Cancer Genetics Announces First Quarter 2013 Financial Results and Significant Business and Portfolio Progress

Cancer Genetics Announces First Quarter 2013 Financial Results and Significant Business and Portfolio Progress

First quarter revenue increased 46% YoY
Clinical test volume increased 19% YoY
Institutional client base grows to 42% of revenues
DNA-Probe product manufacturing moved to India, reducing cost of goods

RUTHERFORD, N.J.-- Cancer Genetics, Inc. (OTCQB: CGIX) ("CGI" or the "Company") is an emerging leader in the diagnosis and disease management for the most complex and difficult-to-treat cancers, including hematologic, urogenital, and gynecological malignancies. CGI's focused portfolio of IP-protected and clinically validated genomic tests, CAP- and CLIA-certified reference laboratory, and suite of unique service offerings are ideally positioned to serve the needs of clinicians, pathologists and laboratories across the entire ecosystem of cancer diagnosis and treatment. CGI today reported financial results for the quarter ended March 31, 2013.

Revenue for the first quarter of 2013 increased 46% to $1.2 million, compared with $835,000 in the first quarter of 2012.

Clinical test volume increased 19% to 1,911 tests in the first quarter, compared with 1,610 tests in the first quarter of 2012.

Average revenue per test increased 23% to $615, from $502 in the first quarter of 2012, driven by an increase in direct bill revenue.

DNA-probe sales by the Company's wholly-owned subsidiary, CGI Italia, increased 193% to $44,000 for the first quarter of 2013, from $15,000 for the same period of 2012.

Gross profit increased to $149,000 in the first quarter, from $12,000 for the same period of 2012, while gross margin improved to 12% compared to 1% in the first quarter of 2012 and 9% for the full year 2012.

Adjusted for a one-time write off of $618,000 in IPO-related costs, operating expenses were unchanged at $1.8 million in the first quarter, compared to the same period of 2012. R&D expense remained relatively flat at $491,000, compared to $524,000 in the first quarter of 2012. Sales and marketing expense increased 16% to $396,000 in the first quarter, from $340,000 in the year-ago period.

Adjusted for the one-time write off in IPO-related costs, loss from operations in the first quarter was $1.7 million, compared to $1.8 million in the same period of 2012.

Net income for the first quarter was $2.4 million, or $1.75 per share, compared to a net loss of $1.1 million, or ($0.81) per share, in the first quarter of 2012. This increase in income was primarily the result of income related to a $5.3 million decrease in the fair value of derivative warrant liability, plus an income tax benefit of $664,000 from the sale of certain net operating losses ("NOLs") in the state of New Jersey. These gains were partially offset by the increase in operating loss and an increase in interest expense. Interest expense increased from $865,000 in the first quarter of 2012 to $1.3 million in the first quarter of 2013. As of the Company's initial public offering in April, $9.6 million of debt was converted to equity, which is expected to significantly decrease interest expense going forward.

In April, CGI completed a 690,000 share equity offering, including the 90,000 share overallotment option, for which the Company received gross proceeds of $6.9 million. After deducting transaction fees and offering-related expenses not previously paid, CGI netted approximately $5.0 million. Prior to the offering, as of March 31, cash-on-hand was $217,000, compared to $820,000 at December 31, 2012. Cash used in operations in the first quarter was $560,000, compared to $3.2 million cash used in the first quarter of 2012. The reduction in cash usage was the result of $664,000 received in the first quarter of 2013 from the sale of certain state tax NOLs, plus the non-recurrence of $2.1 million in one-time payments that were made in the first quarter of 2012.

Panna Sharma, President and CEO of CGI, commented, "We made significant progress during this past quarter, and it places us in a great position for 2013. The growth in clinical volumes has been due to both new relationships with community hospitals and biotechnology companies using our proprietary programs and from existing customers expanding the range of oncology-focused biomarker testing CGI is providing them. We see this past quarter, which was completed prior to our IPO, as a good foundation for further growth in 2013 as we continue our investment in sales professionals, marketing and brand awareness."

Mr. Sharma continued, "The recent launches of our microarrays in our hematological and urogenital franchises, namely our DLBCL and kidney cancer tests, clearly demonstrate our ability to effectively innovate and develop the genomic products that will help drive improved diagnosis, deeper insights about outcome, and better therapeutic decision making. Our relationship with Gilead, which was announced in March, clearly highlights the value and future growth that our proprietary products can generate for our company. We expect further launches in 2013 that will increase our portfolio of commercially available genomic tests and drive additional value for community hospitals, biopharma companies and patients."

"We have a deep knowledge base in these underserved cancers; this, coupled with our approach to commercialization, will be a cornerstone for our joint venture with Mayo Clinic in next-generation sequencing. We believe our investors will be able to participate in both a high-growth genomics company serving the market today, and participate in the long-term upside of proprietary programs that are positioned to change the nature of oncology diagnosis and management in the future."

