Form 8-K CANCER GENETICS, INC For: Nov 10
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 10, 2015
CANCER GENETICS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 001-35817 | 04-3462475 | ||
(State or Other | (Commission | (IRS Employer | ||
Jurisdiction of | File Number) | Identification No.) | ||
Incorporation) | ||||
201 Route 17 North 2nd Floor, Rutherford, New Jersey 07070
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code (201) 528-9200
____________________________________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On November 10, 2015, Cancer Genetics, Inc. (the “Registrant”) issued a press release regarding financial results for the fiscal quarter ended September 30, 2015 and posted a slide presentation to its website, which it may refer to during its conference call to discuss the results. A copy of the press release and slide presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, hereto and are incorporated by reference herein.
Forward-Looking Statements
This report, including Exhibit 99.1 and Exhibit 99.2 furnished herewith, contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “expect,” “anticipate,” “estimate” and similar words, and the opposites of such words, although some forward-looking statements are expressed differently. Forward-looking statements involve known and unknown risks and uncertainties that exist in the Registrant’s operations and business environment, which may be beyond the Registrant’s control, and which may cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. For example, forward-looking statements include, without limitation: statements regarding prospects for additional customers; market forecasts; projections of earnings, revenues, synergies, accretion or other financial information; and plans, strategies and objectives of management for future operations. The risks and uncertainties referred to above include, but are not limited to, risks detailed from time to time in the Registrant’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2014, Quarterly Report on Form 10-Q for the period ended September 30, 2015 and other reports filed with the SEC. These risks could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Registrant. Forward-looking statements represent the judgment of management of the Registrant regarding future events. Although the Registrant believes that the expectations reflected in such forward-looking statements are reasonable at the time that they are made, the Registrant can give no assurance that such expectations will prove to be correct. Unless otherwise required by applicable law, the Registrant assumes no obligation to update any forward-looking statements, and expressly disclaims any obligation to do so, whether as a result of new information, future events or otherwise.
Item 7.01 Regulation FD.
The slide presentation referred to in Item 2.02 above is attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information in Item 2.02 and Item 7.01 of this Current Report on Form 8-K (including Exhibit 99.1 and Exhibit 99.2) attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
As described above, the following exhibits are furnished as part of this report:
Exhibit 99.1 – Press release, dated November 10, 2015.
Exhibit 99.2 – Slide presentation for Q3 2015 earnings call.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CANCER GENETICS, INC.
By: /s/ Edward J. Sitar
Name: Edward J. Sitar
Title: Chief Financial Officer
Date: November 10, 2015
Cancer Genetics, Inc. Announces Strong Third Quarter and Year-to Date 2015 Results
• | Third Quarter Revenues up 24 Percent Year-over-Year |
• | Revenues for Nine Months Ended September 30, 2015 up 104 Percent Year-over-Year |
• | Gross Profit Margins Doubled for the First Nine Months of 2015 to 26% from 13% for the First Nine Months of 2014 |
• | Closed on Acquisition of Operations & Assets of Response Genetics, Inc. (RGI) |
◦ | Expected to Add An Additional $10-$12 Million in Annual Revenue |
◦ | Provides Opportunity to Add & Accelerate Additional Contracts for Clinical Trials |
• | Priced Public Offering Expected to Result in Gross Proceeds of $12 Million to CGI |
RUTHERFORD, N.J., -- November 10, 2015 -- Cancer Genetics, Inc. (Nasdaq: CGIX), an emerging leader in DNA-based cancer diagnostics offering bench to the bedside solutions, announced financial and operating results for the third quarter ended September 30, 2015.
The company will host a conference call today at 8:30am ET; dial-in information is found below.
“As we move toward year-end, our business continues to perform well, delivering strong results and creating additional value for the global oncology community,” said Panna Sharma, CEO & President of Cancer Genetics, Inc. “There is continued high demand for our unique, proprietary portfolio of genomic tests and panels in the marketplace and our focused M&A strategy has delivered three transformative acquisitions over the past two years.”
