Affymetrix Inc., (Nasdaq:AFFX) today reported its operating results
for the second quarter of 2008. Total revenue for the quarter was
$86.9 million, as compared to total revenue of $88.3 million in the
second quarter of 2007. Product revenue was $75.0 million, which
consists of array and reagent revenue of $68.9 million and
instrument revenue of $6.1 million. Service revenue was $9.0
million, and royalties and other revenue were $2.9 million for the
second quarter of 2008. This compares to second quarter 2007
product revenue of $68.4 million. Service revenue was $12.0
million, and royalties and other revenue were $7.9 million for the
second quarter of 2007. Affymetrix shipped 22 GeneChip� systems in
the quarter, bringing its cumulative systems shipped to 1,761 at
the end of the second quarter. The Company reported net loss of
approximately $3.6 million or $0.05 per diluted share in the second
quarter of 2008, which includes a pretax restructuring charge of
$0.9 million or $0.01 per diluted share, as compared to net income
of $1.2 million or $0.02 per diluted share in the second quarter of
2007, which included a pretax restructuring charge of $1.8 million
or $0.03 per diluted share. Cost of product sales was $32.3 million
in the second quarter of 2008 compared to $25.7 million in the same
period of 2007. Cost of services was $6.7 million compared to $10.8
million in the second quarter of 2007. Product gross margin was
57.0 percent in the second quarter of 2008 compared to 62.4 percent
in the second quarter of 2007. Operating expenses were $50.1
million for the second quarter of 2008, which includes
restructuring charges of $0.9 million, as compared to $54.8 million
in the second quarter of 2007, which includes restructuring charges
of $1.8 million. Updated Financial Outlook for 2008 Due to
predicted ongoing weakness in the Company's pharmaceutical revenue,
the Company now expects 2008 revenue to be in the range of $455
million to $460 million, including a one-time $90 million payment.
Total gross margin is expected to be approximately 65 percent, of
which 9 points is expected to be attributable to the one-time $90
million payment. The Company expects total operating expenses
between $262 million to $267 million, including total restructuring
charges of approximately $32 million and acquisition related
charges of $21 million. Operations Affymetrix announces its plan to
consolidate manufacturing to three locations. These manufacturing
consolidations are expected to improve capacity utilization,
increase operational efficiencies and expand the Company�s product
gross margin. Acquisitions In July, Affymetrix completed an
acquisition of a privately held San Francisco-based company that
develops digitally encoded microparticle technology for
approximately $25 million in cash. This high performance and
flexible platform technology will enable the Company to enter low
to mid-multiplex markets and compete with bead-based platforms. In
addition, this technology is applicable to the research, applied,
and diagnostic markets. Recent Highlights DNA Analysis The Wellcome
Trust of Great Britain has awarded Affymetrix the second phase of
its Case Control Consortium (WTCCC) project. The project will
analyze the genetic information of 60,000 additional individuals,
30,000 of them with the Affymetrix Genome-Wide Human SNP Array 6.0,
plus 6,000 common controls. The Company announced that the Republic
of Korea's National Institute of Health (NIH) and Center for
Disease Control and Prevention is expanding the Korean Association
Resource project from its original 10,000 samples to include an
additional 13,000 samples, which will use the Affymetrix
Genome-Wide Human SNP Array 6.0. Affymetrix announced that Case
Western Reserve University and the Translational Genomics Research
Institute will run 10,000 samples with the Affymetrix Genome-Wide
Human SNP Array 6.0 to discover genetic pathways associated with
diabetic nephropathy. The Company announced that the Center for
Inherited Disease Research (CIDR) has adopted its Genome-Wide Human
SNP Array 6.0 for large-scale genotyping and copy number projects.
