This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
Affymetrix this week said it expects fourth-quarter revenue to decline around 11.5 percent as it begins a limited launch of its single-chip SNP 5.0 array but delays by around three months the release of its two-chip, 1 million SNP product.
In a statement released this week, Affy said that it expects to post around $100 million in fourth-quarter revenue, compared with $111.5 million in the fourth quarter of 2005.
Despite the overall decline, the revenue estimate beat analysts’ expectations, which projected the company would post $99.5 million for the period.
As a result Affy’s shares closed up 13.6 percent to $24.67 the day the company released the projection. The shares have since leveled out and were trading down 1.6 percent at $24.10 in mid-afternoon trading Wednesday.
Speaking at the JP Morgan Healthcare Conference in San Francisco this week, Affy CEO Stephen Fodor described Affy’s Q4 performance as “solid” and partially attributed it to its decision to cut prices for its 500K array set by half to $250 last July.
”When we dropped them down to $250, we got a 90-percent increase in orders,” Fodor said at the JP Morgan conference. “In Q4, we saw an incremental increase in orders beyond that.”
“Suffice to say, this has led us to push on the genetic power, the content, and cost in this field,” he said.
Central to that strategy has been the launch of the new SNP 5.0 array, which is a consolidated version of the dual-chip 500K array set the firm launched in the third quarter of 2005 together with 500,000 additional probes that can measure other genetic differences, such as copy number variation. Both products will cost the same, Affy said.
Also this week Affy said it has delayed by three months the launch of its two-chip, 1 million SNP product, which was originally scheduled to debut in the first quarter of this year. Affy is betting that the so-called SNP 6.0 array, now due to appear in the first half of this year, will raise the stakes in the competitive whole-genome genotyping market.
In the case of Affy’s 1M SNP product, Fodor told investors at the JP Morgan conference that the company is currently selecting content for the product from a master list of 1.6 million SNPs.
Affy’s decision to cut the price of its 500K array set and release the higher-density chips could play in its favor. According to Dietrich Stephan, director and senior investigator of the Translational Genomics Institute’s neurogenomics division, the genotyping market could very well come down to density in the future.
“This whole game comes down to three things: price point, throughput, and density. And accuracy is a function of density. If you double the density on a chip, then the chip will be more accurate than a competitor’s chip,” Stephan told BioCommerce Week sister publication BioArray News last week.
“Ultimately you want the highest density in order to get the highest accuracy. It is a numbers game,” he said. “I think that when these tools start getting to the 1 million SNP mark, then researchers will start having enough statistical power to do studies as if they were resequencing the entire genome.”
He added that even higher density chips are likely to come out in future years. “For some of the younger [genomic] populations [1 million SNPs] is probably sufficient, but for more ancient populations we are going to need three million to four million SNPs to have significant power to do disease detection studies,” he said.
“I think it is common knowledge that Affymetrix will continue to shrink feature size to put more content on the arrays. I can easily see a 4 million-SNP product in the future,” Stephan said.
And on the price-point side, Affy’s price-cut “precipitated” a similar step by its biggest rival, Illumina. In July, when Affy cut the price of its 500K array set, Illumina CEO Jay Flatley said that the decision would have “no direct impact” on Illumina’s pricing going forward.
But a few weeks later, Illumina cut its prices. As reported by BioCommerce Week sister publication Pharmacogenomics Reporter in October, Illumina dropped the list prices and reduced the discounts for its Infinium whole-genome genotyping kits in September. Flatley said at the time that the change “was probably precipitated by Affy’s change, but it didn’t cause it.”
This week, Illumina released its own roadmap for launching a 1 million SNP array. The company said in a statement that it plans to release its Human 1M BeadChip by the end of the second quarter — a similar timeline as Affymetrix.
Edward Winnick in San Francisco contributed to this article.