Cancer Genetics, Inc. (Nasdaq: CGIX), a leader in enabling
precision medicine for immuno-oncology and genomic medicine through
molecular markers and diagnostics, today announced financial and
operating results for the third quarter ended September 30, 2018 as
well as an update on its strategic direction and key operational
initiatives.
THIRD QUARTER 2018 AND RECENT OPERATIONAL
HIGHLIGHTS
- Signed definitive agreement to merge with NovellusDx Ltd. to
enhance capabilities in functional genomics which target multiple
driver and/or resistance pathways required for optimal antitumor
efficacy;
- Strengthened management team with appointment of Glenn Miles as
Chief Financial Officer of the Company;
- Entered strategic partnership with Genecast Biotechnology to
commercialize the Tissue of Origin® (TOO) Test in China;
- Signed a partnership with Cellaria to develop precision
medicine tools to support cancer therapeutic research with
biopharma customers;
- Signed supply agreement with Agilent Technologies to supply the
company’s FISH-based HPV-Associated Cancer Test (FHACT®) for
international sales;
- Commercially launched the Thermo Fisher Scientific’s Oncomine
Comprehensive Assay v3 to drive clinical trials;
- Successfully completed the consolidation of the west coast
molecular profiling laboratory and consolidated all of its solid
tumor portfolio to New Jersey and North Carolina laboratories;
and
- Signed new contracts in Q3 with estimated revenue potential of
up to $9.8 for biopharma and discovery/preclinical services.
John A. Roberts, Chief Executive Officer of Cancer Genetics
said, “We have made substantial progress across several fronts in
the third quarter of 2018. First, we signed a definitive merger
agreement with NovellusDx, a leader in functional genomics. This
merger will enhance Cancer Genetics’ capabilities in machine
learning and functional genomics to enhance our comprehensive
diagnostic capabilities and broad data set associated with tumor
biology. The merger is expected to close early next year.”
“Second, we successfully completed the consolidation of our west
coast facility within our planned timeline and budget. We expect
that consolidation of this facility will eliminate approximately $4
million annually of our operating expenses due to the closing of
this location, supporting our planned path to profitability and
positive working capital position of the business. Further, we
appointed Glenn Miles as our Chief Financial Officer to complement
our ongoing initiatives geared toward achieving operational
efficiency and optimization of the overall business. Glenn has
significant experience in financial and accounting leadership and
will play a key role in developing and executing Cancer Genetics’
financial strategy.”
“This quarter, we also launched Thermo Fisher Scientific’s
next-generation sequencing (NGS) Oncomine™ Comprehensive Assay v3
after completing CLIA validation. The Oncomine™ Comprehensive Assay
can provide detailed understanding of cancer mutations and
assisting in driving clinical oncology research. Further, we signed
a non-exclusive supply agreement with Agilent Technologies Inc. to
manufacture our proprietary FISH probe reagents for use in the
Company’s FISH-based HPV-Associated Cancer Test (FHACT®). We
believe out-licensing our probes allows for revenue growth
opportunities in our international business.”
Mr. Roberts added, “As a part of our transformation strategy, we
focused our efforts on expanding our biopharma business. We signed
a strategic partnership with Cellaria to develop precision medicine
tools that support research related to cancer therapies, which we
believe will contribute to the growth of our biopharma business.”
In addition, we entered a collaboration with Genecast Biotechnology
to market, distribute and sell the TOO Test in China, which will
bring committed revenue to the company in early 2019.
Mr. Roberts concluded, “We are proud of the many accomplishments
we have achieved thus far in the year and remain committed to drive
our growth initiatives as we move toward optimizing our operations,
expanding our biopharma business and achieving profitability.”
THIRD QUARTER 2018 FINANCIAL RESULTS
The Company reported total revenue of $5.9 million for the third
quarter of 2018 compared to revenue of $8.0 million in third
quarter of 2017, a decrease of 26% or $2.1 million.
Biopharma services revenue totaled $3.8 million in the third
quarter, compared to $4.2 million during the third quarter 2017,
and an increase over the sequential periods Q2 2018 of $3.6 million
and Q1 2018 of $3.3 million. 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 191
in Q3 2017. The Company’s booking-to-billing ratio for Q3 2018 was
2.3, on $8.9 million of potential revenue from new contracts signed
in the period.
