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Affymetrix Revenues Jump, Net Loss Narrows Amid Q1 Earnings Release Snafu

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Affymetrix last week reported a net loss of $1.9 million for the quarter, compared to a loss of $12.7 million for its first quarter of 2003. The loss included a charge of $8.1 million associated with the company’s redemption of a set of 4.75 and 5.0 percent convertible subordinated notes. The company reported research and development expenses of $17 million, compared to $16 million for the same quarter in 2003.

The reporting of the company’s financial results was marred by communications glitches. The company’s financial results were released before market close on Wednesday, instead of after the end of trading as has been customary under Sarbanes-Oxley fair disclosure regulations.

“The results were released earlier than expected,” Greg Schiffman, the company’s chief financial officer said in the results conference call. The results were not released through a wire service, he said, but were released widely, and early.

“We immediately, the moment we heard that, stopped trading, and released our press release widely, which was definitely earlier than we would normally would have, and immediately put out a second release to reiterate our guidance,” he said.

Analysts on the conference call were not amused and the stock market reacted dramatically. On Tuesday, the company’s stock price reached a 52-week high of $38.20. When trading resumed after Affymetrix stopped it on Wednesday, with the day’s volume spiking to 8.6 million shares traded, the stock dropped to $30.05 before closing at $31.51. The stock closed Monday at $31.82.

When the stock was at its 52-week high, Affymetrix had a market capitalization of $2.3 billion dollars. At Monday’s close, the company had a market cap of $1.9 billion, a loss of $384 million — on paper.

The company told Reuters that that the firm that electronically distributes Affymetrix’s news releases apparently acted too quickly and that it was investigating.

An Affymetrix investor relations spokesman did not return a BioArray News request for information about its investigation of the snafu.

Meantime, the company said it sold some 30 GeneChip platforms in the quarter and now claims an installed base of over 1,000 systems.

Affymetrix does not expect substantial growth in instrument revenue for the year and is looking for “a lot of growth” over the year on the chip side, Schiffman said.

The company fielded several questions about pricing strategy for its chips and its ability to maintain its margins.

‘It’s a topic we debate a lot internally,” said Schiffman. “We are very cognizant and don’t, and over the past years, have not rapidly used it [competitive pricing]. But, at some point, that will be a strategic lever and we will make use of it.”

Affymetrix chairman Steve Fodor said pricing is a small part of the costs of conducting research with microarrays, and will be even smaller as more disease and clinical investigations are performed.

Fodor said the company’s competition is “trying to copy the products we have on the market today” and that Affymetrix will continue to push the technology.

CombiMatrix Reports $17M in Revenues from Roche

CombiMatrix, the life sciences unit of Newport Beach, Calif., based Acacia Research, last week reported $17.6 million in revenues in the first quarter, with $17.3 million of that coming in recognition of deferred contract revenues from a completed research and development agreement with Roche.

CombiMatrix had a net income of $12 million for the quarter, compared to a loss of $5.1 million for the year-ago period. The company spent $1.5 million on research and development in the period, compared to $2.3 million for the year-ago quarter. Cash, cash equivalents, and short-term investments on hand totaled $18.4 million as of March 31, compared to $17.3 million as of Dec. 31.

The company launched its first commercial product in the quarter, the CustomArray 902, a designer array, with 1,000 sites for in situ synthesized oligonucleotides, that will sell for approximately $400. Its next quarter should reflect early sales from this product, and in this quarter, the expected launch of a 13,000 site custom chip.

Illumina Posts Surge in Q1 Revenues, Narrowed Losses

Earlier in the week, Illumina reported a 153 percent increase in revenues for its first fiscal quarter of 2004, accompanied by narrowed losses.

For the quarter ended March 28, 2004, Illumina posted revenue of $10.8 million, up sharply from $4.3 million for the same period in 2003. Product revenue was $8.9 million for the quarter, up from $1.4 million in the first quarter 2003, while service revenue dipped slightly, to $1.2 million, from $1.9 million in the same period last year.

The company’s net loss for the quarter was $3.9 million, compared to $9.0 million in the first quarter of 2003. Illumina spent $5.2 million on R&D expenses in the first quarter of 2004, down from $5.7 million in the same period of 2003. Illumina’s cash and investments as of March 28, were $27.9 million, compared to $32.9 million at the end of 2003. The company said that its cash holdings, including long-term restricted investments, totaled $40 million at the end of the quarter.

Luminex Q1 Revenues Climb

Also reporting in the week was Luminex, which reported first-quarter revenues of $9.3 million, compared to $5.1 million for the first quarter of 2003. Net loss for the quarter was $143,000, compared to $906,000 for the year-ago period. The loss excluded $1.8 million for the settlement of a lawsuit, which would have increased the loss to $2.7 million. The company had cash and cash equivalents of $37.5 million on hand as of March 31, down from $39.5 million on Dec. 31. The company spent $958,000 on research and development for the quarter, compared to $831,000 for the same quarter in 2003.

— MOK

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