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Rosetta s Q1 Revenues Up Sharply with Licensing Deals; Losses Narrower than Expected

NEW YORK, April 19  - Rosetta Inpharmatics reported $4.7 million in revenues for the first quarter of 2001 Thursday, up from $548,000 for the first quarter of 2000, while losses were narrower than Wall Street's expectations.

The Kirkland, Wash., bioinformatics company attributed the revenue surge to a collaboration with Monsanto in crop gene expression that the companies initiated at the end of November 2000, and to sales of the Rosetta Resolver system. 

Rosetta reported $2.5 million in revenue from the Monsanto collaboration, $470,000 from the company's ongoing licensing and distribution collaboration with Agilent Technologies, and $920,000 in product revenue for the quarter, for a total of $3.8 million for the quarter in revenues from collaboration agreements.

The company's gene expression collaboration with Monsanto is to cover three years and yield $15 million in revenues for Rosetta, which has agreed to provide information on gene expression in corn, rice, and wheat. 

During its quarterly conference call Thursday, Rosetta said it had licensed the Rosetta Resolver to biotechnology companies Biogen, Europroteome, and Renovis--in addition to the deals it had previously announced during the quarter with Immunex and Paradigm Genetics.

Rosetta losses were $6 million, or 19 cents per share for the quarter, compared to $15.2 million in the year-ago quarter. These losses were 11 cents per share below Wall Street's expectations of 30 cents per share, which was based on a survey of three brokers conducted by FirstCall/Thomson Financial.

Rosetta's operating expenses increased during the quarter, to $13.1 million, from $8.7 million for the same period in 2000. These expenses included $6.9 million in R&D expenses, which more than doubled over the 2000 quarter; $4.7 million in marketing, general and administrative expenses; and $1.3 million in stock-based compensation.

The major accomplishments for the quarter, said CEO Steven Friend, included the launch of Rosetta Resolver 2.0, an updated gene expression analysis system that allows analysis of single-color DNA chip data; the addition of new members to its Gene Expression Markup Language consortium; and Rosetta scientists' publication of articles in Nature  and Nature Biotechnology

The publication of these articles, "demonstrates our continued leadership in informational genomics," Friend said. 

Friend said he believed the company would sign at least one major new collaborative agreement by the summer that would allow it to expand its revenue base. He noted that unlike older tools providers such as Applied Biosystems, Rosetta's ability to attract customers was unaffected by the general market downturn.

"We have not seen any impact of the general economy on interest shown by biotechnology and pharmaceutical companies in our products," Friend said. "We're dealing in a segment of technology that is very, very new, very, very exciting, and growing extremely rapidly as a marketed dynamic." The company's products, Friend said, "are not in the realm of discretionary spending for most of our customers."

Rosetta chief financial officer Gregory Sessler said during the conference call that the company expected to bring in between $18.3 and $20.1 million in revenues during the year, and remained "comfortable" with Wall Street's expectations of the company's financial performance for the year. 

As of March 31, the company had $155.7 million in cash, cash equivalents and marketable securities.

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