LOS ANGELES--(BUSINESS WIRE)--Response Genetics Inc. (Nasdaq: RGDX), a company focused on the development and sale of molecular diagnostic tests for cancer, today announced its consolidated financial results for the three and nine months ended September 30, 2009.

“This has been an exciting quarter for Response Genetics with growth of our ResponseDX™ tests, our revenue increased 100 percent from the second quarter of this year with a current run rate of approximately 1,800 tests per quarter,” said Kathleen Danenberg, Response Genetics president and CEO. “This increase was driven by the rapid adoption of our diagnostic tests by oncologists and the addition of EGFR mutational analysis to the ResponseDX: Lung™ panel. This addition doubled our reimbursement from payors from approximately $1,000 to $1,950. In addition, we launched our ResponseDX: Gastric™ test, illustrating our ability to develop and bring new diagnostic products to market. We continue to be encouraged by our sales growth and outlook for ResponseDX™ diagnostic tests for lung, colon and gastric cancer.”

Recent Corporate Development Highlights

• ResponseDX™ Test Sales Continue to Ramp – More than 1,250 ResponseDX™ genetic tests were ordered in the third quarter of this year. Revenue recorded from ResponseDX™ sales in the third quarter more than doubled to $915,000 from $446,000 in the second quarter 2009. Based on generally accepted accounting principles, the Company continues to record revenues primarily on a cash basis from certain insurance providers until collection patterns are better determined. Cash collections continue to increase and we expect the cash associated with the majority of the tests processed during the third quarter of 2009 will be collected in the fourth quarter of 2009.
• Increased Reimbursement Due to Expanded ResponseDX™ Panels – With the addition of epidermal growth factor receptor (EGFR) mutational analysis, reimbursement of the Company’s ResponseDX: Lung™ panel increased from approximately $1,000 to $1,950, and ResponseDX: Colon™ test from approximately $950 to $1,200 with the addition of EGFR mutational analysis, VEGFR2 gene expression and BRAF mutational analysis. Approximately 50 percent of our ResponseDX™ revenue during the third quarter was derived from our expanded ResponseDX: Lung™ panel. Response Genetics’ flexible technology allows the addition of new analytic capabilities as genes associated with therapeutic benefit to chemotherapy agents are identified.
• New ResponseDX™ Panel Launched Nationally – In September 2009, Response Genetics announced the nation-wide availability of its newest test panel, ResponseDX: Gastric™, a proprietary PCR-based diagnostic test that quantitatively analyzes three key genes – ERCC1, TS and HER2 – in tumors to help physicians make treatment decisions for patients with gastric cancer and gastroesophageal (GE) junction cancer.

Third Quarter 2009 Results

Total revenue increased by 15 percent to $2.3 million for the third quarter ended September 30, 2009, compared to $2.0 million for the same period last year. Revenue from our ResponseDX™ genetic tests, which we started to sell in the third quarter of 2008, increased more than 100 percent over the second quarter of 2009 to approximately $915,000. Our pharmaceutical client revenue decreased 29 percent to $1.3 million, compared to the third quarter of 2008. As previously announced, this decrease was primarily due to a delay in the receipt of clinical samples from one of our major pharmaceutical clients, which the Company anticipates receiving in subsequent quarters in 2009 through 2010.

Cost of revenue for the third quarter ended September 30, 2009 was $1.2 million, compared with $1.0 million for the same period in 2008. Research and development expenses were $0.7 million for the third quarter of 2009, compared with $0.4 million for the same period in the prior year. General and administrative expenses were $1.3 million for the third quarter of 2009, compared with $2.1 million for the same period in 2008. Selling and marketing costs primarily related to the expansion of our ResponseDX™ tests totaled $0.9 million. Operating costs for our now closed United Kingdom Lab decreased to $0.1 million for the third quarter of 2009, compared to $0.7 million for the same period in 2008. Total operating expenses for the third quarter of 2009 were $4.2 million, compared with $4.2 million for the same period last year. Included in total operating expenses were costs related to the launch of the Company’s ResponseDX™ tests, and its costs related to marketing and its sales force expansion, which totaled $0.9 million for the third quarter. Increases in operating expenses were offset by lower costs for the operations of our United Kingdom lab due to the closure of that facility.

Response Genetics’ net loss for the third quarter ended September 30, 2009 was $2.0 million, or $0.14 per share, compared with a net loss of $2.2 million, or $0.21 per share, for the same period last year.

Nine months ended September 30, 2009

Total revenue was $5.7 million for the nine months ended September 30, 2009, compared to $5.7 million for the same period last year. Revenue from our ResponseDX™ genetic tests totaled approximately $1.6 million. Our pharmaceutical client revenue decreased 27 percent to $4.1 million. As previously announced, this decrease was primarily due to a delay in the receipt of clinical samples from one of our major pharmaceutical clients, which the Company anticipates receiving in subsequent quarters in 2009 through 2010.

Cost of revenue for the nine months ended September 30, 2009 was $3.6 million, compared with $2.8 million for the same period in 2008. Research and development expenses were $1.7 million for the nine months of 2009, compared with $1.7 million for the same period in the prior year. General and administrative expenses were $4.4 million for the nine months of 2009, compared with $5.6 million for the same period in 2008. Selling and marketing costs primarily related to the expansion of our ResponseDX tests totaled $2.8 million for the nine months of 2009. Operating costs for our now closed United Kingdom Lab decreased to $0.7 million for nine months of 2009 compared to $1.9 million for the same period in 2008. Total operating expenses for the nine months of 2009 were $13.3 million, compared with $12.1 million for the same period last year. The primary reasons for the increase in total operating expenses were costs related to the launch of the Company’s ResponseDX™ tests and its sales force expansion, which totaled $2.8 million for the third quarter. These expenses were partially offset by lower costs for the operations of our United Kingdom lab due to the closure of that facility.