CIDR is making Affymetrix-based genotyping available to supporting
members of the National Institutes of Health. Affymetrix and
LineaGen Inc. announced that a team of prominent researchers at the
University of Utah and Vanderbilt University are leveraging Utah's
deep domain expertise in human genetic research and the Affymetrix
Genome-Wide Human SNP Array 6.0 to discover genetic markers
associated with multiple sclerosis and autism. RNA Analysis The
Company announced that a team of researchers at the Fraunhofer
Institute in Germany is using Affymetrix' Whole Transcript gene
expression technology to better understand the molecular basis of
drug-induced liver injury. Molecular Diagnostics Affymetrix and
Asuragen Inc., a leading molecular biology diagnostic company and
service provider, announced an agreement to license, develop and
manufacture in vitro transcription (IVT) reagent kits for molecular
diagnostic applications. Affymetrix announced that its technology
powers the Ipsogen MapQuant Dx� Genomic Grade, the first genomic
test designed to provide a more precise measurement of tumor grade
than previous techniques. Affymetrix' management team will host a
conference call on July 24, 2008 at 2:00 p.m. PT to review its
operating results for the second quarter of 2008. 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 July 24, 2008 until 8:00 p.m. PT
on July 31, 2008 at the following numbers: domestic: (800)
642-1687, international: (706) 645-9291. The passcode for both
replays is 55629576. 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 12,000 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 relating 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, risks associated with manufacturing and product
development, including risks relating to the relocation of a
substantial portion of our manufacturing to Singapore; 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' Form 10-K for the year ended December 31,
2007, 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) � June 30,2008 December 31,2007
(Note 1) ASSETS: Current assets: Cash and cash equivalents $
325,728 $ 288,644 Restricted cash 4,000 � Available-for-sale
securities � short-term portion 263,948 205,718 Accounts
receivable, net ($67 in 2008 and $389 in 2007 from Perlegen
Sciences) 77,889 81,941 Inventories 49,296 42,912 Deferred tax
assets � current portion 15,322 28,584 Notes receivable from
employees � current portion 135 1,376 Prepaid expenses and other
current assets 10,275 17,933 Total current assets 746,593 667,108
Available-for-sale securities � long-term portion 19,658 89,912
Property and equipment, net 126,639 143,884 Acquired technology
rights, net 57,717 46,797 Goodwill 174,129 125,050 Deferred tax
assets � long-term portion 38,942 18,426 Notes receivable from
employees � long-term portion � 487 Other assets 35,151 41,927
Total assets $ 1,198,829 $ 1,133,591 � LIABILITIES AND
STOCKHOLDERS� EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 60,609 $ 61,543 Deferred revenue � current
portion 18,024 22,498 Total current liabilities 78,633 84,041
Deferred revenue � long-term portion 3,754 3,922 Other long-term
liabilities 10,587 10,971 Convertible notes 436,250 436,250
Stockholders� equity: Common stock 702 692 Additional paid-in
capital 734,658 704,189 Accumulated other comprehensive income 100
1,998 Accumulated deficit (65,855 ) (108,472 ) Total stockholders�
equity 669,605 598,407 Total liabilities and stockholders� equity $
1,198,829 $ 1,133,591 � Note�1: The condensed consolidated balance
sheet at December�31, 2007 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, 2007.
AFFYMETRIX,�INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) � � Three
Months Ended June 30, Six Months Ended June 30, 2008 � 2007 2008 �
2007 Revenue: Product sales ($6 and $797 in 2008 and $4,423 and
$11,101 in 2007 from Perlegen Sciences) $ � 75,022 $ � 68,409 $ �
137,828 $ � 132,894 Services 9,005 12,031 17,425 20,788 Royalties
and other revenue 2,884 7,867 101,233 15,060 Total revenue 86,911
88,307 256,486 168,742 � Costs and expenses: Cost of product sales
($0 and $442 in 2008 and $1,907 and $4,328 in 2007 from Perlegen
Sciences) � 32,257 � 25,726 � 58,234 � 47,871 Cost of services
6,691 10,760 12,369 17,166 Cost of royalties and other revenue 52
80 52 146 Research and development 19,591 19,427 38,359 38,654
Selling, general and administrative 29,640 33,643 64,373 69,501
Acquired in-process technology � � 800 � Restructuring charges 898
1,771 14,808 7,142 Total costs and expenses 89,129 91,407 188,995
180,480 Loss (income) from operations (2,218 ) (3,100 ) 67,491
(11,738 ) Interest income and other, net 2,286 5,340 9,158 8,091
Interest expense (3,548 ) (414 ) (7,137 ) (829 ) � Loss (income)
before income taxes (3,480 ) 1,826 69,512 (4,476 ) Income tax
(provision) benefit (155 ) (584 ) (26,895 ) 1,712 Net (loss) income
$ (3,635 ) $ 1,242 $ 42,617 $ (2,764 ) � Basic net (loss) income
per common share $ (0.05 ) $ 0.02 $ 0.62 $ (0.04 ) Diluted net
(loss) income per common share $ (0.05 ) $ 0.02 $ 0.56 $ (0.04 ) �
Shares used in computing basic net (loss) income per share 68,539
68,244 68,522 68,075 Shares used in computing diluted net (loss)
income per share 68,539 68,758 82,971 68,075
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