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Nanogen on Track to Stop Selling Arrays by End of Year; Retains IP for Licensing, R&D

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One year after announcing its decision to sell off its microarray business, and still absent a buyer or partner, Nanogen is on track to stop selling arrays and supporting existing customers by the end of this year, according to a company official.
 
While the San Diego-based vendor has sold most of its NanoChip 400 microarray platform assets and inventory, it has retained the intellectual property related to the system, as well as the ability to use the arrays for internal R&D projects.
 
Moreover, Nanogen’s Israeli distributor has retained the rights to continue selling the system in the Middle East for the foreseeable future.
 
“We are pretty close to done with phasing out the array technology, but there are a few customers that will continue to go through the rest of 2008, and there are two or three that we will continue to support because they are more about multiplex applications and less about arrays,” Robert Proulx, Nanogen’s vice president of sales and marketing, told BioArray News last week.
 
“Other than that, Nanogen will be out of the NanoChip business by end of this year,” he said. “The IP remains with Nanogen and, should sometime in the future we want to revitalize it or use it in some other capacity, it still remains ours.”
 
According to Proulx, Nanogen will “continue to look at the long-term potential applications” for that IP, but has “eliminated all inventory related to the product line.”
 
Nanogen announced last September that it had engaged Cowen & Company to help it find a partner or potential buyer for its array line, arguing that it did not have the financial resources to achieve its dual goals of becoming profitable while supporting the array business’s larger R&D costs (see BAN 9/25/2007).
 
By November, unable to solicit any “serious offers,” Nanogen decided to discontinue the business, and pledged to support customers through the end of 2008. Nanogen subsequently gave notice to 20 percent of its employees, contending that the cuts would save the company $15 million a year (see BAN 11/20/2007).
 
“We have been spending most of ’08 with that customer base trying to finish helping them, in whatever capacity we can, to convert their projects over to other platforms,” said Proulx. He said that most of Nanogen’s customers could convert their projects over to either RT-PCR-based assays, or applications similar to Luminex’s xMAP technology.
 

“We haven’t had any major concerns from our customers that the discontinuation of the product was going to leave them without the ability to continue their work.”

He said Nanogen does not choose the platform for its customers. Instead, it provides application advice or necessary sequence information, “so if they want to convert to RT-PCR or some other technology, they can do it,” Proulx said. “They need to continue to have access to reagents and consumables while they revalidate their methods.”
 
Proulx admitted that there were a few customers that were “vested in the array technology and were doing something they hadn’t attempted on any platform,” but said that all such customers were involved in research-oriented projects. “There were no clinical applications where someone was doing something on the array that they couldn’t do using another method,” he said.
 
Overall, Proulx said that the company was “satisfied” with the phase out. “As difficult a decision it was to discontinue this product line, we felt that in terms of timing and willingness to support the consumable stream, we didn’t leave any customers in a lurch, and that’s gone pretty smoothly,” he said. “We haven’t had any major concerns from our customers that the discontinuation of the product was going to leave them without the ability to continue their work.”
 
Future Potential
 
While Nanogen’s NanoChip business will wrap up in December, Proulx said the company has inked a licensing deal with SHL Telemedicine International, its Tel Aviv, Israel-based distributor, allowing it to continue selling the NanoChip 400 platform for the “next few years.”
 
Proulx did not provide further details, and SHL could not be reached for comment.
 
In August 2007, Nanogen launched a Middle Eastern cystic fibrosis panel for use on the NC400 system. The company said at the time that the test contained a panel of 23 mutations associated with cystic fibrosis as outlined by the American College of Obstetricians and Gynecologists in a 2004 recommendation, plus 14 mutations associated with carriers in that particular population (see BAN 8/14/2007).
 
Proulx said that Nanogen is open to other licensing deals should they come along. “We have had some conversations with a few companies that are interested in the general IP aspect to licensing the technology,” he said, “but we have no near-term commercial plans for products based on it.”
 
Elitech and Jurilab
 
Nanogen also retains the ability to use its array platform in any R&D work. However, Proulx said that it was unlikely that Nanogen’s pending reverse acquisition with the Elitech Group, announced last month, would include the firm’s array technology.
 
Under the terms of that agreement, Nanogen said that shareholders of Paris-based diagnostics firm Elitech are expected to receive shares of Nanogen common stock valued at €66.5 million ($98.5 million).
  
The company said that the merger, expected to close in the first quarter of 2009, will combine Nanogen's experience in molecular and point-of-care diagnostics with Elitech’s global manufacturing, sales, and distribution of in vitro diagnostic products for the clinical chemistry and microbiology markets. Expected first-year revenues for the combined, yet-to-be-named firm will be more than $150 million, according to Nanogen (see BAN 8/19/2008).
 
“All the discussions related to the merger with Elitech are founded around their clinical chemistry and microbiology businesses and our point of care and clinical care businesses,” Proulx said last week. “The array business does not come into play.”
 
Proulx also said that discontinuing the array business would not impact Nanogen’s research projects with Kuopio, Finland-based Jurilab, a biomarker-discovery company. Nanogen retains a stake in Jurilab, though it is no longer the primary beneficiary; President and COO David Ludvigson sits on Nanogen’s board; and Jurilab recently named Carl Foster, formerly vice president of alliance management at Nanogen, to be its CEO.
 
Proulx said that Nanogen continues to “be interested in a joint type 2 diabetes research project” with Jurilab, but that it is not funding any additional projects. He also said that Jurilab has used its NanoChip platform in the past and may continue to do so in the future as an R&D tool.
 
“I do believe that they did have NanoChip products that were arrays produced by our research group as part of the work we are doing on type 2 diabetes projects and that they ran some arrays on those gene targets,” he said.
 
“We still have ability to run arrays in house, so if we continue to have active projects with Jurilab, we still have the instrument and the consumables to support the product as an R&D tool for a period of time.”
 
Jurilab did not respond to e-mails or phone calls seeking comment in time for this publication.

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