LOS ANGELES, Aug. 14 /PRNewswire-FirstCall/ -- Response Genetics, Inc. , today reported financial results for the second quarter ended June 30, 2007.
"The second quarter of 2007 was very exciting for Response Genetics, beginning with our successful initial public offering in June," said Kathleen Danenberg, President and CEO of Response Genetics. "We are very pleased by the recent developments that have since been announced. During the quarter these developments include our collaborations with Hitachi Chemical and the University of California, San Francisco, and the publication of clinical data in the Journal of Clinical Oncology that support the use of diagnostic screening for lung cancer patients. We believe these developments further validate our business strategy of using genetic information to develop diagnostic tests which will help physicians tailor treatment to the individual patient."
Financial Results for Three Months Ended June 30, 2007
Total revenue increased to $1.5 million in the second quarter of 2007 compared to $738,150 in the second quarter of 2006. This increase was primarily due to the introduction of new testing services being offered by Response Genetics to its pharmaceutical clients, and the Company's existing pharmaceutical contracts related to pharmacogenomic testing services.
Cost of revenue for the second quarter of 2007 was $1.2 million, compared with $584,230 for the second quarter of 2006. Research and development expenses were $916,793 for the second quarter of 2007, compared with $269,247 for the same period in the prior year. General and administrative expenses of $1.9 million for the second quarter of 2007 increased from $659,246 for the second quarter of the prior year. The increases in cost of revenue, research and development, and general and administrative expenses were primarily due to 1) stock option grants to employees at the time of the Company's initial public offering totaling $1.0 million, 2) Operating costs related to the set- up and continuing operation of the European laboratory totaling $570,000, and 3) costs associated with an hiring personnel to support the company's growth, costs involving the new testing services the Company is offering, maintaining the Company's patent position, and costs related the completion of the Company's IPO and costs associated with being a public company totaling $880,000. Total operating expenses for the second quarter of 2007 increased to $4.0 million, compared with $1.5 million for the same period last year.
Response Genetics' net loss for the second quarter of 2007 of $2.5 million, or $0.58 per share, compared with $746,962, or $0.36 per share, for the second quarter of 2006.
Financial Results for Six Months Ended June 30, 2007
Revenues for the first six months of 2007 increased to $3.1 million, compared with $2.0 million for the first six months of 2006. Cost of revenue for the first six months of 2007 was $2.0 million, compared with $978,130 reported for the first six months of 2006. General and administrative expenses for the first six months of the year were $3.2 million, compared to $1.6 million for the comparable period in 2006. Research and development expenses in the first half of 2007 totaled $1.2 million, compared to $595,702 for the comparable period in 2006. Total operating expenses for the first six months of 2007 were $6.4 million, versus $3.2 million for the comparable period in 2006. Response Genetics reported a net loss for the six months ended June 30, 2007 of $3.2 million, or $1.00 per share, versus a net loss for the comparable period in 2006 of $920,552, or $0.51 per share.
Cash and Cash Equivalents
Cash and cash equivalents at June 30, 2007 were $19.4 million compared to $4.9 million at December 31, 2006. On June 8, Response Genetics completed its initial public offering of 3,000,000 shares of its common stock at a price of $7.00 per share.
Corporate Highlights
Completion of Initial Public Offering
On June 5, Response Genetics announced its initial public offering of 3,000,000 shares of its common stock at a price of $7.00 per share. Shares of Response Genetics' stock began trading on the NASDAQ under the symbol "RGDX" that day. Maxim Group LLC acted as lead underwriter and representative of the underwriters of the offering, and Caris & Company acted as co-manager.
Opening of European Laboratory in Edinburgh, Scotland
On July 2, the Company announced the opening of its first European laboratory in Edinburgh, Scotland. This is the first in a series of strategically placed global laboratories that the Company plans to open to support the pharmaceutical industry's need for genetic analysis of their global clinical trial specimens. The Edinburgh laboratory is now open, fully equipped and able to analyze clinical trial specimens.
Data Publication in Journal of Clinical Oncology
On July 9, positive Phase III clinical data results were published in the July 1 issue of the Journal of Clinical Oncology, suggesting that low expression of the biomarker Excision-Repair Cross-Complementing 1 (ERCC-1) in patient biopsies with advanced non-small cell lung cancer (NSCLC) predicts for sensitivity to cisplatin-based chemotherapy. ERCC-1 is an enzyme involved in repair of DNA strand breaks such as those caused by cisplatin. The analysis of ERCC-1 levels in this study was conducted by Response Genetics using its RGI-1 technology.
This was the first prospective study using a biomarker to predict chemotherapy response in lung cancer. These findings support the use of measurement of ERCC-1 for individualizing therapies for lung cancer patients.
Collaboration Agreement with Hitachi Chemical
On July 30, Response Genetics secured a collaboration agreement with Hitachi Chemical Co., Ltd., a leading diagnostics manufacturer in Japan. Hitachi Chemical will begin using the Company's proprietary and patented techniques to extract genetic information from formalin-fixed paraffin- embedded (FFPE) tissue samples collected in Southeast Asia, Australia and New Zealand. As part of this collaboration agreement, Response Genetics will provide Hitachi Chemical with the technical information and assistance necessary to perform the testing services, and the two Companies will divide the revenues. Financial terms of the deal were not disclosed.
