Exhibit 99.1
FOR IMMEDIATE RELEASE
| Investor Relations Contact: | Media Relations Contact: |
| Michaela Parnell | Barry Sudbeck |
| Trout Group | Fleishman-Hillard |
| 646-378-2956 | 415-318-4261 |
Response Genetics, Inc. Reports Third Quarter Financial Results and Operational Update
LOS ANGELES, November 10, 2011 — Response Genetics Inc. (Nasdaq: RGDX) (“Response Genetics” or the “Company”), 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 third quarter ended September 30, 2011.
“Sales and revenue of our ResponseDX™ genetic tests continue to increase with a record number of tests ordered during this quarter, and with the addition of seven new sales staff is expected to increase further,” said Denise McNairn, Interim CEO of Response Genetics. “In addition, as we expand our testing services globally and refine our internal systems we will continue to bring value to our stockholders and benefits to physicians and their patients.”
Third Quarter 2011 Financial Results
Total revenue decreased by 9 percent to $5.1 million for the third quarter ended September 30, 2011, compared to $5.6 million for the same period last year. The decrease was primarily due to a decrease in pharmaceutical service revenue of $0.8 million, offset by an increase of $0.3 million in ResponseDX™ revenue. Revenue from ResponseDX™ genetic tests increased by 10 percent to $3.3 million for the third quarter, compared to $3.0 million for the same period in 2010. Pharmaceutical client revenue decreased 30.7 percent to $1.8 million, compared to $2.6 million in the third quarter of 2010.
Cost of revenue was $2.5 million for the third quarter ended September 30, 2011, compared with $2.7 million for the same period in 2010. Research and development expenses were $0.5 million for the third quarter of 2011, compared with $0.3 million for the same period in 2010. General and administrative expenses were $2.3 million for the third quarter, compared with $2.0 million for the same period in 2010. Selling and marketing expenses were $1.3 million for the third quarter of 2011, compared with $1.6 million for the same period in 2010. Total operating expenses for the third quarter were $6.5 million, compared with $6.6 million for the same period last year. The decrease in total operating expenses was related to a reduction in sales personnel expenses, offset by an increase in business consulting and personnel recruiting expenses. Stock compensation expense was $0.2 million for the third quarter of 2011, compared to $0.3 million for the same period in 2010.
Response Genetics’ net loss for the third quarter ended September 30, 2011 was $1.4 million, or a loss of $0.07 per share, compared with a net loss of $1.1 million, or a loss of $0.06 per share, for the same period last year.
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Nine months ended September 30, 2011
Total revenue increased by 19 percent to $17.7 million for the nine months ended September 30, 2011, compared to $15.0 million for the same period last year. Revenue from our ResponseDX™ genetic tests increased by 14.6 percent to $9.4 million for the nine months, compared to $8.2 million for the same period in 2010. Our pharmaceutical client revenue increased 36.7 percent to $8.3 million, compared to $6.1 million in the nine months of 2010.
Cost of revenue for the nine months ended September 30, 2011 was $8.0 million, compared with $7.4 million for the same period in 2010. Research and development expenses were $0.8 million for the nine months of 2011, compared with $1.3 million for the same period in the prior year. General and administrative expenses were $6.5 million for the nine months of 2011, compared with $5.4 million for the same period in 2010. Selling and marketing expenses were $4.1 million for the nine months ended September 30, 2011, compared with $4.4 million for the same period in 2010. Total operating expenses for the nine months of 2011 were $19.5 million, compared with $18.5 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 $0.7 million for the nine months ended September 30, 2011, compared to $0.5 million for the same period in 2010.
Response Genetics’ net loss for the nine months ended September 30, 2011 was $1.8 million or a loss of $0.09 per share, compared with a net loss of $3.6 million, or a loss of $0.20 per share, for the same period last year.
Cash and Cash Equivalents
Cash and cash equivalents at September 30, 2011, were $2.5 million, compared to $4.1 million at December 31, 2010. During the third quarter, cash was used to fund existing operations and sales growth.
