Celera Genomics Reports Fourth Quarter and Fiscal 2003 Results
Rockville, MD - July 23, 2003
Celera Genomics Group (NYSE:CRA), an Applera Corporation business, today reported a net loss of $19.4 million, or $0.27 per share, for the fourth quarter of fiscal 2003 ended June 30, 2003, compared to a net loss of $28.8 million, or $0.42 per share in the prior year period. Included in the prior year's results are a $2.8 million charge related to the restructuring announced in June 2002 and a $6.0 million write-down of investments. All per share amounts refer to Applera Corporation-Celera Genomics Group Common Stock.
For the recently completed quarter, R&D expenses decreased to $28.5 million from $36.7 million in the same quarter last year, due primarily to the wind-down of the Applera Genomics Initiative and programs eliminated in the June 2002 restructuring. Revenues for the quarter decreased to $21.5 million from $28.1 million for the same quarter in fiscal 2002, primarily due to Celera's decision not to pursue additional sequencing service business. Online/Information Business revenue was $17.2 million for the quarter, compared to $19.8 million in the same period last year. Operating income for the Online/Information Business was $6.2 million compared to $6.8 million in the prior year period. Expenses related to the Applera Genomics Initiative are not allocated to the Online/Information Business.
On June 30, 2003, the Group's cash and short-term investments were $802.4 million. Celera Genomics' cash and short-term investments decreased by approximately $87 million during fiscal 2003, including the conversion of approximately $17 million of short-term investments to long-term investments.
For fiscal 2003, Celera Genomics reported a net loss of $81.9 million, or $1.15 per share, compared to a net loss of $211.8 million, or $3.21 per share, for fiscal 2002. Included in the fiscal 2003 results is a $15.1 million non-cash charge associated with Celera's equity method investment in Discovery Partners International, Inc. (NASDAQ:DPII), which represents Celera's share of a charge for the impairment of goodwill and other long-term assets recorded by DPII. Fiscal 2002 results included a $99.0 million non-cash charge for acquired in-process R&D related to the acquisition of Axys Pharmaceuticals, Inc. and $25.9 million of charges related to the Paracel business, in addition to the charges related to the restructuring and the write-down of investments mentioned above. Revenues for fiscal 2003 were $88.3 million, compared to $120.9 million for the prior year, primarily due to Celera's decision not to pursue additional sequencing service business. Online/Information Business revenue for fiscal 2003 was $74.5 million and operating income was $29.7 million, compared to $72.7 million and $15.0 million, respectively, for fiscal 2002.
"During fiscal 2003, we aligned our organization behind our target identification, proteomics and small molecule programs, and added clinical development expertise to better balance our previously established discovery capacity," said Kathy Ordoņez, President, Celera Genomics. "We made this progress while reducing our cash use significantly compared to fiscal 2002."
"Celera Genomics is evaluating findings from disease association studies underway at Celera Diagnostics. These findings have the potential to yield novel therapeutic targets and to provide insight into disease pathways and new approaches to clinical trial design, such as stratification of patient populations based on our understanding of genetic contribution to disease," said Robert Booth, Ph.D., Chief Scientific Officer, Celera Genomics. "In addition, our proteomics programs are continuing to identify and validate potential targets for both protein and small molecule therapeutics in cancer."
The proteomics team at Celera Genomics is continuing its analysis of both lung and colon cancer samples, and has begun protein identification within the lung cancer program. Over 40 lung cancer tumors and matched normal lung samples have been processed and are in analysis. Celera has also undertaken expression and functional validation studies of cell surface proteins identified in its pancreatic cancer study.
Celera Genomics is completing pharmacokinetic (PK) studies for a number of Factor VIIa inhibitor small molecule compounds that are being evaluated for development as parenteral anticoagulants. PK studies are also underway in a histone deacetylase program for cancer and other indications. Celera has solved the crystal structures of both Factor VIIa and tryptase in the presence of small molecule inhibitors. Consequently, these structures are aiding in Celera's efforts to design potent and selective inhibitors against these therapeutic targets.
Celera Genomics Outlook
Celera Genomics believes that at least one of its compounds, most likely one of its partnered compounds, could enter clinical trials during fiscal 2004. Celera's partners will make clinical development decisions with respect to these compounds. During the coming year, Celera Genomics plans to complete the target identification and validation phases of its three ongoing proteomic oncology programs, and to initiate at least one new proteomic discovery program.
