- The Acquisition Positions CGI to Immediately Participate in the
High-Growth Indian Molecular Diagnostics and Oncology Services
Market
- Further Extends Next-Generation Sequencing Capabilities by
Leveraging BioServe India's Capabilities & Development
Roadmap
- Acquisition Adds Immediate Revenue, Valuable Client Base and is
Expected to be Accretive in Fiscal 2015
- Immediately Provides CGI with Infrastructure & Personnel
for Lower-Cost Manufacturing, Test Development & Genomic
Analysis
- CGI Year over Year Quarterly Test Volumes & Revenues
Continue Growth at 45% and 17% Respectively
- Conference Call Scheduled for Today, Thursday, May 15, 2014, at
8:30 a.m. Eastern Time
Cancer Genetics, Inc. (Nasdaq:CGIX) ("CGI" or the "Company"), a
DNA-based diagnostics company focused on developing genomic-based
oncology tests and services, today reported financial results for
the first quarter ended March 31, 2014, and announced an agreement
to acquire BioServe Biotechnologies (India) Pvt. Ltd. for
approximately $1.9 million primarily in CGIX stock and other
deferred consideration. The transaction is expected to close during
the third quarter of 2014 and is subject to customary closing
conditions and government approvals in India.
Under the terms of the agreement, BioServe Biotechnologies
(India) Pvt. Ltd. ("BioServe India"), headquartered in Hyderabad,
India, will become a subsidiary of CGI, and will be renamed Cancer
Genetics India Pvt. Ltd. BioServe India is a premier genomics
services provider, and molecular kit manufacturer serving both the
research and clinical markets.
"The opportunity to access and serve the high growth diagnostics
and personalized medicine market in India through the acquisition
of BioServe India is an ideal launching point for our continued
growth strategy which will include selective acquisitions," said
Panna Sharma, CEO of Cancer Genetics, Inc. "We expect the
acquisition to be accretive in 2015. It has the potential to
accelerate our next generation sequencing development, improve our
gross profit margins, and diversify our revenue growth outside the
U.S."
BioServe India has the infrastructure and scientific expertise
required to integrate CGI's DNA probe manufacturing and proprietary
FHACT™ test into a market that accounts for more than 25 percent of
the global deaths attributed to cervical cancer. BioServe India is
known for providing its nearly 200 clients with cutting-edge
genomic services, including next-generation sequencing, genotyping,
and DNA synthesis. BioServe India provides immediate revenue
benefits to CGI through its long-term contracts and agreements with
academic and research institutions. BioServe India
is certified by ISO-9001:2008, the National Accreditation
Board for Testing and Calibration Laboratories (NABL) and the
Department of Science and Industrial Research (DSIR). CGI plans to
make the Hyderabad based lab CLIA certified in the coming
quarters.
CGI also announced financial results for the first quarter ended
March 31, 2014.
First Quarter Financial Highlights (comparisons
are with the first quarter 2013)
- Test volume grew 45 percent to 2,772 tests
- First quarter revenue grew 17 percent to $1.4 million
- Revenue from direct bill customers, which include hospitals,
cancer centers and biopharma companies, grew 70 percent
- Net loss decreased by 20 percent or $500,000 to $2.4 million,
exclusive of the effect of changes in non-cash derivative warrant
valuation
- Cash and cash equivalents were $47.6 million at March 31, 2014
with $41.3 million unrestricted cash along with $6.3 million of
restricted cash at quarter end
Total first quarter test volume increased 45 percent to 2,772
tests. First quarter of 2014 revenue increased 17 percent, or $212
thousand, to $1.4 million, as the increase in test volume was
partially offset by a decrease in revenue per test. Average
revenue per test decreased by 18 percent to $506, as direct bill
tests and our newly launched unique FHACT™ test for cervical cancer
are a larger percentage of activity than in past quarters. The
revenue per test on FHACT™ is lower than our average historical
test price.
Revenue from direct bill customers, which include hospitals,
cancer centers and biopharma companies, represented 61 percent of
total revenues, increased 70 percent, or $358 thousand, to $869
thousand. Medicare revenue, which accounted for 17 percent of
total revenue, decreased 3 percent, or $7 thousand, to $250
thousand. Revenue from insurance carriers and others, including DNA
probe sales, representing 22 percent of total revenues, decreased
31 percent, or $139 thousand, to $311 thousand.
For the first quarter of 2014, research and development expenses
increased 22 percent over the first quarter of 2013 to $597
thousand primarily due to an increase in headcount involved in the
development and validation of our tests.
