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Helicos Cuts Headcount in Half in Bid to Cut Costs; Seeks to Refocus on Dx Applications

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This article, originally published May 17, has been updated with information from a recent filing with the SEC regarding Helicos' first-quarter earnings results.

By Julia Karow

Helicos BioSciences has laid off half of its staff in a bid to cut costs, and plans to reposition its technology for diagnostic applications, the firm said this week.

In a filing with the Securities and Exchange Commission, Helicos also said that "substantial doubt about our ability to continue as a going concern exists without successfully raising funds" through equity financing, debt financing, or strategic partnerships.

"We believe that an adjustment to our existing strategy would better position us to take advantage of the unique capabilities of our proprietary platform and to address the growing competition in the genetic research marketplace," the SEC filing said.

According to Helicos, several features of its single-molecule sequencing platform may benefit diagnostic applications, including its quantitative accuracy, small sample input requirements, relatively simple sample-prep methods and high throughput, and a lack of biases from sample amplification.

In conjunction with the reorganization and layoff of about 40 employees, the company expects to incur between $550,000 and $650,000 in restructuring costs, mostly related to severance benefits. It estimates approximately $6.8 million in annual savings from the restructuring.

Helicos now plans to shift "a significant portion of its resources" towards developing a diagnostics strategy, related technology, applications, and commercialization plans.

In the meantime, it said it wants to continue to support its current installed base of Helicos Genetic Analysis systems with collaborative activities and by supplying reagents and providing services. The company said it will focus on "satisfying current customer needs and stabilizing system performance, which has varied at some customer and placement sites."

By the end of 2009, the company had received sales orders for 10 Helicos sequencers and has recognized revenue on two of the orders. It has shipped another seven units that have not yet met its revenue recognition requirements. There were no new orders during the first quarter of 2010, Helicos said.

The company also installed three systems "for scientific and commercial evaluation" last year: One at the Dana Farber Cancer Institute, one at Massachusetts General Hospital, and one at the Ontario Institute for Cancer Research, which returned its system in March. One additional system is installed on a no-cost basis at the Broad Institute.

Helicos said that about half of its 40 remaining employees are supported by funding from the National Institutes of Health. Last month, the company won a three-year, $1.6 million NIH stimulus grant for the development of direct single molecule RNA sequencing. Last fall, it was awarded a two-year, $2.9 million stimulus grant under the National Human Genome Research Institute's "$1,000 Genome" technology development program, and in 2006, it won a $2 million grant under the same program that ended in December.

During the first quarter of 2010, the company recorded $569,000 in revenue, consisting of $527,000 in grant revenue and $42,000 in reagent sales, compared to $1.2 million in revenue during the first quarter of 2009, which included revenue for one instrument sale. It did not record any revenue this quarter from instruments shipped to customers.

Helicos' R&D costs during the quarter totaled $4 million, flat compared to last year's first quarter, and its net loss declined to $6.3 million from $6.5 million during the year-ago quarter.

As of March 31, the company had $11.3 million in cash and cash equivalents.

"Because our present capital resources are not sufficient to fund our planned operations" over the next 12 months, "substantial doubt about our ability to continue as a going concern exists without successfully raising funds" through equity financing, debt financing, or strategic partnerships, according to the SEC filing.

Helicos President and CEO Ron Lowy said in a statement this week that the ability of the company's technology to sequence DNA and RNA directly "is well positioned for applications in molecular diagnostics, as it provides a direct path from patient specimen to results, and minimizes sample preparation costs."

Lowy added that the company believes there is "relatively limited competition from major sequencing companies, which we believe are less capable for diagnostics applications."

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