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Epigenomics Reports 24 Percent Drop in 2020 Revenues, Seeks Sale After Negative Coverage Decision

NEW YORK — German molecular diagnostics firm Epigenomics on Thursday reported a 24 percent drop in its fiscal year 2020 revenues, mainly due to the impact of the COVID 19 pandemic, and said it is evaluating a potential sale of the company.

For the fiscal year ended Dec. 31, 2020, revenues for the Berlin-based firm dropped to €840,000 ($991,618) from €1.1 million in fiscal year 2019. Its product revenues declined 41 percent year over year to €584,000 from €988,000, and its license revenue declined 76 percent year over year to €33,000 from €137,000.

In particular, the number of tests conducted in the US declined as some patients skipped or postponed their cancer screenings due to the suspected risk of SARS-CoV-2 infection, the firm said.

The firm also noted that the US Centers for Medicare and Medicaid Services recently issued a negative National Coverage Determination (NCD) for its Epi proColon blood-based colorectal cancer screening test. In January, CMS finalized the draft national coverage decision memo it issued last October, describing criteria for the coverage of such tests but denying coverage for the Epi ProColon assay.

Epigenomics said it is currently reviewing available options to try to revise the NCD decision, including pursuing a legislative pathway to coverage or appealing against the decision and/or taking legal action.

Though Epigenomics placed a convertible bond in the amount of €5 million in January with the proceeds providing liquidity well into 2022, due to the negative NCD decision and capital constraints, the company is evaluating strategic options including a potential sale by a public takeover or an asset deal with one or more investors. The firm said that it is in discussions with "several potential parties" for this purpose and that it has engaged with an international investment bank as its advisor.

"Even though the NCD decision has set us back significantly at the start of the current fiscal year 2021, we believe that Epigenomics is a valuable liquid biopsy technology platform," Epigenomics CEO Greg Hamilton said in a statement.

Epigenomics further said it has developed and validated a new colorectal cancer screening assay with clinical performance characteristics that meet the coverage criteria outlined by CMS in the final NCD.

A large prospective trial would be required to obtain US Food and Drug Administration clearance of the new test, and such a trial and subsequent decision would take at least two to three years and require additional funding, the firm said.

A prospective study on Epigenomics' second blood test for the detection of liver cancer in patients with cirrhosis was completed at the end of 2019 and has been submitted for publication and accepted by a scientific journal, the firm said.

Epigenomics' net loss for the year was €11.7 million, or €2.02 per share, compared to a net loss of €17.0 million, or €3.65 per share, a year earlier.

The firm's 2020 R&D spending declined 49 percent to €3.7 million from €7.3 million in 2019, while its SG&A expenses dropped 18 percent to €7.3 million from €8.9 million in the prior year.

Epigenomics expects its fiscal year 2021 revenues will be in the range of €400,000 to €1.0 million but said it would change that revenue guidance if there is a reversal upon appeal of the CMS NCD decision.