Recent Business Highlights:

  • Selected by Gilead Sciences to provide molecular profiling and clinical trial testing for all national and international trials for chronic lymphocytic leukemia (CLL), which will include the proprietary MatBA-CLL array.
  • Successfully completed migration of DNA-Probe manufacturing to India in order to reduce cost, increase capacity and improve operational flexibility.
  • Launched unique genomic microarrays for lymphoma (MatBA®-DLBCL) in February 2013 and kidney cancer (UroGenRA™-Renal) in April 2013 that have been approved by both CLIA and New York State.
  • Expanded clinical sales force into Midwestern United States and Texas.
  • Established distribution partnership with Nikon Instruments for sale of CGI's DNA-Probe portfolio into Italy and Europe as a key component of their cytogenetic fluorescent microscope equipment offering.

Meetings & Presentations

  • Presenting at UBS Global Healthcare Conference on May 22 at 12:30 p.m. ET
  • Presenting at Marcum MicroCap Conference on May 30
  • Attending the ASCO Annual Meeting from May 31-June 4
  • Moderating the BioNJ Diagnostics & Personalized Medicine Panel on June 6 at the Annual BioNJ Personalized Medicine Innovation Summit

Conference Call Details:

CGI will hold a conference call on Thursday, May 16, 2013, at 9:00 a.m. Eastern time to discuss its results for the first quarter ended March 31, 2013. To participate in the call, please dial (877) 941-1428, or (480) 629-9665 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties can also listen via a live Internet webcast, which can be found via the Company's website at http://ir.stockpr.com/cancergenetics/events, or alternately at http://ViaVid.net.

A replay of the call will be available for two weeks from 5:00 p.m. ET on May 16, 2013, until 11:59 p.m. ET on May 30, 2013. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 4619856. In addition, a recording of the call will be available via the Company's website at http://www.cancergenetics.com.

About Cancer Genetics

Cancer Genetics, Inc. (CGI) is an emerging leader in DNA-based cancer diagnostics and services 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 provide a comprehensive range of non-proprietary oncology-focused tests and laboratory services.

CGI's cutting-edge proprietary tests and state-of-the-art reference laboratory provide critical genomic information to healthcare professionals as well as biopharma and biotech. 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.

Founded in 1999 by world-renowned cytogeneticist Dr. R.S.K. Chaganti, the Company has been built on a foundation of world-class scientific knowledge and IP in solid and blood-borne cancers, and has established strong research collaborations with major cancer centers such as Memorial Sloan-Kettering, The Cleveland 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, uncertainty in the results of clinical trials or regulatory approvals, need and ability to obtain future capital, and maintenance of intellectual property rights and other risks discussed in the Company's Form 10-Q for the quarter ended March 31, 2013 and 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.

               
Consolidated Balance Sheets
(Unaudited)
        March 31,      
        2013     December 31,
        (Unaudited)     2012
ASSETS              
CURRENT ASSETS              
Cash and cash equivalents       $ 216,872       $ 819,906  
Accounts receivable, net of allowance for doubtful accounts of $36,000         1,124,893         850,545  
Other current assets         598,631         489,278  
Total current assets         1,940,396         2,159,729  
FIXED ASSETS, net of accumulated depreciation         899,049         964,923  
OTHER ASSETS              
Security deposits         1,564         1,564  
Restricted cash         250,000         250,000  
Loan guarantee and financing fees, net of accumulated              
amortization of 2013 $1,334,610; 2012 $929,498         1,516,631         1,907,502  
Patents         329,309         324,764  
Deferred initial public offering costs         2,473,763         3,343,289  
          4,571,267         5,827,119  
Total Assets       $ 7,410,712       $ 8,951,771  
               
LIABILITIES AND STOCKHOLDERS' DEFICIT              
CURRENT LIABILITIES              
Accounts payable and accrued expenses       $ 4,885,145       $ 4,578,761  
Obligations under capital leases, current portion         20,464         17,158  
Deferred revenue         676,327         468,010  
Notes payable, current portion         4,530,640         3,836,567  
Line of credit         2,989,577         2,871,200  
Total current liabilities         13,102,153         11,771,696  
               
Obligations under capital leases         -         7,490  
Deferred rent payable         165,920         164,298  
Notes payable, long-term         2,148,494         2,440,683  
Line of credit         6,000,000         6,000,000  
Warrant liability         7,518,000         12,549,000  
Total liabilities         28,934,567         32,933,167  
STOCKHOLDERS' DEFICIT              
Series A Preferred Stock, authorized 588,000 shares $0.0001 par value (converted              
to common stock on April 10, 2013), 587,691 shares issued and outstanding         59         59  
Series B Preferred Stock, authorized 2,000,000 shares $0.0001 par value (converted to              
common stock on April 10, 2013), 1,821,600 shares issued and outstanding         182         182  
Common stock, authorized 100,000,000 and 24,000,000 shares, respectively, $0.0001              
par value, 1,349,936 shares issued and outstanding         135         135  
Additional paid-in capital         25,067,388         24,970,255  
Treasury stock         -         (17,442 )
Accumulated deficit         (46,591,619 )       (48,934,585 )
Total Stockholders' Deficit         (21,523,855 )       (23,981,396 )
Total Liabilities and Stockholders' Deficit       $ 7,410,712       $ 8,951,771  
                       
