WaferGen Biosystems Reports Third Quarter 2011 Financial Results and Announces New Commercialization Strategy

FREMONT, Calif., Nov. 21, 2011 /PRNewswire/ -- WaferGen Biosystems, Inc. (OTCBB:WGBS), an emerging genomic analysis company, today reported financial results for the three and nine months ended September 30, 2011 and announced a revised plan to commercialize and increase adoption of its SmartChip System.

"During the third quarter of 2011 we implemented a new commercial strategy to address the rapidly changing needs of the Life Sciences Research Market and to better anticipate future needs of researchers. We have decided to invest significantly in scientific resources focused on a strategy to engage an array of key opinion leaders in our target market, enabling the profiling and validation of high-value genomic targets," said Mona Chadha, WaferGen's Chief Operating Officer.

"With the advent of next-generation sequencing into the life science marketplace in 2007, there has been a dramatic increase in the amount of genomic content that is available to researchers beyond what other genomic technologies have generated. However, there is an equally dramatic and rapidly growing unmet need to validate and confirm the results of this sequencing information to find clinically relevant biomarkers. In particular, the data from RNAseq experiments, in which researchers are quantifying gene expression levels, is well suited to the high throughput validation of the SmartChip platform. This ability to accurately make quantitative genome measurements is an integral tool in enabling researchers to verify the results coming from next-generation sequencers. Once verified, this content creates a larger, longer term opportunity for the Company as it significantly increases the ability of researchers to validate high value genomic targets for their ultimate use in developing new/improved drugs and diagnostic tests."

"Using the SmartChip platform, we can study many genes simultaneously on multiple samples with a single chip to test the signature of interest. This should enable greater accuracy for discovery of biomarkers and decreased time to results," said Professor Jo Vandesompele, a professor in functional cancer genomics and applied bio-informatics at Belgium's Ghent University and recognized leader in the field of qPCR.

WaferGen's new strategy and organization changes will result in a reduction of approximately 24% of the Company's total workforce, which represents a $1.3 million annual reduction in operating expenses. The Company will take a one-time charge related to the reduction in force of approximately $400,000 in the fourth quarter of 2011.

Revenue

Revenue for the third quarter ended September 30, 2011 was $89,000 compared to $633,000 for the third quarter ended September 30, 2010. Revenue for the nine months ended September 30, 2011 was $485,000 compared to $1.5 million for the nine months ended September 30, 2010. The decrease is primarily due to decreases in sales of SmartChip Real-Time PCR Systems, Real-Time PCR Chip panels and Fee-for-Service, as well as first quarter sales of SmartSlide products (which the Company no longer markets).

Net Income/Loss

WaferGen reported net income attributable to common stockholders of $3.2 million, or $0.08 per share (basic), $0.03 per share (diluted) for the third quarter of 2011, compared to a net loss attributable to common stockholders of $5.7 million, or $(0.14) per share (basic and diluted) for third quarter 2010. The Company reported a net loss attributable to common stockholders of $19.2 million, or $(0.46) per share (basic and diluted), compared to a loss attributable to common stockholders of $9.7 million, or $(0.27) (basic and diluted) for the same period in 2010. The net loss attributable to common stockholders for the first nine months of 2011 includes non-cash charges to net income totaling $5.7 million resulting from new accounting entries related to the closing of the $30.6 million financing.

The net gain for the three months ended September 30, 2011 and the net loss for the first nine months 2011 were impacted by derivative revaluations. The net gains from derivative revaluations of warrants and the conversion element of convertible promissory notes during the three months ended September 30, 2011 were $1.1 million and $7.5 million, respectively. These compare to a loss of $1.7 million during the three months ended September 30, 2010, from warrant derivative revaluations; there were no convertible promissory notes in 2010. The net gains from derivative revaluations during the nine months ended September 30, 2011, were $1.4 million and $5.9 million, respectively, offset by other non-cash charges to net income totaling $11.6 million resulting from new accounting entries for the closing of the $30.6 million financing. These compare to a gain of $15,000 during the nine months ended September 30, 2010 from warrant derivative revaluations; there were no convertible promissory notes in 2010. These gains and losses result primarily from a net decrease or increase in the Company's stock price in the period. These derivative liabilities are also decreasing as the remaining terms of the warrants and convertible promissory notes diminish.

Operating Expenses

Total operating expenses for the third quarter ending September 30, 2011 were $4.1 million compared to $3.9 million for the same quarter in 2010. For the first nine months of 2011, the total operating expenses were $13.3 million compared to $9.9 million in 2010.

Sales and marketing expenses increased to $914,000 for the three months ended September 30, 2011 compared to $653,000 in the same period of 2010. For the first nine months of 2011, sales and marketing expenses increased to $2.6 million compared to $1.4 million in the first nine months of 2010.

Research and development expenses decreased to $1.9 million for the three months ended September 30, 2011, compared to $2.0 million for the same period in 2010. For the first nine months of 2011, research and development expenses increased to $6.0 million compared to $5.1 million in the first nine months of 2010.

General and administrative expenses were $1.3 million for the three months ended September 30, 2011 compared to $1.2 million for the same period in 2010. For the first nine months of 2011, general and administrative expenses were $4.7 million compared to $3.5 million for 2010.

Assets

WaferGen ended the third quarter 2011 with approximately $19.8 million of cash and cash equivalents compared to $2.2 million as of December 31, 2010. The increase in cash is due to the completion of a May 2011 private placement financing of $30.6 million in equity and debt with three leading institutional life science investors and certain members of the Board of Directors and management.

About WaferGen and the SmartChip Real-Time PCR System

WaferGen Biosystems, Inc., an emerging genomic analysis company in the early stage of commercialization, offers the transformative SmartChip Real-Time PCR System -- a next-generation Real-Time PCR System for profiling and validation of gene expression patterns (biomarkers) on a single platform. The SmartChip System provides a range of high-throughput capabilities including microRNA and mRNA 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.

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

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