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
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