Pyrosequencing AB Reports Second Quarter Results for Period Ended June 30, 2001

Pyrosequencing AB Reports Second Quarter Results for Period Ended June 30, 2001 - Installed base climbs to over 100 PSQtm96 Systems for Applied Genomics Uppsala, Sweden, August 7, 2001, Pyrosequencing AB (Stockholm: PYRO A) today reported second quarter results for the period ended June 30, 2001. Commenting on the results, Erik Walldén, President and CEO of Pyrosequencing, said, "Pyrosequencing continues to advance its position within the field of Applied Genomics having achieved sales of over 100 PSQtm96 Systems to date. The Company is also making significant strides in the area of Molecular Diagnostics. During the second quarter, we continued to sell PSQ 96 Systems to prestigious pharmaceutical, biotech and academic customers throughout the world, and we are particularly encouraged by the two new orders we received this quarter for our high-throughput PTPtm (Preferred Technology Program). Both of these PTP orders were from existing PSQ 96 customers who will now scale up their genotyping operations using Pyrosequencingtm. We also established the first in what will be a series of collaborations for the development of our Molecular Diagnostics Business. These new customers and collaborators demonstrate the value of our platform technology to offer the ease-of-use and robustness required for broad applications in applied and routine genomics." Second quarter 2001 highlights include: - Received 20 new orders for the PSQ 96 System; 20 orders were recorded as revenue and at June 30, 2001, there was a backlog of 10 orders - Signed two additional customers for the high-throughput PTPtm - Increased installed base to over 100 PSQ 96 Systems worldwide - Established a research collaboration with The Children's Hospital of Philadelphia for the development of diagnostic tests - Launched DNA Sequence Analysis Software and Reagent Kits for the PSQ 96 System, as well as Primer Design software and Web-based access to this assay design tool - Introduced a new sample preparation method to enhance our SNP and sequence analysis solutions - Received U.S. patent for diagnostics and therapeutic responses in cardiovascular disease - Notified that two core patents for the Pyrosequencing technology were allowed in the U.S. Summary financial group data (in millions except share data) Six months ended June 30, 2001 Three months ended June 30, 2001 2001 2001 2000 2001 2001 2000 USD* SEK SEK USD* SEK SEK 24.6 Net sales 4.1 44.2 9.6 2.3 6.3 Gross profit 3.0 32.5 7.2 1.7 18.5 4.7 Gross margin, % 73.6 73.6 75.5 75.0 75.0 74.1 Operating result (7.7) (83.6 (52.9) (4.1) (44.6) (27.5) ) Results after (5.7) (62.5 (51.5) (3.4) (37.3) (26.9) financial items ) Net result per (0.15 (1.67 (2.04) (0.09) (1.01) (1.07) share ) ) Net loss per share after (0.13 (1.42 (1.83) (0.08) (0.86) (0.95) full dilution ) ) 2001 2000 Weighted average shares outstanding 34,768,500 25,187,400 Weighted average shares outstanding after full 40,875,400 28,145,400 dilution Common shares outstanding, as of June 30 34,770,100 34,767,400 As of June 30, As of December 31, 2001 2000 USD* SEK USD* SEK Cash and short-term 3.2 34.9 35.8 389.6 investments Other securities held as 63.9 694.9 42.0 457.1 fixed assets Other assets 16.6 181.2 9.8 106.8 Total assets 83.7 911.0 87.6 953.5 Shareholders equity 79.4 864.3 82.9 902.4 Operating liabilities 4.3 46.7 4.7 51.1 Total liabilities and 83.7 911.0 87.6 953.5 shareholders equity *Convenience translation rate: SEK 10.881= USD Financial Position For the three months ended June 30, 2001, the Company reported revenues of $2.3 million compared to $0.58 million for the comparable period in 2000. The increase in revenue reflects sales of the PSQ 96 System and consumables. Consumable sales as a percentage of revenue rose to 29 percent compared to 27 percent for the previous quarter. The Company had sold 20 instruments in the second quarter of 2001 compared to nine instruments in the same period last year, and reported a backlog of ten orders as of the end of the quarter. During the second quarter of 2001, Pyrosequencing also received two additional orders for its high- throughput application, PTP. Demand for Pyrosequencing's products is steadily increasing despite a number of industry-wide factors that led to fluctuations in customer- ordering patterns in the second quarter and may continue in the near term. These include industry consolidation, which has affected the decision-making process at some pharmaceutical and biotech companies; a