By Ben Butkus
Fluidigm has filed a registration statement with the US Securities and Exchange Commission for a proposed initial public offering worth up to $86.3 million, reviving plans for an IPO the company scrapped in September 2008 due to rapidly deteriorating economic conditions.
In an e-mail to PCR Insider this week, Fluidigm spokesperson Howard High said that the company "always said that we were keeping all our paperwork and reporting efforts up to standard and when we felt the market conditions had settled [and were] less volatile we would intend to try to IPO. Given our actions … it is safe to assume that we felt conditions in the market had settled enough for us to proceed."
In its preliminary prospectus, filed after the close of market last Friday, Fluidigm disclosed information about its recent financial performance and plans for its IPO proceeds. It also provided information about a previously undisclosed foray into the diagnostics space with partner Novartis.
"We intend to use the net proceeds from this offering for sales and marketing initiatives, including significantly expanding our sales force, to support the ongoing commercialization of our products; for research and product development activities; for expansion of our facilities and manufacturing operations; and for working capital and other general corporate purposes," Fluidigm wrote in its filing. "We may also use a portion of our net proceeds to acquire and invest in complementary products, technologies or businesses; however, we currently have no agreements or commitments to complete any such transaction."
Fluidigm did not provide a price range or anticipated number of shares in its prospectus.
Fluidigm plays primarily in the markets for genetic analysis, PCR, digital PCR, and sample prep for next-generation DNA sequencing. Its products include the BioMark and EP1 systems for digital PCR and SNP analysis; AccessArray platform for sample prep; and Dynamic Array, Digital Array, and Access Array microfluidic chips for use on its analysis systems.
The company said that it has an installed base of more than 250 instruments with 200 customers in more than 20 countries worldwide. Its installed instrument base "generates high-margin recurring revenue from consumables, including chips and reagents," the company said. Fluidigm's largest end users include the National Cancer Institute and National Institute of Allergy and Infectious Diseases; Stanford University; MedImmune; Tokyo University; Genentech; Bayer CropScience; and the Alaska Department of Fish and Game.
Fluidigm said that its revenues have grown from $6.4 million in 2006 to $25.4 million in 2009 and $23.2 million through the first three quarters of 2010; during which time its product margin increased from 30 percent in 2006 to 51 percent in 2009, and to 62 percent so far in 2010.
The $23.2 million in revenues through the first three quarters of 2010 represents a 30 percent increase over $17.8 million in revenues the company logged through the comparable period in 2009.
Thus far in 2010, product revenue increased 28 percent to $20.9 million from $16.4 million in the same period last year, primarily due to a $3 million, or 78 percent, increase in consumables revenue resulting from the higher installed base of instruments, Fluidigm said. In addition, the company's year-to-date instrument revenue increased by $1.5 million, or 12 percent, over the first three quarters of 2009.
Despite this uptick in sales, Fluidigm cited as an investor risk factor the fact that it has incurred "significant" net losses since its inception in 1999, and has accrued an accumulated deficit of $196.2 million as of Sept. 30, 2010.
Fluidigm's net loss for 2009 was $19.1 million, a 35 percent improvement over $29.5 million in 2008. For the nine months ended Sept. 30, the company's loss was $13.8 million, compared to $15.7 million in the prior-year period.
Fluidigm said that the current markets for its products include life science research and agricultural bio, but that it is also developing products for use in molecular diagnostics and other markets.
Most notably, the company underscored a previously undisclosed collaboration with Novartis Vaccines and Diagnostics to develop microfluidic digital PCR-based, non-invasive, prenatal molecular diagnostics, initially for fetal aneuploidies, "for which the most reliable diagnostic tests currently available are invasive and carry significant risks to the fetus." In addition, Fluidigm's High told PCR Insider that the non-invasive prenatal diagnostics could represent a $1 billion annual market in the US alone.
Fluidigm said that the agreement provides Novartis with an option to exclusively license Fluidigm's technology in the primary field of non-invasive testing for fetal aneuploidies and the secondary field of non-invasive testing of genetic abnormality, disease, or condition in a fetus or in a pregnant woman; RhD genotyping or carrier status in a pregnant woman; and the genetic carrier status of a prospective mother and her male partner.
Further, the agreements stipulate that except with Novartis, Fluidigm cannot use, develop, or sell any products or services in the primary or secondary fields described above, other than for research applications in the secondary field, Fluidigm said. "The agreements contain technical feasibility milestones in 2010 and 2011 and may be terminated by Novartis V&D at any time," according to Fluidigm's prospectus. "At Novartis V&D’s option, these agreements can be extended to encompass further research, development, and commercialization of our products, which could take several years or more to complete. The agreements provide that if a test is commercialized, we would supply the required systems and chips for performance of such test."
Among other investor risk factors cited in its prospectus, Fluidigm disclosed uncertainties regarding the intellectual property surrounding its product portfolio. For example, the company recounted a legal row with Applied Biosystems, now Life Technologies, begun in June 2008 when Fluidigm received a letter from Applied Biosystems asserting that the BioMark system infringed upon US Patent No. 6,814,934, and its foreign counterparts in Europe and Canada, which are owned by Applied Biosystems.
In response to the letter, Fluidigm sued Applied Biosystems and Applera seeking declaratory judgment of non-infringement and invalidity of the ‘934 patent. Applied Biosystems and Applera subsequently asserted a counterclaim against Fluidigm, alleging infringement of the ‘934 patent. Fluidigm noted in its prospectus that "pursuant to a joint stipulation," the claims and counterclaims were dismissed in January 2009 "without prejudice to the parties’ claims, which can be reasserted."
Fluidigm said that it has engaged in discussions with Life Tech regarding the '934 patent, as well as with other parties such as Caliper Life Sciences, regarding possible commercial, licensing, and cross-licensing agreements concerning primarily patents in the microfluidic and digital PCR space. "There can be no assurance that these discussions will lead to the execution of commercial license or cross-license agreements or that such agreements will be on terms that are favorable to us," Fluidigm warned. "In addition, if we enter into cross-licensing agreements, there is no assurance that we will be able to effectively compete against others who are licensed under our patents."
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