CUR: Q1 2012 Financial Results (revised)


CUR: Q1 2012 Financial Results

Brian Marckx, CFA

Q1 2012 Financial Results

On March 30th DiagnoCure Inc. (T.CUR, CUR.TO) reported results for the fiscal first quarter ending January 31, 2012. Revenue of $556k was slightly ahead of our $381k estimate as a result of higher than modeled ($269k A vs. $60k E) payments from Signal Genetics related to the R&D services agreement. As a reminder, the mid-2011 transaction in which Signal acquired CUR's clinical lab and exclusive rights to Previstage GCC also calls for DiagnoCure to be paid $2.5 million related to funding of R&D projects, including for studies related to the Previstage test (including phase 2 of the VITAR study) as well as for continued development of a lung cancer test. Payments under this R&D agreement may be somewhat irregular quarter-to-quarter - for simplicity purposes our model assumes ~ $500k/year over the next several years.

Q1 royalties from Gen-Probe related to Progensa PCA3 were $145k while royalties from Signal Genetics related to Previstage GCC were $10k - both slightly below our estimates. Management noted on the call that there is a several-month lag between when Gen-Probe makes sales of Progensa PCA3 and when DiagnoCure books the related royalties. Also noted was that Signal Genetics has recently added sales reps which may help the acceleration in Previstage sales. We continue to model sequential growth in royalties from both Progensa and Previstage throughout 2012.

Q1 net income and EPS were ($816k) and ($0.02), in-line with our ($859k) and ($0.02) estimates. Cash balance (including investments) stood at $7.8MM at 1/31/12, compared to $8.9MM at 10/31/2011. Management noted that they expect cash burn to be approximately $2MM - $3MM in fiscal 2012. The balance sheet remains very healthy.

We have made some slight but relatively immaterial adjustments to our model following the Q1 2012 earnings release. We are maintaining our Outperform rating and  $2.25/share price target.

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