Nanogen scraps microarray business in favour of PCR assays

In September, LabTechnologist.com reported that Nanogen was considering selling off or closing down its microarray business in an effort to achieve profitability.

Nanogen has since decided that its microarray business was not in a competitive position and that it would focus on its real-time PCR (polymerase chain reaction) and point-of-care diagnostics products.

While the company managed an 11 per cent increase in revenues of $8.4m (€5.8m) during the third quarter of 2007, it still fell short of achieving profitability, making a net loss of $7.5m. "Our analysis of alternatives for the array business has not resulted in any financially meaningful opportunities," said David Ludvigson, Nanogen's president and chief operating officer.

"We have determined that the best way to meet our commitment to improving financial performance for our shareholders is to focus on our real-time PCR and point-of-care testing businesses."

He continued by stating that scrapping the business would have only a minimal impact on Nanogen's revenues while resulting in a $15m reduction of operating expenditure.

This restructuring led to a $6.9m non-cash charge to third quarter financials for inventory and assets related to the array business, however this was apparently offset to the tune of $5.8m by the deconsolidation of Jurilab.

The company also expects to be hit with a cash charge during the fourth quarter of around $2.5m to fund the 20 per cent staff reduction that will result from dropping the array business.

"The future of our company and our mission to be a leading diagnostics company has not changed with this decision," said Howard Birndorf, CEO of Nanogen.

"The acquisitions we have made in the past three years have given us a good foothold in both the molecular diagnostics labs and the point-of-care rapid testing market.

We believe the long term growth prospects for both of these product areas will drive significant future value for the company."

At the time of initial announcement the decision raised eyebrows as the microarray sector has been in good health with pharmaceutical companies looking to gain access to array technologies in a bid to push 'personalised medicines'.

This was perhaps best exemplified by Roche acquiring microarray manufacturer Nimblegen, which had 2006 revenues of $13.5m, for $272m.

Indeed, Stuart Matlow, Life Sciences & Chemical Analysis PR for Agilent, told LabTechnologist.com last December that the DNA microarray sector had grown approximately 12 per cent during 2006.

However, the market place appears to be getting increasingly competitive as shown by GE Healthcare's decision to stop selling its Codelink platform .

The product line was eventually rescued by Applied Microarrays .

This move towards consolidation has been somewhat mirrored by Gene Logic's decision to exit the genomics market, selling off its genomics division and name to Ocimum Biosciences for $10m.