses
were $89.4 million for the first quarter of 2006 compared to $69.8
million in the first quarter of 2005. Cost of product and product
related revenue was $25.5 million in the first quarter of 2006
compared to $21.8 million in the same period of 2005. Product and
product related gross margin was 67.8 percent in the first quarter
of 2006 compared to 74.3 percent in the first quarter of 2005.
Research and development expenses were $23.5 million during the
first quarter of 2006 compared to $17.1 million in the first
quarter of 2005. Selling, general and administrative expenses were
$38.8 million for the first quarter of 2006 compared to $29.6
million in the first quarter of 2005. Quarterly Highlights RNA
analysis -- Affymetrix extended its GeneChip Exon Array product
line with the launch of the Mouse and Rat Exon 1.0 ST Arrays.
Syntenic design across the three species provides researchers with
an easier way to perform comparative genomics between model systems
and humans. Exon arrays enable a deeper understanding of
alternative splicing on a whole-genome scale on a single array. --
Affymetrix expanded its gene expression portfolio by launching nine
Tiling Array products for five different organisms including Human,
Mouse, Arabidopsis, S. cerevisiae, and S. pombe. These products
enable genome-wide monitoring and discovery of RNA expression
patterns, mapping sites of DNA-protein interactions and
investigation of epigenomic changes like methylation or
acetylation. -- The Company partnered with Iconix Pharmaceuticals,
Inc. to develop a database for pharmaceutical customers
investigating the toxicological and pharmacological properties of
drugs and drug candidates. Together, Affymetrix' GeneChip
expression arrays and Iconix' analysis methods will provide
detailed toxicology information that will help scientists to better
prioritize candidates and make preclinical development decisions
faster than ever before. DNA analysis -- Affymetrix announced that
Korea's National Institutes of Health (NIH) and Center for Disease
Control and Prevention will use the Affymetrix GeneChip Human
Mapping 500K Array Set for a series of groundbreaking genome-wide
association studies in critical disease areas, including diabetes,
hypertension, asthma and metabolic syndrome. This study will
generate more than 10 billion individual genotypes from 20,000
human DNA samples to help identify the genetic causes of these
diseases. -- Using the Affymetrix GeneChip Mapping 100K Array,
researchers led by the Boston University School of Medicine
identified a common genetic variant associated with a higher risk
of obesity. Published in the April 14, 2006 issue of Science, the
discovery of this predisposing genetic signature may enable better
design of therapies to treat obesity. Licensing -- Abbott
Molecular, a division of Abbott, obtained a royalty-bearing,
non-exclusive, worldwide license to a number of Affymetrix patents
that will allow it to manufacture and sell comparative genomic
hybridization (CGH) microarrays, related readers and software in
the research and diagnostics field. Governance -- Elected Robert H.
Trice, Ph.D., senior vice president for business development at
Lockheed Martin Corporation, to the Affymetrix Board of Directors.
Since joining Lockheed Martin in 1996, he has held several senior
management positions and has overseen many international aspects of
the business. -- Appointed Susan D. Desmond-Hellmann, M.D., M.P.H.
to the Compensation Committee of the Affymetrix Board of Directors.
Dr. Desmond-Hellmann is President, Product Development at
Genentech, Inc. and has served as a director since 2004.
