Response Genetics, Inc. Reports Third Quarter 2010 Financial Results

LOS ANGELES--(BUSINESS WIRE)-- Response Genetics Inc. (Nasdaq:RGDX), a company focused on the development and sale of molecular diagnostic tests for cancer, today announced its consolidated financial results for the three and nine months ended September 30, 2010.

“We are successfully executing on our strategy to take market share and expand the sales of our ResponseDX™ genetic tests. In addition, we are in a great position to take advantage of the increasing market in companion diagnostics,” said Kathleen Danenberg, Response Genetics president and CEO.

Third Quarter Corporate Development Highlights

  • Expanded Sales and Distribution – For the third quarter, total revenue for our ResponseDX™ genetic tests increased 73 percent to $3.0 million compared to $1.9 million (after adjusting for the one-time increase of $1.5 million resulting from the conversion to the accrual basis of revenue recognition) for the second quarter of 2010. Gross margin (Total Revenue less Cost of Revenue, as a percentage of Total Revenue) for the third quarter was 51 percent compared to 45 percent for the second quarter of 2010. Average revenue per case (previously described as test) was $1,175 for the third quarter. Total ResponseDX™ genetic tests ordered increased quarter over quarter. However, now that the Company is on the accrual basis for all ResponseDX sales, the Company will be focusing on total ResponseDX revenue, gross margin and average revenue per case.
  • Publication on ERCC1 and MDR1 Expression in Bladder Cancer – Data from Company sponsored gene expression analysis published in Neoplasia associated high expression of multidrug resistance gene 1 (MDR1) and excision repair cross-complementing 1 (ERCC1) gene expression with inferior outcome after adjuvant chemotherapy in patients with locally advanced bladder cancer. The paper, “MDR1 and ERCC1 Expression Predict Outcome of Patients with Locally Advanced Bladder Cancer Receiving Adjuvant Chemotherapy” (Neoplasia (2010) 12, 628-636), was published online on or about August 5, 2010. The study used quantitative real-time RT-PCR to analyze formalin-fixed paraffin-embedded tumor samples from 108 patients with locally advanced bladder cancer. The Company plans to make available its ResponseDX: Bladder™ test in the future.

Third Quarter 2010 Results

Total revenue increased by 147 percent to $5.6 million for the third quarter ended September 30, 2010, compared to $2.3 million for the same period last year. Excluding the net revenue impact of $0.3 million resulting from the conversion to the accrual basis of revenue recognition for ResponseDX private payors, total revenue increased 135 percent to $5.3 million for the quarter ended September 30, 2010, compared to $2.3 million for the same period last year. The increase was primarily due to both an increase in ResponseDX revenues of $2.1 million and $1.2 million increase in pharmaceutical client revenue. Revenue from ResponseDX genetic tests increased by 226 percent to $3.0 million for the third quarter, compared to $0.9 million for the same period in 2009. Excluding the net revenue impact of $0.3 million resulting from the conversion to the accrual basis of revenue recognition for ResponseDX private payors, revenue from ResponseDX genetic tests increased by 198 percent to $2.7 million for the third quarter, compared to $0.9 million for the same period in 2009. Pharmaceutical client revenue increased 92 percent to $2.6 million, compared to $1.4 million in the third quarter of 2009.

Cost of revenue for the third quarter ended September 30, 2010 was $2.7 million, compared with $1.2 million for the same period ended 2009. Research and development expenses were $0.3 million for the third quarter of 2010, compared with $0.7 million for the same period in the prior year. General and administrative expenses were $2.0 million for the third quarter, compared with $1.3 million for the same period in 2009. Total operating expenses for the third quarter were $6.6 million, compared with $4.2 million for the same period last year. The primary reasons for the increase in total operating expenses are costs related to the continued expansion of the sales force, legal expenses associated with the proxy activities and billing services costs.

Response Genetics’ net loss for the third quarter ended September 30, 2010 was $1.06 million or a loss of $0.06 per share, compared with a net loss of $ 1.97 million, or a loss of $0.14 per share, for the same period last year. Excluding the net revenue impact of $0.3 million resulting from the conversion to the accrual basis for revenue recognition for ResponseDX private payors, the net loss for the three months ended September 30, 2010 was $1.3 million or a loss of $0.07 per share.

