Cancer Genetics, Inc. (Nasdaq:CGIX), a leader in enabling precision
medicine for oncology through molecular markers and diagnostics,
today announced financial and operating results for the fourth
quarter and full year ended December 31, 2017 as well as an
update on its strategic direction and key organizational
initiatives.
Following the departure of its former CEO, the Company has
undertaken a comprehensive and extensive review of its strategy and
organization. This included operations, pipeline programs, revenue
streams, and financial resources. Its goal has been to focus the
business through targeted investment in the Company’s core
strengths, to continue to streamline operations, and to reduce
costs.
In the first quarter of 2018, the Company has been focused on
developing and implementing a transformative strategy to increase
revenues, improve cash collections and reduce costs, allowing the
Company to execute on its broader growth plan. Management intends
to focus on growing both the Biopharma and Discovery businesses in
the US and globally. Combined, Biopharma and Discovery services
represented 63% of the Company’s total revenue in 2017, and the
Company expects to increase this portion of its business in these
two markets through 2018. Demand for the Company’s services in both
of these markets continues to show strength, as the Company exited
Q4 2017 supporting over 220 clinical trials and studies focused on
solid tumor and blood-borne cancers, and 74 preclinical efficacy
and toxicology studies, including 59 and 36 respectively for
immuno-oncology indications.
A major area of concentrated focus during the first quarter of
2018 was the careful evaluation of the Company’s accounts
receivables, which had increased to approximately $16 million on
the balance sheet prior to any adjustments. A significant reason
for the increase was disruptions in collections in its Clinical
Services business. While the Company continues with its collections
efforts on all claims, in the fourth quarter it recorded a bad
debt expense of $4.4 million and wrote off $1.8 million of its
accounts receivable, with a significant portion of the bad debt
expense and write off related to collection issues with respect to
the accounts receivable recorded subsequent to the 2015 acquisition
of Response Genetics Inc. Payors have declined to reimburse the
Company on certain performed Clinical services due to delays in
filing its claims, the demands by payors for copies of patient
medical records or diagnosis codes which have been difficult to
obtain, and reimbursement challenges for certain of our next
generation sequencing tests by Medicare and third-party managed
care plans, among other reasons. As such, the Company has made a
prudent decision to write these off in the fourth quarter.
Management believes that its current outstanding accounts
receivables are collectible, net of the allowance for doubtful
accounts.
The Company expects to file its Annual Report on Form 10-K for
the year ended December 31, 2017 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 will
also disclose that it had a Material Weakness in Internal Controls
Over Financial Reporting at December 31, 2017. See further
discussion in Note 2 to the Company's consolidated financial
statements included in the Company's Annual Report on Form
10-K.
The Company also announced that it has engaged 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.
John A. (Jay) Roberts, interim Chief Executive Officer and COO
of Cancer Genetics said, “We are intently focused on enhancing our
financial and competitive position through efforts to expand our
Biopharma and Discovery businesses through pursuit of select new
partnerships and large volume contracts in precision oncology. Our
leading and unique capabilities and comprehensive portfolio in
precision oncology allow us to provide pharmaceutical and
biotechnology partners with unparalleled clinical trial strategy
and support services, including genomics testing, biomarker
measurement and identification, custom protocol execution and
patient monitoring. We believe we have the strongest, most
comprehensive test portfolio in the industry, based on a broad
selection of methodologies, including Complete::IO™, Tissue of
Origin® TOO®, the Oncomine Dx Target Test from Thermo Fisher,
Liquid::Lung-cfDNA™ and others. We are committed to optimizing and
leveraging this robust suite of unique oncology diagnostics to
drive growth across multiple areas of our business, are confident
in our new growth strategy and in our team’s ability to implement
it, and believe that the execution of this strategy has the
potential to drive shareholder value.”
FOURTH QUARTER 2017 AND RECENT OPERATIONAL
HIGHLIGHTS
- Raised $7 million through the sale of 3.5 million units
consisting of one share and one warrant, through a registered
direct offering to support the Company’s operational and business
expenses.
