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Affymetrix Posts 7 Percent Revenue Increase for Q1

NEW YORK (GenomeWeb) – Affymetrix reported after the close of the market Thursday that its first quarter revenues increased around 7 percent year over year and beat the consensus Wall Street estimate.

The microarray firm generated total revenues of $83 million for the three months ended March 31, compared to $77.9 million for Q1 2013. On average, analysts estimated revenues of $81.1 million.

The first quarter of 2013 included $1.5 million of revenue associated with a product line that the firm divested in the fourth quarter of 2013. Adjusting for that divestiture, Q1 2014 revenue would have been up nearly 9 percent year over year.

Affy said product sales were $73.7 million versus $71.6 million for the first quarter of 2013, while services and other revenue was $9.3 million, up from $6.4 million.

"We have achieved year-over-year revenue growth for the third consecutive quarter," Affymetrix President and CEO Frank Witney said in a statement. "Our focus on execution is clearly paying off and I'm confident that we are on track to return the Company to sustainable growth and profitability."

Witney said on a conference call following the release of the Q1 results that sales of the firm's genotyping chips, led by demand for its CytoScan offering for chromosomal microarray analysis, drove revenue growth in the quarter.

"The growth in this product line is being driven by expanding our customer base in all geographies, increasing our sales in existing accounts, and expanding our base of research-use-only applications in reproductive health and oncology," Witney said of CytoScan.

In total, CytoScan sales grew 25 percent year over year in Q1, and now generate about an eighth of Affy's revenues, Witney said.

The company achieved US Food and Drug Administration clearance for its CytoScan Dx Assay in January. It is the only microarray vendor thus far to get the FDA's nod for a cytogenetic array, a fact that has enabled the company to "be aggressive in talking directly to end users," according to Witney.

The company maintains four business units: genetic analysis, eBioscience, gene expression, and life science reagents. Genetic analysis revenues, of which CytoScan sales are a component, rose 32 percent in the quarter, due in part to a large genotyping services deal with the UK Biobank. As reported by BioArray News, UKBB contracted with Affy last year to genotype its 500,000-sample biorepository. The company expects to recognize the bulk of the revenues from that deal this year.

Affy's eBioscience unit had revenue growth of 7 percent in Q1, driven by sales of its single-cell analysis products, Witney said. Its life science reagents revenues were up 2 percent in the quarter, and Witney predicted growth to be relatively flat in coming quarters.

In gene expression, which accounts for about a fifth of Affy's revenues, the firm saw a loss of 5 percent. Witney noted that the reduction was an improvement over the same quarter of last year, when gene expression revenues dropped 30 percent. He said that the losses in the firm's legacy expression array business were being offset by sales of its Human Transcriptome Array and other new products.

Affy posted a net loss of $10.5 million, or $.14 per share, for the quarter, compared to a loss of $15.4 million, or $.22 per share, for Q1 2013. On an adjusted basis, it reported earnings per share of $.03, above the consensus Wall Street estimate of $.02.

The firm reported a 5 percent drop in R&D expenses to $11.6 million from $12.2 million. Its SG&A spending increased 10 percent to $38.6 million from $35.1 million. Affy also reported a $5.1 million charge related to litigation settlement.

CFO Gavin Wood attributed the decrease in R&D to "lower headcount and the timing of certain products." He acknowledged that the jump in SG&A expenses was "primarily due to high litigation costs." Affymetrix recently agreed to pay Enzo Biochem $5.1 million to settle a pair of decade-old IP infringement cases.

Affy finished the quarter with $57.7 million in cash and cash equivalents.

In Friday morning trade on the Nasdaq, shares of Affymetrix were unchanged from Thursday's close at $7.69.