Berlin, Germany and Seattle, WA, U.S.A., May 11, 2009 - Epigenomics AG (Frankfurt, Prime Standard: ECX), a cancer molecular diagnostics company developing tests based on DNA methylation, today reported financial results for the first quarter of 2009, which ended March 31, 2009.
“We are very pleased with the strong operational start we’ve had in 2009 and are excited about the significant progress we have made in our product development and commercial partnerships during the first quarter,” commented Geert Nygaard, Chief Executive Officer of Epigenomics. “With the additional 5.2 million Euro in liquidity provided by the capital increase in early 2009 and our continued financial discipline, we remain committed to delivering on our business goals and product development as well as commercial milestones. In 2009 our efforts will be dedicated to successfully completing the PRESEPT Study and launching our colorectal cancer blood test in Europe and the US. The positive outcome of our clinical evaluation study in lung cancer has prompted us to initiate the product development of a lung cancer diagnostic test. We expect to launch this test in Europe as a CE marked test kit in the first half of 2010” Geert Nygaard added.
Financial Review
Revenue in Q1 2009 increased by 36% to EUR 1.24 million from EUR 0.92 million in the corresponding period of 2008. This increase was due to milestones received for the execution and expansion of the Abbott partnership, new collaboration agreements with Philips and Sysmex Corporation, as well as the successful completion of several biomarker collaboration projects with Johnson & Johnson, Centocor, Pfizer and others during Q1 2009. The diagnostics business contributed 70% to total revenue, or EUR 0.87 million and biomarker services revenue was EUR 0.37 million (30%).
Cost of sales rose to EUR 0.95 million in the reporting period of Q1 2009 (Q1 2008: EUR 0.16 million) and generated a gross profit of EUR 0.29 million (Q1 2008: EUR 0.76 million). R&D costs decreased from EUR 2.40 million in the first three months of 2008 to EUR 1.76 million in Q1 2009.
Marketing and business development costs decreased by 6% from EUR 0.23 million in Q1 2008 to EUR 0.21 million in Q1 2009, and general and administrative costs of EUR 0.84 million decreased approximately 9% compared to EUR 0.92 million in Q1 2008. Other expenses decreased considerably from EUR 0.30 million in Q1 2008 to EUR 0.05 million in Q1 2009 mainly due to foreign exchange rate effects.
In Q1 2009, EBIT was EUR –2.31 million, almost 22% better than the Q1 2008 EBIT of EUR –2.95 million. Net loss for the first three months in 2009 decreased by 16% from Q1 2008 (EUR 2.9 million) to EUR 2.87 million for the same reporting period. The improvement was foremost due to significant growth in revenue generated and continued fiscal discipline.
Epigenomics’ balance sheet total increased from EUR 20.28 million as of December 31, 2008, to a total of EUR 23.13 million as of March 31, 2009.
This increase was in part due to a successful capital increase, which strengthened Epigenomics’ cash flow and financial position in addition to a decrease in net cash consumption from operations. In February 2009, the Company successfully placed 2,671,088 new shares in a direct private placement with two European institutional investors, namely a 100% subsidiary of Swiss BB Medtech AG, and UK-based Abingworth LLP. The issue price was EUR 1.94 per share, which was a 5% premium to the five-day trading volume-weighted average trading price preceding the announcement of the capital increase. Epigenomics intends to use the proceeds from this transaction to finalize the product development and commercialization of its most advanced product, a blood-based molecular diagnostic test for the early detection of colorectal cancer. Remaining proceeds will be used for clinical research and product development in the Company’s programs in lung cancer and prostate cancer.
In sum, the financial position has improved substantially with liquid assets amounting to EUR 14.98 million as of March 31, 2009, compared to EUR 12.10 million as of December 31, 2008. Total net cash flow in Q1 2009 was positive at EUR 3.36 million, due to the gross proceeds of EUR 5.18 million resulting from the capital increase. Cash outflow from operating activities in Q1 2009 was EUR 2.27 million.
Operational Highlights
During the first quarter of 2009, Epigenomics successfully executed its non-exclusive partnering strategy. The strategic R&D collaboration with Sysmex Corporation, which was signed in January, was another important step towards the non-exclusive commercialization efforts for Epigenomics’ colorectal cancer blood test based on the Company’s proprietary DNA methylation biomarker, SEPT9 (mSEPT9).
Under the terms of the agreement, Sysmex and Epigenomics will assess the suitability of Sysmex’s molecular diagnostics instrumentation for the detection of DNA methylation cancer biomarkers in blood. As a benchmark for the development of its assay system, Sysmex will use Epigenomics’
mSEPT9 detection assay that is commercially available as a research product. Upon the successful completion of the R&D work that is being supported by Epigenomics’ expertise in DNA methylation, Sysmex intends to develop and commercialize initially in Japan a blood-based test for the early detection of colorectal cancer based on mSEPT9. As part of the agreement, Epigenomics will receive certain license fees, R&D funding, and reimbursement and generates additional revenue from the sale of its mSEPT9 research product to Sysmex.
Epigenomics and its first non-exclusive partner Abbott Molecular Inc. continue to make substantial progress in the development of a mSEPT9 test kit for the Abbott m2000 instrument. The product is now in its final stages of development and clinical validation and is on track to be launched in Europe by Abbott in Q4 2009.
