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Microarray Industry Leaders Expected To Report Big Quarterly Revenue Gains

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The top players in the microarray field are expected to report substantial gains in revenues when they report their quarterly results over the next few weeks. A review of analysts' expectations for Affymetrix, CombiMatrix, and Illumina suggest they will stand out among the firms that are predicted to report gains, while Lynx and Nanogen will be looking to rebound from poor results in the second quarter

Affymetrix

Affymetrix is set to report its third-quarter results this week, touching off the earnings season for the primary microarray players. Analysts covering the firm expect Affymetrix to post revenues of $86.8 million for the quarter, a 14-percent increase over 2003 third-quarter revenues of $76.2 million and a nearly 9-percent increase over revenues of $79.8 million in the second quarter of 2004.

Upon releasing its second-quarter results, Affymetrix had forecasted product and product-related revenues of $80 million to $85 million and total revenues of $83 million to $88 million. The firm expects to reports earnings per share of 18 cents compared with an estimate of 19 cents per share from analysts.

The Santa Clara, Calif.-based firm, which is the dominant player in the gene-expression instruments and arrays space, has made inroads into the genotyping market this year, launching its 10K and 100K GeneChip Mapping Arrays and announcing a series of agreements to utilize its genotyping tools.

Affymetrix CFO Greg Schiffman said in a conference call following the release of the firm's second-quarter results that there was "strong adoption and growth" in both its DNA analysis and expression businesses, a trend it expects to continue. (see BAN 7/28/2004) Schiffman also recently said that despite increased competition in the gene-expression products market, particularly from GE Healthcare, Agilent, and Applied Biosystems, the company's sales have not been affected. (see BAN 10/6/2004)

The most significant piece of news for Affymetrix during the quarter, however, was the European Union clearance to market the firm's GeneChip platform for in vitro diagnostic purposes. It was the first marketing approval for Affymetrix and Roche under their collaboration to develop and sell molecular diagnostic products based on the GeneChip system. In tandem with Affymetrix's EU clearance, Roche received the CE Mark for its AmpliChip CYP450 drug-metabolism test. (see BAN 9/8/2004)

Affymetrix expects to be the first to launch a microarray-based diagnostic platform in the US, but it has not been able to provide a timeframe for when it would file with the Food and Drug Administration.

Agilent

Agilent, the No. 2 player in the microarray market, is close to finishing its fourth-quarter and fiscal year, which ends Oct. 31. The Palo Alto, Calif.-based firm does not break out sales of specific products, and it does not issue guidance for specific business segments. It will release its fourth quarter and fiscal 2004 results on Nov. 11.

For its third quarter, Agilent had reported revenues of $335 million for its Life Sciences and Chemical Analysis unit -- which houses its microarray products -- up 11 percent from the 2002 third quarter. Taia Ergueta, Agilent's senior director of business development for the LSCA unit, said recently at the UBS Global Life Sciences Conference that sales for the group were up 17.7 percent in the first half of 2004. She added that life science products account for 40 percent of the unit's revenues, and the firm expects high growth in its integrated biology segment, which consists of genomics, proteomics, and bioinformatics products.

The most significant event for Agilent this past quarter was its agreement to buy Silicon Genetics, expanding its bioinformatics capabilities and firmly cementing its position as a systems biology player. (see BAN 9/1/2004) The company signaled its intention to become a full-fledged systems biology entity in March, merging its gene expression, proteomics, and reagents business into a new unit called Integrated Biology Solutions.

During the quarter, Agilent also launched the first whole-genome oligonucleotide array for the study of Arabidopsis thaliana, and announced that it had surpassed one million chips sold since launching its 2100 Bioanalyzer in 1999.

Applied Biosystems

Applied Biosystems just finished off its first quarter for fiscal 2005, and like Agilent, the firm does not break out sales for specific products. Analysts who cover the company are expecting first-quarter sales of $411.9 million, which would represent 7.6 percent growth over last year's first-quarter revenues of $382.7 million.