For the first quarter of 2014, sales and marketing expenses
increased 89 percent to $749 thousand due to increased headcount as
the company hired additional sales and marketing personnel.
For the first quarter of 2014 general and administrative
expenses increased 74 percent to $2.7 million, primarily due to an
increase in compensation costs of $899 thousand, 58 percent of
which was due to a separation agreement with the former
CFO. The remaining increase was due to increased stock based
compensation expense, higher professional fees and Delaware State
franchise taxes.
The Company's net loss for first quarter of 2014 was $2.5
million, or a loss of ($0.27) per diluted share. This compares to
net income of $2.4 million or a loss of ($2.18) per diluted share
in the first quarter of 2013 as the non-cash income from the
derivative warrant valuation is excluded from the fully diluted EPS
computation.
Total cash and cash equivalents were $47.6 million at March 31,
2014. $41.3 million was unrestricted cash and cash equivalents
with $6.3 million restricted cash.
Recent Corporate Highlights
- Initiated collaborative study and presented new data with
researchers from Memorial Sloan-Kettering Cancer Center at American
Association for Cancer Research (AACR) to identify genomic
alterations that can diagnose and predict metastasis in clear-cell
renal cell cancer.
- Expected commercial launch for next-generation sequencing based
panels in lymphoid and myeloid cancers targeted during the summer
of 2014.
- CGI's FHACT™ test for cervical cancer was promoted at the
American Congress of Obstetricians and Gynecologists annual
clinical meeting driving further awareness among the women's health
community.
- Launched Calreticulin (CALR) gene mutation analysis test to
assist in the diagnosis of acute leukemias and myeloproliferative
neoplasms, which has nearly 3 million diagnosed patients per
year.
- Extended unique position in targeted diagnosis and prognosis of
hematologic cancers with launch of MatBA®-FL for follicular
lymphoma and MatBA®-MCL for mantle-cell lymphoma. The MatBA
franchise of tests now address over one-third of non-Hodgkin
lymphomas and are available as part of comprehensive testing
programs for both clinicians and biopharma trials.
Conference Call & Webcast
Thursday, May 15, 2014 at
8:30 a.m. Eastern Time/5:30 a.m. Pacific Time |
Domestic: |
877-407-4018 |
International: |
201-689-8471 |
Webcast: |
http://www.cancergenetics.com |
|
|
Replays – Available through May
29, 2014 |
Domestic: |
877-870-5176 |
International: |
858-384-5517 |
Conference ID: |
13582336 |
About BioServe India
Founded in 2002 and based in Hyderabad, India, BioServe India is
a leader in providing quality genomic and molecular services to
ICMR (Indian Council for Medical Research) institutes,
biotechnology and pharmaceutical industries in India. Services
include DNA synthesis, DNA sequencing, Next Generation Sequencing.
BioServe-India has accreditations from DSIR, ISO-9001 and NABL.
Customers include Center for Cellular and Molecular Biology (CCMB),
Center for DNA Finger Printing and Diagnostics (CDFD) and Dr.
Reddy's labs. For more information, please visit
www.bioserveindia.com.
About Cancer Genetics
Cancer Genetics Inc. (Nasdaq:CGIX) is an emerging leader in
DNA-based cancer diagnostics, servicing some of the most
prestigious medical institutions in the world. Our tests target
cancers that are difficult to diagnose and predict treatment
outcomes. These cancers include hematological, urogenital and
HPV-associated cancers. We also offer a comprehensive range of
non-proprietary oncology-focused tests and laboratory services that
provide critical genomic information to healthcare professionals,
as well as biopharma and biotech companies. Our state-of-the-art
reference lab is focused entirely on maintaining clinical
excellence and is both CLIA certified and CAP accredited and has
licensure from several states including New York State. We have
established strong research collaborations with major cancer
centers such as Memorial Sloan-Kettering, The Cleveland Clinic,
Mayo Clinic and the National Cancer Institute. For further
information, please see www.cancergenetics.com.
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 future financial and/or operating results, future growth in
research, technology, clinical development and potential
opportunities for Cancer Genetics, Inc. products and services,
along with other statements about the future expectations, beliefs,
goals, plans, or prospects expressed by management 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,
risk that the BioServe transaction will not close, or if it closes,
will not realize the currently anticipated benefits, uncertainty in
the results of clinical trials or regulatory approvals, need and
ability to obtain future capital, maintenance of intellectual
property rights and other risks discussed in the Company's Forms
10-K for the year ended December 31, 2013 and 10-Q for the quarter
ended March 31, 2014 along with other filings with the Securities
and Exchange Commission. These forward-looking statements speak
only as of the date hereof. Cancer Genetics disclaims any
obligation to update these forward-looking statements.
