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Affymetrix's Q1 Revenues Drop 8 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Affymetrix reported after the close of the market on Wednesday that its first-quarter revenues slid 8 percent, but the company recorded a modest profit.

For the three months ended March 31, the Santa Clara, Calif.-based microarray company recorded revenues of $73.7 million, down from $80.2 million a year ago and missing analyst estimates of $75.8 million.

Product revenues retreated to $67.5 million, down 8 percent from $73.4 million during the first quarter of 2010, while service revenue growth was flat at $4.5 million. Royalties and other revenues dropped to $1.8 million from $2.3 million, a 22 percent drop-off.

In a conference call after the release of the results, Affymetrix CFO Tim Barabe said that consumables sales were down 5 percent to $62.9 million from $66.2 million a year ago. DNA revenue was $21.7 million, down 9 percent from $23.9 million a year ago, while RNA revenue fell 4 percent year over year to $36.5 million from $38 million.

The product mix remained about two-thirds RNA, and one-third DNA and other revenues, he added.

Other consumables (not associated with DNA and RNA products) sales, including reagents and biochemical products, inched up to $4.6 million from $4.3 million, a 7 percent climb year over year.

Instrument sales declined to $4.6 million in the quarter, down from $7.2 million, a 36 percent drop-off.

Affy posted a Q1 profit of $39,000, or $.00 per share, compared to a loss of $9.6 million, or $.14 per share, a year ago. On a per-share basis, the company met Wall Street forecasts of break-even.

The company scaled back R&D costs in the quarter to $16.3 million, down 12 percent from $18.5 million, while SG&A spending decreased 13 percent to $27.2 million from $31.4 million.

The company remained on course to diversify its product revenue base, and during the quarter, Affy continued its strategy of moving into the "large and growing markets for validation of routine testing," company CEO Kevin King said on the call.

Affy is seeing revenues from new DNA products including perinatal cytogenetics, targeted genotyping, pharmacogenomics, and cancer, he added.

"The growth from these products is decreasing our dependence on the GWAS market," he said, and, "it's important to note that we believe that demand within these markets is growing and that the whole opportunity exceeds that of the GWAS market by a factor of three."

Calling the GWAS market "very soft," King said that it has been dragging down the company's DNA business.

Affy will expand its cytogenetic product line in the third quarter, King said, and noted that the firm previewed its next-generation array, called Cytoscan, with key opinion leaders at the recent American College of Medical Genetics meeting.

The product will provide "unprecedented resolution for studying copy number variations as well as genotypeable SNP content," King said, adding that early-access customers have called Cytoscan "a real game-changer with great prospects for taking share and accelerating the conversion of the market to arrays."

The product will be one of Affy's most important growth drivers for the second half of the year, he added.

As the company builds its pipeline in the cytogenetics and cancer space, he said other areas it is targeting include post-natal cytogenetic disorders, pre-natal applications, pre-implantation applications, liquid tumors, such as leukemia and lymphoma, as well as solid tumors with Affy's FFPE product.

Products in the pipeline for its QuantiGene ViewRNA assay include those for detecting copy number and for looking at chromosomal aberrations at a single-cell level for perinatal applications and cancer.

As of the end of the quarter, Affymetrix had $29.6 million in cash and cash equivalents, and $52.1 million in available-for-sale securities.

In early Thursday trade on the Nasdaq, shares of Affymetrix were down 8 percent at $5.35.

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