Clarient Announces Fourth Quarter and Year-End 2007 Financial Results

Quarterly Revenue and Case Volumes Increase 53% and 52% Respectively
Year-over-Year

ALISO VIEJO, Calif., March 31 /PRNewswire-FirstCall/ -- Clarient, Inc.
(Nasdaq: CLRT), a premier technology and services resource for pathologists,
oncologists and the pharmaceutical industry, today announced financial results
for the fourth quarter and year ended December 31, 2007. Revenue from
continuing operations was $12.4 million for the fourth quarter of 2007, an
increase of over 53 percent compared to $8.1 million for the comparable period
in 2006.
Total patient case volume for the fourth quarter of 2007 was approximately
21,500, an increase of 52 percent compared to the comparable period in 2006.
Sequential total patient test volume in comparison to the third quarter of
2007 increased 10 percent, including a 6 percent increase in breast
prognostics/solid tumor testing, an 18 percent increase in leukemia/lymphoma
volumes, and a 12 percent increase in PCR/molecular testing volumes.
Clarient reported $6.4 million in gross profit for the fourth quarter of
2007, an increase of 78 percent as compared to $3.6 million for the comparable
period in 2006. Reported gross margin in the fourth quarter of 2007 was 52
percent as compared to 45 percent for the same period 2006. Gross margins
improved as a result of increased total patient volume, better use of the
Company's capacity, improved revenue mix, improved process efficiencies and
improved pricing with vendors.
Commenting on the year end results, Ron Andrews, President and CEO, said,
"Our business model continued to validate that we can produce sustainable
growth as we completed the quarter with a 53 percent increase in revenue over
the fourth quarter of 2006. Our 10 percent sequential growth in test volume
versus third quarter is again indicative of our solid trajectory and has
provided a strong foundation for continued growth in 2008. We believe that our
revenues for the first quarter of 2008 will exceed our revenues for the
comparable period in 2007 by more than 50 percent. This base business
momentum, combined with the pending launch of Clarient's Insight(TM) Dx Breast
Cancer Profile, provides solid reasons to remain very encouraged with our
direction. Assuming we maintain our current commercial velocity, we believe we
will be able to achieve our 2008 goals of growing revenue between 30-40
percent this year versus the fiscal year ended December 31, 2007."
Total operating expenses were $9.6 million for the fourth quarter of 2007,
an increase of 49 percent compared to $6.4 million in the fourth quarter of
2006. The growth in expense was primarily due to increased professional fees,
selling expenses and collection expenses. Also the Company recorded bad debt
expense and increased its allowance for doubtful accounts by $1.8 million in
the fourth quarter of 2007 (as compared to bad debt expense of $300,000 in the
fourth quarter of 2006) based on an analysis of its most recent historical
collection information.
Operating loss was $3.2 million for the fourth quarter of 2007, an
increase of 14 percent from the same period in 2006. Loss from continuing
operations in the fourth quarter of 2007 was $3.8 million or $0.05 loss per
share, compared to $3.2 million or $0.05 loss per share in the fourth quarter
of 2006, an increase of 19 percent.
At December 31, 2007, the Company's cash and cash equivalents were $1.5
million compared to $0.4 million at December 31, 2006. As previously
reported, on March 14, 2008 the Company entered into a credit facility with
affiliates of Safeguard Scientifics, Inc. pursuant to which Safeguard has
agreed to provide the Company with a total of up to $21 million (subject to
adjustment) in debt financing via a revolving credit facility. Further
information regarding the Safeguard facility is set forth in the Company's
current reports on Form 8-K filed with the Securities and Exchange Commission
on March 17, 2008 and March 21, 2008, respectively. The Company currently has
$12.4 million of borrowings outstanding under the Safeguard facility and $9
million of borrowings (plus a $3 million letter of credit) outstanding under
its credit facility with Comerica Bank. Subsequent to the execution of the
Safeguard facility, the Company entered into an amendment to its credit
facility with Comerica Bank to set the financial covenant under the Comerica
facility for the 2008 fiscal year, which requires the Company to maintain
specified levels of minimum tangible net worth. The Company believes that the
Safeguard and Comerica facilities will provide it with access to sufficient
amounts of capital during 2008 to continue to operate and grow its business.
The financial covenant contained in the Comerica facility was set by the
Company and Comerica based on the Company's 2008 business plan, and the
Company believes it will be able to maintain compliance with this covenant.
The financial covenant contained in the Comerica facility is based on the
assumption that the Company's results from operations in 2008 will
significantly improve from the Company's historical results of operations. In
addition, the Company has previously not been able to maintain compliance with
prior financial covenants in its credit facilities with respect to certain
periods. Therefore, for these and other reasons, the Company has been advised
by the Company's independent registered public accounting firm, that the
firm's audit opinion with respect to its audit of the Company's consolidated
financial statements for the fiscal year ending December 31, 2007, will
contain an explanatory paragraph stating that substantial doubt exists with
respect to the Company's ability to continue as a "going concern."
Commenting further, Andrews said, "Given the current uncertainty
surrounding the credit markets and our need for access to working capital to
support our continued rapid growth, we were pleased to gain access to the
capital necessary to enable us to continue to execute our plan. The new
Safeguard credit line, along with our renewed facility with Comerica Bank,
puts us on solid financial footing from which we can embark on the launch of
