COPENHAGEN, DENMARK — Exiqon this week raised approximately DKK 19 million ($3.7 million) following the directed issue of roughly 1.7 million new shares of its stock at market price.
Nordic investment bank Handelsbanken Capital Markets acted as exclusive financial adviser on the transaction, which saw existing and new investors take part.
CEO Lars Kongsbak said that the proceeds will be used to strengthen the company's capital resources, as well as expand its inventory of products in light of growing demand for its qPCR arrays, miRcury microRNA microarrays, and other products and services.
Exiqon recently reported a 33-percent spike in first-quarter revenues, driven by sales of its qPCR and miRNA array products (BAN 5/24/2011).
"The main challenge for us is the growth rate we have, because when you grow at the speed we [are growing] right now, accounts receivable are somewhere between $2 million and $3 million at any time, simply because we have 30-day payment terms," Kongsbak said this week.
"And when you grow that fast, you need a significant inventory corresponding to the next four to six weeks to be delivered," he said. "That ties up funds as well."
Kongsbak spoke with BioArray News during a site visit to the Danish firm's headquarters in Vedbæk, located just outside Copenhagen.
According to Kongsbak, the new funding could also make the firm a more attractive partner for diagnostic alliances.
Exiqon has said previously that it could have two microRNA-based diagnostic tests on the market by 2014. One is designed to use miRNA expression signatures to determine stage II colon cancer patients at risk for disease recurrence and for whom adjuvant therapy may be warranted. A second is a blood-based test for the early detection of colon cancer.
Kongsbak said that the tests will likely be based on the firm's qPCR platform. In both cases, the company is looking for partners to aid in the late-stage development of the diagnostics as well as to market the tests. And having more capital resources may help the firm in this regard.
"We have the experience that if you have enough cash in your account, you are a more reliable partner for alliances with diagnostic and pharmaceutical companies and other partners you may want to work with," Kongsbak said.
Kongsbak asserted that Exiqon will become a cash-flow-positive company in 2011, and said that the $3.7 million the firm raised is "more than sufficient" for its purposes. "We really do not need to spend the money," he said. "It's just to give us a little more room here."
He added that Exiqon has a "very strong pipeline" of diagnostic and life sciences products that is funded by its current operation. "The plan is not to go out and spend the proceeds on new product development or diagnostic long-term investments," Kongsbak said.
Exiqon's aim to become cash-flow positive this year has come with some cost. In 2009, the firm embarked on a restructuring plan, outsourcing its array manufacturing, closing its California-based CLIA lab, and reducing headcount from about 120 to approximately 75 people (BAN 12/22/2009).
Kongsbak credits the restructuring decisions made at that time with saving the company.
"If you look around, many of those companies that were in the microRNA space a few years ago aren't there anymore," he said. "Exiqon survived because it restructured in due time," he said. "We were able to cut the cost before we ran out of money."
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He also credited Exiqon's locked nucleic acid technology as giving the firm an "advantage in the development of multiple kinds of RNA and DNA detection technologies and an important differentiating factor." He said this is "especially true with analysis of short non-coding RNA and has allowed us to develop a range of different miRNA research tools." Looking forward, Kongsbak said that he is "very confident" about the company's future.
Part of that confidence stems from the success of the company's qPCR product lines. Kongsbak told BioArray News last month that the firm's qPCR assays have become its "most important growth driver," and that it is now the "biggest product line" that Exiqon offers, surpassing even its arrays (BAN 5/24/2011).
Indeed, last month the firm debuted its custom miRNA Pick & Mix qPCR Panels. Pick & Mix "provides the customer with the freedom to design their own 96- and 384-well qPCR plates as they want," said Kongsbak at the time. The company expects its array users to move projects from its miRcury arrays to Pick & Mix qPCR arrays for validation.
At the same time, Kongsbak said that demand for the company's miRNA arrays is on the rise. "We still see that business growing," he said.
Exiqon launched its first miRNA array in 2005. The company last updated the chip in December 2010. The latest generation of its Mircury LNA microRNA Arrays contain 2,361 unique capture probes covering all mature human, mouse, rat, and related viral microRNA sequences as annotated in miRBase version 16.0.
Kongsbak attributed part of the continued interest in arrays to "disappointment" in next-generation sequencing technologies.
There has been some "surprise or disappointment among some customer groups that it hasn't been that easy to apply next-generation sequencing," he said. "We have had customers that went to next-gen sequencing and then came back to arrays because they thought they could do the same on next-gen sequencing that they could with arrays," said Kongsbak. "It's not that easy," he said, noting data analysis issues and larger sample requirements.
"It will take some time for next-gen sequencing to outcompete arrays, at least in microRNA expression," Niels Frandsen, an Exiqon product manager, told BioArray News this week. Also, while sequencing is an "extremely powerful discovery tool" that allows for detection of both known and unknown RNAs, the technology can be like "shooting at sparrows with a cannon," he said.
"For samples such a tissue, whole blood or cell cultures, where obtaining a few hundred nanograms of total RNA is not an issue, microarrays will remain a very competitive alternative offering high miRBase coverage at a relatively low cost," he said. However, for samples with "very low RNA content such as serum, plasma, and other biofluids, only PCR technology can provide sufficient sensitivity."
Kongsbak said that another reason why arrays have remained popular, in spite of the interest in qPCR, is that they are cheaper. "It is significantly more expensive to do PCR panels than microarrays," he said, without elaborating. Still, he argued that for most miRNA profiling projects only a subset of miRNAs actually provides relevant information.
By careful experimental design, this subset can be identified in pilot experiments involving a reduced number of samples, said Kongsbak. "Screening of a larger number of samples with this subset of miRNAs will provide virtually the same level of information as genome profiling," he said.
Kongsbak said that the firm's US customers are already starting to gravitate toward its qPCR arrays and away from its traditional arrays, though — an indication of what might come in Europe and Asia.
"The American market is probably the most advanced market, a couple years ahead of Europe, which is ahead of the Asian market," said Kongsbak. "In the US, we see more demand for qPCR arrays than microarrays.
"Europe is somewhere in between," he said. "In Asia, we see that arrays are more popular than qPCR, but we expect the trend of qPCR becoming more popular to spread to Europe and Asia," he added.
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