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8-K - FORM 8-K - CANCER GENETICS, INCd627646d8k.htm

Exhibit 99.1

Cancer Genetics, Inc. Announces Third Quarter Financial Results

Test volume increased 71% year-over-year in the third quarter

Revenue from commercial sales increased 67% year-over-year in the third quarter

RUTHERFORD, NJ (November 13, 2013): Cancer Genetics, Inc. (NASDAQ: CGIX) (“CGI” or the “Company”), a DNA-based diagnostics company focused on developing genomic-based oncology tests and services, reported financial results for the third quarter ended September 30, 2013.

Third-Quarter Highlights

 

    Test volume increased 71% to 2,920 for the quarter ended September 30, 2013, up from 1,704 for the third quarter of 2012.

 

    Total revenue increased 37% to $1.7 million in the third quarter of 2013, compared to $1.2 million in the third quarter of 2012.

 

    Revenue from commercial operations (excluding grants) increased 67% in the third quarter of 2013, compared to the third quarter of 2012.

 

    Gross margin percentage increased to 29% in the third quarter of 2013, compared to 22% in the third quarter of 2012.

 

    Total operating expenses were $2.2 million in the third quarter of 2013, compared to $2.0 million the same period of 2012.

“The significant growth of our commercial sales provides further validation of our ability to translate research-driven genetic insight into the clinical setting and improve patient care,” stated Panna Sharma, CEO of CGI. “With five proprietary products in the market today, two successful capital raises completed since our IPO, and an underserved market opportunity in complex cancers, we are redefining the standard of care for personalized cancer treatment, and we believe that CGI is well positioned to be a leader in the emerging field of DNA-based cancer diagnostics, ultimately leading to improved patient treatment and higher value for the health care system.”

Net loss was $3.1 million for the third quarter of 2013, compared with net income of $0.3 million for the same period of 2012. The net loss was primarily the result of non-cash expense related to an increase in the fair value of warrant liability.

Nine-Month Highlights

 

    Revenue for the nine months ended September 30, 2013 increased 47% to $4.8 million, up from $3.2 million for the nine months ended September 30, 2012.

 

    Test volume increased 63% to 8,035 for the nine months ended September 30, 2013, compared to 4,937 for the nine months ended September 30, 2012.

 

    Operating loss remained unchanged at $5.7 million for the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012.

 

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Recent Business Highlights

 

    CGI successfully completed two secondary stock offerings, raising approximately $62 million in gross proceeds.

 

    At September 30, 2013, the Company had $9.9 million of cash, cash equivalents and investments. On a proforma basis, reflecting the $42.2 million in net proceeds from the October offering, the Company had $52.1 million cash at quarter end.

 

    In August, concurrent with the Company’s first secondary offering, CGI became a Nasdaq-listed company.

 

    In September, the Company announced an expansion of its relationship with Roche Servicios, S.A., a division of Swiss drug giant Roche, designed to drive adoption of CGI’s genomic tests in Latin America and the Caribbean.

 

    OncoSpire Genomics, CGI’s 50/50 joint venture with Mayo Clinic, launched; initial next generation sequencing projects to be unveiled at analyst/media event in New York City on November 22.

 

    CGI launched its proprietary genomic-based diagnostic for cervical cancer, FHACT™, in July outside the United States; the Company expects to obtain CLIA approval and launch in the U.S. during the fourth quarter of 2013.

 

    The Company significantly strengthened its overall intellectual property position through multiple patent awards covering the CGI’s diagnostics for kidney cancer and mature B-cell cancers.

 

    CGI’s proprietary diagnostics were also further validated through multiple poster presentations; and a peer-reviewed published study on the Company’s MatBA®-CLL diagnostic for chronic lymphocytic leukemia, which is to appear in the journal Leukemia and Lymphoma.

Conference Call and Webcast Details

As previously announced, CGI will hold a conference call on Wednesday, November 13, 2013, at 4:30 p.m. Eastern time to discuss its results for the third quarter ended September 30, 2013. To participate in the call, please dial (877) 407-4018, or (201) 689-8471 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.cancergenetics.com/events.

