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Amid Layoffs, WaferGen Repositions SmartChip as Next-Gen Sequencing Validation Tool

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By Ben Butkus

Amid reporting more than a seven-fold drop in third-quarter revenues, WaferGen Biosystems last week disclosed that it is laying off almost a quarter of its workforce and adopting a new strategy to drive adoption of its flagship SmartChip real-time PCR system.

Under the new strategy, WaferGen will emphasize the promise of SmartChip for validating biomarkers uncovered using next-generation sequencing, particularly data from RNA-seq experiments, WaferGen COO Mona Chadha told PCR Insider this week.

"We feel our technology has a sweet spot of … profiling post-next-gen sequencing data, as well as validation, particularly where a lot of new content is coming from transcriptome analysis and looking at non-coding regions of the genome such as microRNAs and [long non-coding] RNAs," Chadha said.

Since launching the SmartChip system in August 2010 (PCR Insider, 8/5/2010), WaferGen has been struggling to gain a commercial foothold for the platform, selling a handful of instruments and gene panels to various customers, mostly in academia; and offering fee-for-service gene profiling at its Fremont, Calif., headquarters.

The SmartChip system was originally designed for highly parallel gene expression profiling studies. The platform comprises a nanodispenser module; 5,184-well consumable chips preloaded with target-specific primers; and the SmartChip cycler, which performs PCR thermal cycling, data collection, and amplicon melting.

In September, the company reported a nearly 10-fold drop in year-over-year revenues due to a dearth of SmartChip sales (PCR Insider, 9/15/11). Then, last month, WaferGen said that longtime president and CEO Alnoor Shivji was resigning, and that former Helicos Biosciences executive Steve Lombardi had agreed to consult the company on its business strategy (PCR Insider, 10/20/11).

WaferGen last week again posted disappointing numbers, reporting total revenues of $89,088 for the quarter ended Sept. 30, compared to $633,241 for the third quarter of 2010.

It also said that would trim its workforce by 24 percent, which is expected to result in a $1.3 million annual reduction in operating expenses. The company noted that it will take a one-time charge related to the job cuts of approximately $400,000 in the fourth quarter.

"The challenges have been more on the timing of when the team was put together from the sales perspective," Chadha said. "In addition, we are third in the marketplace … and some of our competitors have been around longer and with much larger financial bandwidth."

Those main competitors include Life Technologies and Fluidigm, both of which market platforms for high-throughput, nanoscale, real-time PCR.

Chadha noted that the company is not abandoning the highly parallel gene expression studies for which the SmartChip was originally launched, but instead targeting a new area of biology, where analysis tools are sorely needed, in hopes of driving SmartChip adoption.

"We are coming in with a value proposition that is … microRNA and [long non-coding] RNA, the non-coding regions of the genome, are of huge interest, but there are not a lot of tools out there," Chadha said. "We have clear competitors in our space; however, the advantage of both gene expression and genotyping, and the kind of gene panels that we are bringing forward will allow us to be a differentiator there."

Chadha also noted that the company has already entered into relationships with various prominent academic researchers in this application area, including Ghent University's Jo Vandesompele and the University of Michigan's Arul Chinnaiyan, who is a member of WaferGen's scientific advisory board.

It is also possible that these relationships could lead to strategic partnerships with companies in the next-generation sequencing space, she said.

"We are always open to strategic alliances with companies where it would make sense to complement the technologies," Chadha said. "Our current focus is really dealing with clinical researchers and high-profile academic researchers, but as we move along, those strategic relationships will be welcomed."

In other Q3 financial results, WaferGen posted a profit of $3.6 million, or $.03 per share, compared to a net loss of $5.2 million, or $.14 per share, for the third quarter of 2010.

Its Q3 2011 results were impacted by a $7.5 million gain on the revaluation of promissory notes and a nearly $1.1 million gain on the revaluation of warrants. WaferGen's net loss attributable to common stockholders was $19.2 million, or $.46 per share, compared to a loss of $9.7 million, or $.27 for Q3 2010.

WaferGen's R&D costs for the quarter declined 5 percent to $1.9 million from $2 million; while its SG&A expenses increased 16 percent to $2.2 million from $1.9 million. The firm finished the quarter with $19.8 million in cash and cash equivalents.


Have topics you'd like to see covered in PCR Insider? Contact the editor at bbutkus [at] genomeweb [.] com.

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