NEW YORK (GenomeWeb) – Canadian molecular diagnostics firm GeneNews said today that ongoing financial difficulties faced by its Innovative Diagnostics Laboratory joint venture may force the company into a restructuring and possibly a sale of the company.
Sales for the IDL joint venture, which is 50 percent owned by GeneNews and Cobalt Healthcare Consultants, each, have fallen year over year, while its losses have mounted. In August, GeneNews presented an action plan designed to reinvigorate IDL's business, which included completing the transition of IDL billings to a new third-party billing provider; bringing Cobalt's contract sales force in-house at IDL; adding marketing and sales support; building out an inside-sales effort; establishing additional contractual relationships with hospital and large practice groups; and continuing to expand IDL's menu of advanced cancer assays.
In a statement that accompanied its financial results for the first nine months of 2015, the firm said that a private financing to raise C$3 million (US$2.3 million) to support the action plan for the joint venture fell short of its goal. As a result, the JV has seen its test volumes and revenues decline, and it has been unable to pay its obligations to GeneNews and Cobalt Healthcare.
"A requirement of any substantial financing that we investigated involved buying out our partner in IDL, Cobalt, resulting in GeneNews having full control of IDL," James Howard-Tripp, executive chairman of GeneNews, said in a statement. "We have been unable to reach a satisfactory agreement in buying out Cobalt. GeneNews has therefore terminated the license agreement for ColonSentry with IDL and is exploring a number of scenarios through which it may be able to continue making its flagship test available across the United States."
ColonSentry is GeneNews' colorectal cancer test and is the firm's primary revenue source.
GeneNews and Cobalt acquired Health Diagnostic Laboratory's stake in IDL in May with an eye toward expanding the JV's sales efforts.
GeneNews said that a "major shareholder" has agreed to provide the firm with interim working capital financing, but it expects such funds will need to be used for a restructuring of its operations and could include a sale, merger, strategic financing, or other business combination. "No decision has been made with regard to these alternatives, and there is no assurance that any transaction will be entered into or consummated," the firm said in a statement.
GeneNews also reported today that its revenues for the nine-month period ended Sept. 30 fell to C$300,000 from C$1.6 million year over year. Its net loss declined to C$4.5 million, or C$.09 per share, from C$4.9 million, or C$.12 per share.