Amidst Continued Losses, Lynx Takes Steps to Merge with Solexa for $2.5M in Loans

NEW YORK, Aug. 13 (GenomeWeb News) - Lynx Therapeutics reported that it has signed a non-binding letter of intent to merge with the privately held, UK-based company Solexa. Solexa will provide Lynx with up to $2.5 million in loans to sustain Lynx's operations.

Lynx announced the non-binding agreement as it reported revenues of $1.7 million for the second quarter of this year, down drastically from $4.6 million for the second quarter of 2003.

Lynx's losses widened this year, with the company suffering a net loss of $3.6 million, or $.48 per share, for the quarter that ended June 30, 2004. Last year, the company suffered a net loss of $2.9 million, or $.61 per share during the second quarter.

Research and development expenses were down this year, with the company spending $2.6 million during the three months up to June 30, 2004. Last year, the company spent $3.2 million in R&D during the same period.

As of June 30, Lynx had cash, cash equivalents and short-term investments of $2.4 million, including $0.4 million of restricted cash, and total current assets of $4.2 million.

Under preliminary, non-binding terms of the stock-for-stock merger with Solexa, the companies agreed that Solexa shareholders would hold a majority interest of the combined company. Lynx has received a first loan advance of $750,000 under a loan agreement between the two parties.

Lynx said the decision to pursue a merger with Solexa was based in part on the desire to have a combined company to pursue further development of the "cluster technology" assets that were acquired from Swiss-based Manteia by Lynx and Solexa jointly in March.

"We believe that a combination of [Solexa and Lynx's] resources would allow for faster integration of the cluster technology, which in turn would enable us to expand our services offering and accelerate the development of MPSS [massively parallel signature sequencing]-based instrumentation," said Kevin Corcoran, Lynx's president and chief executive officer.

The companies are currently reviewing and discussing the proposed merger with the objecting of concluding a definitive, binding merger agreement in September. Lynx has engaged Seven Hills Partners LLC as its financial advisor in merger discussions.

Due to lower thananticipated sample volume, Lynx is revising its revenue guidance this year to $8 to $9 million in total net revenues. In March, the company had predicted net revenues of $16 to $19 million for 2004.

Complete details of Lynx's second quarter earnings report are available here.