In February, Nanogen, the San Diego-based electronic microarray tool company, described itself as a developer of molecular diagnostic products.
In April, the company described itself as a developer of molecular and point-of-care diagnostic products, as it released its financial results for the first quarter ending March 31.
The financial results didn’t recognize the company’s second-quarter acquisition of Toronto-based point-of-care diagnostic developer SynX Pharma, which closed in April, but did reflect the fact that SynX has a point-of-care diagnostic product to commercialize.
Nanogen said it expects to follow the SynX purchase with an investment of $6 million-$8 million to bring the new subsidiary’s congestive heart failure diagnostic product to market. The company will launch the product first in Europe, and then will apply for a 510(k) clearance from the US Food and Drug Administration before pursuing commercialization of the product in the US.
While the company is repositioning its marketing thrust, financially, it is the same company that has incurred negative cash flow from operations since inception, and at the end of 2003, reported federal net operating loss carryforwards of approximately $157.5 million. Federal regulations allow companies to carry losses to future returns with time frames dependent on the type of loss. Nanogen said that its federal carryforwards will begin to expire in FY 2006.
The company added a net loss of $5.4 million for its first quarter, down from a net loss of $10.7 million for the year-ago quarter.
But, what is materially different after the quarter is the company’s war chest of $63 million, a jump of $34 million from the final quarter of 2003, and $37 million from the year-ago quarter. These new funds come largely from an influx of capital from a private placement of 4.25 million shares of common stock for $34 million in March. The company will recognize another private placement of $7.7 million in the next quarter.
“Nanogen’s focus has been on improving our cash position and taking advantage of opportunities to expand our business into new and growing markets in the US and abroad,” Howard Birndorf, Nanogen’s chairman and chief executive officer said in a statement.
And, apparently, on exiting old businesses.
The company announced that it had pulled the plug on Nanogen Recognomics, a Frankfurt, Germany-based joint-venture with Adventis Research and Technologies, taking a charge of $870,000 for its 60 percent holding in the firm. The company was formed in 2001 to combine Nanogen’s NanoChip electronic microarray platform with Adventis’s technology to develop new products and applications, particularly in the development of analyte-specific reagents to test for genes associated with Canavan disease. Nanogen said in its 2003 annual report that the stakeholders in the company had decided to turn the joint venture into a non-operating holding company in an attempt to commercialize its intellectual property through licensing and sales.
The company did not disclose any layoffs associated with the shuttering of Recognomics.
Nanogen said it and Adventis will retain rights to intellectual property that each contributed to the collaboration in addition to any intellectual property that was developed during the venture.
The company sold seven of its instrument platforms, five in Europe, and reported product revenues of $1.1 million for the quarter, compared to $228,000 for the same period in 2003.
The company sold eight of its NanoChip platforms in the fourth quarter, and reported one reagent rental for product revenues of $1.1 million for the quarter, compared to $510,000 for the same period in 2002. The company has an installed base of 100 systems.
Nanogen has a commitment through Jan. 1, 2005, to purchase $1.9 million of its next-generation NanoChip workstations from Hitachi, which manufactures the product.
The two companies are winding down a research and development agreement that requires Nanogen to pay a royalty based on cartridge sales as part of a $4.5 million long-term obligation to Hitachi.
While in a repositioning mode, Birndorf said Nanogen is also eyeing a new market with less than clear horizons for return on investment — that of diagnostics that combine genomic and proteomic markers — as well as a more solidly positioned market for tests for detecting bacteria and viruses associated with certain infectious diseases. These potential products, which the company said it expects to market in the fourth quarter, will expand a clinical lab market that has been slower to adopt Nanogen’s cystic fibrosis ASR than anticipated by the company, Bruce Heubner, Nanogen’s president, said in the firm’s approximately 15-minute conference call with financial analyts this week.
He added that the company is interested in expanding its platform to enable pharmacogenetics testing and pediatric genetic screening.
Nanogen was founded in 1993 and went public in 1998.
For most of the last two years, Nanogen has pursued a commercial effort of “platformation,” a strategy of placing $150,000 NanoChip Molecular Biology Workstations, manufactured by Hitachi, at customer sites at minimal cost to customers. The company’s hope has been to garner revenue by selling cartridges, chemistries, and tests to these customers.