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Response Biomedical Files Restated Financials

NEW YORK (GenomeWeb News) – Response Biomedical has filed its completed restatements to a number of financial results, it announced after the close of the market on Wednesday.

The wide-ranging set of restatements are the result of an internal review and consultation with external auditors that the Vancouver, British Columbia-based firm has been conducting since the summer and reflect amounts that should not have been recognized as revenues, products that should not have been shipped, and other improprieties.

Response Biomedical announced it was restating its financial statements in September. A month before that, Wayne Kay abruptly resigned as its CEO.

The changes to its financial results affect previously disclosed earnings for full-year 2010 and the first two quarters of 2011.

Among the restatements is C$497,819 (US$489,641) that was improperly recognized as revenue for the fourth quarter of 2010. Response Biomedical is now recording revenues for that period as C$6.8 million, rather than the C$7.3 million previously stated.

In a statement, the firm said that the improperly recognized amount was related to a shipment made in December 2010 to a distributor who was obligated to pay, contingent on the satisfaction of certain criteria being met as of Dec. 31, 2010. Those conditions were not met, however.

For full-year 2010, Response Biomedical also made changes to its financial statements to reflect adjustments to cost of goods sold associated with the reversal of this transaction, resulting in a reduction of C$31,692.

The net loss for the year has been adjusted to C$10.1 million, or C$.32 per share, from an earlier figure of C$9.6 million, or C$.31 per share.

For the first quarter of 2011, among other changes, the company reduced trade receivables by C$470,162 to a final tally of C$1.6 million and restated its net loss as C$1.6 million, up from an earlier figure of C$1.4 million. Loss per share was unchanged at C$.04.

For the second quarter of 2011, the firm revised revenues from product sales to C$2.7 million, a reduction of C$72,356, after determining that sales of Ramp 200 cardiovascular products to Roche should not have been recorded.

The sales were made after the firm received a letter from the US Food and Drug Administration saying its NTproBNP assay for the diagnosis of heart failure did not receive 510(k) clearance for Response Bio's Ramp 200 platform. The products should not have been shipped, as doing so violated FDA's instructions as stated in the agency's May letter to the company, Response Biomedical said.

"Reversing these transactions resulted in a revenue reduction in the second quarter with no associated reduction of cost of goods sold as the inventory items are not re-saleable and therefore will be written off," Response Biomedical said.

Roche had terminated its sales and distribution deal with Response Biomedical as a result of the non-approval letter from FDA.