Celera Genomics intends to establish one or more strategic relationships that advance its pipeline and/or leverage its combination of genomic, proteomic and bioinformatic capabilities. Possible relationships may include a collaboration to identify and develop therapeutic antibodies against cell surface proteins identified by Celera's proteomic programs, as well as partnering of other therapeutic discovery efforts that Celera elects not to pursue independently or in collaboration with Celera Diagnostics.
The financial outlook for Celera Genomics for fiscal 2004 is as follows:
Celera Diagnostics Joint Venture
Celera Diagnostics, a 50/50 joint venture between Applied Biosystems and Celera Genomics, reported fiscal fourth quarter 2003 revenues of $5.6 million, compared to $2.8 million in the same period last year. For fiscal 2003, reported revenues more than doubled to $20.8 million, compared to $9.2 million in fiscal 2002. Reported revenues include equalization payments 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 $8.7 million and $23.4 million in the fiscal 2003 fiscal fourth quarter and 2003 periods, respectively, compared to $3.6 million and $11.6 million in the year-earlier periods. These increases were primarily due to continued growth in sales for cystic fibrosis Analyte Specific Reagents (ASRs), and to a lesser extent, the ViroSeqTM HIV-1 Genotyping System.
Net cash use was $16.1 million in the fourth quarter of fiscal 2003 compared to $15.2 million in the prior year period. Net cash use for fiscal 2003 was $59.4 million, compared to $45.9 million for fiscal 2002. The pre-tax loss for the recent quarter was $15.4 million, compared to $14.5 million in the same period last year. Pre-tax losses for fiscal 2003 increased to $51.2 million from $44.7 million in the year-ago period. Higher R&D expenses associated with discovery programs and product development were partially offset by increased gross margin.
During the past fiscal year, Celera Diagnostics completed the build-out of its high throughput genomics laboratory, established access to over 30,000 well-characterized and consented samples, and determined over 40 million genotypes. Nine disease association studies are currently underway, including studies of rheumatoid arthritis, breast cancer metastasis, Alzheimer's disease, interferon responsiveness, a metabolic disease, and four cardiovascular indications.
"We are very pleased to report that in four of Celera Diagnostics' disease association studies, we have identified and replicated novel associations between disease and single nucleotide polymorphisms in multiple genes," said Kathy Ordoņez, President, Celera Diagnostics. "We plan to communicate selected findings from these studies in the coming months, after we assess the diagnostic and therapeutic value of our discoveries, complete patent filings, consult with our collaborators and finalize product plans."
Recently, Celera Diagnostics began to manufacture for Abbott new ASRs that measure viral load and that genotype the hepatitis C virus (HCV). Established annual global market demand for comparable tests is believed to exceed $300 million. Future sales of HCV products manufactured by Celera Diagnostics will depend, in part, on Abbott's ability to sell these ASRs in a competitive market environment.
In June, Celera Diagnostics received additional clearance from the U.S. Food and Drug Administration to market its ViroSeq? HIV-1 Genotyping System as an in vitro diagnostic product. This latest 510(k) clearance covers the use of the ViroSeq system with the ABI PRISMŪ 3700 DNA Analyzer, a fully automated instrument commonly used in the largest, high-throughput clinical testing laboratories.
Celera Diagnostics Joint Venture Outlook
For fiscal 2004, end-user sales of products manufactured by Celera Diagnostics and marketed through the alliance with Abbott Laboratories are expected to approximately double to a range of $45 to $50 million. Celera Diagnostics anticipates fiscal 2004 pre-tax losses decreasing to a range of $38 to $44 million, and fiscal 2004 net cash use decreasing to a range of $46 to $52 million, including capital spending of approximately $5 million. Celera Diagnostics is assessing options for expanding manufacturing capacity that may additionally impact its total cash requirements for fiscal 2004. This outlook assumes continued demand growth for key products, including the HCV ASRs mentioned above.
Conference Call & Webcast
A conference call with Applera Corporation executives will be held today at 11:00 a.m. (EDT) with investors and media to discuss these results and other matters related to the businesses. 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 10:45 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 approximately two hours after the completion of the conference call on July 23 through August 3, 2003. Interested parties should call 706.645.9291 and enter conference ID 1702597.
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 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 $1.7 billion during fiscal 2003. 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 principal 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 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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