Celera Genomics Reports Second Quarter Fiscal 2003 Results
Rockville, MD - January 23, 2003
Celera Genomics Group (NYSE: CRA), an Applera Corporation business, today reported results for the second quarter of fiscal year 2003 ended December 31, 2002. All per share amounts refer to per share of Applera Corporation-Celera Genomics Group Common Stock.
For the recently completed quarter, Celera Genomics reported a net loss of $16.1 million, or $0.23 per share, compared to $117.9 million, or $1.82 per share, in the same period last year. Results for the prior year quarter included a $99.0 million non-cash charge for acquired in-process R&D related to the November 2001 acquisition of Axys Pharmaceuticals. In the recently completed quarter, lower SG&A expenses and higher Online/Information Business operating income were partially offset by increased R&D expenses, lower interest income, and higher development expenses within the Celera Diagnostics joint venture. Revenues for the quarter decreased to $22.9 million from $35.0 million for the same quarter in fiscal 2002, primarily due to Celera's decision not to pursue additional sequencing service business. At the end of the quarter, the Group's cash and short-term investments were approximately $840 million. The decrease of $41 million from the prior quarter included the conversion of $17 million of short-term investments to long-term investments.
Online/Information Business revenue was $20.3 million for the quarter, compared to $17.3 million in the same period last year. Operating income for the Online/Information Business was $9.3 million compared to $1.5 million in the same period last year due to the combination of higher revenues and reduced operating expenses.
For the six months ended December 31, 2002, Celera reported a net loss of $35.8 million, or $0.50 per share, compared to $133.5 million, or $2.11 per share for the same period last year. Last year's results included the non-cash charge for acquired in-process R&D mentioned above. R&D expenses increased to $65.5 million, compared to $58.4 million in the same period last year, reflecting increased spending on therapeutic discovery and development programs, including programs acquired with Axys. Revenues for this six-month period were $46.5 million compared to $62.3 million for the first half of fiscal 2002. Year to date, Online/Information Business revenue was $40.9 million and operating income was $18.4 million, compared to $34.3 million and $3.6 million, respectively, for the first half of fiscal 2002.
"Celera Genomics has completed hiring its senior management team and its efforts are fully focused on drug discovery and development," said Tony L. White, Applera's Chief Executive Officer. "Celera has communicated a business plan based on the advancement of its therapeutic pipeline, as well as its target discovery and validation programs, that we believe is both clear and achievable."
"Under the leadership of Dr. Jim Yee, our recently hired Head of Development, we are now expanding our development organization to allow us to move selected drug programs forward on our own account," said Kathy Ordoņez, President, Celera Genomics. "Our long-term vision entails leveraging the combination of capabilities within Celera Genomics and Celera Diagnostics to practice genomic-based targeted medicine."
Recently, Celera Genomics has focused its proteomics effort exclusively on the identification of differentially expressed cell surface proteins, the class of proteins believed to represent the most promising targets for near term drug candidates via therapeutic antibodies. Celera Genomics has identified differentially expressed proteins on the surface of pancreatic cancer cells that are undergoing further validation to confirm their viability as targets. The proteomics effort is currently focused on lung cancer and should move on to colon cancer by the end of the calendar year.
Celera Genomics Outlook
Celera Genomics intends to advance its most promising small molecule compounds, such as tryptase inhibitors for asthma and allergic rhinitis and its Factor VIIa inhibitors for anticoagulation, forward into clinical development. Celera anticipates that at least one of its compounds, most likely one of its partnered compounds, could enter clinical trials during calendar 2003. In addition, Celera Genomics plans to initiate at least one new preclinical development program and to make significant progress in building its development organization to support these programs during the coming year.
Celera Genomics has obtained pilot-scale quantities of its lead asthma compound, and plans to initiate additional toxicology and safety evaluations during the third quarter of fiscal 2003. IND-enabling studies with these asthma compounds are anticipated in calendar 2003, pending analysis of the data from these additional evaluations.