Clinical Services revenue decreased by approximately $1.3
million in the third quarter of 2018 compared to the same period in
2017, from $2.9 million to $1.6 million, partly due to the impact
of ASC 606 adoption and a planned reduction on the test menu being
offered into this market to eliminate non-cash generating
activities.
The Company’s Discovery Services contributed $0.5 million in
revenue for the third quarter of 2018 driven by our acquisition of
vivoPharm in August of 2017. This represents a decrease of
approximately $0.4 million as compared to $0.9 million in revenue
for the third quarter of 2017.
Gross profit margin was 21.7% or $1.3 million in Q3 2018,
compared to 42.9% or $3.4 million in the third quarter 2017.
Total operating expenses for the third quarter of 2018 were
approximately $9.3 million, an increase of 39.6%, including $1.4
million of restructuring charges, approximately $0.2 million of
earned vacation payouts from position eliminations, and $0.9
million of merger and acquisition costs related to the NovellusDx
transaction, as compared to $6.6 million during the third quarter
of 2017.
Net loss was $8.5 million or $0.31 per share for the third
quarter of 2018, compared to a net loss of $0.6 million or $0.15
per share for the third quarter of 2017.
Unrestricted cash and cash equivalents as of September 30, 2018
totaled $1.2 million, compared to $9.5 million as of December 31,
2017.
NINE MONTHS 2018 FINANCIAL RESULTS
For the first nine months of 2018 revenues were $20.6 million as
compared to $21.6 million for the first nine months of 2017, a 4.4%
decrease. The Company reported a gross margin in the nine months
ended September 30, 2018 of 29.3% compared to 40.6% in the same
period last year, a decrease of 11.3 percentage points. Total
operating expenses increased $6.4 million or 35.7% to $24.2 million
for the nine months ended September 30, 2018 primarily due to
incremental expenses of $2.5 million associated with the
acquisition of vivoPharm, restructuring charges of $2.1 million
connected with the closing of the California location and $0.9
million of merger & acquisition expenses related to the
evaluation of strategic options. Net loss was $16.6 million or
$0.61 per share for the nine month period of 2018, compared to a
net loss of $13.0 million or $0.65 per share for the corresponding
period of 2017.
ABOUT CANCER GENETICS
Cancer Genetics, Inc. is a leader in enabling precision medicine
in oncology through the use of biomarkers and molecular testing.
CGI is developing a global footprint with locations in the US,
Australia and China. We have established strong clinical research
collaborations with major cancer centers such as Memorial Sloan
Kettering, The Cleveland Clinic, Mayo Clinic, Keck School of
Medicine at USC and the National Cancer Institute.
The Company offers a comprehensive range of laboratory services
that provide critical genomic and biomarker information. Its
state-of-the-art reference labs are CLIA-certified and
CAP-accredited in the US and have licensure from several states
including New York State.
For more information, please visit or follow CGI
at:
Internet: www.cancergenetics.com
Twitter: @Cancer_Genetics
Facebook: www.facebook.com/CancerGenetics
Important Information and Where to Find
It
In connection with the proposed transaction
pursuant to the terms of the Agreement and Plan of Merger and
Reorganization, dated as of September 18, 2018, by and among Cancer
Genetics, Inc., Wogolos, Ltd. and NovellusDx, Ltd., Cancer Genetics
intends to file relevant materials with the Securities and Exchange
Commission, or the SEC, including a registration statement that
will contain a proxy statement and prospectus. Investors and
stockholders will be able to obtain free copies of the proxy
statement, prospectus and other documents filed by Cancer Genetics
with the SEC (when they become available) through the website
maintained by the SEC at www.sec.gov. In addition, Cancer Genetics
and NovellusDx investors and stockholders will be able to obtain
free copies of the proxy statement, prospectus and other
documents filed by Cancer Genetics with the SEC by contacting
Cancer Genetics, Inc., 201 Route 17 North, 2nd Floor, Rutherford,
New Jersey 07070, Attention: Corporate Secretary or through the
website maintained by the SEC at www.sec.gov. Investors and
stockholders are urged to read the proxy statement, prospectus and
the other relevant materials when they become available before
making any voting or investment decision with respect to the
business combination between Cancer Genetics, Inc. and NovellusDx
because they will contain important information.
