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 and business progress for the second quarter ended June 30, 2011.
“And through innovation, both scientific and technical, we remain on track to meet our business objectives as we bring value to our shareholders.”
"With revenue in all of our sales channels increasing and net loss decreasing, Response Genetics continues to trend toward profitability," said Denise McNairn, Interim CEO of Response Genetics. "And through innovation, both scientific and technical, we remain on track to meet our business objectives as we bring value to our shareholders."
Second Quarter 2011 Financial Results
Total revenue increased by 18.8 percent to $6.7 million for the second quarter ended June 30, 2011, compared to $5.6 million for the same period last year. The increase was primarily due to increases in pharmaceutical service revenues of $1.6 million. Revenue from ResponseDX™ genetic tests decreased by 15 percent to $3.0 million for the second quarter, compared to $3.5 million for the same period in 2010. The decrease in ResponseDX™ revenue was artificially caused by the one-time revenue adjustment of $1.5 million recorded in the second quarter of 2010 for the adoption of the accrual basis of accounting. Pharmaceutical client revenue increased 74.4 percent to $3.7 million, compared to $2.1 million in the second quarter of 2010.
Cost of revenue was $2.8 million for the second quarter ended June 30, 2011, compared with $2.5 million for the same period in 2010. Research and development expenses were $0.2 million for the second quarter of 2011, compared with $0.4 million for the same period in 2010. General and administrative expenses were $2.3 million for the second quarter, compared with $1.7 million for the same period in 2010. Selling and marketing expenses were $1.4 million for the second quarter of 2011, compared with $1.4 million for the same period in 2010. Total operating expenses for the second quarter were $6.8 million, compared with $6.1 million for the same period last year. The primary reasons for the increase in total operating expenses are costs related to an increase in personnel, consulting, bad debt, and billing service expenses. Stock compensation expense was $0.3 million for the second quarter of 2011, compared to $0.1 million for the same period in 2010.
Response Genetics' net loss for the second quarter ended June 30, 2011 was $87,344, or a loss of $0.00 per share, compared with a net loss of $425,038, or a loss of $0.02 per share, for the same period last year.
Six Months Ended June 30, 2011
Total revenue increased by 35.2 percent to $12.6 million for the six months ended June 30, 2011, compared to $9.3 million for the same period last year. Revenue from our ResponseDX™ genetic tests increased by 16.3 percent to $6.0 million for the six months, compared to $5.2 million for the same period in 2010. Our pharmaceutical client revenue increased 59.3 percent to $6.5 million, compared to $4.1 million in the six months of 2010.
Cost of revenue for the six months ended June 30, 2011 was $5.5 million, compared with $4.7 million for the same period in 2010. Research and development expenses were $0.4 million for the six months of 2011, compared with $1.0 million for the same period in the prior year. General and administrative expenses were $4.2 million for the six months of 2011, compared with $3.5 million for the same period in 2010. Selling and marketing expenses were $2.9 million for the six months ended June 30, 2011, compared with $2.8 million for the same period in 2010. Total operating expenses for the six months of 2011 were $13.0 million, compared with $11.9 million for the same period last year. The primary reasons for the increase in total operating expenses were costs related to sales force, personnel and consulting, bad debt expense and personnel recruiting fees. Stock compensation expense was $0.5 million for the six months ended June 30, 2011, compared to $0.2 million for the same period in 2010.
Response Genetics' net loss for the six months ended June 30, 2011 was $0.3 million or a loss of $0.02 per share, compared with a net loss of $2.5 million, or a loss of $0.15 per share, for the same period last year.
Cash and Cash Equivalents
Cash and cash equivalents at June 30, 2011, were $3.3 million, compared to $4.1 million at December 31, 2010. During the second quarter, cash was used to fund existing operations and sales growth. As a result of increases in revenues, accounts receivable balances grew from $4.7 million at December 31, 2010 to $6.4 million at June 30, 2011.
Second Quarter Corporate Development Highlights
Company Announces Search for CEO - On July 22, 2011, Kathleen Danenberg stepped down from the position of CEO and was appointed by the Board of Directors to serve as Founder and Executive Scientific and Technology Officer of the Company to focus her attention on the Company's scientific research and development activities. Denise McNairn, Vice President, General Counsel and Secretary, will serve as the Company's CEO on an interim basis, while the Company searches for a permanent successor to Ms. Danenberg.
To facilitate the search for a new CEO, the Board has engaged CTPartners, a leading executive search firm, to assist in identifying qualified candidates.
New ResponseDX™ Test Panel Launched - In June 2011, Response Genetics announced the nation-wide availability of its newest test panel, ResponseDX: Melanoma™, a proprietary, PCR-based diagnostic test that quantitatively analyzes mutations in the BRAF gene - a key component in cell signaling and growth. Such information can help physicians make treatment decisions for patients with this aggressive form of skin cancer.
Presentation at ASCO - The Company presented five abstracts at the 2011 American Society of Clinical Oncology (ASCO) Annual Meeting in Chicago, IL. Data highlighted clinical results in non-small cell lung cancer (NSCLC) and esophageal cancer and novel approaches to improve cancer care. All studies presented used technology developed by Response Genetics to isolate RNA from formalin-fixed, paraffin-embedded (FFPE) archived tissue for quantitative RT-PCR analysis of gene expression.
Improved Capital Position - The Company agreed to sell 1,175,512 shares of its common stock, at a price of $1.99 per share in a registered direct public offering to certain institutional investors. Net proceeds of approximately $2.2 million were received from the sale, after deducting estimated offering expenses. The closing of the offering took place on May 6, 2011. In addition, the Company has secured a $3 million line of credit with Silicon Valley Bank.
Second Quarter Gross Margin and Revenue per Case - Gross margin for the second quarter of 2011 was 58.2 percent compared to 54.4 percent for the first quarter of 2011. For the second quarter of 2011, the average revenue per case was $1,350 compared to $1,380 in the first quarter of 2011. Gross margin is defined as revenues less cost of revenues.
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