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As Strategic Review Continues, Nanosphere Posts Increase in Q4 Loss

NEW YORK (GenomeWeb) – Nanosphere reported after the close of the market Wednesday that its fourth quarter net loss increased to $9.5 million, or $.08 per share, from $8.8 million, or $.11 per share, for the fourth quarter of 2013, as the firm continues to evaluate strategic alternatives.

Its loss per share beat the consensus Wall Street estimate of $.10.

The Northbrook, Ill.-based molecular diagnostics firm two weeks ago reported that its fourth quarter revenues increased 35 percent year over year to $4.6 million, up from $3.4 million in the fourth quarter of 2014. Analysts, on average, had expected revenues of $4.4 million.

Nanosphere placed 47 of its Verigene molecular diagnostics systems during the quarter, leading to a total of 162 placements for the year.

Its R&D costs for Q4 2014 rose 52 percent year over year to $7 million from $4.6 million 

For full-year 2014, Nanosphere reported revenues of $14.3 million, up 43 percent from $10 million in FY 2013 and above the consensus Wall Street estimate of $14.1 million. Revenues for the year were driven by a $5 million increase in its consumable sales, which were offset by a $700,000 decline in instrument sales.

Its net loss for the year was $39.1 million, or $.47 per share, compared to a net loss of $34.6 million, or $.56 per share, for FY 2013. It beat the consensus analysts' estimate of $.49 per share.

Nanosphere's R&D spending for the year increased to $21.7 million from $18.6 million, and its SG&A costs grew to $21.8 million from $18.7 million. It said in its 10-K filing with the US Securities and Exchange Commission that the increase resulted primarily from additional clinical trials related to the US Food and Drug Administration submission of its Enteric and RP Flex assays.

The firm finished the quarter with $21.1 million in cash and cash equivalents.

It hired investment bank Jefferies in September to explore potential strategic alternatives, and that review is ongoing.

"We continue to evaluate strategic alternatives that will best allow us to advance our commercial and development initiatives to drive continued revenue growth and leadership position in the market," Nanosphere President and CEO Michael McGarrity said in a statement accompanying the firm's FY 2014 financial results. "We are very excited about the progress made in the fourth quarter on our Next Generation Verigene system. This project will enhance our customer experience, advance our competitive position while utilizing our proven chemistry, and we look forward to providing additional updates as we move through 2015."

The firm also said a couple of weeks ago that it had received a warning letter from the FDA related to deficiencies in the firm's quality system regulation. It said in its filing with the SEC that it has submitted a response to the FDA addressing the deficiencies and is taking steps to remedy those deficiencies.

"These steps include, but are not limited to, a review and changes to the company's quality system procedures in the areas indicated in the warning letter, the hiring of new personnel and transfer of existing personnel to its quality assurance department, the completion of company-wide awareness training, and improvements to record keeping policies and procedures," it said in the 10-K. "The company believes that the full implementation of these measures, which remain subject to FDA review and confirmation via follow-up site inspection, will address the deficiencies noted by the FDA in the warning letter."

In addition, Nanosphere noted in its filing that last month it eliminated 20 full time positions at the firm and is required to pay $400,000 in severance through June 2015. It also anticipates making further staff reductions.

It expects FY 2015 revenues of between $18 million and $20 million. Analysts, on average, had expected FY 2015 revenues of $22.6 million.

Following the release of the results and FY 2015 guidance, Piper Jaffray analyst William Quirk downgraded Nanosphere to Neutral and lowered his price target on the stock to $.30 from a previous target of $1.00.

In Thursday morning trade on the Nasdaq, shares of Nanosphere were down 13 percent at $.25.