Affymetrix: A Changing Technology Landscape – At a Crossing


Affymetrix (AFFX), located in Santa Clara, California, sells patented microarray products. In 2009, Affymetrix experienced revenues of $327.1 million dollars, as opposed to $410.2 Million dollars in 2008. The patented microarray products can be visualized as strands of selected deoxyribonucleic acid (DNA) molecules organized into segments called genes. These are attached to a glass slide and positioned in an ordered arrangement of rows and columns (arrays), the size of a postage stamp. This glass slide is contained in a plastic case that is small enough to be concealed in the palm of your hand.

Started in 1992, Affymetrix began using its newly invented microarray to identify or “sequence” the “instruction code” in DNA molecules responsible for making proteins. This changed in 1993, when Stephen Fodor (one of the company’s founders) made a strategic decision to begin using microarrays to identify the arrangement or sequence of nucleotides, that formed the building blocks of genes, instead of focusing on proteins. Fodor’s call was a good one, because that decision positioned the company to be a major player in the microarray genotyping and gene transcription markets that were to follow, leading the Company’s stock to an all- time high of $160.25 dollars on March 3, 2000, with a market capitalization of more than $8 billion dollars.

Affymetrix maintained market leadership in these product applications until market competition from new DNA sequencing technology, and economic conditions, created a downward stock spiral, dropping the stock from its high in March 2000, to a low of $2.13 in February of 2009. Today, the stock is trading at $8.48/share with a market capitalization of $628.2 million dollars (September 18th, 2014).

Today, the market competition is tougher than ever. Affymetrix is seeing many of its microarray applications being transitioned onto next generation sequencing platforms offered by its competitors, which include Illumina, Roche, Applied BioScience, Helicos Systems, Complete Genomics, and Pacific BioSystems.

Affymetrix will be required to identify a third generation sequencing platform company that it can partner with, or new third generation sequencing technology patents that it can acquire.

In response to the changing technology landscape for its microarray products, Affymetrix will be required to identify a third generation sequencing platform company that it can partner with, or new third generation sequencing technology patents that it can acquire.

This is necessary for it to remain a player in the future molecular diagnostic marketplace that will be largely defined within a personalized medicine framework, and to update its microarray products that it has licensed via its “Powered by Affymetrix” (PbA) licensing program.

For example, one of Affymetrix’s licensees, Partners HealthCare for Personalized Genetic Medicine, located in Boston, MA, tests for gene variants associated with cardiac hypertrophy (enlarged heart). According to Birgit Funke, the Director of the company’s laboratory for molecular medicine who recently spoke at a conference on Genomics, “Testing for each of these genes using this traditional sequencing technology is starting to be difficult to do in a cost-effective manner“ (Stein 2010).

Funke also said, that using next-generation sequencing to implement new tests that would examine many of the genes known to harbor disease- associated changes would offer great diagnostic benefits.

There are a number of companies that can offer a strategic partnership to Affymetrix. DNAScribe reviews these Companies, and their third generation sequencing technologies, in a report it has written about Affymetrix (No longer available).

In the meantime, Affymetrix will benefit from the sale of products that it acquired from the purchase of companies like Panomics.

Panomics, acquired in 2008, has enabled Affymetrix to diversify its product offerings into the validation and routine test markets. This has added millions in revenue to the company’s bottom line. For example, there is historical financial data that shows Panomics, would have added $10.7 million dollars to Affymetrix’s top line for the nine months that ended September 30, 2008, if it had been part of Affymetrix during that time period. In fiscal year 2007, Panomics would have added $11 million dollars to Affymetrix’s top line. Moreover, although no longer reporting Panomics sales separate from its own, Affymetrix projected that Panomics 2009 revenues would be “four or five times” greater than what it recorded in 2008. If this is true, then Panomics, with its growing product portfolio of cell signaling assays, its siRNA linking nanoparticles that increase siRNA uptake in cells, its popular DNA copy number analysis, its RNA monitoring analysis and its protein biomarker assays could garner sales in excess of $100 million dollars per year by 2011.

Affymetrix has also begun selling into a global $2 billion dollar cytogenetics market place with a family of microarray products that have technical advantages over its competitors, such as its ability to detect loss of heterozygosity (LOH). LOH indicates, that in one set of chromosomes, an individual is missing a chromosome from one parent. In other words, they have received two chromosomes from the same parent in error.

“LOH is a cardinal feature of cancer genomes that is tightly linked to cancer development” (Yammamoto et al. 2007). For example, LOH can contribute to tumorigenesis by activating potential oncogenes or unmasking mutated tumor suppressor genes.

Affymetrix’s cytogenetics’s microarray product has received high praise from cytogeneticists globally for this feature, and for its user- friendly, menu-driven interface.

Affymetrix also has the potential to benefit financially from the unexpected exploitation of microarrays for methods of DNA capture and target enrichment that are being used in combination with next generation sequencing platforms to preamplify DNA.

