Pyrosequencing AB Reports Fourth Quarter and Year End Results for Period Ended December 31, 2001

Pyrosequencing AB Reports Fourth Quarter and Year End Results for Period Ended December 31, 2001 -- Performance confirms worldwide acceptance of Company's technology -- Uppsala, Sweden, February 18, 2002, Pyrosequencing AB (Stockholm: PYRO A) today reported fourth quarter and year-end results for the period ended December 31, 2001. Erik Walldén, President and CEO of Pyrosequencing, commenting on the fourth quarter and 2001 performance said, "The fourth quarter began with a considerable amount of market uncertainty, magnified by the events of September 11th. By the end of the quarter, however, we saw our customers and the scientific community in genera, returning to normal activity levels, with a renewed and strong interest in applied genetic analysis. Fourth quarter results and year 2001 performance show increasing demand for our products as we report an impressive number of systems sold and high gross margins on both instruments and reagents. We believe this bodes well for 2002 and the long-term future of Pyrosequencing." Accomplishments for 2001 include: - Increased revenues by 134 percent to $10.2 million compared to year 2000 revenues - Expanded installed base to more than 150 systems and 18 customers now have two or more systems - Sold four 384-well systems under the Company's Preferred Technology Program (PTPtm) - Formed a Molecular Diagnostic business and established ten collaborations to develop diagnostic tests and related intellectual property - Launched DNA Sequence Analysis software and reagent kits for the PSQtm96 System and introduced Primer Design software - Completed a worldwide sales network with new distributors in Asia Pacific - Received three U.S. patents, which cover aspects of Pyrosequencing technology and diagnostic and therapeutic responses in cardiovascular disease Summary financial group data (in millions except share data) Twelve months ended Three months ended Dec. Dec. 31 31 2001 2001 2000 2001 2001 2000 USD** SEK SEK USD** SEK SEK 37.5 Net sales 10.2 108.2 46.2 3.6 25.8 Gross profit 7.3 77.6 35.6 2.6 27.5 19.1 Gross margin, % 71.8 71.8 77.0 73.5 73.5 74.3 Operating result (16.5) (174.5) (103.0 (5.4) (56.7) (29.0) ) Results after (13.0) (137.1) (78.1) (4.4) (46.5) (18.5) financial items Net results (13.0) (137.5) (78.0) (5.1) (53.8) (18.5) 2001 2000 Weighted average shares 34,769,875 29,997,40 outstanding 0 Weighted average shares outstanding after 36,253,375 31,879,92 full dilution 8 Common shares outstanding, as of 34,770,100 34,767,40 Dec 31 0 As of Dec. 31, As of Dec. 31, 2000 2001 USD** SEK USD** SEK Cash and short-term 21.0 222.0 36.9 389.6 investments* Securities held as long-term financial assets* 42.0 443.2 43.3 457.1 Other assets 17.2 181.6 12.0 126.9 Total assets 80.2 846.8 92.2 973.6 Shareholders equity 74.3 785.0 87.4 922.5 Operating liabilities 5.9 61.8 4.8 51.1 Total liabilities and 80.2 846.8 92.2 973.6 shareholders' equity *Total cash and marketable securities = $63.0 **Convenience translation rate: SEK 10.56 = 1 USD Financial Position For the year ended December 31, 2001, the Company reported revenues of $10.2 million as compared to $4.4 million in the prior year. This increase reflects additional sales of PSQ 96 Systems, climbing from 53 systems in 2000 to 88 this year, as well as a substantial increase in reagent sales. In addition, during 2001 the Company introduced its high- throughput 384-well instrument developed under the PTP program and received four orders by year-end. For the three months ended December 31, 2001, the Company reported revenues of $3.6 million compared to $2.4 million for the comparable period in 2000. The increase in revenue reflects systems sales as well as an increase in reagent and consumable sales. During the quarter the Company received 33 orders for PSQ 96 Systems and 34 were recognized as revenue. The consumable sales as a percentage of revenue rose from 13.4 percent of total revenue in the fourth quarter of 2000 to 21.0 percent in the current quarter. In contrast to PSQ 96 System sales, PTP installations typically extend over multiple accounting periods. As a result, revenue related to PTP sales is recorded using the percentage of completion method for sales on contracts with fixed prices. Gross margins for the fourth quarter of 2001 were 73.5 percent, an increase from the margins of 66.2 percent for the third quarter of the year. The increase reflects a return to historic margin levels as the third quarter was adversely affected by a one-time sale of robotics from inventory at the Company's cost. Operating expenses were $8.0 million for the fourth quarter of 2001 and $23.9 million for the 12 months ending December 31, 2001, compared to $4.6 million and $13.1 million, respectively, in the corresponding periods of 2000. The rise in operating expenses is mainly attributed to the Company's increased efforts in sales and marketing as it completed a worldwide sales and support network and to growing research and development expenses associated with new software and hardware products launched in 2001 and those planned for 2002. The Company expects to realize long-term benefits in future operating results from the spending initiatives in 2001. Pyrosequencing reported a net loss of $5.1 million, or $0.15 per share, for the fourth quarter of 2001 and a net loss of $13.0 million ($0. 