Affymetrix may not technically be a "new company," as one analyst recently called it, but its fourth quarter results revealed a firm with revenue growth driven by success in markets different from the ones it targeted just a few years ago.
Long gone is the era where the Santa Clara, Calif.-based vendor's executives spoke on earnings calls about sales of SNP arrays for mammoth genome-wide association studies, or its GeneChip products' status as the gold standard for gene expression profiling.
Instead, Affymetrix's greatest opportunities now lie in cytogenetics, biobanking, agricultural research, and single-cell biology, management told investors on the firm's Q4 earnings call last week.
The market for cytogenetics tools continues to be a focus for the company. According to CEO Frank Witney, sales of the company's CytoScan chromosomal microarrays and Axiom genotyping products helped to drive the firm's Q4 2013 revenues up 10 percent year over year. For the three months ended Dec. 31, 2013, Affymetrix brought in total revenues of $92.6 million, compared to $84.3 million for Q4 2012.
GenomeWeb Daily News has provided a full overview of Affymetrix's Q4 and full year 2013 financials.
In Q4, CytoScan sales rose 18 percent, driven by a "combination of factors, including expanding our customer base in all geographies, increased business in existing accounts, as well as expanding our application base," Witney said. For the full year, CytoScan sales were up 25 percent over 2012 figures.
To date, cytogeneticists have used CytoScan mainly for pediatric constitutional testing, but Witney said that more CytoScan customers are now using the array for reproductive health applications – presumably prenatal testing – as well as in oncology.
Last month, the US Food and Drug Administration cleared a version of CytoScan – CytoScan Dx – for clinical use in pediatric cases. While Affymetrix, Agilent Technologies, Illumina, and the companies and labs they supply with chips have sold chromosomal arrays in the past under a research use only provision, Affymetrix will now be able to go to market with an FDA-cleared product, which Witney believes will be to the firm's advantage.
"Not only is CytoScan Dx the best-in-class product on the market for cytogenetic analysis, it's also the first and only cytogenetic microarray to receive regulatory clearance," Witney said. This, in his words, gives the company "first mover status," allowing the firm to "promote more aggressively against the research-use-only products offered by competitors," by targeting "end users such as physicians, advocacy groups, and parents, to educate them on the advantage of this powerful new test and expand the total addressable market."
Having FDA clearance will also accelerate the conversion of customers to array-based cytogenetics from traditional karyotyping, an approach that involves looking at chromosomes with a microscope. "New labs will now find it easier to adopt CytoScan Dx as these customers won't need to do extensive internal validation, which makes the transition faster and less expensive," said Witney.
Other benefits of FDA clearance include "improving reimbursement and maintaining pricing power" and the fact that clearance "helps to lay the foundation for additional regulatory approvals outside of the US," Witney said. Witney told BioArray News last month that clearance was an "important milestone for adoption in other key countries around the world where they are now evaluating advanced tools and tests like this," such as China, where regulatory clearance in a product's country of origin is a prerequisite to filing the product with the Chinese FDA.
While Affymetrix seems keen to use CytoScan's clearance to broaden the array's clinical adoption, the company's customers do not yet have their hands on the chip, and continue to use the research-use-only version of CytoScan. Another issue is that the array runs on the firm's GCS 3000Dx2 instrument, meaning that new customers who wish to use the product will need to acquire the instrument, too.
Andy Last, Affymetrix's COO, said on the call that the company will begin marketing CytoScan Dx to customers next quarter, and that, as the year progresses, the company expects labs to adopt the entire Dx platform.
"As labs come on stream, they'll go through validation and there'll be a slow ramp-up throughout the year," said Last.
Last also commented on how FDA clearance might help labs gain reimbursement of the test.
"There's not a direct correlation between reimbursements and FDA clearance," said Last. "However, what the clearance does do for us is underlie the relevance and importance of the test as a first-tier test in the target market of postnatal disorders, which gives us the ability to increase our arguments for coverage amongst private payers, and at least try and build arguments for preferential coverage, preferential reimbursement versus non-cleared products," he said.
Last noted that the results of such activities "remain to be seen."
It is unclear how long Affymetrix can maintain its "first-mover status" with CytoScan Dx. Like Affymetrix, Illumina submitted its chromosomal microarray to the FDA for review last year. And Agilent, another major rival, expects to file its array with the agency later this year.
Beyond broadening the appeal of CytoScan, though, Witney hinted on the call that Affymetrix has other products for the cytogenetics market in development. He said that these new products will enable Affymetrix to "segment geographies based on the local regulatory and commercial needs." He did not elaborate.
Affymetrix's greatest fourth quarter growth was in its Axiom genotyping business. While some arrays like CytoScan are still manufactured in its older, cartridge-based format, the Axiom system enables high-throughput genotyping using arrays manufactured in strips and plates that are analyzed on its automated GeneTitan instrument. Affymetrix has been courting biobanks and agricultural researchers with new Axiom arrays and formats, such as the 384-sample Axiom 384-HT, launched last year.