This DNA preamplification is used to reduce the complexity of the DNA and is a fundamental requirement for the next generation sequencing platforms that are currently being sold in the global DNA sequencing marketplace.

This DNA preamplification is used to reduce the complexity of the DNA and is a fundamental requirement for the next generation sequencing platforms that are currently being sold in the global DNA sequencing marketplace. Affymetrix scientists have published articles about a unique method for DNA capture and target enrichment, which combines DNA capture by ligation*, and DNA mismatch Repair (TALC MDR). The method first uses target amplification by “capture and ligation” (Barany 1991) (TALC) to amplify the specific genes of interest. Next, the method uses E-coli bacteria’s innate mechanism that recognizes and repairs imperfections or errors in its newly replicated DNA called mismatch repair (MRD). In fact, MRD, actually uses live E-coli bacteria, (i.e. an in-vivo bacterial assay) to recognize the human DNA mutations, and it does so with a high level of sensitivity.

One advantage of this method is that scientists can recognize both known alleles from other unknown alleles on the same gene fragment that is produced (Zheng et al. 2009) (Faham and Cox 1995).

It is believed that this DNA Capture and Enrichment method would enable the generation of high-quality sequencing data over many megabases in thousands of samples, which would make it popular for DNA resequencing studies (Zheng et al. 2009).

(TALC MRD) should also be competitive with rival methods from Agilent, Nimblegen, Rain Dance Technologies, and Febit. According to scientists, there is no single method that is currently preferred over the next, so the competition is wide-open. Moreover, proprietary digitally encoded microparticles, which Affymetrix acquired from its July 2008 acquisition of the company called “True Materials,” may have the potential to add enhanced features to this DNA capture and enrichment method, giving it a strong competitive edge over rival product offerings. Furthermore, selling this product would position Affymetrix in a target market that will be using future third generation sequencing platforms. Hence, if Affymetrix decides to move into the third generation sequencing market with a partnership, an acquisition of an existing company, or the purchase of a technology patent, it will have already established itself in the marketplace alongside its major competitors.

The sale of microarray DNA capture and target enrichment products, used in combination with next generation sequencing platforms, will be driven by “targeted resequencing applications.” Targeted DNA resequencing applications will enable consumers to benefit right now from current genomic knowledge that can be used in their physician’s office.

Should Affymetrix choose to sell TALC-MRD, DNA capture and targeted enrichment microarrays to be used in combination with next generation sequencing platforms, it would be well positioned to earn revenues in the current $700 million dollar world-wide DNA sequencing market (including reagents and instruments) with U.S. sales contributing over $500 million dollars. This DNA sequencing market is projected to grow to $900 million dollars by 2014 and $1.8 billion by 2019 (Jain 2010).

Affymetrix’s Genotyping Product Described:

Affymetrix microarrays are used by scientists to identify an individual’s gene variants, as well as other variations in a person’s DNA that may have significance for an individual’s personalized medicine profile.

A person’s genotype contains single nucleotide polymorphisms (SNPs), which represent that portion of an individual’s DNA that makes him/her different or unique from everyone else. Scientists estimate that SNPs, or gene variations, occur in approximately .5% of a person’s DNA.

Gene variations occur when an individual’s DNA code changes throughout generations, as required in order to adapt and survive in a continuously evolving environment. Scientists have found that SNPs can contribute to a person’s risk for acquiring diseases and/or to their risk for having adverse drug reactions. SNPs can also affect how effective a drug might be for a particular individual.

SNPs can also confer benefits. For example, individuals who are homozygous, or who have two copies of the altered gene for a Chemokine receptor (CCR5-delta32), have substantial protection against HIV-1 infection. HIV-1 infected individuals, that are heterozygous, or have one copy of the altered gene, show substantially delayed progression of the HIV-1 infection (Hutter, Schneider and Thiel 2009, Liu et al. 1996, de Roda Husman et al. 1997).

The Science Behind Affymetrix Genotyping Microarray- Affymetrix Exploited a Natural Feature of DNA

To create its microarray products, the Affymetrix scientists exploited a natural feature of DNA called DNA hybridization. In other words, when solutions of DNA molecules are slowly heated, a dramatic macromolecular change occurs in a very restricted temperature range, causing the two strands of DNA to separate. When the temperature is cooled, the two strands bind again or “hybridize.” Hybridization is a key feature of Affymetrix’s microarrays (Doty et al. 1960).

To incorporate hybridization into its microarrays, Affymetrix takes a strand of a patient’s DNA and determines if it will bind to a DNA strand that has been associated with a disease or has been associated with an adverse drug reaction. The Affymetrix reference DNA strands are called “probes” because they probe or interrogate the patient’s DNA.

These probes were identified in studies called “Genome Wide Association Studies” (GWAS). In these studies, scientists looked at the genetic profile of individuals and determined which genes showed up most frequently in individuals who had certain diseases.

