Nanogen last week said that recent acquisitions led to a 37-percent increase in first-quarter sales, and the company provided greater insight into the status of its flagship NanoChip 400 System.
Nanogen's revenues for the quarter ended March 31 rose to $4.4 million from $3.2 million in the same period in 2005. Product revenues nearly doubled to $2.1 million from $1.2 million in the prior-year period, while revenues from license fees rose slightly to $1.8 million from $1.7 million in the first quarter of 2005.
Nanogen attributed the increase in product revenues to its recent acquisitions of Spectral Diagnostic's cardiac test business and Amplimedical, two firms that specialize in RT-PCR-based tests (see BAN 12/21/2005, BAN 4/25/2006).
According to a company official, the first-quarter results underscore Nanogen's shift from selling microarrays to specializing in RT-PCR, and highlight the fact that its NanoChip 400 System has yet to significantly contribute to sales.
During a conference call last week, David Ludvigson, Nanogen's chief operating officer, said that the NanoChip 400 System, which the firm rolled out in October 2005, is still undergoing its initial launch (see BAN 10/26/2005).
Ludvigson said that the first NC400 units have shipped to clinical laboratories in the US and to its non-US distributors. He said that the first users of the system are now developing their own assays using Nanogen's menu of analyte specific reagents.
Nanogen claims the 400-site array is suitable for developing homebrew molecular assays in mid- to high-volume clinical and research laboratories.
"The initial users of the system are developing their own assays using the open platform capabilities of the system, and some of the customers are also purchasing reagents from us for genetic disease testing applications," Ludvigson said.
Ludvigson also said that, due to its instrumentation rental policies, the NanoChip400 had yet to significantly contribute to the company's revenues.
Nanogen has maintained that it will take time for the NC400 to build momentum in the marketplace.
In November 2004, CEO Howard Birndorf told BioArray News that it could take "some time to make inroads" into the clinical lab market."
"We're not going to sell a hundred of these in the first month. [But] we think we now have a competitive product," Birndorf said at the time.
"Shipments to US customers are primarily being done on reagent rentals. Use of the reagent rental model has delayed the revenue ramp as customers and usage ramp over time," Ludvigson said last week.
Operating Cost Increase
While acquisitions helped bolster Nanogen's revenues in the first quarter, the company also reported a boost in operating expenses that led to a 46-percent increase in net loss for the period.
Nanogen said that its net loss widened to $12 million, or $.21 per share, compared to $8.3 million, or $.17 per share in the same period of 2005.
The company said that its $14.2 million in total operating expenses included $1.4 million in non-cash accounting expenses for share-based compensation, compared to $300,000 in share-based compensation in the prior-year period. In addition, the company recorded expenses related to its investment in Jurilab, which were not included in last year's results.
R&D spending also rose, to $6.3 million in the first quarter of 2006 from $4.9 million in the prior-year period. As of March 31, the company held $12.3 million in cash and cash equivalents. Including short-term investments, that figure was $32.4 million.
During last week's conference call, Birndorf said that a pair of recent investments in Nanogen would provide it with the operating capital necessary to continue its missions to "build on the platforms [it has] developed, significantly grow revenue, and steadily reduce [its] operating cash use."
Thermo Fisher Scientific, as well as a $25 million equity financing line from Azimuth Opportunity, announced this week, would provide Nanogen with access to "flexible capital" over the next 18 months (see BAN 3/21/2006, Briefs, this issue).
"I expect [the Fisher] investment will be the initial step in a continuing collaborative relationship with Fisher as they look to Nanogen and our technology to help them develop their molecular and research diagnostic offering," Birndorf added.
— Justin Petrone ([email protected])