Affymetrix

Affymetrix (nasdaq: AFFX) is a manufacturer of DNA microarrays, based in Santa Clara, California, United States. The company was co-founded by Dr. Stephen Fodor in 1992. The company was begun as a unit in Affymax N.V. in 1991 by Fodor's group, which had in the late 1980's developed methods for fabricating DNA microarrays, called "GeneChips" according to the Affymetrix trademark, using semiconductor manufacturing techniques. The company's first product, an HIV genotyping GeneChip, was introduced in 1994 and the company went public in 1996. As a result of their pioneering work and the ensuing popularity of microrarray products, Affymetrix derives significant benefit from its patent portfolio in this area.

Acquisitions have included Genetic MicroSystems for slide-based microarrays and scanners and Neomorphic for bioinformatics. In 2000 Perlegen Sciences was spun out to focus on wafer-scale genomics for massive data creation and collection required for characterizing population variance of genomic markers and expression for the drug discovery process.

Description of Product
Affymetrix makes quartz chips for analysis of DNA Microarrays. These chips are sold under the trademarked name GeneChip. Affymetrix's GeneChips assist researchers in quickly scanning for the presence of particular genes in a biological sample. Within this area, Affymetrix is focused on oligonucleotide microarrays. These microarrays are used to determine which genes exist in a sample by detecting specific pieces of mRNA. A single chip can be used to do thousands of experiments in parallel. Chips can be used only once.

Affymetrix sells both mass produced GeneChips intended to match scientifically important parts of human and other animal genomes. It also operates the Affymetrix Made-to-Order Program which makes custom chips available to researchers.

Affymetrix manufactures its GeneChips using photolithography. Glass chips are relatively expensive; list prices range from $50-$500 depending on the capabilities of the single-use chip.

Competitors in the DNA Microarray business include Illumina, GE Healthcare, Ocimum Biosolutions, Applied Biosystems, Beckman Coulter, Eppendorf Biochip Systems, and Agilent. There are also various inexpensive plastic-based technologies under development in small companies and laboratories around the world. It has been widely speculated that mass-produced plastic chips can be produced at lower prices than Affymetrix's quartz chips.

The company also manufactures machinery for high speed analysis of biological samples. List prices for the newest DNA arrayers, which prepare and place samples onto chips, are around $250,000 each. Scanners which read the results from the chip list from $150,000 for complete starter systems to $325,000 for high-throughput systems. Substantially lower retail prices have been seen in the market.

The business model of Affymetrix is based on these sources for revenue: consumables; instruments; subscription, service, license; royalty; and sales to Perlegen Sciences. Affymetrix currently controls 82% of the DNA microarray market in terms of sales.

Affymetrix has established a licensing program to make its intellectual property accessible to stimulate the broad commercialization of genome analysis technologies. Licensing fees have offset weak product sales in Q3-2006. They have several collaboration relationships with other companies that utilize their patented GeneChip technology.

Currently Affymetrix is fighting a patent infringement lawsuit against Illumina, alleging the infringement of six Affymetrix patents. A pre-trial hearing favors Affymetrix, but the trial is not until May 2007.