By Ben Butkus
Fluidigm this week reported a 25 percent increase in third-quarter revenues and upped its full-year revenue guidance, citing as primary drivers the continued uptake of its instruments for single-cell genomics applications and targeted resequencing for next-generation sequencing.
Although Fluidigm anticipates continued growth from these applications, officials noted that there is still "room for improvement" in the company's commercial execution in light of quickly stiffening competition in these areas, and that it would likely need to significantly build out its sales and marketing team in the coming year to exploit commercial opportunities worldwide.
In a conference call this week discussing Fluidigm's Q3 financial results, CEO Gajus Worthington said that the company was pleased with its performance in the quarter — its third as a publicly traded company — in three primary application areas: single-cell genomics, sample prep for targeted resequencing, and SNP genotyping.
Worthington said that Fluidigm was particularly bullish on how customers are warming to its BioMark HD real-time PCR system for single-cell genomics work, noting that about half of the instruments Fluidigm sold in Q3 are slated for such work, as was the case in the second quarter.
As an example of this increased uptake, Worthington cited the fact that recent Stanford University spinout Quanticel Pharmaceuticals — which is conducting single-cell genomic analysis for drug discovery and recently signed a $45 million deal with Celgene for that purpose — is a BioMark HD user (see related story, this issue).
"The work they are doing is important … [and] a deal of this size for a company this new is a real credit to the team, and to the importance and power of single-cell genomics," Worthington said. "It's really exciting and rewarding for us to be in a position to contribute to success like this. In an environment where healthcare startups are struggling, Quanticel's victory is yet another sign that single-cell genomics is on the rise."
During the call's Q&A period, Worthington told analysts that another reason for the uptick in use of the BioMark HD for single-cell genomics was increasing interest in the application from "dyed-in-the-wool" cell biologists who previously did not consider employing such technology in their work.
"Early adopters really started from the genomics field, but it pretty quickly moved to people who were doing cell biology," Worthington said. "Now I'd say it's a pretty even mix. And this has increased lately, particularly due to our co-marketing efforts with Becton Dickinson."
In August, Fluidigm and BD announced that they would begin co-hosting a series of public seminars on isolating and analyzing single cells using a combination of fluorescence-activated cell sorting on BD's FacsAria III system and the BioMark HD platform. That initiative has been "really well-received," Worthington said, adding that the companies have now begun offering their seminars outside the US.
In addition, when asked by an analyst whether a biotech like Quanticel, as opposed to academic users, is an anomaly among Fluidigm's customers or becoming par for the course, Worthington replied that it is more the latter.
"I'd say we're actually a bit surprised at how often we see either startups or biotechs that are really interested in doing single-cell genomics," he said. "What I think is an anomaly about Quanticel — and we certainly hope to see a lot more of this in the future — is that really all they do is single-cell genomics."
The second major anticipated growth driver for Fluidigm is in the use of the company's AccessArray platform for targeted resequencing sample prep. Although this application area did not contribute as much as single-cell genomics to the company's Q3 revenue growth, revenues for next-gen sequencing sample prep grew by more than 100 percent year over year.
An example of a customer in this application area is genomics services company Expression Analysis, which is using the AccessArray in conjunction with several next-generation sequencing platforms, including Pacific Biosciences' RS system, to provide candidate gene resequencing to its customers, Worthington said.
AccessArray, he added, "is the only targeted resequencing sample prep platform with proven results across all of the NGS instruments that are in place today, and it provides the fastest and simplest workflow with the lowest cost per sample."
When asked by one analyst whether burgeoning competition in this area — particularly new platforms for targeted amplicon sequencing from Life Technologies and Illumina — was cause for concern, Worthington noted that Fluidigm has not yet seen any impact from those product launches.
"Those announcements were really not a surprise to us. We knew they'd be coming into this marketplace," he said. "As a smaller company we view our task as making sure we are substantially better than those solutions — and we are, if you look at the major things that matter to customers, and that is flexibility, time to result, and particularly cost per sample."
Lastly, Worthington cited Fluidigm's increasing SNP genotyping play as a minor growth driver, and the primary reason the company saw a 71 percent year-over-year increase in consumable revenue in Q3. Fluidigm originally launched this product line with the agricultural genomics market in mind, but has recently noticed its SNP genotyping products being applied to human genetics, as well.
The Numbers
For the three months ended Sept. 30, Fluidigm's revenues increased 25 percent to $10.6 million from $8.5 million in the same quarter last year.
Instrument revenue spiked to $6.4 million from $5 million, and consumables revenue grew to $3.7 million from $2.2 million over Q3 2010.
Fluidigm said that revenues from licensing agreements, collaborations, and grants were $428,000, down from $1.3 million.
CFO Vikram Jog said during the call that Fluidigm's instruments/consumables mix was 63 percent/37 percent, which is within the range of the company's historical mix. Analytical systems such as the BioMark HD comprised roughly 60 percent of instrument sales; while AccessArray systems comprised roughly 40 percent of instrument sales.
Jog said that Fluidigm's installed instrument base was approaching 440 by the end of Q3, of which roughly 75 percent were analytical systems and 25 percent were sample-prep systems. He also noted that the firm has not experienced a slowdown in revenues from government/academic customers, bucking a trend that several firms in the research tools space reported for the third quarter.
Fluidigm's net loss for the quarter was $4.5 million, or $.22 per share, compared to $3.4 million, or $1.78 per share, in Q3 2010. The firm's R&D spending dropped 6 percent to $3.3 million from $3.5 million, while its SG&A spending jumped 45 percent to $8.1 million from $5.6 million.
Regarding the hike in SG&A spending, Worthington said during the conference call that Fluidigm has made and will continue making a concerted effort to expand its global sales and marketing force to sniff out new sales opportunities and application areas.
"We have a bunch of open jobs right now. We aren't adequately staffed yet in sales and marketing," although the company expects to improve on that, Worthington said. "In terms of 2012, it's too early yet to provide specific guidance around that, but we do anticipate that we're going to continue to need to make investments in the channel in order to execute like we have been and in order to expand our presence geographically," he added.
During the quarter Fluidigm made a payment of $2 million to Life Technologies tied to the exercise of an option that shields it from litigation related to Life Tech's PCR patents, some of which were the subject of lawsuits the two firms filed against each other in June (PCR Insider, 7/7/2011).
In addition, Fluidigm said that it paid Caliper Life Sciences $500,000 to amend an earlier agreement between the firms. Under the amended deal, royalty rates payable to Caliper beginning in January 2012 were "substantially reduced and the period for which we are obligated to make royalty payments was shortened, with the last payment due in mid-2018," said Fluidigm.
Fluidigm finished the quarter with $58.9 million in cash, cash equivalents, and available-for-sale securities.
The company also raised its product revenue growth guidance for full-year 2011 to between 31 percent and 33 percent from a previous range of 27 percent to 30 percent. It expects revenues from grants and collaborations to be around $2 million for the year.
Worthington said on the call that the forecast implies fourth-quarter 2011 revenues of around $12 million.
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