Complete Genomics (GNOM) priced its IPO on November 11 at $9 per share, below the expected range of $12-$14.
Business Overview (from prospectus)
We are a life sciences company that has developed and commercialized an innovative DNA sequencing platform, and our goal is to become the preferred solution for complete human genome sequencing and analysis. Our Complete Genomics Analysis Platform, or CGA Platform, combines our proprietary human genome sequencing technology with our advanced informatics and data management software and our innovative, end-to-end, outsourced service model to provide our customers with data that is immediately ready to be used for genome-based research. We believe that our solution will provide academic and biopharmaceutical researchers with complete human genomic data and analysis at an unprecedented combination of quality, cost and scale without requiring them to invest in in-house sequencing instruments, high-performance computing resources and specialized personnel. By removing these constraints and broadly enabling researchers to conduct large-scale complete human genome studies, we believe that our solution has the potential to revolutionize medical research and expand understanding of the basis, treatment and prevention of complex diseases.
Offering: 6 million shares at $9 per share, below the range of $12-$14. Net proceeds of $54 million will be used for capital expenditures, product development, working capital and general corporate purposes.
We recognized revenue of $1.4 million in the first six months of 2010, which represented sales to thirteen customers. We did not recognize revenue during the first six months of 2009... During the first six months of 2010, we incurred $9.0 million of start-up production costs to support our genome sequencing service, compared to $1.0 million in the first six months of 2009. These activities include the acceptance testing of customer genomic samples, sample sequencing preparation, sample sequencing, the processing of data generated by our prototype sequencing instruments, continued validation of the production process and optimization of instrument performance. The increase in start-up production costs was primarily due to employee salaries and benefits and stock-based compensation expenses of $2.7 million and $0.1 million, respectively, depreciation expense of $1.5 million, facilities and maintenance costs of $1.3 million, data communication charges of $0.8 million, reagents, materials and supplies expenses of $0.8 million and consulting expenses of $0.3 million. As in 2009, we continued to incur considerable start-up costs in excess of revenue during the first six months of 2010 to initiate and bring our human genome sequencing production process to commercial-scale. We continued to commit significant personnel and equipment resources to our production process in advance of our achieving full commercial production volume. As only a portion of our production expenses varies with our revenue, our production costs will be greater than our revenue until we achieve significant product volume and revenues.
Competition among organizations developing or commercializing sequencing instruments and services is intense. The sequencing industry is dominated by large, established companies that provide instruments and reagents, mostly for expression analysis and genotyping. These companies include Illumina, Inc., Life Technologies Corporation and Roche Diagnostics Corporation. These competitors are large and well-established, and each maintains a significant market share. Although historically these companies have sold instruments and reagents, some of these competitors have made recent forays into the sequencing services market. For example, Illumina recently announced that it will be providing individual genome sequencing services for as low as $9,500 per genome, and Life Technologies recently announced a collaboration to build a genome sequencing facility. Illumina also announced that it is pursuing a global program designed to provide researchers with access to academic and commercial institutions that can perform large-scale whole human genome sequencing projects using Illumina’s technology.