CUR.TO: DiagnoCure's Q2 2012 Financial Results
Brian Marckx, CFA
On June 6th
DiagnoCure Inc. (
T.CUR
)
(Toronto:CUR.TO)
reported results for the fiscal second quarter ending April 30,
2012. Revenue of $1.1 million was well ahead of our $328k
estimate as a result of ~$820k more than anticipated Other Revenue,
partially offset by lower than modeled Progensa PCA3 royalties.
Other Revenue ($890k A vs. $70k E) benefitted from $503k received
under the agreement with Gen-Probe whereby Gen-Probe pays
DiagnoCure $503k annually on January 31 until Progensa PCA received
FDA approval. As Progensa received FDA approval in February
2012, DiagnoCure was able to book the full $503k in Q2 2012 (which
we did not model). Also running through Other Revenue was
$387k (vs. our $70k estimate) under the R&D contract with
Signal Genetics. As a reminder, the mid-2011 transaction in
which Signal acquired CUR's clinical lab and exclusive rights to
Previstage GCC also calls for DiagnoCure to be paid $2.5 million
related to funding of R&D projects, including for studies
related to the Previstage test (including phase 2 of the VITAR
study) as well as for continued development of a lung cancer
test. Payments under this R&D agreement may be somewhat
irregular quarter-to-quarter.
Meanwhile, royalties from Gen-Probe related to Progensa PCA3 came
in lower than our estimate ($169k A vs. $228k E) for the second
consecutive quarter. We have since made some slight downward
revisions to this line item in our model to account for a later
ramp in sales. However, as we noted in our note on May 1st,
Hologic's (HOLX) impending acquisition of Gen-Probe (GPRO) could be
a positive development for DiagnoCure and help spark a greater rate
of sales growth of Progensa PCA3. Progensa PCA3 could be a
natural fit with Hologic's major presence in cancer diagnostics and
treatment. Hologic's sales force will also have a
substantially larger presence than did Gen-Probe's. The other
major potential catalyst to growth of Progensa is the
recommendation by the U.S. Preventative Services Task Force
(USPSTF) against the use of PSA testing. The USPSTF issued a
draft recommendation in late 2010 and its final recommendation
statement against the use of PSA testing on May 21, 2012.
Q2 net income and EPS were ($270k) and ($0.01), slightly better
than our ($961k) and ($0.02) estimates as a result of the beat in
Other Revenue as detailed above. Cash balance (including
investments) stood at $7.4 million at 4/30/12, compared to $7.8
million at 1/31/12. We continue to expect cash burn to be
between $2 million and $3 million for the full fiscal year 2012.
We have made some very moderate adjustments to our model, mostly
reflecting an assumed slightly flatter ramp in Progensa PCA3
royalties. This has resulted in relatively minor changes to
our EPS estimates, especially over the longer term. We are
maintaining our Outperform rating and $2.25/share price
target.
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