our new breast cancer test. Based on our improvement in gross margins in 2007,
our current commercial growth and our ongoing expense management, we believe
we should be able to reduce our operating losses during 2008, which in turn
should reduce the amount of additional funds we will need to draw from our
newly negotiated line of credit."
The financial results described above reflect the impact of the adjustment
to bad debt expense described above, as well as an aggregate $950,000
adjustment to reduce revenue (and record a corresponding liability) that the
Company has made to its consolidated financial statements (allocated over a
period of multiple quarters) resulting from the Company's analysis of
financial information provided to the Company from its third party billing
vendor relating to certain credit balances. As a result of matters identified
in connection with the Company's year-end financial statement preparation
process, management has identified material weaknesses in the Company's
internal control over financial reporting. Additional details relating to
these material weaknesses and the above-referenced adjustments will be
included in the Company's Form 10-K for the fiscal year ended December 31,
2007 to be filed with the Securities and Exchange Commission.
Clarient will discuss fourth quarter 2007 results and certain future
expectations on a conference call and live web cast at 8:00 a.m. EDT today.
Call information is available at http://www.clarientinc.com/investor.
Forward-looking financial guidance reflects management's expectations as
of the date of this press release and is based upon limited available
information which is dynamic and subject to risk and uncertainty. Results may
be materially affected by many factors including those described in the
Forward-Looking Statements section below.
About Clarient
Clarient combines innovative technologies with world class expertise to
assess and characterize cancer. Clarient's mission is to provide the services,
resources and critical information to improve the quality and reduce the cost
of patient care as well as accelerating the drug development process. The
Company's principal customers include pathologists, oncologists, hospitals and
biopharmaceutical companies.
The rise of individualized medicine as the new direction in oncology has
created the need for a centralized resource providing leading diagnostic
technologies such as flow cytometry and molecular testing. Clarient is that
resource, having created a state-of-the-art commercial cancer laboratory
providing the most advanced oncology testing and drug development services
available both onsite and over the web. Clarient is a Safeguard Scientifics,
Inc. partner company. For more information, visit www.clarientinc.com.
About Safeguard
Founded in 1953 and based in Wayne, PA, Safeguard Scientifics, Inc.
(NYSE: SFE) provides growth capital for entrepreneurial and innovative
technology and life sciences companies. Safeguard targets technology companies
in Software as a Service (SaaS), Technology-Enabled Services and Internet-
based Businesses, and life sciences companies in Molecular and Point-of-Care
Diagnostics, Medical Devices and Specialty Pharmaceuticals with capital
requirements between $5 and $50 million. Safeguard participates in expansion
financings, corporate spin-outs, management buyouts, recapitalizations,
industry consolidations and early-stage financings. www.safeguard.com
Forward Looking Statements
The statements herein regarding Clarient, Inc. contain forward-looking
statements that involve risks and uncertainty. Future events and the Company's
actual results could differ materially from the results reflected in these
forward-looking statements. Factors that might cause such a difference
include, but are not limited to: the Company's ability to continue to develop
and expand its diagnostic services business, the Company's ability to expand
and maintain a successful sales and marketing organization, the Company's
ability to maintain compliance with financial and other covenants under its
credit facilities, the effects of a going concern audit opinion on the
Company's operations, the Company's ability to successfully complete a joint
development agreement with Zeiss for the development of novel diagnostic
tests, whether the conditions to payment of all or any portion of the
contingent consideration from the Company's sale of its instrument systems
business to Zeiss are satisfied, the Company's ability to remediate the
material weaknesses in the Company's internal control over financial
reporting, the Company's ability to successfully transition its customer
billings from a third party billing vendor to an in-house billing system, the
continuation of favorable third party payer reimbursement for laboratory
tests, the Company's ability to obtain additional financing on acceptable
terms or at al , unanticipated expenses or liabilities or other adverse events
affecting cash flow, uncertainty of success in identifying and developing new
diagnostic tests or novel markers, the Company's ability to fund development
of new diagnostic tests and novel markers and the amount of resources the
Company determines to apply to novel marker development and commercialization,
the Company's ability to obtain additional financing if required on favorable
terms or at all, failure to obtain FDA clearance or approval for particular
applications, the Company's ability to compete with other technologies and
with emerging competitors in novel cancer diagnostics and dependence on third
parties for collaboration in developing new tests, and risks detailed from
time to time in the Company's SEC reports, including quarterly reports on Form
10-Q, reports on Form 8-K and annual reports on Form 10-K. Recent experience
with respect to laboratory services, revenues and results of operations may
not be indicative of future results for the reasons set forth above.
The company does not assume any obligation to update any forward-looking
statements or other information contained in this document.
Contact:
Matt Clawson
Allen & Caron, Inc.
(949) 474-4300
matt@allencaron.com

