-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F7u/mrN+rC4S+l3dsgB7es4GJUBqElUidHRKucwWkJf/yCzDg0VP5aRyIX+h1zu+ NYtiKQjTU7J9KVEKA8NVig== 0001047469-97-004494.txt : 19971115 0001047469-97-004494.hdr.sgml : 19971115 ACCESSION NUMBER: 0001047469-97-004494 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFFYMETRIX INC CENTRAL INDEX KEY: 0000913077 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 770319159 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28218 FILM NUMBER: 97717453 BUSINESS ADDRESS: STREET 1: 3380 CENTRAL EXPRESSWAY CITY: SANTA CLARA STATE: CA ZIP: 95051 BUSINESS PHONE: 4085226000 MAIL ADDRESS: STREET 1: 3380 CENTRAL EXPRESSWAY CITY: SANTA CLARA STATE: CA ZIP: 95051 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------------------- FORM 10-Q X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934 for the period ended SEPTEMBER 30, 1997 or Transition Report Pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934 for the transition period from _____________ to ________________. Commission File No. 0-28218 AFFYMETRIX, INC. (Exact name of Registrant as specified in its charter) CALIFORNIA 77-0319159 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3380 CENTRAL EXPRESSWAY, SANTA CLARA, CALIFORNIA 95051 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408)731-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ COMMON SHARES OUTSTANDING ON SEPTEMBER 30, 1997: 22,700,521 AFFYMETRIX, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION --------------------- Page ---- Item 1. Financial Statements Condensed Balance Sheets at September 30, 1997 and December 31, 1996 ................... 3 Condensed Statements of Operations for the Three and Nine Months Ended September 30, 1997 and 1996 .......... 4 Condensed Statements of Cash Flows for the Nine Months Ended September 30, 1997 and 1996 ................... 5 Notes to Condensed Financial Statements ...................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................................ 8 PART II. OTHER INFORMATION ----------------- Item 6. Exhibits and Reports on Form 8-K ............................... 11 SIGNATURES ............................................................... 12 EXHIBIT INDEX ............................................................ 13 -2- PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED BALANCE SHEETS (In thousands) September 30, December 31, 1997 1996 ------------- ------------ ASSETS (Unaudited) (Note) Current assets: Cash and cash equivalents $ 12,076 $ 14,143 Short-term investments 73,143 94,839 Accounts receivables 3,845 1,888 Inventories 3,025 1,901 Other current assets 947 523 -------- -------- Total current assets 93,036 113,294 Net property and equipment 14,344 5,397 Other assets 787 169 -------- -------- $108,167 $118,860 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 9,786 $ 5,626 Noncurrent portion of capital lease obligation 567 741 Shareholders' equity: Common stock 158,821 158,687 Deferred compensation (903) (1,460) Accumulated deficit (60,182) (44,743) Other 78 9 -------- -------- Total shareholders' equity 97,814 112,493 -------- -------- $108,167 $118,860 -------- -------- -------- -------- Note: The balance sheet at December 31, 1996 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. See accompanying notes. -3- CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 1997 1996 1997 1996 --------- ------- -------- -------- Revenue: Product $ 1,046 $ 401 $ 2,408 $ 858 Contract and grant 3,962 2,250 10,150 5,508 --------- ------- -------- -------- Total revenue 5,008 2,651 12,558 6,366 Costs and expenses: Cost of product revenue 907 382 2,751 1,089 Research and development 6,725 4,533 19,804 12,843 General and administrative 3,980 2,058 9,426 5,608 --------- ------- -------- -------- Total operating expenses 11,612 6,973 31,981 19,540 --------- ------- -------- -------- Loss from operations (6,604) (4,322) (19,423) (13,174) Interest income, net 1,297 1,743 3,984 2,897 --------- ------- -------- -------- Net loss $ (5,307) $(2,579) $(15,439) $(10,277) --------- ------- -------- -------- --------- ------- -------- -------- Net loss per share (1) $ (0.23) $ (0.11) $ (0.68) $ (0.53) --------- ------- -------- -------- --------- ------- -------- -------- Shares used in computing net loss per share (1) 22,648 22,449 22,612 19,337 --------- ------- -------- -------- --------- ------- -------- --------