Response Genetics’ net loss for the nine months ended September 30, 2009 was $7.6 million or $0.60 per share, compared with a net loss of $6.1 million, or $0.60 per share, for the same period last year.

Cash and Cash Equivalents

Cash and cash equivalents at September 30, 2009, were $9.3 million, compared to $9.5 million at December 31, 2008. As previously announced, Response Genetics completed a private placement of approximately 3.1 million newly issued common shares at a per-share price of $1.30. The Company received net proceeds of approximately $4.0 million from this private placement on July 22, 2009.

About Response Genetics, Inc.

Response Genetics, Inc. (“RGI”) (the “Company”) (Nasdaq: RGDX) is focused on the development and sale of molecular diagnostic tests for cancer. RGI’s technologies enable extraction and analysis of genetic information from genes derived from tumor samples stored as formalin-fixed and paraffin-embedded specimens. In addition to diagnostic testing services, RGI generates revenue from the sales of its proprietary analytical pharmacogenomic testing services of clinical trial specimens to the pharmaceutical industry. The Company was founded in 1999 and its principal headquarters are located in Los Angeles, California. For more information, please visit www.responsegenetics.com.

Forward-Looking Statement Notice

Except for the historical information contained herein, this press release and the statements of representatives of RGI related thereto contain or may contain, among other things, certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to the Company’s plans, objectives, projections, expectations and intentions, such as defining, targeting and individualizing therapies for cancer patients, the ability of the Company to offer its ResponseDX tests, the ability of the Company to offer EGFR mutation analysis, the ability of the Company to offer its ResponseDX: Gastric test panel, to continue to expand its test panels, the use of predictive biomarkers for personalizing therapy, the ability of the Company to continue to collect revenues on sales of its ResponseDX tests, the cost-effectiveness of test panels, and other statements identified by words such as “projects,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions.

These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission. Actual results, including, without limitation, actual sales results, if any, or the application of funds, may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control). The Company undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise, except as required by law.

RESPONSE GENETICS, INC. CONSOLIDATED BALANCE SHEETS
		December 31, 2008				September 30, 2009
						(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	9,545,000			$	9,299,183
Accounts receivable, net			2,119,496				1,704,362
Prepaid expenses and other current assets			399,612				434,273
Total current assets			12,064,108				11,437,818
Property and equipment, net			1,414,842				1,300,840
Other assets			69,103				69,102
Total assets		$	13,548,053			$	12,807,760
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	545,971			$	871,153
Accrued expenses			513,868				531,259
Accrued royalties			526,712				555,641
Accrued payroll and related liabilities			154,185				373,093
Deferred revenue			2,580,498				2,123,590
Total current liabilities			4,321,234				4,454,736
Deferred revenue, net of current portion			2,355,948				2,277,709
Total liabilities			6,677,182				6,732,445
Commitments and contingencies
Stockholders’ equity
Common stock, $0.01 par value; 50,000,000 shares authorized; 10,239,276 and 15,297,183 shares issued and outstanding at December 31, 2008 and September 30, 2009, respectively			102,393				152,972
Additional paid-in capital			36,805,932				43,542,320
Accumulated deficit			(29,805,729	)			(37,423,960	)
Accumulated other comprehensive loss			(231,725	)			(196,017	)
Total stockholders’ equity			6,870,871				6,075,315
Total liabilities and stockholders’ equity		$	13,548,053			$	12,807,760

RESPONSE GENETICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2008				2009				2008				2009
Revenue		$	1,957,030			$	2,259,523			$	5,683,409			$	5,694,988
Operating expenses:
Cost of revenue			1,025,383				1,175,615				2,849,482				3,646,358
Selling and marketing			-				934,946				-				2,759,108
General and administrative			2,101,864				1.305,247				5,580,186				4,453,204
UK operating expenses			688,794				21,645				1,939,828				465,910
UK redundancy costs			-				66,140				-				268,374
Research and development			410,469				726,696				1,719,013				1,734,223
Total operating expenses			4,226,510				4,230,289				12,088,509				13,327,177
Operating loss			(2,269,480	)			(1,970,766	)			(6,405,100	)			(7,632,189	)
Other (expense):
Interest expense			(58	)			(2,360	)			(3,027	)			(8,199	)
Interest income			76,087				256				319,383				22,157
Other			(2,266	)			-				(3,692	)			-
Net loss		$	(2,195,717	)		$	(1,972,870	)		$	(6,092,436	)		$	(7,618,231	)
Unrealized gain (loss) on foreign currency translation			5,270				18,467				-				35,708
Total comprehensive loss		$	(2,190,447	)		$	(1,954,403	)		$	(6,092,436	)		$	(7,582,523	)
Net loss per share — basic and diluted		$	(0.21	)		$	(0.14	)		$	(0.60	)		$	(0.60	)
Weighted-average common shares — basic and diluted			10,239,276				14,599,182				10,239,276				12,594,995

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