MELBOURNE, AUSTRALIA--(Marketwired - Apr 30, 2014) - Genetic Technologies Limited (NASDAQ: GENE) (ASX: GTG) today announced it has filed its Quarterly Activities Report for the Quarter ended March 31, 2014 in accordance with the ASX.
Total cash receipts from customers during the quarter ended March 31, 2014 were $1.4 million taking the equivalent figure to more than $3.7 million for the nine-month period ended on that date.
Domestic testing revenues for the quarter under review continue to exceed budget expectations and the revenue received for the Company's flagship test BREVAGen™ in the March quarter grew more than 39% over the preceding December quarter. As reported in the Company's 2013 Annual Report, the revenues generated from the sale of the BREVAGen test are still recorded on a cash, not an accruals, basis. The Company anticipates that this treatment will change at the end of the 2014 financial year, with an appropriate upward adjustment to revenues being made at that time.
BREVAGen™ breast cancer risk test
For the first time since the launch of BREVAGen in July 2011, the number of test samples received in the most recent quarter, was lower than that of the previous quarter. The numbers of BREVAGen samples received in the first quarter of CY2014 fell to 800 from the prior fourth quarter 2013 of 1125. The company believes that the reasons for this softening in demand was a result of a combination of the beginning of the new insurance year, an extremely severe winter during which physician consultations dropped markedly across the board; together with the implementation of the Affordable Care Act in the US, which affected the "discretionary" health spend by patients. Nevertheless, the numbers still represented a 99% increase over the same quarter in 2013 and the Company believes that the upward trend will resume in the next quarter and beyond. This trend will be augmented by not only additional geographic territories in large population density locations, but a significant number of large breast care facilities which are adopting BREVAGen as part of the care service they provide their patients. The launch of the next generation BREVAGen later this calendar year, is anticipated to result in a further increase in test volumes.
New Product Development
The Company is on track to introduce the next generation of BREVAGen for launch in the fourth quarter of this calendar year. This new version of BREVAGen will incorporate an expanded SNP panel, which will increase the predictive power of the test and ensure the product utilises the latest advances in scientific knowledge of the genetic basis of breast cancer. Furthermore, the new test will be applicable to additional ethnicities (African American and Hispanics) which will expand the application of the test to a broader target population and provide a test that clinics and breast centers will be able to apply to a large proportion of their patients. The Company believes that increased sample test volumes will be received by the laboratory as a result of this new product introduction.
As mentioned in previous Activities Reports, until the end of 2012, insurance claims for BREVAGen were submitted using the so-called "code stack" of CPT methodology codes. Reimbursement under this regime was positive, with a low percentage of denials and appeals. However, effective 1 January 2013, the AMA removed the code stack claim process, requiring tests without a specific CPT code to be claimed via an "Unlisted or Miscellaneous Code".
As a result of the change from "Stacked Codes" to a "Miscellaneous Code" for insurance claims, the Company's reimbursement per test (including write-offs and denials for non-coverage) has increased by more than 30%. However, the use of a Miscellaneous code requires more administration and time by the Insurance company to adjudicate the claim and thus increases the time taken to receive the reimbursement.
Cost effectiveness studies to improve reimbursement outcomes
Further to the publication in the journal of Cancer Prevention Research Vol 6 (12): pp 1328 - 36 dated December 5, 2013, an additional paper has been published demonstrating the cost effectiveness of the BREVAGen test to direct chemoprevention.
On March 7, 2014, GTG announced the publication in the journal Applied Health Economics and Health Policy Vol 12 (2): pp 203 - 17, of a study entitled "Economic Evaluation of Using a Genetic Test to Direct Breast Cancer Chemoprevention in White Women With a Previous Breast Biopsy". This study was a collaborative project between Genetic Technologies Limited and Archimedes Inc. of San Francisco, a healthcare modelling and analytics organization. The study examined the cost-effectiveness of utilizing BREVAGen to direct tamoxifen chemoprevention.
