Complete Genomics is laying off 20 percent of its workforce in order to reduce its cash burn and has hired a financial advisor to explore strategic alternatives, the company said today.
The layoffs, which will affect about 55 employees in the field service and sequencing factory at its Mountain View, Calif., headquarters and other US locations, will be substantially completed by June 30. The company expects restructuring costs of approximately $1.5 million, mostly in termination benefits, that will be recorded this quarter.
Cliff Reid, Complete's CEO, chairman, and president, told In Sequence via e-mail that the restructuring will "significantly reduce" the firm's cash burn, which was $20 million during the first quarter, though he declined to provide specific numbers.
As part of the cost-cutting measures, Complete Genomics will delay a previously planned expansion of its sequencing capacity until demand for clinical-grade human genomes increases. For now, its monthly capacity will remain at about 1,000 genomes at 40x coverage, or 500 genomes at 80x coverage.
According to Reid, the company is postponing its plans to put its second-generation instruments into production, which would have increased capacity to 2,000 genomes per month.
He said that the company is not updating its previous guidance of 2,000 genomes that it plans to ship to customers during the second quarter.
Going forward, Complete plans to focus on the development of clinical applications for its whole-genome sequencing service while it will continue to provide genomes to research customers.
According to Reid, the firm will concentrate on undiagnosed pediatric diseases as well as on cancer diagnostics.
The company's timeline for obtaining CLIA certification for its lab (CSN 5/9/2012) remains unaffected by the restructuring. It still plans to submit a CLIA application during the third quarter and expects to receive approval later that quarter or early in the fourth quarter, Reid said.
Reid did not comment on whether the company's timeline for launching its long fragment read technology, originally scheduled for 2013, will be delayed.
Complete Genomics has also hired Jefferies & Company as a financial advisor to assist it in reviewing strategic alternatives, which could include a merger, business combination, equity investment, or sale. As of now, it has not made a decision to enter into a transaction.
Reid said there is no specific timeline to complete the strategic review, which is run by Jefferies.
Complete Genomics' restructuring follows a 43 percent revenue drop in the first quarter, compared to the first quarter of 2011, which the company attributed to production delays at the end of 2011 that impacted reorder rates (IS 5/8/2012).
At the end of the first quarter, the firm had $63.1 million in cash, cash equivalents, and short-term investments as well as $500,000 in restricted cash.
Research analysts from Oppenheimer called the restructuring "inevitable" following several "difficult quarters" for the company. They noted that the company's "most valuable component" is its informatics platform.
Leerink Swann analysts said that the delay in capacity expansion "could help stabilize pricing" for whole human genome sequencing, which would help both Complete Genomics and its competitor, Illumina.
Analysts from Robert W. Baird said that they consider all possible strategic alternatives mentioned by Complete Genomics "to be on the table" at this point.