By a News Reporter-Staff News Editor at Biotech Week -- Transgenomic, Inc. (NASDAQ:TBIO) reported financial results for the second quarter ended June 30, 2014, and provided a business update. Second Quarter Financial Results Net sales for the second quarter of 2014 were $6.8 million compared with $7.3 million for the same period in 2013. The year-to-year decline is attributable to a $0.3 million decrease in the Genetic Assays and Platforms segment, due to fewer instrument sales, and a $0.2 million decrease in the Laboratory Services segment, resulting from lower sales of contract development services to pharmaceutical clients. Partially offsetting the decline in contract lab services were higher sales of patient tests, spurred by a number of new products launched in late 2013. Net sales in the second quarter of 2014 showed a nearly double-digit increase over net sales in the first quarter of 2014, including a second consecutive quarter of increases in the patient testing business (see also Transgenomic, Inc.).
Gross profit was $2.4 million, or 35 percent of net sales, compared with gross profit of $3.0 million or 41 percent of net sales for the same period in 2013. Gross profit decreased approximately $0.6 million as a result of fewer instrument sales in the Genetic Assays and Platforms segment and the impact of lower sales in the Laboratory Services segment.
Operating expenses were $6.3 million during the second quarter of 2014, compared with $5.9 million in the prior year. The increase in operating expenses was primarily due to higher non-cash stock compensation costs and a higher bad debt provision in the second quarter of 2014 as compared to the second quarter of 2013.
In the second quarter of both 2014 and 2013, there was $0.2 million of non-cash income related to warrant revaluation. This income for each period resulted from a lower value being assigned to the warrants.
The net loss for the second quarter of 2014 was $3.9 million or $0.57 per share, compared with a net loss of $2.9 million or $0.41 per share for the second quarter of 2013.
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 $3.2 million for the second quarter of 2014, compared to a $2.2 million loss for the same period in 2013. A reconciliation of Net Loss to Modified EBITDA is presented below.
Cash and cash equivalents were $1.2 million as of June 30, 2014, compared with $1.6 million as of December 31, 2013. After the close of the quarter, in July 2014, the Company sold the rights to its SURVEYOR Nuclease technology and assets for a minimum of $4.25 million. The net proceeds from this sale will be used to pay down debt under the Company's revolving credit facility, which may be redrawn as needed, and for working capital and other general corporate purposes. Six Month Financial Results Net sales for the six months ended June 30, 2014 were $13.0 million compared with $14.7 million for the same period in 2013. The decline includes an 11 percent decrease in the Laboratory Services segment, which resulted from lower sales of contract laboratory services and from a higher than usual level of sales in the first half of 2013 that resulted from working down a backlog of Nuclear Mitome tests from the previous year. These decreases were partially offset by higher sales of patient tests, reflecting revenues from a number of new products launched in late 2013, and a continuing increase in revenues from our core patient testing products. In the Genetic Assays and Platforms segment, net sales for the six months ended June 30, 2014 declined 12 percent as compared to the same period in 2013 as a result of fewer instrument sales.
Gross profit was $4.9 million or 38 percent of net sales, compared with gross profit of $6.2 million, or 42 percent of net sales, for the same period in 2013. The decrease was largely attributable to the impact of lower sales of contract laboratory services and fewer instrument sales in the Genetic Assays and Platforms segment.
Operating expenses were $12.4 million during the first half of 2014, compared with $13.0 million in the first half of 2013. The decrease is mainly due to lower bad debt provisions in the first half of 2014 as compared to 2013, along with lower salaries and employee-related costs due to a mid-year 2013 reduction in our Laboratory Services sales force. These decreases were partially offset by increased non-cash stock compensation costs.
For the six months ended June 30, 2014 and 2013, non-cash income related to warrant revaluation was $0.3 million and $0.6 million, respectively.
The net loss for the six months ended June 30, 2014 was $8.1 million or $1.17 per share compared with a net loss of $6.5 million, or $0.95 per share, for the comparable period of 2013.
Paul Kinnon, President and Chief Executive Officer of Transgenomic, commented, "During the second quarter, we continued to make progress putting in place the elements needed to reach our goal of creating a revitalized company. Operationally, our patient testing business continues to show renewed strength, with revenues again growing sequentially quarter over quarter. We expect that this trend will continue in the third quarter, along with growth from new projects in our contract services laboratory."
Mr. Kinnon continued, "Strategically, we have executed on a number of actions that illustrate our roadmap for creating shareholder value. Importantly, during the quarter the company finalized two transactions that are foundational to our strategy. The first was our exclusive license from Dana-Farber Cancer Institute for the multiplexed version of our groundbreaking ICE COLD-PCRTM technology, which makes possible the simultaneous detection of multiple DNA mutations from a single liquid sample, such as blood or urine, or from tissue. Multiplexing makes ICE COLD-PCR far more efficient and allows us to assemble targeted panels of relevant mutations, which should greatly increase its utility for routine use in cancer therapy, as well as for biopharmaceutical customers who will use the technology to develop new cancer treatments and companion diagnostics."
"The second transaction involved the redeployment of a non-core asset," said Mr. Kinnon. "The sale of our SURVEYOR Nuclease technology to IDT for the research market allows us to focus more resources on commercialization efforts in our core businesses. By licensing back exclusive rights to clinical and diagnostic uses, we ensured our continued access to SURVEYOR in high value applications. The monetization of this asset will also contribute to the expedited development and commercialization of ICE COLD-PCR. Other actions during the quarter included our uplisting to NASDAQ, which is important symbolically and also brings the company enhanced visibility and liquidity. We also added to our Board another outstanding business leader with extensive life science experience-the second high-caliber individual we have recruited in the past few months."
Keywords for this news article include: Cancer, Genetics, Oncology, Technology, Transgenomic Inc, Investment and Finance.
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