AFFX Affymetrix, Inc.

Affymetrix Reports Second Quarter 2004 Results Company Reiterates Full-Year Revenue and Earnings Guidance SANTA CLARA, Calif., July 21 /PRNewswire-FirstCall/ -- Affymetrix, Inc., (NASDAQ:AFFX) today reported its results for the second quarter of 2004. The Company reported net income of approximately $7.0 million or $0.12 per basic share and $0.11 per diluted share in the second quarter of 2004, as compared to a net income of $5.2 million or $0.09 per basic and diluted share in the second quarter of 2003. Total revenue for the quarter was $79.8 million, of which $1.4 million was related to the sale of products and wafers to Perlegen Sciences, Inc., as compared to total revenue of $68.6 million in the second quarter of 2003, of which $2.8 million was related to the sale of products and wafers to Perlegen. Product and product related revenue increased to $75.2 million for the second quarter of 2004, compared to $63.2 million in the same period in 2003. Second quarter product sales included GeneChip(R) array revenue of $35.4 million and instrument revenue of $20.1 million. The year-over-year growth in product and product related revenue was driven by continued adoption of the next-generation GeneChip instrumentation and continued growth of consumable sales including arrays and reagents. In addition, Affymetrix increased its installed base to approximately 1,070 GeneChip systems. Royalties and other revenue were $3.2 million for the second quarter of 2004 compared to $2.7 million in the second quarter of 2003. Total operating costs and expenses were $70.6 million for the second quarter of 2004 compared to $63.8 million in the second quarter of 2003. Cost of product and product related revenue was $21.5 million in the second quarter of 2004 compared to $19.3 million in the same period of 2003. Product and product related gross margin was 71.4% in the second quarter of 2004 compared to 69.5% in the second quarter of 2003. Research and development expenses were $17.8 million during the second quarter of 2004 compared to $16.6 million in the second quarter of 2003. Selling, general and administrative expenses were $30.0 million for the second quarter of 2004 compared to $24.2 million in the second quarter of 2003. Company Highlights -- Accomplishments in the DNA analysis market include: -- Whole genome population studies are now possible with the full commercial release of the 100K Mapping Array Set, the first in a family of large-scale genotyping products. -- The entire adult population of the Micronesian island of Kosrae will be genotyped with over 200,000 SNPs to study the genetics of obesity and related diseases in a project led by Dr. Jeffrey Friedman of Rockefeller University. -- Leveraging the strength of photolithographic manufacturing, a higher-density, more cost-effective GeneChip Mapping 10K 2.0 Array is now broadly available to enable a wide variety of genetic studies, including loss of heterozygosity (LOH), familial linkage studies and gene amplification. -- The genetics of autism will be examined by a team of over 170 researchers worldwide in a study funded by the National Alliance for Autism Research (NAAR) using Affymetrix GeneChip 10K technology. -- A gene responsible for a form of Sudden Infant Death Syndrome has been identified using the Affymetrix 10K Mapping Array by scientists at the Translational Genomics Research Institute and the Clinic for Special Children. -- Professor John Todd of Cambridge University is leading a large-scale genetic study of diabetes utilizing technologies from Affymetrix and ParAllele BioScience. -- The genetics of Parkinson's disease are being studied by the Mayo Clinic in collaboration with Perlegen Sciences using Affymetrix whole-genome technology. -- Access to Perlegen Sciences' whole genome services is now broadly available to the entire research community through Affymetrix' global sales channels. -- In Affymetrix' expression product portfolio, more than 100 recently sequenced genomes have been added using its custom array design options. -- On June 14th, the Company announced that it had converted an ongoing royalty obligation to a fully paid-up license, thereby increasing product gross margins. Based on this, the Company increased its guidance for net income and earnings per share for fiscal 2004. Financial Outlook For fiscal year 2004, the Company reiterates its previous guidance of product and product related revenue of $330-335 million and earnings per basic and diluted share of around $0.60. For the third quarter of 2004, the Company expects product and product related revenue in the range of $80-85 million, total revenue in the range of $83-88 million, and earnings per basic and diluted share of approximately $0.18. Affymetrix' management team will host a conference call to review its operating results for the second quarter of 2004 and to provide financial guidance for the third quarter and fiscal year 2004. A live webcast of the conference call can be accessed by visiting the Investor Relations section of the Company's website at http://www.affymetrix.com/. In addition, investors and other interested