These overtures resulted in a 63 percent jump in Axiom-generated Q4 revenues compared to Q4 2012, Witney said. He noted that full-year Axiom revenues grew at an even greater rate, 74 percent year over year, "primarily driven by our expanded menu of standard products, continued success for our custom array program and our strengthened competitive position in biobanking and ag-bio."
In terms of biobanking, Affymetrix last year announced it would provide arrays and genotyping services for the UK Biobank, which aims to genotype its 500,000-sample repository by mid-2015. In November, the firm said it had signed a similar agreement with BioProcessing Solutions Alliance to genotype 100,000 samples.
Witney suggested that Affymetrix could win similar contracts this year. "There's a number of biobank initiatives occurring around the world," said Witney. "I think our technology is being very well-received and considered very competitive in these situations, and we think we're certainly going to continue to grow in these various biobank initiatives."
On the call, CFO Gavin Wood was asked about UKBB's potential contribution to the firm's 2014 revenues, but he declined to comment on it. "We won that in a competitive environment and we prefer just to keep that confidential for the time being," Wood said. He did acknowledge that projected UKBB-related revenues are factored in to the company's guidance of $335 million in total revenues for the year, and said that Affymetrix would likely recognize about two-thirds of UKBB contract revenues this year.
"I think as the year develops, then the size of that deal will become more apparent," said Wood.
In ag-bio, Affymetrix continues to debut new products. The firm announced a number of new SNP chips for wheat, salmon, and maize at last month's Plant and Animal Genome conference in San Diego.
Witney said that customer interest in the Axiom platform was "very high" at the conference, and "many of these ag-bio customers have the potential to run very large numbers of samples and routine marker-assisted breeding applications."
According to Witney, Affymetrix now believes the total addressable ag-bio market is approaching $500 million per year. "Furthermore, we believe that our Axiom-384HT format gives us a sustainable, competitive advantage for these projects based on data quality, throughput, and cost-effectiveness," he added.
CytoScan and Axiom are two components of Affymetrix's Genetic Analysis business unit, which consists mainly of its genotyping array portfolio. The company also maintains business units for its eBioscience, Expression, and Life Science Reagents products.
Affymetrix's eBioscience business consists mainly of reagents for use in flow cytometry and mass spectrometry assays, and during the quarter it transferred its Procarta protein analysis products from its expression business to eBioscience, where it can "leverage eBioscience's world-class capabilities in antibody development and immunoassay manufacturing."
Witney said that eBioscience's revenues grew 13 percent in Q4 over the prior year period, and 8 percent when removing the contribution from Procarta from the comparison.
And Affymetrix expects eBioscience revenues to continue to grow, especially given "increasing interest in single-cell biology."
Researchers' interest in single-cell biology has benefited fellow Bay Area life science tool vendor Fluidigm, which has seen its revenues rise over the past year on the back of its C1 Single-Cell AutoPrep System and associated applications. And last month, Stanford University announced that it would use $40 million in California Institute for Regenerative Medicine funding to open a Center of Excellence in Stem Cell Genomics, where single-cell genomics will play an important role.
Witney said that Affymetrix could also capture some of that interest as eBioscience "offers the industry's second largest portfolio of products for analysis of single cells by flow cytometry." He noted that 60 percent of eBioscience revenues derive from sales of flow cytometry reagents, "the preeminent single-cell biology technology." Affymetrix last year launched a product called QuantiGene FlowRNA, a flow cytometry-based assay that allows simultaneous measurement of gene and protein expression in a single cell.
While Affymetrix is "just engaging customers" with QuantiGene FlowRNA, it is also looking to combine existing offerings and develop new ones for the single-cell space, "pooling the broad range of single-cell solutions that we have across Affymetrix together to better leverage this portfolio," and "looking at other approaches that end up with expression profiling from single cells or potentially genetic analysis of a single cell," Witney said.
Expression and LSR
During the call, Witney addressed Affymetrix's Expression business, once its main revenue generator, last, in part because the firm derives the bulk of its revenues from its Genetic Analysis and eBioscience products. In fact, Witney said that Expression sales represented about 30 percent of the company's revenues in 2013, and said that expression sales continue to decline about 10 percent on a sequential basis.
About half of expression revenues continue to come from sales of the firm's legacy expression array business, while the other half consists of newer products, such as Affymetrix's Human Transcriptome Array.
"This mix shift to these newer, growing product lines helped us to achieve sequential quarter-over-quarter improvement in our Expression business throughout 2013," said Witney. "We are encouraged by the customer response to our new HTA product," he said, adding that this year the firm will launch similar full transcriptome analysis tools for both mouse and rat, which are "key model organisms for the pharmaceutical industry."
Affymetrix's fourth business unit, Life Science Reagents, consists mainly of products gained through its 2008 acquisition of USB, minus its Anatrace product line, which the company divested in the third quarter of last year.
According to Witney, LSR revenues represented about 7 percent of the company's total revenues in 2013. Excluding the impact of the divestment, the unit was down 6 percent over the prior year, and Witney said that Affymetrix expects its LSR business unit to be "flat to slightly down over the next several quarters."