Interpace Diagnostics Group, Inc. (“Interpace” or the “Company”)
(NASDAQ: IDXG) today announced financial results for the second
quarter and six months ended June 30, 2019 and reviewed recent
business progress.
For the second quarter of 2019 Net Revenue was
$6.3 million, an increase of 14% over the second quarter of 2018,
and year to date Net Revenues were $12.3 million, a 19% increase
year to date over the prior year. In July 2019, Interpace acquired
the assets of the BioPharma Services Business of Cancer Genetics
with the funding and support of Ampersand Capital Partners
(“Ampersand”).
“Our second quarter and year to date revenue is
on track in accordance with our plans”, said Jack Stover, President
& CEO of Interpace. “We are excited about the successful
acquisition of the BioPharma Services business and the partnership
we have developed with Ampersand Capital Partners. The remainder of
the year will be focused on recognizing synergies and integrating
our businesses to further accelerate growth and diversification as
a biopharma and clinical business,” concluded Mr. Stover.
SECOND QUARTER 2019 FINANCIAL
PERFORMANCE
For the Second Quarter of 2019 as Compared to
the Second Quarter of 2018
|
● |
Net Revenue was $6.3 million, an increase of 14%; |
|
● |
Gross Profit was 52%, a decrease compared to 59% primarily due to
the timing of laboratory supply purchases in the prior year,
one-time upgrade and integration costs for lab equipment and
increased lab personnel headcount in anticipation of further unit
growth; Gross Profit year to date increased over 2018; |
|
● |
Sales & marketing expenses increased $0.9 million to $3.0
million to also support our expected growth in the second half of
the year; |
|
● |
G&A expenses were $2.8 million as compared to $1.7 million, an
increase related principally to certain non-cash charges including
bad debt expense from the ASC 606 conversion and the reversal of a
contingent claim in the prior year; |
|
● |
Acquisition-related costs were $1.3 million in the current quarter
with no such costs in the prior year; |
|
● |
Loss from Continuing Operations was $(5.3) million as compared to
$(1.9) million; |
|
● |
Net Loss per basic and diluted share was $(0.14) versus
$(0.07); |
|
● |
Adjusted EBITDA was $(3.4) million as compared to $(0.6) million;
and |
|
● |
Net cash used in operations for the quarter was $(4.8) million as
compared to $(2.5) million due principally to the incremental costs
related to our BioPharma acquisition, building resources in our
diagnostic business to further accelerate growth in the second half
of the year and timing of collections due to transition to a new
billing and collections contractor. |
For the Six Months Ended June 30, 2019 as
Compared to the Six Months Ended June 30, 2018
|
● |
Net Revenue increased to $12.3 million, a 19% improvement; |
|
● |
Gross Profit improved to 54% from 53%; |
|
● |
Sales & marketing expenses increased $1.3 million or 31% to
rebuild our Key Opinion Leader (KOL) programs and to support
anticipated growth for the remainder of the year; |
|
● |
G&A expenses were $5.3 million as compared to $3.9 million, an
increase due principally to certain non-cash charges including bad
debt expense from the ASC 606 conversion and the reversal of a
contingent claim in the prior year; |
|
● |
Acquisition-related costs were $1.7 million with no such costs in
the comparable period for the prior year; |
|
● |
Loss from Continuing Operations was $(8.6) million as compared to
$(5.0) million; |
|
● |
Net Loss per Share was $(0.24) as compared to $(0.18); |
|
● |
Adjusted EBITDA was $(5.2) million as compared to $(2.3)
million; |
|
● |
Net cash used in operations was $(7.8) million as compared to
$(5.0) million due principally to the costs related to the
BioPharma acquisition, building to further accelerate growth in the
second half of the year and collections timing due to transition to
a new billing and collections contractor; and |
|
● |
Cash and cash equivalents were $4.2 million as of June 30,
2019. |
With the completion of our transition to a new
billing and revenue service provider in 2019, the completion of the
Biopharma asset acquisition in early Q-3 2019 and the expansion of
our borrowing ability under our line of credit to support our
accounts receivable growth, $13 million of proceeds anticipated
under the second tranche, our cash collections with our new billing
and collections contractor we are confident that we will have
sufficient cash available for the foreseeable future. We will be
advising later in the year as to our estimated timing of achieving
cash flow and/or adjusted EBITDA breakeven.