FINANCIAL HIGHLIGHTS
• | Third quarter 2015 revenues were $4.0 million, up 24% from $3.2 million in the third quarter of 2014. |
◦ | Biopharma Services revenue was $2.6 million, up 35% from $1.9 million in the third quarter of 2014 as new trials launched and existing trials continued to mature into later stages |
◦ | Clinical Services revenue was $1.1 million, down slightly from $1.2 million in the third quarter of 2014, due largely to test volume and reimbursement rates |
• | Revenues for the nine-months ended September 30, 2015 were $12.6 million, up 104% from $6.2 million during the nine-months ended September 30, 2014. |
◦ | For the nine-months ended September 30, 2015, Biopharma Services revenue was $8.6 million, up 204% from $2.8 million during the nine-months ended September 30, 2014 |
◦ | Clinical Services revenue remained steady at $3.3 million for the nine months ended September 30, 2015, while Discovery Services generated $0.7 million in revenues, driven in part by growing demand for NGS services throughout India and Asia |
• | For the nine-months ended September 30, 2015, pro forma revenue for Cancer Genetics and Response Genetics was $22.6 million. |
• | Gross profit margins improved to 22.0%, or $0.9 million, in the third quarter of 2015, compared to 20.0%, or $0.7 million, in the third quarter of 2014, and improved to 26.0%, or $3.2 million, in the nine-months ended September 30, 2015, compared to 13.0%, or $0.8 million, in the comparable period of 2014. |
• | Cash & cash equivalents at September 30, 2015 was $19.9 million. |
• | On a pro forma basis, after considering the close of the RGI transaction, which used $7 million in cash, and the anticipated net proceeds from our recently priced public offering, cash and cash equivalents were approximately $23 million. |
“Our recently priced public offering, which we expect will result in gross proceeds of $12 million for CGI, will help facilitate RGI’s integration, will back multiple upcoming launches and will further support the marketing and continued growth of our Biopharma business. Rapid, successful integration of RGI will deliver revenue and cost synergies, and will accelerate the time to cash flow breakeven for CGI. The RGI acquisition is a value creator for the Company that expands the product offering; enhances CGI’s ability to compete for national payer contracts; enhances geographic sales coverage; grows the existing customer base; and provides the basis for deeper customer penetration,” continued Sharma.
RECENT CORPORATE HIGHLIGHTS
• | Finalized the purchase of RGI, which is a significant element of the growth strategy. |
◦ | Expected to add an additional $10-$12 million in annual revenue |
◦ | Establishes national clinical sales footprint |
◦ | Combined company has an industry leading biomarker and genomic portfolio in over 8 of the top 10 cancers, including an FDA-cleared and Medicare reimbursed test for tumors of unknown origin, Tissue of Origin (TOO™) |
◦ | CGI intends to develop the Los Angeles facility into a center of excellence in solid tumors, with a particular emphasis on lung and colorectal cancers, which are among the top five most commonly diagnosed cancers in the United States |
• | Formally launched our strategic alliance with ICON Central Laboratory, which will help to satisfy the need among biotechnology and pharmaceutical companies for more efficient and comprehensive testing and monitoring solutions by integrating CGI’s specialized, genomic and biomarker testing to ICON’s laboratory solutions. |
◦ | ICON is a $1.5 billion global CRO industry leader specializing in Phase I through Phase IV clinical trial testing with significant experience in managing oncology trials |
◦ | This partnership will provide clients access to combined expertise in large scale oncology-focused genomic testing, disease-specific proprietary genomic panels and world-class bioinformatics |
◦ | Tests and services offered by Cancer Genetics through ICON will be branded as “POWERED BY CGI” |
• | Reported results from two independent cervical cancer studies focused on evaluating the clinical utility and sensitivity of CGI’s FHACT® test for the detection of cervical cancer and pre-cancer at the 30th International Papillomavirus Conference and Clinical and Public Health Workshops. |
◦ | Studies were independently conducted by the National Cancer Institute (NCI) in the U.S. and Kamineni Hospital in Hyderabad, India, respectively. |
◦ | The NCI study included 296 patients and the FHACT test demonstrated 96.9% sensitivity when used to evaluate samples preserved in liquid cytology |
◦ | The Kamineni Hospital study included 200 patients and the FHACT test was used in conjunction with molecular detection of HPV, and other methods, and demonstrated 94% sensitivity and specificity |
