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Fluidigm Books Record Revenues in Q2; Cites Single-Cell Analysis, IP Pacts as Growth Drivers

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By Ben Butkus

Fluidigm this week reported record quarterly revenues for the second quarter of 2011, driven largely by sales of its newly launched BioMark HD system for single-cell genomic applications and its Access Array platform for sample prep in next-generation sequencing.

In addition, company executives said that they believe Fluidigm has charted the course for sustained revenue growth with the recent launch of its own gene expression-analysis assays for use on its instrument platforms; by increasing its focus on a burgeoning single-cell genomics trend; and by executing legal settlements and licensing agreements that may have been scaring away potential customers.

The second quarter of 2011 was "the finest quarter in Fluidigm's history;" and was characterized by "solid execution across the company," President and CEO Gajus Worthington said in a conference call this week discussing the company's financial results.

"We expanded our product offerings substantially with the launch of our own assays and content; we formalized a major new collaboration with BD Biosciences in the field of single-cell genomics; we secured a new high-profile genotyping customer win at the Broad Institute; and we concluded multiple intellectual property arrangements that removed litigation threats and provides new opportunities," Worthington said.

For the three months ended June 30, Fluidigm reported total revenues of $10.6 million, a 32-percent increase over the $8 million in revenues it logged in Q2 2010. Product revenue for the quarter was $9.7 million, up 30 percent from $7.5 million in year-ago period.

Fluidigm said that instrument and consumables revenue each grew 30 percent year-over-year, and that the instrument/consumable mix for the quarter was 66 percent and 34 percent, respectively.

"Demand for our products was strong across all our addressable customer segments, including academic research, and we were successful in harvesting it," Worthington said during this week's conference call. "We are seeing market demand for our products increase across our end customer base, including academic research; industrial genotyping like [agricultural] bio; and pharma [and] biotech."

He noted that the company's BioMark HD system — a higher-throughput version of its legacy BioMark platform that Fluidigm launched in February (PCR Insider, 2/3/11) — "had the strongest full quarter of any new product we've ever launched, signaling the importance of single-cell genomics."

Worthington noted that a recent purchase of a BioMark HD system and associated consumables by the Broad Institute underscored the early enthusiastic uptake of the platform.

"The Broad Institute found our new total solution compelling, and bought a BioMark HD system, SNP-type assays, and our 96.96 Dynamic Arrays for very high-throughput genotyping — roughly 100,000 samples for starters, he said, adding that the company did not recognize revenue from this transaction in Q2 but will begin to do so in the third quarter.

In other areas, Worthington said that consumable demand for genotyping, both in human and ag-bio, grew in the second quarter; and that revenues from the company's Access Array system for next-generation sequencing sample prep more than doubled over Q2 2010.

Fluidigm recorded a net loss in the second quarter of $7.2 million compared to a $4.8 million net loss in Q2 2010. The net loss included a one-time charge of $3 million related to a litigation settlement and intellectual property-licensing agreements with Life Technologies.

R&D spending remained flat year-over-year at $3.4 million, while SG&A expenses rose to $7.8 million in the second quarter from $5.9 million in the year-ago period.

Fluidigm ended the quarter with $64.3 million in cash, cash equivalents, and available-for-sale securities, compared to $77.7 million at the beginning of the period. The cash decline was caused by several significant one-time payments during the quarter, including expenses associated with Fluidigm’s successful IPO in February, payments related to the Life Technologies and Caliper agreements, and associated legal expenses.

The strong quarter also spurred company executives to raise revenue guidance slightly for the year. Fluidigm had previously projected year-over-year product revenue growth to be in the range of 27 percent to 30 percent, but said this week that it is now guiding to the top end of that range.

Expected to contribute significantly to this growth is increased interest from customers in single-cell genetic analysis, a wave that Fluidigm has already begun to ride both with the launch of the BioMark HD system and its recently announced collaboration with BD Biosciences.

