PARIS The third-quarter results of French genomics company Genset SA confirm that its losses have bottomed out and that it is on the road to profitability. Its net post-tax loss of FFr16.6 million (US$3 million) was 19 percent down on the third-quarter 1997 loss of FFr20.5 million and 28.4 percent below the second-quarter 1998 shortfall of FFr23.2 million.
Moreover, the Paris-based company pointed out that, excluding foreign exchange losses of FFr5 million due to the depreciation of the yen and the U.S. dollar, its net loss in the third quarter would have come out at FFr11.6 million, little more than half the figure for the corresponding period of 1997. The improvement in the third quarter is even more significant when compared to the first-quarter 1998 net loss of FFr27.8 million. Deborah Smeltzer, chief financial officer, said these results are in line with the company¿s objective of profitability by the end of 1999.
While Genset¿s research and development spending continues to grow, having increased by 27.6 percent to FFr52.4 million in the third quarter of 1998 from FFr41.1 million in the same period of 1997, its R&D income more than doubled, to FFr47.8 million from FFr22.8 million, from one period to the next. With sales of oligonucleotides edging up to FFr9.6 million from FFr8.3 million, Genset¿s total revenues were up 85 percent, at FFr57.4 million, in the third quarter of 1998, as against FFr31 million in the corresponding period of 1997.
In the first nine months of 1998, turnover nearly tripled to FFr108.8 million (from FFr37.3 million the year before), while R&D outlays were 45.4% higher, at FFr155 million (from FFr106.6 million). As a result, the company¿s cumulative pretax loss fell by 12 percent to FFr77.1 million in the first nine months of 1998 (from FFr87.7 million), although its net loss after tax declined by no more than 6.2 percent to FFr67.7 million (from FFr72.2 million). That was due to a sharp drop in R&D tax credits from FFr15.5 million in the first nine months of 1997 to FFr9.5 million in the corresponding period this year.
As at Sept. 30, Genset¿s financial reserves (of cash, cash equivalents and short-term investments) amounted to FFr374.7 million, compared to FFr461.7 million at the end of 1997. Genset¿s work force at that point totaled 429 people worldwide, of which nearly 300 were engaged directly in research and development.
Company officials pointed out that its R&D spending is continuing to grow as a result of the development of its genomics, gene discovery and pharmacogenomics research programs, which entailed the further expansion of its laboratories and the hiring of additional staff in the third quarter. The research collaboration agreements with Wyeth-Lederle Vaccines in August and with Pharmacia & Upjohn at the beginning of October will entail a further expansion of Genset¿s total R&D effort.
The deal with Wyeth-Lederle gives the latter exclusive world rights to exploit the discoveries and patents filed by Genset on the complete genomic sequences of the Chlamydia pneumoniae and Chlamydia trachomatis intracellular bacteria (strain L2) for the development and marketing of new vaccines. In exchange for these rights, Genset will receive a total of $15 million, consisting of an up-front license fee and further milestone payments linked to key stages in the clinical development process. In addition, Wyeth-Lederle will pay Genset royalties for future sales of vaccines derived from the latter¿s intellectual property.
The two-year research agreement Genset signed with Pharmacia & Upjohn on Oct. 5 gives the pharmaceutical giant the right to use Genset¿s pharmacogenomics technology to discover markers and genes associated with the response to one of its compounds. More specifically, it will use the technology to identify genetic markers in patients enrolled in clinical trials of the compound.
Genset said it expects to sign a third pharmacogenomics research agreement at the end of this year or early in 1999.