IDXG : Interpace Diagnostics Group Stock Research Report

2017-10-20 - by Asif, Contributing Analyst

Interpace Diagnostics Group is a fully integrated commercial company that provides clinically useful molecular diagnostic tests and pathology services. The company develop and commercialize molecular diagnostic tests and related first line assays principally focused on early detection of patients at high risk of cancer and leverage the latest technology and personalized medicine for improved patient diagnosis and management.

PancraGEN, ThyGenX, ThyraMIR, and BarreGEN

The company currently has three commercialized molecular diagnostic assays in the marketplace for which the company is reimbursed by Medicare and multiple private payers: PancraGEN®, a pancreatic cyst and pancreaticobiliary solid lesion molecular test that can aid in pancreatic cyst diagnosis and pancreatic cancer risk assessment utilizing its proprietary PathFinder platform; ThyGenX®, which assesses thyroid nodules for risk of malignancy; and ThyraMIR®, which assesses thyroid nodules for risk of malignancy utilizing a proprietary gene expression assay. The company is also in the process of “soft launching” while The company gather additional market data, BarreGEN®, an esophageal cancer risk classifier for Barrett’s Esophagus that utilizes its PathFinder platform.

Interpace Diagnostics Group's mission is to provide personalized medicine through molecular diagnostics and innovation to advance patient care based on rigorous science. The company are leveraging its Clinical Laboratory Improvement Amendments (“CLIA”), certified and The companyof American Pathologists(“CAP”), accredited laboratories to develop and commercialize its assays and products. The company aim to provide physicians and patients with diagnostic options for detecting genetic and other molecular mutations that are associated with gastrointestinal and endocrine cancer. The company customers consist primarily of physicians, hospitals and clinics.

Global Molecular Diagnostics Market Size

The global molecular diagnostics market is estimated to be $6.45 billion and is a segment within the approximately $60 billion in vitro diagnostics market. The company believe that the molecular diagnostics market offers significant growth and strong patient value given the substantial opportunity it affords to lower healthcare costs by helping to reduce unnecessary surgeries and ensuring the appropriate frequency of monitoring. The company is keenly focused on growing its test volumes, securing additional coverage and reimbursement, maintaining its current reimbursement and supporting revenue growth for its three commercialized innovative tests, introducing related first line product and service extensions, as well as expanding its business by developing and promoting synergistic products, like BarreGEN®, in its market.

Additional Reimbursement Coverage During 2017

Reimbursement progress is key for any molecular diagnostic company. Interpace Diagnostics Group was successful in expanding the reimbursement of its products in 2016 and that has continued into 2017. Specifically the most significant progress the company have made regarding payers so far in 2017 is as follows:

  • In April 2017, The company announced that UnitedHealthcare, the largest health plan in the United States, has agreed to cover its ThyraMIR® test used in assessing indeterminate thyroid nodule fine needle aspirate (“FNA”) biopsies. The coverage is now in effect and is subject to members’ specific benefit plan design.

  • In June 2017, The company announced that it signed a new national contract with Aetna for its ThyGenX ® and ThyraMIR® molecular tests for indeterminate thyroid nodules. The agreement covers many of Aetna’s products, including commercial and Medicare Advantage plans. The agreement is its first national provider contract with a national health plan and means that the company will now be part of Aetna’s laboratory network for these services. The agreement goes into effect August 15, 2017.

  • In July 2017, The company announced that Cigna, one of the largest national health plans in the United States, has agreed to cover Interpace’s ThyGenX® test for Cigna’s 15 million members nationwide, with coverage effective immediately. Cigna’s coverage combine with Aetna, UnitedHealthcare, Medicare and other payers brings the total number of covered lives for ThyGenX® to approximately 275 million patients nationwide.

