This story has been updated from a previous version to include Witney's salary details and the reactions of analysts and investors.
Frank Witney will replace Kevin King as CEO and president of Affymetrix, the firm announced last week. Witney's appointment is effective July 1, and he will become a member of the Santa Clara, Calif.-based firm's board of directors at that time.
King has resigned from Affy following a four-year stint at its helm. His resignation will be effective on June 30, and he has left the company to "pursue other interests," the company said. It did not disclose whether he had joined another firm.
King was named president of Affy in 2007 and CEO in 2009, succeeding co-founder Stephen Fodor, who remains chairman of its board of directors (BAN 10/28/2008).
Witney most recently served as president and CEO of Dionex and oversaw its $2.1 billion sale to Thermo Fisher Scientific earlier this year. Before joining Dionex in 2009, Witney served as executive vice president and chief commercial officer of Affy, following its acquisition of Panomics in December 2007 (BAN 2/24/2008). Witney was president and CEO of Panomics from 2002 until 2008.
Fodor said in a statement that Witney is the "right person to lead the company through its next phase of growth and development."
Witney said that Affy has "significant untapped potential," citing the firm's "strong technology base, … valuable portfolio of innovative products and solutions, longstanding and strong customer relationships, and deeply talented employees."
Prior to joining Panomics in 2002, Witney was president and CEO at Packard Bioscience, which he led through its acquisition by PerkinElmer in 2001. From 1983 to 2000, Witney held a series of research and general management positions at Bio-Rad Laboratories. He was a postdoc at the National Institutes of Health from 1980 to 1983 and holds a PhD in molecular and cell biology from Indiana University.
Witney currently serves on the board of directors of One Lambda, DVS Sciences, and RareCyte.
Separately, Affy disclosed Witney's salary in a filing with the US Securities and Exchange Commission last week.
According to the filing, Witney will receive an annual base salary of $500,000 and will be eligible to receive an annual bonus at a target level equal to 75 percent of his base salary, with actual payment based on Affy's performance bonus program.
Upon taking over on July 1, Witney will receive initial equity awards consisting of options to purchase 300,000 shares, at an exercise price equal to the fair market value on the grant date, and 150,000 restricted shares, both of which awards will vest over four years.
He will also have the opportunity to earn performance share awards over the next four years representing an aggregate of up to 240,000 shares, subject to meeting performance criteria to be determined by Affy's compensation committee.
In connection with his departure, King will be eligible to receive severance payment of two times his annual salary and up to a year of reimbursement of COBRA premiums and outplacement services.
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Analysts and Investors React
Industry analysts reacted favorably to Witney's appointment.
Investment firm RW Baird last week upgraded Affy's stock to an Outperform rating with a new $11 price target. It had previously rated the company's stock as Neutral with a $6 target.
In a research note, RW Baird analyst Quintin Lai noted Witney's "string of successful leadership roles, many of which have ended as shareholder-favorable exits (takeovers)," noting that the last three companies he headed were acquired.
Lai expects Witney to "make a return to growth" a priority for Affy, and to "hone in" on the firm's "languishing revenue base while continuing the drive to improve gross and operating margins." He noted that the company has seen organic revenues decline for 12 of the past 14 quarters.
Lai said that areas of focus for Witney's Affy could be the Panomics line of branched DNA-based products, as well as CytoScan, a new cytogenetics research product the company plans to debut later this year (BAN 5/10/2011).
Oppenheimer last week maintained its Perform rating for Affy's stock. Analyst David Ferreiro said the investment firm would "wait to see if this change in leadership will help improve business fundamentals," but said that it is hopeful that Witney will "catalyze the next stage of the company's transformation, and again return the company to consistent top-line growth."
In a research note, Ferreiro also praised King, who he said "successfully improved cost structure and returned the company to operating profitability, despite major fundamental headwinds."
And those headwinds are still strong, according to Ferreiro. He described the market dynamics facing the 20-year-old company as "challenging" as "pressure from [next-generation sequencing] looms," and called the microarray market "unpredictable."
Microarrays in general will "continue to lose ground to new technological developments that are both more robust and cheaper, creating a fundamental business headwind," he said.
Ferreiro acknowledged that Affy "continues to diversify away from its core markets" in research and now derives about 22 percent of its revenue from validation studies, up from 20 percent in 2010. "In addition, uptake of cytogenetic, cancer, and pharmacogenomics arrays has been promising, suggesting potential microarray stabilizers," he said.
Finally, Affy's distribution agreement with Fisher Scientific "remains a potential wild card for growth," he said. Affy inked the distribution pact with Fisher, which enables the latter to market and sell its benchtop GeneAtlas system in North America, earlier this year (BAN 5/17/2011).
In the note, Oppenheimer maintained a full-year 2011 revenue estimate of $298 million for Affy.
Investors also reacted positively to Witney's appointment, and the share price of Affy's stock rose 13 percent to a high of $7.08 on June 2, the day after the announcement was made. More than 7.9 million shares of Affy stock were traded that day, nearly nine times the average daily volume of 948,017 shares during the past three months.
The price of the firm's stock has continued to climb in recent days, closing at $7.21 on June 6. Shares of Affy's stock were still trading at $7.21 at noon on June 7.
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