◦ | Both studies support the further evaluation and development of FHACT as a molecular diagnostic tool to improve the management of HPV-related cancers and reduce the costs associated with patient management globally |
• | Expanded significantly the patent portfolio in cancer diagnostics. |
◦ | Received a third U.S. patent directed to a separate proprietary aspect of our unique FHACT test from the U.S. Patent & Trademark Office |
◦ | Gained three U.S. patents from the acquisition of RGI related to the FDA-cleared, and Medicare reimbursed TOO test |
◦ | Increased overall patent portfolio to 30 U.S. patents and 84 global patents focused on oncology diagnostics, cancer detection and therapeutic selection |
• | Priced public offering that is expected to result in $12.0 million in gross proceeds to CGI that will be utilized to support and accelerate the RGI integration and further strengthens CGI’s balance sheet to support additional market penetration initiatives. |
• | Secured in-network provider agreements with several significant payer groups, including: Blue Cross Blue Shield of Illinois, Blue Cross Blue Shield of North Carolina, Harvard Pilgrim Healthcare, Blue Cross Blue Shield Nebraska, and Wellmark, Inc., which is comprised of the Blue Cross Blue Shield networks in Iowa and North Dakota. |
◦ | CGI’s total covered lives are now over 50 million in the U.S. through agreements with third-party payers and healthcare organizations |
"CGI continues to execute well on its bench to bedside strategy. Going forward, we expect to benefit from increased demand and complexity in clinical trials and from our well-positioned offering for the clinical oncology community,” concluded Sharma.
CGI will also be providing slides with an overview of the results and select discussion points; they will be available at http://ir.cancergenetics.com/presentations.
Conference Call & Webcast
Tuesday, November 10, 2015 at 8:30 a.m. Eastern Time/5:30 a.m. Pacific Time
Domestic: 877-407-4018
International: 201-689-8471
Conference ID: 13622111
Webcast: http://public.viavid.com/player/index.php?id=116550
Replays - Available through November 24, 2015
Domestic: 877-870-5176
International: 858-384-5517
Conference ID: 13622111
Note: To confirm compatibility with your operating system, please dial in ten minutes prior to the start of the call.
About Cancer Genetics
Cancer Genetics Inc. is an emerging leader in DNA-based cancer diagnostics, servicing some of the most prestigious medical institutions in the world. Our tests target cancers that are difficult to diagnose and predict treatment outcomes. These cancers include hematological, urogenital and HPV-associated cancers.
We also offer a comprehensive range of non-proprietary oncology-focused tests and laboratory services that provide critical genomic information to healthcare professionals, as well as biopharma and biotech companies. Our state-of-the-art reference labs are focused entirely on maintaining clinical excellence and are both CLIA certified and CAP accredited and have the appropriate licensure from several states including New York State.
We have established strong research collaborations with major cancer centers such as Memorial Sloan-Kettering, The Cleveland Clinic, Mayo Clinic and the National Cancer Institute.
For more information, please visit or follow us:
Internet: www.cancergenetics.com
Twitter: @Cancer_Genetics
Facebook: www.facebook.com/CancerGenetics
Investor Contact:
LifeSci Advisors
Hans Vitzthum
Tel: 212.915.2568
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, future growth in research, technology, clinical development and potential opportunities for Cancer Genetics, Inc. products and services, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. Any statements that are not historical fact (including, but not limited to, statements that contain words such as "will," "believes," "plans," "anticipates," "expects," "estimates“, “pro formas”) should also be considered to be forward-looking statements. Forward-looking statements involve risks and uncertainties, including, without limitation, risks inherent in the development and/or commercialization of potential products, risks of cancellation of customer contracts or discontinuance of trials, risks that anticipated benefits from acquisitions will not be realized, uncertainty in the results of clinical trials or regulatory approvals, need and ability to obtain future capital, risks that closing conditions for previously announced financings will not be satisfied, maintenance of intellectual property rights and other risks discussed in the Cancer Genetics, Inc. Forms 10-K for the year ended December 31, 2014 and 10-Q for the quarter ended September 30, 2015 along with other filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. Cancer Genetics, Inc. disclaims any obligation to update these forward-looking statements.
