By Karen Pihl-Carey
Affymetrix Inc. plans to raise $100 million through a private offering of convertible subordinated notes due 2006.
The offering should be completed later this month and will be convertible into common stock at the option of the holder and at a price to be determined. The company also has the option of issuing an additional $25 million of notes.
The Santa Clara, Calif.-based company declined to release any further details.
Darren Mac, an associate analyst with Everen Securities Inc. in Chicago, said the company is looking to aggressively build its manufacturing capacity in order to maintain its leadership position.
"We are expecting them to double their manufacturing capacity by the end of the second quarter, June of 2000," Mac told BioWorld Today. "That's probably a major use of funds here."
News of the private offering follows Monday's announcement of the company's signed agreement to acquire a DNA array technology company, Genetic MicroSystems Inc. (GMS), of Woburn, Mass., in a deal expected to involve about 1 million shares, or 4 percent, of Affymetrix stock for all outstanding shares of GMS. It was unclear if the company's stock price, which rose significantly Monday, would affect the number of shares issued in the acquisition. (See BioWorld Today, Sept. 14, 1999, p. 1.)
Affymetrix stock (NASDAQ:AFFX), which gained nearly $20 Monday on news of a favorable patent ruling to $121.062, closed Wednesday at $108.937, down $8.125.
For the quarter ended June 30, the company reported a net loss of $6.9 million on revenues of $21.7 million. Affymetrix had $89 million in cash at the end of the second quarter.
A company spokeswoman told BioWorld Today that company executives were in meetings in New York and could not comment Wednesday on the offering, acquisition or patent case.
Affymetrix CEO Stephen Fodor, commenting on the GMS acquisition, said in a statement that DNA arrays are the tool of choice for discovering new technologies to help with the understanding of biology and disease. Affymetrix's GeneChip technology can perform quantitative and reproducible gene expression studies, but the company needed low-volume, user-defined DNA arrays for analyzing unknown genes or for more directed studies of particular genes, he said.
"The acquisition of GMS will allow us to immediately enter this array market and thus provide an integrated solution to accelerate the adoption of DNA array technologies in the scientific research community," Fodor said.
Once the merger is complete, Affymetrix will offer the GMS product line as a complement to its GeneChip platform for acquiring, analyzing and managing genetic information.
The merger offers researchers a broader technology platform, Mac said.
"One of the reasons for the merger is the strong patent position," he said. "With that dominant position and the purchase of the spotted array manufacturer, it really is sending a signal to the market of these other companies that some of them might not want to enter that market because of Affymetrix's patent position."
The favorable ruling by the U.S. Patent and Trademark Office involved Affymetrix's patent infringement lawsuit against Palo Alto, Calif.-based Incyte Pharmaceuticals Inc.'s use of a chip microarray system. Incyte had requested two of Affymetrix's patents be found in interference with two pending Incyte patents, but the PTO denied the request.