WaferGen Reports Second Quarter 2011 Financial Results

FREMONT, Calif., Sept. 12, 2011 -- WaferGen Biosystems, Inc. (OTCBB:WGBSE), a leading developer of state-of-the-art genomic analysis systems, today reported financial results for the second quarter ended June 30, 2011.      

"During the second quarter, our principle focus was to secure adequate funding to commercialize the SmartChip Real-Time PCR System.  We accomplished that goal on May 27, 2011 by completing a private placement financing of $30.6 million in equity and debt with three leading institutional life science investors, Great Point Partners, LLC, Deerfield Management and Merlin Nexus, and certain members of the Board and management," said Alnoor Shivji, Chairman and CEO.

"We will put this money to work in the second half of the year to expand the commercial team and generate additional applications and content for the SmartChip System.  With additional applications (genotyping) and enhancements to SmartChip panels (disposables), we can continue to enrich the transformative SmartChip System to address unmet needs in biomarker profiling validation, next-generation sequencing validation, disease research, drug development, personalized medicine and applied markets."

Revenue

Revenue for the second quarter ended June 30, 2011 was $45,000 compared to $432,000 for the second quarter ended June 30, 2010.  Revenue for the six months ended June 30, 2011 totaled $396,000 compared to $822,000 for the first six months of 2010.  Substantially all of the revenue in the second quarter and the first six months ended June 30, 2011 was from sales of a combination of one or more of WaferGen's SmartChip Systems, SmartChip Panels (disposable gene chips) and/or SmartChip Gene Expression Profiling Services, compared with a mix of SmartChip and SmartSlide revenue in 2010. The decrease in revenue is primarily due to the absence of sales of SmartChip Real-Time PCR Systems, along with a decrease in sales of the company's Real-Time PCR Chip panels and Fee-for-Service.

Net Income/Loss

The closing of the $30.6 million financing required a number of new accounting entries for the three and six months ended June 30, 2011 that resulted in non-cash charges to net income totaling $13.2 million, see details below.

For the second quarter ended June 30, 2011, net loss attributable to common stockholders is $18.6 million (of which $13.2 million is non-cash as above), or $(0.45) per share (basic and diluted), compared to a net income attributable to common stockholders of $646,000 or $0.02 per share (basic and diluted), for the same period in 2010. For the six months ended June 30, 2011, WaferGen reported a net loss attributable to common stockholders of $22.5 million (of which $13.2 million is non-cash as above), or $(0.54) per share (basic and diluted), compared to a net loss attributable to common stockholders of $3.9 million, or $(0.12) per share for the same period in 2010.

Of the $13.2 million non-cash charges for the three and six months ended June 30, 2011, $9.3 million is a one-time accretion expense related to a beneficial conversion feature arising on issuance of the Series A-1 convertible preferred stock; $2.3 million is a one-time interest expense arising from the issuance of convertible promissory notes, and $1.6 million is a non-cash expense on the revaluation of the conversion element of the convertible promissory notes, that can fluctuate in future periods based on the company's stock price.

Net loss for the three and six months ended June 30, 2011 was also impacted by warrant derivative revaluations.  Net loss from warrant derivative revaluations for the three months ended June 30, 2011 was $191,000, compared to net gain of $3.6 million for the three months ended June 30, 2010; and net gain of $300,000 for the six months ended June 30, 2011 compared to net gain of $1.7 million for the six months ended June 30, 2010.  These non-cash gains and losses are attributed to revaluations of outstanding warrants and result primarily from a fluctuation in the company's stock price in the period – a decrease in company stock price results in gains and vice versa.

Operating Expenses

Operating expenses totaled $5.0 million for the three months ended June 30, 2011 compared to $3.1 million in the same period of 2010.  Operating expenses totaled $9.2 million for the first six months of 2011, compared to $6.0 million for the first six months of 2010.

For the three months ended June 30, 2011, research and development expenses were $2.0 million as compared to $1.5 million for the three months ended June 30, 2010.  For the six months ended June 30, 2011, research and development expenses were $4.1 million compared to $3.0 million in the first six months of 2010.  The increase in research and development expenses occurred primarily from expenses associated with the development of SmartChip products and services.

Sales and marketing expenses for the three months ended June 30, 2011 increased to $870,000, as compared to $475,000 for the three months ended June 30, 2010. For the six months ended June 30, 2011, sales and marketing expenses increased to $1.6 million compared to $725,000 in the first six months of 2010. The increase in sales and marketing expenses resulted primarily from additional staff and promotional activities associated with the commercialization and sales of SmartChip Systems and services.

For the three months ended June 30, 2011, general and administrative expenses increased to $2.1 million, as compared to $1.2 million for the three months ended June 30, 2010. For the six months ended June 3, 2011, general and administrative expenses increased to $3.5 million compared to $2.2 million for the same period in 2010.  General and administrative expenses increased due to additional personnel and consulting expenses (primarily non-recurring) and costs related to fund raising activities.

Assets

WaferGen ended the second quarter of 2011 with $24.7 million in cash and cash equivalents compared to $2.2 million at year end 2010.  The increase in cash is due to the completion of a private placement financing of $30.6 million in equity and debt with three leading institutional life science investors and certain members of the Board and management.

About WaferGen and the SmartChip Real-Time PCR System

WaferGen Biosystems, Inc. is a leader in the development, manufacture and sale of state-of-the-art systems for genomic analysis for the life science and pharmaceutical industries.  The company currently offers the breakthrough SmartChip Real-Time PCR System, a next-generation Real-Time PCR system for discovery and validation of gene expression patterns (biomarkers) on a single platform. The SmartChip System provides a range of high-throughput capabilities including microRNA and oncology gene expression profiling and Single Nucleotide Polymorphism (SNP) genotyping.  WaferGen also offers Quick-Turnaround SmartChip Custom (User-Defined) Panels to enable validation studies of specific genes of interest through customization of high-throughput, real-time PCR SmartChip assay panels—all on a quick-turnaround basis.

WaferGen believes that the SmartChip System is ideal for researchers seeking to confirm discoveries made with the growing use of next-generation sequencing.  In addition, the high throughput capabilities of the SmartChip System enable researchers to extend their research across large panels of genes, and hundreds of samples, at a very reasonable cost.

In addition, the company offers an innovative fee-based service for gene-expression profiling using the SmartChip System.  For additional information, please see http://www.wafergen.com.

Forward Looking Statements

This press release contains certain "forward-looking statements".  Such statements include statements relating to the advancement of genomic-based therapeutic and diagnostic development through the use of the SmartChip System, statements relating to the planned use in the second half of 2011 of funds received in the company in its May 2011 financing, and other statements relating to future events are not historical facts, including statements which may be preceded by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words.

Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the control of the company.  Actual results may differ materially from the expectations contained in the forward-looking statements.  Factors that may cause such differences include the risks that: (i) the company may be unsuccessful in commercially developing its products or in achieving market acceptance of new and relatively unproven technologies; (ii) the company may need to raise additional capital to meet its business requirements in the future and the company may not be able to do so on reasonable terms or at all; (iii) the company's proprietary intellectual property rights may not adequately protect its products and technologies; and (iv) the company expects intense competition in its target markets, including from companies that have much greater resources than the company, and there can be no assurance that the company will be able to compete effectively.  More detailed information about the company and the risk factors that may affect the realization of forward-looking statements is set forth in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the year ended December 31, 2010 and the company's most recent Quarterly Report on Form 10-Q for the period ended March 31, 2011.  Security holders are urged to read these documents free of charge on the SEC's web site at www.sec.gov.  The company does not undertake to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

SOURCE WaferGen Biosystems, Inc.