Affymetrix's Loss Widens Y/Y - Analyst Blog
November 06 2012 - 7:42AM
Zacks
Global genetic devices maker, Affymetrix Inc.
(AFFX) reported third quarter 2012 adjusted loss of 3 cents per
share, narrower than the Zacks Consensus Estimate of a loss of 4
cents a share. Adjusted earnings exclude one-time items such as
acquisition, integration and amortization-related expenses along
with impairment charges associated with the West Sacramento
facility.
Reported net loss in the quarter was $17.9 million (or 25 cents per
share) versus a loss of $9.8 million (or a loss of 14 cents per
share) in the year-ago quarter, mainly due to acquisition and
integration-related expenses associated with eBioscience.
Revenues
Revenues increased 24.4% year over year to $79.6 million, which
lagged the Zacks Consensus Estimate of $81 million marginally.
Revenues included roughly $17.6 million from the eBiocience
acquisition. Excluding eBioscience, revenues dipped 2% on a
constant currency basis, as weak Gene Expression array sales offset
higher revenues from the Genetic Analysis business and the Panomics
portfolio.
Revenues from products were up 27.5% year over year to $72.7
million in the quarter, which included consumable sales of $50.5
million (excluding eBioscience), down 4.5%. However, instrument
sales grew 12.2% to $4.6 million. The eBioscience unit grew 1% year
over year in terms of constant currency to $17.6 million. Services
and other revenues inched down 1.4% to $6.9 million.
Margins
Gross margin declined to 52.4% from 56.8% in the year-ago period,
due to inventory step-up amortization cost of $4.5 million,
associated with the eBioscience acquisition, and amortization of
intangibles worth $1.6 million. Product gross margin declined to
53% from 57% in the prior-year quarter.
Operating loss was $11.1 million in the quarter compared with a
loss of $5.9 million, a year-ago, mostly due to expenses related to
the eBiosciense acquisition and the CytoScan clinical trials. This
was partially offset by savings in headcount and facilities
costs.
Selling, general and administrative (SG&A) expenses were higher
at 45.6% of sales versus 42.1% in the year-ago quarter, Research
and Development (R&D) expenses, as a percentage of sales, fell
to 20.7% from 24% in the year-ago period, due to reduced
headcount-related expenses partially offset by higher spending on
clinical trials.
Balance Sheet
Affymetrix ended the third quarter of 2012 with cash and cash
equivalents of $29 million, down 10.5% year over year.
Recent Developments
During the quarter, Affymetrix inked a ‘Powered by Affymetrix’
(“PbA”) Program agreement with Singapore-based molecular
diagnostics company, PathGEN Dx Pte. Ltd. Per the terms of the
deal, PathGEN Dx will adopt a contract manufactured GeneChip
microarray from Affymetrix and use its own proprietary PathGEN
PathChip kit along with an automated software package to develop an
in-vitro diagnostic (“IVD”) test for pathogen detection.
Affymetrix also launched the SensationPlus FFPE Amplification and
3’ IVT Labeling Kit (SensationPlus FFPE Reagent Kit) in the
quarter. It is an advanced form of the company’s Genisphere
technology.
Furthermore, the company expanded its license agreement with
Siemens Healthcare Diagnostics, whereby, among other things,
Affymetrix has the exclusive right to develop and market in situ
QuantiGene ViewRNA products in the in vitro diagnostic market.
Our Take
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. Affymetrix holds a leading position in the
gene expression products and services market.
Affymetrix is expanding its customer base through new product
launches and strategic alliances and has reorganized its business
to drive future profitability. Moreover, the company is pursuing a
number of strategies (including acquisitions and expansion into new
markets) aimed at expanding its top line.
However, Research and development (R&D) spending by
Affymetrix’s customers have fallen considerably due to a weak
macroeconomic environment coupled with stringent government actions
including budget cuts.
Moreover, a declining Euro as well as a difficult global academic
funding backdrop is adversely affecting the gene expression and
eBioscience unit, thereby constricting the company’s top-line
growth. We also remain cautious regarding integration-related risks
associated with the e-Bioscience acquisition.
We are currently Neutral on the stock, which carries a short-term
Zacks #3 Rank (Hold rating).
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