Affymetrix' management team will host a conference call on April
20, 2006 at 2:00 p.m. PT to review its operating results for the
first quarter of 2006. 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) 500-2339,
international: (706) 643-2771. A replay of this call will be
available from 5:00 p.m. PT on April 20, 2006 until 8:00 p.m. PT on
April 27, 2006 at the following numbers: domestic: (800) 642-1687;
international: (706) 645-9291. The passcode for both is 7725576. 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 scientists invented
the world's first high-density microarray in 1989 and began selling
the first commercial microarray in 1994. Since then, Affymetrix
GeneChip(R) technology has become the industry standard in
molecular biology research. 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 1,400 systems have been installed around the
world and nearly 4,000 peer-reviewed papers have been published
using the technology. Affymetrix' patented photolithographic
manufacturing process provides the most information capacity
available today on an array, enabling researchers to use a
whole-genome approach to analyzing the relationship between
genetics and health. Affymetrix is headquartered in Santa Clara,
Calif., with manufacturing facilities in Sacramento, Calif., and
Bedford, Mass. The company maintains important sales and marketing
operations in Europe and Asia and has about 1,100 employees
worldwide. For more information about Affymetrix, please visit the
company's website at www.affymetrix.com. Use of Non-GAAP Financial
Measures In addition to disclosing financial results calculated in
accordance with GAAP, the Company's earnings release contains
non-GAAP financial measures that exclude the effects of non-cash
equity-based stock compensation expense as a result of the
Company's adoption of FAS 123R on January 1, 2006. The Company
believes that the presentation of results excluding non-cash
equity-based stock compensation expense provides meaningful
supplemental information to both management and investors that is
indicative of the Company's core operating results. The Company is
using the Modified Prospective Method in its adoption of FAS 123R
and as such, will not restate prior year results for the impact of
employee stock option expensing. Therefore, the Company believes
these non-GAAP financial measures facilitate comparison of
operating results across reporting periods. A reconciliation
between the Company's results of operations on a GAAP and non-GAAP
basis for the periods reported is included as part of the condensed
consolidated statements of operations at the end of the Company's
earnings release. The Company uses these non-GAAP financial
measures when evaluating its financial results as well as for
internal planning and forecasting purposes. The non-GAAP financial
measures disclosed by the Company should not be considered a
substitute for or superior to financial measures calculated in
accordance with GAAP, and the financial results calculated in
accordance with GAAP and reconciliations to those financial
statements should be carefully evaluated. The non-GAAP financial
measures used by the Company may be calculated differently from,
and therefore may not be comparable to, similarly titled measures
used by other companies. All statements in this press release that
are not historical are "forward-looking statements" under the
federal securities laws. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially,
including but not limited to: risks related to the Company's
ability to achieve and sustain higher levels of revenue and
improved gross margins and operating income; uncertainties relating
to technological approaches, manufacturing (including risks related
to achieving hoped-for manufacturing yields and resolving
manufacturing problems) and product development; uncertainties
relating to changes in senior management personnel and structure;
uncertainties related to cost and pricing of Affymetrix products;
risks relating to 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, 2005 and other SEC reports, including its Form 10-Q reports for
subsequent 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 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. -0- *T AFFYMETRIX, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) March 31,
December 31, 2006 2005 ----------- ------------ (Note 1) ASSETS
Current assets: Cash and cash equivalents $104,492 $100,236
Available-for-sale securities - short-term 149,804 184,696 Accounts
receivable 70,606 93,028 Accounts receivable from Perlegen Sciences
6,236 4,082 Inventories 40,702 35,980 Deferred tax assets - current
portion 22,218 22,117 Prepaid expenses and other current assets
10,648 12,622 ----------- ------------ Total current assets 404,706
452,761 Available-for-sale securities - long-term 22,515 --
Property and equipment, net 99,894 85,560 Acquired technology
rights, net 59,442 61,426 Goodwill 124,063 124,498 Deferred tax
assets - long-term portion 13,436 13,436 Notes receivable from
employees 1,839 1,824 Other assets 28,019 27,318 -----------
------------ $753,914 $766,823 =========== ============ LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued liabilities $50,054 $71,551 Deferred revenue -- current
portion 39,577 35,644 ----------- ------------ Total current
liabilities 89,631 107,195 Deferred revenue -- long-term portion
