Ciphergen Reports Third Quarter 2004 Financial Results Announced
Sale of BioSepra Process Chromatography Business to Pall
Corporation FREMONT, Calif., Nov. 1 /PRNewswire-FirstCall/ --
Ciphergen Biosystems, Inc. (NASDAQ:CIPH) announced today its
financial results for the third quarter of 2004. For the quarter
ended September 30, 2004, total revenue decreased 31% to $11.0
million, as compared to revenue of $16.1 million in the third
quarter of 2003; revenue increased approximately 3% as compared to
the second quarter of 2004. The year-over-year decrease in revenue
was due to decreased sales of ProteinChip(R) Systems and decreased
revenue from Ciphergen's BioSepra(R) Process Proteomics products,
partially offset by increased revenue from ProteinChip Arrays and
service activities. The Company reported a net loss of $9.5 million
for the third quarter of 2004, compared to a net loss of $5.2
million for the comparable period of 2003. "We have received
positive feedback following the Q3 market launch of our
next-generation platform, the ProteinChip System, Series 4000. We
expect that this will result in increased sales growth in the near
term as users and prospects become more familiar with its
state-of-the-art features designed for translating biomarker
discoveries into high value assays," commented William E. Rich,
President and CEO. "The sale of our BioSepra process chromatography
business allows us to focus our financial and business resources on
our core research products and emerging diagnostic business. The
joint sales and marketing collaboration with Pall Corporation
positions us to continue to sell the ProteinChip Systems into the
process proteomics market. In addition, our Diagnostics Division
continues to report encouraging results in its development programs
in ovarian cancer and Alzheimer's disease. Also, we are pleased
with the progress in our efforts to identify strategic commercial
partnerships." Summary of Recent Highlights: -- Introduction of the
ProteinChip System, Series 4000 The ProteinChip System, Series 4000
was launched in July 2004 and features the Pattern Track(TM)
Biomarker Discovery to Assay process, which integrates Ciphergen's
proprietary ProteinChip Arrays, SELDI-TOF-MS detection and
Biomarker Patterns(TM) software. The Series 4000 has been designed
to discover, validate, purify, ID and translate biomarkers into
high value assays - all on a single platform and in an easy to use,
bench-top format. This platform addresses what has been a major
bottleneck in translational medicine. -- Sale of Process
Chromatography Business and Collaboration with Pall Corporation.
Ciphergen announced last week that it has reached an agreement to
sell its BioSepra process chromatography business to Pall
Corporation for a purchase price of approximately $32.0 million,
net of cash and debt. The transaction is expected to close within
45 days, subject to customary closing conditions. In addition, the
two companies are entering into a process proteomics collaboration,
based on the combination of Ciphergen's ProteinChip technology and
BioSepra's leading chromatography products. Ciphergen will also
retain certain limited rights to access BioSepra's chromatography
sorbent technology for manufacture, use and sale in the research
and diagnostic markets. -- Progress on Reducing Operating Expenses.
Cost reduction steps taken in July resulted in operating expenses
$2.3 million, or 13%, lower in the third quarter than in the second
quarter of 2004. This decrease has already exceeded our initial
target of reducing annualized operating expenses by $8.0 million in
the fourth quarter. -- Automated Chip Manufacturing Commences.
During the third quarter, our automated chip manufacturing system
completed the validation process and generated its first production
runs for customer shipment. Expected benefits of this new system
are an ability to increase production volumes without adding labor
and an improvement in product quality. -- Ovarian Cancer
Diagnostics Program. Ciphergen's 500-sample, multi-site ovarian
cancer study was published by the journal Cancer Research on August
15; this study was conducted in collaboration with the Johns
Hopkins University School of Medicine, MD Anderson, Duke University
Medical School, The Royal Hospital for Women (Sydney), University
Hospital Groningen and Queen Mary's School of Medicine (London).
