Celera Genomics Reports First Quarter Fiscal 2007 Results

Business Wire, Oct 25, 2006

ROCKVILLE, Md. -- Celera Genomics Group (NYSE:CRA), an Applera Corporation business, today reported a net loss of $7.1 million, or $0.09 per share, for the first quarter of fiscal 2007 ended September 30, 2006, compared to a net loss of $16.7 million, or $0.23 per share, for the first quarter of fiscal 2006. Included in the results for the first quarter of fiscal 2007 was a pre-tax charge of $3.5 million for Celera's estimated share of the damage award in continuing litigation between Abbott Laboratories, Celera's alliance partner, and Innogenetics N.V., Ghent, Belgium. The first quarter of fiscal 2006 included a pre-tax gain of $4.5 million from the sale of an investment. All per share amounts refer to Applera Corporation-Celera Genomics Group Common Stock.

"This has been another very good quarter for Celera as we continued to focus on growing our molecular diagnostics business," said Tony L. White, Chairman, President and Chief Executive Officer of Applera Corporation. "We're executing on our strategy of penetrating the existing molecular diagnostics market and also saw the launch by Specialty Laboratories of the first new genetic test based on Celera original research."

"This has been a solid quarter for us with end-user revenues growing 45 percent year-over-year," said Kathy OrdoEez, President of Celera Genomics. "We're pleased with the continued acceptance of the m2000[TM] system in the European markets, as well as the commercialization of our discoveries in cirrhosis through Specialty Laboratories' launch of its HCV Liver Fibrosis GenotypR[TM] test earlier this month."

Financial Highlights

* Reported revenues for the first quarter of fiscal 2007 were $10.2 million, compared to $9.2 million for the first quarter of fiscal 2006. The increase was primarily due to a higher equalization payment and diagnostic-related licensing revenues, previously reported as Celera Diagnostics' revenues in the prior year period. The first quarter of fiscal 2006 included $2.1 million of revenues from the discontinued Online/Information and Paracel businesses.

Reported revenues for the Group are comprised of product sales, equalization payments, and license and collaborative revenues. Product sales consist primarily of shipments to our partner, Abbott, at cost. Revenues from items that are outside of the alliance with Abbott are also reported in this category. Equalization payments result from an equal sharing of alliance profits and losses between the alliance partners and vary each period depending on the relative income and expense contribution of each partner.

* R&D expenses for the first quarter of fiscal 2007 were $13.2 million, compared to $29.5 million in the prior year quarter. SG&A expenses for the first quarter of fiscal 2007 decreased to $7.2 million, from $9.9 million in the prior year quarter. These expense reductions were primarily due to the decision to exit small molecule drug discovery and development and the discontinuation of the Online/Information Business.

* At September 30, 2006, the Group's cash and short-term investments were $566.4 million, compared to $569.5 million at June 30, 2006.

Supplemental Financial Information

* For the first quarter of fiscal 2007, total end-user revenues increased 45 percent to $25.8 million from $17.8 million in the prior year quarter. These end-user revenues included products sold through the alliance with Abbott and revenues from our unpartnered new genetic tests. Increased sales of HIV and HCV RealTime[TM] viral load assays used on the m2000 system, sales of cystic fibrosis analyte specific reagents (ASRs), and the ViroSeq[R] HIV-1 Genotyping System all contributed to the year-over-year growth. The first quarter of fiscal 2006 included $1.7 million in end-user revenues from a low resolution HLA product line that was removed from the alliance in December 2005.

Business and Scientific Developments

* In October, Specialty Laboratories announced the commercial launch of its Hepatitis C Virus (HCV) Liver Fibrosis GenotypR[TM] test, the first genomic clinical test to predict progression to liver fibrosis and cirrhosis in HCV patients. This test is based on Celera's cirrhosis marker discoveries, which were licensed to Specialty in June 2006. The HCV Liver Fibrosis GenotypR test is the first of its kind to identify a patient's genomic signature and uses seven single nucleotide polymorphisms to rate the relative risk of progression to liver fibrosis and cirrhosis.

* In September, Celera published data that identified the FCAR genetic polymorphism associated with increased risk for myocardial infarction. The research study confirmed prior research findings of a genetic basis for individuals at elevated risk for heart attack who derive better than average protective benefits of statin treatment This paper will appear in the December 2006 edition of Arteriosclerosis, Thrombosis and Vascular Biology, and is currently available on the publication's website at http://atvb.ahajournals.org/.> * In September, a jury in Madison, Wisconsin found that the sale of HCV genotyping ASR products by Abbott willfully infringed a U.S. patent owned by Innogenetics. These products are manufactured by Celera and are sold through its alliance with Abbott. The U.S. District Court for the Western District of Wisconsin found Abbott liable for $7 million in damages. The Court set a schedule to address Innogenetics' request for an injunction and enhanced damages, and this is ongoing. Abbott has informed Celera that it has brought post-trial motions and intends to appeal this judgment as both Abbott and Celera believe that Innogenetics' patent is invalid and that the alliance's HCV genotyping ASRs do not infringe Innogenetics' patent. Innogenetics did not name Celera as a party in this lawsuit. However, as these products are part of its alliance with Abbott, Celera shares equally in the costs of, and any financial implications relating to, this litigation.