An in-silico model of breast cancer and health care processes was used to simulate a population of white women aged 40 - 69, who were at elevated risk for breast cancer due to a history of benign breast biopsy, in a virtual clinical trial. Women were assessed for risk of developing breast cancer using the BREVAGen test to determine eligibility for five years of tamoxifen therapy. The BREVAGen test was most cost-effective when given to patients at an intermediate risk of developing breast cancer (1.2 - 1.66% 5-year risk). The results demonstrated that adding genetic information about breast cancer susceptibility loci to current decision models for breast cancer chemoprevention not only improves clinical outcomes (with an average of 15 breast cancer cases prevented per 1,000 women), but is also cost-effective, with an incremental cost-effectiveness ratio below the benchmark number used by U.S. payers of $50,000 per quality-adjusted life year (QALY) saved.
Clinical utility studies are currently being designed and will be performed during the latter part of 2014. The data obtained in these studies will be utilised in the direct contracting discussions with Insurers and self-insured employer groups.
LICENSING AND IP
Non-coding Assertion Program
On 24 December 2013, the Company reported that several significant cases pending in the District of Delaware -- including cases against Bristol Myers Squibb, Pfizer and Merial -- had each been allocated to the same Judge. While they remain separate cases, this consolidation will offer certain efficiencies to the legal processes now under way, and could possibly also speed up the process for GTG.
On 12 February 2014, the Company announced it has received a further ExParte Re-Examination Certificate from the United States Patent and Trademark Office ("USPTO") - dated 10 February 2014 (the "Certificate"). This Certificate follows a third request by Merial L.L.C. of Duluth, Georgia, who had asked the USPTO to undertake further re-examination of various claims of the Company's U.S. Patent No. 5,612,179 (the '179 patent), previously reported by GTG on 30 September 2013. The USPTO Certificate again confirmed the validity of the patent claims, and no amendments were made to the '179 patent.
On 12 March 2014, the Company announced that the United States District Court for the Northern District of California had issued an Order denying a motion brought by Agilent Technologies, Inc. ("Agilent"), to dismiss the patent infringement law suit initiated against it by GTG. This action had been filed by GTG in 2011, in the District Court of Colorado, but was then moved at the request of Agilent to the District Court in the Northern District of California. Thereafter, both sides filed motions to support their opposing legal perspectives. Most recently, Agilent moved to have GTG's complaint dismissed, arguing the relevant GTG patent covers natural phenomena -- or laws of nature -- that are not entitled to patent protection, and that the Court should therefore dismiss the action. On 9 March 2014, the Court issued an Order denying Agilent's motion to dismiss.
GTG has also pursued actions in Delaware against several entities -- Natera, Inc, HistoGenetics, LLC and Laboratory Corporation of America Holdings. In mid-April, the Court agreed that the Natera action could be transferred to Northern District of California. GTG has also been pursuing an action against Medical Diagnostic Laboratories LLC in the District of New Jersey, and Glaxo-SmithKline LLC in the Middle District of North Carolina. During the quarter, the Company reported an agreement had been executed with Promega Corporation.
OTHER COMMERCIAL ASSETS
As part of the Company's strategy to focus on the expansion of its cancer diagnostic franchise, work continues to sell, out-license, or partner other assets and technologies in which the Group has an interest.
As previously reported, on December 18, 2013, the Company announced that entities associated with the Company's founder and largest beneficial shareholder, Dr. Mervyn Jacobson (collectively, the "Jacobson Entities"), had entered into transactions which, if completed, will result in the disposal by them of 105,937,500 shares in the Company. Subsequent to that date, the Jacobson Entities disposed of 30,000,000 shares in GTG.
The Jacobson Entities and GTG entered into a binding Share Exchange Agreement ("Agreement") pursuant to which, subject to GTG shareholder approval, the Jacobson Entities will exchange a total of 75,937,500 shares in GTG at an agreed price of $0.08 per share for 4,500,000 shares in ImmunAid Limited ("ImmunAid") owned by GTG at an agreed price of $1.35 per share.
ImmunAid and GTG have also executed an Option Agreement pursuant to which ImmunAid will, when completion occurs under the Agreement, grant to GTG options to acquire a total of 2,250,000 ordinary shares in ImmunAid.
On March 13, 2014 GTG released the notice of the Extraordinary General Meeting of shareholders and Sample Proxy for the Meeting. The notice of meeting also included the Independent Expert's Report which was required to show all of the transactions above are fair and reasonable to Non-Associated Shareholders.