Cancer Genetics, Inc.
and Subsidiary |
Consolidated Statements
of Operations |
(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
2014 |
2013 |
Revenue |
$ 1,430,375 |
$ 1,218,667 |
Cost of revenues |
1,290,062 |
1,070,020 |
Gross profit |
140,313 |
148,647 |
|
|
|
Operating expenses: |
|
|
Research and development |
596,771 |
490,577 |
General and administrative |
2,731,404 |
1,570,629 |
Sales and marketing |
748,979 |
396,554 |
Total operating
expenses |
4,077,154 |
2,457,760 |
Loss from
operations |
(3,936,841) |
(2,309,113) |
|
|
|
Other income (expense): |
|
|
Interest expense |
(341,177) |
(1,293,985) |
Interest income |
22,184 |
606 |
Change in fair value of warrant
liability |
(44,000) |
5,299,000 |
Total other income
(expense) |
(362,993) |
4,005,621 |
Income (loss) before income
taxes |
(4,299,834) |
1,696,508 |
Income tax provision (benefit) |
(1,813,941) |
(663,900) |
Net income (loss) |
$ (2,485,893) |
$ 2,360,408 |
|
|
|
Basic net income (loss) per share |
$ (0.27) |
$ 1.75 |
Diluted net loss per share |
$ (0.27) |
$ (2.18) |
|
|
|
Basic Weighted Average Shares
Outstanding |
9,276,643 |
1,349,936 |
Diluted Weighted Average Shares
Outstanding |
9,276,643 |
1,349,936 |
|
Cancer Genetics, Inc.
and Subsidiary |
Consolidated Balance
Sheets |
(Unaudited) |
|
|
|
|
March 31,
2014 |
December 31, 2013 |
ASSETS |
|
|
CURRENT ASSETS |
|
|
Cash and cash equivalents |
$ 41,314,995 |
$ 49,459,564 |
Accounts receivable, net of allowance for
doubtful accounts of $36,000 |
1,818,096 |
1,567,039 |
Other current assets |
929,460 |
864,616 |
Total current
assets |
44,062,551 |
51,891,219 |
FIXED ASSETS, net of accumulated
depreciation |
1,311,842 |
1,264,624 |
OTHER ASSETS |
|
|
Security deposits |
1,564 |
1,564 |
Restricted cash |
6,300,000 |
300,000 |
Loan guarantee and financing fees, net of
accumulated amortization of $517,500 in 2013 |
— |
310,500 |
Patents |
431,816 |
401,709 |
Investment in joint venture |
975,902 |
987,657 |
|
7,709,282 |
2,001,430 |
Total Assets |
$ 53,083,675 |
$ 55,157,273 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
CURRENT LIABILITIES |
|
|
Accounts payable and accrued
expenses |
$ 2,327,442 |
$ 2,346,240 |
Obligations under capital leases, current
portion |
43,910 |
51,400 |
Deferred revenue |
86,559 |
199,560 |
Notes payable, current portion |
— |
22,298 |
Line of credit |
— |
6,000,000 |
Total current
liabilities |
2,457,911 |
8,619,498 |
Obligations under capital leases |
309,777 |
309,777 |
Deferred rent payable |
167,579 |
170,789 |
Line of credit |
6,000,000 |
— |
Warrant liability |
513,000 |
594,000 |
Total liabilities |
9,448,267 |
9,694,064 |
STOCKHOLDERS' EQUITY |
|
|
Preferred stock, authorized 9,764,000
shares, $0.0001 par value |
— |
— |
Common stock, authorized 100,000,000
shares, $0.0001 par value, 9,282,610 and 9,275,384 shares issued
and outstanding at March 31, 2014 and December 31, 2013,
respectively |
928 |
927 |
Additional paid-in capital |
107,444,953 |
106,786,862 |
Accumulated deficit |
(63,810,473) |
(61,324,580) |
Total Stockholders'
Equity |
43,635,408 |
45,463,209 |
Total Liabilities and
Stockholders' Equity |
$ 53,083,675 |
$ 55,157,273 |
CONTACT: Investor Relations
Andrew McDonald
Life Science Advisors LLC
646-597-6987
Media Relations
Paul Kuntz
RedChip Companies, Inc.
800-733-2447, ext. 105
paul@redchip.com
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