The financial outlook for Celera Genomics for fiscal 2003 is as follows:
The comments in the Outlook sections of this press release, including the Celera Diagnostics Joint Venture outlook below, reflect management's current outlook. The Company does not have any current intention to update this Outlook and plans to revisit the outlook for its businesses only once each quarter when financial results are announced.
Celera Diagnostics Joint Venture
Celera Diagnostics, a 50/50 joint venture between Applied Biosystems and Celera Genomics, reported fiscal second quarter 2003 revenues of $7.8 million, compared to $1.9 million in the same period last year. For the six months ended December 31, 2002, reported revenues were $10.8 million compared to $3.7 million in the same period last year. Reported revenues include equalization revenue from Abbott Laboratories resulting from the profit-sharing alliance between Abbott and Celera Diagnostics, and fluctuate from period to period due, in part, to differences in relative expenses between the alliance partners. End-user sales of products manufactured by Celera Diagnostics were $5.0 million and $8.9 million in the fiscal second quarter and six-month periods ended December 31, 2002, respectively, compared to $2.2 million and $4.6 million in the year-earlier periods. These increases were primarily due to adoption of its cystic fibrosis reagents by several large reference labs.
Net cash use was $11.5 million in the second quarter of fiscal 2003 compared to $8.5 million in the second quarter of fiscal 2002. The pre-tax loss for the quarter was $9.9 million, compared to $8.5 million in the same period last year. Pre-tax losses for the six-month period ended December 31, 2002 increased to $23.2 million from $17.9 million in the year-ago period, as higher R&D expenses associated with product development and the Applera Genomics Initiative were partially offset by higher revenue.
Last week, Abbott Laboratories (NYSE:ABT) announced plans to discontinue the manufacture of its LCx assays for chlamydia and gonorrhea, products that had been anticipated to be included in the Celera Diagnostics-Abbott alliance beginning July 1, 2003. In light of Abbott's decision, Celera Diagnostics and Abbott negotiated an amendment to their alliance agreement to provide Celera Diagnostics with ongoing compensation for profits it had expected from the sale of these products.
Other developments at Celera Diagnostics over the last three months include the following:
Celera Diagnostics Joint Venture Outlook
For fiscal 2003, Celera Diagnostics continues to anticipate end-user sales, including those from its alliance with Abbott Laboratories, to be in a range of $18 to $22 million. This outlook assumes continued demand growth, both for new products and from higher sales of existing products. For fiscal 2003, Celera Diagnostics anticipates pretax losses of $50 to $60 million and net cash use in the range of $55 to $65 million, including capital spending of approximately $10 million.
During calendar 2003, Celera Diagnostics anticipates it will launch several new products, including analyte specific reagents (ASRs) for hepatitis viral load and genotyping. In addition, Celera Diagnostics plans to commercialize new ASRs for at least two diseases, contingent upon success in its disease association studies.
Conference Call & Webcast
A conference call with Applera Corporation executives will be held January 23, 2003, at 10:00 a.m. (EDT) with investors and media to discuss these results and management's current outlook for the Company. The call will be formatted to focus on each of the Applera businesses separately, approximately at the times indicated below, although the exact timing may be different as the call will proceed without pause between segments:
During each segment, the management team will make prepared remarks and answer questions from securities analysts and investment professionals. Investors, securities analysts, representatives of the media and other interested parties who would like to participate should dial (+1) 706.634.4992 (code "applera") at any time from 9:45 a.m. until the end of the call. This conference call will also be webcast. Interested parties who wish to listen to the webcast should visit either www.applera.com and go to the Investor Relations section of the web site, or www.celera.com and go to the Investor section. A digital recording will be available two hours after the completion of the conference call from January 23 to February 1, 2003. Interested parties should call 706.645.9291 and enter conference ID 7527541.
