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Affymetrix Q3 Revenues Rise 1 Percent on 'Strong Growth' in Genetic Analysis Business

NEW YORK (GenomeWeb News) – Affymetrix reported after the close of the market on Wednesday that its third quarter revenues rose 1 percent year over year.

Total revenues for the three months ended Sept. 30 were $80.4 million, compared to $79.6 million in the same period last year. The results beat the average Wall Street estimate of $79 million for the quarter.

Affymetrix President and CEO Frank Witney in a statement cited "strong growth" in the firm's Genetic Analysis business and "improved results" in its Expression and eBiosciences businesses. He also attributed the revenue growth to "stronger results" in Europe and North America, and said that the Santa Clara, Calif.-based company is "encouraged by the progress" it made in Q3.

Witney elaborated during a conference call following the release of the results that while Affymetrix saw modest year-over-year growth, it believes its growth momentum will continue with new product offerings.

He referred specifically to Affymetrix's OncoScan FFPE Kit for genotyping formalin-fixed, paraffin-embedded samples, which it launched during the quarter; its Human Transcriptome Array for expression profiling; its QuantiGene FlowRNA offering; as well as the strength of its CytoScan chromosomal microarray and Axiom high-throughput genotyping franchises.

Affymetrix submitted CytoScan to the US Food and Drug Administration for review in February. Witney said that the filing is "proceeding well" and reiterated that Affymetrix expects the review process to "take about a year from the time of our filing."

Affymetrix's revenues included a $19.9 million contribution from eBioscience, the San Diego-based flow cytometry and immunoassay reagents maker that Affymetrix acquired in June 2012. Affymetrix reported eBiosciences revenues of $17.6 million for Q3 2012, its first quarter as part of the company.

During the third quarter of this year, Affymetrix sold its Anatrace business to StoneCalibre for an undisclosed sum.

Product revenue for the quarter was $74.8 million, up nearly 3 percent from $72.7 million in the prior year period, while services revenues dropped by more than a fifth to $5.6 million from $6.9 million in Q3 2012.

CFO Gavin Wood said on the call that the company's scientific service revenue is "project driven" and that Affymetrix expects to see this revenue increase materially as it begins to run samples for the UK Biobank in the next few months.

As BioArray News reported earlier this week, Affymetrix and UKBB have finalized the design of the array that will be used to genotype all 500,000 samples in UKBB's biorepository. Wood said that Affymetrix expects to recognize the majority of revenue from that project next year.

Core consumable revenues rose 3 percent to $52.1 million in Q3 compared to $50.5 million a year ago while the firm's instrument revenues dropped 40 percent to $2.8 million from $4.6 million in Q3 2012.

Affymetrix maintains four main business units: Genetic Analysis, Expression, eBioscience, and Life Science Reagents.

Within Affymetrix's Genetic Analysis business, CytoScan sales climbed 36 percent year over year, while Axiom genotyping sales jumped 80 percent, driven by an expanding menu of products and sales to biobanks and agricultural biotechnology customers.

The company continued to stem losses in its legacy Expression business. Expression sales declined 12 percent in the quarter, a lesser decline than in previous quarters. Witney said that sales of the company's Human Transcriptome Array had helped to stabilize the business.

Revenues from Affymetrix's eBioscience business grew 13 percent year over year, while its Life Science Reagents business revenues fell 4 percent, with the "biggest challenge" in its molecular biology line, according to Witney.

He said that Affymetrix expects Life Science Reagents revenues to be "flat to slightly down over the next couple of quarters" as it works to improve the performance of that business. Though the Anatrace franchise was part of Affymetrix's Life Science Reagents business and was profitable, Witney said that Affymetrix does not expect the sale of Anatrace to have a significant impact on Life Science Reagents revenues going forward.

Affymetrix reduced its GAAP net loss by 77 percent to $4.2 million, or $.06 per share, in the quarter from $17.9 million, or $.25 per share, in the third quarter of 2012.

Non-GAAP net income was $3.3 million, or $.05 per share, compared to a non-GAAP net loss of $2.4 million, or $.03 per share, for the third quarter of 2012. Affy beat analysts' consensus estimate of $.02 per share.

The company cut its SG&A spending to $33.6 million in the quarter from $36.3 million in the year-ago period, while Q3 R&D costs fell to $11.5 million from $16.5 million.

Wood attributed the declines in SG&A and R&D costs to "reduced headcount and variable compensation" as well as lower IT costs, and reduced spending on supplies and consulting.

Affymetrix ended the quarter with cash and cash equivalents of $50.6 million.

Wood said in a statement that "stronger revenue and prudent working capital management" combined with "careful control of our operating expenses" allowed the firm to generate about $10.5 million in cash flow from operations. He noted that Affymetrix has reduced its senior secured debt by 45 percent since June 2012.

Affymetrix said earlier this month that it had refinanced its senior secured debt after making a prepayment made up of cash and proceeds from the sale of its Anatrace business.

In Thursday morning trade on the Nasdaq, shares of Affymetrix were flat at $6.60.

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