Cancer Genetics Reports Third Quarter 2019 Financial Results and Provides Strategic Business Update
November 20 2019 - 8:00AM
Cancer Genetics, Inc. (Nasdaq: CGIX), a leader in drug discovery
and preclinical oncology and immuno-oncology services, today
announced strategic, financial and operating results for the third
quarter ended September 30, 2019.
RECENT STRATEGIC AND OPERATIONAL HIGHLIGHTS
- Delivered on cost reduction
initiatives and consolidated operational focus on drug discovery
and preclinical services
- Increased Discovery Services revenue in Q3 2019 to $2.1
million, an increase of $0.5 million, or 35% growth in Q3 2019
sequentially over Q2 2019
- Gross margin on Discovery Services was 53.2%, consistent with
Q2 2019 results
- Completed divestiture of two operating units for cash, notes
and future payment streams; received a combined approximately $9.1
million in cash from such transactions in Q3 and October 2019
- Retained HC Wainwright & Co. to explore strategic
alternatives for future merger, sale of other assets, or other
strategic transactions
We continue to make progress to improve the
Company’s financial profile with the reduction of over $15 million
of total liabilities in the nine month period ended September 30,
2019. We received over $9.1 million in cash, including
approximately $0.8 million from siParadigm in Q3 and $8.3 million
from Interpace Diagnostics Group ($2.3 million in Q3 and $6.0
million in October 2019), the recently announced M&A
transactions. We also repaid approximately $9 million in senior
secured debt and paid down approximately $2.6 on two unsecured
notes payable in October, further reducing our debt and we expect
to further reduce our debt throughout Q4 2019, giving the Company
time to explore a variety of new strategic alternatives,” said John
A. Roberts, Chief Executive Officer of Cancer Genetics.
Additionally, Mr. Roberts stated “our Discovery
Services business is self-sustaining, thereby eliminating any
further operating cash burn, and we are now focused on collecting
cash that is due to the Company, substantially reducing our
accounts payable with our unsecured creditors, focusing on the
operational elements of our Discovery Services business, and
continuing to explore strategic alternatives, which could include
the sale of other assets, a merger or other strategic transactions.
With these asset sales now completed, we believe the Company is in
a good position to explore further strategic initiatives as well as
to grow the remaining Discovery Services business”.
THIRD QUARTER 2019 FINANCIAL RESULTS
As described in the Company’s quarterly report
for Q3 2019 on Form 10-Q, the Company presented its financial
results for its historic BioPharma and Clinical services as
discontinued operations, as the result of the two July 2019
divestiture transactions. Going forward, the Company currently has
an extensive set of anti-tumor referenced data based on predictive
xenograft and syngeneic tumor models from the acquisition of
vivoPharm, Pty Ltd. (“vivoPharm”) in 2017, to provide Discovery
Services such as contract research services, focused primarily on
unique specialized studies to guide drug discovery and development
programs in the oncology and immuno-oncology fields. The Company
reported total Discovery Services revenue of $2.1 million for the
third quarter of 2019 compared to revenue of $0.5 million in the
third quarter of 2018, partially the result of recording out of
measurement period adjustments to deferred revenue in the Q3 2018
period associated with the vivoPharm acquisition and the
corresponding 2018 impact of the adoption of ASC 606.
Gross profit margin from continuing operations
was 53.2% or $1.1 million in the third quarter of 2019, compared to
-28% or ($0.2) million in the third quarter of 2018. Total
operating expenses from continuing operations for the third quarter
of 2019 were approximately $4.8 million, compared to $3.1 million
in the third quarter of 2018. The increase is the result of
recording non-cash, non-recurring charges to goodwill of $2.9
million and merger related costs of $0.3 million. Net loss from
continuing operations was $3.7 million in the third quarter of 2019
compared to a net loss of $3.3 million in the same period of 2018,
and the comprehensive net income was $1.9 million or $0.98 per
share for the third quarter of 2019, compared to a comprehensive
net loss of $8.5 million or $9.34 per share for the third quarter
of 2018.
Cash and cash equivalents as of September 30,
2019 totaled $2.1 million, compared to $0.2 million as of December
31, 2018, an increase of approximately $2 million.
About Cancer Genetics, Inc.
