It wasn't exactly business as usual Wednesday at Affymetrix Inc., which struck separate financial and product development deals announced hours apart.
The Santa Clara, Calif.-based firm agreed to collaborate with privately held NuGEN Technologies Inc. to incorporate technology offerings from both companies. Almost simultaneously, it said it priced $100 million worth of 0.75 percent senior convertible notes. Affymetrix also said it would buy back the remaining $102 million worth of 5 percent notes due in 2006, and plans to buy the remaining $165.5 million worth of 4.75 percent notes due in 2007, subject to closing its 0.75 percent debt offering.
With San Carlos, Calif.-based NuGEN, Affymetrix will work to develop the former's Whole Transcript Amplification (WT-SPIA) system for use with its GeneChip technology. NuGEN plans to develop amplification reagents that replicate the entire length of mRNA transcripts and are optimized for use with GeneChip technology.
"This is a significant event because it will provide the research community, and ultimately the medical community, with a tool that will enable a much better understanding of what's really going on in diseased tissues vs. normal tissue," NuGEN President and CEO Jan D'Alvise told BioWorld Today. "What our technology does now, for which Affymetrix is developing a complementary chip, is to interrogate these genes or mRNA transcripts along the entire length of the gene. So instead of just getting information about what's going on in the first 1,000 bases or so, it's now going to tell you that if there is a splicing event, how it was recombined and what it tells us about the impact on the disease being studied."
Such a broader focus could overcome limitations of today's microarray and sample preparation technologies, which she said are focused toward one end of the mRNA, and even then only look at a short distance along that sequence. The WT-SPIA technology will be applied in identifying splice variants.
Alternative mRNA splicing is used to expand the diversity of gene products because an estimated 60 percent of human genes undergo alternative splicing of their coding units, or exons.
"We're experts in developing amplification and labeling technologies," D'Alvise said. "We'll work to take our core technology and optimize it for the new Affymetrix GeneChip. This is the first time that the sample preparation technology has been invented and developed for a specific chip."
Affymetrix will supply its microarray technology as well as bioinformatics content knowledge, such as sequences of probes and their design that match with different portions of a gene.
Following the collaborative research efforts, the companies plan to develop their new target amplification method to support next-generation GeneChip arrays. The microarrays are helping fuel Affymetrix, as it recorded $34.3 million in GeneChip-related revenue during the quarterly period ended Sept. 30, nearly half of its total three-month revenue of $76.2 million. The company also posted a $5.8 million profit during the period.
The collaborative deal's financial terms were not disclosed, though Affymetrix did lay out terms of its debt offering. Due in 2033, the notes carry a conversion rate of about 32.2 common shares per $1,000 principal amount of notes, representing a conversion price of $31.01 per share. The initial conversion price represents about a 28 percent premium over $24.23, the last reported sale of Affymetrix shares on Dec. 9.
The notes will be redeemable at the company's option beginning Dec. 15, 2008, at a redemption price of 100 percent of their principal amount. Noteholders will have the right to require Affymetrix to repurchase some or all of the debt on Dec. 15 of 2008, 2013, 2018, 2023 and 2028, and upon a fundamental change of the company at a repurchase price of 100 percent of their principal amount.
Affymetrix also granted the initial purchasers an option to purchase an additional $20 million worth of notes.
The company then called for all of its outstanding 5 percent notes, with a redemption date set for Jan. 9. Each note will be redeemed for cash at a price of 101.7 percent of their principal amount, plus accrued and unpaid interest to that date.
Subject to the completion of the latest note offering, Affymetrix plans to fund its 4.75 percent note redemption with proceeds from the note sale and available cash. Through Sept. 30, the company reported $329.6 million in cash, cash equivalents and available-for-sale securities.
On Wednesday, Affymetrix's stock (NASDAQ:AFFX) dropped $1.27 to close at $22.96 Company officials could not be reached for comment.