- Received approval from the New York State Department of Health
for Thermo Fisher Scientific’s Oncomine Dx Target Test, the first
FDA-approved companion diagnostic test for lung cancer.
- Expanded its immuno-oncology (IO) panel, Complete::IO™, to
include five new IO markers bringing the total number of
simultaneously detectable markers to twenty seven. Complete::IO™ is
the most comprehensive flow-cytometry-based biomarker panel with a
24-hour turnaround time.
- Delivered an oral presentation at the 2017 American Society of
Hematology Annual Meeting demonstrating the potential value of an
agnostic platform along with best diagnostic modality to evaluate
PD-L1 in DLBCL (Diffuse Large B-Cell Lymphomas).
- Appointed renowned biotech entrepreneur Thomas F. Widmann, MD
to the Company’s Board of Directors to advise the company on
improving business growth and advancing its test and services
portfolio.
- Presented two oral presentations at the Association for
Molecular Pathology Annual 2017 meeting highlighting the role of
next-generation sequencing in lung cancer biomarker testing,
comprising of the Company’s liquid biopsy test,
Liquid::Lung-cfDNA™.
FOURTH QUARTER 2017 FINANCIAL RESULTS
The Company reported total revenue of $7.5 million for the
fourth quarter of 2017 compared to revenue of $7.2 million in
fourth quarter of 2016, an increase of 4% or $0.3 million.
Biopharma services revenue totaled $3.5 million in the fourth
quarter, compared to $4 million during the fourth quarter 2016.
Biopharma projects are dependent on the timing, size and duration
of our contracts with pharmaceutical and biotech companies and
clinical research organizations, and can fluctuate in comparable
periods. The Company increased the number of clinical studies and
trials it is supporting to 224, up from 125 in Q4 2016.
Clinical Services revenue decreased by approximately $1.1
million in the fourth quarter of 2017 compared to the same period
in 2016, from $3 million to $1.9 million. The decrease in revenue
was primarily related to higher contractual allowance adjustments
than the Company historically has taken following its examination
of outstanding receivables. The Company’s Discovery Services
contributed $2.1 million in revenue for the fourth quarter of 2017,
an increase of approximately $1.8 million compared to the fourth
quarter of 2016, driven by the first full quarter of vivoPharm
revenue following its August 2017 acquisition and growing demand
for early stage discovery results combined with bioinformatics
analysis capabilities.
Gross profit margin decreased to 30.0% or $2.3 million in Q4
2017, compared to 41% or $2.9 million in the fourth quarter 2016.
The gross margin percentage was impacted by lower revenue in the
fourth quarter of 2017 in Biopharma and the contractual allowance
adjustment made to Clinical Services, partially offset by the
increase in revenue from Discovery Services.
Total operating expenses for the fourth quarter of 2017 were
approximately $11.8 million, an increase of 82% compared to $6.5
million during the fourth quarter of 2016. The increase in total
operating expenses is primarily the result of the Company recording
an additional $4.4 million in bad debt expense, to increase its
reserve for doubtful accounts receivable.
Net loss was $7.9 million or $0.35 per share for the fourth
quarter of 2017, compared to a net loss of $2.8 million or $0.15
per share for the fourth quarter of 2016, primarily impacted by the
additional $5.3 million in bad debt expense.
FULL YEAR 2017 FINANCIAL RESULTS
For the full year 2017, revenues were $29.1 million as compared
to $27.0 million for the full year 2016. Gross margin for the
twelve months ended December 31, 2017 was 37.9% compared to 36.8%
in the same period last year, an improvement of 1.1 percentage
points. Total operating expenses increased approximately $3.0
million to $29.7 million for full year 2017. The Company recorded a
total of $5.3 million in bad debt expense in 2017. Net loss was
$20.9 million or $1.01 per share for 2017, compared to a net loss
of $15.8 million or $0.87 per share for the corresponding year-ago
period.
