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Sequencing Services Help Helicos Double Q1 Revenues, Though Two Institutes Return Machines

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A newly launched sequencing services business helped Helicos BioSciences more than double its first-quarter revenue, the company reported this week in a filing with the Securities and Exchange Commission.

The company also said that two academic research organizations — the Broad Institute and an undisclosed group — have returned their Helicos instruments. The Broad instrument, which had been placed at the institute on a no-cost basis, was returned in April. The other instrument, which was placed for "scientific and commercial evaluation," was returned in March, according to the SEC filing.

To date, Helicos has received orders for 10 Helicos systems and recognized revenue for three of them.

For the three months ended March 31, Helicos posted revenues of $1.2 million, compared to $569,000 a year ago.

The revenue increase was driven by the company's DNA and RNA sequencing services business, which it launched in the fourth quarter of 2010. That business contributed $371,000 to total Q1 revenues.

Product revenues — derived from reagent sales for its instruments — increased to $229,000 from $42,000 a year ago "due to a greater number of Helicos Systems operating in the field during this period in 2011 than 2010," the company said in the filing.

Grant revenues rose 9 percent to $582,000 from $527,000.

Helicos stopped production of its Helicos Systems sequencer in the first half of 2010 as it shifted its focus to deploying the system for molecular diagnostics. While the company abandoned plans to develop its own CLIA-certified genetic testing lab later in the year (IS 11/30/2010), it said in its first-quarter SEC filing that it will "continue to evaluate the best modality of bringing high-value MDx tests based on our technology to the market through a CLIA laboratory in partnership, through out-licensing, or our own efforts should the financial outlook for us improve."

The company narrowed its net loss for the quarter to $404,000 from $6.3 million in the year-ago quarter.

Helicos said the improvement was primarily due to reduced costs associated with the company's workforce reductions last year.

The company's bottom line also benefitted from additional income of $900,000 during the quarter, comprised of $251,000 from the federal government's Therapeutic Discovery Tax Credit and $649,000 from "a business interruption insurance claim" the company made in 2010.

Helicos noted that it will not receive any additional funds related to the tax credit or business interruption insurance claim.

The company's first-quarter R&D expenses fell to $1.2 million from $4 million a year ago, while SG&A expenses dropped to $982,000 from $4.1 million a year ago.

As of March 31, Helicos had $2.5 million in cash and cash equivalents.

The company reiterated previous statements that it will require "significant additional capital" in the second half of 2011 to continue its operations.

Helicos added that workforce reductions and "curtailed financial resources" have required it to "significantly scale back" service support and reagent supply to its current installed base, as well as "collaborative activities with other parties."

The company added that it believes these actions "will preserve its viability and provide additional time to execute its business priorities."

These priorities include "focusing on intellectual property monetization and concentrating its research and development efforts in targeted areas designed to achieve tangible proof-of-concept goals, which may enable the company to seek partnership opportunities with companies interested in next-generation sequencing, or to pursue other funding and strategic alternatives."

Last year, the company launched a technology licensing program and took steps to defend its IP by suing Pacific Biosciences, Life Technologies, and Illumina for patent infringement. The three firms later responded with a countersuit (IS 12/21/2010).

In January, PacBio submitted requests to the US Patent and Trademark Office for inter partes reexamination of the four patents at stake in the suit. The USPTO has since granted the requests for reexamination and has issued non-final office actions rejecting all claims of the patents (IS 5/10/2011).

Helicos noted in its quarterly earnings filing that PacBio asked the court on April 25 to stay the litigation pending the outcome of the patent-reexamination proceedings, but noted that the court has not yet ruled on this motion.

A trial date has been set for Sept. 10, 2012.

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