The Foster City, Calif.-based firm is undergoing a restructuring that will involve cutting 145 jobs -- about 3.5 percent of its 4,400-person workforce -- and divide the company into four new divisions: molecular biology, proteomics and small molecules, applied markets, and service. ABI's microarray business will fall under its molecular biology unit.

ABI rolled out its new Expression Array System earlier this year, as well as several new gene-expression arrays. But the firm reported relatively flat earnings for fiscal 2004 and said it is looking toward strong growth in its mass spectrometry and applied genomics products units. Meanwhile, company officials yielded little information on its efforts to capture market share specifically in the microarray sector.

CombiMatrix

CombiMatrix will release its third-quarter results this week, looking to build on modest revenues of $750,000 reported in the second quarter of 2004. Analysts are predicting revenues of $1.1 million, a 516.7 percent increase over the comparable quarter a year ago.

During the past quarter, the Mukilteo, Wash.-based firm expanded its drug-discovery operations with the planned acquisition of a 33-percent stake in Leuchemix. The company said that the action was part of a long-term investment strategy, and that it has no intention of de-emphasizing other parts of its business. (see BAN 10/6/2004)

CombiMatrix also announced last week that it would collaborate with Science Applications International on developing microarrays for the identification of multiple biothreat organisms. Both firms have received funding from the US Department of Defense and will use some of that money to support the collaboration.

Illumina

Illumina will be looking to build on the strong sales growth reported for its second quarter, with analysts predicting revenues of $13.6 million, which would represent nearly 65 percent growth over last year's third-quarter revenues. The San Diego-based firm reported Q2 revenues of $11.5 million, which was a 140-percent increase over the comparable period a year ago.

The most significant events for Illumina during the quarter revolved around litigation. The firm settled a 2-year-old lawsuit and countersuit with ABI by agreeing to pay ABI $8.5 million. Illumina had alleged that ABI breached a 1999 joint development pact, and ABI alleged patent infringement related to an oligo ligation assay. Under the settlement, the firms agreed to exchange royalty-free cross-licenses to certain intellectual property.

In August, Affymetrix filed suit against Illumina alleging that the firm's BeadArray and Sentrix instruments infringe six patents held by Affymetrix. Illumina President and CEO Jay Flatley said at the UBS Global Life Sciences Conference that he expects the litigation to take a couple of years to resolve and believes it was initiated to "slow down" the firm's efforts in the genotyping and gene expression fields.

Lynx, Nanogen Hope to Rebound

Lynx will be seeking to improve upon its poor second-quarter results, which saw its revenues drop drastically from $4.6 million in the second quarter of 2003 to $1.7 million in the second quarter of 2004. The firm is in the process of merging with privately held Solexa, an Essex, UK-based company developing a sequencing system based on clustered arrays. The combined company, which has yet to be named, will be publicly traded under Lynx's ticker symbol, "LYNX."

The partners plan to market their first jointly developed product next year and hope to build a substantial presence in both the DNA-sequencing and gene-expression markets.

A close working relationship between the firms was forged in March 2004, when they jointly purchased technology from Swiss firm Manteia for generating DNA colonies .

Meanwhile, San Diego-based Nanogen also is looking to rebound from its recent financial difficulties. The firm's second-quarter revenues dropped from $1.7 million in 2003 to $1.1 million in 2004.

During the quarter, Nanogen took another step in reshaping its business focus and broadening its offerings with an agreement to buy Epoch Biosciences in an all-stock transaction worth around $60 million. The firms have several complementary products in the molecular diagnostics field. According to Nanogen, it plans to continue offering both microarray and in vitro diagnostics products.

GE Healthcare

GE Healthcare, the unit of General Electric that includes the operations of GE Bio-Sciences (formerly Amersham Biosciences) and GE Healthcare Technologies, reported its Q3 results a couple of weeks ago. Total orders for GE Healthcare increased 42 percent over the third quarter in 2003, including Amersham, the company said.

The company did not specifically break out Amersham's contribution, but said that excluding Amersham, the unit's orders grew 15 percent to $2.3 billion, which would credit Amersham with $600 million in orders, and growth of 27 percent.

GE launched its rat whole-genome bioarray during the quarter. (see p.1 article)

-- EW

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