Cancer Genetics, Inc. (the “Company”) (Nasdaq: CGIX), a leader in
drug discovery and preclinical oncology and immuno-oncology
services, today announced financial and operating results for the
quarter ended March 31, 2020.
RECENT STRATEGIC AND OPERATIONAL HIGHLIGHTS
- Continued focus on cost reduction and cash preservation
initiatives.
- Increased attention on drug discovery and preclinical
services.
- Consistent revenue from Discovery Services in the comparable Q1
quarters of 2020 and 2019.
- Successful and efficient operation of Discovery Services in the
US, Europe, and Australia.
- Meaningful progress made with
evaluating potential strategic options including collaborations,
mergers or acquisitions, or other collaborative transactions.
Further announcements expected to be made later in 2020.
John A. Roberts, Chief Executive Officer of
Cancer Genetics stated, “In Q1 2020, our Discovery Services
business unit remained stable, and believe it will continue to
experience year-over-year revenue growth in 2020, consistent with
prior years. Our operating costs associated with the disposition of
certain business assets in 2019 and the related financial statement
audit for 2019 were greater than expected in Q1 2020. While we
anticipate that certain expenses related to these events will
continue in Q2 2020, given the one-time occurrence of these
transactions, we expect operating costs to be significantly reduced
in the second half of 2020.”
“Efforts have accelerated to identify strategic
and collaboration partners so that we can execute our plans to
further enhance value for our shareholders. We intend to transform
the business significantly by continuing to improve our balance
sheet and refocusing the business on precision and translational
medicine. We feel these actions will move our business into the
emerging area of drug discovery and novel therapies. As previously
reported, various strategic options are being evaluated. We are
pleased to report that our vivoPharm business continues to operate
efficiently, allowing us to take a thoughtful and methodical
approach in regards to a future transaction,” Mr. Roberts
stated.
“In summary, the Company’s management and Board
of Directors are committed to evaluating all potential strategic
opportunities and to pursuing the path most likely to create both
near and longer-term value for Cancer Genetics’ shareholders. We
look forward to keeping shareholders apprised of our progress,” Mr.
Roberts concluded.
The Company filed its quarterly report for Q1
2020 on Form 10-Q today with the Securities and Exchange
Commission.
FIRST QUARTER 2020 FINANCIAL RESULTS
The Company reported total revenue from
continuing operations of $1.4 million for the first quarter of 2020
compared to revenue of $1.8 million in the first quarter of 2019
(which included $0.3 million from an IP license arrangement
unrelated to the Discovery Services business unit), a decrease of
approximately $0.4 million or 21.7%.
Gross profit decreased to $0.6 million or 42.9%
in the first quarter of 2020, compared to $0.8 million or 45.0% in
the first quarter of 2019. While the overall gross margin decreased
by 2.1 percentage points primarily as a result of the high margin
revenue recorded from the IP license transaction, the Discovery
Services business unit gross margin increased from $0.5 million or
34.2% in the first quarter of 2019 to $0.6 million or 42.9% in the
first quarter of 2020 principally due to a reduction in outsourcing
costs offset by a slight seasonal effect on revenue. The remaining
costs are relatively consistent in the comparable periods for the
Discovery Services business unit.
Total operating expenses for the first quarter
of 2020 were approximately $1.9 million, a decrease of 4.7%
compared to $2.0 million during the first quarter of 2019. The
decrease in total operating expenses was partially due to decreased
corporate costs, partially offset by higher sales and marketing
spend in the Discovery Services business unit compared to the first
quarter of 2019.
Net loss from continuing operations was $1.2
million or $0.56 per share for the first quarter of 2020, compared
to a net loss of $1.7 million or $1.06 per share for the first
quarter of 2019.
Cash and cash equivalents totaled approximately
$3.9 million as of March 31, 2020, including restricted cash.
ABOUT CANCER GENETICS
Through its vivoPharm subsidiary, the Cancer
Genetics offers proprietary preclinical test systems supporting
clinical diagnostic offerings at early stages, valued by the
pharmaceutical industry, biotechnology companies and academic
research centers. The Company is focused on precision and
translational medicine to drive drug discovery and novel therapies.
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. vivoPharm operates in
The Association for Assessment and Accreditation of Laboratory
Animal Care International (AAALAC) accredited and GLP compliant
audited facilities. For more information, please visit
www.cancergenetics.com.