Through the acquisition of vivoPharm, the
Company offers proprietary preclinical test systems supporting
clinical diagnostic offerings at early stages, valued by the
pharmaceutical industry, biotechnology companies and academic
research centers. vivoPharm specializes in conducting studies
tailored to guide drug development, starting from compound
libraries and ending with a comprehensive set of in vitro and in
vivo data and reports, as needed for Investigational New Drug
filings. The Company recorded revenue from its Discovery Services
business from continuing operations of $4.9 million for the full
year 2018 and $5.4 million in the nine month period ended September
30, 2019.
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, 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 with respect to
our ability to collect on future income or payment streams and
settle with our creditors, risks with respect to our ability to
successfully operate the Discovery Services business, risks with
respect to our ability to obtain future capital to satisfy our
obligations to our lenders and creditors, regulatory risks, risks
of cancellation of customer contracts or discontinuance of trials,
uncertainties with respect to evaluating strategic options,
maintenance of intellectual property rights, risks with respect to
maintaining our listing on Nasdaq, and other risks discussed in the
Cancer Genetics, Inc. Form 10-K for the year ended December 31,
2018 and Form 10-Q for the quarter ended September 30, 2019, 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: John A. Roberts Email:
jay.roberts@cgix.com
Cancer Genetics, Inc. and
SubsidiariesConsolidated Balance Sheets
(Unaudited)(in thousands, except par
value)
|
|
September 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,147 |
|
|
$ |
161 |
|
Accounts receivable |
|
|
813 |
|
|
|
777 |
|
Earn-Out from siParadigm, current portion |
|
|
693 |
|
|
|
- |
|
Note receivable from IDXG |
|
|
6,795 |
|
|
|
- |
|
Other current assets |
|
|
1,030 |
|
|
|
553 |
|
Current assets of discontinuing operations |
|
|
1,125 |
|
|
|
23,421 |
|
Total current assets |
|
|
12,603 |
|
|
|
24,912 |
|
FIXED ASSETS, net of
accumulated depreciation |
|
|
671 |
|
|
|
497 |
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
Operating lease right-of-use assets |
|
|
115 |
|
|
|
- |
|
Restricted cash |
|
|
350 |
|
|
|
350 |
|
Earn-Out from siParadigm, less current portion |
|
|
594 |
|
|
|
- |
|
Patents and other intangible assets, net of accumulated
amortization |
|
|
3,021 |
|
|
|
3,349 |
|
Investment in joint venture |
|
|
92 |
|
|
|
92 |
|
Goodwill |
|
|
3,090 |
|
|
|
5,963 |
|
Other |
|
|
300 |
|
|
|
243 |
|
Total other assets |
|
|
7,562 |
|
|
|
9,997 |
|
Total Assets |
|
$ |
20,836 |
|
|
$ |
35,406 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
3,330 |
|
|
|
3,100 |
|
Obligations under operating leases, current portion |
|
|
207 |
|
|
|
- |
|
Obligations under finance leases, current portion |
|
|
60 |
|
|
|
20 |
|
Deferred revenue |
|
|
1,607 |
|
|
|
1,215 |
|
Convertible note, net |
|
|
2,273 |
|
|
|
2,481 |
|
Advance from NovellusDx, Ltd., net |
|
|
1,500 |
|
|
|
535 |
|
Advance from siParadigm, current portion |
|
|
469 |
|
|
|
- |
|
Other derivatives |
|
|
- |
|
|
|
86 |
|
Current liabilities of discontinuing operations |
|
|
3,229 |
|
|
|
20,742 |
|
Total current liabilities |
|
|
12,675 |
|
|
|
28,179 |
|
Obligations under operating
leases, less current portion |
|
|
29 |
|
|
|
- |
|
Obligations under finance
leases, less current portion |
|
|
148 |
|
|
|
23 |
|
Advance from siParadigm, less
current portion |
|
|
505 |
|
|
|
- |
|
Deferred rent payable and
other |
|
|
- |
|
|
|
154 |
|
Warrant liability |
|
|
15 |
|
|
|
248 |
