On September 26, 2016 Rosetta Genomics Ltd. (NASDAQ:ROSG), a leading developer and provider of microRNA-based and other molecular diagnostics, reported financial results for the three and six months ended June 30, 2016 (Press release, Rosetta Genomics, SEP 26, 2016, View Source [SID:SID1234515420]).
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Recent developments include:
Gross billings for RosettaGX Reveal ("Reveal"), the Company’s first-of-its-kind microRNA classifier for indeterminate thyroid nodules, are tracking to be approximately $1.5 million for the first nine months of 2016;
Announced that Reveal is now available for use on ThinPrep samples;
Published data confirming the analytical validity of Reveal to classify indeterminate thyroid nodules in the peer-reviewed journal Cancer Cytopathology;
Entered into a services agreement with an unnamed global pharmaceutical company to provide Fluorescence in Situ Hybridization (FISH) testing services for a clinical study the pharmaceutical company is conducting in prostate cancer;
Launched OncoGxSelect, a next-generation sequencing (NGS)-based test that detects somatic mutations frequently found in cancers and provides actionable results to help guide decisions related to targeted cancer therapies; and
Received U.S. patent allowance for a microRNA-based ovarian cancer treatment.
Management Commentary
"Throughout the first half of 2016 we demonstrated our ability to increase revenues by expanding our molecular diagnostics test menu and advancing our commercial programs to enable precision medicine for patients and physicians," said Kenneth A. Berlin, President and Chief Executive Officer of Rosetta Genomics. "We are particularly pleased about our progress with the commercial launch and clinical adoption of our Reveal test for the classification of indeterminate thyroid nodules.
"We made two key advances that significantly enhance our commercial efforts with Reveal. First, compelling analytical data was published in a peer-reviewed journal that supports the robustness of the Reveal assay under many different laboratory conditions. In addition, we presented data at the recent American Thyroid Society annual meeting confirming that Reveal produces the same high-level performance on ThinPrep prepared slides as it does on a direct smear from a thyroid Fine Needle Aspirate ("FNA") biopsy. We believe offering the option of using Reveal with either ThinPrep or direct smears will expand our customer base and potentially increase our test volumes by more than 50% over the next several months.
"We are gaining traction with our strategy to use Reveal to access new accounts to promote our exceptional thyroid offering as well as our urologic cancer and solid tumor product lines. In the near term, this primary focus on Reveal may temporarily slow the growth of the solid tumor and urology business lines as our sales people will be mainly calling on pathologists and endocrinologists, rather than oncologists and urologists. Over the long term, we believe that by winning new accounts with our Reveal offering we will be able to expand use of our solid tumor and urologic oncology offerings by many of these new accounts, thus further accelerating revenue growth.
"The commercial launch of Reveal will continue to be a prime focus of our company. We believe Reveal’s excellent performance – combined with the assay’s ability to be used with either ThinPrep or FNA biopsy, as well as its unique ability to use the same smears from the original indeterminate diagnosis – gives Reveal a significant competitive advantage that we expect will allow us to gain meaningful market share in this $350 million market in the U.S. and recent trends in demand and gross billings for Reveal demonstrate this. For example, in the third quarter we expect approximately 300 Reveal orders with gross billings of approximately $900,000.
"With demand for Reveal reaching higher levels in the current quarter and with that demand expected to continue to increase substantially going forward, we are increasing capacity at our Philadelphia laboratory to process samples. In addition, the investments we made in enhancing billing and collections is bearing fruit as we continue to improve collections.. We are pleased with our progress to date, as evidenced by our cash collections during the first half of 2016.
"Throughout the balance of the year we will continue to build on recent progress to drive demand for Reveal and the rest of our products and improve billings, collections and reimbursement. We look forward to making advances that will enhance shareholder value," concluded Mr. Berlin.
Second Quarter Financial Results
Revenues for the second quarter of 2016 increased 23% to $2.4 million compared with revenues of $2.0 million for the second quarter of 2015, and decreased 7% compared with revenues of $2.6 million for the first quarter of 2016. On a pro-forma basis (as if the PersonalizeDx acquisition occurred on January 1, 2015 instead of the actual acquisition date of April 13, 2015), revenues increased 13% compared with revenues of $2.1 million for the second quarter of 2015.
Revenues from urologic cancer testing services in the second quarter of 2016 increased 43% to $1.4 million, compared with $971,000 for the second quarter of 2015, and represented approximately 58% of clinical testing revenues for the second quarter of 2016. On a pro-forma basis, revenues increased 26% compared with $1.1 million for the second quarter of 2015.
