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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

Commission File No. 000-30981

Genaissance Pharmaceuticals, Inc.
(Exact Name of Registrant as Specified in its Charter)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

Yes ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act):

Yes o    No ý

        The number of shares of the registrant's outstanding common stock as of August 5, 2004, was 30,822,857 shares.

        DecoGen®, HAP®, HAP™ and FAMILION™ are either registered trademarks or trademarks of Genaissance Pharmaceuticals, Inc. in the United States and/or other countries. All other trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.

GENAISSANCE PHARMACEUTICALS, INC.

For the quarter ended June 30, 2004

Index

PART I—Financial Information

Item 1—Financial Statements.

GENAISSANCE PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

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The accompanying notes are an integral part of these condensed consolidated financial statements.

2

GENAISSANCE PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

GENAISSANCE PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GENAISSANCE PHARMACEUTICALS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

For the Quarter Ended June 30, 2004

(Amounts in thousands, except per share data)

(1)   BASIS OF PRESENTATION AND RECENT DEVELOPMENTS

        Genaissance Pharmaceuticals, Inc. is a leader in the discovery and use of human gene variation for the development of a new generation of DNA-based diagnostic and therapeutic products. The Company's technology, services and clinical development expertise are marketed to biopharmaceutical and diagnostic companies, as a comprehensive solution to their pharmacogenomic needs. Genaissance's goal is to improve drug development, drug therapy prescribed by physicians and the quality of a patient's life by elucidating the role of genetic variation in drug response. The Company offers the FAMILION Test, a genetic test for cardiac channelopathies that is compliant with the Clinical Laboratory Improvement Acts, or CLIA. Additionally, Genaissance provides Good Laboratory Practices (GLP) compliant DNA banking and research and GLP compliant sequencing, genotyping and related molecular biology services, herein referred to collectively as molecular biology services, to a variety of entities.

        The accompanying condensed consolidated financial statements of Genaissance Pharmaceuticals, Inc. and its subsidiary, Lark Technologies, Inc. (collectively "Genaissance" or the "Company") were prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the Company's audited financial statements and related footnotes for the year ended December 31, 2003, included in its Annual Report on Form 10-K (File No. 000-30981). The unaudited consolidated financial statements include, in the opinion of management, all adjustments, including the elimination of all significant intercompany transactions, which are necessary to present fairly the Company's consolidated financial position as of June 30, 2004, and the results of its operations for the three and six months ended June 30, 2004 and 2003, respectively. The results of operations for such interim periods are not necessarily indicative of the results to be achieved for the full year.

        In June 2004, the holder of our Series A Redeemable Convertible Preferred Stock (Series A) exercised its warrant to purchase an additional 190 shares of Series A. See Note 10 for further discussion of the warrant exercise.

        In April 2004, the Company merged with Lark Technologies, Inc. (Lark) in a stock-for-stock exchange such that Lark became a wholly-owned subsidiary of the Company. Lark provides GLP compliant and research sequencing and related molecular biology services to the pharmaceutical, biotechnology and agbio industries at its facilities in Houston, Texas, and the United Kingdom. Lark's service portfolio consists of over one hundred different molecular biology services in the areas of nucleic acid extraction services, DNA sequencing services, genetic stability testing services, gene expression and detection services and other custom services. See Note 2 for further discussion of the merger agreement.

        In May 2003, the Company acquired certain assets and assumed certain liabilities of DNA Sciences, Inc. The assets acquired included a GLP compliant DNA banking and a GLP compliant and CLIA licensed genotyping services business.

        The Company has incurred losses since inception and expects to incur losses in the future. Based upon the Company's current activities, the Company plans to fund its operations for at least the next

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twelve months with existing cash and marketable securities on-hand, revenue from proprietary programs and services revenue.

(2)   MERGER WITH LARK TECHNOLOGIES

        On April 1, 2004 the stockholders of the Company and the stockholders of Lark voted to approve the plan of merger the two companies entered into in December 2003 and the merger closed that day. Under the terms of the agreement, the Company acquired Lark in a stock-for-stock exchange accounted for as a purchase transaction.

