Affymetrix's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Affymetrix (AFFX)

Q1 2012 Earnings Call

May 03, 2012 5:00 pm ET

Executives

Doug Farrell - Vice President of Investor Relations

Frank Witney - Chief Executive Officer, President and Director

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

Analysts

Travis Steed - Macquarie Research

David C. Clair - Piper Jaffray Companies, Research Division

Peter Lawson - Mizuho Securities USA Inc., Research Division

Jeff Ares - Goldman Sachs Group Inc., Research Division

Daniel Brennan - Morgan Stanley, Research Division

Quintin J. Lai - Robert W. Baird & Co. Incorporated, Research Division

Doug Schenkel - Cowen and Company, LLC, Research Division

Daniel L. Leonard - Leerink Swann LLC, Research Division

Daniel Arias - UBS Investment Bank, Research Division

Bryan Brokmeier - Maxim Group LLC, Research Division

Unknown Analyst

Derik De Bruin - BofA Merrill Lynch, Research Division

Presentation

Operator

Greetings, and welcome to the Affymetrix First Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Doug Farrell, Vice President of Investor Relations for Affymetrix. Thank you, Mr. Farrell, you may begin.

Doug Farrell

Thank you, operator. Good afternoon, everyone. Welcome to the conference call. At the close of the market today, we released our operating results for the first quarter ended March 31, 2012. Joining me on the call today is our President and CEO, Frank Witney; as well as our CFO, Tim Barabe. As a reminder, today's call is being recorded and the audio from the call is being webcast over the Internet on our home page at affymetrix.com.

During this call, we may make various remarks about the company's future expectations, plans and prospects that constitute forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that could cause actual results to differ materially for Affymetrix from those projected. These risk factors are discussed in Affymetrix's Form 10-K for the year ended December 31, 2011, and on other SEC reports, including our prior period quarterly report on Form 10-Q. We encourage you to review these documents carefully as forward-looking statements are made as of today's date, and we make no obligation to update this information.

With that, let me turn the call over to Frank.

Frank Witney

Thanks, Doug, and good afternoon, everyone. I'm happy to tell you that our hard work has begun to pay off. We're making steady progress in stabilizing the business and we're seeing growth in important new product lines. In the first quarter, we did a good job of controlling our expenses and overall, we are on track towards our goal of returning the overall business to growth in 2012.

Before discussing the core Affymetrix business in the first quarter, I'd like to take a minute to give you an update on the status of our previously announced acquisition of eBioscience. Despite working diligently on this acquisition over the last 4 months, I'm disappointed to tell you that we have not been able to reach an agreement with eBioscience that would allow us to complete the merger. We have an ongoing discussion, and we'll let you know when we have clarity on the status of the acquisition.

The positive news is that our core business is improving and we have roughly $170 million in cash that provides us significant flexibility going forward. We continue to focus 100% of our attention on our core business.

I'll begin with some more general, commercial and operational update before providing more color on each of our business units. As a reminder, our primary operational goals in 2012 include: stabilizing our expression business; increasing our market share in genotyping, particularly targeted human and Ag-Bio applications; building critical mass towards a market-leading position in cytogenetics; and maintaining the growth in our life science reagents business.

From a geographic perspective, Europe and Asia performed well in Q1, while our North America sales lagged particularly for academic customers. Late last year, we changed our global commercial leader, as well as the leadership in both Europe and Japan, and this is reinvigorating our commercial efforts in those markets, and we're seeing that in the numbers. We recently recruited an industry veteran to head up sales and marketing for North America, and I expect that the performance in this critical region will improve under his leadership.

We're also driving hard to further penetrate emerging markets like China, Brazil and Mexico. During the first quarter, we approved investments in these important markets that included the addition of a number of sales reps and a local office in Brazil. We should begin to see the benefits of this investment in the second half of the year as we bring new staff on board.

Now I'd like to discuss our core business. As you're aware, in the fourth quarter of last year, we completed an internal reorganization into 3 business units, including expression, genetic analysis and clinical applications, and life science reagents. I'd like to walk you through the dynamics of each of these business units and their impact on our first quarter results..

I'll begin with our expression business unit, which represents the largest component of our total revenue. This business unit includes all of our array-based expression products, as well as our QuantiGene and Procarta family of RNA and protein expression products. Expression constitutes about 50% of our total revenue and we're making steady progress in stabilizing this business. We're doing this by reinvigorating our commercial efforts to better support our IVT revenue, as well as to augment these more mature products by adding new products to our array-based expression portfolio, including new Panomics mid-plex cell and tissue assays.

Read the rest of this transcript for free on seekingalpha.com

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