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Transgenomic Reports First Quarter 2016 Financial Results
[May 24, 2016]

Transgenomic Reports First Quarter 2016 Financial Results


Transgenomic, Inc. (NASDAQ: TBIO) today reported financial results for the first quarter ended March 31, 2016, and provided a business update.

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 (News - Alert)™ (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 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
    • 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.

Conference Call
Transgenomic management will host a conference call to discuss first quarter 2016 financial results and answer questions beginning at 9:00 a.m. Eastern Time today. To access the call via telephone, please dial 877-876-9176 from the U.S. or Canada or 785-424-1667 for international participants and enter conference ID TRANS. The call also will be broadcast live over the Internet. To listen to the webcast, please log onto the Company's Investor Relations web page at http://www.transgenomic.com/ir/investor-information/ and follow the instructions. An archived webcast of the call will be available for 30 days. A telephone replay will be available from 8:00 p.m. Eastern Time on today through 11:59 p.m. Eastern Time on June 6th by dialing 800-839-0866 (domestic) or 402-220-0662 (international).

About Transgenomic
Transgenomic, Inc. is a global biotechnology company advancing personalized medicine in oncology and inherited diseases through advanced diagnostic technologies, such as its revolutionary ICE COLD-PCR, which enables use of liquid biopsies for mutation detection. The company also provides specialized clinical and research services to biopharmaceutical companies developing targeted therapies. Transgenomic's diagnostic technologies are designed to improve medical diagnoses and patient outcomes.

Forward-Looking Statements
Certain statements in this press release constitute "forward-looking statements" of Transgenomic within the meaning of the Private Securities Litigation Reform Act of 1995, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Forward-looking statements include, but are not limited to, those with respect to management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results, including the ability of the Company to grow its involvement in the diagnostic products and services markets, expectations regarding new clients, projects and prospects, MX-ICP's ability to accelerate the Company's growth and generate revenue, and the operation of our billing systems. The known risks, uncertainties and other factors affecting these forward-looking statements are described from time to time in Transgenomic's filings with the Securities and Exchange Commission. Any change in such factors, risks and uncertainties may cause the actual results, events and performance to differ materially from those referred to in such statements. Accordingly, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 with respect to all statements contained in this press release. All information in this press release is as of the date of the release and Transgenomic does not undertake any duty to update this information, including any forward-looking statements, unless required by law.





   
TRANSGENOMIC, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
 
Three Months Ended
March 31,
2016     2015
NET (News - Alert) SALES $ 236 $ 750
COST OF GOODS SOLD:   505     465  
Gross profit (269 ) 285
OPERATING EXPENSES:
Selling, general and administrative 1,704 1,804
Research and development   270     451  
  1,974     2,255  
OPERATING LOSS FROM CONTINUING OPERATIONS (2,243 ) (1,970 )
OTHER INCOME (EXPENSE):
Interest expense, net (169 ) (190 )
Warrant revaluation 321 (145 )
Other, net   -     (13 )
  152     (348 )
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (2,091 ) (2,318 )
INCOME TAX BENEFIT   -     -  
LOSS FROM CONTINUING OPERATIONS (2,091 ) (2,318 )
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES   (1,173 )   (723 )
NET LOSS   (3,264 )   (3,041 )
 
PREFERRED STOCK DIVIDENDS   (21 )   (331 )
 
NET LOSS FROM CONTINUING OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS (2,112 ) (2,649 )
NET LOSS FROM DISCONTINUED OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS   (1,173 )   (723 )
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS $ (3,285 ) $ (3,372 )
 
BASIC AND DILUTED LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS $ (0.10 ) $ (0.28 )
BASIC AND DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS $ (0.06 ) $ (0.08 )
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.16 ) $ (0.36 )
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING   20,323,333     9,392,851  
 

   
Transgenomic, Inc.
Summary Financial Results
Proforma Modified EBITDA
(dollars in thousands)
 

Management uses Modified EBITDA, a non-GAAP measure, to measure the Company's financial performance and to internally manage its businesses. Management believes that Modified EBITDA provides useful information to investors as a measure of comparison with peer and other companies. Modified EBITDA should not be considered an alternative to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles. Modified EBITDA calculations may vary from company to company. Accordingly, our computation of Modified EBITDA may not be comparable with a similarly-titled measure of another company.

 

The following sets forth the reconciliation of Net Loss to Modified EBITDA for the periods indicated:

 
Three Months Ended
March 31,
2016     2015
NET LOSS FROM CONTINUING OPERATIONS $ (2,091 ) $ (2,318 )
 
INTEREST EXPENSE 169 190
 
DEPRECIATION AND AMORTIZATION 83 41
 
CHANGE IN FAIR VALUE OF WARRANTS (321 ) 145
 
STOCK COMPENSATION EXPENSE 110 114
   
MODIFIED EBITDA $ (2,050 ) $ (1,828 )
 
       
TRANSGENOMIC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
(unaudited)
March 31, December 31,
2016 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 222 $ 444
Accounts receivable, net 170 264
Inventories, net 44 50
Other current assets 503 537
Assets held for sale   1,182     1,987  
Total current assets 2,121 3,282
PROPERTY AND EQUIPMENT, NET 237 259
OTHER ASSETS:
Intangibles, net 1,146 1,170
Other assets   88     105  
$ 3,592   $ 4,816  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current liabilities $ 17,261 $ 16,717
Liabilities held for sale   20     264  
Total current liabilities 17,281 16,981
OTHER LIABILITIES:
Common stock warrant liability 1,466 350
Other long-term liabilities   255     305  
Total liabilities 19,002 17,636
 
STOCKHOLDERS' (DEFICIT) EQUITY   (15,410 )   (12,820 )
$ 3,592   $ 4,816  
 


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