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Cancer Genetics Q4 Revenues Grow 4 Percent

NEW YORK (GenomeWeb) – Cancer Genetics said after the close of the market on Monday that its fourth quarter revenues rose 4 percent year over year, falling short of the consensus Wall Street estimate.

For the three months ended Dec. 31, 2017, the firm posted $7.5 million in total revenues, up from $7.2 million a year ago. On average, Wall Street had expected $9.2 million in revenues.

By market, Biopharma service revenues contracted 13 percent year over year to $3.5 million from $4 million in Q4 2016, although Cancer Genetics said that the number of clinical trials it supported increased to 224 from 125 a year ago.

Clinical revenues dropped 37 percent year over year to $1.9 million from $3 million, primarily because of higher contractual allowance adjustments than the company has historically taken, following an examination of its outstanding receivables, the company said.

Discovery Services, meanwhile, recorded $2.1 million in revenues in Q4 2017, an increase of $1.8 million from Q4 2016, driven by the first full quarter of revenues from vivoPharm — which Cancer Genetics acquired in August 2017 — as well as increased demand for early-stage discovery results combined with bioinformatics analysis capabilities.

The company did not break out its R&D or SG&A costs for the quarter, but said that total operating expenses shot up 82 percent to $11.8 million from $6.5 million, primarily as a result of an additional $4.4 million in bad debt expenses that were recorded in Q4 2017.

Cancer Genetics' net loss for the quarter was $7.9 million, or $.35 per share, compared to a net loss of $2.8 million, or $.15 per share, in Q4 2016. The analysts' average estimate was for a loss of $.11 per share.

For full-year 2017, the Rutherford, New Jersey-based firm said total revenues grew 8 percent year over year to $29.1 million from $27.0 million in 2016. It fell short of the analysts' average estimate of $30.8 million.

Its R&D spending was trimmed 20 percent year over year to $4.8 million from $6.0 million, while its SG&A costs rose 12 percent to $24.7 million $22.0 million.

Its net loss for 2017 was $20.9 million, or $1.01 per share, compared to a net loss of $15.8 million, or $1.00 per share, in 2016, missing the consensus Wall Street estimate of a loss of $.71 per share.

Cancer Genetics finished 2017 with $9.5 million in cash and cash equivalents.

Prior to the end of 2017, former CEO Panna Sharma left the company. Since then, Cancer Genetics has extensively reviewed its strategy and organization, including its operations, pipeline programs, revenue streams, and financial resources, to focus the business "through targeted investment in the company's core strengths, to continue to streamline operations, and to reduce costs," it said in a statement.

During the first three months of 2018, efforts have been initiated to develop and implement a "transformative strategy" to improve revenues and cash collections, while reducing costs. The company plans on growing the Biopharma and Discovery markets in the US and globally, which it said comprised about 63 percent of its total revenues in 2017 and is expected to grow this year.

The company is currently evaluating its strategic opportunities, which include raising additional capital, acquiring other firms and/or complementary assets, the sale of Cancer Genetics, or another type of strategic partnership. It said it has hired Raymond James as an advisor during the process.

It noted that a major focus during Q1 2018 has been evaluating the firm's accounts receivables, which had increased to approximately $16 million before adjustments. Cancer Genetics attributed the increase in large part to disruptions in collections in its Clinical Services business, and said that while it continues with it collection efforts on all claims, it recorded a bad debt expense of $4.4 million and wrote off $1.8 million of its account receivables in Q4 2017. A large portion of its bad debt and write-off were attributable to collection issues related to the accounts receivable recorded following its acquisition of Response Genetics in 2015 for $14 million, the company said.

Cancer Genetics noted that because of delays in filing its claims, payors have declined to reimburse it for certain clinical services that were performed. Meanwhile, demands by payors for copies of patients' medical records or diagnosis codes have been "difficult to obtain," and it has faced reimbursement challenges from Medicare and third-party managed care plans for some of its next-generation sequencing-based tests.

As a result, it decided to write off such expenses in Q4 2017.

"We are intently focused on enhancing our financial and competitive position through efforts to expand our Biopharma and Discovery businesses through pursuit of select new partnerships and large volume contracts in precision oncology," Cancer Genetics interim CEO John Roberts said in a statement. He also highlighted the company's portfolio of tests, including the Complete:IO immune-oncology panel; the Tissue of Origin gene expression test; the Oncomine Dx Target Test companion diagnostic from Thermo Fisher Scientific; the Liquid::Lung-cfDNA liquid biopsy test; and others.

"We are committed to optimizing and leveraging this robust suite of unique oncology diagnostics to drive growth across multiple areas of our business, are confident in our new growth strategy and in our team's ability to implement it, and believe that the execution of this strategy has the potential to drive shareholder value," Roberts said.