SOURCE: Atossa Genetics, Inc.

Atossa Genetics, Inc.

March 28, 2013 08:00 ET

Atossa Genetics Reports 2012 Results and Operating Highlights

Enters 2013 With Two Marketed Breast Health Tests; Two More Slated for Launch This Year; National Launch of ForeCYTE Breast Health Test Positions Atossa for Accelerated Revenue Growth in 2013

SEATTLE, WA--(Marketwire - Mar 28, 2013) - Atossa Genetics, Inc. (NASDAQ: ATOS), a healthcare company focused on the prevention of breast cancer through the commercialization of diagnostic medical devices and laboratory developed tests that can detect precursors to breast cancer, and through the research, development, and ultimate commercialization of treatments for pre-cancerous lesions and ductal carcinoma in situ, today announced its 2012 financial results and corporate developments. 

Recent Accomplishments and Highlights

"We continue to make steady progress in the national rollout of our patented ForeCYTE Breast Health Test, advancing our ambition to arm women and their physicians with information that will enable improved breast health management and prevent breast cancer," stated Dr. Steven Quay, chairman, CEO and president. "We are very encouraged by the enthusiastic response we are seeing from doctors and their patients for the ForeCYTE test during the early phases of our national rollout. We believe that widespread adoption of the ForeCYTE test could lead to a dramatic lowering of the incidence of breast cancer, much as the Pap smear has led to a 75 percent reduction in cervical cancer."

Developments in 2012 and early 2013 include:

  • In January 2013, the Company initiated the national rollout of the ForeCYTE Breast Health Test in partnership with Clarity Women's Health, a division of Diagnostic Test Group, LLC. Clarity distributes the Clarity-branded ForeCYTE product line with major national distributors. These distributors collectively have more than 5,000 employee sales representatives and/or independent sales representatives selling their products to a target market of 33,000 obstetric-gynecologists in the United States. Progress in the first quarter of 2013 includes:

    • Conducted a teaching session in Florida with about 20 representatives from Clarity Women's Health.
    • Continued the national launch of the ForeCYTE test at the Pri-Med South 2013 meeting in Florida, which generated 275 office leads from primary care physicians and practices.
    • Presented at the Pri-Med Southwest 2013 meeting in Texas, which resulted in 150 primary care physician leads. Product codes were established with the medical supply distributors Henry Schein, PSS World Medical (PSS), and McKesson, which together have a total of 1,809 representatives nationwide. Establishing these product codes will enable physicians to purchase Atossa's ForeCYTE device and test kits from these distributors. Outreach and teaching also began with these medical supply distributors. 
    • Atossa also began its own sales program by recruiting and training independent sales representatives.

  • To help ensure that more doctors and their patients have access to the ForeCYTE and ArgusCYTE Breast Health Tests and that patients will receive insurance reimbursement for the laboratory costs associated with these tests, Atossa entered into two contracts with third parties to facilitate the reimbursement process from insurers, one with MultiPlan, Inc. in September 2012 and another with FedMed, Inc., in February 2013:

    • MultiPlan is a leading provider of healthcare cost management solutions for diagnostic laboratory testing involving Atossa's tests. Approximately 20 percent of Americans are covered by MultiPlan. The agreement allows Atossa to participate in the MultiPlan, PHCS and PHCS Savility Networks. 
    • FedMed is one of the largest proprietary Preferred Provider Organization (PPO) networks in the U.S., for diagnostic laboratory testing. FedMed's network is comprised of over 550,000 total providers, including 4,000 hospitals and more than 60,000 ancillary facilities, serving over 40 million Americans.

  • The Company obtained CLIA certification for the Company's National Reference Laboratory for Breast Health, a high-complexity molecular diagnostic laboratory where Nipple Aspirate Fluid (NAF) samples collected by the Company's medical device, the Mammary Aspirate Specimen Cytology Test System (MASCT System), are examined by microscopy for the presence of normal, pre-malignant, or malignant changes as determined by cytopathology and biomarkers that distinguish "usual" ductal hyperplasia, a benign condition, from atypical ductal hyperplasia, which may lead to cancer.