deterioration in economic conditions, which is leading customers to manage capital expenditures more carefully; and longer than anticipated purchasing cycles. Applied genomics is a newly emerging market that continues to evolve rapidly. Pyrosequencing will continue to be vigilant and react promptly to secure our business objectives in this dynamic field. Gross margins for the second quarter of 2001 amounted to 75.0 percent, an increase from the margins of 71.9 percent for the first quarter of the year. The increase is in part due to efficiencies related to the Company's new manufacturing facility. Operating expenses increased to $5.8 million in the second quarter of 2001 from $4.9 million in the first quarter. The rise in operating expenses reflects costs associated with Pyrosequencing's strengthening of its worldwide sales organization and increased research and development expenditures. The increase also reflects costs associated with the growth of the Company's Molecular Diagnostics Business Unit. Pyrosequencing reported a net loss of $3.2 million, or $0.09 per share, for the quarter ended June 30, 2001, compared to a net loss of $2.5 million or $0.10 per share, for the same period last year. At June 30, 2001, cash, cash equivalents and investments in high-grade debt securities, including investments with maturity dates exceeding 12 months, totaled $67.1 million as compared to $77.8 million at December 31, 2000. Pyrosequencing has no debt financing and total equity amounted to $79.4 million and $82.9 million at June 30, 2001 and December 31, 2000. Marketing and Sales For large-scale genotyping, Pyrosequencing introduced a high-throughput, customized offering this year and announced the first sale in February. During the second quarter, the Company received two additional orders for the automated, high-throughput PTP from a leading academic research institution and a well-known European biotechnology company. PTP, the Company's high-throughput SNP (Single Nucleotide Polymorphism) analysis system, is based on 384-well microplates and the same patented Pyrosequencing technology. In addition to the software and reagent kits, PTP also includes sample preparation robotics, for a fully automated, cost-efficient operation that can score up to 100,000 SNPs per day. The Company also continues to dominate the moderate-throughput market for bench-top instruments with more than100 PSQ 96 Systems sold to date and eight customers who have purchased multiple machines. New to an extensive list of customers, are leading pharmaceutical and biotech companies Abbott Laboratories and Biogen, Inc. and research institutions such as Washington University and Imperial College of Science, Technology and Medicine in London. New software and reagent kits for sequence analysis and Primer Design Software were also launched this quarter, further demonstrating the many potential applications of Pyrosequencing technology. "More than 100 systems have been sold at this point in time as a result of deliberate decisions by customers to select the PSQ 96 System over other competing technologies," stated Mårten Winge, Vice President, World Wide Marketing, Sales and Support for Pyrosequencing. "Our global leadership in the Applied Genomics market across all major segments including pharma, biotech and academic institutions is evidence that Pyrosequencing continues to sell more instruments than any of our competitors." Pyrosequencing continued to implement an aggressive product launch plan during the quarter, further demonstrating the breadth of applications for its technology. The Company introduced new Sequence Analysis Software and Reagent Kits for the PSQ 96 System at the annual American Society of Microbiology meeting in May. A satellite symposium featured a presentation by a leading researcher on the identification and characterization of bacterial pathogens, such as H. pylori using Pyrosequencing technology. In June, the Company launched new Primer Design Software designed to optimize SNP analysis using Pyrosequencing technology. This offering also provides customers with convenient and secure Web-based access to this design tool. Industry Outlook There continues to be significant interest in applied genomics as evidenced by several new initiatives recently announced by the public and private sectors. For example, Britain's Medical Research Council, the Department of Health, and the Wellcome Trust are building what promises to be the world's biggest ethnically diverse gene database. In the U.S., the National