The Company is engaged in a series of retrospective and prospective
follow-on studies to validate these findings and determine their
utility in addressing three clinical questions: early stage
detection, late stage detection and treatment monitoring for
recurrence. -- Alzheimer's Study Results Presented. Prof. Kaj
Blennow, M.D., Ph.D., University of Goteborg, Molndal, Sweden,
presented promising results from our joint Alzheimer's disease
discovery program seeking to differentiate Alzheimer's disease from
other forms of dementia at the July 17-22 9th International
Conference on Alzheimer's disease and Related Disorders in
Philadelphia. In addition, there were a total of 10 studies
presented by our collaborators and customers at this meeting,
including three that highlighted Ciphergen's Amyloid Beta
multi-peptide SELDI-based immunoassay. -- New Appointments. Within
the Diagnostics Division, Eric Fung, M.D., Ph.D. has been promoted
to the position of Vice President, Clinical and Medical Affairs. In
his new position, Dr. Fung will manage our biomarker discovery
efforts within academic collaborations, and direct clinical trial
studies designed to achieve commercialization. Additionally, Simon
Shorter, Ph.D. was appointed as Vice President of Business
Development. Dr. Shorter will oversee corporate strategy and
academic business development activities. These appointments were
made in support of Ciphergen's major clinical diagnostics business
initiatives designed to develop and commercialize protein molecular
diagnostics based on the ProteinChip platform. About Ciphergen
Ciphergen's Biosystems Division develops manufactures and markets a
family of ProteinChip(R) Systems and services for clinical,
research, and process proteomics applications, as well as a broad
range of bioseparations media for protein purification and large
scale production. ProteinChip Systems enable protein discovery,
characterization, identification and assay development to provide
researchers with predictive, multi-marker assay capabilities and a
better understanding of biological function at the protein level.
Ciphergen's Diagnostics Division 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.
Additional information about Ciphergen can be found at
http://www.ciphergen.com/. Safe Harbor Statement Note Regarding
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 statements regarding the expected impact of the
introduction of the ProteinChip System, Series 4000 on future
revenue growth, statements regarding our plans to sell the BioSepra
business to Pall and the expected results of our collaboration with
Pall in the process proteomics market, the expected benefits of our
automated chip manufacturing system, our investment in and
commitment to our Diagnostics Division, progress toward identifying
strategic commercial partnerships and the anticipated progress of
that business, statements regarding the benefits of the new chip
manufacturing system, and statements regarding the use of
ProteinChip technology to discover useful protein biomarkers and
develop diagnostic assays for Alzheimer's disease, ovarian cancer
or other medical conditions, and future growth in the field of
proteomics. Actual results may differ materially from those
projected in such forward-looking statements due to various
factors, including the risk that competition may not only lengthen
the sales cycle but also result in permanently lost orders, the
risk that sales may not increase due to funding issues, the risks
associated with new product introductions including the risk that a
new product does not achieve significant commercial market
acceptance, that sales and marketing expenses may be temporarily
higher due to the product launch, that sales cycles could be
lengthened due to the need to train and educate customers and
potential customers about new features, protocols and technology
encompassed by the new products, that initial manufacturing costs
may be high as new production processes are introduced and that new
products may involve quality issues that negatively impact our
gross margin as well as the potential need to increase inventory
reserves for obsolescence of old products, the risk that product
quality will not improve as a result of the new chip manufacturing
system, the ability to close the proposed sale of BioSepra, the
ability of Pall and Ciphergen to work together to grow ProteinChip
sales in the process market, the ProteinChip technology's ability
to validate and/or develop the Alzheimer's disease, ovarian cancer
or other biomarkers as diagnostic assays, and the continued
emergence of proteomics as a major focus of biological research and
drug discovery. Investors should consult Ciphergen's filings with
the Securities and Exchange Commission, including its Form 10-Q
dated August 9, 2004 for further information regarding these and
the other risks of the Company's business. NOTE: Ciphergen,
ProteinChip, Biomarker Discovery Center and BioSepra are registered
trademarks of Ciphergen Biosystems, Inc. Ciphergen Biosystems, Inc.
Summary Financial Information (unaudited) (in thousands, except per
share data) Three Months Ended Nine Months Ended September 30,
September 30, 2003 2004 2003 2004 Revenue $16,072 $11,032 $43,177
$37,324 Cost of revenue (1) 5,749 3,858 22,534 14,060 Gross profit
10,323 7,174 20,643 23,264 Operating expenses: Research and
development 5,400 4,679 18,792 16,842 Sales and marketing 5,971
7,423 17,917 22,758 General and administrative 3,332 3,623 12,286
11,249 Amortization of intangible assets 207 208 621 622 Total
operating expenses 14,910 15,933 49,616 51,471 Loss from operations
(4,587) (8,759) (28,973) (28,207) Interest and other income
(expense), net (124) (649) 164 (1,593) Loss before income taxes
(4,711) (9,408) (28,809) (29,800) Provision for income taxes 526
121 1,229 352 Net loss $(5,237) $(9,529) $(30,038) $(30,152) Basic
and diluted net loss per share $(0.18) $(0.33) $(1.08) $(1.03)
Shares used in computing basic and diluted net loss per share
28,730 29,319 27,902 29,186 December 31, September 30, 2003 2004
Cash, cash equivalents and investments in securities $47,316
$18,965 Total assets 102,026 69,920 Long-term debt, net of current
portion 30,879 30,983 Stockholders' equity 47,892 19,006 (1) In the
nine months ended September 30, 2003, cost of revenue included a
non-recurring expense of $7,257 related to our litigation
settlement. 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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