For more information, please visit or follow CGI
at:
Internet: www.cancergenetics.com
Twitter: @Cancer_Genetics
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 services, future revenues or growth,
or the potential for future strategic transactions 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 our
attempts to adapt to the global coronavirus pandemic, achieve
profitability and increase sales of our pre-clinical services,
maintain our existing customer base and avoid cancellation of
customer contracts or discontinuance of trials, raise capital to
meet our liquidity needs, properly evaluate strategic options, and
other risks discussed in the Cancer Genetics, Inc. Form 10-K for
the year ended December 31, 2019 and Form 10-Q for the quarter
ended March 31, 2020, 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: Jennifer K. Zimmons.
Ph.D.Investor RelationsZimmons International Communications,
Inc.Email: jzimmons@zimmonsic.comPhone: +1.917.214.3514
Cancer Genetics, Inc. and
SubsidiariesCondensed Consolidated Balance Sheets
(Unaudited)(in thousands, except par
value)
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,593 |
|
|
$ |
3,880 |
|
Restricted cash |
|
|
350 |
|
|
|
350 |
|
Accounts receivable |
|
|
848 |
|
|
|
696 |
|
Earn-Out from siParadigm, current portion |
|
|
772 |
|
|
|
747 |
|
Excess Consideration Note |
|
|
888 |
|
|
|
888 |
|
Other current assets |
|
|
415 |
|
|
|
546 |
|
Current assets of discontinuing operations |
|
|
— |
|
|
|
71 |
|
Total current assets |
|
|
6,866 |
|
|
|
7,178 |
|
FIXED ASSETS, net of
accumulated depreciation |
|
|
506 |
|
|
|
558 |
|
OTHER ASSETS |
|
|
|
|
|
|
|
|
Operating lease right-of-use assets |
|
|
76 |
|
|
|
94 |
|
Earn-Out from siParadigm, less current portion |
|
|
201 |
|
|
|
356 |
|
Patents and other intangible assets, net of accumulated
amortization |
|
|
2,816 |
|
|
|
2,895 |
|
Investment in joint venture |
|
|
92 |
|
|
|
92 |
|
Goodwill |
|
|
3,090 |
|
|
|
3,090 |
|
Other |
|
|
635 |
|
|
|
641 |
|
Total other assets |
|
|
6,910 |
|
|
|
7,168 |
|
Total Assets |
|
$ |
14,282 |
|
|
$ |
14,904 |
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
2,146 |
|
|
$ |
2,072 |
|
Obligations under operating leases, current portion |
|
|
153 |
|
|
|
193 |
|
Obligations under finance leases, current portion |
|
|
66 |
|
|
|
68 |
|
Deferred revenue |
|
|
1,118 |
|
|
|
1,217 |
|
Note payable, net |
|
|
1,313 |
|
|
|
1,277 |
|
Advance from NovellusDx, Ltd., net |
|
|
200 |
|
|
|
350 |
|
Advance from siParadigm, current portion |
|
|
573 |
|
|
|
566 |
|
Due to Interpace Biosciences, Inc. |
|
|
1,200 |
|
|
|
— |
|
Current liabilities of discontinuing operations |
|
|
861 |
|
|
|
1,229 |
|
Total current liabilities |
|
|
7,630 |
|
|
|
6,972 |
|
Obligations under operating
leases, less current portion |
|
|
21 |
|
|
|
10 |
|
Obligation under finance
leases, less current portion |
|
|
81 |
|
|
|
107 |
|
Advance from siParadigm, less
current portion |
|
|
119 |
|
|
|
252 |
|
Warrant liability |
|
|
51 |
|
|
|
178 |
|
Total
Liabilities |
|
|
7,902 |
|
|
|
7,519 |
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Preferred stock, authorized 9,764 shares, $0.0001 par value, none
issued |
|
|
— |
|
|
|
— |
|
Common stock, authorized 100,000 shares, $0.0001 par value, 2,107
and 2,104 shares issued and outstanding at March 31, 2020 and
December 31, 2019, respectively |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
171,853 |
|
|
|
171,783 |
|
Accumulated other comprehensive income |
|
|
130 |
|
|
|
26 |
|
Accumulated deficit |
|
|
(165,603 |
) |
|
|
(164,424 |
) |
Total Stockholders’
Equity |
|
|
6,380 |
|
|
|
7,385 |
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
14,282 |
|
|
$ |
14,904 |
|
See Notes to Unaudited Condensed Consolidated
Financial Statements.