Adjusted EBITDA (in the attached schedule),
which we believe is a meaningful supplemental disclosure that may
be indicative of how management and our Board of Directors evaluate
Company performance, is defined as income or loss from continuing
operations, plus depreciation and amortization, non-cash stock
based compensation, interest and taxes, and other non-cash expenses
including asset impairment costs, loss on extinguishment of debt,
goodwill impairment and change in fair value of contingent
consideration and our warrant liability.
RECENT BUSINESS HIGHLIGHTS
Acquisition of Biopharma Services
Business
On July 15, 2019 we acquired the assets and
certain liabilities constituting the Biopharma Services business of
Cancer Genetics, Inc. for approximately $23.5 million subject to
certain adjustments. The acquisition was funded primarily by means
of an investment in Interpace by Ampersand Capital Partners, one of
the leading private equity firms in the diagnostic/biopharma
sector, who agreed to invest $27 million in Interpace in two
tranches of newly issued convertible preferred stock, a portion of
which is subject to approval by Interpace’s shareholders. We
believe the acquisition will help stabilize and secure our future
with diversified laboratory services and a strong biopharma
customer base. In 2018 the Biopharma Business reported net revenues
of approximately $15 million.
Reimbursement Expansion
Announced
|
● |
Reimbursement expansion for our thyroid business with Independence
Blue Cross in Pennsylvania; |
|
● |
Entered into an agreement with SelectHealth to provide our thyroid
tests to members in Utah and Idaho; |
|
● |
Expansion for our thyroid business with Blue Shield of California;
and |
|
● |
Expansion for our thyroid business with Blue Cross Blue Shield of
Michigan. |
Clinical Validation
Announcements
● |
Awarded an oral presentation at the World Congress on Thyroid
Cancer 2019 annual meeting in Rome, Italy, where data from 8,113
patients was presented, describing the favorable incremental
utility of using ThyGeNEXT®; |
● |
Data was presented at the 2019 annual Digestive Disease Week®
meeting in San Diego, California, supporting BarreGEN®’s ability to
identify high or low risk of future progression to esophageal
adenocarcinoma; |
● |
Multiple abstracts describing results from over 16,000 patients who
underwent molecular testing using ThyGenX®/ThyGeNEXT® and ThyraMIR®
testing were accepted for presentation at the 2019 annual American
Thyroid Association® meeting; and |
● |
Enrolled multiple sites and accrued specimens for large scale
ThyGeNEXT® and ThyraMIR® clinical validation study. |
Commercial & Regulatory
Progress
|
● |
Launched new, more comprehensive PancraGEN® report format providing
additional detail for improved results, interpretation and optimal
patient management decisions; |
|
● |
Became a member of the American College of Medical Quality, a group
of Medical Directors that conducts technology assessment for
medical devices and laboratory tests; and |
|
● |
Added nine new commercial team members, including sales
representatives and account managers to focus on collections. |
Pipeline and Development
Advancements
|
● |
Held first BarreGEN® Key Opinion Leader (KOL) advisory board
meeting with eleven nationally-known gastroenterologists; |
|
● |
Expanded our Clinical Evaluation Process (CEP) for BarreGEN®
exploring potential research partnerships to expedite the further
validation and potential commercial launch of this test; and |
|
● |
Continued collaborative pilot efforts with potential commercial
partners to leverage synergy in Barrett’s Esophagus diagnostic and
prognostic testing; |
|
● |
Engaged Dr. Vinay Chandrasekhara, MD, from Mayo Clinical Rochester
Minnesota, to chair the PancraGEN® KOL advisory board; and |
|
● |
Entered into collaboration with Helomics to leverage ThyGeNEXT® and
ThyraMIR® molecular markers with artificial intelligence (AI). |
UPDATED NET REVENUE
GUIDANCE
Interpace is increasing its 2019 annual
Net Revenue guidance to a range of $33 million to $36 million from
its previous guidance of $27 million to $28 million, a 22%-33%
increase over prior guidance. With the ongoing integration of the
BioPharma Business recently acquired, Interpace expects to provide,
later this year, 2020 Net Revenue guidance as well as guidance as
to when we expect to achieve operating cash flow and/or adjusted
EBITDA breakeven.
