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Growth in PGx Research Services Lab Helps Transgenomic Post Profit in Q1

Transgenomic posted its second straight quarter of profitability on the growth of its laboratory business, which includes a pharmacogenomics research services laboratory and a molecular reference lab.
Last week, Transgenomic reported a 21 percent increase in first-quarter revenues. The Omaha, Neb.-based cancer genetic test provider said that it brought in revenues of $6.3 million for the three-month period ended March 31, compared to revenues of $5.2 million for the first quarter of 2007.
The firm’s molecular clinical reference lab had revenues of $500,000, up 74 percent from the comparable period in 2007, and its pharmacogenomics research services lab had revenues of $467,000, which was nearly five times higher than a year earlier.
“The leverage in these two laboratories is fantastic and the productivity for the sales resources for laboratory services will be critical for us to be able to achieve this significant growth, which we believe is attainable throughout 2008,” Transgenomic Chief Financial Officer Deborah Schneider said during a call announcing the company’s earnings. 
Transgenomic posted a profit of $122,000 compared to a net loss of $1.2 million in the first quarter of 2007.
In the first quarter, Transgenomic’s R&D spending dropped nearly by half to $572,000 from $1.1 million, while SG&A costs were flat at $3 million.
The company finished the quarter with $5.8 million in cash and cash equivalents.
According to Transgenomic President and CEO Craig Tuttle, the company worked on 21 pharmacogenomics projects in the quarter and added 24 new hospital clients into its molecular laboratory service.

“The leverage in these two laboratories is fantastic and the productivity for the sales resources for laboratory services will be critical for us to be able to achieve this significant growth, which we believe is attainable throughout 2008.”

In March, Transgenomic announced agreements with two major unnamed pharmaceutical companies to provide mutation discovery and detection services for three Phase II trials. The collaborations are expected to bring in more than $500,000 in the first half of 2008, Transgenomic said in a statement.
On March 31 — the last day of the quarter — Transgenomic announced a new laboratory-services agreement with the Guangzhou Family Planning Center in China. Under this agreement, Transgenomic will provide pharmacogenomic analyses within the Guangzhou Laboratory for pharmaceutical companies conducting clinical trials in China.
“The company has already equipped the facility with the instrument system technology needed to provide these sophisticated pharmacogenomics services,” Transgenomic said in a statement.
Tuttle also expressed excitement about the agreement the company penned during the quarter with the National Cancer Institute to complete a full mitochondrial genome and key nuclear mitochondrial gene analysis of the NCI 60 cancer cell lines. Under the collaboration, Transgenomic will evaluate the amount of mitochondrial DNA damage that occurs in these cancer cell lines and gauge whether there are any links between mitochondrial DNA changes and treatment outcomes.
“This collaboration is the first of its kind in the NCI-60 cell line, and one we hope results in valuable data and opportunities for both cancer detection as well as uncovering linkages between mitochondrial mutations and drug response across several cancer types,” Tuttle said.
Also at the end of March, Transgenomic hired its first two pharmacogenomics sales representatives. While the company did not secure any new pharmacogenomic projects during the first quarter, it is “pursuing a number of really exciting collaborations” with potential pharma partners. Tuttle noted that several discussions are underway and new PGx collaborations will be announced later in the year.
As part of their sales pitch, the reps will be conveying the message that “particularly in cancer … typical sequencing can only see at about 20 percent sensitivity level, meaning the amount of mutant to wild-type DNA, and the Surveyor and the Wave can see down to between 1 percent and 0.5 percent,” Tuttle said. “That’s a key selling message” for Transgenomic’s reps.
“For cancer, the level of mutations increases as the disease progresses, [which] might be important in terms of staging the disease but also in terms of finding it earlier,” Tuttle said.
Transgenomic began increasing its focus on garnering pharma partners through its PGx research services lab at the start of 2007.
In the fourth quarter of 2007, Transgenomic completed a mutation-discovery project for a Phase II drug for an undisclosed pharma partner and contracted for a second Phase II project with the same company. The second Phase II trial is slated to end by the second quarter.
Eventually, Transgenomic said it hopes that some of these relationships with pharma will give the company access to biomarkers that it can develop into new diagnostics [see PGx Reporter 03-05-2008].

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