Nanogen Reports Preliminary 2005 Fourth Quarter and Year-End Financial Results

Feb 23, 2006, 00:00 ET from Nanogen, Inc.

    SAN DIEGO, Feb. 23 /PRNewswire-FirstCall/ -- Nanogen, Inc. (Nasdaq:   NGEN),
 developer of advanced diagnostic products, today announced its unaudited
 financial results for the fourth quarter and year ended December 31, 2005.
     Total revenues for the quarter ended December 31, 2005 were $3.1 million
 compared to $1.0 million in the same period of 2004 and $3.2 million in the
 third quarter of 2005.  Product revenues for the fourth quarter were
 $1.2 million verses $410,000 for the fourth quarter in 2004 and $1.1 million
 in the third quarter of 2005.  For the twelve months ended December 31, 2005,
 total revenues were $12.5 million, as compared to $5.4 million in total
 revenues in 2004.
     Nanogen's research and development, and selling, general and
 administrative operating expenses for the fourth quarter of 2005 were
 $12.3 million compared to $10.8 million in the quarter one year ago, and
 $11.0 million in the third quarter of 2005.  Expenses for the fourth quarter
 2005 included $1.2 million related to Jurilab operations which we began
 consolidating in July 2005.  For the year ended December 31, 2005 research and
 development, and selling, general and administrative were $45.6 million versus
 $36.3 million during 2004.  The year ended December 31, 2005 included the
 first full year of operating activities of SynX Pharma Inc. and Epoch
 Biosciences Inc., which were acquired in April 2004 and December 2004,
     Nanogen's consolidated cash, cash equivalents and short-term investments
 balance at the end of the fourth quarter of 2005 was $32.4 million, compared
 to $40.7 million at the close of the third quarter.  At the end of 2004,
 Nanogen's cash, cash equivalents and short-term investments balance was
 $51.9 million.
     The company recorded a non-cash goodwill impairment charge of $59 million
 in the fourth quarter of fiscal 2005 to write-off a portion of the goodwill
 attributable to its 2004 purchase of Epoch Biosciences.  Approximately
 13.4 million shares of Nanogen stock were issued as consideration for the
 acquisition of Epoch Biosciences.  Between the signing date (September 7,
 2004) and the closing date of the acquisition (December 16, 2004), the
 stock-based valuation of the transaction increased by $35 million due to the
 rise in Nanogen's stock price during the period.
     The net loss for the quarter ended December 31, 2005, was $69.7 million or
 $1.27 per share including the $59 million non-cash goodwill impairment charge,
 compared to a net loss of $11.2 million or $0.31 per share in the same period
 of 2004 and a net loss of $8.8 million or $0.18 per share in the third quarter
 of 2005.  For the year ended December 31, 2005, Nanogen reported a net loss of
 $96.5 million or $1.95 per share, also including the $59 million non-cash
 goodwill impairment charge, compared to a net loss of $38.9 million or
 $1.21 per share for 2004.
     "The goodwill impairment recorded in the fourth quarter is a non-cash
 charge related to the original value assigned to goodwill recorded on our
 balance sheet at the time of the Epoch acquisition," said Robert Saltmarsh,
 Nanogen's chief financial officer.  "The charge does not reflect the
 performance of Epoch, rather the charge reflects an adjustment to the
 estimated fair value of this goodwill asset based on current valuation
     Fourth Quarter & 2005 Highlights
     *  In early 2005, Nanogen successfully completed the integration of Epoch
        Biosciences, which added several real-time PCR (polymerase chain
        reaction) products to Nanogen's portfolio and a significant license
        revenue stream.
     *  In July 2005, Nanogen made an equity investment in Jurilab Ltd., and
        acquired rights to develop diagnostic products based on Jurilab's novel
        genes and gene markers related to cardiovascular and metabolic diseases
        including adult onset diabetes. Nanogen will begin distributing
        Jurilab's pharmacogenomic product for genotyping Cytochrome P450 and
        other enzymes involved in drug metabolism.
