SAN CARLOS, California, December 8, 2006 - Deltagen, Inc. (Pink
Sheets: DGEN), a leading provider of drug discovery tools to the
biopharmaceutical industry, today reported financial results for the three
months ended September 30, 2006 and declared a 20-cent per share dividend
scheduled to be distributed on or about December 28, 2006 to shareholders of
record as of the close of business on December 18, 2006.
Revenues: The Company's
consolidated revenues for the three months ended September 30, 2006 totaled
$0.970 million. The third quarter revenues were attributable primarily to
license fees associated with the provision of knockout mice and related
phenotypic data under the Company's DeltaOneTM program. A delivery order for four knockout mouse
lines was placed by the NIH in the third quarter of 2006. The revenues relating to this delivery order
($0.160 million) will be recognized starting in the fourth quarter of 2006 and
through the first two quarters of 2007.
There are no assurances that the NIH will place any additional delivery
orders during the three-year term of the NIH contract, which expires on
September 30, 2008.
Interest
Income: The Company had interest
income of $0.126 million for the three months ended September 30, 2006.
Expenses: Total consolidated
expenses for the three months ended September 30, 2006 were $0.959 million, of
which $0.246 million were attributable to third-party royalty and commission obligations
and $0.123 million were attributable to a non-cash stock-based compensation
expense relating to stock options granted by the Company on March 30, 2006 in
accordance with Statement of Financial Standards (SFAS 123R). Other operating expenses, which totaled
$0.590 million for the three months ended September 30, 2006, were attributable
primarily to salaries and other general and administrative expenses. Legal and administrative fees associated with
prosecution of the Company's patent portfolio for the three months ended
September 30, 2006 were $0.083 million, compared to $0.201 million for the
second quarter of 2006 and $0.373 million in the first quarter of 2006. The decrease in patent-related expenses is due
to the Company reducing or discontinuing in the third quarter of 2006 its
efforts on the prosecution of certain of its patent applications in an effort
to reduce such expenses and
for the other reasons set forth in the "Risk Factors" and other
sections of Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
Net
Income:
Net income for the three months ended September 30, 2006 was $0.137
million.
Cash, Cash
Equivalents and Accounts Receivable: As of September 30, 2006, the Company
had $11.993 million in consolidated cash and cash equivalents and $1.808
million in accounts receivable. The
proposed dividend will reduce cash by approximately $7.7 million.
Subsequent
Events:
Completion of Strategic Review: In July 2006, the Company engaged the
services of an investment banking firm to assist the Company in identifying and
evaluating various strategic alternatives and opportunities, including possible
sale of the Company. After thoroughly
reviewing the alternatives, the Board of Directors of the Company decided in
November 2006 not to pursue any such opportunities and terminated its agreement
with the investment banking firm.
DeltaBase Milestone Buyouts: In October 2006, the Company entered into an
agreement with one of its DeltaBase collaborators under which the Company
received in early December 2006 a one-time buyout payment in exchange for the
elimination of any future access extension fees and potential milestone
payments that may become due or payable under the DeltaBase agreement with such
collaborator. This buyout does not
affect any fees due Deltagen associated with the provision of knockout mouse
materials in the future. The Company is
also currently negotiating with another of its DeltaBase collaborators for a
buyout of that collaborator's access extension fees and potential milestone
payments. Assuming the Company will be
successful in reaching agreement with such collaborator, the Company may
discontinue prosecution of a significant portion or all of its patent
applications relating to individual knockout mouse lines relating to those
DeltaBase collaborations. Any decision
whether to discontinue prosecution of its patent applications will also involve
consideration of the factors discussed in the "Risk Factors" and other sections
of Management's Discussion and Analysis of Financial Conditions and Results of
Operations. Cessation of patent
prosecution efforts would significantly reduce operating expenses. The patent prosecution expenses totaled
$1.138 million during 2005 and $0.657 million during the first nine months of
2006.
Contracts with The Wellcome Trust and GSF: In
November 2006, the Company entered into agreements with The Wellcome Trust and
GSF - National Research Center
for Environment and Health GmbH ("GSF") for the provision by the Company of
knockout mouse lines for distribution to academic researchers. The terms of these agreements are generally
consistent with those of the NIH contract, under which The Wellcome Trust, as a
"partner" of the NIH, was eligible for financial terms no less favorable than
those under the NIH contract. The
Wellcome Trust and GSF are not obligated to place any orders under these
contracts and, to date, have not placed any orders. However, the Company expects to receive an
initial order in the first quarter of 2007.
New Facilities Lease: In November 2006, the Company signed a lease
for new office space located at The Atrium, 1900 South Norfolk Street, Suite 105, San
Mateo, CA 94403. The new address will become effective in
January 2007.
Dividend
Declaration: The
Company will distribute on or about December 28, 2006 a dividend of $0.20
per share. The Company's shareholders of
record as of the close of business on December 18, 2006 will
receive this dividend.
The unaudited consolidated financial statements for the third quarter
of 2006, accompanying notes, and Management's Discussion and Analysis of
Financial Conditions and Results of Operations for such period will be posted
on Deltagen's website (www.deltagen.com). Review of the financial statements for the
third quarter of 2006 has not been completed by our independent auditors. As a result, the financial statements for the
third quarter of 2006 are subject to change.
About
Deltagen
Deltagen, Inc. is
a leading provider of drug discovery tools to the biopharmaceutical industry.
Deltagen offers access to its extensive inventory of knockout mouse lines and
related phenotypic data, which enhance the efficiency of target validation and
drug discovery. In addition, Deltagen offers target validation data in the
areas of immunology and metabolic diseases. Deltagen's products and programs
have been validated by customers and partners such as Eli Lilly & Co.,
GlaxoSmithKline, Merck & Co., Inc. and Pfizer Inc. For more information on
Deltagen, visit the Company's website at www.deltagen.com.
Safe
Harbor
Statement
This press release contains "forward-looking statements,"
including statements about Deltagen's future revenues and operating results,
any possible future dividend declarations, royalty and milestone revenues,
third-party royalty obligations and third-party licenses and intellectual
property, as well as other matters that are not historical facts or
information. These forward-looking statements are based on management's
current assumptions and expectations and involve risks, uncertainties and other
important factors, specifically including those relating to Deltagen's ability
to achieve its operational objectives and revenue projections and to obtain
patent protection for its discoveries, that may cause Deltagen's actual results
to be materially different from any future results expressed or implied by such
forward-looking statements. There are no assurances that the Company will
declare any future dividends.
Information identifying such important risk factors is contained in
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations", which can be found at Deltagen's website at www.deltagen.com.
Deltagen undertakes no obligation to update or revise any such forward-looking
statements, whether as a result of new information, future events or otherwise.
Contact:
Robert J. Driscoll
President & CEO, Deltagen, Inc.
650-569-5168
