A small player in the new DNA-probing business, Affymetrix (AFFX) has struck strategic alliances with some drug biggies. Among its newest partners: Merck and Hoffmann-La Roche. Also, British drugmaker Glaxo Wellcome owns a 34% stake. What's Affymetrix' attraction? The company, which went public in June at 15 a share, has developed a genetic-information system called GeneChip. It aims to improve the diagnosis and treatment of various diseases by helping manage genetic information.
Affymetrix will supply GeneChip instruments to Merck, along with its DNA-probing arrays. Hoffmann-La Roche will also use the GeneChip. Both Merck and Hoffmann have started feasibility studies to see whether GeneChips can be used in their gene research. If tests succeed, both will negotiate broader agreements with Affymetrix.
In addition, the company has signed a pact with France's BioMerieux Vitek to produce kits for bacterial identification and antibiotic-resistance analysis. BioMerieux will market the kits worldwide. Affymetrix also plans to make a disposable GeneChip for BioMerieux' clinical diagnostic system.
One New York manager who has been accumulating shares, now at 18, figures the stock could double in 12 to 18 months. Analyst David Crossen of Montgomery Securities, one of the underwriters that took Affymetrix public, expects it to start making money next year. He thinks GeneChip's potential is "open-ended" and could bring revenues of $150 million by 2001.