Cancer Genetics, Inc. (Nasdaq: CGIX), a leader in enabling
precision medicine for immuno-oncology and genomic medicine through
diagnostics, molecular markers and data solutions, today announced
financial and operating results for the fourth quarter and full
year ended December 31, 2018.
FOURTH QUARTER 2018 AND RECENT OPERATIONAL
HIGHLIGHTS
- Revenue increased sequentially by 15%, from $5.9 million in Q3
to $6.8 million in Q4, and decreased from $7.5 million in Q4
2017;
- Gross margin increased sequentially by 17 percentage points
from 22% in Q3 to 39% in Q4, and 9 percentage points from 30% in Q4
2017;
- Signed new contracts in Q4 with estimated revenue potential of
up to approximately $9.8 million for biopharma and
discovery/preclinical services;
- Completed the consolidation of lab operations from Los Angeles
to east coast facilities, realizing more than $4 million in
annualized operating cost savings;
- Strengthened management team with appointment of Glenn Miles as
Chief Financial Officer and William Finger as Executive Vice
President, Precision Medicine and Pharma Services;
- Entered strategic partnership with Genecast Biotechnology to
commercialize the Tissue of Origin® (TOO) Test in China; the
project is now in the implementation phase with a planned start in
Q3 2019;
- Partnered with Cellaria to develop precision medicine tools to
support cancer therapeutic research with biopharma customers;
- Raised gross proceeds of $6.5M through public offerings of
common stock in January 2019.
John A. Roberts, Chief Executive Officer of Cancer Genetics
said, “In 2018, we focused on executing our transformation strategy
to lower our costs and position our business to capitalize on the
growing biopharma services industry, which leverages our expertise
and quality systems to support innovative immuno-oncology drug
development through precision oncology tests and services.
We are extremely pleased with the progress made during the
fourth quarter as we continued to execute on our objectives for
2018. During the quarter, we began to recognize the benefits of our
consolidation initiatives by relocating our operations to the east
coast. This relocation was implemented throughout 2018, and
completed at the end of Q3 on time and on budget. As we have
reported previously, we expect the consolidation initiatives to
collectively reduce total expenses by more than $4 million on an
annualized basis while we incurred approximately $2.3 million of
restructuring costs in 2018. Overall, we believe that we are well
positioned to continue executing on our key strategic and
operational objectives as we work to grow revenue and accelerate
our path to profitability.”
Mr. Roberts continued, “We signed multiple contracts with
biopharma customers, which reinforces our optimism about our
ability to grow our discovery and biopharma services
businesses. In the fourth quarter of 2018, we signed 105 new
contracts for discovery and biopharma services with anticipated
future revenue of up to approximately $9.8 million, and we
completed the year with up to approximately $38 million in signed
contracts having revenue yet to be recognized. Our partnership with
Cellaria is focused on developing extensive precision medicine
tools and platform technologies in our discovery business unit for
development of oncology medicines. We also entered into a
collaboration agreement with Genecast Biotechnology to expand the
availability of the Tissue of Origin® (TOO) Test by marketing,
distributing and selling it in China.”
Recently, we raised gross proceeds of $6.5 million through two
public offerings, which we believe provide the Company with greater
financial stability. We remain committed to enhancing our unique
test and service offerings that will help us expand our business
overall, and our biopharma business in particular.”
The Company filed its Annual Report on Form 10-K for the year
ended December 31, 2018 today with the Securities and Exchange
Commission. The audited financial statements contain a going
concern qualification paragraph in the audit opinion from its
independent registered public accounting firm. The Company also
disclosed it had a Material Weakness in Internal Controls over
Financial Reporting at December 31, 2018. See further discussion in
Note 2 to the Company's consolidated financial statements included
in the Annual Report on Form 10-K.
The Company continues to engage Raymond James & Associates,
Inc. as a financial advisor to assist with evaluating options for
the Company’s strategic direction. These options may include
raising additional capital, the acquisition of another company and
/ or complementary assets, the sale of the Company, or another type
of strategic partnership.
The Company’s Board of Directors is committed to evaluating all
potential strategic opportunities and to pursuing the path most
likely to create both near- and longer-term value for Cancer
Genetics’ shareholders.
FOURTH QUARTER 2018 FINANCIAL RESULTS
The Company reported total revenue of $6.8 million for the
fourth quarter of 2018 compared to revenue of $7.5 million in the
fourth quarter of 2017, a decrease of $696 thousand or 9.3%,
partially related to the impact on its clinical services business
unit of the adoption of ASC 606 at the beginning of
2018.
Biopharma services revenue totaled $3.7 million in the fourth
quarter of 2018, compared to $3.5 million during the fourth quarter
of 2017. Revenue from biopharma projects are dependent on the
timing, size and duration of contracts with pharmaceutical and
biotech companies and clinical research organizations, and can
fluctuate in comparable periods.