Cash and cash equivalents totaled $9.5 million, net of $1.0
million in restricted cash, as of December 31, 2017.
UPCOMING EVENTS
- The Company will be attending and presenting at the BioNJ 2018
BioPartnering Conference in Somerset Park, NJ on May 3, 2018.
CONFERENCE CALL & WEBCAST |
Monday,
April 2, 2018, 4:30 p.m. Eastern Time |
Domestic: |
888-394-8218 |
International: |
323-701-0225 |
Conference ID: |
7874980 |
Webcast: |
http://public.viavid.com/index.php?id=128829 |
|
|
Replay –
Available through April 16, 2018 |
Domestic: |
844-512-2921 |
International: |
412-317-6671 |
Conference
ID: |
7874980 |
ABOUT CANCER GENETICS
Cancer Genetics, Inc. is a leader in enabling precision medicine
in oncology by partnering with leading pharmaceutical and
biotechnology companies developing novel treatments to fight cancer
and supporting physicians providing direct patient care through the
use of oncology biomarkers and molecular testing. CGI has developed
a global footprint with locations in the US, Australia, India and
China. We have established strong clinical research collaborations
with leading biopharma companies and major cancer centers such as
Memorial Sloan Kettering, The Cleveland Clinic, Mayo Clinic, USC
Norris Comprehensive Cancer Center, Tisch Cancer
Institute at Mount Sinai and the National Cancer Institute among
others.
The Company offers a comprehensive array of oncology-focused
services that provide critical genomic and biomarker information.
The Company’s team of medical and scientific experts delivers
clinical laboratory services from CLIA-certified and CAP-accredited
laboratories in the US with licensure from several states,
including New York State; and preclinical services, including
animal studies, from GLP-compliant audited facilities,.
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 may contain 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 revenues, margins,
research, technology, clinical development and potential
opportunities for Cancer Genetics, Inc. tests 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 bookings or discontinuance
of trials, risks that anticipated benefits from acquisitions will
not be realized, uncertainty in the results of clinical trials or
regulatory approvals, need and ability to obtain future capital,
maintenance of intellectual property rights, uncertainty of
collections from Medicare and third party payors for novel tests
and services and other risks discussed in the Cancer Genetics, Inc.
Form 10-K for the year ended December 31, 2016 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 CONTACTS:
Lee Roth / Carol Ruth The Ruth GroupTel: 646-536-7012 /
7026Email: 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, |
|
2017 |
|
2016 |
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
9,541 |
|
|
$ |
9,502 |
|
Accounts receivable,
net of allowance for doubtful accounts of 2017$6,539; 2016
$1,387 |
|
10,958 |
|
|
|
11,748 |
|
Other current
assets |
|
2,707 |
|
|
|
2,174 |
|
Total current
assets |
|
23,206 |
|
|
|
23,424 |
|
FIXED ASSETS, net of
accumulated depreciation |
|
5,550 |
|
|
|
4,738 |
|
OTHER ASSETS |
|
|
|
Restricted cash |
|
350 |
|
|
|
300 |
|
Patents and other