        Lark stockholders received 1.81 shares of Genaissance's common stock in exchange for each share of Lark common stock for an aggregate of approximately 6,693 shares of the Company's common stock. In addition, options to purchase Lark common stock were converted into options to purchase approximately 1,448 shares of the Company's common stock. The total cost of the acquisition was approximately $24,486 consisting of the following:

        The purchase price was allocated to the tangible and identifiable intangible assets of Lark acquired by the Company and the liabilities assumed by the Company on the basis of their fair values on the acquisition date. The Company has allocated the total costs of the acquisition to the net assets of Lark as follows:

        Identifiable intangible assets include backlog of $200, with an estimated useful life of one year, customer relationships of $7,200, with an estimated useful life of 15 years, and GLP certification of $137 and trade name of $3,500, with indefinite useful lives (see Note 5). The indefinite lived intangible assets will not be amortized and will be tested for impairment at least annually. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired less liabilities assumed. Amortization of all of the intangible assets is not deductible for income tax purposes. A federal deferred tax liability of approximately $2,516 has been established for the tax effects of temporary differences resulting from the purchase price allocation. This federal deferred tax liability has been offset by the recognition of deferred tax assets for the tax effects of the carryforward losses of the Company. As a result, these federal deferred tax liabilities had no net impact on goodwill.

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The Company recognized a state deferred tax liability of approximately $222 as a result of the tax effects of temporary differences arising from the purchase price allocation.

        The results of operations of Lark are included in the Company's condensed consolidated statements of operations since the date of acquisition. Supplemental pro-forma disclosure of results of operations for the three months ended June 30, 2003 and six month periods ended June 30, 2004 and 2003, respectively, as though the merger had been completed as of January 1, 2003, are as follows:

        The financial statements of the Company's U.K. facility are measured using the local currency as the functional currency. Assets and liabilities of the U.K. facility are translated at the rates of exchange at the balance sheet date. The resulting translation adjustments are recorded in a separate component of stockholders' equity included in other comprehensive income (loss) (see Note 11). Income and expense items are translated at average monthly rates of exchange.

        Laboratory services for the U.K. facility totaled approximately $852 for the three months ended June 30, 2004.

(3)   EARNINGS PER SHARE

        The Company computes and presents net loss per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 128). For the three and six months ended June 30, 2004 and 2003, respectively, there is no difference in basic and diluted net loss per common share as the effect of stock options and warrants would be anti-dilutive for all periods presented. The outstanding Series A, stock options and warrants (prior to application of the treasury stock method) would entitle holders to acquire 9,911 and 4,581 shares of common stock at June 30, 2004 and 2003, respectively.

(4)   REVENUE RECOGNITION

        The Company earns its revenue primarily through the licensing of its HAP Technology and by providing molecular biology services. The Company has also entered into agreements that provide for the Company to receive future milestone and royalty payments. The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition (SAB 104) (which supercedes SAB 101, Revenue Recognition in Financial Statements), Statement of Position 97-2 (SOP 97-2), Software Revenue Recognition, as amended by Statement of Position 98-9 (SOP 98-9), and Emerging Issues Task Force Issue 00-21 (EITF 00-21), Revenue Arrangements with Multiple Deliverables. In accordance with SAB 104 and EITF 00-21, the Company generally recognizes license fees over the term of the agreement and service fees as the services are performed. Revenue associated with GLP compliant DNA banking and genotyping services and Lark's molecular biology services are included in laboratory

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services in the accompanying condensed consolidated statement of operations. For agreements with multiple deliverables, revenue is not recognized unless the fair value of the undelivered elements can be determined and the elements delivered have stand-alone value to the customer. Future milestones and royalty payments, if any, will be recognized when received, provided that the milestone is substantive and a culmination of the earnings process has occurred. Deferred revenue results when consideration is received or amounts are receivable in advance of revenue recognition.

