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Genaissance Lays Off 10 Percent of Staff Despite 115-Percent Jump in Q3 Revenue

NEW YORK, Nov. 9 (GenomeWeb News) - Genaissance Pharmaceuticals has laid off 10 percent of its workforce, or around 20 people, as the company continues to seek break-even from operations by the end of 2005, the firm said today.

 

The news comes three weeks after Genaissance said contract delays forced it to lower by around 20 percent its year-end revenue expectations, to between $20 million and $21 million from $25 million.

 

"This has been a challenging period for Genaissance," Kevin Rakin, president and CEO, said in a statement today. He said the staff reductions will "better position us to meet our goal of breakeven from operations by the end of 2005."

 

The move will save the company around $2 million per year beginning in 2005, according to a company spokesperson. Genaissance expects to book a $400,000 one-time charge for the lay-offs in the fourth quarter, the company said in the statement.

 

Investors yawned at the news as shares in Genaissance were up less than half a percentage point at $2 in mid-afternoon trade on the Nasdaq exchange today.

 

The staff reductions were announced as Genaissance posted a 115-percent increase in third-quarter revenue, to $5.6 million from $2.6 million year over year. The increase was "primarily" the result of Genaissance's acquisition of Lark Technologies, which closed in April. Without the acquisition, third-quarter revenue would have increased 37 percent to $3.2 million, according to Genaissance.

 

Receipts from licenses and research in the quarter ended Sept. 30 increased 47 percent to $2.8 million from $1.9 million, while revenue from lab services jumped 345 percent to $2.8 million from $625,000, the company said.

 

Genaissance said it spent around $4.7 million on R&D, a 13-percent decline from its R&D outlays during the same period one year ago. As a result, net loss remained flat at $5.9 million, or $.20 per share.

 

The company said it had around $6.9 million in cash, equivalents, and marketable securities, and an additional $5 million in working capital as of Sept. 30.

 

According to Genaissance, "a majority" of the lay-offs will be made in R&D. The company took the steps to "align the company's operating structure with its current and projected revenues and reduced expenses in certain other areas."

 

"Our business is partly influenced by our customers' drug development timelines that can cause a delay in the timing of revenues," Rakin said in a statement Oct. 21 when Genaissance announced its expected 20-percent year-end revenue short-fall. "Overall, we believe we can grow our revenue in 2005 in excess of 20 percent over 2004."

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