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Is Affymetrix, Inc. Stock Sour After A Poor 2012?

In 2012, most analysts/investors rated, in fact, still rate Affymetrix, Inc. (NASDAQ: AFFX) a sell mainly because of its poor share performance throughout the year. Truth be told, this stock has been pretty unstable since 2010, when it used to trade in the range of $10 per share. However, the tide seems to be turning for Affymetrix, given its improved earnings results as well as entry into the Korean genomic market. The entry into the Korean genomic market is the latest from the company, having entered into partnership with DNA Link, Inc. (127120: KS), a Korean genomics-based biotechnology company.

About the Agreement

It is a Powered by Affymetrix™ Program agreement, which gives DNA Link a worldwide license to develop and commercialize a forensic test for comprehensive human identification and other diagnostic tests using Affymetrix' microarray technology and the Korea FDA (KFDA) cleared GeneChip® System 3000Dx v.2. Affymetrix noted that DNA Link is its first Korean partner. According to Dara Wright, Vice President of Clinical Applications Marketing at Affymetrix, this agreement opens the gate into the Korean genomic market for Affymetrix and its partners.

The first good thing about this deal is that it extends the market reach of Affymetrix to an entirely new location. This is in line with the company's plans to improve its customer base through strategic alliances. Second, considering that most of its partner's expenses on R&D have declined significantly, (some due to governmental regulations) this agreement brings freshness to the program. Overall, I expect this partnership to help Affymetrix build on the improvement in earnings that it reported for 2012. It's difficult to say, but I also suggest that this agreement will bring about some improvement in its share performance.

I'm not saying this just because I want to speculate on this deal. I took a moment to check on DNA Link in order to figure out what its business activities looks like. I found that DNA Link is relatively healthy. Its revenue grew by about 44.5 percent in 2011 when compared to 2010. Its EPS is also impressive. One other thing I found about DNA Link is that its results improve significantly across board on a yearly basis. This is just the sort of company with which Affymetrix needs to partner.


Considering all that's been said, I'd rate Affymetrix a hold, at least for the time being. Investors should be on the lookout for any development regarding this partnership, as it could influence its share price. If Affymetrix can secure a couple more deals of this sort within this year, 2014 could be the year this stock would be a good buy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.