Affymetrix Upgraded to Neutral - Analyst Blog
July 02 2012 - 11:56AM
Zacks
We have upgraded our long-term recommendation for
genetic products maker Affymetrix Inc (AFFX) 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 translational research.
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
Illumina Inc. (ILMN), 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.
AFFYMETRIX INC (AFFX): Free Stock Analysis Report
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