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UPDATE: Affy Q4 Revenues Surge; Losses Beat Estimates

This story has been updated from a previous version.

NEW YORK, Feb 5 – Affymetrix reported Monday a 70 percent rise in fourth-quarter 2000 revenues to $59.4 million, from $34.9 million in the year ago period, while the loss from operations widened.

Nevertheless, the company beat the street’s expectations with narrower-than-expected fourth quarter net losses.

For the full year, revenues nearly doubled, totaling $200.8 million, compared with $109.1 million in the year ago quarter.

In the fourth quarter, total costs and expenses, excluding charges stemming from the acquisitions of Gene MicroSystems and Neomorphic, rose to $64.8 million, compared with $41.7 million in the year ago period. For 2000, total costs and expenses, excluding the charges stemming from the acquisitions, totaled $221.2 million, compared with $139.3 million a year ago.

“The increase in operating expenses for the quarter and year compared to the respective periods in 1999, resulted primarily from the company's expansion of commercial activities, increases in research and development activities, including those associated with Perlegen Sciences, and increased legal costs arising from ongoing patent litigation,” the company said in a statement.

The company invested some $3.5 million in the public mouse sequencing project and $3 million in Perlegen. The company said it expects to invest an additional $5 to $10 million in its new subsidiary in the first half of 2001.

In October, Affymetrix announced the establishment of Perlegen, saying that the company would initially scan 50 genomes in order to allow researchers to begin to link patterns of in genetic variation with disease.

Throughout the year, Affymetrix also expects to focus its efforts on developing whole human- and mouse-genome arrays.

The company posted a loss from operations of $23.6 million in the fourth quarter, compared with $6.8 million in the year ago period. For the year, the loss from operations rose to $40.9 million, compared with $30.3 million in 1999.

For the fourth quarter, the cost of product revenue increased to $19.9 million, compared with $13.5 million a year ago. Research and development costs rose to $18.5 million in the fourth quarter, compared with $12.4 million in fourth-quarter 1999 and selling, general, and administrative costs jumped to $26.5 million, compared with $15.8 million in the year ago period.

Affymetrix did not offer a separate figure stemming from its ongoing litigation costs, which are included in the selling, general, and administrative expenses. Affymetrix has been mired in a host of legal battles with companies such as Incyte, Hyseq, and Oxford Genome Technologies. The company said it expects its selling, general, and administrative expenses to increase “modestly” each quarter from the fourth-quarter levels.

On a brighter note, licensing fees and royalties for the quarter rose to $7.0 million, compared with $1.1 million in fourth quarter 1999, indicating that a number of companies recognized Affymetrix’s powerful patent position. For the year, Affy posted licensing fees and royalties of $21.5 million, compared with $2.8 million in 1999.

Affymetrix said that it introduced 17 new products in 2000, shipped more than 200,000 arrays, more than 150 GeneChip systems, and over 375 arrayers and scanners. During 2000, Affymetrix added Biogen, Pharmacia, Byk Gulden, Altana, and Sumitomo Pharmaceuticals to its customer list. The company also signed BiotechAccess agreements with Lexicon Genetics, PPD Discovery, MediGene, Isis Pharmaceuticals, Iceland Genomics, Celgene-Signal Research Division, and Sangamo BioSciences.

Arrays accounted for over 40% of the company’s revenue in the fourth quarter, compared with one-third of its sales at the star of the year. Meanwhile, instrument sales fell to 30 percent of total product sales in 2000 from 40 percent previously. The company said that that trend is expected to continue.

Net losses for the quarter totaled $21.5 million, or 38 cents a share, compared with net losses of $5.5 million, or 10 cents a share, a year ago. For 2000 net losses increased to $33.6 million, or 61 cents a share, compared with $27.6 million, or 54 cents a share, in 1999.

Excluding acquisition-related charges, Affy posted a net loss of $3.4 million, or six cents a share, in the fourth quarter, compared with a net loss of $5.5 million, or 10 cents a share, in the year ago period. Wall Street had expected a net loss of 11 cents a share, according to analysts surveyed by First Call/Thomson Financial.

For the year, Affymetrix reported a loss of $13.1 million, or 24 cents a share, not including charges stemming from the acquisition, compared with net losses of $27.6 million, or 54 cents a share a year ago.

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