Recent Equity Financings

From January 6, 2017 through June 30, 2017, The company completed four public offerings of common stock and a private placement of warrants, which resulted in aggregate gross proceeds to it of approximately $25.9 million. A description of the financings is as follows:

  • On January 6, 2017, The company completed a registered direct public offering, or the Second Registered Direct Offering, to sell 630,000 shares of its common stock at a price of $6.81 per share to certain institutional investors. The Second Registered Direct Offering resulted in gross proceeds to it of approximately $4.2 million. The company are using the net proceeds from the Second Registered Direct Offering for working capital, repayment of indebtedness and general corporate purposes. In addition, it granted each institutional investor who participated in the Second Registered Direct Offering the right, for a period of 15 months following January 6, 2017, or until April 6, 2018, to participate in any public or private offering by it of equity securities, subject to certain exceptions, up to such investor’s pro rata portion of 50% of the securities being offered.

  • On January 25, 2017, The company completed a registered direct public offering, or the Third Registered Direct Offering, to sell 855,000 shares of its common stock and a concurrent private placement of warrants to purchase 855,000 shares of its common stock, or the Warrants, to the same investors participating in the Third Registered Direct Offering, (the “Private Placement”). The Warrants and the shares of its common stock issuable upon the exercise of the Warrants were not registered under the Securities Act and were sold pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The shares of common stock sold in the Third Registered Direct Offering and the Warrants issued in the concurrent Private Placement were issued separately but sold together at a combined purchase price of $4.69 per share of common stock and accompanying Warrant. The Third Registered Direct Offering and the Private Placement together resulted in gross proceeds to it of approximately $4 million. The company are using the net proceeds from the Third Registered Direct Offering for working capital, repayment of indebtedness and general corporate purposes and also used approximately $1.0 million to satisfy the obligations due to the five former senior executives.

  • On February 8, 2017, The company completed an underwritten, confidentially marketed public offering, or the CMPO, to sell 1,200,000 shares of its common stock at a price of $3.00 per share. In addition, The company granted the underwriters an option to purchase up to an additional 9% of the total number of shares of common stock sold by it in the CMPO, solely for the purpose of covering over-allotments, if any. The underwriters exercised the over-allotment option in full. The CMPO resulted in gross proceeds to it of approximately $3.9 million. The company are using the proceeds from the CMPO for working capital, repayment of indebtedness and liabilities and for general corporate purposes.

  • On June 21, 2017, pursuant to its S-1 filing of its preliminary prospectus to register shares on May 22, 2017, as amended thereafter, the Company completed a public offering for 9,900,000 shares of common stock together with an equal number of common warrants (the “Base Warrants”), to purchase shares of its common stock (and the shares of common stock that are issuable from time to time upon exercise of the common warrants) for $1.10 per share. Each Base Warrant upon exercise at a price of $1.25 will result in the issuance of one share of common stock to the holder. A public trading market for the Base Warrants was established on July 5, 2017 on the OTC market under the trading symbol IDGGW. As part of the offering (the “Offering”), which closed on June 21, 2017, the related underwriters purchased the full over-allotment of 1,875,000 Base Warrants available to them for the specified $.01 per warrant. 2,600,000 of Pre-Funded Warrants were also sold at the specified $1.09 per warrant. The combined gross proceeds of the June 21st offering totaled $13.7 million with approximately $12.3 million of net funds available to the Company after deducting underwriting discounts and other stock issuance expenses. As of July 7, 2017 all of the 2,600,000 Pre-Funded Warrants were exercised for the $.01 per warrant exercise price and all 2,600,000 common shares related to the warrants have been issued. On July 31, the Company and the underwriters closed on the exercise of the underwriters’ over-allotment option to purchase an additional 875,000 shares of common stock at a price of $1.09 per share for gross proceeds of $0.960 million.

As of July 7, 2017 all of the 2,600,000 Pre-funded Warrants were exercised for the $.01 per warrant exercise price and all 2,600,000 common shares related to the warrants have been issued. On July 31, 2017, the Underwriters exercised their right to purchase 875,000 Firm Shares for $0.960 million net of $0.072 million in underwriter discounts, or $0.882 million.

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