(1) For the nine months ended September 30, 1996, shares used in computing net loss per share include convertible preferred shares as if they had been converted due to the Company's initial public offering in June 1996. See accompanying notes. -4- CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine months ended September 30, ------------------------------- 1997 1996 ---------- --------- Cash flows from operating activities: Net loss $(15,439) $(10,277) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,337 924 Amortization of investment premiums, net (24) (544) Amortization of deferred compensation 557 948 Loss on disposal of equipment -- 62 Change in operating assets and liabilities: Accounts receivable (1,957) 699 Inventories (1,124) (848) Other current assets (424) (370) Other assets (618) (30) Accounts payable and accrued liabilities 4,137 (190) --------- -------- Net cash used in operating activities (13,555) (9,626) Cash flows from investing activities: Capital expenditures (10,284) (1,959) Proceeds from the sale of short-term investments 90,227 33,448 Proceeds from maturities of short-term investments 12,237 42,909 Purchases of short-term investments (80,673) (99,096) --------- -------- Net cash provided by/(used in) investing activities 11,507 (24,698) Cash flows from financing activities: Issuance of common stock 134 85,199 Principal payments on capital lease obligation (153) (139) --------- -------- Net cash (used in)/provided by financing activities (19) 85,060 --------- -------- Net (decrease)/increase in cash and cash equivalents (2,067) 50,736 Cash and cash equivalents at beginning of period 14,143 2,481 --------- -------- Cash and cash equivalents at end of period $ 12,076 $53,217 --------- -------- --------- --------
See accompanying notes. -5- AFFYMETRIX, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (Unaudited) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring entries) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 1996 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997, filed by Affymetrix, Inc. ("Affymetrix" or the "Company"). REVENUE RECOGNITION Contract and grant revenue is recorded as earned as defined within the specific agreements. Payments received in advance under these arrangements are recorded as deferred revenue until earned. Direct costs associated with these contracts and grants, other than cost of goods sold, are reported as research and development expense. Product revenue is recognized upon shipment. Certain reserves are also recorded upon product shipment. NOTE 2 - CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS As of September 30, 1997, debt securities held by the Company are comprised of U.S. Government obligations and U.S. Corporate debt securities. They are classified as available-for-sale and are carried at fair value with unrealized gains and losses reported in shareholders' equity. NOTE 3 - INVENTORIES Inventories consist of the following (in thousands): September 30, December 31, 1997 1996 ------------ ------------ Raw material $ 828 $ 358 Work in process 129 178 Finished goods 2,068 1,365 ------ ------ Total $3,025 $1,901 ------ ------ ------ ------ -6- AFFYMETRIX, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (Unaudited) NOTE 4 - SHAREHOLDERS' EQUITY The Company's initial public offering on June 6, 1996 generated net proceeds of approximately $83.0 million from the sale of 6.0 million shares. On July 5, 1996, the Company's underwriters purchased 153,000 shares pursuant to the over-allotment option, for additional net proceeds of $2.1 million. The Company had approximately 22.7 million shares outstanding at September 30, 1997. NOTE 5 - RECENTLY ISSUED ACCOUNTING STANDARD In February 1997, the Financial Accounting Standards Board issued Statement No. 128, EARNINGS PER SHARE, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share. The adoption of FAS 128 will not result in a change to previously reported earnings per share information. NOTE 6 - SUBSEQUENT EVENTS On October 17, 1997 the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission for an underwritten public offering of up to 1,725,000 shares of common stock. On November 4, 1997 the Company withdrew the offering. -7- PART 1. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations as of September 30, 1997 and for the three and nine month periods ended September 30, 1997 and 1996 should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997. All statements in this discussion that are not historical are forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially for Affymetrix, Inc. ("Affymetrix" or the "Company") from those projected, including, but not limited to, uncertainties relating to technological approaches, product development, manufacturing and market acceptance, uncertainties related to cost and pricing of Affymetrix products, dependence on collaborative partners, uncertainties relating to sole source suppliers, uncertainties relating to FDA and other regulatory approvals, competition, risks relating to intellectual property of others and the uncertainties of patent protection. These and other risk factors are discussed in Affymetrix' Registration Statement on Form S-3 filed with the Securities and Exchange Commission ("SEC") on October 17, 1997, and in periodic reports filed with the SEC, including the Company's annual report on Form 10-K for the year ended December 31, 1996 and quarterly report on Form 10-Q for the quarter ended June 30, 1997. Affymetrix expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Affymetrix' expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based. OVERVIEW Affymetrix has developed and intends to establish its