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Affy to Miss Q2 Guidance Due to Delayed Instrument Purchases, Declining Expression Sales

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This story was first published on July 7.

By Justin Petrone

Affymetrix last week said that its second-quarter revenues will likely fall short of its previous guidance.

Affy now expects to report second-quarter revenues of $71 million to $72 million, as much as 13 percent below guidance of $80 million to $82 million the company provided when it released its first-quarter results in April. Analysts, on average, had expected Q2 revenues of $82.2 million. Affy posted $81.6 million in Q2 revenues last year.

The Santa Clara, Calif.-based array vendor attributed the anticipated shortfall to delayed equipment purchases, weak RNA sales, and currency fluctuations in Europe. Specifically, the firm cited "delayed and lengthened capital equipment purchase cycles by academic research customers, particularly in Europe"; "declines in RNA sales that were related to the integration of recent acquisitions and the realignment of sales territories"; and "material deterioration in both the euro and British pound of $1 million in aggregate" since the company provided its second-quarter guidance on April 21.

President and CEO Kevin King said in a statement that "when the company previously issued guidance for the second quarter of 2010, we anticipated that growth in product sales would offset an expected decline in services revenue as compared to the second quarter of 2009." Instead, "instrument adoption was slower than anticipated, principally due to reduced foreign academic research spending."

Affymetrix has over the past few years sought to upgrade it technology platform, launching its high-throughput, automated GeneTitan in 2008, followed by the benchtop GeneAtlas earlier this year. The company previously reported that instrument sales had exceeded internal expectations. For instance, for the first quarter of 2010, Affy's instrumentation revenue was up 38 percent over the prior year, driven by adoption of GeneTitan platform and initial shipments of GeneAtlas (BAN 4/27/2010).

Affy breaks its consumables sales into RNA, typically products used in gene expression profiling, and DNA, mostly products used in genotyping. RNA sales have been in decline for some time, and the company has tried to offset decreasing demand for its legacy gene expression microarrays with new expression products, such as its PanomicsQuantiGene panels, and new genotyping products, such as its Cytogenetics Research Solution.

The firm's DNA product sales jumped 23 percent in the first quarter, and the company this week noted that DNA sales had once again increased, partially making up for waning RNA sales.

"Despite the challenges we experienced in the second quarter, we are confident our business is moving in the right direction," said King. "We are focused on growing the business beyond the basic research market."

Affy will report its second-quarter results on July 21. It said that it will not provide updated revenue guidance for the remainder of the year due to the uncertainties surrounding academic research funding and foreign currency fluctuations.

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