intangible assets, net of accumulated amortization |
|
4,478 |
|
|
|
1,503 |
|
Investment in joint
venture |
|
246 |
|
|
|
268 |
|
Goodwill |
|
17,992 |
|
|
|
12,029 |
|
Other |
|
399 |
|
|
|
172 |
|
Total other
assets |
|
23,465 |
|
|
|
14,272 |
|
Total
Assets |
$ |
52,221 |
|
|
$ |
42,434 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
CURRENT
LIABILITIES |
|
|
|
Accounts payable and
accrued expenses |
$ |
8,715 |
|
|
$ |
8,148 |
|
Obligations under
capital leases, current portion |
|
272 |
|
|
|
109 |
|
Deferred revenue |
|
516 |
|
|
|
789 |
|
Line of credit |
|
4,137 |
|
|
|
- |
|
Bank term note, current
portion |
|
6,000 |
|
|
|
2,000 |
|
Total current
liabilities |
|
19,640 |
|
|
|
11,046 |
|
Bank term note |
|
- |
|
|
|
2,654 |
|
Obligations under
capital leases |
|
624 |
|
|
|
374 |
|
Deferred rent payable
and other |
|
360 |
|
|
|
290 |
|
Warrant liability |
|
4,403 |
|
|
|
2,018 |
|
Deferred revenue,
long-term |
|
429 |
|
|
|
428 |
|
Total
Liabilities |
|
25,456 |
|
|
|
16,810 |
|
STOCKHOLDERS’
EQUITY |
|
|
|
Preferred stock,
authorized 9,764 shares, $0.0001 par value, none issued |
|
- |
|
|
|
- |
|
Common stock,
authorized 100,000 shares, $0.0001 par value, 27,754 and18,936
shares issued and outstanding at December 31, 2017
andDecember 31, 2016, respectively |
|
3 |
|
|
|
2 |
|
Additional paid-in
capital |
|
161,527 |
|
|
|
139,576 |
|
Accumulated other
comprehensive income |
|
69 |
|
|
|
- |
|
Accumulated
deficit |
|
(134,834 |
) |
|
|
(113,954 |
) |
Total
Stockholders’ Equity |
|
26,765 |
|
|
|
25,624 |
|
Total
Liabilities and Stockholders’ Equity |
$ |
52,221 |
|
|
$ |
42,434 |
|
|
|
|
|
|
Cancer
Genetics, Inc. and Subsidiaries |
|
|
|
Consolidated Statements of Operations and Other
Comprehensive Loss |
|
(in thousands,
except per share amounts) |
|
|
|
|
|
|
|
|
Years Ended December 31 |
|
2017 |
|
2016 |
Revenue |
$ |
29,121 |
|
|
$ |
27,049 |
|
Cost of
revenues |
|
18,070 |
|
|
|
17,104 |
|
Gross profit |
|
11,051 |
|
|
|
9,945 |
|
Operating
expenses: |
|
|
|
Research
and development |
|
4,789 |
|
|
|
5,967 |
|
General
and administrative |
|
19,894 |
|
|
|
16,034 |
|
Sales and
marketing |
|
4,990 |
|
|
|
4,668 |
|
Total operating expenses |
|
29,673 |
|
|
|
26,669 |
|
Loss from operations |
|
(18,622 |
) |
|
|
(16,724 |
) |
Other income
(expense): |
|
|
|
Interest
expense |
|
(2,128 |
) |
|
|
(454 |
) |
Interest
income |
|
63 |
|
|
|
23 |
|
Change in
fair value of warrant liability |
|
(1,964 |
) |
|
|
1,525 |
|
Change in
fair value of acquisition note payable |
|
(42 |
) |
|
|
152 |
|
Other
expense |
|
(266 |
) |
|
|
(325 |
) |
Total other (expense) |
|
(4,337 |
) |
|
|
921 |
|
Loss before income taxes |
|
(22,959 |
) |
|
|
(15,803 |
) |
Income tax
(benefit) |
|
(2,079 |
) |
|
|
- |
|
Net (loss) |
$ |
(20,880 |
) |
|
$ |
(15,803 |
) |
Basic and diluted net
(loss) per share |
$ |
(1.01 |
) |
|
$ |
(1.00 |
) |
Basic and diluted
weighted-average shares outstanding |
|
20,663 |
|
|
|
15,861 |
|
|
|
|
|
Net (loss) |
|
(20,880 |
) |
|
|
(15,803 |
) |
Unrealized gain on
foreign currency translation |
|
69 |
|
|
|
- |
|
Total comprehensive
(loss) |
$ |
(20,811 |
) |
|
$ |
(15,803 |
) |
|
|
|
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