NEW YORK, March 7 – After Affymetrix disclosed that its U74 Mouse arrays contained defective sequences, the microarray maker’s shares slid nearly 11 percent Wednesday by midday.
The company’s shares were down $5 15/16, at 50 1/16 in early-afternoon trading on the Nasdaq.
Affymetrix stated in an 8-K filing with the Securities and Exchange Commission Wednesday that it had discovered its mouse genome arrays, which it sells as a set of three chips, contained errors in the sequence, which the company obtained from the UniGene database.
The company said it would replace these defective arrays with newly designed ones, and estimated its replacement costs at $4 million. Additionally, the company said it would have to take out additional product warranty accruals.
But Ellen Lubman, an analyst who covers Affymetrix at Robertson Stephens, said the financial impact of this problem would be limited.
“The maximum possible charge, if all customers want all new chips (all three of the set) is a $4 million charge broken over the fourth quarter of 2000 and the first quarter of 2001,” Lubman told GenomeWeb.
In Lubman’s analysis, “Impact to earnings per share was just three cents but [there was] no general impact, because we exclude amortization and such charges.”
Although Affymetrix has not issued a forecast for this year’s revenues, the company’s 2000 revenues totaled $200.8 million and its net loss totalled $33.6 million or $0.61 per share.
Affymetrix said in the 8-K filing that its recent acquisition of computational genomics company Neomorphic would strengthen its abilities in the future to ensure the accuracy of public domain sequence information. Neomorphic has genome annotation and analysis tools.