GeneChip-Registered Trademark- system as the platform of choice for acquiring, analyzing and managing complex genetic information in order to improve the diagnosis, monitoring and treatment of disease. The Company's GeneChip system consists of disposable DNA probe arrays containing gene sequences on a chip, reagents for use with the probe arrays, a scanner and other instruments to process the probe arrays, and software to analyze and manage genetic information. The business and operations of the Company were commenced in 1991 by Affymax N.V. ("Affymax") and were initially conducted within Affymax. In March 1992, the Company was incorporated as a California corporation and wholly owned subsidiary of Affymax. Beginning in September 1993, the Company issued equity securities which diluted Affymax' ownership in Affymetrix. In March 1995, Glaxo plc, now Glaxo Wellcome plc ("Glaxo"), acquired Affymax, including its ownership interest in Affymetrix. As of September 30, 1997 Glaxo owned approximately 33% of Affymetrix. -8- RESULTS OF OPERATIONS THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 Product revenue was $1.0 million and $2.4 million for the three and nine months ended September 30, 1997, respectively, compared to $0.4 million and $0.9 million in the three and nine months ended September 30, 1996, respectively. Contract and grant revenue increased to $4.0 million for the three months ended September 30, 1997 from $2.3 million for the three months ended September 30, 1996. Contract and grant revenue increased to $10.2 million for the nine months ended September 30, 1997 from $5.5 million for the nine months ended September 30, 1996. The increase was primarily due to achievement of certain milestones with certain collaborative partners and increases in funding from the Advanced Technology Program and NIH National Center for Human Genome Research grants. Cost of product revenue was $0.9 million and $2.8 million for the three and nine months ended September 30, 1997, respectively, compared to $0.4 million and $1.1 million for the three and nine months ended September 30, 1996, respectively. Margins fluctuated during the three and nine month periods, and are expected to fluctuate in the future, due primarily to costs related to manufacturing production scale-up activities. Research and development expenses increased to $6.7 million and $19.8 million for the three and nine months ended September 30, 1997, respectively, compared to $4.5 million and $12.8 million for the three and nine months periods ending September 30, 1996, respectively. The increase in research and development expenses was attributable primarily to the hiring of additional research and development personnel and associated purchases of research supplies. The Company expects research and development spending to increase over the next several years as product development and core research efforts continue to expand. General and administrative expenses increased to $4.0 million and $9.4 million for the three and nine months ended September 30, 1997, respectively, compared to $2.1 million and $5.6 million for the three and nine months periods ending September 30, 1996, respectively. The increase in general and administrative expenses was attributable primarily to the hiring of additional management personnel, professional fees (primarily legal fees) and overall scale-up of the Company's operations and business development efforts. General and administrative expenses are expected to continue to increase as the Company expands sales and marketing and adds management and support staff. Net interest income decreased to $1.3 million for the three months ended September 30, 1997 from $1.7 million for the three months ended September 30, 1996. Net interest income increased to $4.0 million for the nine months ended September 30, 1997 from $2.9 million for the nine months ended September 30, 1996. The decrease in net interest income for the comparative three months was primarily due to a decrease in cash balances available for investment. The increase in net interest income for the comparative nine months was primarily attributable to increased cash and investment balances arising from the Company's initial public offering in June 1996. -9- LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1997, the Company's cash, cash equivalents, and short-term investments were $85.2 million compared to $109.0 million at December 31, 1996. The decrease is primarily attributable to expansion of core research, manufacturing and capital spending, and growth in general and administrative expenses. Net cash used in operating activities was $13.6 million for the nine months ended September 30, 1997, as compared to $9.6 million for the nine months ended September 30, 1996. The increase in net cash used in operating activities resulted primarily from increases in the Company's net loss and accounts receivables, offset by an increase in accounts payable and accrued liabilities. The Company's investing activities, other than purchases, sales and