We have upgraded our long-term recommendation for genetic
) from Underperform to Neutral.
Recently, in June, Affymetrix completed its previously announced
acquisition of eBioscience Holding Company, Inc. for $315 million
in cash.The acquisition should significantly boost Affymetrix's
foothold in the fast-growing immunology, oncology and translational
medicine markets, representing an annual opportunity nearing $2.5
billion. It will diversify the company's revenue base, expand its
product range (to include a vast array of reagents) and reinforce
its growing molecular diagnostics business.
Moreover, in the month of May, the company entered into a global
distribution agreement with ScreenCell, a medical devices company,
which specializes in isolating rare circulatory cells. This latest
addition to the expression business will revolutionize cancer
treatment in a big way as it will enable quick and cost-effective
Affymetrix is expanding its customer base through new product
launches. In the most recent quarter, the company launched and
shipped the most sophisticated functional variants in protein
coding regions of the human genome, the Axiom Exome Genotyping
Array, in the market.
However, Affymetrix's product revenue especially consumable
sales have been declining for quite some time now. The company's
core business, the expression unit (which constitutes about 50% of
total revenue) has not been performing up to the mark. Despite
European and Asian expression units reporting positive results,
American array sales are still sluggish and so are in vitro
transcription ("IVT") sales.
The company also needs to successfully integrate its
acquisitions so that they do not turn out to be a waste of
resources. Affymetrix is operating in an intensely competitive
industry and faces risks associated with lower research and
development (R&D) spending by its customers due to a soft
economy and government actions including budget cuts.
Affymetrix is a leading provider of microarray-based products
and services to the global research community. Along with
), it is one of the two major providers of microarray technologies,
primarily used in the field of genetic research.
The stock currently retains a Zacks #2 Rank, which translates
into a short-term Buy recommendation.
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