By Matthew Willett
What happens when you stack your batting order with high-average hitters? The same thing that happened for Deltagen Inc. in the first quarter: runs.
Runs translate to revenues, and in that area Deltagen stood out in earnings released Thursday. Revenue for the first quarter rose 757 percent to $2.45 million, up from $286,000 in the same period last year. Net loss for the quarter was $7.1 million, or 25 cents per share.
Deltagen CEO William Matthews said the revenue jump is directly attributable to the company¿s base path-clearing hitter, the DeltaBase mammalian gene function database.
¿It¿s mainly because we¿ve spent a period of time developing our product, and what we¿re seeing now is the rollout of that product,¿ Matthews told BioWorld Today.
Deltagen rolled out the DeltaBase product in the third quarter of 2000. With subscriptions sold out of the gate to GlaxoSmithKline plc, of London, and New York-based Pfizer Inc., he said, the product was almost instantly validated.
Wall Street is swinging the Deltagen pennant. The company¿s stock (NASDAQ:DGEN) rose 19 percent Thursday, or $1.17, closing at $7.32, after reaching a high of $8.05.
Menlo Park, Calif.-based Deltagen¿s business strategy is designed to produce sustainable revenue and take some of the risk out of a risky business, Matthews said.
¿We provide what I think is crucial information on which drug targets companies should work on from the genome,¿ he said. ¿Essentially, the technology translates from the genetic sequence and gives you in vivo gene function. This is very, very important information. What we¿ve spent our time doing is building a database for pharmaceutical companies, up-and-coming biotech and emerging biopharmaceutical companies that gives information on drug targets, like what the in vivo function and the potential therapeutic value of those targets are.¿
At the plate, the DeltaBase comes through. Three-year subscriptions cost $15 million each.
¿What we¿re seeing is the establishment of product revenue generated from that product, and sustainable revenue generated from the product as we add subscriptions,¿ Matthews said. ¿The estimate from [Wall Street] is that we¿ll see an additional three subscriptions per year, and we see that increase in revenue being something sustainable, moving forward. The dramatic increase this quarter is a result of the database being out there.¿
While pharmaceutical companies focus on small-molecule therapeutics, he said, Deltagen is pursuing drug development in secreted proteins.
¿We wanted this model going forward, and we¿ve been working on it for a long time,¿ he said. ¿This gives us the balance. Developing drugs can be risky business, and we wanted a sustainable revenue generation platform that would allow us to take some of the risk out, but we also wanted the upside of bringing drugs to market. I think we want to have home run capacity, and we¿ve started that. We¿ll be moving into development within 18 months, a target for myelogenous leukemia.¿
Expenses for the first quarter added up to $11.1 million. Of that, research and development ran the company $8.2 million. The company claimed $110.7 million in cash and cash equivalents at the end of the quarter.
¿We¿ve positioned the company with adequate resources to drive forward our programs,¿ Matthews said. ¿In today¿s market, it¿s important to be well capitalized to execute your business plan. The other thing about this is that it¿s revenue that¿s sustainable. This is not a one-quarter blip.¿