The bargain-basement purchase of a cancer diagnosis test helped rocket shares of Response Genetics Inc. last week.
The Boyle Heights life sciences company announced Aug. 26 that it had paid $200,000 in cash and issued about $1 million worth of its stock to buy a Food and Drug Administration-cleared test for diagnosing certain cancers. The seller was a defunct company named Pathwork Diagnostics of Redwood City.
The announcement drove shares of Response Genetics up more than 32 percent in midday trading to a 52-week high of $2.93 before backing off to trade for around $2.50 range. It closed Aug. 28 at $2.39, a 20 percent gain for the week that made it the second-biggest gainer on the LABJ Stock Index. (See page 32.) Shares of the company are up nearly 200 percent over the last 52 weeks.
“I think some of the investors are taking this acquisition as a signal that the cost-reduction efficiency piece of the (company’s) turnaround is pretty much done,” said Kevin DeGeeter, managing director of equity research at Ladenburg Thalmann & Co. Inc., a financial company in New York. “And here is some evidence that it will begin to grow revenue.”
The test, the primary asset of Pathwork, is a cancer-diagnosing test that compares a patient’s genes with a panel of 15 known tumor types that collectively represent 90 percent of all cancers. It uses a proprietary platform and software and focuses on diagnosing hard-to-identify cancers whose origins are unknown, such as metastatic, poorly differentiated and undifferentiated cancers. The test generated revenue in the midseven figures last year.
Degeeter said Pathwork collapsed under the weight of the $60 million it invested to bring the test to market, going out of business in April, adding that the $1.2 million fire-sale price was a great deal for Response Genetics.
It was the first product acquisition made by the company, and in a statement it signaled intentions to acquire more products in the future.
Response Genetics recorded a loss of $1.3 million (4 cents a share) in the quarter ended June 30, far narrower than the $2.6 million loss (11 cents) in the year-earlier period. The technology company, which controls proprietary tests for cancers of the lungs, colon and melanoma, had second-quarter revenue of $5.3 million, 39 percent greater than the $3.8 million posted the year earlier.
