SAN FRANCISCO (GenomeWeb News) – The JP Morgan Healthcare Conference wrapped up today with a handful of life science tools and molecular diagnostics companies presenting to investors.
Earlier this week Affymetrix announced a restructuring aimed at returning the firm to profitability and revenue growth. That restructuring included an 8 percent workforce reduction, or 100 employees.
At the JP Morgan Healthcare Conference on Thursday Affymetrix President and CEO Frank Witney said the firm is in the second phase of a three-phase plan aimed at realigning the company toward higher-growth markets. The first phase, which ran from 2011 to 2012, included the acquisition of eBioscience and focused on building its portfolio in translational medicine and clinical diagnostics. The second phase, which begins this year and is expected to run through next year, is focused on reducing the company's cost structure and returning to profitability. The final phase in 2014 to 2015 will aim to expand Affy's translational and clinical diagnostics franchises, return the firm to growth, and strengthen the balance sheet.
As part of its pre-announcement of fourth-quarter revenues of $84 million, Affy noted that it had prepaid $9.6 million of its fiscal year 2013 principal of senior secured debt. Company officials said today that they expect to continue to pay down debt early in 2013 as Affy aims to strengthen the balance sheet.
For 2013, Witney said that Affy expects to bring in revenues of around $330 million, with positive operating income and free cash flow after interest, taxes, debt repayment, and capital expenditures.
Though gene expression was long the focus of Affy, the firm has decreased its reliance on revenues from that part of its business, which is declining at an annual rate of around 10 percent, said Witney. It accounted for around 50 percent of Affy's total revenues in 2011, 41 percent in 2012, and is expected to further decrease to 32 percent of Affy's total revenues in 2013. Meanwhile, the eBioscience business is expected to increase its share of total revenues to 22 percent in 2013 from 13 percent in 2012. Affy acquired eBioscience in June of 2012.
Witney cited three key growth drivers for the firm going forward: the cytogenetics business, genotyping arrays, and eBioscience. The cytogenetics business had a strong 2012, and Witney noted that the company's clinical diagnostics sales doubled in the year as a result. It plans to file for US Food and Drug Administration clearance for its CytoScan platform in the first quarter of this year for post-natal applications.
He also noted that Affy's Axiom genotyping franchise grew 50 percent in 2012, adding that the custom genotyping abilities of the product made it particularly attractive to customers involved in large research consortia and in the ag-bio space.
Though these relatively newer products for Affy are its key growth drivers, Witney said the firm will continue to invest in gene expression, but in a prudent manner. He noted that the gene expression products are still very profitable.
In late 2011 Bio-Rad acquired digital PCR firm QuantaLife for $162 million and last year launched its system, the QX100 Droplet Digital system. To date, Bio-Rad has placed more than 200 systems worldwide, Norman Schwartz, president and CEO of the firm, said today.
Additionally, he said that Bio-Rad has created a Digital Biology Center to leverage the technology into the diagnostics space. While digital PCR has been limited mostly to life science research, Schwartz said that the technology has diagnostic applications, though he added that it is still too early to say what those applications could be.
Emulsion PCR has been around for years, he said, but Bio-Rad's platform is the first that allows scientists to do emulsion PCR at a "reasonable cost." To date, the QX100 has been used for rare-event analysis and absolute quantification of PCR results, but as more publications appear using the technology, interest in the system will build, he added.
Asked about Bio-Rad's interest in the next-generation sequencing space, Schwartz said that while that technology may eventually become a valuable diagnostic tool, cost issues need to be addressed before it can have meaningful diagnostic use. Specifically, he said that whether Medicare would reimburse for an NGS-based test is a major question.
Eventually the technology will find a place in the market, but "I'm not sweating nights over" it, Schwartz said.
Earlier today, Bio-Rad also announced it had completed its $70 million purchase of AbD Serotec. In October, the company acquired the S3 Cell Sorter flow cytometry system from Propel Labs. Schwartz said today that the AbD Serotec acquisition would provide content for the platform as well as protein expression and electrophoresis systems.
The company has said that it would start shipping the S3 instrument this month. Becton Dickinson is the dominant player in flow cytometry, Schwartz said, but with the S3's low cost and ease of use, it is targeted initially to core laboratories, but eventually would be marketed to individual labs.