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SNPTech Reporter/Third Wave Makes its Move into Molecular Diagnostics


By Kirell Lakhman


If CEO Lance Fors follows through on his word, Third Wave will not be the same little Wisconsin genotyping company in 2004 that it was last year.

In the waning days of 2002, the company was putting finishing touches on a massive restructuring that saw headcount shrink by 125 people. Falling revenue and rising net losses also forced it to shutter in-house oligonucleotide manufacturing for research projects, sell much of its manufacturing equipment, and shave its break-even point to the low $40 millions from $125 million.

Then, six months ago, Fors announced that the company would henceforth focus on building its clinical molecular diagnostics business.

Today, Rod Hise, manager of corporate communications, says Third Wave is beginning to fulfill that promise.

To be sure, Third Wave is not totally abandoning its old approach. Hise confirms that the company will continue to sell its Invader product for genotyping, but it will increasingly use that product to make analyte-specific reagents.

Though first-half revenues and R&D spending continue to fall year over year (see table below), the company is marking modest growth in its nascent diagnostics business as it nears the end of 2003. Year-over-year clinical molecular diagnostic revenue for the first and second quarter doubled, Hise says. And while the company is still clearly in transition, Hise says it’s “on track.”

The track, he says, is to evolve from a company that relies predominantly on revenue derived from low-margin, one-time sales of large genetic research projects to one that can generate recurring higher margin clinical diagnostic product revenues.

A couple of recent wins have added to Third Wave’s new confidence. A patent-infringement skirmish with EraGen ended recently with Third Wave promising to drop a lawsuit that it filed last September in exchange for EraGen agreeing to cease developing and selling its Gene Code products 1.0, 1.2, and 1.3; EraGen will no longer use technologies employing invasive cleavage. And the company has disclosed that researchers at Japan’s Riken Center and the University of Tokyo have begun using the Invader technology to analyze their country’s share of the genome for the HapMap Project.

Though Third Wave’s R&D spending dropped between the first half of 2002 and 2003, Hise is unfazed. Asked if spending will pick up in the second half, he says, “We are very comfortable with the resources we have behind building what we think will be a very attractive product pipeline that will secure the long-term growth of the company.”

This report was adapted from an interview with Third Wave communications director Rod Hise that appeared in the July 31 edition of SNPTech Reporter. The interview was one in a series of Q&As with executives from nine different pure-play SNP genotyping companies.


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