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As Expected, Affymetrix Reports Flat Q1 Revenues; Swings Back to Profit

This article has been updated to include comments from a conference call and a stock quote.
NEW YORK (GenomeWeb News) – Affymetrix reported after the close of the market today that its first-quarter revenues were flat with the comparable period a year ago, excluding a $90 million settlement payment recognized during the quarter.
The results were expected, as Affymetrix cautioned investors two weeks ago that its first-quarter revenues would fall short of analysts’ expectations and it lowered its forecast for fiscal 2008 revenues by 3 percent.
The Santa Clara, Calif.-based firm reported Q1 revenues of $169.6 million, which included a $90 million payment from Illumina to settle litigation between the firms. Affy had reported revenues of $80.4 million for the first quarter of 2007.
The firm brought in product revenues of $62.8 million, which included array and reagent revenue of $58.8 million and instrument sales of $4 million. Service revenues were $8.4 million for the quarter, while royalties and other revenue were $98.3 million.
Affymetrix said that it shipped 17 GeneChip systems in the first quarter.

“For the first quarter, our revenue came up short of our internal expectations in three areas: gene expression counted for about $4 million, instrumentation about $4 million, and services by $3 million,” Affymetrix President Kevin King said during the firm’s conference call last night. “The $3 million in services was a timing issue and we will expect it to be recognized in Q2.”

King said that the shortfall in revenue compared to expectations “was not driven by competitive inroads or the emergence of emerging technologies but rather pharmaceutical companies are simply doing less target identification.”

Company officials noted during the call that revenue from Perlegen Sciences decreased roughly $6 million year over year. Excluding that contribution, genotyping revenues were up 24 percent for the quarter, they noted.

Affymetrix posted a profit of $46.3 million, or $.58 per share, for the three-month period ended March 31. The results include a pre-tax restructuring charge of $13.9 million, or $.17 per share. For the first quarter of 2007, Affy had posted a net loss of $4 million, or $.06 per share, including restructuring charges of $5.4 million.

The company’s R&D costs declined 2.1 percent for the quarter to $18.8 million from $19.2 million. Its SG&A costs fell 3.3 percent to $34.7 million from $35.9 million.
Affymetrix finished the quarter with $431.2 million in cash and cash equivalents.
The firm reiterated its forecast from two weeks ago of fiscal 2008 revenues of between $490 million and $510 million.
“Although we are not projecting overall growth in our expression business in 2008, we believe that growth in the newer exon, tiling, and gene-level products will allow us to keep the business consistent with respect to the prior year," King said.
Shares of Affymetrix were up .4 percent at $10.90 in early Friday trade on the Nasdaq.

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