During Q1 2009, Epigenomics focused on executing the PRESEPT colorectal cancer screening study. The PRESEPT Study is a multicenter study to characterize the clinical performance of mSEPT9 and its health economic benefit in a U.S. colorectal cancer screening guideline-eligible population. The trial is enrolling individuals who have an average or increased disease risk and will undergo a screening colonoscopy in accordance with U.S. screening guidelines. The approximately 7,500 individuals that are to be enrolled are expected to yield about 50 colorectal cancer cases. By the end of Q1 a total of 3,549 subjects were enrolled in the study at 21 clinical centers in the US and Germany. The number increased to over 4,000 subjects as of today. Study results are expected to be available by the end of 2009.
The Company also significantly advanced its lung cancer program. After a successful clinical evaluation of the mSHOX2 biomarker in bronchial lavage specimen from patients with suspected lung cancer, formal product development of an in vitro diagnostic test for lung cancer has been initiated. Epigenomics expects to launch the test in Europe in the first half of 2010.
In its prostate cancer program Epigenomics recently finalized the development of its mPITX2 research product and has initiated an “Early Access Program” with selected pathology laboratories in Europe. This initiative will allow these laboratories to make use of laboratory-validated innovative prognostic tests for prostate cancer based on the Company’s proprietary mPITX2 biomarker.
In February 2009, Epigenomics expanded its licensing agreement with Quest Diagnostics Inc. to include the Company’s proprietary biomarker mGSTP1. A similar agreement was executed with Predictive Biosciences in April 2009. Under the agreements, both companies have obtained rights for the use of Epigenomics’ proprietary mGSTP1 biomarker to establish and commercialize a molecular-based laboratory-developed test (LDT) that can help pathologists better diagnose prostate cancer based on the testing of a patient’s tissue specimen.
Outlook
Epigenomics’ primary focus for the remainder of 2009 will remain on driving its colorectal cancer blood test based on mSEPT9 through the final stages of product development and clinical validation with an operational focus on completing the PRESEPT Study and delivering results from that trial.
The Company will continue to support Abbott Molecular in the final phases of their product development and expects them to launch a CE-marked IVD blood test kit for colorectal cancer (CRC) based on mSEPT9 in Europe by the end of 2009. Further the company expects to introduce mSEPT9 testing in an increasing number of diagnostic laboratories in the US and Europe by enabling them through licenses and research products, respectively.
Marketing and business development efforts in 2009 and 2010 will focus on entering into additional non-exclusive licensing agreements for mSEPT9 similar to our recently signed agreement with Sysmex Corporation. In order to maximize the value of additional mSEPT9 license agreements, the Company believes future licensing opportunities should be anticipated around, or after the results from the PRESEPT Study have been released as well as the expected Abbott product launch in Europe.
The Company’s on-going research and development pipeline programs will continue to be focused on colorectal, lung, and prostate cancer.
As previously announced, Epigenomics’ expects revenue guidance of at least EUR 3 million in FY 2009. This moderately increased revenue is expected to come from diagnostic milestones including Abbott’s CE-marked mSEPT9 kit launch, traction from the Company’s RUO mSEPT9, mPITX2 and mGSTP1 kit sales, and revenues from new partnerships such as the Philips and Sysmex collaborations. Despite of the bulk of the PRESEPT expenses impacting 2009 operating expenses, the Company expects EBIT and net loss for 2009 to be improving compared to 2008 actuals. Cash burn for fiscal 2009 should be at a very similar level compared to 2008 i.e. remain below EUR 10 million.
Further Information
The full 3-Months Report 2009 can be obtained from Epigenomics’ website at:
http://www.epigenomics.com/en/investor_relations/Financial_Information/
About Epigenomics
Epigenomics is a molecular diagnostics company with a focus on the development of novel products for cancer. Using DNA methylation biomarkers, Epigenomics’ tests in development aim at diagnosing cancer at an early stage before symptoms occur and thereby may reduce mortality from this dreaded disease.
Epigenomics’ product pipeline contains a validated biomarker for the early detection of colorectal cancer in blood plasma, and further proprietary DNA methylation biomarkers at various stages of development for prostate and lung cancer detection in urine, blood and bronchial lavage specimens. Epigenomics’ biomarker mSEPT9 for the early detection of colorectal cancer in a simple blood sample demonstrated continuously highest performance in multiple clinical studies with in total about 3,500 individuals tested. A large prospective clinical study – PRESEPT – for evaluation of mSEPT9 in a screening population is currently under way (www.presept.net).
For development and global commercialization of in vitro diagnostic test products, Epigenomics pursues a non-exclusive partnering strategy.
Strategic diagnostics industry partners include Abbott Molecular, Philips, Sysmex Corporation and Quest Diagnostics Incorporated for diagnostics test products and services, and QIAGEN N.V. for sample preparation solutions and research products.
Partners in the health care industry and the biomedical research community can access Epigenomics’ portfolio of proprietary DNA methylation technologies and biomarkers protected by more than 150 patent families through research products, Biomarker Services, IVD Development Collaborations, and Licensing. The company is headquartered in Berlin, Germany, and has a wholly owned subsidiary in Seattle, WA, U.S.A. For more information, please visit Epigenomics’ website at www.epigenomics.com.
Epigenomics legal disclaimer. This communication expressly or implicitly contains certain forward-looking statements concerning Epigenomics AG and its business. Such statements involve certain known and unknown risks, uncertainties and other factors which could cause the actual results, financial condition, performance or achievements of Epigenomics AG to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Epigenomics AG is providing this communication as of this date and does not undertake to update any forward-looking statements contained herein as a result of new information, future events or otherwise.
