AFFX Affymetrix, Inc.

Affymetrix, Inc., (NASDAQ: AFFX) today reported its operating results for the third quarter of 2011. Total revenue for the quarter was $64.0 million, as compared to total revenue of $74.0 million in the third quarter of 2010.

The Company reported a net loss of $9.8 million, or $0.14 per diluted share, in the third quarter of 2011. This loss included impairment charges totaling $0.7 million, or $0.01 per diluted share, on investments as well as a reserve of $2.2 million, or $0.03 per diluted share, on a note receivable from a private biotechnology company. This compares to net income of $1.0 million, or $0.01 per diluted share, in the same period of 2010. Results for the third quarter of 2010 included a gain of $4.1 million, or $0.06 per diluted share from the repurchase of convertible notes.

For the third quarter of 2011, product revenue was $57.0 million, which consisted of consumable revenue of $52.9 million and instrument revenue of $4.1 million. Service revenue was $5.3 million, and royalties and other revenue was $1.7 million. This compares to third quarter 2010 product revenue of $67.3 million, which consisted of consumable revenue of $61.9 million and instrument revenue of $5.4 million. Service revenue in the third quarter of 2010 was $4.9 million, and royalties and other revenue was $1.8 million.

For the third quarter of 2011, cost of product sales was $24.6 million compared to $29.8 million in the same period of 2010. Cost of services and other was $3.0 million compared to $3.7 million in the same period of 2010. Product gross margin was 57%, as compared to 56% in the same period of 2010.

For the third quarter of 2011, operating expenses were $42.2 million as compared to operating expenses of $42.5 million in the same period of 2010.

“During the third quarter we completed a number of initiatives to position the company for top-line growth and profitability in 2012,” said Frank Witney, President and CEO. “This involved restructuring the organization to better align our resources with our key commercial opportunities. We reduced our headcount in R&D and plan to reallocate some of those resources to sales and marketing to help drive product adoption. During the quarter, our cash-flow from operations was roughly $12 million and our net cash position increased to approximately $170 million.”

During the third quarter, the Company announced:

• The introduction of the CytoScan® HD Solution, a research-use-only array for cytogenetic analysis. The CytoScan HD Solution provides the broadest coverage, highest performance, and most genotype–able single nucleotide polymorphisms (SNPs) for detecting human chromosomal aberrations associated with genes related to constitutional and cancer cytogenetics. This single array includes more than 2.6 million copy number markers of which 750,000 are genotype–able SNPs and 1.9 million are non–polymorphic probes.
• The commercial launch of the Axiom® Genome-Wide Pan-African Array, the first commercial product to maximize genomic coverage of both common and rare alleles in populations of African ancestry, including West African, East African, and African American. The Axiom Solution is the only microarray family of products to provide a complete set of population-optimized arrays for all three HapMap populations: Western European (CEU), East Asian (ASI), and Yoruba (YRI). Each array is strategically designed to address the unique haplotype structure of these populations to ensure high genomic coverage and statistical power.
• The commercialization of 18 new array designs for whole-transcriptome analysis of model and applied research organisms that will allow scientists to obtain a more complete gene expression view than traditional 3' biased arrays. The new Affymetrix® Gene 1.1 ST Array Strips are created exclusively for the GeneAtlas® System--the first personal bench-top microarray system in which four samples can be processed simultaneously. The GeneAtlas System and array strips offer an affordable solution that combines excellent performance and a simplified workflow with intuitive, easy-to-use software.
• The commercialization of a next-generation human transcriptome array demonstrated by Stanford University researchers to be superior to mRNA sequencing (RNA-Seq) in gene expression profiling studies. In multiple experiments using a clinically relevant transcriptome discovered by deep sequencing, the research scientists compared the throughput and performance of both profiling technologies and found the new GeneChip® Human Transcriptome and Splice Junction Array outperformed RNA-Seq in most all parameters when detecting exonic changes implicated in human disease and genetic disorders. According to results of Stanford's recently published study, the Human Transcriptome Array detected the same number of genes and two times the number of exons, had lower variance over a wide range of expression levels, improved the percentage of true-positive detections in alternative splicing analysis, and measured more non-coding RNA than RNA-Seq. With 99 percent coverage of human genes and 95 percent coverage of transcript isoforms, researchers determined that the high density microarray is a better profiling technology than RNA-Seq for clinical studies.

