CIPH Ciphergen Biosystems (MM)

Sharpens Business Focus and Integrates Divisions to Leverage Quest Diagnostics Alliance; Gail S. Page Promoted to President and COO FREMONT, Calif., Aug. 8 /PRNewswire-FirstCall/ -- Ciphergen Biosystems, Inc. (NASDAQ:CIPH) today announced financial results for the second quarter ended June 30, 2005. Ciphergen's total revenue was $7.5 million in the second quarter of 2005 as compared to $8.3 million in the second quarter of 2004. Ciphergen's net loss was $9.0 million in the second quarter of 2005 as compared to $13.1 million in the second quarter of 2004. As of June 30, 2005, the Company's cash and investments were $23.5 million. Total long term debt totaled $28.4 million, of which $28.3 million was convertible debt. On July 22, Ciphergen entered into a strategic alliance with Quest Diagnostics whereby Quest Diagnostics made a $15 million equity investment in Ciphergen and has agreed to lend Ciphergen $10 million to fund certain development activities; this loan will be forgiven if certain milestones are made. The Company also announced an increased focus on its emerging proteomic biomarker-based clinical diagnostic business, for which a strategic alliance was recently formed with Quest Diagnostics. The Company believes that it has unique capabilities to discover proteomic biomarkers that can be translated into highly predictive research and clinical diagnostic assays that enable improved understanding of disease pathology, faster pharmacoproteomic-based drug development and the improvement of patient care. "The recently announced alliance with Quest Diagnostics is an important step towards translating our proprietary biomarker discovery and assay capabilities into commercial clinical diagnostic tests to address unmet medical needs and improve patient care," stated William E. Rich, CEO. "I am pleased to announce the promotion of Gail S. Page to President and COO. Under her leadership, we are integrating and streamlining our operating divisions to focus our resources on biomarker discovery partnerships with key academic and pharmaceutical customers to speed development of diagnostic and theranostic assays and better leverage the Quest alliance." Ciphergen also announced that it intends to focus its sales efforts on collaborative BDC service projects with key translational research customers in academia and pharma. The Company believes that this increased emphasis on project-scale, collaborative services will expedite the success of its customers with the technology, increase ProteinChip(R) product and service revenues, while also enabling the Company to reduce its operating expenses. In line with this strategy, a number of organizational changes were implemented at the Company, including steps to reduce headcount by approximately 20% by the fourth quarter. In addition Ciphergen is integrating its divisions into one organization and has promoted Gail S. Page to President and Chief Operating Officer of Ciphergen. Other Recent Highlights * Major presence at AACR Annual Meeting. At the American Association of Cancer Research (AACR) annual conference, there were a total of 44 studies presented that utilized Ciphergen's ProteinChip technology for biomarker discovery, validation, identification and assay development across a wide varieties of cancers and therapeutic strategies. At a special invited session, Dr. Judah Folkman of the Children's Hospital Boston presented results of work done in his laboratory and in collaboration with Ciphergen scientists using SELDI-TOF-MS, suggesting that proteomic analysis of circulating platelets can potentially be useful for early cancer diagnosis. * Promising results presented at AUA Annual Meeting. Dr. Daniel W. Chan and Dr. Zhen Zhang of the Johns Hopkins Medical School, working in collaboration with Ciphergen scientists, presented results at the American Urological Association Annual Meeting suggesting that two protein markers, in combination with PSA levels, may be useful in predicting risk of recurrence within five years of treatment. * Agreement signed with National Cancer Institute. In April, Ciphergen signed a material transfer agreement with the NCI Clinical Proteomics Reference Laboratory (CPRL) which allows CPRL to evaluate the ProteinChip System, Series 4000, arrays and software to study biomarker patterns indicative of ovarian cancer. The CPRL intends to test archived ovarian cancer samples on assays it has constructed on Ciphergen's platform. * Novel Approach Reported to Detect Cancer by Measuring Host Response Proteins. A Ciphergen study performed in collaboration with scientists at the Johns Hopkins University School of Medicine was published in the International Journal of Cancer which suggested a novel alternative to searching for highly specific classical markers coming