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Neoprobe to shed money-losing blood-flow segment, prepares for end of drug trials

The announcements, made discussing third-quarter financial returns, set the stage for Neoprobe by year’s end to advance its cancer-detection drug Lymphoseek. The drug pinpoints cancerous lymph nodes, which decreases the number of lymph nodes doctors must remove and cuts down on drug side effects.

DUBLIN, Ohio — Neoprobe has enough money to fund its current pharmaceutical development without further investment, but will also try to shed a wholly owned and unsuccessful subsidiary that makes blood-flow products, executives said Tuesday.

The announcements, made discussing third-quarter financial returns, set the stage for Neoprobe by year’s end to advance its cancer-detection drug Lymphoseek. The drug pinpoints cancerous lymph nodes, which decreases the number of lymph nodes doctors must remove and cuts down on drug side effects.

Neoprobe posted a loss from operations of $324,000 for the third quarter of this year compared to $1.4 million in 2008. Net sales in the third quarter increased by 51 percent to $2.6 million compared to $1.7 million from prior year’s third quarter.

However, the company posted a net loss of $25.1 million for the quarter due to non-cash charges, changes in how the company calculates continuing expenses and its discontinued operations for a net loss of .34 per share this quarter.

Higher sales continued thanks to a price increase, a slight sales increase in the United States and an agreement this year with its distribution partner, Ethicon Endo-Surgery, which gives Neoprobe a higher portion of device sales revenue. The revenue also means the company continues to fund its day-to-day operations off device sales, with losses coming largely from the Lymphoseek trial.

By year’s end the company plans to complete its second phase three trial for Lymphoseek, which focuses on head and neck cancer; to have prepared a request for a meeting with FDA about its phase three trial; and to release further results of the first phase three trial, which examined breast cancer and melanoma. Chief Executive David Bupp said the company will unveil further results of the trial, which exceeded expectations and showed no drug-related side effects, next month at a breast cancer conference in San Antonio, Texas.

Bupp told analysts that within two years of Lymphoseek’s release it would have more than half the market share — thanks to its agreement with Cardinal Health to distribute the drug once its read. Neoprobe expects the drug to be in the market by mid-2011.

Neoprobe said it will try to divest itself of Cardiosonix, a seven-year-old blood-flow device venture that has largely produced a trickle of losses. The segment has lost the company about $500,000 annually in recent years, according to annual reports. The company lists its intellectual property assets in Cardiosonix at $1.8 million. There will be no job loss as a result of the sale and Neoprobe hopes to land an Israeli suitor, Chief Financial Officer Brent Larson said.

The company admitted last year that its marketing partnerships related to Cardiosonix were “largely ineffective in penetrating our target market” and announced on Tuesday that the unit was “no longer strategic to the company.”

Bupp also on Tuesday downplayed the near-term potential of recent reports about a retrovirus that could be linked to chronic fatigue syndrome and the potential for Neoprobe’s cellular therapy drug development program to solve that problem. Bupp said the company is reviewing the data, but not seeking new investment or spending additional resources until the results are clearer.

For the year through September, Neoprobe has posted a loss of $39.5 million, or 56 cents per share, compared to $3.9 million, or $0.06 per share, for the same period last year.

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