Park News
15 May 2006
Solexa Reports First Quarter Financial Result
HAYWARD, Calif. and Cambridge, U.K. (May 15, 2006) - Solexa, Inc. (Nasdaq: SLXA) today announced financial results for the quarter ended March 31, 2006.
"We are actively working to execute the commercial launch of the Solexa Genome Analysis system and to realize the longer term opportunity we see for our technology," said John West, chief executive officer of Solexa. "In the coming months, we plan to grow our sales, marketing and manufacturing teams, including recruiting a senior executive to assemble a field organization to support the anticipated broad commercial release of our system after the initial early access phase. In manufacturing, we are implementing the steps necessary to build our capacity to produce instruments, flow cells and reagents, and we intend to recruit a senior executive to run these operations.
"In our quest to broaden exposure for the Solexa Genome Analysis System and its potential to dramatically reduce the cost of genome sequencing, we are continuing our practice of making presentations at scientific conferences and industry trade shows. In March we delivered a plenary talk on human sequence variation and new sequencing technologies at The Human Genome Organisation (HUGO) conference in Taiwan, in April we participated in the 2006 Life Sciences Conference + Expo sponsored by Bio-IT World and just this week we presented at Cold Spring Harbor Laboratory's annual meeting, The Biology of Genomes. At the end of this month we expect to be at the HUGO 11th Annual Meeting in Helsinki.
"We continue on track toward our major milestone of sequencing a human genome by year end. Our ability to achieve this goal will be an important validation of our system and will serve as a key demonstration project for prospective customers," said Mr. West. "As previously announced, we plan to release interim results from the project throughout the year."
Financial Results
Solexa, Inc. is the result of a business combination between Solexa Limited and Lynx Therapeutics, Inc. Reported results of operations for the three months ended March 31, 2005 reflect those of Solexa Limited, to which the results of operations of Lynx Therapeutics, Inc. have been added following March 4, 2005, the date of the consummation of the business combination.
Revenue for the first quarter of 2006 was $768,000, compared with $605,000 for the first quarter of 2005. Revenue was derived primarily from service fees generated from the MPSS™ genomics services business that we acquired as a result of the business combination. Revenue in the first quarter of 2006 is from the MPSS genomics services business and does not yet reflect any contribution from the Solexa Genome Analysis System, Solexa's reversible-terminator chemistry and Clonal Single Molecule Array™ DNA sequencing platform.
Total operating costs and expenses were $11.1 million in the first quarter of 2006, up from $5.9 million in the first quarter of 2005. The increase primarily reflects the addition of the results of Solexa's U.S. operations from the date of the business combination; the expensing of stock-based compensation in accordance with adoption of Statement of Financial Accounting Standards No. 123R (SFAS 123R), Share-Based Payment; and increased material costs for research and development, particularly spending on components for the production of instrument prototypes based on the new technology; partially offset by the absence of expenses related to execution of the business combination. Cost of service fees, which represents costs associated with providing Solexa's genomics services, was $912,000 in the first quarter of 2006. In this quarter, the Company charged certain operating costs against a forward loss contingency for unprofitable contracts in its genomics services business; the reserve balance was $364,000 at March 31, 2006. Research and development expense in the first quarter of 2006 was $6.3 million, and selling, general and administrative expense was $3.8 million.
Solexa reported an income tax benefit related to research and development tax credits recorded in the first quarter of 2006 of $411,000. The Company did not report an income tax benefit in the comparable quarter of 2005.
Solexa reported a net loss attributable to common shareholders for the first quarter of 2006 of $9.3 million, or $0.27 per share. Effective January 1, 2006, the company began expensing stock options as required by SFAS 123R. Adoption of SFAS 123R increased the net loss for the first quarter of 2006 by approximately $846,000. The Company reported a net loss attributable to common shareholders for the first quarter of 2005 of $5.8 million, or $0.96 per share.
As of March 31, 2006, Solexa reported cash and cash equivalents of $68.8 million. In January 2006, Solexa completed a private placement of common stock and warrants for gross proceeds of $40 million, which represents the second and final closing of a $65 million private equity financing announced in November 2005.