Transgenomic Reports Fourth Quarter and Fiscal Year 2012 Financial Results

  Transgenomic Reports Fourth Quarter and Fiscal Year 2012 Financial Results

              Conference Call to Be Held at 5:00 PM Eastern Time

Business Wire

OMAHA, Neb. -- March 13, 2013

Transgenomic, Inc. (OTCBB: TBIO) today reported financial results for the
fourth quarter and year ended December 31, 2012 and provided a business
update.

Fourth Quarter Financial Results

Net sales for the fourth quarter of 2012 were $7.3 million compared with $8.6
million for the same period in 2011. The decline was principally driven by
lower revenues in the Diagnostic Tools segment reflecting a decline in OEM
instrument sales. Clinical Laboratories sales were modestly below a strong
prior year quarter. These declines were partially offset by strong revenue
growth in the Pharmacogenomics Services segment.

Gross profit was $3.5 million or 49% of net sales, compared with gross profit
of $5.3 million or 62% of net sales for the same period in 2011. The decline
was due to a lower margin in the Diagnostic Tools segment as a result of shift
in product mix. The Clinical Laboratories segment also had a decline in its
gross margin to 44% of net sales in 2012 from 59% of net sales in 2011, due to
investments made to improve efficiency and capacity in anticipation of volume
growth.

Operating expenses were $6.8 million during the fourth quarter of 2012,
compared with $5.4 million in the prior year. The increase was due to higher
costs related to expansion of our field sales force to support the launch of
C-GAAP and ScoliScore™ and a higher bad debt provision.

The net loss for the fourth quarter of 2012 was $2.3 million, or $0.03 per
share, compared to a net income of $0.3 million, or $0.00 per share, for the
fourth quarter of 2011.

Modified EBITDA, which is a non-GAAP measure that Transgenomic views as an
appropriate and sound measure of the Company's results was a $2.4 million loss
for the fourth quarter of 2012 compared to income of $615,000 for the same
period for 2011. A reconciliation of Net Loss to Modified EBITDA is presented
below.

Cash and cash equivalents were $4.5 million as of December 31, 2012, compared
with $4.9 million as of December 31, 2011.

2012 Full Year Financial Results

Net sales for the twelve months ended December 31, 2012 were $31.5 million
compared to $32.0 million for the same period in 2011. The Clinical
Laboratories segment had a 9% increase in sales, driven by sales of its
recently launched NuclearMitome, C-GAAP and ScoliScore tests. This increase
was partially offset by a decline in the Pharmacogenomics Services segment,
due to a lower volume of projects performed for our pharmaceutical clients,
and in our Diagnostic Tools segment, which had a higher percentage of its
sales go to our European distribution partner at distributor prices.

Gross profit was $15.0 million or 48% of net sales, compared with gross profit
of $18.4 million or 58% of net sales for the same period in 2011. The decline
in gross profit largely resulted from lower revenues at lower margins in our
Diagnostic Tools business. Laboratory Services segment had lower gross margins
due to investments made to increase capacity in our laboratories in
anticipation of higher volume from our newly launched tests. In addition,
lower sales in our Pharmacogenomics Services segment negatively impacted
margins due to its relatively fixed cost structure.

Operating expenses were $24.5 million for the twelve months ended December 31,
2012, compared with $21.4 million in the prior year. Operating expenses
increased primarily due to costs related to the expansion of our field sales
force to support new product launches. Also contributing to the increase was a
higher bad debt provision of $0.7 million.

The net loss for the twelve months ended December 31, 2012 was $8.3 million or
$0.13 per share compared to a net loss of $9.8 million or $0.22 per share
during the comparable period of 2011. The net loss in 2012 was reduced by $2.2
million fair value adjustment related to our common stock warrants which
decreased the net loss. The net loss in 2011 included $6.1 million in expense
related to the revaluation of the preferred stock warrants and conversion
feature.

“Our activities in 2012, and particularly in the fourth quarter, were aimed at
preparing for resumed growth in 2013. These 2012 activities included: the
launch of two new proprietary products from our Clinical Labs, C-GAAP and
ScoliScore™; a major expansion of our Clinical Lab Sales team to drive growth
from these new assays, the development of the assay kits for our distribution
relationship with A. Menarini Diagnostics; and the completion of new assays
for our ICE COLD-PCR technology,” said Craig Tuttle, President and Chief
Executive Officer. “Looking forward into 2013, we expect these activities will
drive top line revenue growth, especially as we progress throughout the year.
We are looking for increasing revenue impact from our ScoliScore™ and C-GAAP
assays, as well as from other new tests in development that we expect to
commercialize this year. We also expect to see a positive impact on revenue
later in the year from our A. Menarini distribution agreement. In addition, we
anticipate announcements beginning at scientific conferences starting mid-2013
from ongoing clinical research aimed at validating ICE COLD-PCR and its
ultra-sensitive ability to detect genetic mutations in blood.”

