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Rathmann Extends $20M Credit Line to Hyseq as Cash Reserves Approach Empty

NEW YORK, Feb 8 – Hyseq said Wednesday its cash reserves dwindled to just $2.7 million at the end of 2000, prompting CEO George Rathmann to step in with a $20 million line of credit that could prevent the beleaguered company from going under.

“I have confidence in our financing ability and expect that Hyseq will be able to meet its cash requirements for the year,” Rathmann said in a statement.

The Sunnyvale, Calif.-based company, which has had its share of uncertainty over the last few years, attributed the drop in its reserves to ongoing operating expenses, investments in laboratory and office facilities, and capital equipment purchases. The company recently obtained a non-exclusive license to ICOS’ CHEF1 protein expression technology in order to make proteins for preclinical evaluation.

The company also began construction of a 34,000 sq. ft. R&D lab space.

There was, however, some good news in the company’s quarterly and yearly earnings announcement. Revenues for the quarter nearly quadrupled to $4.3 million, compared with $1.1 million a yea ago, fueled by rising contract revenue.

For the year, revenues surged to $15.6 million, compared with $6.4 million in 1999. Hyseq, which does not have any products on the market, generates revenues through contracted gene-discovery services with companies such as Kirin Brewery and American Cyanamid.

Operating expenses rose to $10.4 million in fourth-quarter 2000, compared with $6.4 million in the year ago period. For the year, operating expenses rose to $37.8 million from $26.3 million.

Losses from operations widened to $6.0 million in the quarter, compared with losses of $5.3 million in the year ago period. For the year losses from operations widened more moderately, totaling $22.2 million, compared with losses of $19.9 million in the year ago quarter.

Net losses for the fourth quarter of 2000 totaled $6.7 million, or 49 cents a share, compared with net losses of $5.1 million, or 39 cents a share, for the same quarter in 1999. For the year, net losses widened to $22.3 million, or $1.65 a share, compared with $18.5 million, or $1.43 a share, a year ago.

Hyseq currently hopes to have two drug candidates in clinical trials in the near future as well as to commercialize its HyChip biochip. Applied Biosystems licensed the technology, but has yet to commercialize the chip.

Recently, Hyseq hired a new chief operating officer, Ted Love, formerly with Advanced Medicine, to help rev up its drug discovery efforts.

A costly patent dispute with Affymetrix over microarray technology remains unresolved.

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