This method for understanding how different genes might be associated with the risk for a certain disease, or the risk for an adverse drug reaction, is fundamentally new knowledge and scientists are still in the process of learning how it works. For example, a gene variant alone will not cause a disease. Environmental factors such as diet, exercise, and environmental exposure to carcinogens, (including cigarette smoke, or toxic chemicals) can combine with “genetic variants” to influence an individual’s risk for a particular disease or adverse drug reaction.

Nonetheless, having a SNP, (gene variant) with an established association to a particular disease may provide an individual’s physician with information that will serve to inform or guide the patient’s lifetime disease prevention and monitoring strategies.

Affymetrix Microarrays Were Also Designed to Measure Gene Transcription

Affymetrix’s “gene transcription” microarrays measure levels of ribonucleic acid (RNA) transcripts. These transcripts are used to determine the expression levels of certain genes in specific cells at various time points.

“RNA transcript” is a term used to refer to a segment of the DNA that contains the instructions for the arrangement of the amino acid molecules that will provide the building blocks that make up a specific protein. During gene transcription*, this DNA segment, (transcript) is “spliced” (cut) out of DNA molecule.

“As the RNA polymerase moves along the duplex DNA transcribing, it separates a short segment of its 2 strands to form a so called transcription bubble, thereby permitting this portion of the template strand to transiently form a short DNA/RNA hybrid helix with newly synthesized RNA”(Voet and Voet 2004).

Then this newly synthesized transcript messenger RNA (mRNA) travels from the cell nucleus to a different cellular compartment called the “cell cytoplasm.”

In the cell cytoplasm, the mRNA transcript is “transcribed” (read and processed) by the cell’s protein making machinery located inside of a “ribosome.” In the ribosome, which is composed of about 2/3 RNA and one/third protein, the cell directs the synthesis of proteins in a process called translation.

Identification of the mRNA transcript levels can be used for many different purposes. In one example, measuring mRNA transcript levels provides the identity and quantity of proteins that are expressed or produced in a given cancer cell. These proteins can then be used as cancer protein biomarkers in a diagnostic setting to determine if a cancer is at an early stage, advanced stage, or to identify characteristics of a particular cancer, which may help choose the best drug for treatment.

The section of mRNA that is spliced from the DNA also contains the exons, or the coding regions for proteins. The second generation sequencing platforms that have begun to seriously compete with Affymetrix microarrays are allowing scientists to study all the exon coding regions of DNA in new ways. From this research, exciting and important new drug treatment methods can be designed and implemented. For example, scientists have developed new methods for directing the splicing machinery to specific locations on the DNA where RNA transcript splicing will occur in order to skip over mutated exons, and move the splicing activity onto the next DNA exon. In one case, scientists have used an antisense oligonucleotide*, or an antisense sequence, to hide target exons from the host genetic splicing machinery so that they are not included in the final mRNA (Aartsma-Rus et al. 2010). This new method for modulating protein expression is currently being used in clinical trials for Deuchennes Muscular Dystrophy (DMD), but it also has potential for more common chronic disease treatments including cancer, cardiovascular disease, and Alzheimer’s disease.

According to scientists who have successfully skipped over mutated exons in clinical trials for Duchennes Muscular Dystrophy (DMD), “it is possible that bypassing dysferlin mutations could lead to more stable, (partly) functional dysferlin proteins and would therefore have therapeutic potential” (Aartsma-Rus et al. 2010).

In closing, Affymetrix has long been at the forefront of exploring the new genetic frontier and designing and marketing the tools used to negotiate this frontier. As such, Affymetrix has built a foundation of knowledge that will serve it well should it position itself for success in the third generation sequencing marketplace. Affymetrix has also added substantial value to the company in new products and technologies that have resulted from its prescient acquisition strategies that have not yet been fully realized.

-Affymetrix declined to be interviewed for this story.


*Transcription: The term indicates transferring information from DNA to RNA

*Translation: Indicates that in translating information from RNA to proteins the “language” changes from that of nucleotide to short (`10 base pair) amino acid.

* RNA polymerase: Eucaryotic cells, contain four or five different types of rRNA polymerases that synthesize a different class of RNA.

* Codon: A codon is the three-unit sequence (AUG, AGC, etc.) of mRNA nucleotides that code for a specific amino acid.

* Exon: A DNA sequence that codes information for protein synthesis that is transcribed into messenger RNA.

* Genetic Code: The correspondence between the sequence of bases in a codon and the amino acid residues it specifies is known as the genetic code.

* Ligation: The process of joining two pieces of DNA to a single piece through the use of ligase (DNA enzyme).

* Duchenne muscular dystrophy: A severe recessive form of muscular dystrophy characterized by rapid progression of muscle degeneration, eventually leading to loss of ambulation and death.

* Antisense oligonucleotide: DNA normally has two strands. The sense strand and the antisense strand. Only one strand codes for the RNA that is translated into a protein. This DNA strand is referred to as the antisense strand (oligonucleotide refers to short fragments of nucleic acids).

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