     *  During the fourth quarter, Nanogen shipped its second-generation
        instrument, the NanoChip(R) 400, both domestically and to Europe.  The
        general laboratory system for molecular biology applications utilizes
        the company's improved NanoChip(R) 400-site electronic microarray, upon
        which homebrew molecular assays can be developed in clinical and
        research laboratories.
     *  In the fourth quarter, Nanogen expanded its molecular reagent product
        portfolio to include two new products: a solid-phase hybridization set
        of reagents for developing assays for the detection of the sequences of
        seven human respiratory viruses prevalent during flu season, and a
        research-use-only real-time PCR probe and primer set for the
        identification influenza A and B viral sequences.
     *  In December 2005, Nanogen announced the acquisition of Spectral
        Diagnostics' rapid cardiac test business.  The transaction closed in
        February 2006, providing Nanogen with additional product revenues in
        2006 that will positively impact Nanogen's bottom line.
      "After establishing a strong foundation of research, clinical and
 point-of-care products, Nanogen is poised for significant penetration into the
 molecular diagnostics market.  We are focused on continuing to improve our
 financial results and our management team is engaged in a number of actions to
 that end," said Howard C. Birndorf, Nanogen's chairman of the board and CEO.
 "Further demonstrating a clear path to profitability and reducing our rate of
 cash use are the key objectives for 2006."
     Webcast of Today's Conference Call
     Nanogen management will host a conference call today at 4:30 p.m. Eastern
 (1:30 p.m. Pacific) to discuss preliminary 2005 fourth quarter and year-end
 financial results.  Interested investors and others may participate in the
 conference call by dialing 877-407-9210 for US/Canada participants, and
 201-689-8049 for international participants.
     Audio of management's presentation will also be available via live webcast
 on the investor relations section of Nanogen's corporate website at, and will be archived for 90 days.  A digital recording of the
 call will also be available for 48 hours, beginning two hours after the
 completion of the conference call on February 23, and can be accessed via
 telephone at (877) 660-6853 for US/Canada callers, and (201) 612-7415 for
 international callers. The account number, 286, along with the conference ID,
 194025, will be required to listen to the playback.
     About Nanogen, Inc.
     Nanogen's advanced technologies provide researchers, clinicians and
 physicians worldwide with improved methods and tools to predict, diagnose, and
 ultimately help treat disease.  The company's products include real-time PCR
 reagents, the NanoChip(R) electronic microarray platform and a line of rapid,
 point-of-care diagnostic tests.  Nanogen's ten years of pioneering research
 involving nanotechnology holds the promise of miniaturization and continues to
 be supported for its potential for diagnostic and biowarfare applications.
 For additional information please visit Nanogen's website at
     Forward-Looking Statement
     This press release contains forward-looking statements that are subject to
 risks and uncertainties, including statements regarding the impact of the
 acquisition of the rapid cardiac immunoassay test business of Spectral
 Diagnostics, and future operating performance and penetration of the molecular
 diagnostic market.  These forward-looking statements are based on current
 expectations and speak only as of the date hereof.  Actual results may differ
 materially from those set forth in the forward-looking statements, as a result
 of various factors and uncertainties, including whether the rapid cardiac
 immunoassay test business is successfully integrated, whether additional
 capital is available to fund operations, whether patents owned or licensed by
 Nanogen will be developed into products, whether the patents owned by Nanogen
 offer any protection against competitors with competing technologies, whether
 products under development can be successfully developed and commercialized,
 and whether unforseen circumstances may impact the timing of product launches,
 and other risks and uncertainties discussed under the caption "Factors That
 May Affect Results" and elsewhere in Nanogen's Form 10-K or Form 10-Q most
 recently filed with the Securities and Exchange Commission.  These
 forward-looking statements speak only as of the date hereof.  Nanogen
 disclaims any intent or obligation to update these forward-looking statements.
     Additionally, the information contained in this press release reflects
 preliminary financial results, as Nanogen's 2005 audit has not yet been
 completed.  Under Section 404 of the Sarbanes-Oxley Act of 2002, integrated
 audit requirements will not be complete until Nanogen has finished all of the
 steps necessary to file its 2005 audited financial statements with the
 Securities and Exchange Commission.
                                 NANOGEN, INC.
