Response Genetics (RGDX) announced today that it has entered purchase agreements with private investors including current holders to raise more than $7.8M with placement of 5.3M un-registered shares of common stock at a price of $1.50. Board members and management participated in the offering. Institutions are still major holders, about 33% of the outstanding shares with little change over the past year but we will see the recent Q4 2011 positions in about 30 days.With 5.3M newly issued shares added to the 19.5M outstanding gives RGDX a market cap of about $38M.Up to now share trading volume has been low to non-existent due to lack of news and a low stock price.
Third Quarter Revenues were $5.1M, a decrease of 9% over the same period of the prior year. Assuming a $5M quarterly running rate for 2012 the valuation of the Company would be a modest 1.9X Revenue so any upside on revenues would be positive. The Net Loss over nine months of 2011 was $0.09/share a steady improvement over prior quarters.Revenues for 2012 will be highly dependent on relationships with large pharmaceutical players such as GlaxoSmithKline (GSK) that could result in development of companion diagnostics for targeted cancer therapies.The Company also markets its own lab developed tests (LDT’s) using a dedicated sales force in the US. The Response Genetics product line includes predictive biomarkers for lung and colon cancer to assist physicians with treatment decisions. Among the commonly used genetic tests being marketed are BRAF, EGFR, and KRAS.
One outstanding issue is May 14 compliance deadline with NASDAQ that requires a $35M market value for 10 consecutive business days, should be helped by this raise.
On December 21 the Company received FDA approval for a FISH based ALK test for NSCLC (non-small cell lung cancer). A core technology of the Company is extraction and analysis of genetic information from genes derived from tumor samples stored as formalin-fixed and paraffin- embedded specimens.
Disclosure: we have a small position in the stock.