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 first
quarter ended March 31, 2018 as well as an update on its strategic
direction and key organizational initiatives.
John A. Roberts, Chief Executive Officer of Cancer Genetics
said, “Our progress during the first quarter aligned with our
transformation strategy for 2018, which focuses on leveraging our
core competencies and market-leading portfolio of diagnostics to
accelerate the path to profitability and improve our competitive
position.
“We are particularly pleased with the expansion of our Biopharma
and Discovery Services businesses, where we are continuing to
capitalize on the significant synergies that exist to add new
clients and expand revenue among existing clients. Our
oncology-focused testing, genomic services and biomarker insight
capabilities are among the strongest in the industry, and add
substantive value to our partners’ development efforts. We are
currently supporting over 300 clinical trial and discovery
projects, including 101 clinical trials that are focused on the
growing trends associated with immuno-oncology product development,
and are continuing to add more as we expand our capabilities and
further establish ourselves as a major player in this space.
Mr. Roberts added, “In addition to expanding Biopharma and
Discovery Services activities, there are two other keys to
executing this strategy, which we believe will drive revenue growth
and operating cost reductions. These were the divestiture of
certain non-strategic assets and the reduction of our geographic
footprint. We advanced both of these initiatives since the
beginning of 2018.”
“In an effort to further optimize efficiency across the
organization, we recently completed the sale of our India operation
to REPROCELL Incorporated and made the strategic decision to
consolidate our Los Angeles laboratory operations, relocating our
comprehensive solid tumor test portfolio and capabilities to our
New Jersey and North Carolina facilities during the second and
third quarters of 2018. These actions represent an important step
in focusing our business, simplifying our operating structure and
generating monetary value for the Company, and are consistent with
the execution of the transformation strategy.”
Mr. Roberts concluded, “Overall, we are pleased with the
advancements we have made since the beginning of 2018. We are
continuing to leverage synergies and implement strategies aimed at
accelerating growth, while reducing expenses associated with
non-core activities. We remain committed to optimizing our
proprietary and unique test and service offerings to drive a
leadership position in precision oncology.”
FIRST QUARTER 2018 AND RECENT OPERATIONAL
HIGHLIGHTS
- Received special 510(k) clearance from the FDA for the Tissue
of Origin (TOO®) test to identify tumor origin and differentiate
between metastatic, poorly differentiated, or undifferentiated
cancers.
- Completed sale of wholly-owned subsidiary BioServe
Biotechnologies (India) Private Limited to REPROCELL for $1.9
million in April 2018.
- As part of 2018 transformation strategy, began the
consolidation of the west coast molecular profiling laboratory and
relocation of most of these activities to New Jersey and North
Carolina laboratories. The consolidation of this facility is
expected to reduce operating expenses by over $4 million annually
once completed, with completion planned for September 2018.
FIRST QUARTER 2018 FINANCIAL RESULTS
On January 1, 2018 the Company adopted the FASB Accounting
Standards Codification Topic 606 “Revenue from Contracts with
Customers” (“ASC 606”). The Company also adopted several FASB
Accounting Standards Updates (“ASUs”). Financial information for
the three months ended March 31, 2017 has not been restated and
continues to be reported under the accounting standards in effect
for that period. Additional information on the recently adopted
accounting standards is included in the Company’s quarterly report
on Form 10-Q for the period ended March 31, 2018.
The Company reported total revenue of $7.7 million for the first
quarter of 2018 compared to revenue of $7.0 million in the first
quarter of 2017, an increase of 10% or $0.7 million.
Biopharma services revenue totaled $3.7 million in the first
quarter, flat compared to $3.7 million during the first quarter
2017. 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 241, up from 140 in Q1 2017.
The Company’s book-to-bill ratio moved from 1.2 in Q1 2017 to 1.3
in Q1 2018.
Clinical Services revenue decreased by approximately $0.7
million in the first quarter of 2018 compared to the same period in
2017, from $3.0 million to $2.3 million. The decrease in revenue
was primarily related to the adoption of ASC 606, and a 16% decline
in test volume in the NJ lab.
The Company’s Discovery Services contributed $1.7 million in
revenue for the first quarter of 2018, an increase of approximately
$1.4 million compared to $0.3 million in the first quarter of 2017.
The increase was driven by a full quarter of vivoPharm revenue
following its acquisition in August 2017, as well as growing demand
for the Company’s early-stage discovery and bioinformatics analysis
capabilities.
Gross profit margin was 33.7% or $2.6 million in Q1 2018,
compared to 40% or $2.8 million in the first quarter 2017. Gross
profit and gross margin percentage were impacted by a reduction in
the number of non-revenue generating test validations, an increased
focus among clinical and medical staff on customer-driven
initiatives, and the continued rationalization of the Company’s
cost structure from prior acquisitions and efforts to introduce
greater efficiency in its laboratory operations.
Total operating expenses for the first quarter of 2018 were
approximately $7.5 million, an increase of 35.5% compared to $5.6
million during the first quarter of 2017. The increase in
total operating expenses is primarily related to the addition of
SG&A expenses from the vivoPharm acquisition of $0.9 million,
increases in sales and marketing costs of $0.4 million in the
comparable periods as the Company ramped up clinical sales during
the second half of 2017, non-cash charges associated with severance
related payroll and benefit costs of $0.5 million in Q1 2018 and an
increase in bad debt reserve of $0.5 million related to its
Clinical Services business.
Net loss was $(4.5) million or $(0.16) per share for the first
quarter of 2018, compared to a net loss of $(9.6) million or
$(0.51) per share for the first quarter of 2017.
