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Epigenomics Reports 81 Percent Drop in Q2 Revenues; Takeover Bid Fails

NEW YORK (GenomeWeb) – Epigenomics reported today that its second quarter revenues dropped 81 percent due to lower orders of its Epi proColon colorectal cancer test and a continued lack of reimbursement coverage for its products.

Additionally, a takeover bid launched in April by a Chinese private equity firm was scuttled last month after it failed to achieve the required minimum acceptance threshold by Epigenomics' shareholders, despite the support of the company's executive board. As a result, Epigenomics CEO Gregory Hamilton and Chief Operating Officer Uwe Staub said in a statement the company now faces "an uncertain situation with respect to its liquidity."

For the three months ended June 30, Epigenomics' revenues fell to €246,000 ($288,109) from €1.3 million the the second quarter last year. Epigenomics attributed the decline to its US commercialization partner Polymedco stocking up on large inventories of Epi proColon in Q2 2016 following the test's approval by the US Food and Drug Administration, resulting in a relatively high revenue figure for that quarter. Reimbursement difficulties in the US further impacted Q2 revenues.

"Our revenues was relatively low in the first six months of 2017. We do not expect any tangible improvements in this area until the payors on the US healthcare market begin reimbursing the Epi proColon," Hamilton and Staub said. However, the company is aiming to get CE marking for Epi proColon in the second half of the year, and is expecting a final decision in November from the Centers of Medicare and Medicaid Services on its request for a higher price for the test.

Epigenomics' net loss in the quarter widened to €4.1 million, or €.18 per share, from €3.3 million, or €.16 per share, in Q2 2016.

The Berlin-based company's Q2 R&D spending was up 17 percent to €1.4 million from €1.2 million, while SG&A costs climbed 21 percent to €3.4 million from €2.8 million on increased US commercialization activities and share-based repayments.

"Securing our success going forward requires further investment, for instance in commercialization, marketing, clinical expertise, and research and development activities," Hamilton and Staub noted. "All of these activities require more robust financing."

At the end of the quarter, Epigenomics had cash and cash equivalents totaling €6.8 million — which is expected to be sufficient to fund operations only until the first quarter of 2018 — and marketable securities of €753,000.

About three weeks ago, Epigenomics cut its revenue guidance for full-year 2017 to a range of between €1.0 million and €1.5 million from a previous guidance of about €2.5 million, citing lower-than-expected revenues in the first half of the year and difficulties securing Medicare reimbursements.

Further, the failed takeover bid by Blitz F16-83, a subsidiary of Chinese private equity firm Cathay Fortune International, had become "the focal point of our activities," Hamilton and Staub said. "After the minimum acceptance threshold of the offer was missed, securing robust financing for Epigenomics remains our key priority in order to successfully commercialize our products and develop innovative cancer tests in the future."

The firm will continue to examine all available strategic options to ensure its continued survival, including additional capital market transactions aimed at procuring additional funding, they added.