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Spreading the Chips Around

Executive Summary

Affymetrix has long contended that its first-mover advantage in technology development and in the research market would secure for it a leading position in the gene-based microarray (gene chip) business, first in the research market and then, as applications moved downstream, into drug development and, eventually, clinical diagnostic testing. As for the first phase of its plan, it looks like the company was right. Several competitors have left the chip field, and Affymetrix is largely responsible for driving them out.

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Affymetrix: Taking the Long View

Affymetrix can succeed long term if gene expression proves to be a viable method for assaying disease. For now, that core question-the extent to which genotype correlates with phenotype-is as much a matter of philosophy as it is demonstrable fact. But making that determination will take time-and much data. Meanwhile, with its first-mover advantage in technology development and a strong IP portfolio, the company's GeneChip will likely as not be the technology used to answer that question. And in that sense, the GeneChip technology is enabling. Thus, at least for the time being, Affymetrix is well positioned to grow its life sciences markets. And through a recent major deal with Roche, it could become a major player in the nascent but arguably huge market for array-based clinical diagnostics.

Affymetrix: Taking the Long View

Affymetrix can succeed long term if gene expression proves to be a viable method for assaying disease. For now, that core question-the extent to which genotype correlates with phenotype-is as much a matter of philosophy as it is demonstrable fact. But making that determination will take time-and much data. Meanwhile, with its first-mover advantage in technology development and a strong IP portfolio, the company's GeneChip will likely as not be the technology used to answer that question. And in that sense, the GeneChip technology is enabling. Thus, at least for the time being, Affymetrix is well positioned to grow its life sciences markets. And through a recent major deal with Roche, it could become a major player in the nascent but arguably huge market for array-based clinical diagnostics.

Disco(very) Dancing to a Slower Beat?

SARS. Iraq. Recession. Terrorists. Risk aversion is in the air, and it hardly seems surprising that leading suppliers of discovery tools for studying gene expression are warning that their own businesses may suffer going forward. Roche and Merck say it's discovery-business-as-usual in Big Pharma, despite the fact that capital spending in the biotech sector has slowed. But some Wall Street analysts contend that customers are moving away from gene expression as a discovery vehicle. And such a point of view creates disturbing implications for the still unprofitable Affymetrix, which has yet to demonstrate that selling gene-based microarrays and related instrument systems is a model for a sustainable business.

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