Third Quarter Corporate Development Highlights
Chief Executive Officer Search – Under the direction of the Board, the search for a permanent CEO has progressed nicely, with a number of strong candidates identified.
Symposium at the 14th World Conference on Lung Cancer (the “WCLC”) – At the WCLC in Amsterdam, Response Genetics sponsored the symposium, “Biomarker-Driven Prospective Clinical Trials.” Presentations by key opinion leaders highlighted the clinical use of tumor molecular determinants to enhance patient benefit. Through efforts such as this, the Company is helping physicians individualize treatment for patients with advanced NSCLC.
Sales Force Expansion – Response Genetics continued to expand its national sales force to meet the demand for its Response DX™ tests, adding seven new sales people in the third quarter of 2011 for a total sales team of 21 individuals. The Company also expanded its infrastructure to support continued growth and meet expected demand.
Successful Implementation of Xifin Revenue Cycle Management System – Billing and collections were brought in-house as of July 1, 2011 to more effectively manage the Company’s cash flow and reduce the risks associated with regulatory compliance. Through investments such as the Xifin system, all outgoing claims are “clean” and those received begin processing within 24 hours, allowing faster reimbursement and a reduced number of collection days.
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Third Quarter Gross Margin and Revenue per Case – Gross margin for the third quarter of 2011 was 50 percent compared to 51 percent for the third quarter of 2010. For the third quarter of 2011, the average revenue per case was $1,414 compared to $1,175 in the third quarter of 2010. Gross margin is defined as revenues less cost of revenues.
About Response Genetics, Inc.
Response Genetics Inc. (“RGI”) is focused on the development and sale of molecular diagnostic tests for cancer. RGI’s technologies enable extraction and analysis of genetic information from genes derived from tumor samples stored as formalin-fixed and paraffin-embedded specimens. In addition to diagnostic testing services, the Company generates revenue from the sales of its proprietary analytical pharmacogenomic testing services of clinical trial specimens to the pharmaceutical industry. RGI was founded in 1999, and its principal headquarters are located in Los Angeles, California. For more information, please visit www.responsegenetics.com.
Forward-Looking Statement Notice
Except for the historical information contained herein, this press release and the statements of representatives of RGI related thereto contain or may contain, among other things, certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to the Company’s plans, objectives, projections, expectations and intentions, such as the ability of the Company to successfully announcing its third quarter financial results, execute on its business strategy and operations, , and other statements identified by words such as “projects,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions.
These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission. Actual results, including, without limitation, actual sales results, if any, or the application of funds, may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control). The Company undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise, except as required by law.
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CONSOLIDATED BALANCE SHEETS
| | | December 31, 2010 | | | September 30, 2011 | |
| | | | | | (Unaudited) | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 4,120,074 | | | $ | 2,532,009 | |
| Accounts receivable | | | 4,733,698 | | | | 5,096,486 | |
| Prepaid expenses and other current assets | | | 941,981 | | | | 793,738 | |
