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Affymetrix Revenues Rise for 2001, As Comeback Company Reports Solid Q4

NEW YORK, Jan. 30 - For Affymetrix, 2001 could have been an annus horribilis. The company began the year with the revelation that its murine chips were defective, a whopping $19 million-plus settlement payment to end litigation with Oxford Gene Technology, and a pack of competitors nipping at its heels.

 

Instead competitors Incyte and Corning bowed out, others failed to follow up bark with bite, and Affymetrix ended the year on top, with solid fourth-quarter and year-end results to back up its boasts.

 

"The past year was a year of defining challenges and tremendous accomplishments for Affymetrix in 2001," said CEO and founder Steve Fodor in a conference call to discuss the company's fourth quarter. "We faced our challenges, overcame them, and I believe we emerged stronger than ever."

 

"We feel pretty good about our results, and particularly the uptake in the momentum throughout the second half of the year," noted Affymetrix president Sue Siegel.

 

For the fourth quarter, the company reported a pro forma profit of $744,000, or a penny a share. While this was the first profit Affymetrix reported in its history, the pro forma accounting excluded $4.5 million in charges associated with the company's settlement of its litigation with Incyte in December, as well as costs associated with the company's previous acquisitions of Neomorphic and Genetic Microsystems, other settlement costs, amortization of deferred stock compensation, and a gain received from the sale of the company's convertible notes.

 

Under standard rules, Affymetrix reported losses of $8.4 million or 15 cents per share - 10 cents more than Wall Street had predicted, on overall revenues of $65.1 million for the quarter. Subtracting $5.6 million in revenues for the sale of its microarray wafers to spin-off Perlegen at cost, the company's overall revenues totaled $59.5 million, a number virtually unchanged from the $59.4 million in revenues reported for the fourth quarter of 2000. For the year, the company's revenues increased six percent (excluding the at-cost sales to Perlegen) to $213.4 million, from $200 million.

 

The bulk of the increase came from sales of Affy's DNA microarrays and other products, which comprised $55.2 million, up from $51.3 million for the fourth quarter of 2000, and $194.9 million for the year, an increase of 12 percent compared to $173.5 million in 2000.

 

These product sales "were almost exclusively from GeneChip microarrays," said Gregory Schiffman, the company's chief financial officer.

 

Revenues on Affymetrix's flagship microarray products increased 15 percent during the fourth quarter compared to the same period last year, the company said.

 

Considering that the company took its biggest hit in the microarray chip area earlier in the year, this resurgence can only be seen as a renewal of confidence in the product among Affymetrix's customers.

 

Meanwhile, the company seemingly trimmed expenses for the fourth quarter, to $73.5 million, from $103.5 million for the same period of 2000. But this apparent jump was largely illusory, as the previous-year expenses included a $15 million charge for in- process R&D associated with the acquisition of Neomorphic as well as a one-time charge related to a settlement entered into in 2000. Overall costs and expenses for 2001 were $266.4 million compared to $262.2 million in 2000.

 

For 2002, Affymetrix is optimistic. Having just released a new U133 human array that condenses a 39,000 unique transcript representation of the human genome onto two chips, the company expects to see its chip volume soar and its product revenues grow 25 percent for the year to $245 million. The company does expect to see a $3 million to $5 million profit, but only on a "pro forma basis that excludes charges related to acquisitions" - presumably those already completed.

 

Affymetrix also plans to introduce new genotyping chips and updates on its murine and other products during the year, as well as to step up marketing efforts in Europe and Asia, said Siegel and Fodor.

 

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