Cancer Genetics, Inc. and
SubsidiariesCondensed Consolidated Statements of
Operations and Other Comprehensive Income (Loss)
(Unaudited)(in thousands, except per share
amounts)
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Revenue |
|
$ |
1,426 |
|
|
$ |
1,822 |
|
Cost of
revenues |
|
|
814 |
|
|
|
1,002 |
|
Gross profit |
|
|
612 |
|
|
|
820 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
General and administrative |
|
|
1,533 |
|
|
|
1,782 |
|
Sales and marketing |
|
|
341 |
|
|
|
185 |
|
Total operating expenses |
|
|
1,874 |
|
|
|
1,967 |
|
Loss from operations |
|
|
(1,262 |
) |
|
|
(1,147 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense |
|
|
(78 |
) |
|
|
(615 |
) |
Interest income |
|
|
4 |
|
|
|
2 |
|
Change in fair value of acquisition note payable |
|
|
4 |
|
|
|
— |
|
Change in fair value of other derivatives |
|
|
— |
|
|
|
31 |
|
Change in fair value of warrant liability |
|
|
127 |
|
|
|
(7 |
) |
Change in fair value of siParadigm Earn-Out |
|
|
24 |
|
|
|
— |
|
Total other income (expense) |
|
|
81 |
|
|
|
(589 |
) |
Loss before income taxes |
|
|
(1,181 |
) |
|
|
(1,736 |
) |
Income tax expense |
|
|
6 |
|
|
|
— |
|
Loss from continuing operations |
|
|
(1,187 |
) |
|
|
(1,736 |
) |
Income (loss) from discontinuing operations |
|
|
8 |
|
|
|
(2,881 |
) |
Net loss |
|
|
(1,179 |
) |
|
|
(4,617 |
) |
Foreign currency translation
gain (loss) |
|
|
104 |
|
|
|
(76 |
) |
Comprehensive loss |
|
$ |
(1,075 |
) |
|
$ |
(4,693 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
share from continuing operations |
|
$ |
(0.56 |
) |
|
$ |
(1.06 |
) |
Basic and diluted net loss per
share from discontinuing operations |
|
|
— |
|
|
|
(1.77 |
) |
Basic and diluted net loss per
share |
|
$ |
(0.56 |
) |
|
$ |
(2.83 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted
weighted-average shares outstanding |
|
|
2,106 |
|
|
|
1,631 |
|
See Notes to Unaudited Condensed Consolidated
Financial Statements.
Cancer Genetics, Inc. and
SubsidiariesCondensed Consolidated Statements of
Changes in Stockholders’ Equity (Unaudited)(in
thousands)
|
|
Three Months Ended March 31, 2020 |
|
|
|
Common Stock |
|
|
Additional Paid-in |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income |
|
|
Deficit |
|
|
Total |
|
Balance,
January 1, 2020 |
|
|
2,104 |
|
|
$ |
— |
|
|
$ |
171,783 |
|
|
$ |
26 |
|
|
$ |
(164,424 |
) |
|
$ |
7,385 |
|
Stock based compensation—employees |
|
|
— |
|
|
|
— |
|
|
|
58 |
|
|
|
— |
|
|
|
— |
|
|
|
58 |
|
Issuance of common stock—VenturEast settlement |
|
|
3 |
|
|
|
— |
|
|
|
12 |
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
Unrealized gain on foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
104 |
|
|
|
— |
|
|
|
104 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,179 |
) |
|
|
(1,179 |
) |
Balance, March 31,
2020 |
|
|
2,107 |
|
|
$ |
— |
|
|
$ |
171,853 |
|
|
$ |
130 |
|
|
$ |
(165,603 |
) |
|
$ |
6,380 |
|
|
|
Three Months Ended March 31, 2019 |
|
|
|
Common Stock |
|
|
Additional Paid-in |
|
|
Accumulated Other Comprehensive |
|
|
Accumulated |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Deficit |
|
|
Total |
|
Balance,
January 1, 2019 |
|
|
924 |
|
|
$ |
— |
|
|
$ |
164,458 |
|
|
$ |
60 |
|
|
$ |
(157,716 |
) |
|
$ |
6,802 |
|
Stock based compensation—employees |
|
|
— |
|
|
|
— |
|
|
|
158 |
|
|
|
— |
|
|
|
— |
|
|
|
158 |
|
Issuance of common stock - 2019 Offerings, net |
|
|
952 |
|
|
|
— |
|
|
|
5,412 |
|
|
|
— |
|
|
|
— |
|
|
|
5,412 |
|
Unrealized loss on foreign currency translation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(76 |
) |
|
|
— |
|
|
|
(76 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,617 |
) |
|
|
(4,617 |
) |
Balance, March 31,
2019 |
|
|
1,876 |
|
|
$ |
— |
|
|
$ |
170,028 |
|
|
$ |
(16 |
) |
|
$ |
(162,333 |
) |
|
$ |
7,679 |
|
See Notes to Unaudited Condensed Consolidated
Financial Statements.
