Transgenomic Reports Second Quarter 2008 Results

Achieves Third Consecutive Quarter of Profitability

OMAHA, Neb., Aug. 5 /PRNewswire-FirstCall/ -- Transgenomic
(OTC Bulletin Board: TBIO) today announced financial results for the quarter
ended June 30, 2008. The Company reported net income of $101,000, or $0.00 per
share, in the second quarter 2008, compared to net income of $226,000, or
$0.00 per share, in the year ago period.
The second quarter of 2008 represented the Company's third consecutive
quarter of profitability from continuing operations and reflects stable
instrument and consumables revenues coupled with growth in the Company's
Molecular Clinical Reference Laboratory and its Pharmacogenomics Services
Laboratory businesses.
Craig Tuttle, Transgenomic's President and Chief Executive Officer, noted,
"We are pleased to report the Company's third profitable quarter in a row,
driven by significant growth in our laboratory services product line. We
continue to build customer validation of our unique mutation discovery and
detection service capabilities by increasing revenues from our reference lab
and entering additional agreements for pharmacogenomic studies with large
pharmaceutical partners. We are also looking for opportunities to enter into
larger collaborations covering Phase III clinical trials that could generate
significantly more revenue for the Company by enrolling much larger patient
populations."
Second Quarter 2008
Net income from continuing operations was $101,000, or $0.00 per share,
for the second quarter of 2008, compared to net income of $226,000, or $0.00
per share, for the second quarter of 2007. Net income for the year ago period
consisted of $233,000, or $0.00 per share, from continuing operations and was
offset by a loss of $7,000, or $0.00 per share, from discontinued operations
related to the Company's sale of its Nucleic Acids operating segment and
related assets. Net income in the second quarter of 2007 also included two
non-recurring items: a realized gain of $937,500 from selling an investment in
equity securities; and restructuring charges of $624,000 related to the close
of the Cramlington, England production facility and an administrative office
outside of Paris, France.
Net sales from continuing operations were $6.3 million during the second
quarters of 2008 and 2007. The second quarter of 2008 reflected a 52% increase
in net sales from the laboratory services segment and a 7% decrease in
instrument-related net sales versus the same period last year. Gross profit
from continuing operations during the second quarter of 2008 was $3.7 million,
or 60 %, compared to $3.4 million, or 54%. Gross profit margin of 45% from the
Laboratory Services product line in the second quarter of 2008 was up from
29% in the year ago period and was the primary contributor to the
year-over-year improvement in overall profit margin.
Operating expenses from continuing operations were $3.7 million during the
second quarter of 2008, compared to $4.2 million during the same period of
2007. The 2007 period included $624,000 of restructure charges. Foreign
currency translation adjustments decreased operating expenses by $278,000 in
2008. The foreign currency impact in the second quarter of 2007 was
immaterial. Offsetting this was increased sales costs. Cash and cash
equivalents totaled $5.7 million at June 30, 2008 and December 31, 2007.
Six Months Ended June 30, 2008
The Company reported net income of $223,000, or $0.00 per share, for the
six months ended June 30, 2008, compared to a net loss of $970,000, or $0.02
per share, during the comparable period of 2007. Net income for the six
months ended June 30, 2008 was comprised of income from continuing operations
of $223,000, or $0.00 per share. The net loss for the six months ended June
30, 2007 was comprised of a loss from continuing operations of $1.0 million,
or $0.02 per share, and income from discontinued operations of $66,000, or
$0.00 per share.
Net sales from continuing operations were $12.5 million for the six months
ended June 30, 2008, up from $11.5 million during the comparable period of
2007. This increase reflected year-over-year net sales growth of 91% from
laboratory services, 49% from the clinical reference laboratory, and 246% from
pharmacogenomics research services. Gross profit from continuing operations
was $7.4 million, or 59%, for the six months ended June 30, 2008, compared to
$6.1 million, or 53%, in the same period during 2007. The improvement in gross
margin was largely attributed to the Company's laboratory services product
line, which had 43% gross profit during the six months ended June 30, 2008
versus 10% gross profit for the same period in 2007. Product mix and
production operating efficiencies on the instrument product lines also
contributed to the gross profit improvement.
Operating expenses from continuing operations were $7.2 million for the
six months ended June 30, 2008, compared to $8.2 million during the comparable
period of 2007, which included $624,000 of restructuring charges. The
decrease in operating expenses is largely due to higher research and
development collaboration expenses and patent expenses in 2007 as well as a
favorable foreign currency translation adjustment of $454,000. These were
somewhat offset by increased sales costs.
The company generated $193,000 in cash flows from operations for the six
months ended June 30, 2008, compared to $1.6 million in cash flows used in
operations during the same period in 2007.
Continued Tuttle, "In addition to achieving our third successive quarter
of profitable performance, we are very encouraged by the sound level of growth