This press release also contains “forward-looking statements” and pro forma information regarding the Company’s acquisition of Response Genetics, Inc. (“Response Genetics”) and the anticipated benefits from the acquisition. The Company cautions that these statements are subject to certain risks, including, but not limited to, the effects of the bankruptcy proceeding on the business of Response Genetics; risks that the Company will not realize the
anticipated benefits of such transaction; risks that the pro forma financial information included in this presentation may not necessarily reflect the Company’s operating results and financial condition following the acquisition.
Cancer Genetics, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
September 30, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
CURRENT ASSETS | |||||||
Cash and cash equivalents | $ | 19,917,926 | $ | 25,554,064 | |||
Accounts receivable, net of allowance for doubtful accounts | 5,165,093 | 5,028,620 | |||||
Other current assets | 1,540,501 | 1,172,750 | |||||
Total current assets | 26,623,520 | 31,755,434 | |||||
FIXED ASSETS, net of accumulated depreciation | 3,778,605 | 4,310,126 | |||||
OTHER ASSETS | |||||||
Restricted cash | 300,000 | 6,300,000 | |||||
Patents | 585,259 | 502,767 | |||||
Investment in joint venture | 300,225 | 1,047,744 | |||||
Goodwill | 3,187,495 | 3,187,495 | |||||
Deposit for acquisition | 880,000 | — | |||||
Other | 324,641 | 1,564 | |||||
Total other assets | 5,577,620 | 11,039,570 | |||||
Total Assets | $ | 35,979,745 | $ | 47,105,130 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES | |||||||
Accounts payable and accrued expenses | $ | 4,437,373 | $ | 3,762,567 | |||
Obligations under capital leases, current portion | 61,079 | 58,950 | |||||
Deferred revenue | 1,173,128 | 544,446 | |||||
Bank term note, current portion | 833,333 | — | |||||
Total current liabilities | 6,504,913 | 4,365,963 | |||||
Obligations under capital leases | 254,021 | 300,385 | |||||
Deferred rent payable and other | 289,319 | 347,840 | |||||
Line of credit | — | 6,000,000 | |||||
Warrant liability | 34,000 | 52,000 | |||||
Acquisition note payable | 657,744 | 560,341 | |||||
Deferred revenue, long-term | 782,818 | 924,850 | |||||
Bank term note | 5,138,783 | — | |||||
Total liabilities | 13,661,598 | 12,551,379 | |||||
STOCKHOLDERS’ EQUITY | |||||||
Preferred stock, authorized 9,764,000 shares, $0.0001 par value, none issued | — | — | |||||
Common stock, authorized 100,000,000 shares, $0.0001 par value, 9,861,340 and 9,821,169 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively | 986 | 982 | |||||
Additional paid-in capital | 114,754,824 | 112,520,268 | |||||
Accumulated (deficit) | (92,437,663 | ) | (77,967,499 | ) | |||
Total Stockholders’ Equity | 22,318,147 | 34,553,751 | |||||
Total Liabilities and Stockholders’ Equity | $ | 35,979,745 | $ | 47,105,130 | |||
Cancer Genetics, Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Revenue | $ | 4,000,332 | $ | 3,221,850 | $ | 12,555,806 | $ | 6,163,895 | |||||||
Cost of revenues | 3,103,227 | 2,565,715 | 9,342,399 | 5,358,872 | |||||||||||
Gross profit | 897,105 | 656,135 | 3,213,407 | 805,023 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 1,801,813 | 1,390,189 | 4,335,235 | 3,092,733 | |||||||||||
General and administrative | 3,487,242 | 3,104,100 | 9,535,723 | 8,230,966 | |||||||||||
Sales and marketing | 1,242,803 | 1,070,531 | 3,543,047 | 2,737,967 | |||||||||||
Total operating expenses | 6,531,858 | 5,564,820 | 17,414,005 | 14,061,666 | |||||||||||
Loss from operations | (5,634,753 | ) | (4,908,685 | ) | (14,200,598 | ) | (13,256,643 | ) | |||||||
