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As Transgenomic Cuts 80 Staffers, Diagnostic Market Beckons

NEW YORK, Jan. 3 - Transgenomic has laid off 80 of its employees, or approximately one out of every four people, including its CFO, as it takes steps to save cash, the company said today.

 

The company said it plans to take a one-time restructuring charge of between $3 million and $4 million in the fourth quarter, which ended Dec. 31.

 

The CFO, Gregory Duman, will be replaced by Bill Rasmussen while Transgenomic looks for a replacement.

 

It was not immediately clear in which departments the staff cutbacks were made, and an official from Transgenomic did not immediately return telephone calls seeking comment.

 

Though the restructuring is largely the product of lackluster sales of Transgenomic's Wave instruments, the move will not affect the company's strides to clear a path into the diagnostics market, according to statements made by CEO Collin D'Silva in November and reaffirmed today.

 

"We are optimistic about emerging opportunities to leverage our Wave technology in several higher-value markets, including molecular diagnostics and oncology-related theranostics," D'Silva said. In other words, he wants to help make the Wave machine a staple in US-based molecular-diagnostic labs, and in the process take a swing at a sliver of a market that some say may reach $3.7 billion by 2006.

 

In an interview with GenomeWeb in November, Rob Pogulis, Transgenomic's director of strategic planning, the firm is "really in the early-going here to just enhance targeting of institutions, entities, and individuals involved in clinical-diagnostic testing. So that's the first step at this point," he said. "We're not necessarily fleshing out lots of details, but we certainly want to make a concerted effort to advance the Wave technology into the [US-based] clinical-diagnostics setting."

 

To be sure, moving the Wave platform from the bench to the clinic would not be a logistical stretch--clinics in the UK and France already use the technology to help diagnose colon cancer and cystic fibrosis. One challenge would likely be in overcoming US regulatory requirements.

 

Because the Wave instrument does not have 510K marketing clearance, its use in the United States is limited to CLIA lab settings. And because molecular diagnostics are regularly performed in CLIA labs, Transgenomic can first "look for opportunities with those sorts of users," Pogulis explained.

 

But don't look for Transgenomic to spend any additional cash to get there. In fact, back in November, Pogulis foreshadowed today's cutbacks when he  stressed that Transgenomic's downstream designs do not necessarily portend an increase in R&D spending or in sales and marketing efforts. "There's really not a whole lot to develop other than optimizing the specific PCR amplicons for the genes of interest," he said at the time.

 

While Pogulis wouldn't disclose Transgenomic's timeline--or whether the company has in fact nailed down a schedule--some analysts caution the move into the clinical lab would take a long time to realize.

 

"Our view is very long-term," RBC Capital Markets analyst Thomas Flaten said in early November. "This is not a market that is going to explode over the next year or two. Does the [Wave] technology have an opportunity in diagnostics? Sure. Is it something I would build into a model for next year or the year after? No--unless we saw some extremely compelling evidence of them ... producing ASRs"--so-called home-brew diagnostics.

 

These days, likely Transgenomic competitors Nanogen and Third Wave Technologies have already begun their migration downstream by courting the home-brew market with novel ASRs, according to Flaten. "That's likely going to be the first entry for a lot of these diagnostics as they gain some type of traction in the market. At that point companies will make the decision whether to run down the 510K path," he said.

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