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Affymetrix Pays $121M to Acquire Array Maker, Genetic MicroSystems


SANTA CLARA, Calif.--Affymetrix's purchase of Genetic MicroSystems, a manufacturer of instruments for fabricating and analyzing DNA arrays used in life sciences R&D applications, for about $121 million in stock, came about because both sides saw an opportunity to link their "interdependent" array analysis applications to assist drug discovery and genomics researchers, commented Stanley Rose, vice-president and COO of Genetic MicroSystems, of Woburn, Mass. The deal, for one million shares of common stock or approximately 4 percent of the outstanding Affymetrix common stock, is expected to close in January.

When that happens, the companies plan to jointly enhance their software, instrumentation, and applications support to supply a comprehensive solution for gene expression analysis studies and other DNA array applications. This involves "developing the bioinformatic capabilities to take array-based data from both spotted array experiments as well as from GeneChip arrays and--with a single system--be able to handle the data coming out of both kinds of experiments," said Rose. While some researchers might not need this capability, he added, "to really take advantage of the full power of array technology, I think this kind of a combined bioinformatics platform is essential."

Affymetrix chairman and CEO Stephen Fodor remarked that his company's customers have cited the need for low volume, user-defined DNA arrays--Genetic MicroSystems' specialty. The so-called spotted arrays, he said, are proving to be a complementary tool for analyzing unknown genes or for more directed studies of particular genes of interest. "The acquisition of Genetic MicroSystems will allow us to immediately enter this array market and thus provide an integrated solution to accelerate the adoption of DNA array technologies in the scientific research community," Fodor said.

Affymetrix plans to market the Genetic MicroSystems products as a supplement to its GeneChip platform for researchers who want the flexibility to make low-volumes of microarrays. GeneChip will still be offered to researchers who need the higher performance and information content of its synthetic oligo-based microarrays for analyzing gene expression patterns of known genes.

Because the Genetic MicroSystems instrumentation is installed at the customer site, its products--the GMS 417 Arrayer and the GMS 418 Array Scanner--give researchers flexibility to create user-specific arrays while keeping direct control over cloned materials, sample preparation, and hybridization conditions. The 65-employee company, along with its distributor network, has sold more than 150 of its systems in the year since it launched its products. It was founded in August 1997 by Rose, a former Perkin-Elmer and PE Applied Biosystems executive and Jean Montagu, founder of General Scanning, a laser systems manufacturer, and a pioneer in optical scanning system design.

Separately, Affymetrix has entered into a GeneChip array supply agreement and research
collaboration with the Novartis Institute for Functional Genomics. The contract includes volume-based pricing for GeneChip array purchases and a broad technical collaboration between the institute and the company. As part of the agreement, the Scripps Research Institute and the Novartis
Agricultural Discovery Institute have the option to gain widespread access to the GeneChip technology in exchange for subscription fee payments.

In other news, the US Patent and Trademark Office has ruled in Affymetrix's favor concerning a patent dispute with Incyte Pharmaceuticals. Incyte plans to appeal the ruling, which came as part of an interference proceeding, which is invoked by the PTO when more than one patent application claims the same invention. The announcement of the ruling on September 13 sent Affymetrix's stock price up 20 percent while Incyte's fell as much as 38 percent, according to a Bloomberg report. Affymetrix announced subsequently that it has raised $150 million in a private placement.

--Matthew Dougherty

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