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Transgenomic Posts 22 Percent Decline in PGx Business, but Predicts Segment 'Swell' in Coming Months

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By Turna Ray

Although Transgenomic reported a 22 percent drop in revenues for its pharmacogenomics services business in the first quarter of 2011, company officials believe that segment of its business will contribute significantly to earnings in the coming months as a number of newly signed genomic testing arrangements with pharmaceutical companies start to bring in money.

Transgenomic reported a 39 percent increase in overall sales to $7.5 million from $5.4 million in the first quarter of 2010.

Revenue from lab services, which includes molecular clinical reference laboratory and pharmacogenomics research services, nearly tripled to $3.8 million from $1.3 million in the year-ago period. This growth was due to the company's reference lab services business, which generated $3.5 million in revenue compared to $942,000 in the prior-year period. PGx services, meantime, fell to $270,000 from $329,000 in the previous year.

Revenues for the company's instrument business fell 12 percent to $3.7 million from $4.2 million in the first quarter of 2010.

During an earnings call to discuss the company's first-quarter performance, CEO Craig Tuttle attributed the increase in reference lab sales to the Familion suite of genetic tests for inherited heart conditions that it acquired from Clinical Data in December (PGx Reporter 12/01/2010). Under the deal, Transgenomic also bought Clinical Data's PGxPredict tests for gauging drug response, tests targeting Fc gamma receptor biomarkers, and a Plavix response test that is still under development.

Discussing the sales decline in its PGx services business, Tuttle said that the company has signed deals "for a number of significant high-value projects" with pharmaceutical firms, which promise to "swell the [segment to] $1.5 million or more in the second quarter plus [bring in] significant revenues throughout the remainder of the year."

He added that some of the new projects "are for multimillion-dollar clinical trial studies with projected time frames of 18 to 24 months, which should provide balanced growth in this area of our business." Although he did not name the specific pharma partners, Tuttle said that they include large drug developers who appear interested in using the company's Ice COLD-PCR and BLOCker sequencing technologies to conduct genomic analysis for cancer drug trials.

"We signed a mix of project contracts for both our standard high-sensitivity mutation testing based on our Wave and Surveyor technologies [that are] being used to augment standard sequencing analysis, as well as a number of contracts with top pharma companies for our Ice-COLD-PCR and BLOCker sequencing technologies," Tuttle said.

"We believe that Ice-COLD-PCR and BLOCker sequencing will be an integral tool for drug firms' oncology trials …and [for] pursuing diagnostics approaches for earlier detection of cancer, monitoring therapy effectiveness, treatment selection, and recurrence monitoring."

Transgenomic is hoping that its relationships with drug companies to use its technologies in clinical trials will eventually mature into commercial diagnostic development deals. According to the company, its BLOCker technology improves upon Sanger sequencing by sequencing only the mutant DNA and blocking the wild-type DNA from being sequenced. In past studies, Transgenomic has reported that BLOCker sequencing lowers the detection limit to 1 percent, compared to 10 percent with Sanger sequencing.

Tuttle noted that Ice-COLD PCR and BLOCker sequencing can test for resistance-conferring mutations in cancer patients using blood samples rather than tissue. This might make it easier for drug companies to run clinical trials, since "blood tests have higher uptake than tumor biopsy," Tuttle noted. This "opens up marketing opportunities with pharma partners to use this technology for patient selection in oncology trials."

Finally, Tuttle claimed that because ICE-COLD PCR and BLOCker sequencing run on the Sanger sequencing platform, drug developers will have an easier time submitting genomic data as part of their drug applications with the FDA, since the agency is most comfortable with Sanger platforms.

Tuttle couldn't provide forward-looking guidance for the company, and would not provide future projections regarding the opportunities related to its Familion brand of tests, other than noting that the company "expects to see continued growth in the Familion business."

The Familion suite of tests detect mutations associated with cardiac channelopathies and cardiomyopathies, as well as serious heart conditions such as long QT syndrome, Brugada syndrome, catecholaminergic polymorphic ventricular tachycardia, hypertrophic cardiomyopathy, arrhythmogenic right ventricular cardiomyopathy, dilated cardiomyopathy, and left ventricular noncompaction cardiomyopathy.

According to Tuttle, the company is considering M&A activity to add new genomic tests into its reference lab, growing the firm's presence in the cardiac and oncology space. Transgenomic is also evaluating opportunities for the application of Ice-COLD PCR and BLOCker sequencing in prenatal and circulating tumor cell applications.

Transgenomic scaled back its first-quarter R&D spending 33 percent to $557,000 from $827,000 a year ago. Meanwhile, SG&A expenses increased 79 percent to $4.3 million from $2.4 million, due to Transgenomic's Familion lab, including non-cash charges of $300,000 due to amortization of acquired intangibles.

The company's net loss increased to $2.8 million from $324,000 a year ago.

Transgenomic ended the quarter with $3.2 million in cash and cash equivalents.


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