Affymetrix Misses as Sales Dip - Analyst Blog
February 10 2012 - 6:00AM
Zacks
Genetic products maker
Affymetrix Inc’s (AFFX) fourth-quarter fiscal 2011
loss per share of 21 cents was higher than the Zacks Consensus
Estimate of a loss of 7 cents. The California-based company
recorded a loss of $14.7 million in the quarter compared with a
profit of $4 million (or 6 cents a share) a year ago as it saw a
double-digit decline in its top line.
For the fiscal, loss per share of
40 cents was also higher than the Zacks Consensus Estimate of a
loss of 17 cents. Losses nearly tripled year over year to $28.2
million.
Revenues
Revenues for the quarter slid 23.3%
year over year to roughly $65.1 million, trailing the Zacks
Consensus Estimate of $66 million. Sales were hurt by declines
across the board, largely on account of lower product revenues
which clipped 18.4% year over year to $58.7 million.
Affymetrix saw declines across
consumables (down 13% to $54.8 million) and instrument (down 55% to
$3.8 million) sales in the fourth quarter. DNA and RNA revenues
dipped 13% and 14%, respectively.
Service revenues skid 20.2% year
over year to $5.1 million. Royalties and other revenues plummeted
80% to roughly $1.3 million.
For the full year, sales dipped
13.9% year over year to $267.5 million, also missing the Zacks
Consensus Estimate of $268 million.
Margins and
Expenses
Gross margin declined to 53.3% in
the quarter from 58.1% a year ago, hurt by volume absorption and
unfavorable mix. Product gross margin fell to 54.1% from 56.1% in
the prior-year quarter.
Consolidated costs and expenses
declined 4.8% year over year to $75.9 million in the quarter.
R&D expenses rose 8% while selling, general and administrative
expenses were essentially flat year over year at $28 million.
Balance Sheet and Cash
Flows
Affymetrix exited fiscal 2011 with
cash and cash equivalents and available for sale securities
(short-term) of $209.9 million, a more than double year-over-year
increase. Outstanding convertible debt was roughly $95.5 million,
flat year over year. The company generated operating cash flows of
roughly $40 million during the fiscal (including $6 million in the
fourth quarter).
Guidance
Moving ahead, Affymetrix expects
flat-to-low, single-digit growth in revenues in fiscal 2012 and
expects sales to pick up in the back half of the year. The company
forecasts operating expenses in the range of $167 million to $170
million and capital spending between $7 million and $10 million for
the year. Moreover, free cash flows is expected in the band of $10
million to $15 million.
Neutral on
Affymetrix
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 is broadening its
customer base through new product launches and strategic alliances.
The company is pursuing a number of strategies (including expansion
into new high-growth markets including cytogenetics and cancer)
aimed at expanding its top line. The company reckons cytogenetics
and cancer research as promising areas for expansion, representing
market opportunities of roughly $200 million and $500 million,
respectively.
During the fourth quarter,
Affymetrix inked a Memorandum of Understanding (“MOU”) with leading
genomics center “BGI” to co-develop and commercialize microarrays
for genotyping analysis. The collaboration will aim at developing
and marketing a range of plant, crop, and livestock microarrays in
an effort to broaden the use of molecular tools in agriculture.
Moreover, Affymetrix signed an exclusive licensing agreement with
Genisphere, under which, it will use Genisphere’s proprietary
FlashTag reagents with its miRNA GeneChip arrays.
Affymetrix has also taken up
various steps to stabilize its expression business which accounts
for roughly 45% of its sales. Moreover, the company expects its
genetic analysis and clinical diagnostic business (35% of sales) to
grow at least 20% in 2012, driven by its cytogenetics program and
increased traction of its Axiom genotyping platform.
However, Affymetrix is operating in
an intensely competitive industry and faces risks associated with
lower R&D spending by its customers due to a soft economy and
government actions including budget cuts. We are currently Neutral
on Affymetrix, which is in line with a short-term Zacks #3 Rank
(Hold).
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