  • In September 2012, Atossa acquired assets of Acueity Healthcare, Inc., including 35 issued patents (18 issued in the U.S. and 17 issued in foreign countries), 41 patent applications (32 in the U.S. and 9 in foreign countries), six 510(k) FDA marketing authorizations related to the manufacturing, use, and sale of the Viaduct Miniscope and accessories, the Manoa Breast Biopsy system, the Excisor Bioptome, the Acueity Medical Light Source, the Viaduct Microendoscope and accessories, and cash in the amount of $0.4 million. The microendoscopes are less than 0.9 mm outside diameter and permit a physician to pass a microendoscope into the milk duct system of the breast and view the duct system via fiberoptic video images. Abnormalities that are visualized can then be biopsied from inside the duct with the biopsy tools that are inserted adjacent to the microendoscope.

  • On March 13, 2013, Atossa responded to an FDA Warning Letter dated February 21, 2013, alleging, among other things, that following 510(k) clearance the Company changed the MASCT System in a manner that requires submission of an additional 510(k) notification. While Atossa believes that there was no evidence of safety- or efficacy-related issues, Atossa intends to submit a new 510(k) notification for the MASCT System and plans to continue to market its MASCT System.

  • Atossa strengthened the senior management team with the hiring of Kyle Guse, CFO and general counsel, Chris Destro, VP of sales and marketing and Michael Malafronte, VP operations.

Full-Year 2012 Financial Results

Net loss for the year ended December 31, 2012 was $5.1 million, or $(0.41) per share, compared with net loss of $3.4 million, or $(0.38) per share, for the year ended December 31, 2011. The increase in net loss was primarily attributable to an increase in general and administrative expense of $1.8 million. 

Revenues for the twelve months ended December 31, 2012 were $481,842, which included $6,440 of product revenue from the sale of MASCT Systems and $475,402 of diagnostic testing service revenue from the ForeCYTE and ArgusCYTE breast health tests. This compares with total revenues of $1,500 for the year ended December 31, 2011. The year-over-year increase in total revenues was driven by the launch of the ForeCYTE test near the end of 2011 in a field experience trial and sales of the ArgusCYTE test.

Gross profit for the twelve months ended December 31, 2012 was $416,213. This compares to gross loss of $95,690 for the year ended December 31, 2011. Loss on reduction of inventory to lower of cost or market was $29,884 for the twelve months ended December 31, 2012, and $92,026 for the twelve months ended December 31, 2011, primarily due to write-off of parts purchased during the year for the assembly of MASCT System which was determined at zero net realizable value as a result of lower of cost or market analysis at year end. The MASCT System is currently sold at a price substantially lower than its cost to encourage sales and because the MASCT System is currently manufactured by Atossa's suppliers only in small quantities. For these reasons, the manufacturing cost allocated to each inventory unit is high.

Total operating expenses were $5.5 million for the twelve months ended December 31, 2012, consisting of G&A expenses of $5.0 million and selling expenses of $0.5 million. This compares to total operating expenses of $3.3 million for the twelve months ended December 31, 2011, consisting of G&A expenses of $3.2 million and selling expenses of $0.1 million. The increase in G&A expenses of $1.8 million, or approximately 56%, from 2011 to 2012 is attributed to the launch of the Company's MASCT System, ForeCYTE test and ArgusCYTE test and the related growth in expenses to hire additional staff, expand our operations, invest additional funds in research and development and increased legal fees and other costs associated with our initial public offering. Atossa expects that its G&A expenses will continue to increase as it adds additional full time employees and incurs additional costs as a publicly traded company. Additionally, G&A costs are expected to rise as the Company increases headcount to coordinate the production and manufacture of the MASCT System, and the expected increase in service revenues. 

At December 31, 2012, Atossa had cash and cash equivalents of $1.7 million.

About Atossa Genetics, Inc.

Atossa Genetics, Inc. (NASDAQ: ATOS), The Breast Health Company™, is based in Seattle, WA, and is focused on preventing breast cancer through the commercialization of patented, FDA-designated Class II diagnostic medical devices and patented, laboratory developed tests (LDT) that can detect precursors to breast cancer up to eight years before mammography, and through research and development that will permit it to commercialize treatments for pre-cancerous lesions.

The National Reference Laboratory for Breast Health (NRLBH), a wholly owned subsidiary of Atossa Genetics, Inc., is a CLIA-certified high-complexity molecular diagnostic laboratory located in Seattle, WA, that provides the patented ForeCYTE Breast Health Test, a risk assessment test for women 18 to 73 years of age akin to the Pap Smear, and the ArgusCYTE Breast Health Test, a blood test for recurrence in breast cancer survivors that provides a "liquid biopsy" for circulating cancer cells and a tailored treatment plan for patients and their caregivers.

