Illumina Inc. secured $30.7 million in a registered direct offering of its common stock, which might represent the last financing the company ever conducts.
Founded six years ago, San Diego-based Illumina expects to become cash-flow positive sometime next year. However, the most recent financing will give the company the funds to cover general corporate purposes.
"We have $40 million of cash already, so this financing was not something that was done out of desperation or real need," company President and CEO Jay Flatley told BioWorld Today. "But our general strategy is to make sure we have plenty of money for all opportunities going forward."
With the direct offering, the company will sell about 4.6 million shares at $6.75 per share to a select group of undisclosed institutional investors. Illumina's stock (NASDAQ:ILMN) dropped 83 cents Tuesday to close at $6.71.
The company expects to receive net proceeds of $28.5 million upon closing, set for Friday. SG Cowen & Co. LLC, of New York, is acting as exclusive placement agent.
The offering draws down shares from a shelf registration statement filed with the SEC on Tuesday. In that filing, the company states its intention to sell, from time to time, up to $65 million worth of common stock.
The prospectus states the company would use funds for general corporate purposes that include research and development, product manufacturing and commercialization, working capital, capital expenditures and general and administrative expenses, as well as the reduction of debt. It also could use a portion to acquire or invest in complementary businesses, products and technologies.
But Flatley said there might be no need for Illumina to conduct another financing beyond the latest $30.7 million private placement.
"We believe it will take us [forward] forever," he said. "Our intent is to become cash-flow positive next year."
As of Dec. 28, the company has incurred an accumulated deficit of $117.5 million. For 2003, it had a net loss of $27.1 million. But the company believes it will see an increase in revenues from the sale of its products over the coming years.
Illumina focuses on developing tools for large-scale analysis of genetic variation and function. Its BeadArray technology enables researchers at genomics centers to analyze data points that could lead to personalized medicine.
The company has several products on the market. It began the commercial sale of short pieces of DNA, or oligos, in the first quarter of 2001. Later that year, the company began marketing its SNP genotyping services product line. The company also entered genotyping services contracts with organizations such as London-based GlaxoSmithKline plc and The Sanger Centre to use its high-throughput BeadArray technology. The company's BeadLab production-scale genotyping system includes Sentrix Array Matrices and BeadArray Reader - a scanner that uses a laser to read the results of experiments captured on its arrays - as well as the GoldenGate SNP genotyping assay, which analyzes up to 1,536 SNPs per DNA sample.
In 2003, the company launched Sentrix BeadChip, a gene-expression product line that allows researchers to analyze a focused set of genes across eight to 96 samples on a single array, and a benchtop SNP genotyping and gene-expression system called the BeadStation. This year the company launched Sentrix BeadChips for whole-genome gene expression and genotyping.
Aside from seeing increased revenues in the coming years, the company also might continue to incur legal costs due to an ongoing dispute with Foster City, Calif.-based Applied Biosystems Group. The companies began collaborating in November 1999 to develop an SNP genotyping system that combined Illumina's BeadArray technology with Applied Biosystems' assay chemistry and scanner technology. Illumina was responsible for developing and manufacturing the arrays, while Applied Biosystems developed and manufactured the instruments. As part of the financial terms of the agreement, Applied Biosystems purchased 1.25 million shares of Series C convertible preferred stock at $4 per share from Illumina, and it provided $10 million in research and development support.
But the launch of the companies' genotyping system never occurred due to Applied Biosystems' inability to optimize and multiplex the SNP assay reagents, Illumina said. Applied Biosystems eventually launched a competing product, and Illumina launched its own genotyping system in July 2002. Within a year, Applied Biosystems filed a patent-infringement suit against Illumina, asking for $30 million in damages and the prohibition of future sales of Illumina's production-scale genotyping products. Illumina filed breach of contract counterclaims and denied infringing any patents. Illumina in January officially terminated the collaboration between the companies.
"It's headed for arbitration and that's scheduled for late September," Flatley said. The arbitrator's decision on the contract between the companies is expected later this year. That decision would be followed by the patent litigation, he said.