A replay of the call will be available for two weeks from 7:30 p.m. ET on November 13, 2013, until 11:59 p.m. ET on November 27, 2013. The number for the replay is (877)-870-5176, or (858) 384-5517 for international calls; the passcode for the replay is 13572828. In addition, a recording of the call will be available via the Company’s website at http://www.cancergenetics.com.

 

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About Cancer Genetics:

Cancer Genetics, Inc. 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, 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 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.

Contact Information:

Investor Relations

RedChip Companies, Inc.

Jon Cunningham, 800-733-2447, ext. 107

jon@redchip.com

 

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Cancer Genetics, Inc. and Subsidiary

Consolidated Statements of Operations

(Unaudited)

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013     2012     2013     2012  

Revenue

   $ 1,705,146      $ 1,242,604      $ 4,755,462      $ 3,225,831   

Cost of revenues

     1,211,384        971,557        3,560,678        2,880,242   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     493,762        271,047        1,194,784        345,589   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     433,525        501,431        1,384,122        1,551,672   

Sales and marketing

     442,665        334,147        1,274,620        1,049,996   

General and administrative

     1,297,801        1,145,649        4,259,175        3,475,301   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     2,173,991        1,981,227        6,917,917        6,076,969   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (1,680,229     (1,710,180     (5,723,133     (5,731,380
  

 

 

   

 

 

   

 

 

   

 

 

 

Other (expense) income:

        

Interest expense

     (356,442     (1,312,232     (2,039,750     (3,260,010

Interest income

     3,295        —         4,649        —    

Debt conversion costs

     —         —         (6,849,830     —    

Change in fair value of warrant liability

     (1,033,000     3,334,000        4,096,000        6,370,000   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other (expense) income

     (1,386,147     2,021,768        (4,788,931     3,109,990   
  

 

 

   

 

 

   

 

 

   

 

 

 

(Loss) income before income taxes

     (3,066,376     311,588        (10,512,064     (2,621,390

Income tax provision (benefit)

     —         —         (663,900     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

   $ (3,066,376   $ 311,588      $ (9,848,164   $ (2,621,390
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic net (loss) income per share

   $ (0.61   $ 0.23      $ (2.84   $ (1.96
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted net loss per share

   $ (0.61   $ (2.23   $ (4.02   $ (6.66
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic Weighted Average Shares Outstanding

     5,055,591        1,346,124        3,463,730        1,340,530   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted Weighted Average Shares Outstanding

     5,055,591        1,355,678        3,468,627        1,350,084   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Cancer Genetics, Inc. and Subsidiary

Consolidated Balance Sheets

 

     September 30,
2013
(Unaudited)
    December 31,
2012
 

ASSETS

    

CURRENT ASSETS

    

Cash and cash equivalents

   $ 9,878,176      $ 819,906   

Accounts receivable, net of allowance for doubtful accounts of $36,000

     1,616,134        850,545   

Other current assets

     713,127        489,278   
  

 

 

   

 

 

 

Total current assets

     12,207,437        2,159,729   
  

 

 

   

 

 

 

FIXED ASSETS, net of accumulated depreciation

     810,387        964,923   
  

 

 

   

 

 

 

OTHER ASSETS

    

Security deposits

     1,564        1,564   

Restricted cash

     300,000        250,000   

Loan guarantee and financing fees, net of accumulated amortization of 2013 $207,000; 2012 $929,498

     621,000        1,907,502   

Patents

     366,113        324,764   

Deferred offering costs

     —         3,343,289   
  

 

 

   

 

 

 
     1,288,677        5,827,119   
  

 

 

   

 

 

 

Total Assets

   $ 14,306,501      $ 8,951,771   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

    

CURRENT LIABILITIES

    

Accounts payable and accrued expenses

   $ 1,807,081      $ 4,578,761   

Obligations under capital leases, current portion

     11,886        17,158   

Deferred revenue

     215,023        468,010   

Notes payable, current portion

     43,622        3,836,567   

Lines of credit

     6,000,000        2,871,200   
  

 

 

   

 

 

 

Total current liabilities

     8,077,612        11,771,696   

Obligations under capital leases

     —         7,490   

Deferred rent payable

     169,166        164,298   

Notes payable, long-term

     —         2,440,683   

Lines of credit

     —         6,000,000   

Warrant liability

     1,178,000        12,549,000   
  

 

 

   

 

 

 