Cancer Genetics, Inc. and
SubsidiariesCondensed Consolidated Statements of
Cash Flows (Unaudited)(in thousands)
|
|
Three Months Ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
CASH FLOWS FROM OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,179 |
) |
|
$ |
(4,617 |
) |
Loss (income) from discontinuing operations |
|
|
(8 |
) |
|
|
2,881 |
|
Net loss from continuing operations |
|
|
(1,187 |
) |
|
|
(1,736 |
) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating
activities, continuing operations: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
52 |
|
|
|
14 |
|
Amortization |
|
|
79 |
|
|
|
82 |
|
Stock-based compensation |
|
|
58 |
|
|
|
119 |
|
Change in fair value of warrant liability, acquisition note payable
and other derivatives |
|
|
(131 |
) |
|
|
(24 |
) |
Amortization of operating lease right-of-use assets |
|
|
10 |
|
|
|
49 |
|
Change in fair value of siParadigm Earn-Out |
|
|
(24 |
) |
|
|
— |
|
Amortization of discount on debt and debt issuance costs |
|
|
36 |
|
|
|
467 |
|
Interest added to Convertible Note |
|
|
— |
|
|
|
89 |
|
Changes in: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(183 |
) |
|
|
(103 |
) |
Other current assets |
|
|
110 |
|
|
|
77 |
|
Other non-current assets |
|
|
(4 |
) |
|
|
(1 |
) |
Accounts payable, accrued expenses and deferred revenue |
|
|
130 |
|
|
|
(109 |
) |
Due to Interpace Biosciences, Inc. |
|
|
1,200 |
|
|
|
— |
|
Obligations under operating leases |
|
|
(21 |
) |
|
|
(60 |
) |
Net cash provided by (used in) operating activities,
continuing operations |
|
|
125 |
|
|
|
(1,136 |
) |
Net cash used in operating activities, discontinuing
operations |
|
|
(289 |
) |
|
|
(3,328 |
) |
Net cash used in operating activities |
|
|
(164 |
) |
|
|
(4,464 |
) |
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
Purchase of fixed assets |
|
|
— |
|
|
|
(19 |
) |
Net cash provided by (used in) investing activities,
continuing operations |
|
|
— |
|
|
|
(19 |
) |
Net cash provided by (used in) investing activities,
discontinuing operations |
|
|
28 |
|
|
|
(13 |
) |
Net cash provided by (used in) investing
activities |
|
|
28 |
|
|
|
(32 |
) |
CASH FLOWS FROM FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
Principal payments on obligations under finance leases |
|
|
(13 |
) |
|
|
(10 |
) |
Proceeds from offerings of common stock, net of certain offering
costs |
|
|
— |
|
|
|
5,412 |
|
Payments on Advance from NovellusDx, Ltd. |
|
|
(150 |
) |
|
|
— |
|
Net cash provided by (used in) financing activities,
continuing operations |
|
|
(163 |
) |
|
|
5,402 |
|
Net cash used in financing activities, discontinuing
operations |
|
|
— |
|
|
|
(291 |
) |
Net cash provided by (used in) financing
activities |
|
|
(163 |
) |
|
|
5,111 |
|
Effect of foreign exchange rates on cash and cash equivalents and
restricted cash |
|
|
12 |
|
|
|
(79 |
) |
Net increase (decrease) in cash and cash equivalents and
restricted cash |
|
|
(287 |
) |
|
|
536 |
|
CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH |
|
|
|
|
|
|
|
|
Beginning |
|
|
4,230 |
|
|
|
511 |
|
Ending |
|
$ |
3,943 |
|
|
$ |
1,047 |
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CASH AND
CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE
SHEETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,593 |
|
|
$ |
697 |
|
Restricted cash |
|
|
350 |
|
|
|
350 |
|
CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH |
|
$ |
3,943 |
|
|
$ |
1,047 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
DISCLOSURE |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
7 |
|
|
$ |
304 |
|
SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Common stock issued in VentureEast settlement |
|
$ |
12 |
|
|
$ |
— |
|
See Notes to Unaudited Condensed Consolidated
Financial Statements.
Cancer Genetics (NASDAQ:CGIX)
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