CONFERENCE CALL INFORMATION
Interpace will hold a conference call and
Webcast on Tuesday, August 13, 2019, at 8:30 am ET to discuss
financial and operational results for the second quarter ended June
30, 2019. Details are as follow:
Date and Time: Tuesday, August 13, 2019 at 8:30
am ETDial-in Number (Domestic): (877)
407-0312Dial-in Number (International): +1 (201)
389-0899
Confirmation Number:
13690534Webcast Access:
https://webcasts.eqs.com/interpacedia20190513/en
The webcast replay will be available on the
Company’s website approximately two hours following completion of
the call and archived on the Company’s website for 90 days.
About Interpace Diagnostics, Group,
Inc.
Interpace is a leader in enabling personalized
medicine, offering specialized services along the therapeutic value
chain from early diagnosis and prognostic planning to targeted
therapeutic applications.
Interpace’s Diagnostic Business is a fully
integrated commercial and bioinformatics business unit that
provides clinically useful molecular diagnostic tests,
bioinformatics and pathology services for evaluating risk of cancer
by leveraging the latest technology in personalized medicine for
improved patient diagnosis and management. Interpace has four
commercialized molecular tests and one test in a clinical
evaluation process (CEP): PancraGEN® for the diagnosis and
prognosis of pancreatic cancer from pancreatic cysts; ThyGeNEXT®
for the diagnosis of thyroid cancer from thyroid nodules utilizing
a next generation sequencing assay; ThyraMIR® for the diagnosis of
thyroid cancer from thyroid nodules utilizing a proprietary gene
expression assay; and RespriDX® that differentiates lung cancer of
primary vs. metastatic origin. In addition, BarreGEN® for Barrett’s
Esophagus, is currently in a clinical evaluation program whereby we
gather information from physicians using BarreGEN® to assist us in
positioning the product for full launch, partnering and potentially
supporting reimbursement with payers.
Interpace’s Biopharma Business is a market
leader in providing pharmacogenomics testing, genotyping, and
biorepository services to the pharmaceutical and biotech
industries. The Biopharma Business also advances personalized
medicine by partnering with pharmaceutical, academic, and
technology leaders to effectively integrate pharmacogenomics into
their drug development and clinical trial programs with the goals
of delivering safer, more effective drugs to market more quickly,
and improving patient care.
For more information, please visit Interpace’s
website at www.interpacediagnostics.com.