10,706 15,606 Other long-term liabilities 4,563 4,184 Convertible
notes 120,000 120,000 Stockholders' equity: Common stock 675 672
Additional paid-in capital 621,567 624,727 Deferred stock
compensation -- (10,799) Accumulated other comprehensive loss
(1,518) (1,227) Accumulated deficit (91,710) (93,535) -----------
------------ Total stockholders' equity 529,014 519,838 -----------
------------ $753,914 $766,823 =========== ============
--------------------------------- Note 1: The condensed
consolidated balance sheet at December 31, 2005 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, 2005. AFFYMETRIX, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED) Three Months Three Months Ended Ended March 31, 2006
March 31, 2005 Revenue: Product sales $65,972 $73,551 Product
related revenue 13,243 11,317 ----------------- ---------------
Total product and product related revenue 79,215 84,868 Royalties
and other revenue 1,876 1,560 Revenue from Perlegen Sciences 5,300
2,187 ----------------- --------------- Total revenue 86,391 88,615
----------------- --------------- Costs and expenses: Cost of
product sales 19,074 19,279 Cost of product related revenue 6,441
2,505 Cost of revenue from Perlegen Sciences 1,584 1,242 Research
and development 23,501 17,090 Selling, general and administrative
38,766 29,597 Stock-based compensation -- 83 -----------------
--------------- Total costs and expenses 89,366 69,796
----------------- --------------- (Loss) income from operations
(2,975) 18,819 Interest income and other, net 4,287 714 Interest
expense (424) (427) ----------------- --------------- Income before
income taxes 888 19,106 Income tax benefit (provision) 937 (2,888)
----------------- --------------- Net income $1,825 $16,218
================= =============== Basic net income per common share
$0.03 $0.26 ================= =============== Diluted net income
per common share $0.03 $0.24 ================= ===============
Shares used in computing basic net income per share 67,213 62,351
Shares used in computing diluted net income per share 68,680 69,081
AFFYMETRIX, INC. RECONCILIATION OF NON-GAAP ADJUSTMENTS (IN
THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended
Three Months Ended March 31, 2006 March 31, 2005 Adjust- Adjust-
GAAP ments Non-GAAP GAAP ments Non-GAAP -------- ------- --------
-------- ------- -------- Revenue: Product sales $65,972 $--
$65,972 $73,551 $-- $73,551 Product related revenue 13,243 --
13,243 11,317 -- 11,317 -------- ------- -------- -------- -------
-------- Total product and product related revenue 79,215 -- 79,215
84,868 -- 84,868 Royalties and other revenue 1,876 -- 1,876 1,560
-- 1,560 Revenue from Perlegen Sciences 5,300 -- 5,300 2,187 --
2,187 -------- ------- -------- -------- ------- -------- Total
revenue 86,391 -- 86,391 88,615 -- 88,615 -------- ------- --------
-------- ------- -------- Costs and expenses: Cost of product sales
(1) 19,074 (341) 18,733 19,279 -- 19,279 Cost of product related
revenue 6,441 -- 6,441 2,505 -- 2,505 Cost of revenue from Perlegen
Sciences 1,584 -- 1,584 1,242 -- 1,242 Research and development (1)
23,501 (1,062) 22,439 17,090 -- 17,090 Selling, general and admin-
istrative (1) 38,766 (2,360) 36,406 29,597 -- 29,597 Stock-based
compensation (2) -- -- -- 83 (83) -- -------- ------- --------
-------- ------- -------- Total costs and expenses 89,366 (3,763)
85,603 69,796 (83) 69,713 -------- ------- -------- --------
------- -------- (Loss) income from operations (2,975) 3,763 788
18,819 83 18,902 Interest income and other, net 4,287 -- 4,287 714
-- 714 Interest expense (424) -- (424) (427) -- (427) --------
------- -------- -------- ------- -------- Income before income
taxes 888 3,763 4,651 19,106 83 19,189 Income tax benefit
(provision) (3) 937 (1,358) (421) (2,888) (13) (2,901) --------
------- -------- -------- ------- -------- Net income $1,825 $2,405
$4,230 $16,218 $70 $16,288 ======== ======= ======== ========
======= ======== Basic net income per common share $0.03 $0.06
$0.26 $0.26 ======== ======== ======== ======== Diluted net income
per common share $0.03 $0.06 $0.24 $0.24 ======== ======== ========
======== Shares used in computing basic net income per share 67,213
67,213 62,351 62,351 Shares used in computing diluted net income
per share (4) 68,680 68,680 69,081 69,081 Explanations for Non-GAAP
adjustments included in table above: (1) For the three months ended
March 31, 2006, the Company has added back stock-based compensation
expense recorded under FAS 123R to compute its non-GAAP operating
results. (2) For the three months ended March 31, 2005, the Company
has added back stock-based compensation expense recorded under
prior accounting standards related to a fully vested restricted
stock grant to a non-employee to compute its non-GAAP operating
results and facilitate comparison of operating results across
reporting periods. (3) Amount reflects the estimated tax impact on
the above noted non-GAAP adjustments. (4) For the three months
ended March 31, 2006, the Company did not adjust the shares used in
computing non-GAAP diluted net income per share to conform to what
the diluted shares would had been had it applied prior accounting
standards. The difference between the shares calculated by applying
FAS 123R and calculated under prior accounting standards was
approximately 0.2 million shares. *T
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