Total liabilities

     9,424,778        32,933,167   

STOCKHOLDERS’ EQUITY (DEFICIT)

    

Series A Preferred Stock, authorized 588,000 shares $0.0001 par value (converted to common stock on April 10, 2013-Note 4), 587,691 shares issued and outstanding in 2012

     —         59   

Series B Preferred Stock, authorized 2,000,000 shares $0.0001 par value (converted to common stock on April 10, 2013-Note 4), 1,821,600 shares issued and outstanding in 2012

     —         182   

Common stock, authorized 100,000,000 and 24,000,000 shares, respectively, $0.0001 par value, 5,965,340 and 1,349,936 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively

     597        135   

Additional paid-in capital

     63,681,317        24,970,255   

Treasury stock

     —         (17,442

Accumulated deficit

     (58,800,191     (48,934,585
  

 

 

   

 

 

 

Total Stockholders’ Equity (Deficit)

     4,881,723        (23,981,396
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity (Deficit)

   $ 14,306,501      $ 8,951,771   
  

 

 

   

 

 

 

 

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Cancer Genetics, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(Unaudited)

 

     Nine Months Ended September 30,  
     2013     2012  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Net (loss)

   $ (9,848,164   $ (2,621,390

Adjustments to reconcile net (loss) to net cash used in operating activities:

    

Depreciation

     227,376        266,489   

Amortization

     11,422        11,422   

Provision for bad debts

     —          (528

Equity-based consulting and compensation expenses

     310,982        766,167   

Equity-based research and development expenses

     96,220        —     

Change in fair value of warrant liability

     (4,096,000     (6,370,000

Extension of warrants

     —          144,000   

Amortization of loan guarantee and financing fees

     884,460        952,544   

Accretion of discount on debt

     584,692        1,559,009   

Deferred rent

     4,868        6,364   

Deferred initial public offering costs expensed

     617,706        —     

Write-off of debt conversion costs

     6,849,830        —     

Change in working capital components:

    

Accounts receivable

     (765,589     (149,870

Other current assets

     (223,849     (182,803

Accounts payable, accrued expenses and deferred revenue

     (1,255,166     (144,773
  

 

 

   

 

 

 

Net cash (used in) operating activities

     (6,601,212     (5,763,369
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

    

Purchase of fixed assets

     (72,840     (33,540

Patent costs

     (52,771     (184,456

Increase in restricted cash

     (50,000     (50,000
  

 

 

   

 

 

 

Net cash (used in) investing activities

     (175,611     (267,996
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Principal payments on capital lease obligations

     (12,762     (32,005

Proceeds from initial public offering of common stock, net of offering costs

     4,984,025        (1,190,609

Proceeds from secondary public offering of common stock, net of offering costs

     14,230,372        —     

Proceeds from warrant exercises

     192,000        619,980   

Proceeds from borrowings on notes payable

     —          5,120,000   

Principal payments on notes payable

     (3,558,542     —     
  

 

 

   

 

 

 

Net cash provided by financing activities

     15,835,093        4,517,366   
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     9,058,270        (1,513,999

CASH AND CASH EQUIVALENTS

    

Beginning

     819,906        2,417,256   
  

 

 

   

 

 

 

Ending

   $ 9,878,176      $ 903,257   
  

 

 

   

 

 

 

SUPPLEMENTAL CASH FLOW DISCLOSURE

    

Cash paid for interest

   $ 570,601      $ 761,458   

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES

    

Warrants issued for financing fees

   $ 47,000      $ 727,000   

Warrants issued with debt

     —          2,048,000   

Warrants issued for debt guarantee fee

     —          755,000   

Accrued offering costs

     —          1,384,123   

Offering costs discounted

     733,250        —     

Accrued expenses reclassified as derivative warrant liability

     221,000        148,000   

Accrued expenses recorded as financing fees

     —          184,000   

Retirement of treasury stock

     17,442        —     

Conversion of notes payable, lines of credit and accrued interest to common stock

     9,364,300        —     

Conversion of preferred stock to common stock

     241        —     

Reclassification of derivative warrants

     7,170,000        —     

Cashless exercise of derivative warrants

     373,000        —     

Reclassification of deferred offering costs to additional paid-in capital

     1,992,333        —    

 

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