By Debbie Strickland
Santa Clara, Calif.-based genomics specialist Affymetrix Inc. has inked its most lucrative deal to date, a three-year subscription-based supply agreement worth at least $15 million with F. Hoffmann-La Roche Ltd., headquartered in Basel, Switzerland, and its subsidiaries worldwide.
Roche is the first subscriber to Affymetrix's new EasyAccess program, which grants access to custom and standard GeneChip expression arrays, as well as to GeneChip instrumentation for simultaneous monitoring of the expression of thousands of genes.
Five Roche sites will fully participate: Basel; Welwyn, U.K.; Kamakura, Japan; Nutley, N.J.; and Roche Bioscience, in Palo Alto, Calif.
"EasyAccess is designed for large pharmaceutical companies that want to do tens to hundreds of millions of data points of analysis," said Edward Hurwitz, Affymetrix's vice president and chief financial officer. "We offer [subscribers] a volume discount, so when they reach a certain threshold of usage, the products become cheaper and cheaper."
In addition to EasyAccess, Roche also will have access to commercially available genotyping and resequencing applications, such as Affymetrix's GeneChip assay for the human p53 tumor suppressor gene.
The contract calls for payments of at least $5 million per year, beginning Jan. 1, 1998, and ending Dec. 31, 2000. The base rate has "substantial profits" built in, according to Hurwitz.
"Affymetrix is prepared to deliver tens of thousands of GeneChips over the three-year period," he said. "They pay us three ways. They pay us up-front subscription fees, they pay us to design the chips, and they pay us a flat rate for each chip we deliver."
The GeneChip system consists of disposable DNA probe arrays containing gene sequences on a chip, instruments to process the probe arrays and software to analyze and manage genetic information.
Roche plans to employ the Affymetrix technology in its drug discovery program, both in the identification of targets and the development of therapeutics. Diagnostics are not included in this agreement.
As for Affymetrix, the company will be seeking similar partnerships with other pharmaceutical companies.
"If we can repeat this deal structure with other appropriate research organizations, we will be able to build a substantial near-term operating business servicing the genomics research field," said Hurwitz.
In the first half of 1997, Affymetrix more than doubled its revenues, hitting $10.24 million, up from $4.87 million for the comparable period in 1996. The company's net loss for the six-month period totaled $10.13 million, up from $7.70 million in the 1996 period. As of June 30, Affymetrix had cash and cash equivalents of $94.65 million.
The company's shares closed Tuesday at $34, down $0.125.
Affymetrix also has agreements with bioMerieux Vitek Inc., of St. Louis.; DNAX Research Institute (a subsidiary of Madison, N.J.-based Schering Plough Corp.), of Palo Alto, Calif.; Genetics Institute Inc., of Cambridge Mass.; Glaxo Wellcome plc. (which owns an equity stake), of London; Hoechst Marion Roussel Inc., of Kansas City; Incyte Pharmaceuticals Inc., of Palo Alto, Calif.; Hewlett-Packard Co., of Palo Alto, Calif.; Merck & Co., of Whitehouse Station, N.J.; OncorMed Inc., of Gaithersburg, Md.; Pfizer Inc., of New York; and Pioneer Hi-Bred International Inc., of Des Moines, Iowa.
In April, the company joined a research consortium with Millennium Pharmaceuticals, of Cambridge, Mass., and Bristol-Myers Squibb Co., of New York, to sponsor research at Massachusetts Institute of Technology, in Cambridge. *