Business Highlights

  *Acquired ScoliScore™ Prognostic Scoliosis Test: In September, the Company
    announced the close of the acquisition of Axial Biotech’s ScoliScore™
    Adolescent Idiopathic Scoliosis (AIS) Prognostic Test. The acquisition
    provides Transgenomic with the ScoliScore™ assay technology and
    intellectual property, an established revenue and customer base, and
    access to a testing market estimated at more than 400,000 patients in the
    United States alone.
  *Medicare Coverage for C-GAAP: In July, the Company successfully secured
    Medicare coverage for C-GAAP, which is a simple but comprehensive saliva
    test that accurately predicts a patient’s response to Plavix®
    (clopidogrel). This innovative test analyzes markers in two important
    genes to identify patients who are at a genetically increased risk of
    major adverse cardiovascular events due to diminished effectiveness of
    Plavix®. As a result of this coverage, the 48 million Americans currently
    covered by Medicare will have access to this important genetic test.
  *ICE COLD-PCR Collaborations: In addition to our ongoing study with The
    University of Texas MD Anderson Cancer Center evaluating ICE COLD-PCR in
    several cancer types, in the second half of 2012 we initiated several new
    collaborations for clinical validation of this breakthrough platform
    technology. We expect that the results of the MD Anderson study will be
    announced later this year.
  *$8 Million Credit Facility: On March 13, 2013 we secured an $8.0 million
    term and revolving credit facility from Third Security, LLC, a leading
    life sciences investment firm. Proceeds from the facility will be used to
    refinance the Company’s outstanding debt with Forest Laboratories and to
    help fund working capital requirements.

Conference Call

Transgenomic management will host a conference call to discuss 2012 financial
results and answer questions beginning at 5:00 p.m. Eastern Time today. To
access the call via telephone, dial 866-952-1906 from the U.S. and Canada or
785-424-1825 for international participants and enter conference ID TRANS. A
telephone replay will be available from 6:00 p.m. Eastern Time on March 13,
2013 through 11:59 p.m. Eastern Time on March 27, 2013 by dialing 800-723-0520
(domestic) or 402-220-2653 (international).

About Transgenomic

Transgenomic, Inc. (www.transgenomic.com) is a global biotechnology company
advancing personalized medicine in cardiology, oncology, and inherited
diseases through its proprietary molecular technologies and world-class
clinical and research services. The Company is a global leader in cardiac
genetic testing with a family of innovative products, including its C-GAAP
test, designed to detect gene mutations which indicate cardiac disorders, or
which can lead to serious adverse events. Transgenomic has three complementary
business divisions: Transgenomic Clinical Laboratories, which specializes in
molecular diagnostics for cardiology, oncology, neurology, and mitochondrial
disorders; Transgenomic Pharmacogenomic Services, a contract research
laboratory that specializes in supporting all phases of pre-clinical and
clinical trials for oncology drugs in development; and Transgenomic Diagnostic
Tools, which produces equipment, reagents, and other consumables that empower
clinical and research applications in molecular testing and cytogenetics.
Transgenomic believes there is significant opportunity for continued growth
across all three businesses by leveraging their synergistic capabilities,
technologies, and expertise. The Company actively develops and acquires new
technology and other intellectual property that strengthens its leadership in
personalized medicine.

Forward-Looking Statements

Certain statements in this press release constitute “forward-looking
statements” of Transgenomic within the meaning of the Private Securities
Litigation Reform Act of 1995, which involve known and unknown risks,
uncertainties and other factors that may cause actual results to be materially
different from any future results, performance or achievements expressed or
implied by such statements. Forward-looking statements include, but are not
limited to, those with respect to management's current views and estimates of
future economic circumstances, industry conditions, company performance and
financial results, including the ability of the Company to grow its
involvement in the diagnostic products and services markets. The known risks,
uncertainties and other factors affecting these forward-looking statements are
described from time to time in Transgenomic's filings with the Securities and
Exchange Commission. Any change in such factors, risks and uncertainties may
cause the actual results, events and performance to differ materially from
those referred to in such statements. Accordingly, the Company claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 with respect to all
statements contained in this press release. All information in this press
release is as of the date of the release and Transgenomic does not undertake
any duty to update this information, including any forward-looking statements,
unless required by law.