Other income (expense): | |||||||||||||||
Interest expense | (111,620 | ) | (36,166 | ) | (227,140 | ) | (408,087 | ) | |||||||
Interest income | 4,906 | 18,789 | 30,288 | 57,130 | |||||||||||
Change in fair value of acquisition note payable | 315,453 | — | (90,714 | ) | — | ||||||||||
Change in fair value of warrant liability | 214,000 | 129,000 | 18,000 | 324,000 | |||||||||||
Total other income (expense) | 422,739 | 111,623 | (269,566 | ) | (26,957 | ) | |||||||||
Loss before income taxes | (5,212,014 | ) | (4,797,062 | ) | (14,470,164 | ) | (13,283,600 | ) | |||||||
Income tax provision (benefit) | — | — | — | (1,813,941 | ) | ||||||||||
Net (loss) | $ | (5,212,014 | ) | $ | (4,797,062 | ) | $ | (14,470,164 | ) | $ | (11,469,659 | ) | |||
Basic net (loss) per share | $ | (0.54 | ) | $ | (0.50 | ) | $ | (1.49 | ) | $ | (1.22 | ) | |||
Diluted net (loss) per share | $ | (0.56 | ) | $ | (0.51 | ) | $ | (1.49 | ) | $ | (1.25 | ) | |||
Basic Weighted-Average Shares Outstanding | 9,726,067 | 9,575,789 | 9,714,824 | 9,386,613 | |||||||||||
Diluted Weighted-Average Shares Outstanding | 9,727,597 | 9,575,789 | 9,716,214 | 9,403,245 | |||||||||||
Cancer Genetics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, | |||||||
2015 | 2014 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net (loss) | $ | (14,470,164 | ) | $ | (11,469,659 | ) | |
Adjustments to reconcile net (loss) to net cash (used in) operating activities: | |||||||
Depreciation | 971,192 | 487,656 | |||||
Amortization | 26,177 | 20,146 | |||||
Provision for bad debts | 212,914 | — | |||||
Equity-based consulting and compensation expenses | 2,177,554 | 2,129,880 | |||||
Change in fair value of acquisition note payable | 90,714 | — | |||||
Change in fair value of Gentris contingent consideration | (162,000 | ) | — | ||||
Change in fair value of warrant liability | (18,000 | ) | (324,000 | ) | |||
Amortization of loan guarantee fees, financing fees and debt issuance costs | 4,960 | 310,500 | |||||
Loss in equity method investment | 747,519 | 659,426 | |||||
Changes in: | |||||||
Accounts receivable | (349,387 | ) | (521,429 | ) | |||
Other current assets | (367,751 | ) | (169,940 | ) | |||
Other non-current assets | (85,856 | ) | — | ||||
Accounts payable, accrued expenses and deferred revenue | 1,330,145 | 985,644 | |||||
Deferred rent and other | (58,521 | ) | (18,050 | ) | |||
Net cash (used in) operating activities | (9,950,504 | ) | (7,909,826 | ) | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Purchase of fixed assets | (439,671 | ) | (944,423 | ) | |||
Decrease (increase) in restricted cash | 6,000,000 | (6,000,000 | ) | ||||
Patent costs | (108,669 | ) | (95,408 | ) | |||
Investment in JV | — | (1,000,000 | ) | ||||
Deposit for acquisition of Response Genetics | (880,000 | ) | — | ||||
Cash used in acquisition of Gentris, net of cash received | — | (3,180,930 | ) | ||||
Cash from acquisition of BioServe | — | 311,264 | |||||
Net cash provided by (used in) investing activities | 4,571,660 | (10,909,497 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Principal payments on capital lease obligations | (44,235 | ) | (21,554 | ) | |||
Payments for deferred equity offering costs | (237,221 | ) | — | ||||
Proceeds from warrant exercises | — | 178,102 | |||||
Proceeds from option exercises | 23,480 | 79,018 | |||||
Proceeds from offering of common stock, net of offering costs | 33,526 | — | |||||
Principal payments on notes payable | — | (127,532 | ) | ||||
Payment of debt issuance costs | (32,844 | ) | — | ||||
Net cash provided by (used in) financing activities | (257,294 | ) | 108,034 | ||||