| Total current assets | | | 9,795,753 | | | | 8,422,233 | |
| Property and equipment, net | | | 698,755 | | | | 1,033,565 | |
| Intangible assets, net | | | 107,062 | | | | 46,846 | |
| Total assets | | $ | 10,601,570 | | | $ | 9,502,644 | |
| | | | | | | | | |
| LIABILITIES, COMMON STOCK CLASSIFIED OUTSIDE OF STOCKHOLDERS’ EQUITY (DEFICIT) AND STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable | | $ | 1,247,151 | | | $ | 1,200,455 | |
| Accrued expenses | | | 1,075,636 | | | | 288,589 | |
| Accrued royalties | | | 809,694 | | | | 477,890 | |
| Accrued payroll and related liabilities | | | 1,271,037 | | | | 1,096,174 | |
| Capital lease obligation | | | — | | | | 102,101 | |
| Deferred revenue | | | 1,518,696 | | | | 485,451 | |
| Total current liabilities | | | 5,922,214 | | | | 3,650,660 | |
| Deferred revenue, net of current portion | | | 100,070 | | | | — | |
| Capital lease obligation net of current portion | | | — | | | | 226,858 | |
| Total liabilities | | | 6,022,284 | | | | 3,877,518 | |
| | | | | | | | | |
| Commitments and contingencies | | | | | | | | |
| | | | | | | | | |
| Common stock classified outside of stockholders’ equity (deficit) | | | 7,854,682 | | | | 7,854,682 | |
| | | | | | | | | |
| Stockholders’ equity (deficit) | | | | | | | | |
| Common stock, $0.01 par value; 50,000,000 shares authorized; 18,357,406 and 19,537,232 shares issued and outstanding at December 31, 2010 and September 30, 2011, respectively | | | 122,942 | | | | 134,327 | |
| Additional paid-in capital | | | 40,612,785 | | | | 43,490,116 | |
| Accumulated deficit | | | (43,817,163 | ) | | | (45,576,937 | ) |
| Accumulated other comprehensive loss | | | (193,960 | ) | | | (277,062 | ) |
| Total stockholders’ equity (deficit) | | | (3,275,396 | ) | | | (2,229,556 | ) |
| Total liabilities and stockholders’ equity (deficit) | | $ | 10,601,570 | | | $ | 9,502,644 | |
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2010 | | | 2011 | | | 2010 | | | 2011 | |
| Net Revenue | | $ | 5,574,649 | | | $ | 5,100,649 | | | $ | 14,914,212 | | | $ | 17,730,785 | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Cost of revenue | | | 2,738,693 | | | | 2,538,176 | | | | 7,392,756 | | | | 8,040,003 | |
| Selling and marketing | | | 1,554,430 | | | | 1,251,054 | | | | 4,395,400 | | | | 4,107,639 | |
| General and administrative | | | 2,021,654 | | | | 2,268,517 | | | | 5,417,635 | | | | 6,493,079 | |
| Research and development | | | 319,271 | | | | 452,734 | | | | 1,279,501 | | | | 838,622 | |
| Total operating expenses | | | 6,634,048 | | | | 6,510,481 | | | | 18,485,292 | | | | 19,479,343 | |
| Operating loss | | | (1,059,399 | ) | | | (1,409,832 | ) | | | (3,571,080 | ) | | | (1,748,558 | ) |
| Other income (expense): | | | | | | | | | | | | | | | | |
| Interest expense | | | (2,702 | ) | | | (5,804 | ) | | | (7,759 | ) | | | (11,379 | ) |
| Interest income | | | 185 | | | | 96 | | | | 448 | | | | 162 | |
| Other | | | — | | | | — | | | | (1,854 | ) | | | — | |
| Loss before provision for income taxes | | | (1,061,916 | ) | | | (1,415,540 | ) | | | (3,580,245 | ) | | | (1,759,775 | ) |
| Provision for income taxes | | | — | | | | — | | | | 1,256 | | | | — | |
| Net loss | | $ | (1,061,916 | ) | | $ | (1,415,540 | ) | | $ | (3,581,501 | ) | | $ | (1,759,775 | ) |
| | | | | | | | | | | | | | | | | |
| Unrealized gain (loss) on foreign currency translation | | | 9,045 | | | | (25,593 | ) | | | (4,397 | ) | | | (25,593 | ) |
| Total comprehensive loss | | $ | (1,052,871 | ) | | $ | (1,441,133 | ) | | $ | (3,585,898 | ) | | $ | (1,785,368 | ) |
| Net loss per share — basic and diluted | | $ | (0.06 | ) | | $ | (0.07 | ) | | $ | (0.20 | ) | | $ | (0.09 | ) |
| Weighted-average shares — basic and diluted | | | 18,314,379 | | | | 19,537,232 | | | | 17,612,982 | | | | 18,979,010 | |