Forward-Looking Statements

Forward-looking statements in this press release are subject to risks and uncertainties that may cause actual results to differ materially from the anticipated or estimated future results, including the risks and uncertainties associated with actions by the FDA, regulatory clearances, responses to regulatory matters, Atossa's ability to continue to manufacture and sell its products, the efficacy of Atossa's products and services, the market demand for and acceptance of Atossa's products and services, performance of distributors and other risks detailed from time to time in Atossa's filings with the Securities and Exchange Commission, including without limitation its registration statement on Form S-1 filed January 28, 2013, and periodic reports on Form 10-K and 10-Q, each as amended and supplemented from time to time.

   
ATOSSA GENETICS, INC.  
(A DEVELOPMENT STAGE COMPANY)  
CONSOLIDATED BALANCE SHEETS  
   
    As of December 31,  
    2012     2011  
Assets                
                 
Current Assets                
  Cash and cash equivalents   $ 1,725,197     $ 1,910,821  
  Restricted cash     -       1,000,000  
  Accounts receivable     141,665       1,224  
  Prepaid expense     122,633       31,184  
  Rental deposits     -       2,200  
    Total Current Assets     1,989,495       2,945,429  
                 
Fixed Assets                
  Furniture and Equipment, net     159,967       80,467  
    Total Fixed Assets     159,967       80,467  
                 
Other Assets                
  Security deposit     36,446       5,157  
  Intangible assets, net     4,640,224       40,841  
    Total Other Assets     4,676,670       45,998  
                 
    Total Assets   $ 6,826,133     $ 3,071,894  
                 
Liabilities and Stockholders' Equity                
                 
Current Liabilities                
  Line of Credit   $ -     $ 1,000,000  
  Accounts payable     68,217       64,766  
  Accrued expenses     1,582,381       442,329  
  Note payable - related party     -       5,078  
    Total Current Liabilities     1,650,598       1,512,173  
                 
Stockholders' Equity                
  Preferred stock - $.001 par value; 10,000,000 shares authorized, 0 shares issued and outstanding     -       -  
  Common stock - $.001 par value; 75,000,000 shares authorized, 12,919,367 and 11,256,867 shares issued and outstanding     12,919       11,257  
  Additional paid-in capital     14,894,522       6,200,520  
  Accumulated deficit     (9,731,906 )     (4,652,056 )
    Total Stockholders' Equity     5,175,535       1,559,721  
                 
    Total Liabilities and Stockholders' Equity   $ 6,826,133     $ 3,071,894  
 
   
ATOSSA GENETICS, INC.  
(A DEVELOPMENT STAGE COMPANY)  
CONSOLIDATED STATEMENTS OF OPERATIONS  
   
   
 
 
For the Years Ended December 31,
 
 
 
 
From April 30, 2009 (Inception)
Through December
31, 2012
 
   
  2012     2011      
                   
Revenue                        
  Diagnostic Testing Service   $ 475,402     $ -     $ 475,402  
  Product Sales     6,440       1,500       7,940  
    Total Revenue     481,842       1,500       483,342  
                         
Cost of Revenue                        
  Diagnostic Testing Service     (35,745 )     -       (35,745 )
  Product Sales     -       (5,164 )     (5,164 )
    Total Cost of Revenue     (35,745 )     (5,164 )     (40,909 )
                         
Loss on Reduction of Inventory to LCM     (29,884 )     (92,026 )     (121,910 )
                         
    Gross Profit (Loss)     416,213       (95,690 )     320,523  
                         
Selling expenses     (466,821 )     (160,851 )     (639,876 )
General and Administrative expenses     (5,018,422 )     (3,172,649 )     (9,379,722 )
    Total operating expenses     (5,485,243 )     (3,333,500 )     (10,019,598 )
                         
Operating Loss     (5,069,030 )     (3,429,190 )     (9,699,073 )
                         
Interest Income     1,219       4,914       6,588  
Interest Expense     (12,040 )     (17,992 )     (39,171 )
                         
Net Loss before Income Taxes     (5,079,851 )     (3,442,269 )     (9,731,656 )
                         
Income Taxes     -       -       250  
                         
Net Loss   $ (5,079,851 )   $ (3,442,269 )   $ (9,731,906 )
                         
Loss per common share - basic and diluted   $ (0.41 )   $ (0.38 )   $ (1.27 )
Weighted average shares outstanding, basic & diluted     12,452,929       9,117,746       7,657,400