On May 24, 2016 Transgenomic, Inc. (NASDAQ: TBIO) reported financial results for the first quarter ended March 31, 2016, and provided a business update (Press release, Transgenomic, MAY 24, 2016, View Source [SID:1234512757]).
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Business Update
During the first quarter of 2016 Transgenomic (TBIO) continued to work to realign its core activities around the commercialization of ICE COLD-PCR (ICP), an innovative technology that enables the use of DNA liquid biopsies for better, safer and less costly diagnosis and treatment of many diseases. Broader commercialization of ICP is expected to provide a foundation for expansion of the Company’s licensing and partnering strategy in order to maximize the value of this broadly enabling technology.
As part of its strategic focus on broadly commercializing ICP, TBIO is exiting lower growth legacy businesses, a process that is now largely complete. TBIO conducted a strategic review of the Patient Testing Business Unit in the first quarter of 2016 resulting in a decision to suspend testing at its CLIA laboratory in New Haven, Connecticut, and consolidate all remaining CLIA activities in the Company’s laboratory in Omaha, Nebraska. Divestiture options for these legacy Patient Testing assets are being pursued. Suspension of these Patient Testing activities and closure of the New Haven lab have significantly reduced expenses, resulting in savings of over $1 million a month.
The drive to exit legacy businesses has had major effects on the Company’s operations and financial results. The Genetic Assays and Platforms and Patient Testing businesses have been classified as discontinued operations. Information presented for current and prior quarter periods in the financial statements has been modified to reflect them as discontinued operations.
Paul Kinnon, Transgenomic President and Chief Executive Officer, commented, "We are now nearing completion of our plan to exit our low growth, unprofitable legacy businesses, thereby releasing management to focus solely on commercialization and adoption of our ICP technology. As stated in our conference call last month, we are optimistic that the foundation being developed for ICP will begin to bear fruit over the remainder of 2016. The recent release of additional compelling concordance data is an essential element in providing potential partners and customers with the validation they need to demonstrate that ICP can deliver on its promise to enable and simplify the detection of genetic alterations, which is central to implementation of personalized and precision medicine. We believe that the ICP platform has the potential to make TBIO a leader in the rapidly emerging liquid biopsy market, and we have now turned our full attention to further development of our ICE COLD-PCR technology. Having alternatives to tissue-based biopsies is expected to fundamentally change how we diagnose and treat cancer and other disorders. The terrific results from our concordance study have re-affirmed our excitement about the near and long-term potential for this broadly-enabling technology, and we look forward to continued progress in the months ahead."
First Quarter Financial Results from Continuing Operations
Net sales for the first quarter of 2016 were $0.2 million as compared with $0.7 million for the same period in 2015. The $0.5 million decrease reflects phasing of contracts in the first quarter due to client sample availability issues, a situation the Company expects to be transitory.
Gross profit was a negative $0.3 million, compared with gross profit of $0.3 million for the same period in 2015. The negative gross profit in the first quarter of 2016 is due to the lower revenues noted above coupled with a substantial one-time milestone expense associated with product commercialization. A significant portion of Cost of Goods Sold is fixed costs associated with the operation of Transgenomic’s laboratory. The Company anticipates that gross profit percentages will increase as revenues from ICP-based products and services rise.
Operating expenses were $2.0 million during the first quarter of 2016 as compared to $2.3 million in the first quarter of 2015. The $0.3 million decrease in operating expenses was due to lower professional fees in the first quarter of 2016 as compared to the same period in 2015.
The net loss from continuing operations for the first quarter of 2016 was $2.1 million or $0.10 per share, compared with a net loss of $2.3 million or $0.28 per share for the first quarter of 2015. Modified EBITDA, which is a non-GAAP measure that Transgenomic views as an appropriate and sound measure of the Company’s results, was a loss of $2.1 million for the first quarter of 2016, compared to a loss of $1.8 million for the same period in 2015. A reconciliation of Net Loss to Modified EBITDA is presented below.
Cash and cash equivalents were $0.2 million at March 31, 2016, compared with $0.4 million at December 31, 2015. As previously announced, during the first quarter of 2016, the Company completed a financing that raised approximately $2.0 million in net proceeds.
Recent Highlights
Released New Study Showing 100% Concordance between ICE COLD-PCR (ICP) Liquid Biopsies and Conventional Tissue Biopsy Results; ICP Also Identified More Tumor Mutations than Conventional Methods
The concordance study confirmed that ICP-enriched testing identified all mutations detected by standard tissue biopsy PCR. Notably, ICP also identified additional mutations missed by conventional tissue biopsy. The study confirmed that ICP’s ultra-high sensitivity enables use of plasma-based liquid biopsies for cancer mutation detection, replacing costly and invasive tissue biopsies and enabling ongoing patient monitoring.
Launched First Rapid Turnaround Breast Cancer Analysis Panel at 2016 AACR (Free AACR Whitepaper) Annual Meeting
The liquid biopsy test uses Multiplexed ICE COLD-PCR to detect actionable tumor mutations in genes relevant to treatment decisions with high sensitivity. Notably, results are available in 7-10 days, in contrast to turnaround times of up to four weeks for other testing methods.
Announced Data Presentation Confirming Utility of ICP Liquid Biopsy Technology at AACR (Free AACR Whitepaper)
Includes first systematic data confirming concordance of ICP liquid and tissue biopsy results
Launched 1st Commercially Available Assay for Ultra Low Level Detection of EGFR C797S Mutations for Lung Cancer, New MX-ICP Liquid Biopsy Tests for Detection of Colorectal and Melanoma Tumor Mutations, and New MX-ICP Panels for Liquid Biopsy Detection of RAS and PIK3CA Tumor Mutations
Launched multiple important new ICE COLD-PCR liquid biopsy cancer tests.