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Despite 16.9 Percent Hike in Q2 Revenues, Matritech CEO Warns Cash Infusion Needed

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The chief executive of cancer diagnostic firm Matritech, which is in the midst of trying to regain compliance with American Stock Exchange listing requirements, said this week that the company is need of a cash infusion.
 
Stephen Chubb, chairman and CEO of the Newton, Mass., firm, made his remarks as the company released its second-quarter earnings results. Even as revenues for the three months ended June 30 rose 16.9 percent to $3.3 million from $2.8 million a year ago, Chubb said “we must secure further financing in order to meet our ongoing obligations, including possible cash payments on our outstanding debt.”
 
As of June 30, the company had $1.7 million in cash and cash equivalents while the face value of its current and long-term debt was $9.1 million. For the quarter, Matritech’s net loss widened 28.4 percent to $4.6 million, from $3.6 million a year ago.
 
The company is “actively exploring financing and strategic alternatives,” Chubb said, though he did not elaborate what steps it was taking to scare up some funds.
 
“We hope to be able to provide clarifying information about this situation in the near future,” he said.
 
A message requesting an interview with Chubb was not returned.
 
Matritech is one of very few companies that have brought to market a diagnostic based on proteomics technology. But Chubb’s comments this week was just the latest negative development in a series of problems plaguing the company dating back almost a year. Last September, the AMEX told Matritech that it was not in compliance with standards required to continue being listed on the exchange and gave the company until late October to submit a plan detailing how it planned to return to compliance [See PM 09/28/06].
 
The company did so and in December, Matritech said that AMEX had accepted the plan. The company did not release details about its plan but said that the target completion date to regain compliance is March 21, 2008 [See PM 12/14/06].
 
Meanwhile, the company’s finances have remained shaky. For full-year 2006, it reported a loss of $11.9 million, up 25.7 percent from a $9.5 million loss posted in 2005.
 
During the company’s first-quarter earnings release in May, Chubb first acknowledged the company’s cash problems.
 
"We are pleased by the support many of our existing investors showed in providing additional funding to us during the first quarter,” Chubb said in comments accompanying the release of the first-quarter results. “However, we must still secure further financing.”
 
This week, he said that Matritech is limited in how it can raise funds. In January, the company announced it closed on a $4.36 million private placement of Series B, 15 percent secured convertible promissory notes and warrants to purchase 4.15 million shares of common stock. The notes, which netted the company $3.8 million after expenses and commissions, mature on Dec. 13.
 
But this week, Chubb also said that the company’s financing options are restricted by “our previously issued securities.” In June and July, most of the company’s note holders had deferred interest and principal payments due, he said.
 
Staying Afloat Via BladderChek
 
As Matritech tries to shore up its finances, its life vest continues to be the NMP22 BladderChek urine-based test for bladder cancer. The test is based on the firm’s proprietary nuclear matrix protein technology, which correlates the levels of NMPs in body fluids to the presence of cancer. Matritech exclusively licenses the technology from the Massachusetts Institute of Technology.
 

“We must secure further financing in order to meet our ongoing obligations, including possible cash payments on our outstanding debt.”

During the second quarter, BladderChek posted receipts of $2.7 million, or 81.2 percent of the company’s total revenues. BladderChek’s revenues grew 20.2 percent for the quarter, year over year.
 
During a conference call accompanying the release of the company’s financial results, David Corbet, president and COO of Matritech, said that revenues for the BladderChek test grew in each of its core businesses: urology in the US, urology in Germany, and gynecology in Germany.
 
In the US, sales of the test grew almost 25 percent year over year, while in Germany sales grew 17 percent.
 
During the first quarter, the company implemented a new sales strategy for the test, targeting accounts with high growth potential and raising the number of such accounts for each sales representative to 40 from 20. In the second quarter, Matritech continued its aggressive sales and marketing strategy to increase the visibility of the test in urologists’ offices and added two BladderCheck telemarketing sales representatives for a total of five.
 
In April the San Francisco Fire Department began using the test as part of a screening program for bladder cancer. Chubb estimated about 2,000 firefighters and former fighters were screened with the test, and according to Corbet, BladderChek helped in the early diagnosis of cancer in one retired fireman. In his case, the cancer was not able to be seen through cystoscopy, the standard method of diagnosis, Corbet said.

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