Investors did not give Response Genetics Inc. a clean bill of health after the East L.A. biotech company reported earnings below their expectations.
Response Genetics reported a net loss of $3.5 million (-9 cents a share) for the first quarter compared with a net loss of about $800,000 (-3 cents a share) for the same period a year earlier. Revenue for the quarter was $3.9 million, down 30 percent from the previous year.
As a result, shares plunged 16 percent during the week ended May 14 to close at 97 cents, making the company one of the biggest losers on the LABJ Stock Index. (See Page 58.)
On a conference call after earnings were reported May 8, Chief Executive Thomas Bologna said that the company’s disappointing financial results obscured its upward trajectory because Response Genetics is preparing for future growth with investments in infrastructure and acquisitions.
“If one simply measures our success by this last quarter … I believe we are missing the undertones of why we expect 2014 to be a transformable year for our company,” Bologna said.
Response Genetics’ core business is developing diagnostic tests for cancers that affect the lung, colon, digestive systems and skin. Its technology allows doctors to extract genetic information from cancerous tumors, helping them better customize treatments for patients suffering from the disease. The company also sells pharmaceutical companies testing services for specimens from clinical trial subjects.
While Bologna acknowledged that a dip in Response Genetics’ pharmaceutical business adversely affected the company’s quarterly financial performance, he pointed to anticipated future growth in diagnostic testing as something that should boost its fortunes. He said the company’s recent investments in infrastructure and its recent purchase of a small diagnostic company will drive growth.
“It’s a company in transition,” said Peter Rahmer, a vice president at strategic advisory firm Trout Group in San Francisco, the company’s investor relations spokesman. “They’ve put in a number of initiatives throughout the course of last year that should really start bearing some fruit this year.”
Response Genetics has yet to turn a profit. Rahmer said it is “very much in growth mode.”
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