maturities of available-for-sale securities, consisted of capital expenditures, which totaled $10.3 million and $2.0 million for the nine months ended September 30, 1997 and 1996, respectively. These capital expenditures included investments in facilities and laboratory equipment and scale-up of manufacturing. On October 17, 1997 the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission for an underwritten public offering of up to 1,725,000 shares of common stock. On November 4, 1997 the Company withdrew the offering. The Company anticipates that its existing capital resources will enable it to maintain currently planned operations through at least 1998. However, this expectation is based on the Company's current operating plan, which could change, and therefore the Company could require additional funding sooner than anticipated. In addition, the Company expects its capital requirements to increase over the next several years as it expands its facilities and acquires scientific equipment to support expanded manufacturing and research and development efforts. The Company's long-term capital expenditure requirements will depend on numerous factors, including: the progress of its research and development programs; initiation or expansion of research programs; the development of commercial scale manufacturing capabilities; its ability to maintain existing collaborative arrangements and establish and maintain new collaborative arrangements; the costs involved in preparing, filing, prosecuting, defending and enforcing intellectual property rights; the effectiveness of product commercialization activities and arrangements; and other factors. -10- AFFYMETRIX, INC. September 30, 1997 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- *+10.30 Supply Agreement among F. Hoffmann-La Roche Ltd., Hoffmann- La Roche Inc., Syntex (U.S.A.) Inc., and Affymetrix, Inc., effective as of August 15, 1997. 11.1 Statement of computation of net loss per share. 27.0 Financial data schedule. * Previously filed as Exhibit 10.1 to the Company's Registration Statement on Form S-3 filed on October 17, 1997. + Confidential Treatment previously requested. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended September 30, 1997 -11- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. November 13, 1997 AFFYMETRIX, INC. By: /s/ Edward M. Hurwitz ---------------------------- Edward M. Hurwitz Vice President and Chief Financial Officer -12- AFFYMETRIX, INC. EXHIBIT INDEX September 30, 1997 EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- *+10.30 Supply Agreement among F. Hoffmann-La Roche Ltd., Hoffmann-La Roche Inc., Syntex (U.S.A.) Inc., and Affymetrix, Inc., effective as of August 15, 1997. 11.1 Statement of computation of net loss per share. 27.0 Financial data schedule. * Previously filed as Exhibit 10.1 to the Company's Registration Statement on Form S-3 filed on October 17, 1997. + Confidential Treatment previously requested. -13- EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 AFFYMETRIX, INC. STATEMENT OF COMPUTATION OF NET LOSS PER SHARE (In thousands, except per share amounts) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- ----------------------------- 1997 1996 1997 1996 ----------- ---------- ----------- ----------- Net loss ............................................... $ (5,307) $ (2,579) $ (15,439) $ (10,277) ----------- ---------- ----------- ----------- ----------- ---------- ----------- ----------- Historical primary and fully diluted number of shares: Weighted average common shares..................... 22,648 22,449 22,612 9,807 Shares related to SAB Topic 4D..................... 0 0 0 2,468 ----------- ---------- ----------- ----------- Shares used in computing net loss per share............. 22,648 22,449 22,612 12,275 ----------- ---------- ----------- ----------- ----------- ---------- ----------- ----------- Net loss per share ..................................... $ (0.23) $ (0.11) $ (0.68) $ (0.84) ----------- ---------- ----------- ----------- ----------- ---------- ----------- ----------- Pro forma number of shares: Weighted average common shares..................... 22,648 22,449 22,612 9,807 Shares related to SAB Topic 4D..................... 0 0 0 2,468 Convertible preferred shares, as if converted...... 0 0 0 7,062 ----------- ---------- ----------- ----------- Shares used in computing pro forma loss per shares...... 22,648 22,449 22,612 19,337 ----------- ---------- ----------- ----------- ----------- ---------- ----------- ----------- Pro forma net loss per share............................ $ (0.23) $ (0.11) $ (0.68) $ (0.53) ----------- ---------- ----------- ----------- ----------- ---------- ----------- -----------
EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 1 OF FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 12,076 73,143 3,845 0 3,025 93,036 14,344 0 108,167 9,786 0 0 0 158,821 (61,007) 108,167 2,408 12,558 2,751 2,751 29,230 0 3,984 (15,439) 0 (15,439) 0 0 0 (15,439) (0.68) (0.68)
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