About Applera Corporation and Celera Genomics
Applera Corporation comprises two operating groups. The Celera Genomics Group, located in Rockville, MD, and South San Francisco, CA, is engaged principally in integrating advanced technologies to discover and develop new therapeutics. Celera intends to leverage its proteomic, bioinformatic, and genomic capabilities to identify and validate drug targets and diagnostic marker candidates, and to discover and develop new therapeutics. Its Celera Discovery SystemTM online platform, marketed exclusively through the Applied Biosystems Knowledge Business, is an integrated source of information based on the human genome and other biological and medical sources. The Applied Biosystems Group (NYSE:ABI) develops and markets instrument-based systems, reagents, software, and contract services to the life science industry and research community. Applied Biosystems is headquartered in Foster City, CA, and reported sales of $1.6 billion during fiscal 2002. Celera Diagnostics, a 50/50 joint venture between Applied Biosystems and Celera Genomics, is focused on discovery, development, and commercialization of novel diagnostic products. Information about Applera Corporation, including reports and other information filed by the company with the Securities and Exchange Commission, is available at www.applera.com, or by telephoning 800.762.6923. Information about Celera Genomics is available at www.celera.com.
Certain statements in this press release, including the Outlook sections, are forward-looking. These may be identified by the use of forward-looking words or phrases such as "believe," "expect," "intend," "anticipate," "should," "planned," and "potential," among others. These forward-looking statements are based on Applera Corporation's current expectations. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. In order to comply with the terms of the safe harbor, Applera Corporation notes that a variety of factors could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks and uncertainties that may affect the operations, performance, development, and results of Celera Genomics' businesses include but are not limited to:
(1) Celera Genomics expects operating losses for the foreseeable future; (2) Celera Genomics' reliance on Applied Biosystems' emerging Knowledge Business for incremental revenues to Celera Genomics from the Celera Discovery System and Celera Genomics' related information assets; (3) Celera Genomics' and Celera Diagnostics' unproven ability to discover, develop, or commercialize proprietary therapeutic or diagnostic products, (4) the risk that clinical trials of products that Celera Genomics or Celera Diagnostics do discover and develop will not proceed as anticipated or may not be successful, or that such products will not receive required regulatory clearances or approvals; (5) the uncertainty that Celera Genomics' or Celera Diagnostics' products will be accepted and adopted by the market, including the risk that that these products will not be competitive with products offered by other companies, or that users will not be entitled to receive adequate reimbursement for these products from third party payors such as private insurance companies and government insurance plans; (6) reliance on existing and future collaborations, including, in the case of Celera Diagnostics, its strategic alliance with Abbott Laboratories, which may not be successful; (7) Celera Genomics' and Celera Diagnostics' reliance on access to biological materials and related clinical and other information, which may be in limited supply or access to which may be limited; (8) intense competition in the industries in which Celera Genomics and Celera Diagnostics operate; (9) potential product liability or other claims against Celera Genomics or Celera Diagnostics as a result of the testing or use of their products; (10) Celera Genomics' reliance on scientific and management personnel having the training and technical backgrounds necessary for Celera Genomics' business; (11) potential liabilities of Celera Genomics related to use of hazardous materials; (12) uncertainty of the availability to Celera Genomics and Celera Diagnostics of intellectual property protection, limitations on their ability to protect trade secrets, and the risk to them of infringement claims; (13) Celera Genomics' dependence on the operation of computer hardware, software, and Internet applications and related technology; (14) legal, ethical, and social issues which could affect demand for Celera Genomics' or Celera Diagnostics' products; (15) risks associated with future acquisitions by Celera Genomics, including that they may be unsuccessful; (16) uncertainty of the outcome of existing stockholder litigation; (17) Celera Diagnostics' limited commercial manufacturing experience and capabilities and its reliance on a single manufacturing facility; (18) Celera Diagnostics' reliance on a single supplier or a limited number of suppliers for key components of certain of its products; (19) the risk of electricity shortages and earthquakes, which could interrupt Celera Diagnostics' and/or Celera Genomics' operations; and (20) other factors that might be described from time to time in Applera Corporation's filings with the Securities and Exchange Commission. All information in this press release is as of the date of the release, and Applera does not undertake any duty to update this information, including any forward-looking statements, unless required by law.
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