Forward Looking Statements
This press release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, Section 21E of the Securities Exchange Act of 1934 and the
Private Securities Litigation Reform Act of 1995, relating to the
Company’s future financial and operating performance. The Company
has attempted to identify forward looking statements by terminology
including “believes,” “estimates,” “anticipates,” “expects,”
“plans,” “projects,” “intends,” “potential,” “may,” “could,”
“might,” “will,” “should,” “approximately” or other words that
convey uncertainty of future events or outcomes to identify these
forward-looking statements. These statements are based on current
expectations, assumptions and uncertainties involving judgments
about, among other things, future economic, competitive and market
conditions and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are
beyond the Company’s control. These statements also involve known
and unknown risks, uncertainties and other factors that may cause
the Company’s actual results to be materially different from those
expressed or implied by any forward-looking statement. Known and
unknown risks, uncertainties and other factors include, but are not
limited to, the Company’s history of losses, the Company’s ability
to adequately finance its business, the market’s acceptance of its
tests, the Company’s ability to retain or secure reimbursement, its
ability to maintain its NASDAQ listing, its ability to successfully
integrate the BioPharma Business, its ability to realize the
potential benefits of the BioPharma Business acquisition, including
future revenues, and the fact that there is no assurance that the
Company will be able to obtain shareholder approval of a portion of
Ampersand’s investment or that Ampersand will make the second
tranche investment. Additionally, all forward-looking statements
are subject to the “Risk Factors” detailed from time to time in the
Company’s most recent Annual Report on Form 10-K, Quarterly Reports
on Form 10-Q and other SEC filings. Because of these and other
risks, uncertainties and assumptions, undue reliance should not be
placed on these forward-looking statements. In addition, these
statements speak only as of the date of this press release and,
except as may be required by law, the Company undertakes no
obligation to revise or update publicly any forward-looking
statements for any reason.
CONTACTS:Investor
RelationsJoseph Green, Edison Groupjgreen@edisongroup.com
Non-GAAP Financial Measures
In addition to the United States generally
accepted accounting principles, or GAAP, results provided
throughout this document, Interpace has provided certain non-GAAP
financial measures to help evaluate the results of its performance.
We believe that these non-GAAP financial measures, when presented
in conjunction with comparable GAAP financial measures, are useful
to both management and investors in analyzing the Company’s ongoing
business and operating performance. We believe that providing the
non-GAAP information to investors, in addition to the GAAP
presentation, allows investors to view the Company’s financial
results in the way that management views financial results.
In this document, we discuss Adjusted EBITDA, a
non-GAAP financial measure. Adjusted EBITDA is a metric used by
management to measure cash flow of the ongoing business. Adjusted
EBITDA is defined as income or loss from continuing operations,
plus depreciation and amortization, non-cash stock based
compensation, interest and taxes, and other non-cash expenses
including asset impairment costs, bad debt expense, loss on
extinguishment of debt, goodwill impairment and change in fair
value of contingent consideration and our warrant liability. The
table below includes a reconciliation of this non-GAAP financial
measure to the most directly comparable GAAP financial measure.
INTERPACE DIAGNOSTICS GROUP,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(in thousands, except per
share data)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, net |
|
$ |
6,270 |
|
|
$ |
5,501 |
|
|
$ |