Net (decrease) in cash and cash equivalents | (5,636,138 | ) | (18,711,289 | ) | |||
CASH AND CASH EQUIVALENTS | |||||||
Beginning | 25,554,064 | 49,459,564 | |||||
Ending | $ | 19,917,926 | $ | 30,748,275 | |||
SUPPLEMENTAL CASH FLOW DISCLOSURE | |||||||
Cash paid for interest | $ | 157,603 | $ | 92,692 | |||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES | |||||||
Fixed assets acquired through capital lease arrangements | $ | — | 40,922 | ||||
Cashless exercise of derivative warrants | — | 125,000 | |||||
Value of shares issued as partial consideration of Gentris and BioServe | — | 1,515,992 | |||||
Net tangible assets acquired via acquisition | — | 1,255,084 | |||||
November 10, 2015 Q3 2015 Earnings Call
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call Forward-Looking Statements These slides contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, future growth in research, technology, clinical development and potential opportunities for Cancer Genetics, Inc. products and services, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management constitute forward-looking statements. Any statements that are not historical fact (including, but not limited to, statements that contain words such as "will," "believes," "plans," "anticipates," "expects," "estimates“, “proformas”) should also be considered to be forward-looking statements. Forward-looking statements involve risks and uncertainties, including, without limitation, risks inherent in the development and/or commercialization of potential products, risks of cancellation of customer contracts or discontinuance of trials, risks that anticipated benefits from acquisitions will not be realized, uncertainty in the results of clinical trials or regulatory approvals, need and ability to obtain future capital, risks that closing conditions for previously announced financings will not be satisfied, maintenance of intellectual property rights and other risks discussed in the Cancer Genetics, Inc. Forms 10-K for the year ended December 31, 2014 and 10-Q for the quarter ended September 30, 2015 along with other filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. Cancer Genetics, Inc. disclaims any obligation to update these forward-looking statements. These slides also contain “forward-looking statements” and proforma information regarding the Company’s acquisition of Response Genetics, Inc. (“Response Genetics”) and the anticipated benefits from the acquisition. The Company cautions that these statements are subject to certain risks, including, but not limited to, the effects of the bankruptcy proceeding on the business of Response Genetics; risks that the Company will not realize the anticipated benefits of such transaction; and risks that the proforma financial information included in this presentation may not necessarily reflect the Company’s operating results and financial condition following the acquisition. 2
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call 3rd Quarter 2015 Revenue Highlights $6.9M PROFORMA REVENUE WITH RESPONSE ACQUISITION 24% REVENUE GROWTHFROM Q3 2014 Q3 TOTAL REVENUE GREW FROM $3.2M TO 2014 2015 * The proforma revenue numbers above may not be indicative of the consolidated results in the future. Acquisition completed October 9, 2015. 0 1 2 3 4 5 6 7 Q3 2012 Q3 2013 Q3 2014 Q3 2015 Pro Forma with Response $1.2 $1.7 $3.2 $4.0 $6.9 ($ in M ill io n s ) 3 3 2015 Proforma with Response