Cash and cash equivalents, excluding restricted cash of $0.4
million as of March 31, 2018 totaled $4.0 million, compared to $9.9
million as of December 31, 2017.
As announced on April 2, 2018, the Company 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.
CONFERENCE CALL & WEBCAST |
Tuesday,
May 15, 2018, 8:30 a.m. Eastern Time |
Domestic: |
800-289-0438 |
International: |
323-794-2423 |
Conference ID: |
4878415 |
Webcast: |
http://public.viavid.com/index.php?id=129776 |
|
|
Replay –
Available through May 29, 2018 |
Domestic: |
844-512-2921 |
International: |
412-317-6671 |
Conference
ID: |
4878415 |
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 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, uncertainty in the level of operating
expense savings that our consolidation initiatives will achieve and
other risks discussed in the Cancer Genetics, Inc. Form 10-K for
the year ended December 31, 2017 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 Contact:Kirsten ThomasThe Ruth GroupTel:
508-280-6592Email: kthomas@theruthgroup.com
|
Cancer Genetics, Inc. and
SubsidiariesConsolidated Balance Sheets
(Unaudited)(in thousands, except par
value) |
|
|
March 31, 2018 |
|
December 31, 2017 |
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and
cash equivalents |
$ |
4,022 |
|
|
$ |
9,541 |
|
Accounts
receivable, net of allowance for doubtful accounts of 2018 $7,003;
2017 $6,539 |
10,335 |
|
|
10,958 |
|
Assets
held for sale |
2,058 |
|
|
— |
|
Other
current assets |
2,622 |
|
|
2,707 |
|
Total
current assets |
19,037 |
|
|
23,206 |
|
FIXED ASSETS, net of
accumulated depreciation |
4,876 |
|
|
5,550 |
|
OTHER ASSETS |
|
|
|
Restricted cash |
350 |
|
|
350 |
|
Patents
and other intangible assets, net of accumulated amortization |
4,375 |
|
|
4,478 |
|
Investment in joint venture |
244 |
|
|
246 |
|
Goodwill |
17,257 |
|
|
17,992 |
|
Other |
305 |
|
|
399 |
|
Total
other assets |
22,531 |
|
|
23,465 |
|
Total Assets |
$ |
46,444 |
|
|
$ |
52,221 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
CURRENT
LIABILITIES |
|
|
|
Accounts
payable and accrued expenses |
$ |
8,921 |
|
|
$ |
8,715 |
|
Obligations under capital leases, current portion |
319 |
|
|
272 |
|
Liabilities held for sale |
221 |
|
|
— |
|
Deferred
revenue |
1,751 |
|
|
516 |
|
Line of
credit |
3,510 |
|
|
4,137 |
|
Term
note, current portion |
6,000 |
|
|
6,000 |
|
Total
current liabilities |
20,722 |
|
|
19,640 |
|
Obligations under
capital leases |
641 |
|
|
624 |
|
Deferred rent payable
and other |
324 |
|
|
360 |
|
Warrant liability |
3,711 |
|
|
4,403 |
|
Deferred revenue,
long-term |
992 |
|
|
429 |
|
Total Liabilities |
26,390 |
|
|
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, 27,730 and
27,754shares issued and outstanding at March 31, 2018 and
December 31, 2017, respectively |
3 |
|
|
3 |
|
Additional paid-in capital |
161,801 |
|
|
161,527 |
|
Accumulated other comprehensive income |
49 |
|
|
69 |
|
Accumulated (deficit) |
(141,799 |
) |
|
(134,834 |
) |
Total Stockholders’
Equity |
20,054 |
|
|
26,765 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
46,444 |
|
|
$ |
52,221 |
|
|
|
Cancer Genetics, Inc. and
SubsidiariesConsolidated Statements of Operations
and Other Comprehensive Loss (Unaudited)(in
thousands, except per share amounts) |
|
|
Three Months Ended March 31, |
|
2018 |
|
2017 |
Revenue |
$ |
7,667 |
|
|
$ |
6,966 |
|
Cost of
revenues |
5,082 |
|
|
4,209 |
|
Gross profit |
2,585 |
|
|
2,757 |
|
Operating
expenses: |
|
|
|
Research
and development |
681 |
|
|
1,110 |
|
General
and administrative |
5,260 |
|
|
3,477 |
|
Sales and
marketing |
1,591 |
|
|
971 |
|
Total operating expenses |
7,532 |
|
|
5,558 |
|
Loss from operations |
(4,947 |
) |
|
(2,801 |
) |
Other income
(expense): |
|
|
|
Interest
expense |
(239 |
) |
|
(194 |
) |
Interest
income |
21 |
|
|
17 |
|
Change in
fair value of acquisition note payable |
17 |
|
|
(232 |
) |
Change in
fair value of warrant liability |
692 |
|
|
(7,294 |
) |
Other
expense |
— |
|
|
(46 |
) |
Total other (expense) |
491 |
|
|
(7,749 |
) |
Loss before income taxes |
(4,456 |
) |
|
(10,550 |
) |
Income tax
(benefit) |
— |
|
|
(970 |
) |
Net (loss) |
$ |
(4,456 |
) |
|
$ |
(9,580 |
) |
Basic and diluted net
(loss) per share |
$ |
(0.16 |
) |
|
$ |
(0.51 |
) |
Basic and diluted
weighted-average shares outstanding |
27,049 |
|
|
18,904 |
|
|
|
|
|
Net (loss) |
(4,456 |
) |
|
(9,580 |
) |
Foreign
currency translation (loss) |
(20 |
) |
|
— |
|
Comprehensive
(loss) |
(4,476 |
) |
|
(9,580 |
) |
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