SQI Diagnostics said last week that it is restructuring its business and reducing its workforce by nearly a third. The company expects the realignment to bring more focus to its diagnostics tools and services business, while it streamlines its in vitro diagnostics development schedule.
The announcement comes weeks after the Toronto-based firm closed a $4.6 million financing round, and after its planned acquisition of German array company Scienion fell through (BAN 11/1/2011).
The workforce reductions are concentrated in the company's corporate, R&D, regulatory, and manufacturing areas, CFO Andrew Morris told BioArray News this week. The firm will shed 14 positions, bringing its total number of employees to 36.
Morris said the realignment will streamline SQI's IVD development portfolio and allow the firm to devote more resources to a new diagnostic tools and services business, dubbed CustomPlex, that it launched in July.
"We do believe that this business line will bring us revenues sooner in the product development cycle," Morris said.
"In an IVD product where we are developing it, obviously we have to do all the work, do the regulatory work, submit it and wait for the regulatory clearances … But with CustomPlex, the model is to have customers pay for development services, or contract printing, or the devices, without us expending a lot of effort before we get the revenue in," he said.
Toronto-based SQI said the realignment should result in cost savings of approximately C$3.5 million ($3.4 million) per year, with around half of the reductions coming from layoffs.
As part of the reshuffle of the product development process, Morris explained that the company will focus on fewer IVD projects at a time.
Previously, he said, the company had been working in parallel on at least four assays — working toward approval for its IgX PLEX rheumatoid arthritis quantitative test and celiac quantitative tests, while also developing vasculitis and lupus assays.
Now, with the reduction, "We're going to focus on, I would say, more like one and a half at a time," said Morris.
"Right now, the primary focus of product development is to get the celiac quantitative assay completed, which is a six-plex assay … targeted mostly to the US market."
The company will begin verification studies for the celiac test shortly, and will then move to validation studies, he said. At the same time, the company will also be doing some work on the vasculitis test that is also in late-stage development.
After that the company will move its lupus test forward, with the goal to complete that assay by the end of 2012.
"There's not going to ever be a time where we're working on one thing to the exclusion of everything else," Morris said, "but we won't be working on four things full speed."
SQI already markets a number of its assays in North America and Europe. In 2009, SQI received US Food and Drug Administration 510(k) clearance to sell its IgXplex RA test, which is designed to help physicians diagnose and monitor patients with rheumatoid arthritis. SQI has held a Health Canada license for the test since 2008.
Earlier this year, the company obtained FDA clearance for its IgXPlex celiac qualitative assay, a 4-plex microarray-based assay test for anti-tissue transglutaminase IgG and IgA. The assay is already marketed in Canada and Europe.
While SQI slows its diagnostics development programs, it is busy developing its SQiDLite platform, an automated, benchtop system. The firm’s tests are currently performed on its semiautomated SQiDWorks system.
Both systems process SQI's QuantiSpot, a 96-well microarray consumable, and can typically process multiplexed assays to quantify serum concentrations of up to 12 individual biomarkers, or qualitatively detect up to 24 biomarkers per patient, according to the company.
Morris said SQiDLITE will support SQI’s CustomPlex business.
"We're the only company … with a fully automated microarray analyzer cleared by the FDA in the protein and antibody world," Morris said. "What we've found is that there are lots of people trying to do what we do, but [they] haven’t quite got there," he said.
"So we saw an opportunity to generate revenue by providing services to those customers and potentially the analytical platforms we have on an [original equipment manufacturer] basis," he added.
"Where other companies might be unable to get to a level of performance for protein antibody targeted diagnostic arrays, we feel we can provide them with the service of getting their microarrays to an IVD level, and provide to them an analytical platform they can sell to their customers that gives them an automated high-throughput platform, which is what those customers are typically asking for."
Morris said SQI has been "developing customer prospects," since it launched the diagnostics tools and services arm in July.
"There has been, we believe, a strong level of interest in CustomPlex product offerings, from a whole range of target customers … either diagnostics companies with assays that would fit well with microarrays … or large reference labs that do lab-developed tests where they have proprietary content that’s multiplexed. They want a production platform for that content, be that assay development or microarray printing, or analytical devices or all of the above," he said.
One area off-limits for the CustomPlex service is the autoimmune space, "because that's our core area of product focus for our IVD business, but areas outside that we are interested in talking to customers," he said.
According to Morris, the recent layoffs comprise 50 percent of the corporate group, 14 percent of the R&D group, half the regulatory and quality control section, and 40 percent of manufacturing positions.
He stressed that the structure of the company's R&D and manufacturing arms will allow remaining employees to take up slack.
Morris also said that while SQI is shifting its focus to the new CustomPlex offering, in vitro diagnostics will continue to be at the core of the company.
"What we believe and see is that our IVD product success is what gives us the credibility to offer the CustomPlex products and services to customers," he said. "IVD will always be a focus, and we will continue to develop and roll out new products."
"But it does give us the credibility to go out and offer whole or parts of the process to other customers," he said.
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