13 Jun Third Wave's revenues rebound
Madison, Wis. – At their annual shareholder’s meeting, Third Wave Technologies announced increased revenues for the first quarter 2006 and several promising ventures for the rest of the year, but company officials still were unable to say when they would begin to show profit.
Kevin Conroy, president and chief executive officer of Third Wave, told assembled shareholders that the company has been taking action over the last six months to secure its position in the rapidly growing molecular diagnostics market following management changes and lower-than-expected revenues in 2005.
Third Wave reported a loss of $22.3 million in 2005, which was attributed to a decline in research revenue and a shift into the clinical market. Their revenue was $23.9 million, compared to 2004 revenue of $46.5 million.
Conroy said that in the first quarter of 2006, the company saw total revenue of $7.9 million, an 11 percent increase from the same time last year and a 36 percent increase from last quarter. The company also reported a loss of $4.4 million, the same as for first quarter of 2006.
The view from Baird
Quintin Lai, a senior research analyst with Robert W. Baird & Co., said Third Wave’s outlook for 2006 is optimistic because of the market and lowered expectations by the company. Lai said in 2005 Third Wave overestimated its earnings goals and readjusted for the next year, a move that may have damaged the company on the market but which has been to the company’s long-term benefit.
“They set 2006 expectations – which were lower than Wall Street was expecting – [and] now we’re seeing those numbers were reasonable if not conservative,” Lai said. “Now, almost halfway through the year, based on those reset expectations, they can meet or exceed those numbers.”
Conroy acknowledged the company’s expectations problem. “I think we disappointed Wall Street last year, and it takes a while to regain market confidence,” he said.
In addition to altered expectations, the company also has had to deal with legal issues over its Invader technology, a product line that includes tests for genetic mutations associated with immune response and drug metabolism. In October of 2005, Third Wave filed patent lawsuits against multiple companies, and has settled suits with Digene, Chiron, and Bayer. The only lawsuit left pending is with Strategene, which is awaiting appeal after a judge ruled in favor of Third Wave last September.
Third Wave said it spent $6.9 million on patent litigation in 2005. “Our goal is not to become profitable through litigation, but we will fiercely defend the basic Invader technology,” Conroy said.
Lai said the lawsuits have done nothing to hinder Third Wave’s business practices, other than increase its legal budget.
The company’s first-quarter operating expenses included $1 million in litigation costs. If anything, the lawsuits have proven a boon to the company as the outcomes provide it with confidence in its product and practices.
Third Wave has intensified its focus on the clinical field, particularly in the human papillomavirus (HPV). Conroy said that HPV diagnosis and treatment forms a market of almost $500 million in the U.S. alone, and the market has been penetrated only 15 to 20 percent, making it a desirable target for the company.
“We expect the market to be $450 million, and we’re going to do everything we can to be a major part of that market,” Conroy said, adding that Third Wave will announce its product line in July, with FDA submission in 2007.
Third Wave has also been branching out into the Japanese market by partnering with Mitsubishi Corp. to move its Invader products to the clinical lab BML. Conroy said Third Wave has made a $4 million investment in the partnership, and estimates the Japanese market at $80 million.
Lai said getting repeat customers and partnerships like these will be a key to Third Wave’s progress. “The molecular diagnostics field is very competitive, and once you get a base of users through the field, they tend to be very sticky, they adopt your technology, and become a great space,” Lai said. “Third Wave is showing signs of traction in selling their diagnostic business.”
• Third Wave Reports Third-Quarter Financial Results
• Third Wave settles patent suit with Digene
• Stratagene sets aside $21M to pay Third Wave pending appeal
• Third Wave licenses Innogenetics tech to settle lawsuit
• Third Wave agrees to drop Chiron, Bayer patent lawsuits