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call Revenues By Category 65% 29% 6% Q3 2015 $3.2 MN $4.0 MN BIOPHARMA SERVICES Continued growth in contracts for future – now $34 MN Entered into partnership with ICON to offer Cancer Genetics’ services $2.6 MN CLINICAL SERVICES Closed acquisition of Response Genetics on October 9, 2015 Two independent cervical cancer studies focused on CGI’s FHACT® test reported high sensitivity and specificity $1.1 MN DISCOVERY SERVICES New research studies with leading cancer centers and academic institutions Continued growth provides entry point for future revenue opportunities $0.3 MN 60% 38 % 2% Q3 2014 4
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call 3rd Quarter 2015 Financial Highlights Q3 2015 revenues were $4.0 million, a 24% increase over Q3 2014 revenues of $3.2 million. Revenue from Biopharma Services grew 35% , Clinical Services decreased slightly by 7% and Discovery Services grew 356% year-over-year during the third quarter. Total operating expenses were $6.5 million, an increase of 17% year-over-year during the third quarter. Gross margin percentage improved to 22% (from 20% in Q3 2014) due to improved utilization. Sales and Marketing expenses increased slightly by 16% from $1.1 million to $1.2 million, of which $0.3 million included costs due to increased Biopharma sales, year-over-year during third quarter. Net loss for the quarter was $5.2 million, or $0.56 per diluted share, compared to a net loss of $4.8 million, or $0.51 per diluted share, in the third quarter of 2014. Cash and cash equivalents was $19.9 million as of September 30, 2015, before the closing of RGI. Shareholder’s equity was $22.3 million as of September 30, 2015, before the closing of RGI. 5
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call Income Statement Items ($ in Thousands) Q3 2015 Q3 2014 9 mos 2015 9 mos 2014 Revenue $4,000 $3,221 $12,556 $6,164 Gross Profit $897 $656 $3,213 $805 Gross Margin (%) 22% 20% 26% 13% Research & Development (R&D) $1,802 $1,390 $4,335 $3,093 Sales & Marketing (S&M) $1,243 $1,071 $3,543 $2,738 General & Administrative (G&A) $3,487 $3,104 $9,536 $8,231 Operating Profit (Loss) ($5,635) (4,909) ($14,201) ($13,257) Net Income (Loss) ($5,212) ($4,797) ($14,470) ($11,470) Non Cash Adjustments $47 $872 $2,859 $2,509 Net Income (Loss) Excluding Non Cash Items+ ($5,165) ($3,923) ($11,661) ($8,961) Summary Statement of Operations +This is non GAAP measure. Adjustments for Q3 2015 and Q3 2014 are depreciation ($299 and $280), equity compensation ($ 725 and $836) and other ($977 and $244) respectively. Adjustments for 9 months are depreciation ($997 and $508), equity compensation ($2,178 and $2,130) and other ($316 and $129) respectively. 6
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call Highlights of Response Genetics Acquisition Response Genetics is an oncology-focused central laboratory with a specialty in solid tumors headquartered in Los Angeles, CA. Closed on October 9, 2015 Core business in solid tumor molecular diagnostics and bio-marker testing Lung cancer, colorectal cancer, melanoma and brain cancer Majority of revenue from clinical operations 85-90% Clinical and 10-15% Biopharma based on historical revenues. FDA-cleared, Medicare-reimbursed Tissue of Origin® test launched in Q1 2014 $61M invested in this test – acquired from PathWork Diagnostics Separate Medicare code for Tissue of Origins® reimbursed at ~$3,000. 3,000+ clinical ordering sites Potential of $10-12 million of revenue contribution in first 12 months after acquisition. Potential of $5 million of cost synergies – progressing well Awarded multi-million dollar ALCHEMIST trial contract with NCI in Q2 2014 Focus of ALCHEMIST trial is lung cancer ALCHEMIST testing volume is steadily increasing. Focused on solid tumor genetic and biomarkers - including lung, colorectal and melanoma. 75 Employees CLIA Certified CAP Accredited NYS License 27,000 sq. ft. HIGHLIGHTS 7