Participants in the
Solicitation
Cancer Genetics and NovellusDx, and their
respective directors and executive officers and certain of their
other members of management and employees, may be deemed to be
participants in the solicitation of proxies in connection with the
transaction between Cancer Genetics and NovellusDx. Information
about Cancer Genetics’ directors and executive officers is included
in Cancer Genetics’ Annual Report on Form 10-K for the year ended
December 31, 2017, filed with the SEC on April 2, 2018, and the
Form 10-K/A filed with the SEC on April 30, Additional information
regarding these persons and their interests in the proposed
transaction will be included in the proxy statement and prospectus
relating to the proposed transaction when it is filed with the SEC.
These documents can be obtained free of charge from the sources
indicated above.
This communication does not constitute an offer
to buy or sell or the solicitation of an offer to buy or sell any
securities or a solicitation of any vote or approval.
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 Cancer Genetics
Inc.’s expectations regarding future financial and/or operating
results and potential for our tests and services, and future
revenues or growth in this press release 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 discontinuance of trials,
risks that anticipated benefits from consolidation efforts and/or
acquisitions will not be realized, uncertainty in the results of
clinical trials or regulatory approvals, need and ability to obtain
future capital, uncertainties with respect to evaluating strategic
options, maintenance of intellectual property rights and other
risks discussed in the Cancer Genetics, Inc. Form 10-K for the year
ended December 31, 2017 and Form 10-Q for the quarter ended
September 30, 2018, 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 The Ruth GroupTel: 646-536-7012 Email:
lroth@theruthgroup.com
Media:Kirsten ThomasThe Ruth GroupTel:
508-280-6592Email: kthomas@theruthgroup.com
|
Cancer Genetics, Inc. and
Subsidiaries |
|
Consolidated Balance Sheets
(Unaudited) |
(in thousands, except par value) |
|
|
September 30,2018 |
|
December 31,2017 |
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
1,206 |
|
|
$ |
9,541 |
|
Accounts
receivable, net of allowance for doubtful accounts of 2018 $7,967;
2017 $6,539 |
8,981 |
|
|
10,958 |
|
Other
current assets |
2,928 |
|
|
2,707 |
|
Total
current assets |
13,115 |
|
|
23,206 |
|
FIXED ASSETS, net of
accumulated depreciation |
4,499 |
|
|
5,550 |
|
OTHER ASSETS |
|
|
|
Restricted cash |
350 |
|
|
350 |
|
Patents
and other intangible assets, net of accumulated amortization |
4,121 |
|
|
4,478 |
|
Investment in joint venture |
242 |
|
|
246 |
|
Goodwill |
17,257 |
|
|
17,992 |
|
Other |
301 |
|
|
399 |
|
Total
other assets |
22,271 |
|
|
23,465 |
|
Total Assets |
$ |
39,885 |
|
|
$ |
52,221 |
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
CURRENT
LIABILITIES |
|
|
|
Accounts
payable and accrued expenses |
$ |
13,040 |
|
|
$ |
8,715 |
|
Obligations under capital leases, current portion |
324 |
|
|
272 |
|
Deferred
revenue |
2,409 |
|
|
516 |
|
Line of
credit |
2,764 |
|
|
4,137 |
|
Term
note |
6,000 |
|
|
6,000 |
|
Convertible note, net |
2,302 |
|
|
— |
|
Advance