12,280 |
|
|
$ |
10,310 |
|
Cost of revenue |
|
|
3,031 |
|
|
|
2,247 |
|
|
|
5,654 |
|
|
|
4,827 |
|
Gross Profit |
|
|
3,239 |
|
|
|
3,254 |
|
|
|
6,626 |
|
|
|
5,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
2,959 |
|
|
|
2,095 |
|
|
|
5,369 |
|
|
|
4,086 |
|
Research and development |
|
|
647 |
|
|
|
518 |
|
|
|
1,175 |
|
|
|
1,019 |
|
General and
administrative |
|
|
2,788 |
|
|
|
1,726 |
|
|
|
5,299 |
|
|
|
3,897 |
|
Acquisition related
expense |
|
|
1,295 |
|
|
|
- |
|
|
|
1,696 |
|
|
|
- |
|
Acquisition related
amortization expense |
|
|
813 |
|
|
|
813 |
|
|
|
1,626 |
|
|
|
1,626 |
|
Total operating expenses |
|
|
8,502 |
|
|
|
5,152 |
|
|
|
15,165 |
|
|
|
10,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(5,263 |
) |
|
|
(1,898 |
) |
|
|
(8,539 |
) |
|
|
(5,145 |
) |
Accretion expense |
|
|
(91 |
) |
|
|
- |
|
|
|
(220 |
) |
|
|
- |
|
Other income (expense),
net |
|
|
74 |
|
|
|
33 |
|
|
|
123 |
|
|
|
144 |
|
Loss from continuing operations before tax |
|
|
(5,280 |
) |
|
|
(1,865 |
) |
|
|
(8,636 |
) |
|
|
(5,001 |
) |
Provision for income
taxes |
|
|
5 |
|
|
|
8 |
|
|
|
10 |
|
|
|
14 |
|
Loss from continuing operations |
|
|
(5,285 |
) |
|
|
(1,873 |
) |
|
|
(8,646 |
) |
|
|
(5,015 |
) |
Income (loss) from discontinued operations, net of tax |
|
|
65 |
|
|
|
(44 |
) |
|
|
7 |
|
|
|
(95 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(5,220 |
) |
|
$ |
(1,917 |
) |
|
$ |
(8,639 |
) |
|
$ |
(5,110 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted (loss)
income per share of common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From continuing operations |
|
$ |
(0.14 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.18 |
) |
From discontinued operations |
|
|
0.00 |
|
|
|
(0.00 |
) |
|
|
0.00 |
|
|
|
(0.00 |
) |
Net (loss) income per diluted share of common stock |
|
$ |
(0.14 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
common shares and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common share equivalents
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
38,130 |
|
|
|
27,933 |
|
|
|
36,647 |
|
|
|
27,894 |
|
Diluted |
|
|
38,130 |
|
|
|
27,933 |
|
|
|
36,647 |
|
|
|
27,894 |
|
Selected Balance Sheet Data
(Unaudited)($ in thousands)
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
Cash and cash equivalents |
|
$ |
4,210 |
|
|
$ |
6,068 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
19,153 |
|
|
|
17,721 |
|
Total current liabilities |
|
|
10,966 |
|
|
|
8,492 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
50,332 |
|
|
|
48,442 |
|
Total liabilities |
|
|
19,503 |
|
|
|
15,504 |
|
Total stockholders equity |
|
|
30,829 |
|
|
|
32,938 |
|
Selected Cash Flow Data
(Unaudited)($ in thousands)
|
|
For the Six Months Ended |
|
|
|
June 30, |
|
|
|
2019 |
|
|
2018 |
|
Net loss |
|
$ |
(8,639 |
) |
|
$ |
(5,110 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in
operations |
|
$ |
(7,785 |
) |
|
$ |
(5,027 |
) |
Net cash used in investing
activities |
|
|
(35 |
) |
|
|
(79 |
) |
Net cash provided by (used in)
financing activities |
|
|
5,962 |
|
|
|
(9 |
) |
Change in cash and cash
equivalents |
|
|
(1,858 |
) |
|
|
(5,115 |
) |
Cash and equivalents,
Beginning |
|
|
6,068 |
|
|
|
15,199 |
|
Cash and equivalents,
Ending |
|
$ |
4,210 |
|
|
$ |
10,084 |
|
Reconciliation of Adjusted EBITDA
(Unaudited)($ in thousands)
|
|
Quarters Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Loss from continuing
operations |
|
$ |
(5,285 |
) |
|
$ |
(1,873 |
) |
|
$ |
(8,646 |
) |
|
$ |
(5,015 |
) |
Depreciation and
amortization |
|
|
876 |
|
|
|
856 |
|
|
|
1,749 |
|
|
|
1,710 |
|
Stock-based compensation |
|
|
452 |
|
|
|
442 |
|
|
|
990 |
|
|
|
1,040 |
|
Bad debt expense |
|
|
499 |
|
|
|
- |
|
|
|
499 |
|
|
|
- |
|
Taxes |
|
|
5 |
|
|
|
8 |
|
|
|
10 |
|
|
|
14 |
|
Accretion expense |
|
|
91 |
|
|
|
- |
|
|
|
220 |
|
|
|
1 |
|
Mark to market on warrant
liability |
|
|
(42 |
) |
|
|
4 |
|
|
|
(45 |
) |
|
|
(66 |
) |
Adjusted EBITDA |
|
$ |
(3,404 |
) |
|
$ |
(563 |
) |
|
$ |
(5,223 |
) |
|
$ |
(2,316 |
) |
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