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Affymetrix Bets Branched DNA Will Drive Growth in Expression Market

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By Justin Petrone

Affymetrix is betting that its branched DNA-based QuantiGene kits, on board since its 2008 acquisition of Panomics, will spur growth in the gene-expression market and eventually challenge RT-PCR, according to a company official.

"More and more of our expression products are being used downstream," according to Doug Farrell, head of investor relations. "We see more use in validating biomarkers, clinical trials; things of that nature."

Farrell, who made his remarks during Jefferies Global Life Science Conference in New York last week, said sales of new products for gene-expression profiling now compose roughly half of Affy's total RNA-analysis revenue.

The firm breaks its business into DNA analysis, which comprises genotyping, and RNA analysis, which corresponds to gene expression. According to Farrell, Affymetrix retains a majority share of the global array-based gene-expression market. RNA analysis sales rose 3 percent during the first quarter of 2010 while DNA sales surged 23 percent.

But Farrell noted that sales of new gene expression products to customers involved in biomarker-validation projects rose 15 percent during the quarter, driven largely by adoption of QuantiGene kits.

In all of 2009, Affymetrix's expression business grew about 5 percent. "Going forward, we expect to see the growth driven by new products," said Farrell, whose Jefferies presentation was webcast. Indeed, new products are already contributing to the firm's top line.

Sales of new products comprised 47 percent of all RNA revenues in 2009, up from 34 percent in 2008. Farrell attributed the jump to the QuantiGene product line, which Affy gained through its $73 million acquisition of Panomics in 2008 (BAN 11/18/2008). The increase also partially offset a decline in legacy discovery products for expression profiling, such as whole-genome expression microarrays, which Farrell said are "maturing."

It is unclear exactly how much QuantiGene sales have so far contributed to Affy's revenues. The company does not break out its earnings by product line. The company disclosed after the acquisition that Panomics brought in $10.7 million in the first nine months of 2008 (BAN 2/24/2008). While the firm has not provided further financial details since that time, it has said that sales of Panomics products have grown due in part to Affy's global sales and marketing organization (BAN 1/12/2010).

Affy has also said Panomics' kits, which enable users to run low-to-midplex assays for gene, protein, and cellular-function experiments, could expand Affy's presence in the biomarker-validation segment of the gene-expression market.

Affy currently supplies QuantiGene kits for RNA and DNA profiling and a QuantiGene ViewRNA kit for in situ RNA analysis. This year the company made QuantiGene kits available for copy number-variant analysis and in situ analysis of RNA taken from formalin-fixed, paraffin-embedded samples (BAN 1/12/2010). The kits can be run on Luminex's xMAP technology platform.

By looking to QuantiGene to propel its gene-expression business, Affy is also moving into a much larger segment of the $700 million gene-expression market — one it has so far ignored.

Farrell estimated that the sector is currently split 60-40 into biomarker validation and biomarker discovery, respectively. Affy claims it commands 50 percent of the discovery segment and 3 percent of the validation segment, whose dominant revenue driver comprises RT-PCR kits.

RT-PCR is "not a market where we have competed," Farrell said. "Historically, we have not had the products to do that," though the company said branched DNA technology is "very competitive" with RT-PCR.

"As we look forward to where growth comes from in gene expression, it's really a strategy of maintaining our share in core markets" and "penetrating low-multiplex markets that have been dominated [so far] by RT-PCR," Farrell said.

RT-PCR vendors include Qiagen, Bio-Rad Laboratories, Thermo Fisher Scientific, and Life Technologies' Applied Biosystems business. In the end, Affy is betting that its QuantiGene kits have an edge over RT-PCR because they "multiplex well" and can work with "difficult" material, such as FFPE samples.

"RT-PCR is a fairly tedious process. With branched DNA technology you can scale up and look at 50 markers simultaneously," Farrell said. "Going forward, we think a large part of our growth in the expression franchise is going to come from the low end of the spectrum, being driven largely by the QuantiGene products."

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