Clinical services revenue decreased by approximately $0.5
million in the fourth quarter of 2018 compared to the same period
in 2017, from $1.9 million to $1.4 million. The decrease in revenue
was primarily related to the adoption of ASC 606 beginning in 2018,
resulting in implicit price concessions which lowers the overall
average revenue per test. The Company’s discovery services
contributed $1.7 million in revenue for the fourth quarter of 2018,
a decrease of approximately $0.4 million compared to the fourth
quarter of 2017, partially the result of the adoption of ASC 606
and the inherent variability in project start and end times at the
individual contract level.
Gross profit margin increased to 39% or $2.7 million in the
fourth quarter of 2018, compared to 30% or $2.3 million in the
fourth quarter of 2017. The gross margin percentage improved as the
result of reductions in head count and lab facility costs
associated with the consolidation of the Los Angeles operations
into the New Jersey and North Carolina labs, notwithstanding the
reduction in clinical services and discovery business unit revenue
in the comparable periods.
Total operating expenses for the fourth quarter of 2018 were
approximately $6.5 million, a decrease of 45% compared to $11.8
million during the fourth quarter of 2017. The decrease in total
operating expenses is primarily the result of the Company’s
consolidation of its lab operations formerly in Los Angeles and
further reductions in research and development and sales and
marketing related expenses during the quarter.
Net loss was $3.8 million or $0.14 per share for the fourth
quarter of 2018, compared to a net loss of $7.9 million or $0.35
per share for the fourth quarter of 2017.
FULL YEAR 2018 FINANCIAL RESULTS
Revenues for full year 2018 were $27.5 million as compared to
$29.1 million for full year 2017, a 5.7% decrease. The Company
reported gross margin for the twelve months ended December 31, 2018
of 31.8% compared to 37.9% in the same period last year, a decrease
of 6.1 percentage points. Total operating expenses increased
approximately $1.0 million to $30.7 million for full year
2018. The Company recorded a total of $2.6 million in bad
debt expense in 2018 compared to bad debt expense of $5.3 million
in 2017. Net loss was $20.4 million or $0.75 per share for
2018, compared to a net loss of $20.9 million or $1.01 per share
for 2017.
Cash and cash equivalents totaled $0.2 million, net of $0.35
million in restricted cash, as of December 31, 2018.
ABOUT CANCER GENETICS
Cancer Genetics, Inc. is a leader in enabling precision medicine
in oncology through the use of biomarkers and molecular testing.
CGI is developing a global footprint with locations in the US and
Australia. We have established strong clinical research
collaborations with major cancer centers such as Memorial Sloan
Kettering, Mayo Clinic, Keck School of Medicine at USC and the
National Cancer Institute.
The Company offers a comprehensive range of laboratory services
that provide critical genomic and biomarker information. Its
state-of-the-art reference labs are CLIA-certified and
CAP-accredited in the US and have licensure from several states
including New York State.
For more information, please visit or follow CGI
at:
Internet: www.cancergenetics.com
Twitter: @Cancer_Genetics
Facebook: www.facebook.com/CancerGenetics
Forward Looking Statements:
This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements pertaining to Cancer Genetics
Inc.’s expectations regarding future financial and/or operating
results and potential for our tests and services, and future
revenues or growth in this press release constitute forward-looking
statements.
Any statements that are not historical fact
(including, but not limited to, statements that contain words such
as “will,” “believes,” “plans,” “anticipates,” “expects,”
“estimates”) should also be considered to be forward-looking
statements. Forward-looking statements involve risks and
uncertainties, including, without limitation, risks inherent in the
development and/or commercialization of potential products, risks
of cancellation of customer contracts or discontinuance of trials,
risks that anticipated benefits from consolidation efforts and/or
acquisitions will not be realized, uncertainty in the results of
clinical trials or regulatory approvals, need and ability to obtain
future capital, uncertainties with respect to evaluating strategic
options, maintenance of intellectual property rights and other
risks discussed in the Cancer Genetics, Inc. Form 10-K for the year
ended December 31, 2018, along with other filings with the
Securities and Exchange Commission. These forward-looking
statements speak only as of the date hereof. Cancer Genetics, Inc.
disclaims any obligation to update these forward-looking
statements.
