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Genomic Solutions Says Sept. 11 Attack Hurt Q3 Revenues: Sells GeneTac System to Rice Institute

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Genomic Solutions said last week that its third-quarter revenue would be lower than originally expected, blaming shrinking orders and economic uncertainty in the wake of the attacks on the World Trade Center and the Pentagon on Sept. 11.

Separately, the company announced that its global distribution partner, PerkinElmer, sold a GeneTac Biochip system to the International Rice Research Institute in Los BaÒos, Phillippines. The Institute, which studies rice genomics, plans to use the GeneTac system to set up a microarray facility.

Genomic Solutions said its third quarter revenues would total between $3.5 million and $3.7 million. These figures compare to a projection the company made at the end of the first quarter that its revenues for the third and fourth quarters would increase between 40 and 50 percent over 2000, meaning third-quarter revenues at between $7 million and $7.5 million.

“The market is quite different since first quarter,” said Kathleen Murphy, Genomic Solutions’ vice president of corporate communications. “Based on 1999 performance, market dynamics, and trends, our expectations of growth were reasonable. The market downturns, coupled with economic downturns have changed the picture.”’

The reason the September 11 attacks affected Genomic Solutions business so much, the company said, was that it expected to record an increase in orders at the end of the quarter.

“This had a major impact because customers couldn’t fly here for onsite demos, and we couldn’t get to them,” said Shannon Richey, the company’s vice president of Marketing. “ We couldn’t ship consumable products because you had to be concerned about whether it would make it to the customer. All of these things are difficult for us to have at the end of the quarter.”

The revenue warning comes just weeks after Genomic Solutions announced it would slash 25 percent of its workforce and restructure its business in an effort to achieve profitability by next year. This decision accompanied the company’s announcement that it was acquiring arraying equipment maker Cartesian Technologies for 6.8 million shares of common stock, options to buy 449,319 shares of common stock, and $2.5 million in cash.

This acquisition and layoff process, Richey said, has not been delayed by the September 11 events and is proceeding “right on target.”

As for the long term, the company said it still hews to projections that it will achieve profitability early next year.

“We have strong confidence that this isn’t going to be a long term thing,” Richey said. “We still have people interested in our product and though we’ve seen a delay in orders due to the September 11 event, all of us expect this to pick up.”

The IRRI purchase, however, is the only publicly announced sale of a biochip instrument that Genomic Solutions made during the quarter, indicating that the company’s troubles may reach farther back than the September 11 tragedy.

A slew of companies, from Affymetrix and Agilent to Motorola, have reported that the tragedy did not substantially affect their business, while the only other genomics company to report a negative effect was Qiagen, which derives a large portion of revenue from consumables delivered on short notice.

On the upside, Genomic Solutions appears to already be benefiting from the acquisition of Cartesian. September 11, the company announced that Cartesian had licensed liquid handling devices from GlaxoSmithKline.

This device is “technically elegant, cost-effective and particularly applicable to dispensing low volumes of compounds with a high level of volumetric accuracy, key to the miniaturization of assays used in high-throughput screening throughout the pharmaceutical industry,” a Genomic Solutions statement said.

Genomic Solutions and Cartesian plan to introduce liquid handling systems based on this technology.

The company said it plans to release financial results for the quarter November 1.

— MMJ