WaferGen Biosystems, Inc. (OTC Bulletin Board: WGBS), a leading developer of state-of-the-art genome analysis systems, today reported performance results for the first quarter ended March 31, 2010.
Revenue
Revenue for the first quarter ended March 31, 2010 totaled $389,785 compared to $41,838 for the first quarter 2009. For the quarter ended March 31, 2010, 67 percent of sales related to the SmartChip Real-Time PCR Systems for customers who are part of the SmartChip Early-Access Program initiated during the quarter.
The company is in the early stages of commercializing the SmartChip Real-Time PCR System, and is currently offering the SmartChip System and the SmartChip Gene Expression Profiling Services as part of its revenue-generating Early-Access Program. The SmartChip System includes the 5,184-assay SmartChip, the SmartChip Cycler, and SmartChip Nanodispenser or Multi-Sample Dispenser for investigating candidate genes and microRNA panels for associate changes within disease states. The SmartChip Gene-Expression Profiling Services are provided to universities, research hospitals, pharmaceutical and biotechnology companies by WaferGen scientists at the company's new headquarters facility in Fremont, Calif.
"This initial revenue from the SmartChip Early-Access Program is an indication of the recognition of the SmartChip System by leading university, university hospital and biotechnology and pharmaceutical researchers in the U.S., Europe and Japan," said Alnoor Shivji, Chairman and CEO. "Given our business model, we are pleased with this base on which to build our SmartChip business."
WaferGen employs a business model that generates revenue from both the sale of the instruments, and a recurring revenue stream from the sale of the SmartChip, similar to the "razor and razor blade" business model. In addition, the company is generating revenue by offering service for gene-expression profiling of thousands of genes using the SmartChip System in-house.
Net Loss
WaferGen reported a net loss of $4.6 million, or $(0.14) per share, for the first quarter 2010 compared to a net loss of $1.8 million, or $(0.07) per share, from the same period in 2009. The increased net loss is primarily due to an unrealized loss of $1.9 million on the fair value of approximately 3.5 million outstanding warrants accounted for as derivative liabilities, driven primarily by a significant increase in the stock price in the quarter. The company's research and development expenditures increased by $0.6 million due to the development and scale-up of the SmartChip System. Sales and marketing increased by $0.1 million due to increased personnel, and general and administrative costs increased by $0.3 million, due to increased personnel costs, mainly for senior management and consultants, as well as a move to a new headquarters facility with additional laboratory and office space.
Assets
The company ended the quarter with $4.9 million in total assets, including cash of $3.6 million, and working capital of $2.1 million. The company ended 2009 with $6.9 million of total assets and working capital of $4.2 million, having generated more than $11 million in 2009 through financing activities and $379,373 of total 2009 revenue.
First Quarter and Early Second Quarter 2010 Accomplishments Jumpstart Full-Scale SmartChip Availability
"During the first quarter and early second quarter, we made outstanding progress to prepare for full availability of our SmartChip System in the second half of 2010," said Shivji.
"First, we completed development of the SmartChip System (5,184 wells) that will enable scientists to study thousands of genes simultaneously based on gene-specific pathways, potentially leading to identification and validation of clinically relevant disease signatures. In April we launched the SmartChip Multi-Sample Dispenser to enable significant speed and cost advantages for biomarker validation using gene expression and genotyping.
"Next, we initiated the Early-Access Program that included offering the SmartChip Service that we subsequently enhanced with the addition of the Human microRNA Panel for gene expression profiling. This program resulted in ten leading major universities and service provider customers.
"To prepare for full-scale commercialization of the SmartChip System, we increased our manufacturing capability to enable us to produce 10,000 chips per year. We strengthened our sales and marketing capability by appointing industry-veteran Janet Lankard as senior vice president, worldwide sales and support. In addition, we received CE Marking and TUV safety certification of our SmartChip Cycler and SmartChip Nanodispenser that will enable us to market and sell the SmartChip system in Europe and Japan where the CE mark is recognized. We extended our collaboration program into Europe with the addition of Ghent University as both a collaborator and early-access customer; we signed an agreement with the Luxembourg government toward establishing our European headquarters there; and we moved to a new worldwide headquarters facility to accommodate growth."
The company also conducted marketing activities to present SmartChip to biopharma companies at key conferences that in the first quarter and early second quarter included the Cambridge Healthcare Institute's 17th International Molecular Medicine Tri-Conference; the Association of Biomolecular Resource Facilities (ABRF); microRNA in Human Disease & Development; American Association of Cancer Research (AACR); and the Biomarker World Congress
At the Cambridge Healthcare Institute's Conference in February 2010, the company also presented data on the performance of the SmartChip System. The presentation poster included an overview of the company's novel whole genome, high-throughput SmartChip Real-Time PCR System, and data to demonstrate the system's ability to quantify gene expression levels by real-time PCR for a large number of genes at one time utilizing a simple workflow. WaferGen's SmartChip Human Oncology Gene Panel was used to quantify changes in gene expression levels in breast and lung tumors.
2010 Goals
"To achieve full commercialization of the SmartChip System in 2010, we are continuing to work on several important goals," continued Shivji. "As we expect to incur significant expenses completing the commercialization of the SmartChip product line, we plan to secure additional financing. Part of those funds will be used to scale up instrument manufacturing capacity to 1-2 per week. To advance sales in the EU and Japan, we plan to sign agreements with European and Japanese distributors and open a European headquarters facility. We also plan to expand the Early-Access Program customer base by focusing on the addition of more biopharma companies. To support our on-going commercialization and R&D activities, we plan to add additional members to our Scientific Advisory Board and industry veterans to the Board of Directors.
"This is a very exciting and significant year for WaferGen and for researchers who perform genome analysis," concluded Shivji. "Pharmaceutical and biotech companies spent approximately $65.2 billion in 2008 on research and development for new drug discovery. We believe that many of these efforts seek new therapeutic drugs, and that much of this spending will be directed towards developments at the molecular level for understanding the expression of specific segments of DNA (or genes). Through our SmartChip Real-Time PCR System, we are aiding researchers in re-defining performance standards with significant time and cost savings in the fields of personalized medicine and pharmacogenomics (the study of how genes affect the way individuals respond to drugs)."
Summary of First Quarter and Early Second Quarter 2010 Accomplishments
- SmartChip System Advancements
- Launched Early-Access Program for SmartChip System
- Launched new service for Gene Expression Profiling using the SmartChip Real-Time PCR System
- Launched Human MicroRNA Panel for gene-expression profiling of MicroRNA for the Gene Expression Profiling Services using the SmartChip System
- Received CE marking and TUV safety certification of SmartChip instruments
- Launched SmartChip Multi-Sample Dispenser
- Presented data on SmartChip System at CHI Molecular Medicine Tri-Conference
- Sales and Marketing
- Secured a total of ten new early-access customers, that include leading universities and service providers in the U.S., Europe and Japan
- Added Ghent University (Belgium) as both an early-access customer and new collaborator for SmartChip System
- Signed agreement with Government of Luxembourg toward locating WaferGen European headquarters in Luxembourg
- Appointed industry-veteran Janet Lankard new senior vice president, worldwide sales and support
- Marketed SmartChip at four industry-relevant conferences
- Moved to new world headquarters in Fremont, Calif.
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