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As Affy Releases Panomics' Financials, Some Customers Praise 'Seamless' Transition

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Affymetrix recently filed financial information with the US Securities and Exchange Commission about Panomics, the privately held firm it acquired last year.

Meantime, while Affy has disclosed little about its integration of the Fremont, Calif.-based company, several existing Panomics customers this week said that the transition had gone smoothly.

In its SEC filing, Affy provided a condensed combined financial statement showing that unaudited, pro forma data for Panomics suggested it would have added $10.7 million to Affy's top line for the nine months ended Sept. 30, 2008, had it been part of the array company for that time. The results also showed that Panomics would have added $11 million to the Affy's top line in fiscal year 2007.

Affy reported total sales of $331.7 million in the first nine months of 2008 and $371.3 million in 2007. Had Panomics been part of the company, revenues for those periods would have been $342 million and $382 million, respectively.

Santa Clara, Calif.-based Affymetrix said in the filing that the combined financial data was presented for "informational purposes only" and is "not intended to represent or be indicative of the consolidated results of operations or financial position that would have been reported had the Panomics acquisition been completed as of the dates presented."

Affy also warned that the combined data "should not be taken as representative of our future consolidated results of operations or financial condition."

Affy paid $72.7 million to acquire Panomics, which specializes in lower-multiplex DNA and protein assays. The deal closed in December. Affy has said it hopes to target Panomics' assays to its pharmaceutical and biotech clients that are moving their biomarker-discovery programs to downstream analysis (see BAN 11/18/2008).

According to the SEC document, which Affy filed on Feb. 13, Panomics generated $10.7 million in sales for the first nine months of 2008 and reported a net loss of $4.3 million. As of Sept. 30, the firm had $1.9 million in cash and cash equivalents, and $13 million in total assets.

Geographically for the first three quarters of 2008, Panomics reported $7.9 million in sales in North America, $1.9 million in Europe, and $785,000 in Asia and other markets.

For the year ended Dec. 31, 2007, Panomics posted $8.1 million in total sales and a net loss of $7.9 million. The firm had $384,000 in cash and cash equivalents as of Dec. 31, 2007, and $7.6 million in total assets. In 2007, Panomics spent $5.6 million on R&D and $5.7 million on SG&A.

According to the filing, Panomics recorded $6.6 million in sales in North America, $1.2 million in Europe, and $347,000 in Asia and other markets. In addition, nearly a fifth of Panomics' 2007 revenue was from the firm's top three customers. Sales to these three unnamed customers composed 9 percent, 6 percent, and 4 percent of all accounts receivable.

Affy CEO Kevin King told investors during the firm's Q4 earnings call this month that, based on historical performance, Affy expects Panomics to pull in around $3.5 million in sales this quarter. The company has not provided guidance for Panomics's contribution beyond that.

King said that Panomics' products open Affy up to "growing market opportunities that are downstream of whole-genome analysis," and noted that Panomics' suite of applications includes biomarker analysis, drug compound screening, in situ gene expression, RNAi monitoring, and DNA copy number analysis.

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Panomics' QuantiGene assays are sold into an installed base of more than 5,000 instruments and represent a market worth more than $1.5 billion, King said. He said that QuantiGene assays are "more accurate and precise" compared to RT-PCR; perform well on formalin-fixed, paraffin-embedded tissues; are "easy to use;" and scale from single-plex to higher multiplex studies.

Panomics customers such as Novartis can perform "high-throughput expression-profiling studies, evaluating up to 25,000 compounds in a single day," King said

Discussing the Panomics integration, King said Affy hired CEO Frank Witney to serve as chief operations officer and to oversee the integration of Panomics and recent Affy acquisitions True Materials and USB.

King also said that Affy believes its academic customer base might be interested in Panomics' products. "The vast majority of [Panomics'] revenue was in industrial segments," said King. "Being a fairly small company, they tended to focus on big customers and industrial customers. Our opportunity is to take the Panomics products into the academic accounts."

'Seamless Transition'

While King said Affy aims to boost Panomics' revenues by "four or five times" its 2008 performance, some existing Panomics customers have noticed little change since Affy integrated the shop — which they said is a good thing.

"It's worked out fine and there have been no problems whatsoever," said Curtis Klaassen, a researcher at the University of Kansas Medical Center. "Right now, things are fine. We are still ordering things from them, and they are cooperating nicely."

Klaassen’s lab has used QuantiGene for pharmacology, toxicology, and therapeutics studies. Since adopting the tool, Klaassen and affiliated researchers have published a number of papers that cite it.

Klaassen said he has continued to use Panomics assays because they are "more rapid" than using RT-PCR. "One person working four hours with this technique can do more than a person can do in a couple weeks by RT-PCR," he told BioArray News this week. "It is very good if you want to quantify a set of genes and you know the genes."

He also said that QuantiGene could be attractive for pharmas and biotechs doing downstream analysis. "One can make a few little gene batteries to test whatever is of interest to that company, desired effects, toxic effects, side effects, and determine quite rapidly if that is happening," Klaassen said.

"It is definitely something that can be used to evaluate biomarkers or small molecules in downstream analysis," said Brian Liu, a Panomics customer and researcher at Brigham and Women's Hospital in Boston. "I think their platform allows some of the cause and effect to be addressed."

Liu, whose general area of research is proteomics, told BioArray News that his lab had used in the past Panomics' TranSignal TF-TF Interaction Array, which enables the user to determine transcription factor complexes of interest with multiple other TFs. Liu has, however, recently stopped using the company's products.

"We spent a considerable amount of effort and time using that array and I think the platform is still very useful," he said. We just haven't had any reason to continue the same line of studies because we found some answers that we were interested in."

John Rossi, a professor of molecular biology at the Beckman Research Institute of City of Hope in Duarte, Calif., said that COH is using Panomics technology for HIV viral monitoring, and that the acquisition "hasn't impacted us that much, as far as I can tell."

"It's been a pretty seamless transition," Rossi told BioArray News this week. "We use Panomics products for viral RNA quantification. It's faster because it's a hybridization-based approach and it is very linear," he said. Because of COH's experience with Panomics' QuantiGene assays, he said that it would be suitable for the pharma and biotech customers Affy is trying to reach.

"This is a straightforward assay; It doesn't involve any optimization, it's just hybridization," said Rossi. "So I think it has pretty good potential as far as functional genomics goes."

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