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SQI Streamlines Dx Development Pipeline, Ramps up Sales Effort for Tools and Services Business

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This article was originally posted Aug. 23.

Continuing a restructuring effort that began in late 2011, SQI Diagnostics last week said it plans to back-burner some diagnostic assays it has in development in order to focus its resources on short-term revenue growth in its Diagnostic Tools and Services business.

The Toronto-based microarray diagnostics developer disclosed last week that it has stalled development of five IgX Plex tests in its pipeline in order to focus on three that are currently in later stages of development — a quantitative antibody test for celiac disease, a vasculitis panel, and an 8-plex cytokine inflammatory marker panel.

Assays that have temporarily been put on hold include those for lupus, Crohn’s disease, and antiphospholipid syndrome, as well as a second-generation version of its quantitative IgX Plex rheumatoid arthritis assay and an assay to measure anti-TNF in the blood of autoimmune patients.

"[T]hese projects are expected to be put back into active development following the successful completion of current projects," SQI disclosed last week in documents filed with SEDAR, the Canadian financial information filing system. The lupus and Crohn's tests, in particular, are slated to move back into active development in calendar year 2012.

The company reported in the filing that it had no revenues for its fiscal third quarter ended June 30, compared to C$9,000 (US$9,064) in the comparable period of 2011.

This revenue decline resulted from the company's sole customer, Gamma Dynacare Medical Labs, choosing not to purchase SQI's QuantiSpot RA test kits in the quarter. Subsequent to the end of the third quarter, GDML reordered the kits, SQI said.

Despite this revenue setback, SQI is optimistic that sales and marketing efforts related to its Diagnostic Tools and Services business during the quarter will pay off before the end of the fiscal year.

SQI launched its tools and services offering, marketed under the CustomPlex name, last July with the intention of creating a short-term revenue stream to support continued development of its diagnostic assays. Through the group, SQI works as an OEM partner with clients who are looking to move single-biomarker tests onto microarrays. Clients are then free to market the multiplexed panels as research-use only assays, lab-developed tests, or, with proper regulatory approval, in vitro diagnostics.

SQI said that during the quarter ended June 30, it focused its sales efforts "on generating multiple opportunities in the Diagnostic Tools and Services segment," which led to several "site visits to SQI to assess the company’s platforms and capabilities to develop products on an OEM basis."

This pipeline of prospective customers includes immunology diagnostic manufacturers, contract research organizations, and blood bank testing manufacturers. The company noted that the "ideal" customers for this business "are those that have either tried to apply competing bead-based multiplexing technologies or planar microarrays (or both) to antibody-based immunologic tests or panels requiring multiple biomarkers."

In addition, last month SQI signed a letter of intent with Celerion, a CRO, under which it will develop a proof-of-concept immunogenicity assay "to detect, measure, and quantify multiple isotypes and sub-class antibodies to a therapeutic protein in a single assay."

The successful completion of the proof-of-concept assay "is expected to lead to the completion of a commercial, fully automated multiplex assay to be sold to Celerion," SQI said.

SQI also disclosed that it has hired Russel Peloquin as a senior sales contractor. SQI CFO Andrew Morris told BioArray News that Peloquin will focus initially on the Diagnostic Tools and Services business. "Right now this means developing customers in the CRO and pharma space that would benefit from the immunogenicity product development/products as well as diagnostic companies with [enzyme-linked immunosorbent assay] products that would benefit from being multiplexed."

Peloquin has sales management experience at Luminex, Quest Diagnostics, and Nordiag.

As a result of these efforts to ramp up sales and marketing for its Diagnostic Tools and Services business, SQI said it believes that "one, or more, agreements to produce turn-key research use only … tests will be finalized in the fiscal year."

Financials

For the three months ended June 30, SQI posted a net loss of C$1.6 million, or C$.04 per share, compared to a net loss of C$2.6 million, or C$.08 per share, a year ago. The company attributed the improvement to a restructuring in late 2011 that cut its headcount by a third and trimmed R&D and corporate expenses (BAN 12/6/2011).

R&D spending for the quarter fell by half to C$672,000 from C$1.4 million a year ago, while SG&A costs were reduced to C$528,000 from C$869,000. "With fewer projects in active development the company reduced expenditures on salaries, lab consumables, scientific consultants, [and] partnering and validation costs," it said.

SQI finished the quarter with about C$6 million in assets, with C$4.9 million in working capital.

It said that it has enough cash on hand to fund operations and commercialization plans for at least the next 12 months, though it warned that it expects losses to continue for fiscal 2012 "as investment continues in product development and commercialization efforts on its pipeline of autoimmune test kits and platforms, as well as investment in sales and marketing."

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