directly from tumors. This approach utilizes SELDI-TOF-MS to detect and quantitatively assay for post-translationally modified proteins formed by the host response to the tumor. * Introduction of Deep Proteome(TM) Research Services. At the American Society of Mass Spectrometry Annual Meeting, Ciphergen announced the introduction of Deep Proteome Research Services through our Biomarker Discovery Center(R) (BDC) scientists, making proprietary Equalizer(TM) protein biomarker discovery technology available to scientists for the first time. Deep Proteome Research Services enable scientists to look at low abundance proteins in various biological samples and significantly improve their biomarker discovery power. These services are preferentially provided to Ciphergen's ProteinChip System customers and BDC collaboration partnerships. * Biomarker Research Collaboration with Bayer Pharmaceuticals. Ciphergen will analyze patient samples from one of Bayer's compounds in a Phase II clinical trial in cancer, with a goal of delivering to Bayer a biomarker assay that is predictive of drug response. This agreement expands Ciphergen's business initiative to form pharmacoproteomic collaborations with pharmaceutical companies to accelerate and streamline clinical development of new drugs through the identification of important biomarkers of drug response. * Patent Issuances. Ciphergen has had seven patents issue in the U.S. during the first half of 2005; of particular interest, one issued patent is directed to the detection of multiple diagnostic markers by SELDI-TOF-MS for the diagnosis of disease, and another is directed toward methods of using SELDI-TOF-MS to rapidly purify proteins for applications including protein identification. Ciphergen currently has 28 issued patents and 109 active patent families. * Other Management Changes. James S. Burns, President and CEO of EntreMed, Inc. has joined Ciphergen's Board of Directors. Mr. Burns brings to Ciphergen significant experience and accomplishments in both the pharmaceutical and laboratory products industries, particularly important to the Company's initiatives to further penetrate the pharmaceutical industry. Matthew Hogan, the Company's Chief Financial Officer, has informed the Company that he is considering pursuing potential alternative career opportunities in the investment management field. He currently remains as the Chief Financial Officer of the Company and has made no decision to leave the Company at this time. In addition, Michael Acosta recently joined Ciphergen as Vice President, Quality Assurance/Regulatory Affairs. Mr. Acosta has a long record of ensuring compliance with regulatory requirements and his primary initial focus at the Company will in the area of cGMP compliance to facilitate the Company's biomarker diagnostic development program. About Ciphergen Ciphergen is dedicated to the discovery of protein biomarkers and panels of biomarkers and their development into protein molecular diagnostic tests that improve patient care; and to providing collaborative R&D services through its Biomarker Discovery Center(R) laboratories for biomarker discovery for new diagnostic tests as well as pharmacoproteomic services for improved drug toxicology, efficacy and theranostic assays. Ciphergen develops, manufactures and markets a family of ProteinChip(R) Systems and services for clinical, research and process proteomics applications. ProteinChip Systems enable protein discovery, validation, identification and assay development to provide researchers with predictive, multi-marker assay capabilities and a better understanding of biological function at the protein level. Additional information about Ciphergen can be found at http://www.ciphergen.com/. Safe Harbor Statement Note Regarding Forward-Looking Statements: This press release contains forward-looking statements. For purposes of the Private Securities Litigation Reform Act of 1995 (the "Act") Ciphergen disclaims any intent or obligation to update these forward-looking statements, and claims the protection of the Safe Harbor for forward-looking statements contained in the Act. Examples of such forward-looking statements include the discovery of proteomic biomarkers that can be translated into highly predictive research and clinical diagnostic assays that enable improved understanding of disease pathology, faster pharmacoproteomic-based drug development and the improvement of patient care; translating any proteomic biomarkers that may be discovered into highly predictive research and clinical diagnostic assays; increasing the emphasis on project-scale, collaborative services will expedite the success of our customers with our technology, increase ProteinChip product and service revenues, while also enabling the Company to reduce its operating expenses; commencement