from our two laboratory businesses. We continue to develop exciting new
products while maintaining a very active business development effort for
uncovering and licensing high-value tests to add to our menu offering in both
laboratory businesses. One example of our novel research efforts is our
recently announced SEAL technology, or SURVEYOR(R) Endonuclease
Adaptor-ligated Libraries (SEAL). This cost-effective and high-throughput
enabling technology for whole genome analysis evolved from our highly
sensitive SURVEYOR Nuclease mutation detection technology. SEAL will prove
extremely useful for whole genome sequence analyses and a host of key mutation
and variation analyses of specific gene targets which positions this
technology to change the shape of pharmacogenomic research and patient
assessment. With the possibility to reduce the cost of whole genome analysis
to under $10,000, SEAL could impact the use of DNA sequencing within
pharmacogenomic assessments for personalized medicine. We are confident that
SEAL and other assays under development or in licensing discussions will
continue to create valuable opportunities to expand our services as well as
the depth and breadth of our third-party collaborations."
Earnings Call
Company management will discuss second quarter 2008 financial results via
teleconference on Wednesday, August 6, at 8:30 AM Eastern Time. To access the
call via telephone, dial 800-895-1085 or 785-424-1055. The Company will also
host a live broadcast of the call over the Internet. To listen to the
webcast, investors should log on to the Company's Investor Relations web page
at http://www.transgenomic.com/events.asp?id=6 and follow the instructions
provided. An archived recording of the conference call will be available and
can be accessed via the web using the same link listed above for 14 days after
the call. Investors can also listen to a replay via telephone until 11:59 p.m.
Eastern Time on Wednesday, August 20, 2008. Simply dial 800-388-9064 or
402-220-1116 from any telephone.
About Transgenomic
Transgenomic (OTC-Bulletin Board: TBIO) is a global biotechnology company
specializing in high sensitivity genetic variation and mutation analysis. The
Company provides products and services in the fields of pharmacogenomics and
pharmacogenetics.
Product offerings include the WAVE(R) DHPLC Systems and associated
consumables specifically designed for use in genetic variation detection and
single- and double-strand DNA/RNA analysis and purification. With broad
applicability to genetic research, over 1500 systems have been shipped to
customers in more than 30 countries. The SURVEYOR(R) Mutation Detection Kits
and SURVEYOR Check-It Kit provide reagents and protocols are for the detection
of mutations in DNA. In addition, HANABI automated chromosome harvesting
systems improve laboratory productivity with consistent quality compared to
manual methods.
Service offerings include the Transgenomic Clinical Reference Laboratory,
which provides reference laboratory services specializing in molecular
diagnostics including Mitochondrial Disorders, Oncology and Hematology,
Molecular Pathology and Inherited Diseases. Transgenomic Genomic Research
Services is a CRO for pharmacogenomic, translational research and clinical
trials.
FORWARD LOOKING STATEMENTS:
This document contains forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. These statements
relate to future events or our future results of operation or future financial
performance, including, but not limited to the following statements: the
Company's ability to develop, obtain regulatory approval and commercialize its
clinical and preclinical product candidate programs. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, which may cause our actual results to be materially different from
these forward-looking statements. Factors which may significantly change or
prevent our forward looking statements from fruition include that we may be
unsuccessful in developing any products or acquiring products; that our
technology may not be validated as we progress further and our methods may not
be accepted by the scientific community; that we are unable to retain or
attract key employees whose knowledge is essential to the development of our
products; that unforeseen scientific difficulties develop with our process;
that our patents are not sufficient to protect essential aspects of our
technology; that competitors may invent better technology; that our products
may not work as well as hoped or worse, that our products may harm recipients;
and that we may not be able to raise sufficient funds for development or
working capital when we require it. As well, our products may never develop
into useful products and even if they do, they may not be approved for sale to
the public. We caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date they were made.
Certain of these risks, uncertainties, and other factors are described in
greater detail in our filings from time to time with the Securities and
Exchange Commission (the "SEC"), which we strongly urge you to read and
consider, including our Form 10-Q filed with the SEC on May 8, 2008 and our
Form 10-K filed with the SEC on March 28, 2008, all of which are available
free of charge on the SEC's web site at http://www.sec.gov. Subsequent written
and oral forward-looking statements attributable to us or to persons acting on
our behalf are expressly qualified in their entirety by the cautionary
statements set forth in our reports filed with the SEC. We expressly disclaim
any intent or obligation to update any forward-looking statements.

