NEW YORK (GenomeWeb) – Cancer Genetics reported after the close of the market on Monday that its second quarter revenues fell 6 percent year over year, principally due to a decrease in project-specific activities related to the timing of certain customers’ clinical studies and patient enrollment.
The firm also announced that it has entered into an agreement to acquire contract research organization vivoPharm for $12 million.
For the three months ended June 30, the oncology diagnostics company reported revenues of $6.6 million, down from $7.0 million a year earlier, and missing the consensus Wall Street estimate for revenues of $8.0 million.
Clinical services revenues rose 20 percent in Q2 to $3.1 million from $2.5 million in Q2 2016. The growth was driven by a 6 percent increase in clinical test volumes to 14,341 from 13,481 a year earlier, the firm said. However, this was offset by a 22 percent decrease in revenues from biopharma partners and customers to $3.3 million from $4.2 million during Q2 2016. Discovery services revenues rose 10 percent to $263,000 in Q2.
"During the second quarter of 2017, we continued our drive to become the oncology diagnostics partner of choice for biopharmaceutical companies and clinicians," CGI President and CEO Panna Sharma said in a statement. "Our revenue from biopharma projects during the second quarter were uneven due to the delay of nine clinical trials, although we expect many of them to start over the next two quarters. We continue to be focused on reducing our losses and operating expenses as we target near-term profitability. We also achieved record demand from biotech and pharma customers as demonstrated by $7.1 million in new contracts and bookings. We are now supporting over 170 clinical trials serving nine of the top 10 biopharma companies globally. We also closed 13 new biotech and pharma customers during the second quarter of 2017 that will support the reacceleration of our biopharma revenue."
CGI's Q2 net loss narrowed to $2.8 million, or $.16 per share, from $4.0 million, or $.28 per share, a year earlier. Analysts had expected a loss of $.15 per share for the quarter.
The firm's Q2 R&D costs fell 41 percent to $989,000 from $1.7 million in Q2 2016. Its SG&A expenses for the quarter fell 8 percent to $4.7 million from $5.1 million in the year-ago quarter.
CGI ended the quarter with $6.2 million in cash and cash equivalents, and $300,000 in restricted cash. The firm also said it has arranged to have $16 million in equity financing available for the next two years, with $3 million provided immediately and future amounts to be drawn at the company's discretion. The financing will be used in part to fund the acquisition of vivoPharm.
CGI said it expects the deal to significantly strengthen its position in the markets for oncology discovery, in vivo and in vitro drug development, and early phase clinical trial testing for biotechnology and pharmaceutical companies.
"This accretive acquisition immediately strengthens our market position as the premier partner for oncology therapeutic and diagnostic development while furthering our mission to change patient outcomes and improve industry insight into the mechanisms of oncology," Sharma said. "VivoPharm furthers our biopharma strategy and adds capabilities to enable our strategy to rescue and repurpose oncology drugs while providing us enhanced, revenue-generating capabilities across a broad and globally diverse client base."
VivoPharm has generated compounded annual revenue growth of 14 percent over the past three fiscal years, and has expected revenues of approximately $5 million in the most recent fiscal year, CGI noted. Further, the CRO's studies have been used to support more than 200 IND submissions across a range of therapeutic indications, including lymphomas, leukemia, GI cancers, liver cancer, pancreatic cancer, non-small cell lung cancer, and other non-cancer rare diseases.
The acquisition, which is expected to close on Aug. 15, is expected to be immediately accretive, adding both revenues and income. The purchase price of $12 million will include $1.2 million in cash, and the remaining 90 percent of the purchase price will be paid with shares of CGI common stock.
The firm's shares fell 12 percent to $3.45 in after-hours trading on the Nasdaq.