Affymetrix second quarter total revenue increases to $66.4 million

AffymetrixJul 31 2012

Affymetrix, Inc., (NASDAQ:AFFX) today reported its operating results for the second quarter of 2012. Total revenue for the quarter was $66.4 million, including approximately $1.4 million in revenue from eBioscience following the close of Affymetrix's acquisition of the company on June 25. This compares to total revenue of $64.7 million for the same period of 2011.

The Company reported net income of approximately $30.9 million, or $0.43 per diluted share, in the second quarter of 2012 compared to a net loss of $3.7 million, or $0.05 per diluted share, in the same period of 2011. The second quarter of 2012 included the following one-time items: (1) an income tax benefit related to the eBioscience acquisition of $44.7 million, (2) acquisition-related non-recurring costs of $4.7 million, (3) a stock compensation charge of $8.3 million related to the acceleration of stock options held under eBioscience equity incentive plans, and (4) the recovery of a $2.2 million note that had been provided for in full. Excluding these one-time items and recurring amortization of acquired intangible assets and release of step-up in inventory fair value, the Company would have reported a net loss of $1.2 million, or $0.02 per diluted share. This compares to a net loss of $2.1 million, or $0.03 per diluted share, in the same period of 2011 excluding recurring amortization of acquired intangible assets.

Total revenue for the second quarter of 2012 was $66.4 million, comprised of product revenue of $58.5 million and service and other revenue of $7.9 million. Product revenue included consumable revenue of $53.3 million, instrument revenue of $3.8 million, and revenue from eBioscience of $1.4 million. This compares to total revenue of $64.7 million in the second quarter of 2011, comprised of product revenue of $58.1 million and service and other revenue of $6.6 million. Product revenue included consumable revenue of $54.3 million and instrument revenue of $3.8 million.

For the second quarter of 2012, cost of product sales, including eBioscience, was $24.4 million, as compared to $22.4 million in the same period of 2011. Product gross margin was 58%, as compared to 62% in the same period of 2011. Cost of services and other was $3.3 million compared to $3.4 million in the same period of 2011.

For the second quarter of 2012, operating expenses were $54.1 million, including acquisition-related non-recurring costs of $4.7 million and a stock compensation charge of $8.3 million related to the acceleration of stock options held under eBioscience equity incentive plans. This compared to operating expenses of $42.0 million in the same period of 2011.

"During the second quarter we completed the acquisition of eBioscience which allows us to access significant new markets to drive future growth and profitability," said Frank Witney, president and chief executive officer. "In addition, we generated double-digit growth in a number of our key business areas as we continue on our path to return to overall growth. We exited the quarter with gross cash-on-hand of about $38 million and we expect to generate cash in the second half of the year after interest and principal payments."

Second quarter highlights:

• On June 25th, the Company announced that it had completed the acquisition of eBioscience, a privately-held company with an industry-leading position in flow cytometry and immunoassay reagents for immunology and oncology research and diagnostics. The acquisition enhances Affymetrix's product portfolio and expands its addressable markets by more than $2.5 billion per year. Through the acquisition of eBioscience, the Company can now offer a blue-chip portfolio of cell-based assays that diversifies the business and opens up important new avenues for growth. With eBioscience's portfolio of profitable and growing reagents, the combined Company intends to introduce novel molecular solutions to enter sizable new markets.
• Signed a worldwide distribution agreement for ScreenCell's isolation devices and dilution buffers, designed for the collection of Circulating Tumor Cells (CTCs) in peripheral blood. The Company expects this platform will help to improve disease detection, enabling researchers in translational sciences to further examine the impact on treatment, management and outcome in cancer.
• Announced a world-wide collaboration with Leica Microsystems that automates Affymetrix's QuantiGene ViewRNA ISH Tissue Assay on the Leica BOND RX staining platform for research applications. This partnership provides researchers with a powerful automated everyday solution for drug-discovery, translational research, and the development of new companion diagnostic tests for personalized medicine by significantly reducing assay time for single-copy RNA in situ hybridization (ISH) analysis. The highly-sensitive QuantiGene® ViewRNA ISH Tissue Assay assists drug discovery and translation research by enabling researchers to measure RNA expression directly in a tissue section at single-copy sensitivity. Over 1,000 standard probes are already available and it only takes a few days to produce a customized probe for a new gene target. The Leica BOND RX system automates the staining process bringing all the benefits of consistency, reduced labor, and speed. This means researchers can now have access to same-day assay completion and, with a standardized staining protocol, rapid set-up for any probe.
• Announced a research collaboration and licensing agreement with Massachusetts General Hospital to co-develop new cancer biomarker tests using Affymetrix's QuantiGene® ViewRNA Assay platform, an in situ hybridization assay capable of single transcript in single-cell detection. As part of this agreement, Affymetrix has the rights to commercialize the new biomarker tests as an outcome of this collaboration.