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call Tissue of Origin® Competitor Comparison CRITERIA Tissue of Origin® CancerTYPE ID™ Cancer Origin Test™ EXTERN A L REVIE W FDA CLEARED Yes No No MEDICARE COVERED Yes Yes Yes PEER-REVIEWED PUBLICATIONS 23 21 6 V A L ID A T IO N STUD Y NUMBER OF GENES MEASURED 2,000 92 64 ACCURACY (measured as Positive Percent Agreement; akin to sensitivity) 89%(1) 85%(2) 74 % or 85%(3) (algorithm dependent) CERTAINTY FOR RULE-OUTS (measured as Negative Percent Agreement; akin to specificity) 99% 99% 99 % (1 algorithm only; Rule-outs not reported) LOWEST PUBLISHED ACCURACY FOR AN INDIVIDUAL TISSUE 72% (Gastric) 48% (Endometrium) Not Published NUMBER OF INDIVIDUAL TISSUES WITH AT LEAST 25 PUBLISHED VALIDATION SPECIMENS (at least 25 specimens recommended for statistically relevant calculations) 100% of all reported (17 tissue types) 37% of all reported (28 tissue types) 2% of all reported (1 tissue type) (1) Pillai et al. Microarray-based gene expression assay for identification of primary site using FFPE tissue. J Molec Diag 13 2011;13:48-56. Jan. 2011. (2) Kerr et al. Multisite validation study to determine performance characteristics of a 92-gene molecular classifier. Clinical Cancer Research, Published online May 30, 2012. Recalculated including unclassifiable cases. (3) Meiri et al. A second generation microRNA-based assay for diagnosing tumor tissue of origin. Oncologist 2012 May 22. 8
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call Proforma Revenue with Response Genetics * The proforma revenue numbers above may not be indicative of the consolidated results in the future. Acquisition completed October 9, 2015. $6.6 $10.2 $12.6 $19.8 $16.7 $10.0 $26.4 $26.9 $22.6 2013 2014 Thru 9/30/2015* CANCER GENETICS RESPONSE GENETICS PROFORMA ($ I N M IL L ION S ) +$32M PROFORMA ANNUAL REVENUE RUN RATE* ~$4.5M ADDITIONAL POTENTIAL REVENUE FROM BIOPHARMA TRIALS HIGHLIGHTS * 9/30/2015 based on preliminary results, subject to finalization. CUSTOMER RECEPTION OF CGI OWNERSHIP VERY POSITIVE SINCE CLOSING 9
Cancer Genetics, Inc. | NASDAQ: CGIX | Q3 2015 Earnings Call Expense Synergies for Response Acquisition Management estimates expense savings of more than $5 million in the first year of acquisition Consolidation of common functions including Billing, Accounting, Quality Assurance, Information Technology, Purchasing, Legal and Human Resources. Consolidated and improved efficiency of Sales and Marketing. Elimination of public company costs including executive and Board of Director’s at Response Genetics. Increased efficiency in savings with external providers, vendors and service professionals. 10
THE ONCOLOGY DIAGNOSTICS PARTNER FROM BENCH TO BEDSIDE CGI Headquarters 201 Route 17 North Rutherford, NJ 07070 Phone: +1 201-528-9200 Fax: +1 201-528-9235 RUTHERFORD, NJ Research Triangle Park 133 Southcenter Court Morrisville, NC 27569 Phone: +1 919-465-0100 Fax: +1 919-465-0554 RALEIGH, NC LOS ANGELES, CA 1640 Marengo Street Seventh Floor Los Angeles, CA 90033 Phone: +1 323-224-3900 Fax: +1 323-224-3096 #3-1-135/1A CNR Complex Mallapur Main Road, R.R. Dst. Hyderabad – 500 076, Telangana Toll-free: +91 040-2717-8178 Fax: +91 040-2717-8176 HYDERABAD, INDIA 781 Cai Lun Road, Room 803 Shanghai 201203 P.R. China Toll-free: +91 040-2717-8178 Fax: +91 040-2717-8176 SHANGHAI, CHINA WWW.CGIX.COM WWW.CANCERGENETICS.COM
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