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Lynx Stock Slides 9 Percent on Ernst & Young Disclosure

This article has been updated to include share prices and details.

NEW YORK, Oct. 29 (GenomeWeb News) - Shares in Lynx Therapeutics were down nearly 9 percent at $2.65 in mid-afternoon trade on the Nasdaq exchange after sliding to $2.25 earlier in the day on news that its financial position is more precarious than originally reported.

 

Investors responded to Lynx's disclosure this morning that its independent auditor, Ernst & Young, recently raised "substantial doubts" about its ability to remain solvent. Lynx said it reported this announcement to the US Securities and Exchange Commission in an amended filing to its 2003 year-end earning report.

 

In a paragraph attached to the amended report, Lynx said the company's "losses since inception, including a net loss for the six months ended June 30 ... [indicates that the company] "will require additional funding to continue its business activities through at least December 31, 2005 and raises substantial doubt as to Lynx' ability to continue as a going concern."

 

Also today, Lynx said that Solexa, with which it plans to merge, plans to pour additional cash into Lynx in an attempt to speed the development of new sequencing technologies in time for their merger.

 

"The intent of this [new funding] is to accelerate the integration of both companies' technologies prior to completing" the merger, the firms said in a statement.

 

Lynx has pocketed at least $2.5 million from Solexa as part of the companies' merger agreement,  disclosed in August. Today's announced means Solexa will give Lynx an additional undisclosed sum to help it "accelerate development of ... [a new] DNA sequencing instrument.

 

As GenomeWeb News reported in September, Lynx and Solexa signed a definitive merger agreement. As part of the merger, which is expected to be completed later this year, Lynx will issue up to 29.5 million shares in exchange for all of the outstanding shares and share options of Solexa. The combined company will continue to operate both in the USand in the UKand will trade on the Nasdaq SmallCap Market under the tickers symbol LYNX.

 

Under a separate agreement, Lynx has received $1.25 million in loan advances from Solexa. It will receive another $500,000 following the merger agreement and $750,000 in October. The cash infusion announced today is in addition to this $2.5 million amount.

 

The mew company plans to develop novel DNA sequencing technology, based on molecular arrays, and to release its first commercial instrument for whole genome resequencing and for gene-expression analysis by sequencing next year.

 

Solexa's $14.4 million financing round was led by Amadeus Capital Partners. Existing investors Abingworth Management, Schroder Venture Life Sciences, and Oxford Bioscience Partners also participated. Including the Series B round, Solexa has raised $40 million in total.

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