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Affymetrix Posts 14 Percent Decline in Q3 Revenues, Reorganizes into Three Units

NEW YORK (GenomeWeb News) – Affymetrix reported after the close of the market Wednesday that its third-quarter revenues dropped around 14 percent year over year on lower product sales.

The Santa Clara, Calif.-based microarray technologies firm also said that it has reorganized its business into three new business units.

The company reported total revenues of $64 million for the three-month period ended Sept. 30, compared to $74 million for the third quarter of 2010. It fell short of analysts' consensus estimate of $67.1 million for the quarter.

Affy's product sales were $57 million versus $67.3 million for Q3 2010. Its services revenue increased to $5.3 million from $4.9 million, while its royalty and other revenues declined slightly to $1.7 million from $1.8 million.

The firm posted a net loss of $9.8 million, or $.14 per share, compared to a profit of $968,000, or $.01 per share, for Q3 2010. On an adjusted basis, its loss per share was $.10, missing the Wall Street forecast of $.04.

Affy's R&D spending dropped around 6 percent to $15.3 million from $16.2 million, while its SG&A expenses increased 2 percent to $26.9 million from $26.3 million.

"During the third quarter we completed a number of initiatives to position the company for top-line growth and profitability in 2012," Frank Witney, president and CEO of Affy, said in a statement. "This involved restructuring the organization to better align our resources with our key commercial opportunities."

He added on a conference call following the release of the financial results that the company had reduced its R&D headcount by around 20 percent and plans to reallocate some of those resources to sales and marketing efforts to drive product adoption.

"The leadership team at Affymetrix has an urgency about getting the company growing again and achieving sustainable profitability," Witney added.

During the quarter the firm launched the CytoScan HD array for cytogenic analysis. Other product introductions included the Axiom Genome-Wide Pan-African Array and 18 new array designs for whole-transcriptome analysis of model and applied research organisms.

The firm estimates that the constitutional cytogenetics market offers an annual market opportunity of around $200 million, and Affy intends to file the CytoScan for US Food and Drug Administration approval by mid-2012, Witney said. He added that FDA approval would be the firm at "a significant advantage" over other array-based cytogenetics offerings.

The firm also is focused on stabilizing its gene expression business, which had another tough quarter, Witney said. "We believe that the combined opportunities in translational medicine and clinical applications … can help offset the declines we've seen in our expression business," he said.

During the quarter Affy also completed a reorganization that divided the firm into business units including gene expression, genetic analysis/clinical diagnostics, and a life sciences reagent unit. "This structure will streamline our decision-making process while increasing customer focus and accountability," Witney said.

Affy CFO Tim Barabe said on the call that with the new structure the firm plans on providing more granularity in its financial reporting. He said Affy is in the process of categorizing products into the business units. "I think it's important for us to give you that transparency so you can see into the product lines and see where our growth drivers are," he said.