37 per share) for the 12 months ended December 31, 2001. Those results compare to $1.7 million ($0.06 per share), and $7.4 million ($0. 25 per share), respectively, for the comparable periods of 2000. At December 31, 2001, cash, cash equivalents and investments in high- grade debt securities, including investments with maturity dates exceeding 12 months, totaled $63.0 million as compared to $80.2 million at December 31, 2000. Pyrosequencing has no debt financing. The Board of Directors and President propose that no cash dividends will be paid. Marketing and Sales This was the second year that the Pyrosequencing PSQ 96 System for applied genetic analysis was available to the market and the Company continues to lead the market in moderate-throughput processing with an installed base of more than 150 systems. During 2001, the Company began a process of expanding the applications available on this platform. An example of the broad utility of the technology is the Cleveland Clinic's application of the Company's sequence analysis products for the rapid identification of mycobacteria using the PSQ 96 System. For high- throughput needs, Pyrosequencing launched a 384-well, highly customized program (PTP) in February 2001. The Company demonstrated strong market demand for this offering by selling four PTPs in the first ten months, including a fourth quarter PTP sale to Germany's Max Delbrück Center for Molecular Medicine which is using the system to analyze single nucleotide polymorphisms (SNPs) implicated in the genetics of complex diseases. Beneficial software capabilities such as allele frequency, sequence analysis and primer design were also introduced during 2001, and we expect to continue to broaden our product offerings and applications by introducing both enhanced software and systems in 2002. The year 2001 also marked a significant expansion of Pyrosequencing's marketing, sales and support capabilities. The Company added 14 new sales and technical support people in the United States and Europe and completed the network of distributors for the rest of the world by adding key distributors in Asia Pacific. For the year, Pyrosequencing sold 86 PSQ 96 Systems and four customized, high-throughput systems. This represents an increase in revenue of 134 percent over year 2000. The Company expects that during 2002 it will harvest the significant investment made in strengthening and expanding the organization. Research and Development Pyrosequencing continued to develop and enhance the functionality of current product offerings based on the PSQ 96 System. Capabilities in multiplexing and haplotyping were developed and new sample preparation protocols were designed to enhance the Company's SNP and sequence analysis solutions. In addition, considerable efforts were dedicated to developing the new high-throughput PTP system, made available through a successful early access program. Ongoing research and development projects related to the Company's third generation product yielded significant milestones in designing a microfluidics platform to meet the emerging needs in the applied genetic analysis market. The new technology will be applicable in several different market niches ranging from cost-efficient, high-throughput systems for large-scale research to the evolving requirements in molecular diagnostics. In support of the Company's new Molecular Diagnostics business, R&D efforts were also focused on strengthening the Applications group to build further capabilities in this important area. Pyrosequencing remains committed to achieving the highest quality in R&D with the goal of becoming ISO compliant. In 2001, Pyrosequencing was granted three U.S. patents which cover the Company's core technology as well as the application of SNP analysis to drug response in cardiovascular disease. Additional technology and molecular diagnostics-related patent applications were also filed. Molecular Diagnostics The Molecular Diagnostic Business Unit was formed in January 2001. This Unit, based in the United States, will exploit Pyrosequencing technology for molecular diagnostic on a global basis. The group succeeded in establishing ten collaborations with thought-leaders at prestigious clinical research institutions and with several commercial partners. The goal of these collaborations is to