Though the businesses of Affymetrix and Illumina differ in some areas and overlap in others, both witnessed a healthy array market during the quarter ended Sept. 30 and officials from both companies have a positive outlook for the upcoming year
Last week, both Affy and Illumina said that they saw a surge in instrumentation sales during the third quarter as well as a continued uptake of their microarray products for both gene expression and genotyping. Both firms also provided updates on their relationships with personal genetics companies during their third-quarter earnings calls.
Illumina Sees Growth Across the Board
Illumina’s third-quarter results showed the firm performing well across product lines. Total receipts for the three months ended Sept. 30 increased 82 percent to $97.5 million from $53.5 million last year. Product revenues grew to $90 million from $46.9 million, while service and other revenues rose to $7.4 million from $6.4 million in the third quarter of 2006.
Much of the rise in product revenues was due to instrumentation sales, which jumped to $34.1 million in the quarter, up 206 percent from last year, driven primarily by the firm’s Genome Analyzer. However, CFO Christian Henry pointed out in the firm’s earning’s call last week that “BeadStation growth was also impressive during the quarter as [Illumina] expands the footprint of the platform to meet the demand of Illumina’s genotyping technology.”
The company has also seen increased adoption of its BeadArray products, spurred by Illumina’s growing portfolio of chips. “What helps is that we have a suite of products in the Infinium line,” he said.
“So, for example, DeCode Genetics has been a big user of the HumanHap300 [chip] in the past because that fits their study requirements, other customers are using the [HumanHap550-Duo] and still others are using the [Human] 1M,” he said. “So the diversity and flexibility of the product line bodes well for us in terms of satisfying the entire market.”
CEO Jay Flatley said that the Human 1M, launched in the second quarter, has “rapidly become one of our best selling arrays, with revenue in the quarter just behind that of our HumanHap550.” He added that the company’s Human370CNV-Duo chip was its “best-selling product in Q3, narrowly eclipsing the Hap550.”
Sales of custom arrays also grew in the third quarter, an increase of 71 percent over the same period last year. “As researchers conduct increasing numbers of genome-wide association studies, we expect fine mapping and SNP validation work will grow significantly over the foreseeable future,” Flatley said. He added that business in the firm’s iSelect custom array product line grew 72 percent from the previous quarter.
In terms of new products, Flatley said that Illumina is continuing to build new digital gene expression applications for use on its Genome Analyzer. Illumina debuted two such applications earlier this year.
“We are continuing to develop applications and kits for new applications such as ChIP-Seq, for protein-DNA binding analysis, and soon we expect to enable support for these in our BeadStudio software,” Flatley said.
During the third quarter, Illumina’s R&D spending nearly tripled to $19.8 million from $7.7 million in the year-ago period. Profit for the quarter, meantime, declined to $14.5 million from $16.2 million.
Illumina said it had around $352.8 million in cash, equivalents, and short-term investments as of Sept. 30.
The company raised its expected full-year 2007 revenues to between $354 million and $358 million, which is about 5 percent higher than projections it made in July, and around 17 percent more than it projected at the beginning of the year.
llumina expects fourth-quarter revenues to be between $100 million and $104 million, or as much as 69 percent over the same period last year.
Flatley declined to offer guidance on how the firm’s supply agreement with personal genetics startup 23andMe might impact future earnings, though he said that 23andMe is on schedule to debut its service at year-end, and Illumina will update any financial forecasts to include potential revenues from the partnership early next year.
New Affy Products Counter Expression Falloff
Like Illumina, Affymetrix also saw an increase in sales related to instrumentation as well as its flagship genotyping products in the third quarter. The company announced last week that revenue for the period rose 12 percent as R&D spending declined 24 percent and last year’s loss swung to a profit.
Total revenue for the three months ended Sept. 30 increased to $95 million from $84.7 million in the year-ago period. For the quarter, Affy said product sales increased about 23 percent to $69.4 million; product-related revenue slipped 12 percent to $15.8 million; royalties and other revenue rose about 58 percent to $9.5 million; and revenue from Perlegen Sciences dropped to $355,000 from $4.6 million.
GeneChip consumable revenue was $65.4 million, including array revenue of $42.9 million, reagent revenue of $15.8 million, and services revenue of $6.3 million. Instrument revenue was $10.7 million for the quarter.
CFO John Batty said during the firm’s earnings call that Affy shipped 48 GeneChip systems during the quarter, bringing cumulative systems shipped to almost 1,700 units, an increase of 25 percent over the third quarter of 2006.
Kevin King, Affy’s presicent, said during the call that the company’s customers continue to be academics rather than pharmaceutical or biotech companies.
“From a customer perspective, academic sales were about two-thirds of our product and product-related revenue for the quarter, while the remaining one-third came from our industrial customers,” King said during the call.
The overall mix of consumables for the quarter was about 55 percent from gene expression, and 45 percent from genotyping. King said that Affy’s pharma customers are more likely to use its expression products rather than its genotyping chips, although “pharma has been increasingly up-ticking our DNA products, as well as the whole-genome-level [chips].”
“Pharma has been increasingly up-ticking our DNA products, as well as the whole-genome level [chips].”
King added that the expression market is “showing slower growth overall” but the firm is encouraged by sales of its exon- and gene-level arrays. “In the long run, I think our growth is going to be driven more by the new products, than it is by the current version of products in the marketplace overall.”
Affy CEO Stephen Fodor said the company is now offering its Drug Metabolism Enzyme and Transporter panel as a service and will make the assay more widely available next year. He also discussed Affy’s relationship with Navigenics, a Redwood Shores, Calif.-based personal genetics start-up that plans to launch its service by early next year (see BAN 10/2/2007).
“We are running their samples through our CLIA laboratory in West Sacramento,” said Fodor. “That assay, if you will, is nearly complete in terms of validation and they should be ready to go shortly.”
King hinted during the call that Affy will reveal more about its plans for 2008 at the end of the next quarter. “Some of these programs will expand current markets and product lines, such as whole-genome association, copy number, and targeted genotyping,” he said. “In addition, we will soon be describing new technologies that will scale both genetic content and throughput to unprecedented levels, opening up new commercial markets for Affymetrix.”
Affy’s R&D spending fell to $16.5 million from $21.6 million in the prior-year period.
The company posted a $2.6 million profit compared to a loss of $14.2 million in the third quarter of 2006. The improvement was driven by strong adoption of the firm’s SNP 6.0 Array for whole-genome genotyping.
Affy had $250.7 million in cash, equivalents, and short-term investments as of Sept. 30, and said it expects total 2007 revenue in the range of $365 million to $375 million. In July, the firm said it expected total 2007 revenues to be between $365 and $385 million.