Response Genetics total revenue for second-quarter 2010 increases 197% to $5.6 million

Aug 7 2010

Response Genetics Inc. (Nasdaq:RGDX), a company focused on the development and sale of molecular diagnostic tests for cancer, today announced its consolidated financial results for the three and six months ended June 30, 2010.

"Molecular diagnostic testing has been integrated into routine clinical practice and drug development. Our continued growth last quarter was due to increased acceptance of our ResponseDX™ panels of tests, as well as further interest from the pharmaceutical industry in our services. With the rapid acceptance of our newly launched test, EML4-ALK, we believe continued expansion of our test panels and sales force will result in further growth," said Kathleen Danenberg, Response Genetics president and CEO.

Second Quarter Corporate Development Highlights

• Expanded Sales and Distribution - Sales of our ResponseDX™ genetic tests continue to show strong growth quarter over quarter. For the second quarter of 2010, total tests ordered increased by 21 percent to 2,449, compared to 2,023 for the first quarter of 2010.
• Launch of EML4-ALK Genetic Test in Lung Cancer - In June, 2010, the Company expanded its ResponseDX: Lung™ genetic test panel to detect the presence of EML4-ALK gene variants in lung cancer patients. By assessing mutations and expression levels across multiple genes, the ResponseDX: Lung™ genetic test panel may help physicians tailor treatment to their patients, potentially improving outcome to therapy for the more than 200,000 newly diagnosed lung cancer patients in the U.S. yearly.
• Key Appointments to Executive Management - In May 2010, the Company announced the appointment of David D. O'Toole as the Company's chief financial officer. Mr. O'Toole has more than 26 years of accounting, business and finance experience primarily focused on global companies and the life science and biotechnology industry. Mr. O'Toole was most recently chief financial officer at Abraxis Biosciences, Inc., a publicly traded biotechnology company.

In June 2010, the Company announced that it had appointed Michael B. McNulty as the Company's chief operating officer. In his role as COO, Mr. McNulty brings extensive experience in managing the scale-up of laboratory operations and testing services. Mr. McNulty will be responsible for the Company's operations, strategy and corporate development. Prior to joining the Company, Mr. McNulty was general manager, Diagnostics at Agilent Technologies, Inc., a premier measurement company and a technology leader in communications, electronics, life sciences and chemical analysis.

• Record revenue for the quarter from both our ResponseDX™ tests and our pharmaceutical clients - ResponseDX™ genetic tests revenue increased by 346 percent, excluding the favorable impact of a one-time adjustment, and our pharmaceutical revenue increased by 46 percent compared to the same period last year.
• Completed Conversion from Cash to Accrual for ResponseDX™ Recognition of Revenue from Third Party and Private Insurance Payors - Revenue from third party and private payors, (Private Payors) previously recognized on the cash basis, beginning with the second quarter of 2010 is now being recognized on the accrual basis, which makes it consistent with the method of recognizing revenue from Medicare. The change was accomplished this quarter as a pattern of collections was established for Private Payors, which allowed revenue to be accrued as of April 1, 2010. The change in the Company's revenue recognition policy resulted in a $1,499,655 one-time increase in revenue for the second quarter and the six months ended June 30, 2010, which represents the difference between the revenue that would have been recorded under the previous cash basis and the recently adopted accrual basis. (See attached reconciling tables).

Second Quarter 2010 Results

Total revenue increased by 197 percent to $5.6 million for the second quarter ended June 30, 2010, compared to $1.9 million for the same period last year. Excluding the net revenue increase of $1.5 million resulting from the conversion from cash to the accrual basis for Private Payor ResponseDX revenue, total revenue increased 118 percent to $4.1 million for the quarter ended June 30, 2010, compared to $1.9 million for the same period last year. The increase was primarily due to increase in ResponseDX revenues. Revenue from our ResponseDX genetic tests increased by 687 percent to $3.5 million for the second quarter, compared to $446 thousand for the same period in 2009. Excluding the net revenue impact of $1.5 million resulting from the conversion to accrual for Private Payors, revenue from our ResponseDX genetic tests increased by 346 percent to $2 million for the second quarter, compared to $446 thousand for the same period in 2009. Our pharmaceutical client revenue increased 46 percent to $2.1 million, compared to $1.5 million in the second quarter of 2009.

Cost of revenue for the second quarter ended June 30, 2010 was $2.5 million, compared with $1.5 million for the same period ended 2009. Research and development expenses were $0.4 million for the second quarter of 2010, compared with $0.4 million for the same period in the prior year. General and administrative expenses were $1.7 million for the second quarter, compared with $1.4 million for the same period in 2009. Total operating expenses for the second quarter were $6.1 million, compared with $4.3 million for the same period last year. The primary reasons for the increase in total operating expenses are costs related to the continued expansion of the sales force, legal expenses associated with the ongoing proxy activities and personnel recruiting costs.

Response Genetics' net loss for the second quarter ended June 30, 2010 was $0.4 million or a loss of $.02 per share, compared with a net loss of $2.4 million, or a loss of $0.19 per share, for the same period last year. Excluding the net revenue impact of $1.5 million resulting from the conversion from cash to the accrual basis for Private Payors, the net loss for the second quarter ended June 30, 2010 was $1.9 million or a loss of $.11 per share.

Six months ended June 30, 2010

Total revenue increased by 172 percent to $9.3 million for the six months ended June 30, 2010, compared to $3.4 million for the same period last year. Excluding the net revenue impact of $1.5 million resulting from the conversion from cash to the accrual basis for Private Payor ResponseDX revenue, total revenue increased 128 percent to $7.8 million for the six months ended June 30, 2010, compared to $3.4 million for the same period last year. The increase was primarily due to increase in ResponseDX revenues. Revenue from our ResponseDX genetic tests increased by 638 percent to $5.2 million for the six months, compared to $709 thousand for the same period in 2009. Excluding the net revenue impact of $1.5 million resulting from the conversion from cash to the accrual basis for Private Payor revenue, revenue from our ResponseDX genetic tests increased by 425 percent to $3.7 million for the six months, compared to $709 thousand for the same period in 2009. Our pharmaceutical client revenue increased 54 percent to $4.1 million, compared to $2.7 million in the six months of 2009.

Cost of revenue for the six months ended June 30, 2010 was $4.7 million, compared with $2.8 million for the same period in 2009. Research and development expenses were $1.0 million for the six months of 2010, compared with $1.0 million for the same period in the prior year. General and administrative expenses were $3.4 million for the six months of 2010, compared with $3.1 million for the same period in 2009. Total operating expenses for the six months of 2010 were $11.9 million, compared with $9.1 million for the same period last year. The primary reasons for the increase in total operating expenses were costs related to sales force expansion, increased legal fees associated with the ongoing proxy activities and personnel recruiting fees.

Response Genetics' net loss for the six months ended June 30, 2010 was $2.5 million or a loss of $0.15 per share, compared with a net loss of $5.6 million, or a loss of $0.49 per share, for the same period last year. Excluding the net revenue impact of $1.5 million resulting from the conversion to accrual for Private Payors, the net loss for the six months ended June 30, 2010 was $4.0 million or a loss of $.22 per share.

Cash and Cash Equivalents

Cash and cash equivalents at June 30, 2010, were $6.6 million, compared to $7.1 million at December 31, 2009.

SOURCE Response Genetics, Inc.