parties can listen by dialing domestic: 888-737-3798; international: 706-643-2578 on July 21 at 2:00 p.m. PT. A replay of the conference call will be available until 5:00 p.m. PT on July 28, 2004 at the following numbers: domestic: 800-642-1687; international: 706-645-9291; passcode for both: #8350582. An archived webcast of the conference call will be available under the Investor Relations section of the Company's website at http://www.affymetrix.com/. About Affymetrix Affymetrix is a pioneer in creating breakthrough tools that are driving the genomic revolution. By applying the principles of semiconductor technology to the life sciences, Affymetrix develops and commercializes systems that enable scientists to improve the quality of life. The Company's customers include pharmaceutical, biotechnology, agrichemical, diagnostics and consumer products companies as well as academic, government and other non-profit research institutes. Affymetrix offers an expanding portfolio of integrated products and services, including its integrated GeneChip platform, to address growing markets focused on understanding the relationship between genes and human health. Additional information on Affymetrix can be found at http://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, including Affymetrix' financial outlook for 2004, are subject to risks and uncertainties that could cause actual results to differ materially for Affymetrix from those projected, including, but not limited to, risks of the Company's ability to achieve and sustain higher levels of revenue, higher gross margins, reduced operating expenses, market acceptance, personnel retention, global economic conditions, the fluctuations in overall capital spending in the academic and biotechnology sectors, changes in government funding policies, unpredictable fluctuations in quarterly revenues, 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, 2003 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. CustomExpress is a trademark of Affymetrix, Inc. AFFYMETRIX, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED) June 30, December 31, 2004 2003 (Note 1) ASSETS Current assets: Cash and cash equivalents $54,227 $275,928 Available-for-sale securities 105,692 183,955 Accounts receivable 62,812 71,343 Inventories 18,801 22,632 Prepaid expenses and other current assets 5,510 7,443 Total current assets 247,042 561,301 Property and equipment, net 62,882 62,611 Acquired technology rights, net 67,511 27,818 Goodwill 18,601 18,601 Notes receivable from employees 2,699 1,500 Other assets 26,341 28,333 $425,076 $700,164 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $42,028 $71,044 Deferred revenue - current portion 32,110 30,019 Convertible subordinated notes - short-term -- 267,460 Total current liabilities 74,138 368,523 Deferred revenue - long-term portion 36,664 43,346 Other long-term liabilities 3,913 3,240 Convertible notes 120,000 120,000 Stockholders' equity: Common stock 606 595 Additional paid-in capital 389,689 370,304 Notes receivable from stockholders (451) (428) Deferred stock compensation (4,537) (5,185) Accumulated other comprehensive loss (1,463) (1,572) Accumulated deficit (193,483) (198,659) Total stockholders' equity 190,361 165,055 $425,076 $700,164 Note 1: The condensed consolidated balance sheet at December 31, 2003 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, 2003. AFFYMETRIX, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 Revenue: Product sales $61,664 $49,216 $122,755 $95,974 Product related revenue 13,511 13,977 27,033 28,366 Total product and product related revenue 75,175 63,193 149,788 124,340 Royalties and other revenue 3,187 2,690 5,558 5,845 Revenue from Perlegen Sciences 1,392 2,751 3,041 5,261 Total revenue 79,754 68,634 158,387 135,446 Costs and expenses: Cost of product sales 19,388 16,997 40,120 33,817 Cost of product related revenue 2,076 2,308 4,932 4,501 Cost of revenue from Perlegen Sciences 1,099 2,751 2,470 5,261 Research and development 17,804 16,622 35,100 32,527 Selling, general and administrative 29,955 24,183 58,224 52,159 Amortization of deferred stock compensation 324 673 648 1,368 Amortization of purchased intangibles -- 281 -- 562 Charge for acquired in-process technology -- -- -- 10,096 Total costs and expenses 70,646 63,815 141,494 140,291 Income (loss) from operations 9,108 4,819 16,893 (4,845) Interest income and other, net (940) 5,986 135 8,362 Interest expense (404) (5,266) (10,238) (10,167) Net income (loss) before income taxes 7,764 5,539 6,790 (6,650) Income tax provision (755) (344) (1,614) (878) Net income (loss) $7,009 $5,195 $5,176 $(7,528) Basic net income (loss) per share $0.12 $0.09 $0.09 $(0.13) Diluted net income (loss) per share $0.11 $0.09 $0.08 $(0.13) Shares used in computing basic net income (loss) per share 60,376 58,708 60,140 58,628 Shares used in computing diluted net income (loss) per share 62,970 60,193 62,775 58,628 DATASOURCE: Affymetrix, Inc. CONTACT: Doug Farrell, Vice President of Investor Relations of Affymetrix, Inc., +1-408-731-5285 Web site: http://www.affymetrix.com/

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