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Affy Expects Its Clinical Lab Arm Will Fuel Growth in Expression Business

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Affymetrix has finished constructing its clinical service laboratories in West Sacramento, Calif., and will look to use them as a staging ground in the coming months to increase the use of its expression arrays in the clinic, according to a company official.
 
Affy, which first disclosed plans to open clinical services labs in January 2006 (see BAN 1/31/2006), originally said the business would help diagnostic partners develop and launch new products. But Affy, which filed the labs for CLIA approval last October (BAN 11/7/2006), also expects them to help grow its expression business.
 
Doug Farrell, Affy’s vice president of investor relations, told investors at Merrill Lynch’s Global Pharmaceutical, Biotechnology and Medical Device Conference in New York on Feb. 8 that the company’s clinical service labs have been functional for several months, and that Affy will look to introduce tests based on its expression chips in the first half of this year.
 
“We brought on line at the end of the year our own clinical labs,” Farrell said during his presentation. “This is a clinical laboratory that allows us to run expression tests and products for customers” in a Clinical Laboratory Improvement Act-regulated setting, he said.
 
“We just finished building that out at year end, and we’ll begin running tests for partners in the first part of the year or so.”
 
Farrell pointed out that “consumables continue to be the growth driver for the company” and called the gene-expression market, which was responsible for 65 percent of Affy’s business in 2006, the “foundation” of the company.
 
Janie Kole, Affy’s vice president of finance, said two weeks ago during the company’s fourth-quarter earnings call that Affy’s customer base is split roughly 60 percent academic and 40 percent industry — mostly biotechs and pharma (see BAN 2/13/2007).
 
“When we look at what are really going to be the growth drivers for gene expression, certainly the clinical application of that technology is where we expect the bulk of the growth to come from,” Farrell said at Merrill Lynch. “We are seeing much more of expression technologies making their way into clinical trials, trying to stratify patients with responses, particularly in cancer,” he said.
 
Affy CEO Steve Fodor said during the Q4 earnings call that Affy now believes that the “single most significant opportunity for growth in gene expression lies in the increased penetration of clinical markets, where sample volumes are traditionally high (see BAN 2/13/2007).
 
According to Farrell, “two-thirds of the clinical usage of arrays for us is in clinical trials studying cancer. That is one area that we expect to see pretty good growth. Roughly two-thirds of the drugs in development right now are cancer drugs.
 
“Obviously, the pharma and biotech companies are looking at ways to manage the risk in their clinical programs to decide what compounds to accelerate and which ones to stop spending money on because of potential toxicity issues or what have you that could derail a program,” Farrell said.
 

But beyond selling directly to pharmas and biotechs, Fodor said that Affy’s own clinical laboratory would prove a convenient mechanism for increasing the use of Affy’s expression chips in the clinical

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