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Affy Decides to Shutter US Manufacturing Facility As Singapore Plant Is Validated for Production

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Affymetrix’s decision to shutter its instrument manufacturing and development facility in Bedford, Mass., disclosed last week, coincides with the validation of the company’s new manufacturing plant in Singapore, according to Affy officials.
 
Both moves are part of the firm’s previously announced restructuring effort, the officials said.
 
The closure of the Bedford facility, expected to wrap up this winter, was disclosed in a filing with Securities and Exchange Commission last week. Affy “committed to” the move on Sept. 7 and said it is part of a broader effort to cut costs.
 
The plan is to consolidate the facility's instrument-manufacturing operations with the company's probe array-manufacturing space in West Sacramento, Calif. Bedford’s instrumentation development capabilities, meantime, will be consolidated with Affy’s principal R&D facilities in Santa Clara, Calif., Affy said.
 
The restructuring is expected to “eliminate or transfer” around 80 jobs beginning in the fourth quarter and continuing into the first half of 2007, Affy said in the filing. The company said it expects the Bedford facility closure to be “materially completed” by the third quarter next year.
 
“These actions were approved as part of the company's previously announced efforts to reduce expenses in the general and administrative functions including the rationalization of the company's facilities,” Affy said in the SEC filing.
 
During Affy’s second-quarter conference call in July, CEO Stephen Fodor said Affy will restructure its “corporate, general, and administrative expenses.” He called 2006 the “single most challenging year” in Affy’s 13-year history and blamed “increased competition, especially in the genotyping market” (see BAN 8/1/2006).
 
At the annual Bear Stearns investor conference in New York last week, Affy CFO Greg Schiffman said: “As we have evaluated our facilities on a global basis, we made the decision … to close our Bedford manufacturing facility. It will bring us leverage in R&D, SG&A, and manufacturing."
 
In the SEC filing that followed Schiffman’s statement Affy said it “expects to incur costs” related to the restructuring but was unable to offer details at the time of the filing. The company said it is “currently preparing its analysis of the restructuring costs and expects to complete its analysis before the end of the current fiscal quarter.”
 
Singapore, Ho!
 

“The goal is to eventually supply half of our capacity from our Singapore plant and to balance our capacity between Singapore and Sacramento.”

As the withdrawal from Bedford begins, Affymetrix has been putting the finishing touches on its first international manufacturing plant in Singapore.
 
According to Schiffman, Affy has “completed the validation of the [Singapore] facility and it is ready to begin commercial production and shipment of commercial units.”
 
“The goal is to eventually supply half of our capacity from our Singapore plant and to balance our capacity between Singapore and Sacramento,” he said at the Bear Stearns conference.
 
Affy purchased the Singapore plant from an undisclosed semiconductor company for $5.5 million last year. It was originally supposed to open in 2007, but in January Affy revised its forecast and said it would be operational by the second half of 2006 (see BAN 1/31/2006). According to Schiffman, Affy has now met that goal.
 
In addition to the Singapore expansion, Affy has been investing in its Sacramento facilities. Over the past year the firm has expanded its manufacturing capabilities at its existing plant by 60 percent. Affy also broke ground on a new microarray and reagent manufacturing plant in Sacramento earlier this year. That facility is scheduled to open in 2007 (see BAN 1/10/2006).

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