The BD alliance was primarily billed as the two companies co-hosting a series of public seminars on isolating and analyzing gene expression in single cells using BD Biosciences' fluorescence-activated cell sorting systems with Fluidigm's genetic analysis platforms.

However, Worthington hinted this week that the pact could take on much greater significance moving forward.

"We realized some time ago that this experimental workflow is profound, and that many in the community could substantially benefit from it," Worthington said. "We've been working closely with BD Biosciences … for some months now to develop a new and streamlined workflow combining their leadership in FACS with ours in single-cell gene expression."

This combination, he noted, essentially allows researchers to conduct "high-fidelity measurements of cell-surface activity followed by gene-expression profiling across hundreds of genes, all on the same cell." The historical alternative has been measuring cell-surface activity and correlating it to large populations of cells.

"Together with BD, we can now allow researchers to collect unprecedented data on what is going on inside and outside individual cells at a molecular level," Worthington said. "We believe this will be good for both companies. The workflow can drive up the utilization of BD's top-selling FACS machines and even create new demand; and we'll get to know a new customer base, the users of literally thousands of FACS systems, and that expands our addressable market substantially."

Threat Removal

Fluidigm also underscored how future growth might be impacted by a pair of intellectual-property transactions it completed during the quarter: the settlement of a lawsuit and execution of cross- and sub-licensing deals with Life Tech for PCR-related technologies; and a licensing agreement with Caliper Life Sciences related to its microfluidics patent portfolio.

"In this industry, it is a challenge to insulate costs from the royalties that some of the larger companies extract through both licensing and litigation," Worthingon said. "Customers ultimately pay the price for this, often without any benefit to them; not to mention the fact that both companies and their customers suffer the distraction that litigation or the threat of it brings.

"I'm delighted to tell you that we made major progress here, too, in a manner that won't materially impact our [bottom line]," Worthington added. "These agreements allow us to maintain our focus on … our customers and grow our business."

As part of Fluidigm's settlement with Life Tech, it gained access to PCR-related patent families, including the so-called Higuchi patents; nucleic acid sample-preparation patents; and digital PCR patents acquired by Life Tech along with microfluidics shop Cytonix in 2009.

Some of these licenses will allow Fluidigm to "expand its product offerings and workflow," Worthington said. In turn, Fluidigm granted Life Tech licenses to patents related to advanced imaging readers; and to some its non-core IP, including digital PCR methodology patents.

"Back and forth payments were due from each of us for various licenses, but the net result was that we paid Life Tech $3 million," Worthington said. "These agreements provide for us to receive royalties from Life Tech on instruments that use the imaging IP that they licensed from us, and we believe that this includes their ViiA 7 [real-time PCR] system. We may also owe royalties to each other on certain types of digital PCR consumables, should we each choose to commercialize them."

As part of the Life Tech agreement Fluidigm also exercised a $2 million option precluding Life Tech from suing Fluidigm for "any of its current or equivalent future products under Life Technologies' several thousand existing patents for the next four years," Worthington said.

As for Fluidigm's other IP agreement in Q2, it paid Caliper $625,000 up front and expects to make an additional payment and provide non-material royalty payments under Caliper's microfluidics patent portfolio for various fields, including non-invasive prenatal diagnostics.

In December, as Fluidigm was prepping its IPO, it disclosed that it is developing digital PCR-based non-invasive prenatal diagnostics with Novartis Vaccines and Diagniostics, initially in the area of fetal aneuploidies (PCR Insider, 12/9/10).

During the conference call this week, when asked by an investor whether customers may have been hesitant to purchase Fluidigm products for their research due to the threat of litigation from Life Tech and/or Caliper, Worthington succinctly replied, "absolutely."

"Marketing and selling in our business is a contact sport, and there's no doubt that there were certain customers being told at various points in time that there [was] potential litigation overhang, and [asked whether] they really wanted to be buying a system at that price if there was such potential for litigation," Worthington said.

"There's no question in my mind … that there was some of that lingering in the marketplace," he added. "After we announced the settlement, I was surprised at how many notes I got from customers congratulating us on that outcome"


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