), a global genetic products company, reported second quarter 2012
adjusted (excluding one-time items other than stock-based
compensation expense) loss of 13 cents per share, worse than the
Zacks Consensus Estimate of a loss of 8 cents a share.
Reported profit in the quarter was $30.9 million (or 43 cents
per share) versus a loss of $3.7 million (or a loss of 5 cents per
share) in the year-ago quarter, primarily due to a one-time income
tax benefit of $44 million related to the eBioscience
Revenues increased 2.7% year over year to $66.4 million
marginally ahead of the Zacks Consensus Estimate of $66 million.
Revenues included roughly $1.4 million from the eBiocience
acquisition, negated by a currency impact of 2%. Sales were mainly
led by higher revenues from scientific services, partially offset
by lower chips revenue.
Revenues from products were approximately flat year over year at
$58.5 million in the second quarter, which included consumable
sales of $53.3 million, down 1.2%. However, instrument sales
remained flat year over year at $3.8 million. Services and other
revenues rose 19.7% to $7.9 million.
Unfavorable product mix led to a decline in gross margin to
58.3% from 60.1% in the year-ago period. This was partially offset
by decline in excess and obsolescence costs in inventory. Product
gross margin declined to 58% from 62% in the prior-year
Operating loss was $15.4 million in the quarter compared with a
loss of $3.1 million, a year-ago. Selling, general and
administrative (SG&A) expenses were higher at 61% of sales
versus 41.3% in the year-ago quarter, largely due to expenses
related to the eBiosciense acquisition. Research and Development
(R&D) expenses, as a percentage of sales, fell to 20.5% from
23.7% in the year-ago period.
Affymetrix ended the second quarter 2012 with cash and cash
equivalents of $26.7 million, down 2.4% year over year.
On June 25, Affymetrix completed its acquisition of San Diego,
California-based eBioscience Holding Company, Inc. for $315 million
in cash. The acquisition is expected to significantly boost
Affymetrix's foothold in the fast-growing immunology, oncology and
translational medicine markets, representing an annual opportunity
of more than $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
During the quarter, Affymetrix entered into a global
distribution agreement with ScreenCell, a medical devices company
which specializes in isolating rare circulatory cells. Under the
agreement, Affymetrix will be the sole distributor of ScreenCell's
Circulatory Tumour Cells ("CTC") Technology, to be used only for
research purposes. The company believes that this latest addition
to the Expression business will revolutionize cancer treatment in a
big way as it will enable quick and cost-effective translational
Affymetrix also signed a research collaboration and licensing
deal with Massachusetts General Hospital. Per the agreement,
utilizing Affymetrix's QuantiGene ViewRNA Assay platform, both the
organizations will co-develop innovative cancer biomarker
The company also announced a global partnership with Leica
Microsystems in the second quarter. Affymetrix will combine its
QuantiGene ViewRNA ISH Tissue Assay with Leica's BOND RX staining
platform for research purposes.
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. Affymetrix holds a
leading position in the gene expression products and services
The company is shifting its research and development (R&D)
focus from discovery and exploration markets to the faster-growing
validation and routine testing markets. The company reckons
cytogenetics and cancer research as promising areas for expansion,
representing market opportunities of roughly $200 million and $500
Affymetrix is also expanding its customer base through new
product launches and strategic alliances. Moreover, the company is
pursuing a number of strategies (including expansion into new
markets) aimed at expanding its top line. Currently, the company
retains a short-term Zacks #2 Rank (Buy).
However, Affymetrix is operating in an intensely competitive
industry and faces risks associated with lower microarray demand
and R&D spending by its customers due to a soft economy and
government actions including budget cuts.
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