INVESTOR CONTACT:
Lee Roth The Ruth GroupTel: 646-536-7012 Email:
lroth@theruthgroup.com
Media:Kirsten ThomasThe Ruth GroupTel:
508-280-6592Email: kthomas@theruthgroup.com
|
Cancer Genetics, Inc. and
Subsidiaries |
Consolidated Balance Sheets |
(in thousands, except par value) |
|
|
December 31, |
|
|
2018 |
|
|
|
2017 |
|
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and
cash equivalents |
$ |
161 |
|
|
$ |
9,541 |
|
Accounts
receivable, net of allowance for doubtful accounts of 2018 $3,462;
2017 $6,539 |
|
7,038 |
|
|
|
10,958 |
|
Other
current assets |
|
2,148 |
|
|
|
2,707 |
|
Total current assets |
|
9,347 |
|
|
|
23,206 |
|
FIXED ASSETS, net of
accumulated depreciation |
|
4,056 |
|
|
|
5,550 |
|
OTHER ASSETS |
|
|
|
Restricted cash |
|
350 |
|
|
|
350 |
|
Patents
and other intangible assets, net of accumulated amortization |
|
4,004 |
|
|
|
4,478 |
|
Investment in joint venture |
|
92 |
|
|
|
246 |
|
Goodwill |
|
17,257 |
|
|
|
17,992 |
|
Other |
|
300 |
|
|
|
399 |
|
Total other assets |
|
22,003 |
|
|
|
23,465 |
|
Total
Assets |
$ |
35,406 |
|
|
$ |
52,221 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
CURRENT
LIABILITIES |
|
|
|
Accounts
payable and accrued expenses |
$ |
13,067 |
|
|
$ |
8,715 |
|
Obligations under capital leases, current portion |
|
330 |
|
|
|
272 |
|
Deferred
revenue |
|
2,173 |
|
|
|
516 |
|
Line of
credit |
|
2,621 |
|
|
|
4,137 |
|
Term
note |
|
6,000 |
|
|
|
6,000 |
|
Convertible note, net |
|
2,481 |
|
|
|
- |
|
Advance
from NovellusDx, Ltd., net |
|
535 |
|
|
|
- |
|
Other
derivatives |
|
86 |
|
|
|
- |
|
Total current liabilities |
|
27,293 |
|
|
|
19,640 |
|
Obligations under
capital leases |
|
379 |
|
|
|
624 |
|
Deferred rent payable
and other |
|
305 |
|
|
|
360 |
|
Warrant liability |
|
248 |
|
|
|
4,403 |
|
Deferred revenue,
long-term |
|
379 |
|
|
|
429 |
|
Total
Liabilities |
|
28,604 |
|
|
|
25,456 |
|
STOCKHOLDERS’
EQUITY |
|
|
|
Preferred
stock, authorized 9,764 shares $0.0001 par value, none issued |
|
- |
|
|
|
- |
|
Common
stock, authorized 100,000 shares, $0.0001 par value, 27,726 and
27,754 shares issued and outstanding as of December 31, 2018
and 2017, respectively |
|
3 |
|
|
|
3 |
|
Additional paid-in capital |
|
164,455 |
|
|
|
161,527 |
|
Accumulated other comprehensive income |
|
60 |
|
|
|
69 |
|
Accumulated deficit |
|
(157,716 |
) |
|
|
(134,834 |
) |
Total
Stockholders’ Equity |
|
6,802 |
|
|
|
26,765 |
|
Total
Liabilities and Stockholders’ Equity |
$ |
35,406 |
|
|
$ |
52,221 |
|
|
|
|
|
|
Cancer Genetics, Inc. and
Subsidiaries |
Consolidated Statements of Operations and Other
Comprehensive Loss |
(in thousands, except per share
amounts) |
|
|
Years Ended December 31, |
|
|
2018 |
|
|
|
2017 |
|
Revenue |
$ |
27,470 |
|
|
$ |
29,121 |
|
Cost of
revenues |
|
18,724 |
|
|
|
18,070 |
|
Gross profit |
|
8,746 |
|
|
|
11,051 |
|
Operating
expenses: |
|
|
|
Research
and development |
|
2,488 |
|
|
|
4,789 |
|
General
and administrative |
|
19,184 |
|
|
|
19,894 |
|
Sales and
marketing |
|
5,268 |
|
|
|
4,990 |
|
Restructuring costs |
|
2,320 |
|
|
|
- |
|
Merger
costs |
|
1,464 |
|
|
|
- |
|
Total operating expenses |
|
30,724 |
|
|
|
29,673 |
|
Loss from operations |
|
(21,978 |
) |
|
|
(18,622 |
) |
Other income
(expense): |
|
|
|
Interest
expense |
|
(2,120 |
) |
|
|
(2,128 |
) |
Interest
income |
|
21 |
|
|
|
63 |
|
Change in
fair value of warrant liability |
|
3,732 |
|
|
|
(1,964 |
) |
Change in
fair value of other derivatives |
|
(86 |
) |
|
|
- |
|
Change in
fair value of acquisition note payable |
|
136 |
|
|
|
(42 |
) |
Other
expense |
|
(78 |
) |
|
|
(266 |
) |
Total other income (expense) |
|
1,605 |
|
|
|
(4,337 |
) |
Loss before income taxes |
|
(20,373 |
) |
|
|
(22,959 |
) |
Income tax
(benefit) |
|
- |
|
|
|
(2,079 |
) |
Net (loss) |
$ |
(20,373 |
) |
|
$ |
(20,880 |
) |
Basic and diluted net
(loss) per share |
$ |
(0.75 |
) |
|
$ |
(1.01 |
) |
Basic and diluted
weighted average shares outstanding |
|
27,291 |
|
|
|
20,663 |
|
|
|
|
|
Net (loss) |
|
(20,373 |
) |
|
|
(20,880 |
) |
Unrealized gain (loss)
on foreign currency translation |
|
(9 |
) |
|
|
69 |
|
Total
comprehensive (loss) |
$ |
(20,382 |
) |
|
$ |
(20,811 |
) |
|
|
|
|
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