of discovery projects using our Deep Proteome products and their ability to detect low abundant proteins; the potential for our ProteinChip technology to yield useful protein biomarkers; and our goals of delivering to Bayer a biomarker assay that is predictive of drug response. Actual results may differ materially from those projected in such forward-looking statements due to various factors, including the risk that our ProteinChip technology is unable to discover, validate and/or develop protein biomarkers as diagnostic or toxicology assays; the risk that we do not achieve clinical diagnostic launch milestones due to a failure to validate the performance of potential clinical assays in larger studies, an inability to translate research assays into highly reproducible commercially acceptable assays, a failure to achieve cGMP status and other factors; the risk that pharmaceutical companies will not expand their use of our products and services; the risk that we do not successfully launch our new product introductions and that such new products do not receive market acceptance or generate revenue at a rare or in the amounts we anticipate; and the risk that we are unable to protect and promote our proprietary technologies. Investors should consult Ciphergen's filings with the Securities and Exchange Commission, including its Form 10-Q dated May 10, 2005, for further information regarding these and other risks of the Company's business. NOTE: Ciphergen, ProteinChip and Biomarker Discovery Center are registered trademarks of Ciphergen Biosystems, Inc. Ciphergen Biosystems, Inc. Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2004 2005 2004 2005 Revenue $8,336 $7,493 $21,588 $14,141 Cost of revenue 4,300 3,783 8,270 6,918 Gross profit 4,036 3,710 13,318 7,223 Operating expenses: Research and development 5,535 3,626 11,292 7,133 Sales and marketing 7,361 4,792 13,297 10,065 General and administrative 3,554 3,742 7,229 7,246 Total operating expenses 16,450 12,160 31,818 24,444 Loss from operations (12,414) (8,450) (18,500) (17,221) Interest and other income (expense), net (442) (535) (969) (946) Loss from continuing operations before income taxes (12,856) (8,985) (19,469) (18,167) Income tax provision (benefit) for continuing operations 140 (11) 192 139 Net loss from continuing operations (12,996) (8,974) (19,661) (18,306) Loss from discontinued operations, net of tax (1) (146) (67) (962) (67) Net loss $(13,142) $(9,041) $(20,623) $(18,373) Basic and diluted loss per share information: Loss from continuing operations $(0.45) $(0.31) $(0.68) $(0.62) Loss from discontinued operations (0.00) (0.00) (0.03) (0.00) Net loss $(0.45) $(0.31) $(0.71) $(0.62) Shares used in computing basic and diluted loss per share 29,205 29,575 29,121 29,524 (1) Amounts attributable to our BioSepra business, which was sold on November 30, 2004, have been reclassified to loss from discontinued operations. Ciphergen Biosystems, Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands) December 31, June 30, 2004 (1) 2005 ASSETS Current assets: Cash and cash equivalents $35,392 $21,256 Short term investments 2,175 2,206 Accounts receivable, net 10,811 6,746 Notes receivable from related parties 126 12 Prepaid expenses and other current assets 1,847 1,462 Inventories 6,919 6,542 Total current assets 57,270 38,224 Property, plant and equipment, net 9,315 8,216 Goodwill 2,529 2,529 Other intangible assets, net 3,040 2,760 Other long term assets 2,223 2,056 Total assets $74,377 $53,785 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $3,369 $3,593 Accrued liabilities 7,499 6,197 Current portion of deferred revenue 5,529 4,865 Current portion of capital lease obligations 16 26 Current portion of long term debt 925 740 Total current liabilities 17,338 15,421 Deferred revenue, net of current portion 855 676 Capital lease obligations, net of current portion 28 50 Long term debt, net of current portion 377 -- Convertible senior notes, net of discount 28,051 28,317 Other long term liabilities 1,013 756 Total liabilities 47,662 45,220 Stockholders' equity: Common stock 29 30 Additional paid in capital 187,133 187,334 Notes receivable from stockholders (349) (36) Accumulated other comprehensive income (loss) 263 (29) Accumulated deficit (160,361) (178,734) Total stockholders' equity 26,715 8,565 Total liabilities and stockholders' equity $74,377 $53,785 (1) The condensed consolidated balance sheet at December 31, 2004 has been derived from the audited consolidated financial statements at that date included in the Company's Form 10-K for the fiscal year ended December 31, 2004. DATASOURCE: Ciphergen Biosystems, Inc. CONTACT: Sue Carruthers, Investor Relations of Ciphergen Biosystems, Inc., +1-510-505 2297 Web site: http://www.ciphergen.com/

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