 
Consolidated Statements of Operations
(Unaudited)
                 
          Three Months Ended March 31,
          2013     2012
Revenue         $ 1,218,667       $ 834,752  
Cost of revenues           1,070,020         823,052  
Gross profit           148,647         11,700  
Operating expenses:                
Research and development           490,577         523,511  
General and administrative           1,570,629         936,157  
Sales and marketing           396,554         339,568  
Total operating expenses           2,457,760         1,799,236  
Loss from operations           (2,309,113 )       (1,787,536 )
                 
Other income (expense):                
Interest expense           (1,293,985 )       (864,981 )
Interest income           606         -  
Change in fair value of warrant liability           5,299,000         1,580,000  
Total other income (expense)           4,005,621         715,019  
Income (loss) before income taxes           1,696,508         (1,072,517 )
Income tax provision (benefit)           (663,900 )       -  
Net income (loss)         $ 2,360,408       $ (1,072,517 )
                 
Basic net income (loss) per share         $ 1.75       $ (0.81 )
Diluted net loss per share         $ (2.18 )     $ (1.85 )
                 
Basic Weighted Average Shares Outstanding           1,349,936         1,329,279  
Diluted Weighted Average Shares Outstanding           1,349,936         1,433,182  
                         
 
Consolidated Statements of Cash Flows
(Unaudited)
          Three Months Ended March 31,
          2013     2012
                 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income (loss)         $ 2,360,408       $ (1,072,517 )
Adjustments to reconcile net income (loss) to net cash                
used in operating activities:                
Depreciation           77,783         82,963  
Amortization           3,807         3,807  
Provision for bad debts           -         48,931  
Equity-based consulting and compensation expenses           97,133         276,867  
Change in fair value of warrant liability           (5,299,000 )       (1,580,000 )
Amortization of loan guarantee and financing fees           407,871         244,336  
Accretion of discount on debt           538,911         404,150  
Deferred rent           1,622         1,997  
Deferred initial public offering costs expensed           617,706         -  
Change in working capital components:                
Accounts receivable           (274,348 )       (110,000 )
Other current assets           10,647         (152,969 )
Accounts payable, accrued expenses and deferred revenue           897,521         (1,350,859 )
Net cash (used in) operating activities           (559,939 )       (3,203,294 )
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of fixed assets           (11,909 )       (7,677 )
Patent costs           (8,352 )       (43,201 )
Increase in restricted cash           -         (50,000 )
Net cash (used in) investing activities           (20,261 )       (100,878 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Principal payments on capital lease obligations           (4,184 )       (10,569 )
Payment of equity issuance costs           -         (688,969 )
Proceeds from warrant exercises           -         619,980  
Proceeds from borrowings on notes payable           -         3,000,000  
Principal payments on notes payable           (18,650 )       -  
Net cash provided by (used in) financing activities           (22,834 )       2,920,442  
Net (decrease) in cash and cash equivalents           (603,034 )       (383,730 )
CASH AND CASH EQUIVALENTS                
Beginning           819,906         2,417,256  
Ending         $ 216,872       $ 2,033,526  
                 
SUPPLEMENTAL CASH FLOW DISCLOSURE                
Cash paid for interest         $ 128,215       $ 241,987  
                 
SUPPLEMENTAL DISCLOSURE OF NONCASH                
INVESTING AND FINANCING ACTIVITIES                
Warrants issued for financing fees         $ 47,000       $ -  
Warrants issued with debt           -         940,000  
Warrants issued for debt guarantee fee           -         1,061,000  
Accrued IPO costs           601,430         -  
Payment of accrued IPO costs           -         162,878  
IPO costs discounted           733,250        
IPO costs reclassified to accounts receivable           120,000        
Accrued expenses reclassified as derivative warrant liability           221,000         -  
Accrued expenses recorded as financing fees           -         147,000  
Retirement of treasury stock           17,442         -  
                         
 
RECONCILIATION OF GAAP OPERATING EXPENSES TO NON-GAAP ADJUSTED OPERATING EXPENSES
           
      For the Three Months Ended
      March 31,
      2013   2012
           
Operating Expenses     2,458   1,799
           
Adjustments to Operating Expense          
One-Time Write Off of IPO Costs     618   -
Adjusted Operating Expenses     1,840   1,799
           

The non-GAAP metric above is not a substitute for GAAP but is viewed as useful

by management this quarter because of its recent IPO.

           
           
RECONCILIATION OF GAAP LOSS FROM OPERATIONS TO NON-GAAP ADJUSTED LOSS FROM OPERATIONS
           
      For the Three Months Ended
      March 31,
      2013   2012
           
Loss from Operations     (2,309)   (1,788)
           
Adjustments to Loss from Operations          
One-Time Write Off of IPO Costs     618   -
Adjusted Loss from Operations     (1,691)   (1,788)
           

The non-GAAP metric above is not a substitute for GAAP but is viewed as useful

by management this quarter because of its recent IPO.

 

Investor Relations
RedChip Companies, Inc.
Jon Cunningham, 800-733-2447, ext. 107
[email protected]

Source: Cancer Genetics, Inc.

 

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