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 Reports and Commentary from the Investment World

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Affymetrix (AFFX:NASDAQ)

The genomics-based Affymetrix has a complete monopoly on automated genetic analysis technologies, utilized by nearly every drug discovery company, and considered the gold standard in the industry. The company produces strong revenue while maintaining forefront in diagnostic technologies.

Yet, in the last year the stock has been hammered from a high of US$52.44 to below US$20 at present.Right now, you can pick up Affymetrix, a stronghold in biotech, for about as cheap as it’s ever been.

Affymetrix scientists invented the world's first high-density microarray in 1989 and began selling the first commercial microarray in 1994. Since then, Affymetrix GeneChip(r) technology has become the industry standard in molecular biology research.

Affymetrix technology is used by the world's top pharmaceutical, diagnostic and biotechnology companies as well as leading academic, government and not-for-profit research institutes. More than 1,400 systems have been installed around the world and nearly 4,000 peer-reviewed papers have been published using the technology.

Affymetrix' patented photolithographic manufacturing process provides the most information capacity available today on an array, enabling researchers to use a whole-genome approach to analyzing the relationship between genetics and health. Affymetrix is headquartered in Santa Clara, Calif., with manufacturing facilities in Sacramento, Calif., and Bedford, Mass.

The company maintains important sales and marketing operations in Europe and Asia and has about 1,100 employees worldwide.

Under the Powered by Affymetrix program, companies license technology from Affymetrix to develop innovative microarray products. This includes the GeneChip(r) System 3000Dx (GCS3000Dx), the first microarray instrumentation system for molecular diagnostic laboratories. The GCS3000Dx has been granted regulatory clearance by the U.S. Food and Drug Administration and is CE marked in the European Union for in-vitro diagnostic use.

The custom-designed technology is being used in many applications, including clinical diagnostics, forensics, animal, industrial, and food testing.

Affymetrix' GeneChip(R) technology uses semiconductor manufacturing techniques with advances in combinatorial chemistry to build vast amounts of biological data on a small glass chip. Brooks supplies a number of applications designed to automate, track and trace all manufacturing-related activities including work-in-process, quality and  equipment engineering.

The Brooks MEDIC suite provides real-time applications, services and solutions allowing medical device manufacturers to link each 'pillar' of their operational and business systems into a House of Compliance(TM) for complete regulatory process management across the enterprise.

The MEDIC suite allows device manufacturers to drive GMP-compliance into their manufacturing operations by integrating specific solution-based pillars as their business needs grow over time. The Brooks MEDIC solution suite is based on a manufacturing compliance framework that utilizes a service-oriented architecture (SOA) and leverages composite applications. The resulting risk avoidance framework provides the 'intelligence' and analytics required to make faster, more accurate decisions to derive greater strategic value  from a manufacturer's investment.

Affymetrix has recently granted Epigenomics, (a company based in Berlin and with a wholly owned subsidiary in Seattle, USA), non-exclusive access to Affymetrix microarray technology to develop
and market microarray-based in-vitro diagnostic (IVD) tests for oncology and other indications. Epigenomics is a molecular diagnostic company with a focus on the development of novel products for cancer.  By detecting and interpreting DNA methylation patterns, Epigenomics' tests can potentially diagnose disease at an early stage and help guide physicians to select an appropriate therapy.

Epigenomics collaborates with Roche Diagnostics on the development of several diagnostic products in cancer. The agreement complements Epigenomics' previously announced strategic alliance with Qiagen N.V. for sample preparation. Together, with the Affymetrix arrays and DNA analysis instrumentation, Epigenomics can now provide a complete platform for its pathology tests based on its proprietary DNA methylation methods.

The first products based on this platform will be pathology tests in prostate and breast cancer. As the first example, Epigenomics is planning to transfer its Molecular Classification Test (MCT) for prostate cancer onto the Affymetrix platform to use it in the pivotal clinical trial for FDA approval of the assay, which is scheduled to start next year. 

"The agreement is another important step to turn Epigenomics into an integrated diagnostics company," said Alexander Olek, CEO of Epigenomics. "It has been our main focus over the last year to obtain gold-standard solutions for our own diagnostic products so that we can start marketing must-have diagnostic products meeting the highest industry standards.

The 'Powered by Affymetrix' program allows us to join in to the Affymetrix open  platform concept, which already provides Affymetrix diagnostic partners, among them several global players, with an excellent opportunity to benefit mutually from their respective strong placement power."

"Last year, we closed a strategic alliance with Qiagen to develop a cutting-edge solution portfolio for sample preparation," Olek added. "While the Qiagen alliance will provide us with robust, reliable, and easy-to-use kitsfor the preparation of clinical samples to enable the actual DNA methylation test, the agreement with Affymetrix now adds the industry standard for DNA analysis.

As a result, our customers will get the world's leading technologies for rapid and reliable DNA methylation analysis."   "The microarray-based tools and applications in the Powered by Affymetrix(TM) program are accelerating the  discovery and development of oncology companion and predictive diagnostics in this era of molecular medicine," said Noel Doheny, senior vice president, Molecular Diagnostics at Affymetrix. "We are pleased that another innovator in the diagnostic field like Epigenomics has adopted our proven technology platform for its in vitro diagnostic products."

Methylation is a natural epigenetic process that occurs when a methyl group binds to one of DNA's four bases, cytosine. The presence of methylation is responsible for controlling the activity of genes by turning them off, like a switch, when not needed. By measuring the differences in the methylation patterns between healthy and diseased tissue, a change in gene activity that could trigger diseases such as cancer is detected. 

Epigenomics has developed an industrial process that is able to read and interpret these methylation patterns.  By detecting and interpreting DNA methylation patterns, Epigenomics' tests can potentially diagnose disease at an early stage and help guide physicians to select an appropriate therapy.

On July 27th Affymetrix Inc. and CapitalBio Corp. said that they will collaborate to provide genotyping services in China. Affymetrix will provide its human mapping array set, which enables researchers to search across the entire genome in detail to find genes involved in disease or drug response. Beijing-based CapitalBio, a life sciences company, has been working with Affymetrix on joint research and development and commercialization programs.

A day later Affymetrix, also announced that Giulia C. Kennedy, Ph.D., Senior Director of Genomics Collaborations, will provide an overview of applications of Affymetrix technology in oncology research and clinical studies at the Baird 2006 Focus on Oncology Conference in New York, NY. A live webcast of the presentation will take place  at 9:35 a.m. ET on Wednesday August 2, 2006. An archived webcast will be available for 30 days.

Affymetrix's share price has been hovering around US$23 but it slumped further last night in after market trading, to below US$20, when it missed its earning targets for the last quarter. At these prices it is a compelling buy. Its high for the last 52 weeks was US$52.44.

It is a leader in its field and it should reap good rewards from its recent joint ventures. We believe that Affymetrics could be the next turnaround stock in our portfolio.

Buy Affymetrix (AFFX:NASDAQ) up to US$25. We dont think we'll have to wait too long to see a profit here.



Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.