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Affy Marks End of 'Days of Fixed Content Arrays,' Reaffirms Sequencing Not a 'Strategic Fit'

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By Justin Petrone

Still not interested in getting into the next-generation sequencing market, Affymetrix will instead continue to focus on making more flexible genotyping and gene-expression array formats and on new Panomics kits, according to the firm's CEO.

Kevin King said that while Affy may revisit the idea of becoming a player in the next-gen sequencing market "perhaps in the future," its current focus is on "leading in exploration and growing our business in validation and routine testing."

King told investors and analysts at the JP Morgan Healthcare Conference held last week in San Francisco that the Santa Clara, Calif.-based array vendor will stick by its original strategic decision to steer clear of the next-gen sequencing market in favor of selling more products targeted toward biomarker validation as opposed to biomarker discovery.

These new products are centered around the company's Axiom genotyping offering, available since October 2009, which allows customers to build their own targeted and whole-genome genotyping assays using an internally developed database (see BAN 10/20/2009). The company likens Axiom to online digital music stores, such as iTunes, that supply what King called "variable" content, rather than "fixed" content.

"We believe that the days of fixed-content arrays are over," King said.

"In the past, we tried to put as much content on a single array to represent human diversity, and when human diversity was defined by about 3 million markers that was a reasonable goal," he said. "Now, when we think about ten times as many markers, we are looking to a much more flexible approach. The approach is similar to the way digital technologies have revolutionized the music, video, and communication industries from moving from fixed content to variable content."

Affy's database currently contains 6 million markers from public databases and projects such as dbSNP and the 1000 Genomes Project as well as internal screens, and is certain to grow, King said. To access the database, though, customers must upgrade to the firm's new instrument platforms, the higher-throughput GeneTitan, which launched in 2008, and the benchtop GeneAtlas, which is scheduled to launch this quarter (see BAN 10/7/2009, BAN 6/9/2009).

King said that Affy is making progress in converting its existing customers to the new systems, which make use of a new array plate format, as opposed to the firm's older cartridge array-based format. For instance, he said that Affy had surpassed a goal to have 35 GeneTitan systems installed by the time it reports its fourth-quarter earnings next month. King predicted that Affy would have between 45 and 50 systems installed by that time.

King estimated that the global genotyping market will be worth around $750 million by 2011, split evenly between whole-genome genotyping and targeted genotyping. Affy is also still competing in the expression market, according to King.

"Gene expression is going to continue to be an important part of the marketplace and an important part of our business," King said. "Not all disease is sequence change related. A lot of disease is affected by gene regulation, gene function, and the environment, hence gene expression is increasingly important. We do see our customer base shifting from biomarker discovery to biomarker validation" using products like Panomics QuantiGene kits, King added.

Not Attracted to Sequencing

At the beginning of his presentation, which was webcast, King addressed an ongoing question from analysts: Why has Affy decided not to compete in the next-generation sequencing market?

"We often get a question about the discovery market: What do we think about it, and why are we not in it?" King said. "First and foremost, we are critically dependent on the output of the discovery market; a lot of our technologies are based on discoveries that are made with next-generation sequencing, but as a general market we don't find it an attractive strategic fit for us."

Wall Street has also repeatedly asked Affy why it did not acquire or develop a next-gen sequencing platform like its rival Illumina. When Illumina decided to buy Hayward, Calif.-based Solexa in 2006, which has provided the technology for its sequencing instruments, Affy said that the sequencing market was too nascent to warrant such an investment (see BAN 11/21/2006).

Now the company views the next-gen sequencing market as "overcrowded," with "high technology obsolescence," and a strong dependence on instrument placements as opposed to consumables sales. In comparison, about 85 percent of Affy's revenues are derived from sales of consumables. According to King, about 69 percent of its revenues last year were in discovery and exploration, while 17 percent were in validation and routine testing, and 15 percent were in instrument sales.

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