AFFX Affymetrix, Inc.

Genetic products company, Affymetrix Inc. (AFFX) provided a disappointing guidance for its 2013 first-quarter results, based on available preliminary financial data. The company will report its financial results on Apr 30, after market closes.

Affymetrix expects revenues to be $78 million in the quarter, which is significantly lower than the Zacks Consensus Estimate of $83 million. It is expected to decline about 8% sequentially. Revenues from the acquired eBioscience business contributed $19 million to total revenues. Excluding the impact of eBioscience, revenues are likely to decline 9.5% year over year.

Management pointed to lower-than-expected gene expression product sales across all regions, particularly Japan, which led to the decline in sales. This offset healthy revenues from genotyping and cytogenetics products and moderate contribution from eBioscience.

Further, Affymetrix had roughly $38 million cash-on-hand as of Mar 31, 2013, after redeeming the remaining $3.9 million of its 3.5% convertible notes and prepaying $3.2 million of senior-secured debt. With current senior secured debt of $70 million, debt repayment is a primary objective of Affymetrix’s management. Affymetrix’s debt-to-equity ratio is 59.7% compared with 7.1% for its peer group.

Based on the disappointing preliminary results, the company currently carries a Zacks Rank #5 (Strong Sell). Research and development spending by Affymetrix’s customers have fallen considerably due to a weak macroeconomic environment coupled with stringent government actions including budget cuts.

On the earnings front, the company’s earnings have failed to beat the Zacks Consensus Estimates once in the last 4 quarters with an average negative surprise of 9.13%. However, it managed to meet estimates in the fourth quarter of 2012 and beat it in the first and third quarters. The current Zacks Consensus Estimate for earnings per share for the first quarter of fiscal 2013 is 1 cent.

While we strongly recommend avoiding the stock, companies like Osiris Therapeutics (OSIR), Cleveland BioLabs (CBLI) and Athersys (ATHX), all carrying a Zacks Rank #1 (Strong Buy), are expected to do well in the Medical-Biomed/Gene industry.

 
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