Transgenomic, Inc.
Summary Financial Results
Unaudited Condensed Consolidated Statements of Operations
(dollars in thousands except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
NET SALES $6,246 $6,272 $12,501 $11,494
COST OF GOODS SOLD 2,507 2,859 5,122 5,373
Gross profit 3,739 3,413 7,379 6,121
OPERATING EXPENSES:
Selling, general and
administrative 3,091 3,067 6,066 6,047
Research and
development 560 492 1,132 1,550
Restructuring Costs 8 624 8 624
3,659 4,183 7,206 8,221
INCOME (LOSS) FROM
OPERATIONS 80 (770) 173 (2,100)
OTHER INCOME (EXPENSE):
Interest income
(expense) 25 79 58 141
Other, net - - (1) 4
Gain on sale of
investment - 938 - 938
25 1,017 57 1,083
INCOME (LOSS) BEFORE
INCOME TAXES 105 247 230 (1,017)
INCOME TAX EXPENSE 4 14 7 19
INCOME (LOSS) FROM
CONTINUING OPERATIONS 101 233 223 (1,036)
INCOME FROM DISCONTINUED
OPERATIONS, NET OF TAX - (7) - 66
NET INCOME (LOSS) $101 $226 $223 $(970)

BASIC AND DILUTED INCOME
(LOSS) PER SHARE:
From continuing
operations $0.00 $0.00 $0.00 $(0.02)
From discontinued
operations - 0.00 - 0.00
$0.00 $0.00 $0.00 $(0.02)

BASIC WEIGHTED
AVERAGE SHARES
OUTSTANDING 49,189,672 49,189,672 49,189,672 49,189,672
DILUTED WEIGHTED
AVERAGE SHARES
OUTSTANDING 49,301,010 49,189,672 49,301,010 49,189,672

Transgenomic, Inc.
Summary Financial Results
Unaudited Condensed Consolidated Statements of Cash Flows
(dollars in thousands)

Six Months Ended
June 30,
2008 2007
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 193 (1,564)
NET CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES (131) 3,572
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES ON CASH (93) 7
NET CHANGE IN CASH AND CASH EQUIVALENTS (31) 2,015
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,723 5,868
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,692 $7,883

Transgenomic, Inc.
Summary Financial Results
Condensed Consolidated Balance Sheets
(dollars in thousands)

(Unaudited)
June 30, December 31,
2008 2007
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $5,692 $5,723
Accounts receivable (net of allowances
for bad debts of $501 and $703, respectively) 5,525 5,095
Inventories 4,617 4,586
Prepaid expenses and other current assets 633 759
Total current assets 16,467 16,163
PROPERTY AND EQUIPMENT, NET 1,350 1,579
OTHER ASSETS:
Goodwill 638 638
Other assets 678 710
$19,133 $19,090
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $920 $1,245
Other accrued expenses 2,884 3,152
Accrued compensation 814 450
Total current liabilities 4,618 4,847
Other long term liabilities 151 141
Total liabilities 4,769 4,988
STOCKHOLDERS' EQUITY 14,364 14,102
$19,133 $19,090

SOURCE Transgenomic

Debra Schneider, Chief Financial Officer of Transgenomic, +1-402-452-5400,
fax, +1-402-452-5461, investorrelations@transgenomic.com