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Agilent Sees Revenues, and Growth, Expressed in Nascent Microarray Work

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While Agilent Technologies is only a three-year-old company, and its microarray business is younger still, the company’s managers today speak of a corporate heritage that stretches back decades, and of microarrays as a maturing growth business.

“We have the right technology for today, and for the future,” said Chris van Ingen, senior vice president and general manager of Agilent’s Life Sciences and Chemical Analysis group, one of five divisions of the global business and the umbrella organization for its microarray technology. “This is the business that we are placing our bets [on] — with growth of 30 to 50 percent sustainable for a number of years.”

The company, like so many others, has been in a period of cost-reduction and fiscal introspection. It has laid off 8,000 workers and consolidated its manufacturing from 40 to 20 sites, shifting much of its manufacturing to Asia. Last April, it asked its executives to take temporary 10-percent salary cuts through August.

Going forward, microarrays appear to be an important part of its revenue aspirations.

“We are shifting our investments to the new parts of our portfolio from our mature businesses,” van Ingen told Wall Street analysts early in December.

Agilent officially introduced its human cDNA microarrays with a press release issued May 16, 2001. However, the company was already well entrenched in the microarray business. Since 1997, in an arrangement that concludes in February, HP, now Agilent, has manufactured the scanners sold by its chief microarray competitor, Affymetrix. Additionally, Agilent markets the Rosetta line of bioinformatics software made by Merck subsidiary Rosetta Biosoftware.

The company, which spun off from Hewlett-Packard three years ago, still retains an HP feeling. Not only does this show at the leadership levels, with Ned Barnholt, the former executive vice president of HP’s measurement organization, serving as CEO; it resonates throughout the company’s campus, where visitors are welcomed in an executive meeting room adorned with pictures of Bill Hewlett and Dave Packard, who founded Hewlett-Packard in a Palo Alto garage in 1939.

But pass the fancy meeting rooms, and go inside the 15,000-square-foot clean room to see Agilent’s future. The production area, nestled within a 30-year-old hangar sized building in Santa Clara, Calif., houses industrial-sized inkjet printers that lay down dots of nucleic acid on glass. The gene expression business — reagents, arrays, instrumentation, and software — is the company’s growth engine, executives told BioArray News. Currently, the company claims a 15-percent market share in gene expression.

Agilent introduced six microarrays in 2002, including 60mer oligo arrays. The Life Sciences and Chemical Analysis group, which manages the microarray business, had $1.3 billion in revenue in 2002 — $298 million in the fourth quarter and an operating profit of $45 million.

While Affymetrix is considered the market leader in microarrays, Agilent is confident about the potential of its microarray business, so much that Barnholt held one up to the camera in a recent interview on CNBC. Last week, company executives also presented a crystal bowl filled with microarrays to Dick Grasso, chairman of the New York Stock Exchange.

Though it’s a relative newcomer in an evolving market, John Jaskowiak, marketing manager for Agilent’s Bio-Research Solutions unit, said Agilent is leveraging its experience and contacts.

“We have a long history of selling measuring instruments to pharmaceutical and biotechnology companies,” he said.

Looking ahead to 2003, the company will introduce broad-based array content and roll out enhancements in its software every couple of months, Jaskowiak said. The focus will be on expanding catalogue arrays and introducing new arrays into the human, rat, and mouse product lines.

“The masses want to buy fixed content,” he said.

Agilent introduced three new microarray products at the Chips to Hits conference in October — a yeast oligonucleotide array, the Human 1A oligo, and the mouse development kit.

“We can’t keep them in stock,” said Erik Bjeldames, catalog microarray product manager.

The company has responded to demand by moving its manufacturing facility to a 24-hour-a-day, 7-day-a-week production schedule.

The arrays that ship meet a quality control standard in which 95 percent of the DNA on the chip must be “present and hybridizable,” said Doug Amorese, biochemistry and chemistry research and development manager.

Every droplet that goes onto the chip substrate is photographed during the manufacturing process, allowing for real-time monitoring and repair during production, he said.

The company will consolidate its five San Francisco Bay Area operations into the Santa Clara plant but move its microarray manufacturing elsewhere, van Ingen said.

“The Bay Area is not the best area for manufacturing in the long term,” he said.

Van Ingen did not say where the microarrays might be manufactured, but, given Agilent’s global presence, direct sales representatives in 72 countries, and 1,000 employees in China, Asia might be a promising location — without seismic activity.

Van Ingen sees strong growth potential overall for the company, putting gene expression in the middle of an S-curve graph, sliced into three equal segments. The mature chemical analysis business - consisting of products for gas and liquid chromatography and mass spectrometry as well as petrochemical sales and pharmaceutical sales - is at the right, on a relatively level growth projection, while at the left segment is the company’s proteomics business, a relatively early-stage effort based on workflow solutions and sample preparations. In the middle, is gene expression, with a steep curve of growth projecting upwards.

— MOK

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