Affymetrix's management team will host a conference call on November 2, 2011 at 2:00 p.m. PT to review its operating results for the third quarter of 2011. 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 2, 2011 until 8:00 p.m. PT on November 9, 2011 at the following numbers: domestic: (877) 660-6853, international: (201) 612-7415. The passcode for both replays is 380800. 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. Almost 2,200 systems have been shipped around the world and over 24,000 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. The Company has more than 900 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' "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 the Company’s ability to successfully commercialize new products, risk relating to past and future acquisitions, including the ability of the Company to successfully integrate such acquisitions into its existing business; 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; 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' Annual Report on Form 10-K for the year ended December 31, 2010, 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' 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, GeneChip, and all other trademarks are the property of Affymetrix, Inc.

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

(UNAUDITED)

  September 30,   December 31,   2011     2010   ASSETS: (Note 1) Current assets: Cash and cash equivalents $ 32,391 $ 35,484 Restricted cash 294 287 Available-for-sale securities—short-term portion 53,439 67,223 Accounts receivable, net 41,101 52,281 Inventories 47,872 49,373 Deferred tax assets—short-term portion 964 1,071 Prepaid expenses and other current assets   7,940     9,422   Total current assets 184,001 215,141 Available-for-sale securities—long-term portion 177,851 134,190 Property and equipment, net 45,124 54,177 Acquired technology rights, net 29,468 38,858 Deferred tax assets—long-term portion 4,981 4,894 Other long-term assets   9,731     13,525   Total assets $ 451,156   $ 460,785     LIABILITIES AND STOCKHOLDERS’ EQUITY: Current liabilities: Accounts payable and accrued liabilities $ 40,305 $ 44,259 Deferred revenue—short-term portion   9,671     10,950   Total current liabilities 49,976 55,209 Deferred revenue—long-term portion 4,125 4,601 Other long-term liabilities 13,769 11,748 Convertible notes 95,469 95,472 Stockholders’ equity: Common stock 705 706 Additional paid-in capital 748,156 742,206 Accumulated other comprehensive income 2,911 1,376 Accumulated deficit   (463,955 )   (450,533 ) Total stockholders’ equity   287,817     293,755   Total liabilities and stockholders’ equity $ 451,156   $ 460,785    

Note 1: The condensed consolidated balance sheet at December 31, 2010 has been derived from the audited consolidatedfinancial statements at that date included in the Company’s Annual Report on Form 10-K for the fiscal year endedDecember 31, 2010.

 

AFFYMETRIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

  Three Months Ended   Nine Months Ended September 30, September 30,   2011       2010     2011       2010   REVENUE: Product sales $ 57,001 $ 67,273 $ 182,608 $ 205,819 Services 5,262 4,929 15,029 14,134 Royalties and other revenue   1,724     1,770     4,733     5,884   Total revenue   63,987     73,972     202,370     225,837   COSTS AND EXPENSES: Cost of product sales 24,647 29,822 70,913 85,816 Cost of services and other 3,001 3,677 9,627 11,820 Research and development 15,328 16,175 46,894 52,469 Selling, general and administrative   26,915     26,309     80,802     86,116   Total costs and expenses   69,891     75,983     208,236     236,221   Loss income from operations (5,904 ) (2,011 ) (5,866 ) (10,384 ) Interest income and other, net (2,154 ) 760 (3,549 ) (2,100 ) Interest expense 991 1,537 2,866 6,309 Gain from repurchase of convertible notes   -     4,108     -     5,852   (Loss) income before income taxes (9,049 ) 1,320 (12,281 ) (12,941 ) Income tax provision   740     352     1,141     1,252   Net (loss) income $ (9,789 ) $ 968   $ (13,422 ) $ (14,193 )   Basic net (loss) income per common share $ (0.14 ) $ 0.01   $ (0.19 ) $ (0.21 )   Diluted net (loss) income per common share $ (0.14 ) $ 0.01   $ (0.19 ) $ (0.21 )   Shares used in computing basic net (loss) income per common share   69,719     68,875     70,790     68,945     Shares used in computing diluted net (loss) income per common share   69,719     69,223     70,790     68,945