Cambridge, MA, USA, Heidelberg, Germany, February 27, 2004 – LION bioscience AG (NASDAQ: LEON) revised its revenue recognition practice with respect to certain software licenses and restated its results for prior fiscal years. Based on this review these revisions in accounting policy caused changes in revenue and earnings as follows:
FY 2000/2001: (1.8) million €; FY 2001/2002: (7.3) million €; FY 2002/2003: 0.0 million €. For further information about the restatement and about the condensed consolidated statements of operations and balance sheet, please see the appendix. The differences in the published Figures in comparison to the preliminary figures announced February 4, 2004 derives primarily from currency fluctuation effects.
Final Q3 Results
LION showed total revenues of 16.1 million € for the nine months ending December 31, 2003, compared with revenues of 20.8 million € for the same period in the prior fiscal year. Net loss for the period stood at (17.5) million €, compared to a loss of (133.9) million € in the same period in the previous fiscal year.
Third quarter revenues were 5.8 million €, which compare to 5.0 million € and 5.3 million €, respectively, for the two previous quarters of the current fiscal year. The restatement caused an increase in revenues and reduction in net loss by a total of 3.8 million € for the first nine months of the fiscal year. Despite additional restructuring expenses in the third quarter in the amount of 2.6 million €, LION continues to reduce its losses. Net loss was 6.3 million € in the third quarter compared to 21.8 million € for the same quarter of the prior fiscal year. Cash flow from operating activities was (4.8) million € during the third quarter of the current fiscal year compared to (12.7) million € during the same period in the prior fiscal year. Cash burn decreased to 5.8 million € compared with 13.2 million € during the same period in the prior fiscal year. As of December 31, 2003, LION had liquidity in the form of cash, cash equivalents and marketable securities of 48.1 million €. As of December 31, 2003, LION had no bank debt.
Future business strategy on SRS and LION Target Engine™
Despite early successes for the company’s new products, the rate of adoption by the Life Sciences industry has been less than anticipated. Customers were not prepared to invest in bigger infrastructure projects. LION will continue to market the new products, and in addition, will continue to focus on its very successful SRS technology. SRS version 8.0, with significant new functionality including new user interfaces and support of Web Application Services, is expected to be released in Summer 2004.
The integration platform LION DiscoveryCenter™ will no longer be sold as a stand alone product; maintenance and support services remains available for the current installed customer base. Some components of LION DiscoveryCenter™ will continue to be used, as appropriate, in professional services projects.
A new version of the LION Target Engine™ is scheduled for release in Summer 2004. This version allows for the use of its various modules as components which can be integrated into a customers existing infrastructure, or as a complete solution suite. The components will interact with SRS and rely on SRS to provide core data integration and access.
LION plans to introduce a solution in the cheminformatics area to integrate disparate chemistry databases and provide advanced analysis and visualization capabilities during the next fiscal year (FY2004/2005). This product suite is expected to include and integrate different components developed as a result of different LION customer projects.
LION expects revenues of 19 to 20 million € for the current fiscal year 2003/2004, which ends on March 31, 2004. LION would not have achieved this revenue target without this change in its accounting practice. Sales in Q4 should be in excess of 3 million €. Expenses (including depreciation and amortization) are expected to decrease to 7 to 8 million € during the fourth quarter of the current fiscal year. The net loss for the current fiscal year is expected to be between 22 and 24 million €. LION expects to have liquidity of at least 40 million € by the end of the current fiscal year 2003/2004 on March 31, 2004.
LION is adjusting its guidance for fiscal year 2004/2005 due to in part to the restatement and the change in LION´s revenue recognition policy. The life science informatics market remains difficult. The described change in product strategy and offering will take time to establish growth again. An important factor will be the outcome of the company’s current negotiations with Bayer, concerning the extension of LION’s collaboration with Bayer, which is currently scheduled to end Summer 2004.
In total the company is calculating with sales of between 12 and 13 million € in fiscal year 2004/2005; a possible follow-on project from Bayer is not included in this estimate. This possible follow-on project is expected to be significantly smaller in scope than in previous years. The total costs are forecasted to be around 25 million €. Further reductions in costs are not planned at this time.
“LION`s management regards the cost basis of 25 million € as a conscious investment in the future, to enlarge and improve the product portfolio. LION wants to send a clear message of support to the employees, that the existing competences and expertise developed within the company are critical for the company’s success in the future”, said the CFO and Co-CEO Martin Hollenhorst.
For a complete report of LION’s results for the first nine months ended December 31, 2003, please visit https://www.netgenics.com/financials (Financial Year 2004).
For further information please contact:
+49 (0) 6221-4038 249
The description of the planned restatement in this release is based on estimates that have not been audited and the amounts for any interim periods are based on LION’s preliminary review only and are subject to change. Until LION issues its restated financial statements and final interim report for the first nine months of the current fiscal year 2003-2004, investors should not rely upon the financial information contained in LION’s annual report on Form 20-F and auditors’ reports thereon as previously filed with the U.S. Securities and Exchange Commission or in LION’s interim reports submitted on Form 6-K.
Except for the historical information contained herein, the matters set forth in this press release are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995, and other applicable U.S. and German laws. These forward-looking statements may include projections, estimates, targets, goals and descriptions of future events. Such statements are based on the current targets that LION has set itself and on LION’s current expectations, each of which is subject to risks and uncertainties. LION’s actual results may vary materially from those targeted, expected or projected because of factors such as uncertainties relating to technologies, product and solution development, acceptance by the market of LION’s offerings, market or industry trends, success of LION’s business model and strategy, competition, exchange rate fluctuations, cost or pricing of LION’s products and solutions, dependence on collaborations and partners, regulatory approvals, competition, intellectual property of others, or patent or copyright protection and litigation. We refer you to LION’s Annual Report on Form 20-F, as filed with the Securities and Exchange Commission (SEC) on September 30, 2003, as well as LION’s subsequent SEC filings, in which these and other risk factors are discussed. LION expressly disclaims any obligation or undertaking to release publicly any updates, revisions or corrections to any forward-looking statements or historical information contained in this announcement, whether as a result of new information, change of assumptions or business model, future developments or otherwise.
LION bioscience®, Life Science Informatics™, LION DiscoveryCenter™, LION SolutionCenter™, LION Hosted Services™, LION Target Engine™, LION Lead Engine™, LSI™, bioSCOUT®, arraySCOUT™, arrayTAG™, arrayBASE™, genomeSCOUT™, pathSCOUT™, πSCOUT™ and iDEA™ are either registered trademarks of LION bioscience AG or its subsidiaries in the United States and/or other countries, or there are pending applications by LION bioscience AG or its subsidiaries for these trademarks in the United States and/or other countries. The names of actual companies and products mentioned herein may be the trademark of the respective owners.
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