SQI Diagnostics, a Toronto-based developer of microarray-based tests, last week announced that it had closed a CDN$1.6 million ($1.3 million) second tranche of a non-brokered private placement of stock, bringing to CDN$4.6 million the total proceeds from the placement.
The publicly traded company, which closed the CDN$3 million first tranche last month, said that as a result of the round, Toronto-based FW Thompson & Company now controls 18 percent of the company’s outstanding shares. It did not disclose the names of all investors involved in the placement.
SQI Chief Financial Officer Andrew Morris told BioArray News this week that the company intends to spend the proceeds from the placement to develop its pipeline of autoimmune tests, and to ramp up its sales and marketing activities.
SQI obtained the financing just weeks after it received a Health Canada license to sell QuantiSpot RA, an array-based panel for diagnosing and monitoring rheumatoid arthritis. The company also said it expects the US Food and Drug Administration later this year to clear the test, which runs on its SQiDworks workstation. SQI submitted QuantiSpot RA to the FDA in October 2008 (see BAN 12/2/2008).
SQI’s test platform consists of the SQiDworks workstation and QuantiSpot, a 96-well microarray consumable. Workstation users can typically process multiplexed assays to quantify serum concentrations of up to 12 individual biomarkers, or qualitatively detect up to 24 biomarkers per patient, according to the firm.
The firm’s RA assay combines enzyme-linked immunosorbent assays previously available for rheumatoid factors IgG, IgA, and IgM with anti-cyclic citrullinated peptide antibodies into one multiplexed, automated assay that can help diagnose and monitor the autoimmune disease.
SQI wants to sell the RA assay and SQiDworks platform to reference labs in North America that specialize in autoimmune-disease testing, Morris said. On top of the RA assay, though, the company has nine other tests for autoimmune diseases in development, four of which could be commercialized during 2009, and the stock placement will help prepare that pipeline for commercialization, he added.
“This financing will accelerate the development of the assays that we have in our pipeline for autoimmune disease,” Morris said. “We have the one test for RA and there are nine other tests left in the autoimmune-disease family that we have targeted. We have four in our near-term pipeline, and we hope to use some of these funds to accelerate the commercialization of those assays.”
Morris declined to name all the tests in the company’s pipeline, but said that SQI has plans to commercialize tests “over the next six to 12 months” to diagnose antiphospholipid syndrome, thyroid disease, celiac disease, and Crohn’s disease.
“We have multiple development teams working on different tests,” he said. “Within a year, we hope to have two or three of those tests done and filed with the regulatory bodies” in the US and Canada, he said.
SQI’s competitors in the autoimmune-testing market include blood-based assays such as standard erythrocyte-sedimentation rate test, which measures non-specific inflammation, and tests for anti-cyclic citrullinated peptide-antibodies, high levels of which indicate the presence of RA.
Dundee, UK-based Axis-Shield, for example, sells an enzyme-linked immunoabsorbent assay for anti-CCP detection called Diastat anti-CCP. And Uppsala, Sweden-based testing firm Phadia sells an automated anti-CCP test called Elia, for which it received FDA clearance in 2006.
According to Morris, SQI’s advantage is that it offers multiplexed testing on an automated platform. “When a clinician is trying to determine whether a patient has one or another autoimmune disease, they always have to investigate more than one biomarker,” said Morris. “They all entail some degree of multiplexing and there isn’t a lot of automation with the existing tests on the market.
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“These are complex, esoteric tests,” he added. “They are hard to do on a consistent basis in their current formats. When we apply our technology, we can drive a lot of the error that arises from doing these tests manually out of the equation.”
Depending on the assay, Morris said, the specific testing markets that SQI targets range from “niche” to “high volume,” and the existing tests on SQI’s platform offered in North America will have an easier path to getting the QuantiSpot assays reimbursed.
Morris said that the company could begin preparing infectious disease assays for use on SQiDworks if the firm has success selling the autoimmune tests in North America. “It is our goal to dominate in the multiplex-testing market,” Morris said. “Autoimmune testing is the first part of that strategy; the second part is to go into infectious disease testing.
“We want to get our platforms to be placed and get some more experience,” he explained. “Then we could move into higher-volume applications, while always focusing on dominating the multiplex space.”
Sales and Marketing Initiatives
While SQI will use part of the proceeds from the private placement to support test development, it will also direct some of the funds towards sales and marketing initiatives. In October 2008, SQI named Thomas O’Connor as vice president of sales and marketing. O’Connor previously held senior sales positions at Beckman Coulter and Luminex.
Morris said at the time that O’Connor is responsible for assembling a “small, direct sales force” in the US and Canada to help launch the QuantiSpot RA and SQiDworks. “We will be adding sales personnel over the course of this year,” Morris said. “Our sales reach will be broadened as we expand our menu.” He did not elaborate.
Because SQI is still awaiting FDA clearance for its RA test, the firm is now building up inventory while laying the groundwork for a “big marketing splash” once it is able to sell the test in the US.
“As we go to market in Canada and prepare for a US launch, we have to have platforms available to place,” Morris said. “It takes us two to three months to build a platform and we need to have ours available for placement in a reasonable period of time. We don’t want to be delayed for some of the lead time.”
Morris said that SQI plans to sell direct in North America, but will also lean on the sales forces of reference labs to spur adoption of its tests. Outside of North America, the company is weighing the option of working with distribution partners.
SQI last week also reported results for its fiscal fourth quarter, which ended on Sept. 30, 2008. The company posted no revenues, and narrowed its net loss to CDN$926,404 from CDN $946,214 for the same period in 2007.
R&D expenses rose 3 percent to CDN $704,205 from CDN $682,877 for the year-ago quarter. In a statement, SQI attributed the uptick in R&D expenses to the “net addition of two lab resources and a change in the composition of the lab team to a more senior group of scientists.”
At Sept. 30, the company had CDN$4.4 million in cash and cash equivalents. SQI said it has “cash on hand sufficient to fund company operations to the middle of 2010.”