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Initiates Commercial Launch of the Verigene® System
Nanosphere, Inc. (NASDAQ: NSPH), a leader in the development and commercialization of advanced molecular diagnostics systems, today reported financial results for the third quarter ended September 30, 2007.
Third quarter 2007 results reflect investments associated with the commercial launch of the Verigene platform and its initial menu of tests, as well as significant non-cash charges associated with the Company's equity structure prior to its November 6 initial public offering (IPO).
"Nanosphere's progress over the past several months has been significant with several noteworthy events. We received United States Food and Drug Administration clearance for our initial products, including The Verigene System, our hyper-coagulation panel and our warfarin metabolism test, the first ever cleared by the FDA," said William Moffitt, president and chief executive officer. "We are currently focused on product launch, initial customer placements, and continuing investments in research and development to expand our test menu and develop next generation systems."
During the third quarter of 2007, the Company incurred increased sales and marketing expenses associated with the launch of its first commercial products. Sales, general and administrative expenses increased from $1.4 million for the third quarter of 2006 to $4.4 million for the third quarter of 2007, which included a one-time $1.7 million compensation expense in connection with the Company's IPO filing. In addition, the third quarter 2007 sales and marketing expenses included $0.5 million in increased sales personnel and marketing expense to support the launch of the Verigene System and $0.4 million in increased stock compensation expense.
Continued investments in the development of the Verigene platform, expansion of the Company's test menu, and development of manufacturing systems and production scale up resulted in an increase in research and development expenses from $4.1 million in the third quarter of 2006 to $5.7 million in the third quarter of 2007.
As a result of these investments, loss from operations for the third quarter of 2007 increased to $9.9 million from $5.1 million in the same period in 2006. In addition to this operating loss, 2007 third quarter results included non-cash charges to earnings of $16.7 million due to the increase in fair value of the convertible derivative liability and preferred stock warrants. The increased valuation of the Company resulted from FDA 510(k) clearance of the Verigene System and the Company's initial diagnostic assays.
Common shares outstanding as of September 30, 2007 were 932,646. Taking into effect the conversion of all preferred shares outstanding into common stock immediately prior to the closing of the IPO, 14,118,401 shares were outstanding. The sale of 8,050,000 shares in the IPO, including the overallotment, resulted in 22,168,401 common shares outstanding.
During the first nine months of 2007, the Company hired additional sales and marketing personnel and incurred marketing expenses to prepare for the commercialization of the products cleared by the FDA. Sales, general and administrative expenses increased from $4.1 million for the nine-month period ended September 30, 2006, to $9.7 million for the nine-month period ended September 30, 2007.
To prepare the Verigene System for commercial launch, expand Nanosphere's test menu, develop manufacturing systems, and production scale up investment in research and development increased 32% over the prior year for the nine-month period ended September 30, 2007.
As a result of these investments cited above, loss from operations for the first nine months of 2007 increased to $24.6 million from $15.2 million in the same period in 2006. In addition to the operating loss, the nine-month period ended September 30, 2007, includes non-cash charges to earnings of $17.0 million due to the increase in fair value of the Company's convertible derivative liability and preferred stock warrants discussed previously.
Conference Call Details
The Company will hold a live conference call and webcast for investors on Thursday, December 13, 2007 at 10:30 A.M., Eastern Standard Time. The teleconference can be accessed by dialing 866-510-0705 (U.S./Canada) or 617-597-5363 (international), participant code 98769147. The call will also be broadcast live over the Internet and can be accessed by interested parties at the Investor Relations tab on the Nanosphere website: www.nanosphere.us. For interested individuals unable to join the call or webcast, a replay will be available through Thursday, December 27, 2007, by dialing 888-286-8010 or for international calls 617-801-6888, pass code 89061695, or on the company's website.
About Nanosphere, Inc.
About Nanosphere, Inc.
Nanosphere develops, manufactures and markets an advanced molecular diagnostics platform, the Verigene® System for direct genomic and ultra-sensitive protein detection. This easy to use and cost effective platform enables simple, low cost and highly sensitive genomic and protein testing on a single platform. Nanosphere is based in Northbrook, IL. Additional information is available at http://www.nanosphere.us.
