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Affymetrix Aims to Diversify Revenue Stream With Upcoming DMET Service, Navigenics Pact

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
With the market for DNA gene expression research waning, Affymetrix is broadening its services offerings to include drug metabolism testing in the short term and personal genetics in the longer term through a collaboration with consumer genotyping startup Navigenics.
Affy is coming off of a strong second quarter in which its revenues rose 10 percent, and company officials said this week that they believe they are gaining share in the genotyping market. But recently the firm has been shifting some of its focus to future growth opportunities, such as molecular diagnostics, pharmacogenomics, and now an alliance in the personal genetics field.
Speaking at the UBS Global Life Sciences Conference in New York this week, Doug Farrell, head of investor relations for Affy, said growth in the gene expression market is “not where we’d like it to be,” but that is not due to competition. He acknowledged that the research market has been moving away from traditional gene expression, a market that Affymetrix has dominated since its inception.
With growth rates for gene expression revenues hovering in the low single digits, Affymetrix has focused on growing its genotyping business. Earlier this year, the firm launched its 6.0 Array, which contains more than 1.8 million copy number probes and SNPs, and sells for 50 percent higher cost than the previous SNP chip.
The firm faces tough competition in the genotyping market from Illumina, which also launched a 1 million SNP chip this past summer (see BioCommerce Week 7/4/2007).
Illumina CEO Jay Flatley also has said that the plateau in the gene-expression market is only temporary, and that the market for traditional, fluorescence-based analog arrays will eventually be eclipsed by demand for digital gene-expression studies performed on the firm’s Genome Analyzer.  
Affy officials recently disputed those claims at other investor conferences. At the Thomas Weisel Partners Healthcare Conference in Boston earlier this month, Affymetrix CFO John Batty said the next-generation sequencing technologies would complement the firm’s arrays rather than make them obsolete.
“From our perspective it is a technology that is actually quite complementary,” said Batty. “If you think about all of the SNPs that are going to come out of this sequencing activity, think about how Affymetrix is going to take those SNPs and put them on arrays on a more cost-effective basis in order to pursue the science in the applications that we see in routine use.”
Beyond the gene expression and genotyping markets, Affy has not been shy about its plans to move closer to the clinical markets. In 2005, the firm, along with partner Roche, received the first US and European clearance of a microarray-based in vitro diagnostic, the CYP 450 AmpliChip.
Earlier this year, the firm received regulatory approval to conduct microarray-based molecular diagnostic testing under Clinical Laboratory Improvement Amendments. Affy has 11 diagnostics partners to date and is working on a variety of cancer diagnostic assays.
New Growth Drivers
Even though company officials are bullish on Affy’s opportunities in both the genotyping and molecular diagnostic markets, they are looking for other ways to diversify its revenue streams.
“We need new markets and new products to keep growing,” Kevin King, who was promoted last week to president of the company, said during the breakout session following his presentation at the UBS conference this week.
Among those new products are the two service offerings to be introduced soon.
The first is the firm’s pharmacogenomics service offering based on its Drug Metabolism Enzyme and Transporter panel, known as D-MET. Affy plans to launch the panel as a service during the fourth quarter of this year, followed by the launch of a catalog product next year.
The panel was originally developed by ParAllele Bioscience and Eli Lilly and was scheduled to become commercially available in the third quarter of 2005. However, after Affy acquired ParAllele that year, the project was delayed as the company focused on launching a series of arrays for whole-genome genotyping.

“We need new markets and new products to keep growing.”

Affy officials believe the service will be a major cost saver for the pharma industry, with adverse drug events costing $4 billion a year alone. They told investors that the service can apply to all phases of drug development — from drug metabolism in phase I, to drug-drug interaction studies in phase II, and differentiated new drugs in phase III.
In addition to the D-MET service and product launch, Affy has inked an alliance with personal genetics firm Navigenics, a startup funded by well-known venture capital firms Kleiner Perkins and Sequoia Capital. The goal is to provide consumers with an understanding of their genetic predisposition for developing certain medical conditions.
Under that pact, consumers will be able to go to the Navigenics website and order a saliva collection kit. The customer will then send the kit to Affymetrix’s CLIA lab, which will run a whole-genome screen and send the analysis to Navigenics. Then, Navigenics will provide the genetic-predisposition analysis to the customer via a secure, private web portal and offer genetic counseling.
Neither Affymetrix nor Navigenics has disclosed the cost of the service or a launch date for the service, but Farrell said the firm is realistic and does not expect the alliance to provide any significant revenue for the firm in the near term.
King added that the potential of combining electronic health records with the personal genetics service could eventually help healthcare providers and researchers better understand the role that environmental factors play in disease.
Navigenics is offering a similar service to that of another consumer genotyping startup, called 23andMe, which inked a partnership with Illumina last month. The arrays that Illumina could offer 23andMe will use Illumina’s existing architecture but will have different SNPs on them.

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