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Affymetrix Investing in Instrumentation, Genotyping Arrays as Genetic Analysis Sales Drive Q2 Revenues

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NEW YORK (GenomeWeb) – The array market seems poised for a number of new product launches in coming years as Affymetrix recently confirmed that it is developing a next-generation instrument platform.

CFO Gavin Wood said on the company's second quarter earnings call last week that a slight spike in R&D expenses during the quarter was "largely driven by the initiation of spend on a new platform."

According to Wood, while the company's current GeneChip system is "very robust," it's been available for years, and the company is moving forward with the development of more automated instrumentation.

Wood did not provide more information about the new instrument platform on the call, and a company spokesperson in a follow up email exchange said that Affymetrix was not ready to disclose additional details at this time.

Still, the Santa Clara, Calif.-based company is the second large vendor to discuss investments in its array business in recent weeks. Illumina CEO Jay Flatley said during the San Diego firm's Q2 earnings call last month that the company is also considering "shifting a little bit more investment back toward arrays, both commercially and in R&D," to take advantage of perceived opportunities for its genotyping arrays in the agricultural biotechnology, consumer genomics, and reproductive health markets.

Affymetrix is also eyeing future growth in the same markets. According to Wood, there is a "broad range of R&D" within the company at the moment, the "majority of which is clearly around our genetic analysis business unit."

Affymetrix breaks its business down into four units: genetic analysis, largely comprised of its genotyping array sales; eBioscience; gene expression; and life science reagents. And while the company reported an 8 percent rise in Q2 revenues, the performance was dwarfed by a 45 percent jump in genetic analysis unit revenues, driven by a 14 percent spike in cytogenetics-related revenues.

Earlier this year, the company received US Food and Drug Administration clearance for its CytoScan Dx Assay for pediatric constitutional cytogenetic testing, as well as a CE-IVD mark, allowing the company to sell the test for clinical use in Europe. The company recently began shipping its CytoScan Dx Assay and is "now able to actively transition customers to the approved clinical product," CEO Frank Witney said on the call.

Affymetrix is also working with consultants and payers to optimize reimbursement for the CytoScan Dx Assay, giving the company "another important advantage over alternative, research-use-only products," Witney said.

Another product lifting Affymetrix's genetic analysis revenues is OncoScan, which enables copy number variation measurement in solid tumor samples. During the quarter, Affymetrix sold instrumentation to academic cancer research centers and clinical reference labs specifically for the adoption of OncoScan, Witney said. Affymetrix also announced partnerships with CollabRx and BioDiscovery in the quarter aimed at providing OncoScan users with access to different analysis tools.

Two other markets that provided Affymetrix's genotyping arrays with a boost in Q2 were agbio and biorepositories. Affymetrix continues to process samples for the UK Biobank, and Witney noted that total genotyping revenue including products and services increased by about 75 percent in Q2.

According to Witney, about a fifth of Affymetrix's total revenues in Q2 were generated by agbio opportunities, and the company believes the market now exceeds $500 million per year. "We believe this is a market in the early stages of adoption with significant long-term growth potential across a broad range of customers for both project-based and routine-use applications," said Witney.

Affymetrix continues to enjoy success in selling chips to biorepositories. In addition to the multiyear, 500,000-sample UKBB deal, the company also recognized revenue connected to two contracts with the US Department of Veteran Affairs' Million Veterans Program in Q2, as well as another project with the China Kadoorie Biobank. And there are more on the way. Witney said that Affymetrix has a pipeline of pharma as well as academic and government-funded deals.

"We don't generally talk about specific opportunities, but we're tracking them all and feel very good that there are a number of opportunities out there that we’re going to execute on," said Witney.

eBio, LSR, and expression

While Affymetrix's genetic analysis unit continues to experience significant growth, its other three business units had a less momentous quarter. The company's eBioscience immunology and flow cytometry reagents business grew 5 percent in Q2, driven by growth in demand for its single-cell analysis products, as well contributions from sales of its ProcartaPlex and QuantiGene assays, which were previously included as part of its expression business unit.

The company's life science reagents business was flat compared with the prior year, and generated about 8 percent of Affymetrix's total revenue. Witney predicted that the unit will continue to be relatively stable over the next few quarters.

Affymetrix's expression business unit continues to decline. While Witney had forecast quarterly decreases of between 5 and 10 percent during the year, Affymetrix's expression revenues dropped 16 percent in Q2. The company is less dependent on expression array revenues than it used to be in the past. While expression array sales years ago generated the majority of Affymetrix's revenues, in Q2 they made up about a fifth of revenues, down from more than a quarter a year ago.

And Witney remains optimistic about the business unit's future, noting that a number of the firm's diagnostic partners have "enjoyed significant technical and commercial success based on our industry leading GeneChip technology." Though he did not name the partners, Almac Diagnostics has in recent weeks discussed the development of an Affymetrix-made chip that can be used as part of an assay to determine which ovarian cancer patients have a good prognosis following chemotherapy.

"Going forward, we believe that the growth in such expression-based clinical applications will help us sustain our overall growth," said Witney.

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