OTHER COMMERCIAL ASSETS (cont.)
On April 17, 2014 the shareholders voted on the special resolution to approve the selective capital reduction by GTG and the disposal by GTG of shares in ImmunAid Limited. The resolution was passed on a show of hands.
Based on the current number of ordinary issued shares in GTG of 664,769,002, the number of ordinary issued shares in GTG will fall by 11.4% to 588,831,502, following the cancellation of the shares acquired from the Jacobson Entities.
At the conclusion of the various transactions contemplated above, the Jacobson Entities will retain a total of 30,536,184 ordinary shares in GTG representing 5.19% of the Company's then total issued capital.
On November 29, 2013, the Company received approval from its shareholders for the issue to Ironridge BioPharma Co., a division of institutional investor Ironridge Global IV, Ltd. ("Ironridge"), of redeemable convertible notes to raise USD 5,000,000 (the "Notes"). On December 23 2013, the Notes were drawn down and the Company received $5,627,462 (being the Australian dollar equivalent of USD 5,000,000) from Ironridge, before the payment of associated costs.
On December 31, 2013, Notes with a face value of USD 250,000 were converted in return for which Ironridge received 8,714,541 ordinary shares. During the quarter ended March 31, 2014, further Notes with a face value of USD 2,000,000 were converted in return for which Ironridge received 2,193,117 American Depositary Receipts (representing 65,931,240 ordinary shares). On April 10, 2014, further Notes with a face value of USD 500,000 were converted in return for which Ironridge received 550,581 American Depositary Receipts (representing 16,517,420 ordinary shares). As a result of these conversions, the face value of the remaining Notes has been reduced to USD 2,250,000.
Chief Executive Officer
On January 7, 2014, the Company announced that the temporary corporate restructure that had been announced on October 15, 2013 regarding CEO Ms. Alison Mew had been extended to March 31, 2014.
On February 24, 2014, the Company was pleased to advise that Ms. Alison Mew had confirmed that she would return to full-time work to resume her position as the Company's Chief Executive Officer as from Tuesday, April 1,2014.
In light of her return, Acting Chief Executive Officer Mr. Tom Howitt relinquished this role on Friday, March 28, 2014. Further, the Company advised that Mr. Howitt tendered his resignation as Chief Financial Officer and Company Secretary and left the Company on that date. The Company wishes to thank Mr. Howitt for his services during his tenure of almost ten years.
Until such time as a replacement for Mr. Howitt can be found, current GTG Financial Controller, Ms. Bronwyn Christie, was appointed as Acting Chief Financial Officer.
On March 19, 2014, Ms. Bronwyn Christie was appointed as the Company Secretary.
The BREVAGen™ breast cancer risk stratification test is a novel genetic test panel that examines a patient's DNA to detect the absence or presence of certain common genetic variations (SNPs) associated with an increased risk for developing breast cancer. The test is designed to help physicians assess aggregate breast cancer risk from these genetic markers, plus factors from a standard clinical assessment based on a patient's family and personal history, thus giving a clearer picture of an individual woman's risk of developing breast cancer. The BREVAGen™ test may be especially useful for women at intermediate risk of developing breast cancer, including those who have undergone breast biopsies, as the test will provide information that can help physicians recommend alternative courses of action, such as more vigilant, targeted surveillance or preventive therapy, on a personalized patient-by-patient basis.
About Genetic Technologies Limited
Genetic Technologies was an early pioneer in recognizing important new applications for "non-coding" DNA (Deoxyribonucleic Acid). The Company has since been granted patents in 24 countries around the world, securing intellectual property rights for particular uses of non-coding DNA in genetic analysis and gene mapping across all genes in all species. Its business strategy is the global commercialization of its patents through an active out-licensing program and the global expansion of its oncology and cancer management diagnostics portfolio. Genetic Technologies is an ASX and NASDAQ listed company with operations in the USA and Australia. For more information, please visit www.gtglabs.com.
Safe Harbor Statement
Any statements in this press release that relate to the Company's expectations are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Since this information may involve risks and uncertainties and are subject to change at any time, the Company's actual results may differ materially from expected results. Additional risks associated with Genetic Technologies' business can be found in its periodic filings with the SEC.