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Lynx Q2 Revenues Rise 57 percent: Extends License to BASF-LYNX in Germany

NEW YORK, July 18 - Lynx Therapeutics reported second-quarter revenues of $4.4 million Wednesday, up 57 percent from the same period last year, and separately said BASF-LYNX, a joint venture with German chemical giant BASF, had agreed to license its Megaclone micro-bead DNA detection technology.

Lynx attributed the increase in revenue primarily to technology access fees that Lynx's customers paid for Megaclone technology. 

However, Lynx's second-quarter earning statement did not include revenue from the spate of new collaborations the company has signed in the first and second quarters of this year, said Lynx chief financial officer Ed Albini in a conference call. Since the beginning of the year, the company has added seven new collaborators.

"This is a very healthy time for us in terms of the message being appreciated," said Norrie Russell, CEO of Lynx. "We're on a wave."

In the second quarter, Lynx signed collaborations with animal genomics company AniGenics and marine genomics company GenoMar, and signed a second agreement with AstraZeneca for disease gene expression analysis. 

These agreements followed partnerships the company began in the first quarter with AstraZeneca for asthma SNP detection, Celera for gene expression data, prostate cancer biotech company UroGene to identify cancer genes, and with plant genomics company Phytera to identify anti-oxidant polyphenol synthesis genes. 

During the year, the company also signed on five academic collaborators for Megaclone-based technology.

Megaclone uses microbeads to sort millions of DNA molecules according to sequence. Each different molecule binds to a microbead, with each bead able to hold up to 100,000 identical molecules. Fluorescent tags on each bead indicate how much of a particular DNA molecule is on the bead.      

Lynx has developed several Megaclone applications, including Megasort, which uses Megaclone to measure comparative gene expression levels in different samples; Massively Parallel Signature Sequencing (MPSS) technology, which can identify genes by a 16 to 20 base signature sequence and can detect the levels of gene expression in cells; and MegaType SNP detection technology. 

Additionally, Lynx is developing Protein ProFiler, a microbead-based protein profiling technology for proteomics experiments.

"Protein Profiler is in the late stages of development," Russell said. "The interest generated has been enormous, and we are committed to commercialize the project by the end of the year."

Russell also said that the company has a "healthy pipeline of conversations and discussions and negotiations" for future Megaclone-based collaborations.

The latest partnership, an extension of its technology license agreement with BASF-LYNX, allows the Heidelberg, Germany-based joint venture between Lynx and BASF to continue to use Lynx's MPSS and Megasort technologies in its neuroscience, toxicology, and microbiology programs through the end of 2007.

Under the agreement, BASF-LYNX will pay Lynx a multimillion-dollar sum for the fee, and Lynx will provide BASF-LYNX with Megaclone microbeads, MPSS technology instruments, and reagents. 

The companies also separately agreed to increase the capital reserves of BASF-LYNX, in which Lynx has more than a 40 percent stake. 

This agreement extension comes as a second shot in the arm, following Lynx's successful private $11.1 million financing round completed in late May. With this infusion of cash, Lynx reported a total of $15.8 million in cash and cash equivalents, up from the $11.9 million at the end of the first quarter.

However, the company still continued to burn cash at the rate of $7 million per quarter in the second quarter, Albini confirmed in the conference call. 

Lynx's operating expenses for the second quarter, which Albini said focused on "development of Megatype and Protein Profiler technologies and on internal discovery projects," as well as on higher personnel and facility related expenses rose to $9.0 million, from $6.2 million for the year-ago quarter. These included $1.2 million in the costs of service fees, up from $953,000; $5.9 million in R&D expenses, up from $3.8 million, and $2 million in general and administrative expenses, up from $1.5 million for the second quarter of 2000.

Albini said new collaborations signed this year will be "kicking in or ramping up their work in the latter half of this year, and will be important in getting us toward our revenue targets," which he estimated at $5.5 to $6 million for the third quarter, and $20 to $25 million for the year.

He also assured analysts that "for the second half of the year, we don't anticipate burning anywhere near [the cash] we burned during the first half of the year."

The company's losses for the quarter widened to $4.6 million, or 37 cents per share, but beat Wall Street's expectations of 40 cents per share based on a survey of three brokers conducted by First Call/Thomson Financial.

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