(A Development Stage Company)
Statements of Operations
|Three Month||Three Month||Nine Month||Nine Month|
|Period Ended||Period Ended||Period Ended||Period Ended|
|September 30,||September 30,||September 30,||September 30,|
|Grant and contract revenue||$||379,494||$||192,880||$||818,006||$||919,383|
|COSTS AND EXPENSES:|
|Cost of product sales||31,049||2,844||31,049||21,211|
|Research and development||4,134,451||5,674,390||12,009,047||15,893,437|
|Sales, general, and administrative||1,443,795||4,429,214||4,107,726||9,685,797|
|Total costs and expenses||5,609,295||10,106,448||16,147,822||25,600,445|
|Loss from operations||(5,140,771||)||(9,907,443||)||(15,213,156||)||(24,621,267||)|
|OTHER INCOME (EXPENSE):|
|Change in fair value of convertible derivative liability||-||(11,888,721||)||(2,916,822||)||(11,888,721||)|
|Change in fair value of preferred stock warrants||7,053||(4,858,974||)||(237,051||)||(5,135,586||)|
|Foreign exchange loss||-||(27,175||)||-||(40,945||)|
|Interest expense — related party||-||-||(146,550||)||-|
|Total other income (expense)||510,184||(17,060,988||)||(2,315,122||)||(17,416,685||)|
|Accumulated convertible preferred stock dividends||(1,531,329||)||(1,652,493||)||(2,882,262||)||(4,832,822||)|
|Convertible preferred stock redemption value adjustment||-||-||(17,737,544||)||(608,940||)|
|NET LOSS ATTRIBUTABLE TO COMMON STOCK||$||(6,161,916||)||$||(28,620,924||)||$||(38,148,084||)||$||(47,479,714||)|
|Net loss per common share — basic and diluted||$||(6.61||)||$||(30.69||)||$||(45.32||)||$||(50.91||)|
|Weighted average number of common shares outstanding — basic and diluted||932,564||932,646||841,824||932,646|
(A Development Stage Company)
|December 31,||September 30,|
|Cash and cash equivalents||$||29,112,429||$||18,105,934|
|Deferred equity financing costs||-||1,946,928|
|Other current assets||462,858||522,375|
|Total current assets||30,504,952||22,523,143|
|PROPERTY AND EQUIPMENT — At cost:|
|Computer equipment and software||730,144||846,275|
|Furniture and fixtures||143,134||251,506|
|Total property and equipment — at cost||8,578,274||10,577,850|
|Less accumulated depreciation||(2,999,802||)||(4,186,301||)|
|Net property and equipment — at cost||5,578,472||6,391,549|
|INTANGIBLE ASSETS — Net of accumulated amortization||4,865,950||5,284,892|
|Accrued license fees||360,000||406,455|
|Accrued legal expenses||137,088||139,218|
|Accrued financing costs||-||1,928,358|
|Other current liabilities||270,935||879,352|
|Note payable — related party||-||-|
|Long term debt — current portion||-||2,494,534|
|Lease payable — current portion||32,444||35,922|
|Total current liabilities||3,172,489||8,812,623|
|Accrued license fees — noncurrent||330,000||-|
|Lease payable — noncurrent portion||58,802||31,121|
|Long term debt — noncurrent portion||-||8,363,649|
|Preferred stock warrants||1,761,533||6,897,119|
|Convertible derivative liability||32,085,041||44,582,702|
|CONVERTIBLE PREFERRED STOCK:|
|Series B Convertible Preferred Stock, $0.01 par value; Liquidation preference of $32,832 at September 30, 2007||25,396||25,396|
|Series C Convertible Preferred Stock, $0.01 par value; Liquidation preference of $6,968,675 at September 30, 2007||6,030,003||6,030,003|
|Series C-2 Convertible Preferred Stock, $0.01 par value; Liquidation preference of $47,794,091 at September 30, 2007||47,037,902||49,140,111|
|Series D Convertible Preferred Stock, $0.01 par value; Liquidation preference of $62,376,967 at September 30, 2007||55,774,739||60,442,890|
|Total Convertible Preferred Stock||108,868,040||115,638,400|
|Common stock, $0.01 par value; 450,000,000 shares authorized at December 31, 2006 and September 30, 2007||92,580||92,580|
|Additional paid-in capital||2,051,126||3,374,617|
|Note receivable from chief executive officer||(1,440,000||)||-|
|Deficit accumulated during the development stage||(105,941,777||)||(153,421,491||)|
|Total stockholders’ deficit||(105,238,071||)||(149,954,294||)|
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Roger Moody, 847-400-9021
The Torrenzano Group
Stuart Pearlman, 212-681-1700, Ext. 124
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