from NovellusDx, Ltd. |
1,500 |
|
|
— |
|
Total
current liabilities |
28,339 |
|
|
19,640 |
|
Obligations under
capital leases |
451 |
|
|
624 |
|
Deferred rent payable
and other |
283 |
|
|
360 |
|
Warrant liability |
1,122 |
|
|
4,403 |
|
Deferred revenue,
long-term |
442 |
|
|
429 |
|
Total Liabilities |
30,637 |
|
|
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, 27,726
and 27,754 shares issued and outstanding at September 30, 2018 and
December 31, 2017, respectively |
3 |
|
|
3 |
|
Additional paid-in capital |
163,092 |
|
|
161,527 |
|
Accumulated other comprehensive income |
104 |
|
|
69 |
|
Accumulated (deficit) |
(153,951 |
) |
|
(134,834 |
) |
Total Stockholders’
Equity |
9,248 |
|
|
26,765 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
39,885 |
|
|
$ |
52,221 |
|
|
See Notes
to Unaudited Consolidated Financial Statements. |
Cancer Genetics, Inc. and
Subsidiaries |
Consolidated Statements of Operations and
Other Comprehensive Loss (Unaudited) |
(in thousands, except per share
amounts) |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenue |
$ |
5,940 |
|
|
$ |
8,028 |
|
|
$ |
20,643 |
|
|
$ |
21,598 |
|
Cost of
revenues |
4,654 |
|
|
4,588 |
|
|
14,589 |
|
|
12,831 |
|
Gross profit |
1,286 |
|
|
3,440 |
|
|
6,054 |
|
|
8,767 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Research
and development |
692 |
|
|
981 |
|
|
2,046 |
|
|
3,080 |
|
General
and administrative |
5,004 |
|
|
4,346 |
|
|
14,950 |
|
|
11,352 |
|
Sales and
marketing |
1,280 |
|
|
1,301 |
|
|
4,212 |
|
|
3,437 |
|
Restructuring costs |
1,418 |
|
|
— |
|
|
2,151 |
|
|
— |
|
Merger
costs |
890 |
|
|
— |
|
|
890 |
|
|
— |
|
Total operating expenses |
9,284 |
|
|
6,628 |
|
|
24,249 |
|
|
17,869 |
|
Loss from operations |
(7,998 |
) |
|
(3,188 |
) |
|
(18,195 |
) |
|
(9,102 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
Interest
expense |
(465 |
) |
|
(350 |
) |
|
(1,282 |
) |
|
(797 |
) |
Interest
income |
— |
|
|
10 |
|
|
21 |
|
|
37 |
|
Change in
fair value of acquisition note payable |
(13 |
) |
|
105 |
|
|
68 |
|
|
(114 |
) |
Change in
fair value of warrant liability |
12 |
|
|
2,790 |
|
|
2,858 |
|
|
(3,927 |
) |
Other
(expense) |
(55 |
) |
|
— |
|
|
(78 |
) |
|
(46 |
) |
Total other income (expense) |
(521 |
) |
|
2,555 |
|
|
1,587 |
|
|
(4,847 |
) |
Loss before income taxes |
(8,519 |
) |
|
(633 |
) |
|
(16,608 |
) |
|
(13,949 |
) |
Income tax
(benefit) |
— |
|
|
— |
|
|
— |
|
|
(970 |
) |
Net (loss) |
$ |
(8,519 |
) |
|
$ |
(633 |
) |
|
$ |
(16,608 |
) |
|
$ |
(12,979 |
) |
Basic net (loss) per
share |
$ |
(0.31 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.61 |
) |
|
$ |
(0.65 |
) |
Diluted net (loss) per
share |
$ |
(0.31 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.61 |
) |
|
$ |
(0.65 |
) |
Basic weighted-average
shares outstanding |
27,370 |
|
|
21,577 |
|
|
27,156 |
|
|
20,059 |
|
Diluted
weighted-average shares outstanding |
27,370 |
|
|
22,359 |
|
|
27,156 |
|
|
20,059 |
|
|
|
|
|
|
|
|
|
Net (loss) |
$ |
(8,519 |
) |
|
$ |
(633 |
) |
|
$ |
(16,608 |
) |
|
$ |
(12,979 |
) |
Foreign
currency translation gain (loss) |
(30 |
) |
|
(1 |
) |
|
35 |
|
|
(1 |
) |
Comprehensive
(loss) |
$ |
(8,549 |
) |
|
$ |
(634 |
) |
|
$ |
(16,573 |
) |
|
$ |
(12,980 |
) |
|
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