Revenues from solid tumor testing services in the second quarter of 2016 of $855,000 decreased 13% compared with $986,000 in the second quarter of 2015, primarily due to a refocused sales force emphasis on the Reveal introduction. Solid tumor testing services, represented 35% of total clinical testing revenues during the second quarter of 2016. On a pro-forma basis, revenues decreased 17% compared with $1.0 million in the second quarter of 2015.
Reveal revenues during the second quarter of 2016 were $166,000 compared with $17,000 in the first quarter of 2016. There were no Reveal revenues in the second quarter of 2015 as the assay was not launched commercially until the first quarter of 2016. On a non-GAAP basis, gross billings for Reveal during the second quarter of 2016 were $511,000 compared with gross billings of Reveal of $111,000 in the first quarter of 2016. Gross billings are the aggregate amounts invoiced to customers.
Cost of revenues for the second quarter of 2016 increased to $2.0 million from $1.9 million for the second quarter of 2015.
Research and development expenses for the second quarter of 2016 increased to $618,000 from $613,000 for the second quarter of 2015.
Sales, marketing and business development expenses for the second quarter of 2016 decreased to $1.7 million from $2.5 million in the prior-year period primarily due to higher headcount in 2015 and transitional expenses associated with the consolidation of the PersonalizeDx business into Rosetta.
General and administrative expenses for the second quarter of 2016 decreased to $1.5 million compared with $2.2 million for the same period in 2015 primarily due to acquisition-related expenses in 2015.
The operating loss for the second quarter of 2016 was $3.4 million, which included $229,000 of non-cash stock-based compensation expense, compared with an operating loss of $2.9 million for the second quarter of 2015, which included $268,000 of non-cash stock-based compensation expense as well as a gain of $2.4 million on bargain purchase related to the acquisition of PersonalizeDx.
The net loss for the second quarter of 2016 was $3.4 million, or $0.16 per ordinary share on 20.9 million weighted average shares outstanding, compared with a net loss for the second quarter of 2015 of $2.8 million, or $0.20 per ordinary share on 14.4 million weighted average shares outstanding.
On a non-GAAP basis, excluding $229,000 of non-cash stock-based compensation expense, the net loss for the second quarter of 2016 was $3.2 million, or $0.15 per ordinary share on 20.9 million weighted average shares outstanding. For the second quarter of 2015, excluding the $268,000 of non-cash stock-based compensation expense as well as the gain of $2.4 million on bargain purchase related to the acquisition of PersonalizeDx, the non-GAAP net loss was $4.9 million, or $0.34 per ordinary share on 14.4 million weighted average shares outstanding.
Six Month Financial Results
Revenues for the first six months of 2016 increased 120% to $5.0 million compared with revenues of $2.3 million for the first six months of 2015. On a pro forma basis, revenues for the six months of 2016 increased 20% compared with pro forma revenues of $4.2M for the first six months of 2015.
Cost of revenues for the six-month period ended June 30, 2016 was $3.6 million compared with $2.3 million for the same period of 2015.
Total operating expenses for the first six months of 2016 of $8.8 million compared with $6.7 million in the first six months of 2015, which included a gain of $2.4 million on bargain purchase related to the acquisition of PersonalizeDx.
The operating loss for the first half of 2016 was $7.4 million, which included $459,000 of non-cash stock-based compensation expense, compared with an operating loss of $6.7 million for the first half of 2015, which included $544,000 of non-cash stock-based compensation expense as well as a gain of $2.4 million on bargain purchase related to the acquisition of PersonalizeDx.
The net loss for the first six months of 2016 was $7.4 million, or $0.36 per ordinary share on 20.8 million weighted average shares outstanding, compared with a net loss for the first six months of 2015 of $6.7 million, or $0.49 per ordinary share on 13.6 million weighted average shares outstanding.
On a non-GAAP basis, excluding $459,000 of non-cash stock-based compensation expense, the net loss for the first half of 2016 was $7.0 million, or $0.34 per ordinary share on 20.8 million weighted average shares outstanding. For the first half of 2015, excluding the $544,000 of non-cash stock-based compensation expense as well as the gain of $2.4 million on bargain purchase related to the acquisition of PersonalizeDx, the non-GAAP net loss was $8.5 million, or $0.62 per ordinary share on 13.6 million weighted average shares outstanding.
Balance Sheet Highlights
As of June 30, 2016, Rosetta Genomics had cash, cash equivalents, restricted cash and short-term bank deposits of $8.7 million, compared with $13.6 million as of December 31, 2015. The Company used approximately $6.5 million in cash to fund operations during the first six months of 2016, and collected approximately $4.9 million in cash from its clinical testing services as well as $1.6 million from a licensing deal signed in December 2015. Based on the Company’s current operations and plans, which include a cost-reduction plan should it be unable to raise sufficient additional capital, if necessary, Rosetta Genomics expects its current cash position will fund operations into May 2017.