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Ciphergen Misses Nasdaq Delisting Deadline, But Investors Remain Patient


Investors are stuck on Ciphergen.

The ProteinChip developer missed a June 23 deadline to lift its market capitalization above the Nasdaq Exchange's minimum requirements, and it now faces the prospect of being delisted.

But shares in Ciphergen have been up 6.2 percent year to date, and up 4.3 percent since May 31, when the company disclosed that its market cap had fallen below the Nasdaq's minimum standard of $50 million for 10 consecutive trading days.

Though stock price is an imperfect metric to predict how a company will perform in a given market, the developments at Ciphergen signal that shareholders have decided to stick with the company as it finds its footing after undergoing a restructuring, management changes, and now the Nasdaq delinquency.

Separately last week, Gail Page, the company's recently appointed president and CEO, said Ciphergen plans to grow its molecular diagnostics business, with an initial focus on ovarian cancer.

On May 24, the Nasdaq notified Ciphergen that it was in jeopardy of being delisted because its market capitalization, which is the total dollar value of all its outstanding shares, had remained below $50 million for 10 consecutive trading days.

Ciphergen's market cap as of June 29 stood at $43.2 million. Ciphergen did not return multiple calls seeking comment. But according to a law firm specializing in securities issues, companies in Ciphergen's predicament have some time before Nasdaq pulls their shares from the exchange.

According to the law firm WilmerHale, if a company fails to return its market cap to Nasdaq's requirements in time, Nasdaq sends a "determination letter" informing the company that the exchange "has determined that the company does not meet the standards for continued listing."

At that time, the company has seven days to appeal the determination. Under Nasdaq rules, the company must publicly announce within seven calendar days that it has received a determination letter and the basis for the delisting.

Ciphergen may also appeal to a Nasdaq listing qualifications panel of two or three persons selected by Nasdaq. The panelists are "independent representatives of the business community" and cannot be employees of the National Association of Securities Dealers, the organization that operates Nasdaq.

"Without a credible plan, delisting is usually swift and certain. The mere assertion that the company believes its stock will trade above the minimum price is insufficient."

If a hearing is requested, it is generally held within four to six weeks. The company must pay a fee of $2,300 for a hearing and $1,400 for a written appeal. In the appeal, company representatives present a "plan of compliance." Without a credible plan, "delisting is usually swift and certain," the law firm said. "The mere assertion that the company believes its stock will trade above the minimum price is insufficient."

The Nasdaq panel makes a decision "typically within two to four weeks after the written submission or hearing." If the decision is to delist, the delisting becomes effective at the close of trading on the day the company is informed of the decision.

Ciphergen may also appeal the Nasdaq panel's delisting decision to the Nasdaq Listing and Hearing Review Council within 15 days, and the Review Council may "on its own motion" elect to review any decision within 45 days. "The NASD Board of Governors may, [at] its discretion, review any decision by the Review Council. Aggrieved issuers may also appeal any Nasdaq decision to the SEC or federal court. Appeals beyond the Nasdaq panel do not stay delisting and are rarely pursued."

This isn't the first time Ciphergen has been in hot water with the Nasdaq. In January the exchange questioned Ciphergen's July 2005 stock sale to Quest, suggesting that the deal "constituted a change of control which required shareholder approval" because the deal could result in Quest's owning more than 20 percent of the total outstanding shares [PM 01-19-06].

Ciphergen replied that Quest would not own more than 19.9 percent of Ciphergen. A week later Nasdaq said Ciphergen was compliant.

'How We Envision Ciphergen'

"We've been going through a transition over the past year," Page told investors in a conference call last week. She called Ciphergen a "high-value molecular diagnostics company" and said the firm's "initial focus" is on a product that helps diagnose ovarian cancer.

She said Ciphergen plans to launch a diagnostic some time this year in this indication. The company's ovarian cancer program comprises three blood tests: The first one distinguishes benign from malignant tumors; the second one monitors for disease recurrence; and the third test triages high-risk women.

"These are unmet needs in the market," Page said in the call.

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