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Affymetrix's Q2 Sales Fall 10 Percent

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Affymetrix's second-quarter sales dropped 10 percent year over year as product sales took an 11 percent tumble, the company said after the close of the market on Wednesday.

For the three months ended June 30, total sales came in at $64.7 million, compared to $71.7 million a year ago, edging out consensus analyst estimates of $64.5 million. The results were in line with a range of between $64 million and $65 million that Affy had provided earlier this month.

While services brought in sales of $5.3 million, a 13 percent improvement from $4.7 million a year ago, product sales dipped to $58.1 million from $65.1 million year over year. Consumables sales were $54.3 million for the quarter and instruments sales were $3.8 million.

In a conference call following the release of the company's earnings, Affy CFO Tim Barabe said that while product sales were down in total, the Panomics business saw "modest" growth in the second quarter, while the USB business experienced "decent" growth. Weakness was primarily microarray-based, he added.

Royalties and other revenues slipped 28 percent to $1.3 million from $1.8 million.

During the call, Frank Witney, who replaced Kevin King as president and CEO of Affy earlier this month, characterized the near term as a period during which the company will have to put its head down and focus on improving its internal operations.

"I think the opportunity here … is very much an execution play," he said. "There are many assets at the company that are underperforming that are in markets that are growing. … [With] the proper focus on the commercial side, I think that there are a number of assets that can grow and can contribute both on the genetic analysis as well as the expression side," Witney added.

In particular, he noted the recently launched CytoScan HD product for cytogenetic analysis, which he said "represents the most comprehensive gene level coverage of both copy number changes and SNPs."

Affy continues working with the US Food and Drug Administration to find the most appropriate regulatory pathway for the product, and the company intends to file for marketing clearance from the agency, though Witney declined to provide a timeline.

He also identified next-generation sequencing as a market opportunity. Answering an analyst question about how Affy can reverse a shift away from microarrays to next-generation technology, Witney said that the solution would be to "make sure that people would understand when one would run a microarray and how it fits into the workflow. People do lots of experiments and have different needs at different times."

Affy, he said, will begin educating researchers about how microarrays fit into translational medicine and large clinical studies "that are in and around NGS."

Asked whether he had any concerns that Affy's product portfolio inherently made any potential for growth challenging, if not impossible, Witney said both Affy's genetic analysis and expression product lines have competitive advantages "that if appropriately positioned and potentially with some relatively small levels of R&D to fill in some gaps can be competitive."

He acknowledged the fierce competition in the genotyping space, and said that "this is not easy, there is no magic answer to the problems, but on the other hand, we have good people, good technology, we have loyal customers, and we are in areas that on a macroscopic level are growing."

For the quarter, Affy posted a net loss of $3.7 million, or $.05 per share, a 33 percent improvement from a loss of $5.5 million, or $.08 per share, a year ago.

Wall Street had expected a loss per share of $.04.

Affy reduced its R&D expenses by 14 percent to $15.3 million from $17.8 million. Its SG&A costs also were trimmed by 6 percent to $26.7 million from $28.4 million a year ago.

Barabe said on the conference call that the company will be closing an R&D pilot manufacturing facility located in California during the third quarter and the company expects to incur a one-time expense of about $2 million.

The Santa Clara, Calif.-based firm ended the quarter with $27.4 million in cash and cash equivalents.

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