Institutes of Health and the Whitehead Institute Center for Genome Research have revealed plans to evaluate a number of projects including genetic databases and haplotype maps to provide insight into SNPs and markers for commonly inherited diseases. Research and Development The list of capabilities offered by the Pyrosequencing technology is rapidly growing. During the last quarter, two important products were finalized and launched into the marketplace and the Company provided customers with the capabilities for multiplexing and haplotyping capabilities. Multiplexing allows customers to reduce their cost per sample and increase genotyping capacity, while haplotyping offers enhanced genetic information. An alternate method for sample preparation was also developed to give customers a process that requires little or no optimization and is easily automated. Pyrosequencing's R&D programs are on track to introduce a number of major additions to the current product portfolio over the next twelve months. Two of the original patent applications describing the basic Pyrosequencing technology were allowed in the U.S. during the quarter. "Our strong intellectual property position is further enhanced and enables us to continue product development without compromise," said Bjorn Ekstrom, Executive Vice President, Chief Scientific Officer of Pyrosequencing. "These patents provide significant protection for our reagent business and allow us to license 'sequencing by synthesis' to our customers." Molecular Diagnostics Pyrosequencing's recently launched Molecular Diagnostics Business Unit continues to advance its position in the emerging market for routine genetic tests. Central to the Company's entrée into molecular diagnostics, Pyrosequencing announced in the second quarter the receipt of a key patent for diagnostic and therapeutic responses in cardiovascular disease. The patent covers a method for assessing cardiovascular status, including myocardial infarction and stroke and involves patterns of SNPs in genes associated with cardiovascular disease. The patent also covers the use of these SNP patterns to predict responses to cardiovascular drugs such as anti-hypertensives. The Molecular Diagnostics Business Unit also made significant progress toward establishing research collaborations for the development of diagnostic tests. This quarter, the Company initiated a sponsored research agreement with The Children's Hospital of Philadelphia to analyze genes linked to hearing loss and to develop diagnostic tests using Pyrosequencing technology. Recently the Company announced a collaboration in the area of infectious diseases and expects to announce a series of additional agreements in the coming months. One of the goals for these collaborations is to expand Pyrosequencing's intellectual property portfolio as it relates to molecular diagnostics. Human Resources At June 30, 2001, the total number of employees in the Pyrosequencing group was 121 compared to 65 at June 30, 2000, and 86 at December 31, 2000. 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 applied genetic analysis based on its proprietary Pyrosequencingtm technology, a simple-to-use DNA sequencing technique. In the post-genome era, Pyrosequencing's technology has established the Company as one of the leading suppliers of solutions for accurate, consistent DNA analysis in research institutions and pharmaceutical, genomics and agbiotech companies. For the analysis of single nucleotide polymorphisms (SNPs), the PSQtm96 System with SNP Software and Reagent Kits is used by customers such as AstraZeneca, GlaxoSmithKline, the Harvard Center for Cancer Prevention, the National Institutes of Health (NIH), the Karolinska Institute and DuPont Agriculture. The Company's Sequence Analysis Software and Reagent Kits together with the PSQ 96 System are used for the identification of gene-specific DNA sequences for applications such as bacterial and viral typing where speed and ease of use are essential. The Company is headquartered in Uppsala, Sweden with North American operations located in Westborough, Massachusetts. Pyrosequencing AB also has sales offices and distribution partners in Europe, Asia Pacific and the Middle East. Pyrosequencing AB is listed on the OM Stockholm Exchange. 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 +1 877 797 6767 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/2001/08/07/20010807BIT00480/bit0002.doc The full report http://www.waymaker.net/bitonline/2001/08/07/20010807BIT00480/bit0002.pdf The full report