(5)   GOODWILL AND INTANGIBLE ASSETS

        Goodwill and identifiable intangible assets recorded in the condensed consolidated balance sheet of the Company are comprised of the following as of June 30, 2004:

        The expected amortization expense for the current and each of the next four years is as follows:

(6)   ACCOUNTING FOR STOCK-BASED COMPENSATION

        At June 30, 2004, the Company had one stock-based compensation plan, which is accounted for under the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations.

        The following table illustrates the effect on net income and earnings per share, if the Company had applied the fair value recognition provisions of FAS 123, Accounting for Stock-Based Compensation,

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to stock-based employee compensation for the three and six months ended June 30, 2004 and 2003, respectively:

(7)   SIGNIFICANT CUSTOMERS

        For the six months ended June 30, 2004 and 2003, Customer A accounted for 28% and 11% of the Company's revenue, respectively. Customer B accounted for 11% of revenue for the six months ended June 30, 2004. Customer C and Customer D accounted for 29% and 14% of revenue, respectively for the six months ended June 30, 2003. The collaboration agreement with Customer C expired in the first quarter of 2004. One customer accounted for 25% of our accounts receivable balance as of June 30, 2004. No other customer accounted for 10% or more of our accounts receivable balance as of June 30, 2004

(8)   INVESTMENT IN AFFILIATE

        In November 2003, the Company entered into several agreements with Sciona Limited (Sciona), a private company based in the U.K., whereby the Company granted a technology license to Sciona (Technology License) in exchange for a 37% equity interest (30% on a fully diluted basis) in Sciona (Investment). The Technology License grants Sciona an exclusive license to the Company's HAP Technology for consumer tests, as defined in the Technology License, for a period of five years. Sciona is obligated to pay to the Company specified royalties and service fees, subject to minimum annual payments. The Company was also granted specified rights to develop genotyping assays and perform genetic tests.

        The Company agreed to fund certain expenses of Sciona for up to 18 months or until Sciona reaches certain levels of financial performance (Sciona Milestones). Since entering into the agreements, the Company has funded $132 of reimbursable Sciona expenses, which are included in other current assets in the accompanying 2004 condensed consolidated balance sheet. Should Sciona not meet the

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Sciona Milestones, the Company may terminate the license and the equity interest will revert back to Sciona (Termination Provision).

        Deferred revenue resulting from the Technology License and the accompanying investment were initially recorded based upon the $2,600 estimated fair value of the equity in Sciona as of the date of the Technology License. The excess of the Investment, over the underlying fair value of the net assets of Sciona, is considered to be unamortizable goodwill. Deferred revenue will be amortized into income over the term of the Technology License once the Termination Provision has lapsed, at which time a one-time cumulative adjustment will be made. The Company also includes in equity in loss of affiliate in the accompanying condensed consolidated statement of operations its percentage interest in the unaudited losses of Sciona and has reduced the investment in affiliate by a like amount. For the three and six months ended June 30, 2004, the Company recorded $150 and $300, respectively, of such losses. Also included in the accompanying condensed consolidated statement of operations, for the three and six months ended June 30, 2004, are $38 and $85, respectively, of revenues for services provided to Sciona.

(9)   LONG-TERM DEBT

        In September 2003, the Company entered into a $5.0 million Loan and Security Agreement with Comerica Bank. The agreement requires equal monthly payments of principal over a 36-month period and bears interest at prime (4.0% as of June 30, 2004) plus 2.5%. Borrowings under the agreement are collateralized by certain assets of the Company. Under the terms of the agreement, the Company is required to satisfy certain financial covenants, including a minimum cash balance and a minimum quick ratio, as defined. In addition, the agreement includes a material adverse change clause, which provides that all amounts become due upon such a change. The Company was in compliance with these covenants as of June 30, 2004.

(10) PREFERRED STOCK

        In October 2003, the Company sold 270 shares of Series A, $0.001 par value per share, to RAM Trading, Ltd. (RAM) for $22.50 per share, resulting in proceeds of approximately $5,925, net of issuance