Genetic systems company Sequenom Inc. is bringing in $30 million through a private placement of stock and warrants to build its core business and support ongoing development of noninvasive prenatal diagnostic tests.
The San Diego-based company agreed to issue about 54.5 million shares of common stock, as well as 32.7 million common stock purchase warrants exercisable at 70 cents per share, after receiving commitments from New York-based ComVest Investment Partners II LLC; Menlo Park, Calif.-based Pequot Private Equity Fund IV LP, and LBI Group Inc., an affiliate of New York-based Lehman Brothers. All are new investors to Sequenom.
"This is truly a world-class caliber" of investors, said Harry Stylli, Sequenom’s president and CEO, adding that the $30 million is expected to carry the company to the point of achieving a positive cash flow, anticipated in 2008.
Much of that growth is expected this year. Stylli said revenue for 2006 is projected at $24 million, which would be a 25 percent increase over the $19.4 million recorded in 2005.
"This financing is going to fuel that drive," he told BioWorld Today.
Sequenom develops research tools aimed at several areas, including genomic testing, biomedical research and molecular medicine. Its MassArray system, a DNA analysis platform, is designed to analyze specific data from complex biological samples and genetic target material, and the company continues to build on the platform with additional products.
Recent additions include the EpiTyper assay, which is an enabling tool for DNA methylation marker research, and the QGE iPlex multiplex assay, designed to provide quantitative gene expression analysis.
The company is working to develop a prenatal diagnostics program, which would include a series of tests for use with the MassArray system, as well as other technology platforms.
That program is based on exclusive rights licensed in October to intellectual property from Isis Innovation Ltd., the technology transfer company of the University of Oxford, covering prenatal genetic diagnostic testing on fetal nucleic acids derived from plasma or serum on any platform, including mass spectrometry and real-time polymerase chain reaction amplification platforms.
Under the licensing terms, Sequenom agreed to pay up-front fees, as well as milestones and royalties.
"In fetal health, the majority of tests that are used are looking for proteins" that might be associated with genetic disorders such as cystic fibrosis and Down’s syndrome, Stylli said.
One test is amniocentesis, which involves using a needle to draw out amniotic fluid to test for genetic abnormalities. But the problem with amniocentesis is that "it’s invasive, and there’s a small but real risk of miscarriage," Stylli said. "It’s also very costly."
What Sequenom is attempting to create is a diagnostic test that can determine the genetic health of the fetus simply by drawing a blood sample from the mother. That procedure would eliminate the risk to the fetus and allow for genetic analysis very early in the pregnancy.
The MassArray system already is capable of analyzing fetal DNA, but the real key to the diagnostic program involves an ability to separate fetal DNA from the mother’s DNA, Stylli said.
An estimated 110 million to 120 million births occur worldwide each year, with 4.2 million happening in the U.S. alone. If Sequenom is successful, "this series of tests could be expected to deliver significant clinical benefit," he added.
Sequenom anticipates the first test being available for research use as early as 2007.
The company, which also released its fourth-quarter and full-year earnings, reported a net loss of $7 million, or 17 cents per share for the last three months of 2005, and a loss of $26.4 million, or 66 cents per share, for the full year.
As of Dec. 31, the company had cash, cash equivalents and short-term investments of $8.7 million.
Shares of Sequenom (NASDAQ:SQNM) closed at 68 cents Tuesday, down 7 cents.
In other financing news:
• Chronogen Inc., of Montreal, secured a $3.3 million venture loan from MMV Financial Inc., of Toronto, to support the company’s continuing growth. Those funds are expected to add to its cash position and sustain the company for about two years, as well as advance the development of its product portfolio. Chronogen is focused on development drug candidates that modulate the production of molecules responsible for cardiovascular, metabolic and central nervous system diseases.
• Panacos Pharmaceuticals Inc., of Watertown, Mass., filed a shelf registration statement with the SEC that would allow the company, from time to time, to offer and sell up to $100 million of equity securities. The company intends to use any proceeds to fund its internal discovery and development programs, including the clinical development of its HIV therapeutic candidate, PA-457, and for other general corporate purposes.