PARIS ¿ Genset S.A. posted a net loss of Euro4.63 million (US$5 million) in the first quarter of 1999, against a loss of Euro4.24 million in the corresponding three months of 1998.

That was a slight improvement on the US$5.2 million loss recorded in the final quarter of 1998, when there was a sharp rebound in the company¿s quarterly loss after three substantial decreases.

The main reason for the year-on-year rise in the first-quarter loss was an 18.5 percent increase in research and development spending to Euro9.7 million from Euro8.2 million in the first three months of 1998. Nevertheless, research and development outlays were 4 percent lower than in the fourth quarter of 1998, which the company attributes to ¿economies of scale in our fully integrated genomics research laboratories, particularly in high-throughput sequencing operations, and the capitalization of software development expenses according to new requirements under US GAAP.¿

Total operating expenses in the first quarter of 1999 were 23 percent higher at Euro13.5 million, and the operating loss was 35.3 percent higher at Euro6.9 million, against Euro5.1 million in the first quarter of 1998. The limited increase in the net loss was due to a foreign exchange gain of Euro1.2 million and a three-fold increase in income tax benefit to Euro1.1 million (from Euro343,000 ).

Genset¿s first-quarter revenues increased by 11.4 percent to Euro6.6 million, which was entirely due to a 65 percent jump in sales of oligonucleotides to Euro1.9 million. At the same time, research and development revenues from the company¿s partners dipped very slightly, to Euro4.73 million from Euro4.79 million in the first quarter of 1998.

As of March 31, Genset had cash, cash equivalents and short-term investments of almost Euro44 million, down from Euro50.2 million at the end of December.

The company¿s CEO, Pascal Brandys, attributed part of the increase in its operating expenses to increased patent activity.

¿Our patent department continues to grow and support an ever-increasing number of patent applications, including in particular state-of-the-art patents on genes and polymorphisms discovered in each of our genomics programs: susceptibility genes for common diseases, pharmacogenomics, and gene libraries.¿ In addition, Genset had established dedicated teams in genetic epidemiology, biostatistics and physiological genomics, Brandys said. n