identify new product opportunities in disease diagnosis, clinical prognosis and pharmacogenomics. During the fourth quarter, the Molecular Diagnostics Unit announced collaborations with the University of California, San Francisco, to analyze genes involved in the development and potential progression of multiple sclerosis, and a collaboration with the Mayo Clinic to develop tests to detect an inherited form of thyroid cancer. In addition to partnerships with leading clinical research institutions, this group also announced two commercial collaborations during the fourth quarter. The first and largest example to date of the potential commercial applications of Pyrosequencing technology in molecular diagnostics is an alliance with Genomics Collaborative, a clinical functional genomic company housing a comprehensive collection of clinical samples. Leveraging Pyrosequencing's existing intellectual property in cardiovascular disease (CVD), this partnership focuses on validating specific genes and SNPs used to predict, diagnose and guide treatment for CVD, and to expand the proprietary position through the discovery of additional markers. Although we do not expect significant revenue from this group in the near future, we do expect to continue to collaborate with academic groups and commercial partners to take full advantage of the exciting opportunities in molecular diagnostics using Pyrosequencing technology. Human Resources At December 31, 2001, the total number of employees in the Pyrosequencing group was 141 compared to 86 at December 31, 2000. Annual General Meeting and Release of Financial Information The Annual General Meeting will be held on Monday, April 22, 2002 in Uppsala. Notice for the meeting will be available on the Company's Website. Pyrosequencing's Annual Report will be distributed to the shareholders at the end of March. The Company will publish the Interim Report for the quarter ended March 31, 2002 on April 22, 2002. Additional quarterly financial reports will be published on August 8 and October 24, 2002. This report has not been subject to examination by the Company's auditors. About Pyrosequencing AB Pyrosequencing AB develops, manufactures and sells complete solutions for rapid applied genetic analysis based on its proprietary Pyrosequencingtm technology, a simple-to-use DNA sequencing technique. Pyrosequencing leads the global market in Applied Genomics with over 150 systems sold to major pharmaceutical and biotech companies and prestigious research institutions worldwide. Pyrosequencingtm is broadly applicable for the analysis of single nucleotide polymorphisms (SNPs) and for the identification and quantification of short DNA sequences used in bacterial and viral typing. The Company's Molecular Diagnostics Business is establishing collaborations with industry leaders to identify new product opportunities in disease diagnosis, clinical prognosis and pharmacogenomics. The Company's products include the bench-top PSQtm96 System and a high- throughput PTPtm system which utilize proprietary software and reagent kits. Among Pyrosequencing's customers are AstraZeneca, GlaxoSmithKline, Merck, the NIH, the Harvard Center for Cancer Prevention, the Karolinska Institute, Biogen, Oxagen, Ltd., and DuPont Agriculture. The Company's Web address is www.pyrosequencing.com. Certain statements in this press release are forward-looking. These may be identified by the use of forward-looking words or phrases such as "believe," "expect," and "anticipate," among others. These forward- looking statements are based on Pyrosequencing'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, Pyrosequencing 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. Such uncertainties and risks include, but are not limited to, risks associated with management of growth and international operations (including the effects of currency fluctuations), variability of operating results, the commercial development of the DNA sequencing and genomics market, nucleic acid-based molecular diagnostics market, and genetic vaccination and gene therapy markets, competition, rapid or unexpected changes in technologies, fluctuations in demand for Pyrosequencing's products (including seasonal fluctuations), difficulties in successfully adapting the Company's products to integrated solutions and producing such products, and the Company's ability to identify and develop new products and to differentiate its products from competitors. Pyrosequencing AB Erik Walldén Theresa McNeely, Sr. Director President and CEO Investor/Public Relations +46 70 326 98 70 +1 508 685 1010 erik.wallden@pyrosequencing.com theresa.mcneely@pyrosequencing.com ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/18/20020218BIT00920/bit0002.doc The full Year-End Report http://www.waymaker.net/bitonline/2002/02/18/20020218BIT00920/bit0002.pdf The full Year-End Report