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Affymetrix's Q4 Revenues Rise 3.3 Percent as Profits Soar

NEW YORK (GenomeWeb News) – Affymetrix yesterday reported modest fourth-quarter revenue growth, while its profits soared 47 percent for the three-month period ended Dec. 31, 2007.
 
The firm reported Q4 revenues of $107.6 million, a 3.3 percent increase over revenues of $104.2 million in the fourth quarter of 2006.
 
Sales for the most recent quarter included GeneChip consumables revenue of $79.9 million, which consisted of array revenue of $61.6 million, reagent revenue of $16.3 million, genotyping services revenue of $1.4 million, and $0.6 million of sales to Perlegen. Affymetrix said it had instrument revenue of $10.7 million in the fourth quarter.
 
The firm said that it shipped 44 GeneChip systems in the quarter, bringing its total systems shipped to around 1,722 by the end of the fourth quarter. But year over year, Affy's instrument sales for the quarter dropped from $15 million.
 
Asked during the firm's conference call last night if a reduction in spending by pharmaceutical firms is hampering Affy's instrument sales, Doug Farrell, vice president of investor relations, said, “I think it’s been pretty public that pharma has been retooling and trying to embrace molecular tools, and it’s taken a little bit longer to do that.
 
“Instrument placements for us tend to be pretty consistent" quarter to quarter, he said. "If I look at the biggest difference year over year … we actually had quite a few upgrades last year of a new fluidics station. The actual number of systems placed actually was very similar year over year.”

He said Affymetrix has new instrument systems in development, but the firm is not yet ready to talk about those. Farrell also noted that academic sales have been robust, which has offset some of the weakness in the pharma spending markets.

 
Affy posted net income of $12.8 million, or $.17 per share, which included a pre-tax restructuring charge of $2.4 million, or $.03 per share. Its profit was 47 percent higher than Q4 2006 net income of $8.7 million, or $.13 per share. That quarter included a pre-tax restructuring charge of $3.5 million, or $.05 per diluted share.
 
The firm’s R&D spending dropped 10.2 percent year over year to $17.6 million from $19.6 million, while SG&A costs climbed 15.2 percent to $35.7 million from $31 million.
 
For full-year 2007, Affy reported total revenues of $371.3 million, up 4.5 percent from revenues of $355.3 million for fiscal 2006. Consumable revenues for 2007 were $272.5 million compared to $251.2 million in fiscal year 2006. Instrument revenues for the year were $38.7 million.
 
Affy’s full-year profit was $12.6 million, or $.17 per share, which included a pre-tax restructuring charge of $15.3 million, or $.18 per share, compared to a net loss of $13.7 million, or $.20 per share for 2006, which included a pre-tax restructuring charge of $13.5 million, or $.20 per share.
 
Its R&D costs for the year fell 15.8 percent to $72.7 million from $86.3 million, while its SG&A costs declined 4.5 percent year over year to $138.5 million from $145.1 million.
 
The firm finished the year with cash and cash equivalents of $288.6 million.
 
Affymetrix projected 2008 revenue to be in a range between $505 million and $525 million, including a one-time $90 million payment in the first quarter related to a recent legal settlement with Illumina. Wall Street analysts had been projecting 2008 revenue of $403 million.
 
Affymetrix President Kevin King said during the call that 2008 revenue growth would be driven primarily by chips and consumables. The firm's acquisition yesterday of USB also is expected to help drive reagent growth while cutting some of the costs Affy spends on outside reagents, company officials said.
 
King said the acquisition of USB would be accretive in 2008. “USB’s historical growth rate is in the low double digits and their margins are in line with Affymetrix’s blended margin,” he said. “This acquisition is expected to accelerate next-generation enzymology and reagents that will be used with the sequencing applications that we have in development,” King added.
In the aftermath of that deal, he said, “You’ll see us look more and be more acquisitive going forward. We can’t disclose any specifics right here other than to say we’re casting a pretty broad net across this whole field of genetic analysis, and we’re sensitive to concerns investors have had about accretiveness.
 
"At the same time, I want us to be bullish and aggressive about growing our business for the long run,” he said.
 
In early Friday trade on the Nasdaq, Affy's shares were up 8.5 percent at $21.76. 

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