Nine Months Ended September 30, 2010

Total revenue increased by 162 percent to $15 million for the nine months ended September 30, 2010, compared to $5.7 million for the same period last year. Excluding the cumulative net revenue impact of $1.8 million resulting from the conversion from the cash to the accrual basis of revenue recognition for ResponseDX private payors, total revenue increased 131 percent to $13.2 million for the nine months ended September 30, 2010, compared to $5.7 million for the same period last year. The increase was primarily due to increases in both ResponseDX revenues of $6.6 million and $2.6 million increase in pharmaceutical client revenue. Revenue from ResponseDX genetic tests increased by 406 percent to $8.2 million for the nine months, compared to $1.6 million for the same period in 2009. Excluding the cumulative net revenue impact of $1.8 million resulting from the conversion from the cash to the accrual basis for revenue recognition for ResponseDX private payor revenue, revenue from ResponseDX genetic tests increased by 298 percent to $6.2 million for the nine months, compared to $1.6 million for the same period in 2009. The Company’s pharmaceutical client revenue increased 52 percent to $6.4 million, compared to $4.0 million in the nine months of 2009.

Cost of revenue for the nine months ended September 30, 2010 was $7.4 million, compared with $3.9 million for the same period in 2009. Research and development expenses were $1.3 million for the nine months of 2010, compared with $1.7 million for the same period in the prior year. General and administrative expenses were $5.4 million for the nine months of 2010, compared with $4.5 million for the same period in 2009. Total operating expenses for the nine months of 2010 were $18.5 million, compared with $13.3 million for the same period last year. The primary reasons for the increase in total operating expenses were costs related to sales force expansion, increased legal fees associated with the proxy activities and billing services costs.

Response Genetics’ net loss for the nine months ended September 30, 2010 was $3.6 million or a loss of $0.20 per share, compared with a net loss of $7.6 million, or a loss of $0.60 per share, for the same period last year. Excluding the cumulative net revenue impact of $1.8 million resulting from the conversion to the accrual basis of revenue recognition for Response DX private payors, the net loss for the nine months ended September 30, 2010 was $5.3 million or a loss of $0.30 per share.

Cash and Cash Equivalents

Cash and cash equivalents at September 30, 2010, were $5.4 million, compared to $7.1 million at December 31, 2009.

About Response Genetics, Inc.

Response Genetics, Inc. (“RGI”) (the “Company”) (Nasdaq: RGDX) is focused on the development and sale of molecular diagnostic tests for cancer. RGI’s technologies enable extraction and analysis of genetic information from genes derived from tumor samples stored as formalin-fixed and paraffin-embedded specimens. In addition to diagnostic testing services, RGI generates revenue from the sales of its proprietary analytical pharmacogenomic testing services of clinical trial specimens to the pharmaceutical industry. The Company was founded in 1999 and its principal headquarters are located in Los Angeles, California. For more information, please visit www.responsegenetics.com.

Forward-Looking Statement Notice

Except for the historical information contained herein, this press release and the statements of representatives of RGI related thereto contain or may contain, among other things, certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to the Company’s plans, objectives, projections, expectations and intentions, such as the ability of the Company to continue to expand its sales of its genetic tests and increase its market share, the potential for using the results of this research to develop diagnostic tests for cancer, the ability of the Company to expand its ResponseDX™ tests , and other statements identified by words such as “projects,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions.

These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission. Actual results, including, without limitation, actual sales results, if any, or the application of funds, may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control). The Company undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise, except as required by law.

 

RESPONSE GENETICS, INC.

 

CONSOLIDATED BALANCE SHEETS

   

December 31,
2009

September 30,
2010

(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 7,058,365 $ 5,439,211
Accounts receivable, net of allowance for doubtful accounts of $21,046 at September 30, 2010 1,982,951 4,749,177
Prepaid expenses and other current assets   418,289   388,625  
Total current assets 9,459,605 10,577,013
Property and equipment, net 1,253,714 1,302,462
Other assets   79,655    
Total assets $ 10,792,974 $ 11,879,475  

LIABILITIES, COMMON STOCK CLASSIFIED OUTSIDE OF STOCKHOLDERS’ EQUITY (DEFICIT) AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Accounts payable $ 729,100 $ 1,357,175
Accrued expenses 503,612 640,389
Accrued royalties 455,995 914,477
Accrued payroll and related liabilities 468,774 819,556
Deferred revenue   2,596,066   2,332,725  
Total current liabilities 4,753,547 6,064,322
 
Deferred revenue, net of current portion   1,414,928   354,467  
Total liabilities 6,168,475 6,418,789
 
Commitments and contingencies
 
Common stock classified outside of stockholders’ equity (deficit) 3,975,279 7,854,682
 
Stockholders’ equity (deficit)
Common stock, $0.01 par value; 50,000,000 shares authorized; 15,297,183 and 18,316,156 shares issued and outstanding at December 31, 2009 and September 30, 2010, respectively 122,393 122,529
Additional paid-in capital 39,858,986 40,401,532
Accumulated deficit (39,146,784 ) (42,728,285 )
Accumulated other comprehensive loss   (185,375 )   (189,772 )
Total stockholders’ equity (deficit)   649,220   (2,393,996 )
Total liabilities and stockholders’ equity (deficit) $ 10,792,974 $ 11,879,475  
 

RESPONSE GENETICS, INC.