TABLES FOLLOW

Clarient , Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share amounts)
(unaudited)

Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006

Revenue $12,357 $8,055 $42,995 $27,723
Cost of revenue 5,993 4,469 22,304 15,566

Gross profit 6,364 3,586 20,691 12,157

Selling, general and
administrative expenses 9,611 6,440 32,488 24,774
Operating loss (3,247) (2,854) (11,797) (12,617)

Other expense and
taxes, net 550 346 2,372 944

Loss from continuing
operations (3,797) (3,200) (14,169) (13,561)

Income (loss) from
discontinued operations,
net of tax (102) (243) 5,412 (2,574)

Net loss $(3,899) $(3,443) $(8,757) $(16,135)

Basic and diluted
income (loss) per
common share:

Continuing
operations $(0.05) $(0.05) $(0.20) $(0.20)
Discontinued
operations $0.00 $0.00 $ 0.08 $(0.04)
Net Income (loss) $(0.05) $(0.05) $(0.12) $(0.24)

Weighted average number
of common shares
outstanding 71,842,274 71,001,545 71,573,121 67,872,436

Clarient , Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

December 31, December 31,
2007 2006

Cash and cash equivalents $1,516 $448
Accounts receivable, net 12,020 9,165
Property and equipment, net 10,997 10,138
Other assets 2,348 7,593

Total assets $26,881 $27,344

Total liabilities $31,670 $26,393
Stockholders' equity (4,789) 951

Total liabilities and stockholders' equity $26,881 $27,344

SOURCE Clarient, Inc.

Matt Clawson of Allen & Caron, Inc., +1-949-474-4300, matt@allencaron.com, for
Clarient, Inc.