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Affymetrix Reports Profitable Q4: Plans To Expand into Europe, Genotyping

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In the last quarter, Affymetrix seemingly crossed over to that Zion that eludes most genomics companies, reporting a profit for the first time in its ten-year history.

Last week, the company reported a pro forma profit of $744,000 for the fourth quarter of 2001, and projected that it will see a $3million to $5 million pro forma profit for 2002, on revenues 25 percent above last year’s.

The results excluded $4.5 million in charges associated with the company’s settlement of its litigation with Incyte in December, as well as costs associated with previous acquisitions, amortization of deferred stock compensation, and a gain received from the sale of the company’s convertible notes. But as these costs are not likely to recur, the balance sheet judges of Wall Street deemed them more meaningful than the $8.4 million overall that the company reported in losses for the quarter and $41.5 million in losses for the year.

The company’s revenues totaled $65.1 million for the quarter and $224.8 million for the year, and almost all of it came from sales of the company’s arrays.

“Let’s talk about momentum,” said president Sue Siegel in the company’s fourth-quarter conference call. “Our strong performance for the quarter and fiscal year reflect the continued momentum in our core gene chip business. While the first half of 2001 was challenging, the second half of the year was defined by commercial momentum and establishing standards for Affymetrix.”

Siegel repeated the word “momentum” like a mantra several times throughout the call, as if to signal that the company is ready to rock and roll over any remaining challenge in its way.

 

Is Motorola Hanging Up On Microarrays?

 

The company’s challenges have shrunk as one by one, potential challengers to Affymetrix have politely bowed out of the business. One analyst said during the conference call that Motorola, which launched its 10,000-spot human arrays in August, is also planning to do so. “We are getting strong indications from multiple sources that Motorola is in the process of exiting the market,” said Credit Suisse First Boston analyst Meirov Chovav.

Chovav refused requests for further comment, and other analysts told BioArray News that this claim was little more than rank speculation.

Motorola also firmly denied that it is leaving the market. “We are shipping arrays. We are seeing a nice pickup in orders in our business,” said Motorola product manager Nancy Schmelkin. Schmelkin said the company is planning to introduce a mouse 10,000-spot array in the second quarter, but did acknowledge that the process of converting customers over to the Motorola platform “is longer than anyone would like it to be,” due to the need for proof-of-performance studies.

Motorola may have an even harder sell if Affymetrix’s new human genome U133 arrays live up to their expectations. This new two-chip set includes 45,000 probe sets for 39,000 unique transcripts, and is the first chip in Affymetrix’s offerings to have been taken from the draft sequence of the human genome. The two-chip set is also priced comparably to two chips of the previous five-chip U95 human genome set.

Additionally, the complete probe sequences for the new array and all other arrays are available through Affymetrix’s website, ending a long-standing criticism of the company’s arrays. Motorola’s probe sequences are not available, and Agilent’s can only be accessed via Incyte’s pay-per-view portal.

These new chips just reached most customers last week, so it is too early to tell whether they hit the spot. Initial reports, however, have been favorable. Gene Logic, which received its first U133 arrays in December, has started running samples on them and has “so far found them to be excellent,” said Doug Dolginow, the company’s senior vice president for pharmacogenomics.

 

Next Stop, Genotyping

 

Affymetrix is planning to follow up this release with updates on its murine U74v2 chips and other products during the year, and is also planning to introduce a chip for genotyping, said Affymetrix CEO Steve Fodor.

“We expect the opportunity for whole genome type approaches towards genome scanning or genotyping will be tremendous,” Fodor said.

The company plans to initially release a genotyping chip that will be generic, not based on spinoff Perlegen''s genotyping research. Eventually, the plan is to develop an "integrated platform" that allows researchers to query for gene expression and genetic diversity at the same time, and examine the correlations between the two.

“Our mission is not only to provide the [genotyping] platform to researchers, but also to evolve the platform so it can be applied to DNA and RNA analysis for broad health care management.”

In addition to extending its reach more broadly across the product spectrum and more deeply into diagnostics, Affymetrix is planning to expand its global reach with increased marketing efforts in Europe and Asia. The company said 24 percent of revenues for 2001 came from Europe, a relative 20 percent increase compared to 2000.

“Typically, Europe will lag behind with regard to certain technology adoptions,” said Siegel. But lately, the company sees “the Affymetrix brand being accepted as a good standard with regard to gene expression also in the European market.”

The company said it has 150 people in sales and marketing around the world, and is growing more in Europe than anywhere else. The emerging Asian market, however, could be next.

— MMJ

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