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Affymetrix Discusses Next-Gen Array Format, True Materials Buy, at Investor Conference

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Affymetrix is planning to launch its next generation of microarrays for gene expression this fall, and is planning a “major genotyping launch” next year that will also be based on the firm’s new “peg” format.
 
The company is also preparing to move into the lower-multiplex genotyping market as a result of its recent acquisition of True Materials, according to CEO Stephen Fodor.
 
Speaking to investors and analysts at Leerink Swan’s Emerging Products and Applications in Life Science Tools Roundtable Conference in New York last week, Fodor said that the company will continue to manufacture and sell arrays in their present, cartridge format, such as its U133 Plus 2.0 chip for gene expression and its 1.2 million-feature SNP 6.0 Array for whole-genome genotyping studies.
 
But the company is also planning two “major” product launches in a new “peg format” that will be available for gene-expression this fall and genotyping next year. “The peg format will cover the genetic diversity profile from 1,000 to about 10 million markers,”  Fodor said. “This will have a fundamentally different cost structure for the market. The packaging costs on this are very low. We can really put this out in many different flavors and be very diverse.”
 
Fodor made his comments as he lamented the demise of the “premium-spending” pharmaceutical industry, which he said has undergone a “general deterioration … over the last couple of years” that he said “we don’t expect … to recover.”
 
Affymetrix first discussed the new platform during its second-quarter earnings call last month. Fodor said in the call that peg-format gene-expression arrays will begin shipping in the fall with human, mouse, and rat peg-formatted expression chips as the first products.
  
According to Fodor, Affy’s “peg-based consumables will be roughly one-fourth the size of our current products,” which will enable the company to increase the number of arrays it manufactures per wafer (see BAN 7/29/2008).
 
During the Leerink Swan conference, Fodor said the new format will offer users the opportunity to pick and choose content using array probes for capture sensitivity and assay biochemistry for interrogation specificity. A slide image of the new system showed arrays on pegs inserted into microtiter plates.
 
Fodor added that the content for new chips will come from a screen of all known sequence polymorphisms against 1,300 genomes. Affy first disclosed its internal screening project in January (see BAN 1/15/2008).
 
“This is a perfect example of how the increase in sequence knowledge from the genomes is going to be used,” Fodor said, referring to the use of second-generation sequencers in identifying sequence polymorphisms. “This is going to be Affymetrix’s strategy in this area,” he said. “As these databases get larger and larger — and they are — you really have to make sense out of them.”
 
Pharma Down, for Good
 
During the conference, Fodor took questions about the firm’s financial performance in the second quarter, during which total revenues dipped 1.5 percent to $86.9 million from $88.3 million in the comparable period of 2007.
 

“We have seen a general deterioration in the front-end pharmaceutical discovery business over the last couple of years. We don’t expect that growth to recover, but we do expect to see academic growth compensate for that.”

For the second time this year, the company lowered its full-year forecast due to “predicted ongoing weakness” in pharmaceutical revenue. As a result, Affy now expects 2008 revenue to be in the range of $455 million to $460 million, including a $90 million payment from Illumina related to litigation between the firms (see BAN 7/29/2008). The total revenue will be around 10 percent below its earlier projections but about 30 percent more than total revenues for 2007.
 
According to Fodor, Affy does not expect its pharma business to recover from its highs during the turn of the decade, but instead said he believes that sales to the research market, driven by adoption of its next-generation platform, will help take up the slack.
 
“I think there’s a macro-issue concerning the mix of revenues we have had over the past eight years in terms of our pharmaceutical and the academic environments,” Fodor said. “About seven or eight years ago, about 80 percent of our revenues came from the pharmaceutical industry, and this was about the time when pharmaceutical companies were heavily invested in up-front clinical research and basic research,” he said. “They were the first movers in any new technology that would come about and paid premium dollars for this.”
 
But over the past few years Affy has seen a transition in which sales to academics have grown to where they now comprise up to 70 percent of the firm’s business, Fodor said.
 
“We have seen a general deterioration in the front-end pharmaceutical discovery business over the last couple of years and most dramatically last year, where that business was down 30 percent year over year,” he said. “We don’t expect that growth to recover, but we do expect to see academic growth compensate for that.”
 
More True
 
Fodor also provided additional information on the company’s $25 million acquisition of True Materials, a microparticle-technology firm based at the University of California, San Francisco’s Mission Bay Campus (see BAN 7/29/2008). The acquisition closed last month.
 
True Materials is developing a digitally encoded microparticle technology that Affy expects will enable it to enter low- to mid-multiplex markets and compete with bead-based platforms, including the technology sold by chief rival Illumina.
 
True Materials’ platform consists of a silicon barcode embedded in glass, 15 x 2 x 2 nanometers in size, which is assayed in solution and read by fluorescence 2D imaging. At Leerink Swan, Fodor said the platform is useful for gene expression, SNP genotyping, microRNA, protein profiling, and methylation profiling, and has opportunities for sales into applied markets like food and environmental testing, and molecular diagnostics.
 
“As we surveyed this area and thought about what the attributes we wanted to go into this area, and we really thought about some of the other technologies that are out there,” Fodor said at the conference.
 
“I think there is a window of opportunity here that the other technologies just don’t serve and that happens to be in the range of hundreds [and] up into the thousands” of markers per assay, he said. Fodor referred to Luminex’s xMAP and Illumina’s VeraCode technology as rivals for the True Materials platform.
 
According to Fodor, the 100- to 10,000-marker genotyping assay range is a “very awkward technology window” for most companies in the genotyping market. “A lot of people, including us, have tried to push arrays down into that area. What this technology allows is a very effective scaling up into that region,” he said. Affy has said it could launch True Material assays as early as next year.

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