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Arrayit Q1 Revenues Rise 47 Percent on Microarray Demand

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This story has been updated to include information from a recent filing with the US Securities and Exchange Commission and comments from a company official.

By Justin Petrone

Arrayit this week said that its first-quarter revenues jumped 47 percent — a sales spike that CEO Rene Schena attributed to "increasing use of the Arrayit platform and increasing market share."

Schena said in a statement that the Sunnyvale, Calif.-based company will "continue to aggressively innovate and bring new products and services to market."

According to the company's first-quarter results, total revenues for the three months ended March 31 were $977,267 compared to $664,858 in the year-ago quarter. The firm's net loss narrowed 98 percent to $17,561 in the first quarter of 2011 from $724,972 in the same quarter a year earlier.

Paul Haje, Arrayit's vice president of sales and marketing, told BioArray News this week that Q1 revenue growth was "driven primarily by sales increases of our life sciences instruments, and expanded research test sales through the services division."

SG&A costs for the quarter declined 57 percent to $368,399 from $848,541 in the year-ago quarter. In a filing with the US Securities and Exchange Commission, the company attributed the drop in SG&A expenses to a "reduction in shares issued in lieu of cash compensation and for services rendered by consultants."

Q1 R&D costs decreased dramatically, falling 86 percent to $11,055 from $76,275 in Q1 2010. Arrayit attributed most of its R&D expenses in the past year to the development of its SpotBot Extreme Microarray Printer.

Still, despite the improved performance, Arrayit said it ended the quarter with just $143 in cash.

According to the company's SEC filing, Arrayit spends a "significant amount of its resources" on developing clinical protein biomarker diagnostic products and services, and it "does not expect to generate substantial revenue until certain diagnostic tests are cleared by the United States Food and Drug Administration and commercialized."

Moreover, Arrayit management believes that current available resources will not be sufficient to fund its planned expenditures over the next 12 months. Because of this, Arrayit will have to raise additional capital to support its activities. Specifically, Arrayit may require as much as $1.2 million over the next year to meet its expenses, the firm said.

Haje said that Arrayit "remains open to structuring a capital raise on favorable terms to the company." With revenues and gross margins increasing, though, he said the "investment timeline is flexible."

Including accounts receivable and inventory, Arrayit had $456,634 worth of assets as of March 31.

The company's dwindling cash position comes as it awaits a multi-million-dollar legal settlement related to ongoing litigation between the firm and Pediatrix Screening.

The case evolved out of a contract dispute between the firms, which had initially sought to co-develop array-based tools for newborn screening.

Arrayit and Pediatrix went to trial in the United States District Court in the Western District of Pennsylvania in 2007. The jury awarded Arrayit $5 million in damages for Pediatrix's breach of contract, fraudulent misrepresentation, and punitive damages, while awarding Pediatrix $1 million for Arrayit's breach of contract.

According to the SEC filing, Pediatrix put $5 million in bond, and submitted an appeal to the Third Circuit Court of Appeals to request that the damages be reduced. Last year, that court ordered a new trial on Arrayit's counterclaim for fraudulent misrepresentation and damages. The case is awaiting a status conference later this month.

Haje declined to comment on the case.

Founded in 1996, Arrayit offers a menu of arrays, reagents, instrumentation, and data analysis software for research use, as well as services. The company has looked to expand into the molecular diagnostics market since it went public in 2009 (BAN 5/12/2009).

In April, Arrayit launched OvaDx, an "array-based blood test that measures the activation of the immune system in response to early stage ovarian tumor cell development." The firm said that the assay, which is advertised for research use, could be used to "analyze different tumor types and stages, the effectiveness of chemotherapies, biomarker profiles in breast cancer and other epithelial cancers, benign gynecological conditions, the efficacy of ovarian cancer drugs for treatment and prevention, and to benchmark existing tests." The firm is charging $650 for OvaDx.

Arrayit said last week that it now offers an assay for Parkinson's disease research called PDx. Haje clarified this week that Arrayit is "finalizing the markers" for PDx and said the assay will be "available for research use shortly."

In 2009, Arrayit announced a partnership with researchers in the neurodegenerative division of the Parkinson's Institute and Clinical Center, also located in Sunnyvale. The institute researchers planned to use Arrayit's Human Genome H25K array to look for biomarkers linked to Parkinson's disease (BAN 4/14/2009).

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