25 Jul Third Wave reports another loss, stronger sales
Madison, Wis. – Third Wave Technologies, Inc. reported a net loss of $4.7 million, or 11 cents a share, for the second quarter of 2006, but robust sales have prompted the company to revise year-end revenue projections upward in a key market.
Third Wave, which develops molecular diagnostic reagents for DNA and RNA analysis applications, reported that revenue rose by 15 percent for the quarter ended June 30, 2006. That increase came largely on the strength of molecular diagnostic revenue that exceeded company expectations, and nearly $1 million in Agbio revenue.
The company’s transition from the research to the clinical market has been a difficult one. Third Wave is coming off a year in which it lost more than $22 million and spent nearly $7 million on patent litigation, with a healthy $15.9 million judgment against one of the alleged violators, Stratagene, still on appeal.
Losing less
The most recent quarterly net loss compares to a net loss of $5.5 million, or 13 cents a share, for the same period of 2005. The second-quarter 2006 net loss, however, improved 35% from the company’s pro forma net loss of $7.2 million, or 18 cents a share, for the same period of 2005.
FAS 123(R) stock compensation costs were factored into both quarters. FAS 123 refers to the Financial Accounting Standards Board statement on share-based payments, and it addresses the expensing of stock options and other equity awards to a company’s employees.
From a year-to-date perspective, the company’s net loss was $9.1 million, or 22 cents a share, compared to a net loss of $9.9 million, or 24 cents a share, for the first six months of 2005. When stock compensation costs are included, Third Wave’s pro forma net loss for the same six-month period of 2005 was $13.1 million, or 32 cents a share.
Total operating expenses were $11.9 million for the second quarter, compared to $11.5 million for the same period of 2005. Third Wave’s pro forma total operating expenses for the second quarter of 2005, including stock compensation costs, were $13.2 million.
For the first six months of 2006, total operating expenses were $24.4 million, compared to $23.1 million for the same period of 2005. The company’s pro forma total operating expenses for the same six-month period in 2005, including stock compensation costs, were $26.3 million.
Also in the second quarter, total revenue grew to $6.8 million, an increase of more than 15% from $5.8 million during the same period of 2005. Total revenue for the first six months, $14.6 million, is tracking 13 percent ahead of 2005, when the company’s six-month figure was $12.9 million.
Third Wave reported clinical molecular diagnostic revenue of $5.1 million, an increase of 18 percent and 7 percent, respectively, from the same 2005 quarter and the first quarter of 2006. Year-to-date, clinical molecular diagnostic revenue also is tracking higher, as the company reported $9.8 million for the first six months, a 32 percent increase from the $7.4 million reported for the same period of 2005.
Pipeline production
Third Wave offers a number of products based on its core Invader chemistry for clinical testing. The company said its current product pipeline remains on track or ahead of schedule, including the scheduled submission of two human papilloma virus (HPV) products to the United States Food and Drug Administration in 2007. The company anticipates submitting to the FDA a 14-type, high-risk screening test, and a genotyping test for types 16 and 18 of the virus. The latter types have been linked to cervical cancer.
Complementing its HPV offering, Third Wave said it would continue its focus on what it called “the highest-value molecular diagnostic markets” by launching reagents for the detection of chlamydia and gonorrhea in 2007. Testing for HPV, chlamydia, and gonorrhea accounts for more than 20 percent of the molecular diagnostic testing market.
As a result, Third Wave has raised its projection on clinical molecular diagnostic revenue to $20-21 million for 2006.
Another new product is a next generation version of Invader. Based on the results of external evaluations of Universal Invader(R) Plus program, the company plans to launch the program earlier than anticipated. Invader Plus, which earlier this year received broad patent protection from the U.S. Patent and Trademark Office, combines the Invader chemistry with chain-reaction chemistry to find minute amounts of DNA or RNA and make what the company calls “exponential” copies of both.
Research revenue
Third Wave also reported $1.6 million of research revenue during the second quarter, including almost $1 million of Agbio revenue. While the company anticipates continued growth in Agbio revenue, it does not expect any material contribution of genomic research revenue during the remainder of 2006. It therefore maintained its previous projection of roughly $7 million in total annual research revenue.
Total annual revenue, which combines product and research sales, is projected to be in the $27 million to $28 million range for 2006.
Third Wave ended the second quarter of 2006 with cash, cash equivalents, and short-term investments of $36.2 million, down from the $38.7 million in cash it had on Dec. 31, 2005.
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