Transgenomic fourth quarter total revenue increases 68% to $8.6M

Transgenomic, Inc.Mar 7 2012

Transgenomic, Inc. (OTCBB: TBIO) today reported financial results for the year ended December 31, 2011 and provided a business update.

"Transgenomic enjoyed a landmark year in 2011, with revenue growth quarter-over-quarter and year-over-year as well as an attention to expense management translating into positive modified EBITDA for both the fourth quarter and full year 2011 periods," said Craig Tuttle, President and Chief Executive Officer. "Our year-over-year top line increase of 59%, to $32 million in revenue for 2011, reflects growth in both our clinical reference labs and pharmacogenomics lab businesses. These encouraging top- and bottom-line results were achieved without compromising our investment in the development of groundbreaking new technologies. Supporting our strategic direction, and adding substantially to shareholder equity, was a $22 million private placement financing executed last month with a number of top-tier life sciences investors."

Mr. Tuttle continued: "2012 promises to be yet another important year for growth and value creation, as we look to build momentum behind our recently launched products, including our proprietary clopidogrel response panel, expand on our growing position as a key partner in cancer research and develop the markets where our products and services are available. As always, we will continue to focus on the successful integration of new products and technologies and expansion into new markets, all while managing toward the bottom line."

Recent Corporate and Business Events

• Publications Validating PGxPredict®:CLOPIDOGREL (Plavix®) Panel: In March 2012, the Company announced the publication of a new study by researchers at Vanderbilt University that further validates the role of both genes found in the Company's PGxPredict®:CLOPIDOGREL (Plavix®) Panel, a comprehensive test to predict a patient's response to clopidogrel (Plavix®). The study confirms the results of two previous studies demonstrating that outcomes in patients receiving clopidogrel were better for patients without genetic variations in CYP2C19, a gene whose effect is described in the drug's label, and ABCB1, a gene that is unique to Transgenomic's panel and is covered by issued and pending patents owned by Transgenomic. The results were published by Delaney, et al., in the February issue of Clinical Pharmacology and Therapeutics.
• Successful Private Placement Offering: In February 2012, the Company successfully completed a $22 Million private placement financing which included an aggregate of $3.0 million in convertible notes issued in December to entities associated with Third Security, LLC, a leading life sciences investment firm, that automatically converted into shares of Transgenomic common stock and warrants to purchase such common stock on the same terms as all investors in the private placement financing.
• Expansion of Cardiology Genetic Test Offerings: In November 2011, the Company announced the launch of two innovative genetic tests at the annual meeting of the American Heart Association in Orlando, Florida: ThePGxPredict:CLOPIDOGREL Panel, and a test for familial atrial fibrillation (AF).

Fourth Quarter and Fiscal Year Financial Results

Total revenue for the fourth quarter 2011 was $8.6 million, an increase of 68 percent compared with $5.1 million for the same period of 2010. Revenues for the fourth quarter of 2011 included $4.6 million in sales related to the Clinical Labs business, $0.5 million in revenue related to the Pharmacogenomics Services Unit ("Pharma" which supports Clinical Trials) and $3.5 million in revenue related to the Diagnostic Tools unit.

For the year ended December 31, 2011, revenues were $32.0 million, an increase of 59 percent compared with $20.0 million for the same period of 2010. This included $16.0 million in net sales related to the Clinical Labs, $2.3 million in Pharma revenues and $13.7 million in revenues related to the Diagnostic Tools unit.

Gross profit was $5.3 million, or 62 percent of net sales during the fourth quarter of 2011, compared with gross profit of $2.4 million, or 47 percent of net sales during the comparable period of 2010. Gross profit was $18.4 million, or 58 percent of net sales for 2011, compared with gross profit of $9.8 million, or 49 percent of net sales for 2010. The improvement in gross margin for the fourth quarter and full year is attributable to improvement in our Lab Services and Pharmacogenomic margins. The improvement in our Lab Services is due to the revenue from the FAMILION acquisition and successful consolidation of operations and reduction of overhead costs. Our Pharmacogenomics margins have improved due to the revenue increase quarter-over-quarter and year-over-year as the costs in that segment are relatively fixed.

Operating expenses were $5.4 million during the fourth quarter of 2011, compared to $3.7 million during the same period of 2010. Operating expenses increased primarily due to the acquisition of the FAMILION business, including non-cash charges totaling $0.3 million related to the amortization of the acquired intangibles. Operating expenses for the year ended December 31, 2011 were $21.4 million, compared with $13.4 million for 2010. Operating expenses increased primarily due to the acquisition of the FAMILION business, including non-cash charges for amortization related to the acquired intangibles of $1.2 million. We also recorded non-cash charges for stock option expenses of $1.0 million and bad debt expense of $1.7 million.

Net income for the fourth quarter of 2011 was $0.3 million, or $0.00 per share, compared with a net loss of $0.8 million, or $0.02 per share, for the fourth quarter of 2010. The Company reported a net loss for the year ended December 31, 2011 of $9.8 million, or $0.22 per share, compared with a net loss of $3.1 million, or $0.06 per share, for 2010. The increase in net loss for 2011 compared to 2010 is attributable primarily to interest expense of $1.0 million and non-cash charges for preferred stock valuation of $6.1 million, amortization related to the acquired intangibles and stock option expenses.

Modified EBITDA, which is a non-GAAP measure that Transgenomic views as an appropriate and sound measure of the Company's results, improved to a gain of $615,000 for the fourth quarter of 2011 from a proforma loss of $1.4 million for the same period for 2010. For the year ended December 31, 2011, Modified EBITDA was a gain of $195,000 as compared to a proforma loss of $6.3 million for the same period for 2010. A reconciliation of Net Loss to Modified EBITDA is presented below.