Affymetrix slumps as pharma sales fall

By Dr Matt Wilkinson

- Last updated on GMT

Related tags: Cent, Revenue

Affymetrix slumped to an operating loss in the second quarter of 2008, reporting flat revenues and blaming a 30 per cent reduction in sales to the pharmaceutical sector.

While other firms in the sector appear to be going from strength to strength, Affymetrix has struggled this year and has announced that it plans to close its Sacramento manufacturing plant in an effort to cut costs.

The firm also announced it had completed the acquisition of True Materials, a privately held San Francisco-based company that develops digitally encoded microparticle technology for approximately $25m (€16m).

According to Steve Fodor, Affymetrix’ CEO, the technology “offers advantages over bead-based approaches”​ like Illumina’s BeadChips, “because it is much more scalable and cost effective,”​ with the tests having “shorter processing times, simplified workflows and using a minimal amount of sample.”

The firm recorded an operating loss of $2.2m after reporting revenues of $86.9m down slightly on the $88.3m reported for the same period last year.

Higher product sales amounting to $75.0m, up 10 per cent from the same period last year, were offset by reduced revenues from services and royalties.

Revenue from services slipped to $9.0m, down 25 per cent from the $12.0m reported during the same time last year, while revenues from royalties plummeted to just $2.8m, down 63 per cent from the $7.8m reported for the second quarter in 2007.

“As a result of reduced spending in the pharma industry and the closure or downsizing of research centres, our sales into pharma have declined, particularly in the area of capital spending on instrumentation,”​ said Kevin King, president of Affymetrix.

“At this point, we don't expect to see pharma conditions improving for the rest of the year… this was the second consecutive quarter that we saw our pharma sales down by 30 per cent over prior year.”

However, according to King, the company did manage to grow its sales to academia by 12 per cent compared with the same period last year, helping overall gene expression consumables sales to grow by 9 per cent and genotyping consumables grow by 26 per cent compared with the same period last year.

“Array and reagent sales were $68.9m, up approximately 16 per cent from the second quarter of 2007 and were driven by strong DNA revenue, which was up approximately 26 per cent year-over-year to $28m,”​ said John Batty, Affymetrix’ chief financial officer.

The firm’s operational costs remained flat, with research and development expenses amounting to $89.1m, or 22 per cent of the company’s total revenues.

In a move to cut manufacturing costs the firm announced that it plans to close its manufacturing facility in Sacramento and consolidate all manufacturing at its sites in Santa Clara, California, Cleveland, Ohio and Singapore, in a bid to shave over $20m off the company’s yearly manufacturing bill.

However, the cost savings will not show up on the balance sheet for some time as the company expects to incur costs of around $42m over the next 18 months to accomplish this.

Related topics: Contract Manufacturing & Logistics

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