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Affymetrix's Q3 Revenues Down 5 Percent on Service Business Decline

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – A $5 million decline in service revenues was one of the reasons for a 5 percent drop in total revenues for Affymetrix during its third quarter, the company reported Wednesday after the close of the market.

For the three months ended Sept. 30, the Santa Clara, Calif.-based microarray firm reported total revenues of $74 million, down from $78.2 million a year ago, but still above analyst estimates of $73.3 million.

The contraction resulted largely from Affymetrix's service business, the revenues of which shrank to $4.9 million from $9.9 million in the third quarter of 2009. During a conference call following the release of the company's earnings, CEO Kevin King said the decline in the scientific services segment has surprised the company, and over the past year the drop in that business is about $20 million.

CFO Tim Barabe added that much of Affymetrix's service business has been migrating to third-party service providers but "we believe this trend is largely behind us."

Product sales inched up to $67.3 million from $66.2 million a year ago, and royalties and other revenues receded to $1.8 million from $2.1 million in the year-ago period.

DNA-related revenues totaled $20.6 million for the quarter, down 1 percent year over year, and RNA revenues totaled $37.5 million, a 6 percent decline from a year ago, Barabe said.

The product mix was about 60 percent RNA and 40 percent DNA, he said, and consumables sales were flat year over year at $61.9 million.

Instrument sales for the quarter climbed up 29 percent to $5.4 million, compared to $4.2 million a year ago, according to Barabe.

King said that the installed base for the firm's GeneTitan platform has expanded throughout the year with both new and existing customers. During the third quarter, Affymetrix shipped more than half of the orders that were delayed in the second quarter, and the remaining Q2 backlog is expected to be shipped by the end of the year.

For full-year 2010, the company expects shipments of the platform to increase 60 percent from 2009, he added.

Affy posted a profit of $968,000, or $0.01 per share, for the third quarter, compared to a loss of $8.8 million, $0.13 per share, for the third quarter of 2009. Wall Street had a consensus estimate of a loss of $0.05 per share.

Net income for the quarter includes a $4.1 million gain on debt repurchase from a convertible notes buyback.

Highlights from the third quarter include the completion of its 510(k) filing last week for its Human U133 gene expression array, which the company said is the "most widely published array in studies exploring the disease process."

Affymetrix also launched its Axiom Chinese myDesign Genotyping Array, and the OncoSpan FFPE Express, a service for analyzing genetic signatures of formalin-fixed paraffin-embedded tumors.

The service, King said, is gaining "broad support" among leading cancer centers and opinion leaders, and Affymetrix has signed agreements with "several big important" pharmaceutical firms and academic customers for use of the service. He did not identify any of the customers, however.

The firm's R&D costs in the quarter declined to $16.2 million from $18.8 million in Q3 2009. SG&A costs also shrank to $26.3 million from $30.6 million a year ago.

As of Sept. 30, Affymetrix had $40.1 million in cash and cash equivalents.

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