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Complete Genomics' Q4 Revenues Fall 34 Percent; Backlog at 5,800 Genomes

NEW YORK (GenomeWeb News) – Complete Genomics reported after the close of the market Thursday that its fourth-quarter revenues declined 34 percent, reflecting a previous announcement from the firm that it had missed its 2011 estimate for genome shipments.

The Mountain View, Calif.-based human genome sequencing services provider had revenues of $2.5 million for the three-month period ended Dec. 31, compared to $3.8 million for the fourth quarter of 2010. It missed analysts' consensus estimate for revenues of $3.2 million.

On a conference call following the release of the financial results, Complete Genomics CFO Ajay Bansal said that the firm recognized revenue for 600 genomes at an average price of just over $4,000 per genome.

Its net loss for the quarter was $22.3 million, or $.67 per share, beating analysts' estimates of $.65 per share. For Q4 2010, its net loss was $10.3 million, or $.69 per share.

The firm's R&D spending for the quarter increased 48 percent to $8.3 million from $5.6 million, and its SG&A expenses more than doubled to $8.3 million from $4.1 million.

For full-year 2011, Complete Genomics reported revenues of $19.3 million versus $9.4 million for 2010. Wall Street expected revenues of $20 million.

The firm recognized revenue from approximately 3,000 genomes in 2011, compared to roughly 800 genomes in 2010.

"2011 was both a gratifying and a very challenging year for us," Complete Genomics Chairman, President, and CEO Cliff Reid said on the call. "On the positive side we took orders for approximately $39 million, representing approximately 8,000 whole human genomes."

He said the firm has more than 125 customers that have now used its service, delivering data to 90 of them in 2011.

Its net loss for the year was $72.3 million, or $2.40 per share, compared to a net loss of $57.7 million, or $13.60 per share, for 2010. The 2010 results included a $7.2 million non-cash expense resulting from an accounting adjustment to the market value of certain convertible equity securities.

Its R&D spending for the year increased 51 percent to $32.7 million from $21.7 million, while its SG&A expenses jumped 78 percent to $27.6 million from $15.5 million.

Complete Genomics ended 2011 with $83.1 million in cash, cash equivalents, and short-term investments, plus $500,000 in restricted cash. Bansal said that the cash on hand will take the firm through the end of 2012.

As of the end of the year, Complete Genomics had a backlog of around 5,800 genomes, representing total revenues of approximately $28 million. Company officials said the firm expects to deliver between 1,100 and 1,300 genomes in the first quarter of 2012, and an additional 2,000 genomes in Q2.

In addition, Complete Genomics is continuing development of its long fragment read technology, and it has more than 10 collaborations under way to evaluate applications and further optimize the technology, Reid said on the call. He added that the technology will enable accuracy of one error per 10 million bases.

Complete Genomics expects to offer the LFR technology to the clinical market in early 2013.

The company also is moving closer to utilizing its next-generation sequencing instruments for commercial purposes. Reid said that the firm expects to receive the first of six commercial instruments in the second quarter. "These are the fastest sequencing instruments in the world and will initially be able to generate approximately a terabase a day, or six whole human genomes per day per instrument," he said.

By the end of the third quarter, Complete Genomics expects to have all six of the instruments in production, which will double its capacity to 2,000 genomes per month.

The firm also is targeting CLIA certification in mid-2012, which would open up clinical sequencing possibilities.

Following the results, Mizuho Securities analyst Peter Lawson lowered his Q1 2012 revenue estimate to $4.3 million from $6.7 million, "due to lower genome delivery assumptions for the quarter." He also lowered the FY 2012 revenue estimate to $32.8 million from $26.5 million. Lawson maintained his 2013 estimates and retained his Buy rating on the stock as well as a $10 price target.

Jefferies analyst Jon Wood, who also has a Buy rating on the shares, lowered his FY 2012 revenues forecast on Complete Genomics to $32.5 million from $35 million. He maintained a $7 price target on the stock.

In early Friday trade on the Nasdaq, shares of Complete Genomics were down 8 percent at $3.52.

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