                                                 
TRANSGENOMIC, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share data)
                                                     
                                                     
                   Three Months Ended                Fiscal Year Ended
                   December 31,                      December 31,
                   2012            2011             2012            2011
NET SALES          $ 7,292          $ 8,571          $ 31,480         $ 31,971
COST OF GOODS       3,748          3,288          16,470         13,534     
SOLD
Gross profit         3,544            5,283            15,010           18,437
OPERATING
EXPENSES:
Selling,
general and          6,191            4,878            22,023           19,150
administrative
Research and         620              568              2,491            2,218
development
Restructuring       —              1              —              41         
Charges
                    6,811          5,447          24,514         21,409     
LOSS FROM            (3,267     )     (162       )     (9,504     )     (2,972     )
OPERATIONS
OTHER INCOME
(EXPENSE):
Interest             (175       )     (238       )     (888       )     (958       )
expense
Expense on
preferred            —                800              —                (6,066     )
stock
Effect on            1,200            —                2,200            —
warrants
Other, net          (12        )    28             11             259        
                    1,013          590            1,323          (6,765     )
LOSS BEFORE          (2,254     )     428              (8,181     )     (9,737     )
INCOME TAXES
INCOME TAX
EXPENSE             60             164            146            45         
(BENEFIT)
NET INCOME         $ (2,314     )   $ 264           $ (8,327     )   $ (9,782     )
(LOSS)
PREFERRED
STOCK               (165       )    (207       )    (660       )    (1,010     )
DIVIDENDS AND
ACCRETION
NET INCOME
(LOSS)
AVAILABLE TO       $ (2,479     )   $ 56            $ (8,987     )   $ (10,792    )
COMMON
STOCKHOLDERS
BASIC AND
DILUTED LOSS       $ (0.03      )   $ —             $ (0.13      )   $ (0.22      )
PER COMMON
SHARE
BASIC AND
DILUTED
WEIGHTED
AVERAGE SHARES      71,645,725     49,524,156     69,417,419     49,361,632 
OF COMMON
STOCK
OUTSTANDING
                                                                                   

                                             
Transgenomic, Inc.
Summary Financial Results
Proforma Modified EBITDA
(dollars in thousands)

Management uses Modified EBITDA, a non-GAAP measure, to measure the Company's
financial performance and to internally manage its businesses.Management
believes that Modified EBITDA provides useful information to investors as a
measure of comparison with peer and other companies. Modified EBITDA should
not be considered an alternative to, or more meaningful than, net income or
cash flow as determined in accordance with generally accepted accounting
principles. Modified EBITDA calculations may vary from company to
company.Accordingly, our computation of Modified EBITDA may not be
comparable with a similarly-titled measure of another company.

The following sets forth the reconciliation of Net Loss to Modified EBITDA for
the periods indicated:
                                                 
                                                 
                 Three Months Ended              Year Ended
                 December 31,                    December 31,
                 2012            2011           2012            2011
NET INCOME       $  (2,314  )     $  264         $  (8,327  )     $  (9,782  )
(LOSS)
                                                                  
INTEREST            175              238            888              958
EXPENSE
                                                                  
INCOME TAX          60               164            146              45
EXPENSE
                                                                  
DEPRECIATION
AND                 708              473            2,278            2,101
AMORTIZATION
                                                                  
PREFERRED
STOCK               —                (800  )        —                6,066
EXPENSES
                                                                  
WARRANT             (1,200  )        —              (2,200  )        —
EFFECT
                                                                  
STOCK OPTION        175              276            731              1,010
EXPENSE
                                                               
MODIFIED           (2,396  )       615          (6,484  )       398     
EBITDA
                                                                     

                                                                     
TRANSGENOMIC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share data)
                                                                     
                                                                     
                                         December 31,  December 31,
                                           2012           2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                  $  4,497       $  4,946
                                                                     
Accounts receivable, net                      8,081          7,573
Inventories, net                              5,092          3,859
Other current assets                         1,047        820     
Total current assets                          18,717         17,198
PROPERTY AND EQUIPMENT, NET                   2,190          1,856
OTHER ASSETS:
Goodwill                                      6,918          6,440
Intangibles                                   10,764         7,966
Other assets                                 202          102     
                                           $  38,791     $  33,562  
                                                                     
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES                        $  16,528      $  16,328
OTHER LIABILITIES:
Long term debt less current maturities        —              4,937
Common stock warrant liability                900            —
Other long-term liabilities                  1,089        1,249   
Total liabilities                             18,517         22,514
                                                                     
STOCKHOLDERS’ EQUITY                         20,274       11,048  
                                           $  38,791     $  33,562  

Contact:

Investor Contact
Argot Partners
Michelle Carroll/Susan Kim, 212-600-1902
michelle@argotpartners.com
susan@argotpartners.com
or
Company Contact
Transgenomic, Inc.
Investor Relations, 402-452-5416
investorrelations@transgenomic.com
 
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