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Helicos Mulls 'Repositioning' as Cash Dwindles, Institute Returns HeliScope, Nasdaq Threatens Delisting

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By Bernadette Toner and Julia Karow

This story has been updated from a version posted April 15 to include additional information from company SEC filings.

Helicos said last week in a filing with the US Securities and Exchange Commission that it has begun considering "alternatives" to its current long-term strategic focus, "including a repositioning of the company in the genetic analysis markets" with a particular focus on the molecular diagnostic sector.

The company also disclosed that the Ontario Institute for Cancer Research recently returned its Helicos sequencer, which the company had placed there last summer "for scientific and commercial evaluation."

Separately, Helicos disclosed that it has received a letter from the Nasdaq Stock Market advising that its stock has closed below the minimum $1.00 per-share requirement for 30 consecutive business days. Helicos has 180 calendar days, or until Oct. 11, to regain compliance with the minimum bid price requirement or face delisting from the Nasdaq Global Market.

Helicos said in its annual report for fiscal year 2009, filed last week with the SEC, that it had cash and cash equivalents worth $15.9 million as of Dec. 31, 2009, and $11.3 million as of March 31, 2010, and will require "significant additional capital" before the end of the second half of 2010 to fund its operations. The company's "current financial resources raise substantial doubt about its ability to continue as a going concern."

The lease for the company's 46,300-square-feet facility in Cambridge, Mass., expired at the end of March, and Helicos said it is currently evaluating its facility requirements, which it hopes to clarify during the second quarter. "In the interim, we are working with our landlord in order to avoid any disruption to our occupancy of our facilities," according to the filing.

Helicos said that it will continue to work with investment bank Thomas Weisel Partners, which it initially hired last September (IS 9/3/2009), to assist with re-evaluating its strategy. Helicos said that it has also "engaged a variety of consultants in the genomic research, services and diagnostics industries to evaluate available alternatives."

The company said in the filing that it believes its single-molecule sequencing technology is "uniquely suited for applications in molecular diagnostics," which could "benefit from the specific features for which the Helicos System is uniquely suited, including the platform's quantitative accuracy, the use of small sample quantities in simple preparation methods, and high throughput, as well as lack of biases typically seen with sample amplification."

Helicos said that the repositioning evaluation process will take "at least several months." During this time, it said it will "focus its limited resources on satisfying current customer needs and stabilizing system performance, which has varied at some customer and placement sites."

As of Dec. 31, 2009, the company said it had received orders for ten Helicos Systems. It also reported one system installed at the Broad Institute on a no-cost basis and three systems installed at "leading academic institutions" for scientific and commercial evaluation — at the Dana Farber Cancer Institute, Massachusetts General Hospital, and the Ontario Institute for Cancer Research. "These reference sites may have the opportunity to purchases their system outright or return the system to us," according to the filing.

OICR returned its system at the end of March, according to the filing, while the other two placements "remained ongoing" as of early April.

John McPherson, director of cancer genomics at OICR, told In Sequence via e-mail this week that the instrument produced "a great deal of data" but "did not augment our current platforms sufficiently for us to take on a third platform for somatic variant analyses in pancreatic tumors." The institute operates both Illumina Genome Analyzer and Life Technologies ABI SOLiD systems.

Helicos only recognized revenue for two of the ten sales orders during 2009 — from Stanford and an undisclosed biotechnology company in the Northeast. It said that it has shipped five units "that have not met our revenue recognition requirements."

During the fourth quarter of 2009, Helicos posted $340,000 in revenue, consisting of $236,000 from the National Institutes of Health and $104,000 in product revenue, up from $242,000 in revenue during the fourth quarter of 2008.

For all of 2009, the company posted an increase in total revenues to $3 million, from $808,000 in 2008. Revenue from product sales contributed $2.3 million in 2009, compared to $36,000 in 2008.

The increase in product revenue is due to the recognition of revenue from the sale of two Helicos Systems "for which all acceptance criteria were satisfied during the period."

Included in full-year 2009 product revenue was $500,000 related to the sale of proprietary reagents. All of the company's revenues in 2008 were from reagent sales.

The balance of the company's revenues for both 2008 and 2009 was from grants from the National Institutes of Health.

The company cut its research and development costs to $18.3 million in 2009, from $24.6 million in 2008. This decrease was due primarily to layoffs that the company carried out in late 2008 that resulted in benefit expense savings of $2.2 million and another $3.6 million in savings related to lower lab expenses, materials, supplies, temporary help, and prototype expenses.

Helicos also reduced its sales, general and administrative costs during 2009 to $12.5 million from $20.1 million in 2008. This decrease was also related to the reduction in force implemented in 2008.

The company said in its annual report that it may seek to raise additional funds "through public or private sales of equity, from borrowings, or from strategic partners," and added that its future capital requirements "will depend on many factors, including the precise nature of our strategic repositioning."

When Helicos first hired Thomas Weisel last fall, it had $5 million in remaining cash, which would only have been enough to support its operations into the first quarter of 2010. Soon afterwards, however, it raised $9.4 million in a private placement of shares of common stock and warrants and by November had determined that its prospects were improving enough to rule out a sale of the company (IS 11/10/2009). In December, the company raised another $5.6 million in net proceeds as part of an underwriting agreement with Thomas Weisel.

It was not clear from last week's SEC filing whether Helicos is reconsidering a potential sale of the company.

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