Two-Year Research Study Collaboration with UCSF
On August 7, Response announced a two-year research study to develop a diagnostic test kit for pancreatic cancer. The study will combine patient outcomes data with genetic information that it extracts from archival formalin-fixed paraffin-embedded (FFPE) pancreatic tissue samples. The results could potentially lead to the development of assays and diagnostic tests for pancreatic cancer. The study will be conducted in collaboration with the University of California, San Francisco, which will provide the FFPE pancreatic tissue samples for evaluation.
About Response Genetics, Inc.
Response Genetics, Inc. ("RGI") is engaged in the research and development of pharmacogenomic cancer diagnostic tests based on its proprietary and patented technologies. RGI's technologies enable extraction and analysis of genetic information from genes derived from tumor samples stored as formalin-fixed and paraffin embedded specimens. RGI currently generates revenue primarily 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 http://www.responsegenetics.com/.
Forward Looking Statement Notice
Except for the historical information contained herein, this press release and the statements of representatives of Response Genetics, Inc. (the "Company") 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 analyze pancreatic cancer samples, the potential for using the results of this research to develop diagnostic tests for pancreatic cancer, the usefulness of genetic information to tailor treatment to patients, 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
As of As of
December June 30,
31, 2006 2007
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 4,930,123 $ 19,427,868
Accounts receivable 1,288,255 2,229,921
Prepaid expenses and other current
assets 837,238 612,265
Total current assets 7,055,616 22,270,054
Property and equipment, net 1,184,963 2,422,049
Other assets 19,102 19,852
Total assets $ 8,259,681 $ 24,711,955
LIABILITIES AND STOCKHOLDERS'
(DEFICIT) EQUITY
Current liabilities
Accounts payable $ 404,008 $ 981,361
Accrued expenses 547,119 2,190,404
Accrued royalties 123,852 86,487
Accrued payroll, bonus and related
liabilities 595,276 178,023
Deferred revenue 1,628,325 3,753,763
Total current liabilities 3,298,580 7,190,038
Notes payable to stockholders 716,854 -
Accrued interest on notes payable
to stockholders 329,036 -
Accrued dividends 6,097,579 -
Deferred revenue, net of current
portion 3,320,000 1,621,489
Total liabilities 13,762,049 8,811,527
Commitments and contingencies
Stockholders' equity (deficit)
Series B Convertible Preferred
Stock, $0.01 par value; 1,038,048
issued and outstanding (liquidation
preference of $9 per share, or
$9,342,432 plus accrued but unpaid
dividends) at December 31, 2006 10,380 -
Series A Junior Convertible
Preferred Stock, $0.01 par value;
500,000 issued and outstanding
(liquidation preference of $5 per
share, or $2,500,000) at December
31, 2006 5,000 -
Common stock, $0.01 par value;
20,000,000 and 50,000,000 shares
authorized; 2,726,320 and
10,239,256 shares issued and
outstanding 27,263 102,393
Additional paid-in capital 9,722,273 34,311,892
Accumulated deficit (15,267,284) (18,509,649)
Accumulated other comprehensive
income (loss) - (4,208)
Total stockholders' (deficit)
equity (5,502,368) 15,900,428
Total liabilities and stockholders'
(deficit) equity $ 8,259,681 $ 24,711,955
RESPONSE GENETICS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months
June 30, Ended June 30,
2006 2007 2006 2007
Revenue $ 738,150 $ 1,495,618 $ 2,007,125 $ 3,115,378
Operating expenses:
Cost of revenue 584,230 1,183,312 978,130 2,006,152
General and
administrative 659,246 1,924,816 1,577,385 3,187,882
Research and
development 269,247 916,793 595,702 1,237,215
Total operating
expenses 1,512,723 4,024,921 3,151,217 6,431,249
Operating income
(loss) (774,573) (2,529,303) (1,144,092) (3,315,871)
Other income
(expense):
Interest expense (14,954) (14,506) (29,878) (26,756)
Interest income 42,565 66,655 75,218 108,331
Other - - 179,000 -
Income (loss) before
income taxes (746,962) (2,477,154) (919,752) (3,234,296)
Provision for income
taxes - 7,269 800 8,069
Net income (loss) (746,962) (2,484,423) (920,552) (3,242,365)
Preferred stock
dividends 233,562 179,064 467,123 412,625
Net income (loss)
attributable to
common stockholders $(980,524) $(2,663,487) $(1,387,675)$ (3,654,990)
Net income (loss)
per share-basic $ (0.36) $ (0.58) $ (0.51) $ (1.00)
Net income (loss)
per share-diluted $ (0.36) $ (0.58) $ (0.51) $ (1.00)
Weighted-average
shares- basic 2,726,320 4,562,815 2,726,320 3,644,568
Weighted-average
shares-diluted 2,726,320 4,562,815 2,726,320 3,644,568
