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Exiqon Restructures Life Science Group, Aims to Outsource Array Production by Q1 2010

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By Justin Petrone

Exiqon said last week that it will outsource the manufacturing of all of its research-related products, including its microRNA arrays, by the beginning of next year.

According to Exiqon, which has a mixed business model based on selling life science research products, developing molecular diagnostics, and pharmaceutical services, the decision to outsource array manufacturing is part of ongoing restructuring measures undertaken to cut costs and put its life sciences business on the path to profitability.

As of June 30, Exiqon Life Sciences, which sells the firm's research products, has been restructured, Exiqon said in a statement reporting its earnings for the first sixth months of 2009. The company decided to outsource manufacturing to "save capacity cost and improve gross profit contribution from Exiqon Life Sciences," it said.

In early July, the company began offering custom locked nucleic acid oligonucleotides that are being manufactured under contract by a third party.

Exiqon said that "all of its product lines are expected to be outsourced under similar models," and that it anticipates that all of its research product manufacturing will be outsourced by the end of the first quarter of 2010.

It is unclear who will manufacture Exiqon's line of miRCURY LNA miRNA arrays or how the restructuring has affected the company's headcount. Company officials did not respond to e-mails seeking comment in time for this publication.

Exiqon hopes to save DKK40 million ($7.6 million) per year as a result of the outsourcing. The company is also scaling back R&D investments, as the firm claims to have completed the development of its menu of miRNA research products.

During the first half of this year, for instance, the company completed its miRCURY LNA miRNA Array System. The array system includes a menu of miRNA arrays, which the firm first debuted in 2005, plus reagents, spike-in miRNAs, and hybridization and washing buffers. Exiqon also sells its LNA miRNA PCR system, a miRNA detection system that uses Northern blots for localization, and LNA miRNA knockdown probes for functional analysis.

For the first half of 2009, Exiqon said Life Sciences product sales increased 21 percent compared to the same period last year, benefiting from a one-time payment by Luminex last quarter. The amount of the payment has not been disclosed. Aside from the Luminex payment, organic growth in research product sales was 9 percent compared to the same period last year, Exiqon said.

Geographically, two-thirds of research product sales were in North America during H1, up slightly from 64 percent during the same period last year. Meantime, 29 percent of sales were in Europe, which was down from 33 percent last year, and receipts from the rest of the world accounted for 5 percent of all research product sales, up from 3 percent in H1 2008.

Exiqon's overall revenues, which also include its molecular diagnostics and pharma services businesses, rose 32 percent to DKK58.4 million compared to DKK44.5 million for the first half of 2008. H1 total revenues rose 9 percent year over year to DKK30.6 million from DKK28 million.

Net loss for the first half of the year was DKK81.2 million, or DKK2.86 per share, compared to DKK 63.5 million in the year-ago period.

Exiqon posted a 25 percent increase in research and development spending to DKK34 million, while and selling, general, and administrative expenses rose 20 percent to DKK60.5 million.

As of June 30, Exiqon had cash and cash equivalents totaling approximately DKK101.5 million.

For full-year 2009, Exiqon said that it expects total revenues in the range of DKK165 million to DKK190 million, with a net loss between DKK115 million and DKK130 million.

The company reaffirmed its goal of reaching profitability by 2011.