Affymetrix-eBioscience Deal Delayed

Affymetrix (AFFX - Analyst Report), a leading provider of microarray-based products and services, recently announced that its proposed merger with eBioscience will be completed in January 2012 against the original expectation of fourth quarter of the current fiscal. The company has cited additional work associated with debt financing for the merger as the reason behind the delay.

Last month, Affymetrix announced its intention of acquiring privately held eBioscience for $330 million in cash. The San Diego, California-based company is a leading player in the field of flow cytometry and immunoassay reagents for immunology and oncology research, and diagnostics.

The acquisition will significantly boost Affymetrix’s foothold in the fast-growing immunology, oncology and translational medicine markets, representing an annual opportunity nearing $3 billion. It will diversify the company’s revenue base, expand its product range (to include a vast array of reagents) and reinforce its growing molecular diagnostics business.

Affymetrix is a leading provider of microarray-based products and services to the global research community. Along with Illumina (ILMN - Snapshot Report), it is one of the two major providers of microarray technologies, primarily used in the field of genetic research. Affymetrix holds a leading position in the gene expression products and services market.

Affymetrix is pursuing a number of strategies (including expansion into new markets such as cytogenetics and cancer research) aimed at expanding its top line. The company is shifting its R&D focus from discovery and exploration markets to the faster-growing validation and routine testing markets.

However, Affymetrix is operating in an intensely competitive industry and faces risks associated with lower R&D spending by its customers due to a soft economy and government actions including budget cuts. Affymetrix is exposed to a volatile funding environment.

Decline in government research grants have had an adverse impact on the Life Science Tools segment across the board affecting major players such as Life Technologies (LIFE - Analyst Report) and Thermo Fisher Scientific (TMO - Analyst Report).  

We are currently Neutral on Affymetrix, in line with the short-term Zacks #3 Rank (Hold).

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