Affymetrix (AFFX)

Q2 2011 Earnings Call

July 27, 2011 5:00 pm ET


Frank Witney - Chief Executive Officer, President and Director

Doug Farrell - Vice President of Investor Relations

Timothy Barabe - Chief Financial Officer, Principal Accounting Officer and Executive Vice President


William Quirk - Piper Jaffray Companies

Bryan Brokmeier - Maxim Group LLC

Zarak Khurshid - Wedbush Securities Inc.

Dane Leone - Macquarie Research

Ross Muken - Deutsche Bank AG

Nandita Koshal - Barclays Capital

Quintin Lai - Robert W. Baird & Co. Incorporated

Daniel Leonard - Leerink Swann LLC

Ramesh Donthamsetty - JP Morgan Chase & Co

Daniel Arias - UBS Investment Bank

Doug Schenkel - Cowen and Company, LLC

Sung Ji Nam - Gleacher & Company, Inc.

Isaac Ro - Goldman Sachs Group Inc.

David Ferreiro - Oppenheimer & Co. Inc.


Question-and-Answer Session

Dane Leone - Macquarie Research

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Okay, great. And then just -- I know it's early days, but in terms of looking internally at the company, for those of us that followed Affymetrix for a number of years now, the problem originally stemmed from not developing technology or missing a technology cycle years ago. And obviously, we see the consequences of that. What can actually be changed internally at Affymetrix to frankly turn the company around. It seems to, I think, a lot of us thought there's just a fundamental technology issue that's going to cause the company to continue to be in secular decline for years to come. Is there something that how you kind of saw looking at the company externally that could be changed internally, whether it's management or whatever, just fundamental processes of R&D to kind of turn the direction of the business around?

Frank Witney

I really think it's -- I really think there's maybe 2 parts to the answer. I would say in the near term is defined over the next year or 2, that it really has to do with the ability for us to appropriately present the technologies that we have to rapidly evolving marketplace. In terms of missing a technology cycle, well, yes, that's a fact. On the other hand, there are a number of -- there's a number of assays that our applications around our core technologies that can take us in different areas, with our existing core microtechnology, for example, cytogenetics. We have products in the pharmacogenetics space. There are plenty of things that we can do in expression that are in and around NGS, for example. So I think at least from my perspective, it's an oversimplification to simply say that we missed the technology cycle, therefore, the company can't grow. Now that doesn't mean that we don't have to think very hard and be very good at presenting how we fit in to current work flows or applications that are appropriate for our current technologies. So I think that's sort of the near-term focus as defined at the next year or 2. I think the longer-term R&D pipeline has to be addressed, and we are thinking very hard about what is -- what kinds of other things that we do, should we get into over time. But in terms of the near-term focus, I really believe it's stepping up our ability to be commercially successful with a number of technologies that are currently in our line of sight. For example, the Cyto products. We've been in cytogenetics for a long time and now we have, we believe, is a breakout product. It can take significant market share, to other assets that we think are commercially very viable, even in this landscape of things moving in very rapidly in some very broad directions.


Our next question comes from Zarak Khurshid from Wedbush Securities.

Zarak Khurshid - Wedbush Securities Inc.

Zarak Khurshid at Wedbush. First on the cytogenetics side. Was there weakness in cytogenetics in addition to the overall DNA business?

Frank Witney

The DNA business was most hit. We were hit the most hard on GWAS and we just launched our Targeted Genotyping fairly recently, so that was really where the hit was the hardest. We saw, even with our current products inside of genetics, we saw some modest growth in that area.

Zarak Khurshid - Wedbush Securities Inc.

Okay. And then I was curious if you could just characterize the funding environment, the challenges that you're facing there, any feedback from customers as far as how things have changed over the last quarter.

Frank Witney

I'm not sure, maybe it's that high resolution over the last quarter. But clearly, for example, in the expression area, NGS is drawing a lot of funding. There's a lot of systems being placed and a lot of experiments are being done by NGS. That is a reality for us. I would say, other than that, I don't -- we didn't observe any macro trends other than the competition for dollars is pretty high right now on the expression side.


Our next question comes from Bryan Brokmeier from Maxim Group.

Bryan Brokmeier - Maxim Group LLC

I guess first, you just mentioned modest growth in cytogenetics. Any particular products where they are growing? Or is that a little bit too much detail that you want to get into within cytogenetics?

Frank Witney

Well, I would just say the current products that we have that have -- the SNP 6.0, for example, that is used in cytogenetics, grew in that application and was challenged in the genotyping application.

Bryan Brokmeier - Maxim Group LLC

Actually it's the couple of Ag-Bio products, have you been able to penetrate that market at all and do you anticipate any new arrays in the near term?

Frank Witney

Well, we've introduced 2 products in Ag in the last quarter or 2, I guess, and it's still early days. We anticipate -- we think are good products and we're going to put some marketing muscle behind those, but it's still early days.

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