Two new probe products helped Neoprobe Corp. narrow losses and boost revenue in 2009, but the unwinding of a complex financing deal cost the company $34 million in noncash charges.
Neoprobe, which sells the GDS line of gamma detection devices used by cancer surgeons, reported a loss attributable to common stockholders of $353,638, or zero cents a diluted share, during the fourth quarter ended Dec. 31. That was better than a loss of $1.2 million, or 2 cents a diluted common share, in the year-ago quarter.
Revenue rose 25 percent to $2.4 million from the same 2008 quarter. Gross profit rose 32 percent to $1.6 million in the quarter from a year ago. And had an operating loss of $420,190 in the quarter, an improvement from a $680,760 loss a year ago.
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For the year, Neoprobe lost $39.8 million, or 54 cents a diluted common share, compared with a loss of $5.2 million, or 8 cents a diluted common share, in 2008. Revenue rose 25 percent to $9.5 million from 2008. Gross profit rose 35 percent to $6.4 million. And operating loss narrowed to $1.8 million from $2.5 million in 2008.
“The 25 percent growth in our gamma device revenue was fueled by the initial commercial shipments of two new probe products during 2009; a wireless laparoscopic probe and a high energy probe, and an overall increase in the share of revenue Neoprobe received from its primary marketing partner,” said Brent Larson, Neoprobe’s chief financial officer, in a Business Wire release.
“The increase in gross profit was the combined result of improved margin from the increased revenue share and margin from the initial stocking order shipments of the two new probes,” Larson said. “Our operating expenses increased approximately 13 percent in 2009 over 2008, reflecting the increased level of activity surrounding the late stages of clinical testing of Lymphoseek, coupled with a corresponding increase in activities associated with the preparation of the New Drug Application for Lymphoseek.”
It’s easy to forget that Neoprobe is a medical device company. The company generates all of its revenue from a series of cancer-detection devices, yet it is valued for the drugs that have yet to come: cancer detectors Lymphoseek and RIGScan.
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“We saw phenomenal results from our gamma detection device product line and our radiopharmaceutical drug development initiatives in 2009,” said David Bupp, Neoprobe’s president and CEO, in his company’s statement. “Our gamma device line performance for the year exceeded our expectations, and we achieved several significant milestones from our radiopharmaceutical development efforts.”
Among the development milestones: Completion of a Phase 3 clinical trial of its cancer-detection drug Lymphoseek “with positive results” and work toward filing an Investigational New Drug application with the U.S. Food and Drug Administration this year. Neoprobe also filed an FDA request to begin Phase 3 clinical trials of RIGScan, an injectable drug that identifies colorectal cancer that other tests cannot find.
“We are optimistic that the coming months will yield even greater accomplishments as our focus shifts from the clinical phase of development for Lymphoseek into a more regulatory-focused phase of activity,” Bupp said. “Also, we have been successful with the biologic development activities to support the RIGS program as we continue to work with [the] FDA toward the restart of clinical activity surrounding our RIGScan CR technology.”
Also during 2009, Neoprobe recorded mark-to-market adjustments of $18.1 million related to accounting for certain of its financial instruments as derivative liabilities. On July 24, the company agreed with the holder of a majority of the derivatives, Platinum-Montaur Life Sciences LLC, to eliminate a feature of the derivatives, permitting it to extinguish the majority of its derivative liabilities.
Neoprobe recognized more than $34 million in noncash charges last year because of the accounting treatment for these complex financial instruments at the same time the market value of the company’s stock doubled.
Neoprobe shares, which trade on Nasdaq’s Over-the -counter Bulletin Board, fell 2 cents to $2.03 on Wednesday. The company announced its earnings after the market closed. The shares have nearly quadrupled in value from 53 cents on March 3, 2009.