                          CONSOLIDATED BALANCE SHEETS
                (in thousands, except par value and share data)
                                                        As of December 31,
                                                        2005          2004
     Current assets:
        Cash and cash equivalents                      $6,194       $ 15,372
        Short-term investments                         26,185         36,562
        Receivables, net                                2,141          2,023
        Inventories, net                                3,724          1,744
        Other current assets                            1,457          1,741
           Total current assets                        39,701         57,442
     Property and equipment, net                        7,590          8,500
     Acquired technology rights, net                    9,604         11,819
     Restricted cash                                    1,794          1,411
     Other assets, net                                  2,214            780
     Goodwill                                          37,178         96,072
           Total assets                               $98,081       $176,024
     Current liabilities:
        Accounts payable and accrued liabilities       $7,728         $9,923
        Deferred revenue                                  535            420
        Common stock warrants                              86          1,112
        Current portion of debt obligations               701            988
           Total current liabilities                    9,050         12,443
     Debt obligations, less current portion               643            610
     Debt obligation variable interest entity           7,245             --
     Other long-term liabilities                        6,648          5,455
           Total long-term liabilities                 14,536          6,065
     Commitments and contingencies
     Stockholders' equity:
        Convertible preferred stock,
         $0.001 par value, 5,000,000 shares
         authorized at December 31, 2005 and 2004;
         no shares issued and outstanding at
         December 31, 2005 and 2004                        --             --
        Common stock, $0.001 par value,
         135,000,000 shares authorized at
         December 31, 2005 and 2004, respectively;
         54,794,648 and 47,765,581 shares issued and
         outstanding at December 31, 2005 and 2004,
         respectively                                      55             48
        Additional paid-in capital                    396,297        374,910
        Accumulated other comprehensive
         income (loss)                                   (189)          (174)
        Deferred compensation                          (2,218)        (1,184)
        Capital deficit in consolidated
        variable interest entity, net                  (6,856)            --
        Accumulated deficit                          (311,656)      (215,162)
        Treasury stock, at cost, 505,830 and
         500,189 shares at December 31, 2005
         and 2004, respectively                          (938)          (922)
           Total stockholders' equity                  74,495        157,516
           Total liabilities and
            stockholders' equity                      $98,081       $176,024
                                 NANOGEN, INC.
                     (in thousands, except per share data)
                             Three Months Ended         Twelve Months Ended
                                   December 31,              December 31,
                                 2005        2004          2005        2004
       Product sales           $1,196        $410       $ 4,544       $2,690
       License fees and
        royalty income          1,459         276         6,530          490
       Sponsored research          --          --            --          500
       Contracts and grants       407         329         1,470        1,694
     Total revenues             3,062       1,015        12,544        5,374
     Costs and expenses:
       Cost of product
        sales                   1,445       1,492         4,518        5,642
       Research and
        development             6,427       5,216        22,033       18,117
       Selling, general
        and administrative      5,875       5,606        23,578       18,232
       Impairment charge
        on goodwill            59,000          --        59,000           --
       Charge for acquired
        in-process research
        and development            --          --            --        3,758
        Impairment of
        technology rights          --          --           167           --
       Amortization of
        purchased intangible
        assets                    393          --         1,571           --
     Total costs
      and expenses             73,140      12,314       110,867       45,749
     Loss from operations     (70,078)    (11,299)      (98,323)     (40,375)
     Other income (expense):
        Interest income, net      266          84           864          517
        Other expense              40         (12)          (78)        (221)
        Warrant valuation
         adjustment                80         (74)        1,026          (74)
        Gain (loss) on
         sale of investments       --          --            --          (47)
        Gain (loss) on
         foreign currency
         translation               14         103            17        1,293
     Total other income           400         101         1,829        1,468
     Net loss                $(69,678)   $(11,198)     $(96,494)    $(38,907)
     Net loss per share
      - basic and diluted      $(1.27)     $(0.31)       $(1.95)      $(1.21)
     Number of shares
      used in computing
      net loss per share
      - basic and diluted      54,689      35,673        49,585       32,203

SOURCE Nanogen, Inc.