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Deltagen s Q3 Revenues Drop on Heels of IPO

NEW YORK, Nov 2 – Deltagen’s third quarter revenues dipped as it shifted its focus from a fee-for-service to a database subscription model, the company said Thursday,

Revenue for the quarter was $206,000 compared with $244,000 for the same period a year ago.

To date, the company has derived all of its revenue from its development and analysis of knockout mice. The company now expects a significant portion of its future revenues to come from periodic licensing fees to its knockout mouse database DeltaBase, beginning with the next quarter.

In this quarter, the Deltagen delivered the first quarterly installment of the DeltaBase database to Glaxo Wellcome, as part of $5 million a year subscription deal.

The change in business focus also led the company to more than double operating expenses for the quarter to $9.8 million versus $4.2 million for the year-ago quarter, with $7 million going to R&D, versus $3.4 million for R&D in the comparable 1999 period. The increase is even greater when this year’s first nine months are compared with last year’s: $26.7 million in 2000 and $9.7 million in 1999.

The company said the R &D increase reflects added investment in efforts to find new gene targets to add to DeltaBase, as well as investments in its DeltaGT therapeutic protein discovery and DeltaXpress gene expression programs.

Deltagen’s staff has also grown this year, to 177 employees from 113 at the beginning of the year.

This quarter’s operating expenses also include a $2.9 million amortization of deferred stock compensation. The company holds cash and equivalents of $116.3 million; mostly as a result of $110 million netted in an IPO it completed this quarter.

The net loss for the quarter was $8.6 million, or 44 cents per share, versus a loss of $4.0 million, or $3.52 per share, in the comparable period in the prior year, falling shy of the Street’s expectations of a 35 cents per share loss, according to a survey of two analysts conducted by First Call/Thomson Financial.

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