|
Total Liabilities |
|
|
13,372 |
|
|
|
28,604 |
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Preferred stock, authorized 9,764 shares, $0.0001 par value, none
issued |
|
|
- |
|
|
|
- |
|
Common stock, authorized 100,000 shares, $0.0001 par value, 2,101
and 924 shares issued and outstanding at September 30, 2019 and
December 31, 2018, respectively |
|
|
- |
|
|
|
- |
|
Additional paid-in capital |
|
|
171,696 |
|
|
|
164,458 |
|
Accumulated other comprehensive income (loss) |
|
|
(101 |
) |
|
|
60 |
|
Accumulated deficit |
|
|
(164,131 |
) |
|
|
(157,716 |
) |
Total Stockholders’
Equity |
|
|
7,464 |
|
|
|
6,802 |
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
20,836 |
|
|
$ |
35,406 |
|
Cancer Genetics, Inc. and
SubsidiariesCondensed Consolidated Statements of
Operations and Other Comprehensive Loss
(Unaudited)(in thousands, except per share
amounts)
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Revenue |
|
$ |
2,069 |
|
|
$ |
535 |
|
|
$ |
5,416 |
|
|
$ |
3,243 |
|
Cost of
revenues |
|
|
960 |
|
|
|
685 |
|
|
|
2,631 |
|
|
|
2,145 |
|
Gross profit (loss) |
|
|
1,109 |
|
|
|
(150 |
) |
|
|
2,785 |
|
|
|
1,098 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
1,290 |
|
|
|
1,939 |
|
|
|
4,463 |
|
|
|
5,236 |
|
Sales and marketing |
|
|
322 |
|
|
|
320 |
|
|
|
825 |
|
|
|
900 |
|
Impairment of goodwill |
|
|
2,873 |
|
|
|
- |
|
|
|
2,873 |
|
|
|
- |
|
Merger costs |
|
|
284 |
|
|
|
890 |
|
|
|
284 |
|
|
|
890 |
|
Total operating expenses |
|
|
4,769 |
|
|
|
3,149 |
|
|
|
8,445 |
|
|
|
7,026 |
|
Loss from continuing operations |
|
|
(3,660 |
) |
|
|
(3,299 |
) |
|
|
(5,660 |
) |
|
|
(5,928 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(200 |
) |
|
|
(82 |
) |
|
|
(1,327 |
) |
|
|
(87 |
) |
Interest income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
21 |
|
Change in fair value of acquisition note payable |
|
|
5 |
|
|
|
(13 |
) |
|
|
12 |
|
|
|
68 |
|
Change in fair value of other derivatives |
|
|
- |
|
|
|
- |
|
|
|
86 |
|
|
|
- |
|
Change in fair value of warrant liability |
|
|
34 |
|
|
|
12 |
|
|
|
233 |
|
|
|
2,858 |
|
Change in fair value of siParadigm Earn-Out |
|
|
(982 |
) |
|
|
- |
|
|
|
(982 |
) |
|
|
- |
|
Other expense |
|
|
- |
|
|
|
(55 |
) |
|
|
(11 |
) |
|
|
(78 |
) |
Total other income (expense) |
|
|
(1,143 |
) |
|
|
(138 |
) |
|
|
(1,989 |
) |
|
|
2,782 |
|
Loss before income taxes |
|
|
(4,803 |
) |
|
|
(3,437 |
) |
|
|
(7,649 |
) |
|
|
(3,146 |
) |
Income tax benefit |
|
|
- |
|
|
|
- |
|
|
|
(512 |
) |
|
|
- |
|
Loss from continuing operations |
|
|
(4,803 |
) |
|
|
(3,437 |
) |
|
|
(7,137 |
) |
|
|
(3,146 |
) |
Income (loss) from discontinuing operations (including gain
on disposal of businesses of $8,496 during the three and nine
months ended September 30, 2019) |
|
|
6,778 |
|
|
|
(5,082 |
) |
|
|
722 |
|
|
|
(13,462 |
) |
Net income (loss) |
|
|
1,975 |
|
|
|
(8,519 |
) |
|
|
(6,415 |
) |
|
|
(16,608 |
) |
Foreign currency translation
gain (loss) |
|
|
(120 |
) |
|
|
(30 |
) |
|
|
(161 |
) |
|
|
35 |
|
Comprehensive income (loss) |
|
$ |
1,855 |
|
|
$ |
(8,549 |
) |
|
$ |
(6,576 |
) |
|
$ |
(16,573 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
share from continuing operations |
|
$ |
(2.38 |
) |
|
$ |
(3.77 |
) |
|
$ |
(3.86 |
) |
|
$ |
(3.48 |
) |
Basic and diluted net income
(loss) per share from discontinuing operations |
|
|
3.36 |
|
|
|
(5.57 |
) |
|
|
0.39 |
|
|
|
(14.87 |
) |
Basic and diluted net income
(loss) per share |
|
$ |
0.98 |
|
|
$ |
(9.34 |
) |
|
$ |
(3.47 |
) |
|
$ |
(18.35 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
weighted-average shares outstanding |
|
|
2,014 |
|
|
|
912 |
|
|
|
1,850 |
|
|
|
905 |
|
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