 

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

     

Three Months
Ended September 30,

Nine Months
Ended September 30

2009     2010 2009     2010

Net Revenue

$ 2,259,523   $ 5,574,649   $ 5,694,988   $ 14,914,212  
Operating expenses:
Cost of revenue 1,161,329 2,738,693 3,918,311 7,392,756
Selling and marketing 942,795 1,554,430 2,458,906 4,395,400
General and administrative 1,311,684 2,010,855 4,501,635 5,399,445
UK expenses 87,785 10,799 734,284 18,190
Research and development   726,696     319,271     1,734,223     1,279,501  
Total operating expenses   4,230,289     6,634,048     13,327,177     18,485,292  
Operating loss (1,970,766 ) (1,059,399 ) (7,632,189 ) (3,571,080 )
Other income (expense):
Interest expense (2,360 ) (2,702 ) (8,199 ) (7,759 )
Interest income 256 185 22,157 448
Other               (1,854 )
Loss before provision for income taxes (1,972,870 ) (1,061,916 ) (7,618,231 ) (3,580,245 )
Provision for income taxes               1,256  
Net loss $ (1,972,870 ) $ (1,061,916 ) $ (7,618,231 ) $ (3,581,501 )
 
Unrealized gain (loss) on foreign currency translation   18,467     9,045     35,708     (4,397 )
Total comprehensive loss $ (1,954,403 ) $ (1,052,871 ) $ (7,582,523 ) $ (3,585,898 )
Net loss per share — basic and diluted $ (0.14 ) $ (0.06 ) $ (0.60 ) $ (0.20 )
Weighted-average shares — basic and diluted   14,599,182     18,314,379     12,594,995     17,612,982  
 

RESPONSE GENETICS, INC.

 

RECONCILING TABLES FOR CASH TO ACCRUAL

 
 

TABLE ONE

 

The following details ResponseDX™ revenue for the three and nine months ended September 30, 2009 and 2010:

 
Three
Months ended September 30,
Nine
Months ended September 30,
2009   2010 2009   2010
Net Medicare revenue $481,302 $1,269,681 $819,266 $3,159,882
 
Private Payor Revenue through March 31, 2010

1,507,187
 
Private Payor Revenue subsequent to March 31, 2010 1,690,761 2,638,553
 
Revenue recorded on the cash basis prior to April 1, 2010 334,926

554,128 717,284
 
NeoGenomics Laboratories revenue 98,421 14,953 250,343 166,464
 
Other 7,228 24,197
 
Net ResponseDX revenue

$914,649

$2,982,623 $1,623,737 $8,213,567
 

TABLE TWO

 

The following table provides details of ResponseDX™ revenue for the three and nine months ended September 30, 2009 and 2010 based upon the former cash basis revenue recognition policy relating to ResponseDX™ private payors. This table is presented to provide the amount of revenue recognized if the change to the accrual basis of revenue recognition for ResponseDX™ private payors had not occurred effective April 1, 2010:

 
          Three
Months ended September 30,
  Nine
Months ended September 30,
2009   2010 2009   2010
Net Medicare revenue $481,302 $1,269,681 $819,266 $3,159,882
 
NeoGenomics Laboratories revenue 98,421 14,953 250,343 166,464
 
Revenue recognized on the former cash basis 334,926 1,436,406 554,128 3,109,014
 
Other 7,228 24,197
 
Net ResponseDX revenue $914,649 $2,728,268 $1,623,737 $6,459,557
 

The increase in revenue due to the conversion from cash basis to accrual basis in the three and nine month period ended September 30, 2010 of $254,355 and $1,754,010, respectively, is the difference between the Net ResponseDX™ revenue in Table One and the Net ResponseDX™ revenue in Table Two.



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or
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KEYWORDS:   United States  North America  California

INDUSTRY KEYWORDS:   Health  Biotechnology  Genetics  Oncology

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