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Affymetrix CEO Says Firm May Recognize Revenue From ParAllele Buy by Year-End

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Affymetrix two weeks ago told analysts that it expects to start recording revenue from its $120 million acquisition of ParAllele Bioscience by the end of the year.
 
Affy acquired ParAllele in October 2005 for its genotyping technology, which Affy said would "help accelerate the commercialization and development of DNA analysis products."
 
But discussion of the ParAllele technology was eclipsed soon after the acquisition by the firm’s interest in its expanding line of genotyping products, manufacturing issues, and clinical diagnostic plans (see BAN 6/8/2005).
 
Since then, Affy has restored its ability to manufacture whole-genome genotyping products — by completing a manufacturing upgrade in the US and opening a plant in Singapore — and finished building its clinical laboratories in Sacramento, Calif., and is now able to refocus on ParAllele.
 
CEO Steve Fodor, speaking to investors during the company’s fourth-quarter earnings call two weeks ago, said this could be the year that the firm will begin to recognize revenue from the ParAllele acquisition.
 
“I think there’s potential for what we have going this year, and some of the deals are pretty good,” Fodor told an analyst during the call. “Hopefully by the end of 2007 we're starting to see a good, positive return on the investment that we made there,” he said.
 
Central to reinvigorating ParAllele’s product portfolio will be the launch of Affy’s drug-metabolism panel, or D-MET assay panel. The product, a ParAllele legacy, runs on Affy's GeneChip platform and tests around 160 genes that are involved in drug metabolism and transport pathways. Though the D-MET panel has been in the hands of some customers since Affy bought ParAllele, Affy has yet to offer it as a standard product to the general research market.
 
“The drug-metabolism panel is one that, as a standard product, we plan to launch this year. Both for clinical work, but also for drug development work,” Fodor said during the call. In addition, he said that Affymetrix plans to develop similar standard panels, also based on ParAllele’s molecular inversion probe technology that will enable researchers to score up to 20,000 probes in one genotyping assay.
 
Fodor said that Affymetrix is investing in “the reagent side of putting ... those products in various formats out into the marketplace.” He said the company will disclose more about this later in the year.
 
Fodor also said that Affy sees opportunities for the ParAllele technology in the clinical and drug-development arena. While he did not elaborate during the call, in the past Affy has said that customers could use the MIP technology for a number of different applications, such as chromosomal copy number detection, DNA methylation profiling, and targeted RNA analysis (see BAN 6/8/2005).
 
Both the plans for the standard panels plus the use of the MIP technology in newer applications could help Affy achieve its goal of using the acquired technology to broaden its place in the clinical and genotyping markets. But the remaining question is whether Affy will stick to the schedule this time.
 
For example, during the firm’s fourth-quarter 2005 earnings, Fodor pledged to launch ParAllele-based products in 2006. “For 2006, we will focus our efforts on growing the markets for the product portfolios launched in 2005," Fodor said. "These include new … products such as ParAllele-based products, the 500K mapping array set, our exon arrays, and our whole-genome tiling arrays," he said (see BAN 1/31/2006).
 

“It's always a little bit bigger of a job to get things out into the marketplace than when you first assume, when you sort of purchase a new technology.”

It never happened that way, and during the earnings call two weeks ago, Fodor said Affy’s manufacturing capacity expansion, among other events, distracted the company from its ParAllele promises. However, he said the firm has been developing the technology.
 
“It's always a little bit bigger of a job to get things out into the marketplace than when you first assume, when you sort of purchase a new technology,” Fodor said. “But, even though we were distracted from quite a bit last year, we have been working constantly on it.”
 
One unanswered question is how the technology will eventually be used. As BioArray News sister publication Pharmacogenomics Reporter reported in April 2006, ParAllele originally planned to file the D-MET assay as an in vitro diagnostic with the US Food and Drug Administration by March 2006.   
 
The company has not provided an update on its FDA filing plans since then.
 
Now it appears that one of the first places that D-MET could be deployed is in Affymetrix’ clinical labs, which are scheduled to begin initial services this year (see related story, this issue).
 
Fodor also said during the call that the ParAllele technology could be useful for its genotyping customers that are interested in doing follow-on studies after using Affy’s whole-genome genotyping products, such as its SNP 5.0 array, which the company officially launched this week, or its forthcoming 1-million SNP 6.0 array, due out later this year.
 
“If there is a focused set that people really want to look at, and they've made the decision that that's just what we're going to look at, we really have two alternatives,” Fodor said. “One ... is to pick a subset, if it is from the higher content arrays. Or [Affy could offer] sort of custom make a set using the ParAllele
technology.”

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