Neoprobe Corp. (OTCBB: NEOP) shareholders took a bath in the second quarter, largely because of one-time charges related to converting their company’s debt to preferred equity.
But the Dublin, Ohio, gamma detection device and radiopharmaceutical developer is on the verge of launching its first game-changing product: Lymphoseek, which is a tracing agent that identifies cancerous lymph nodes in patients with breast cancer and melanoma.
Neoprobe executives now expect to have a pre-new drug application discussion about Lymphoseek (pdf) with the Food and Drug Administration this quarter in preparation for filing the application in the fourth quarter.
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As for the just-completed second quarter, converting $11 million in Platinum-Montaur Life Sciences LLC debt to new preferred equity freed Neoprobe’s balance sheet from complicated debt securities. That could help in the company’s bid for a listing on the NYSE: Amex market.
Currently, Neoprobe’s shares trade on the Nasdaq Over-The-Counter Bulletin Board — essentially a listing service for stock brokers. The NYSE: Amex market is a stock exchange that could give Neoprobe investors more assurance of liquidity. And that assurance might help encourage trading in the stock, which could boost its price of $2 and change.
A more liquid market also could enable the company to sell $20 million in securities for which it has filed a shelf offering registration.
But the conversion also cost $41.7 million, pushing Neoprobe to a $51.2 million, or 64 cents a diluted share, loss in the second quarter. That compared with a loss of $15.2 million, or 21 cents a diluted share, in the year-ago quarter, which included a $13.7 million charge to change the carrying value of derivative securities to their market value.
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For the six months ended June 30, Neoprobe lost $53.7 million, or 67 cents a diluted share, compared with a loss of $14.4 million, or 20 cents a diluted share, in the year-ago period.
Revenue from the sale of gamma detection devices grew 40 percent in the second quarter to $2.5 million from $1.8 million a year ago. For the six-month period, revenue were up 16 percent to $5.2 million from a year ago.
“The increases were due to increased sales volumes offset by slightly lower prices,” Brent Larson, Neoprobe’s senior vice president and CFO, said in the company’s earnings release (pdf). “Gross margins from our device sales remained steady at 68 percent for the first half of 2010 compared to the same period in 2009.”
Though Neoprobe lost money, the second quarter helped set the stage to launch Lymphoseek, as well as relaunch a real-time tumor detection system called RIGScan CR. In 1998, the company aborted its attempt to launch an earlier RIGS system.
“We are pleased with the progress we’ve made with the clinical and regulatory pathway for Lymphoseek,” CEO David Bupp said in the release. “We have successfully completed the re-characterization of the RIGScan CR biologic agent and are now preparing an investigational new drug amendment and a Phase 3 clinical protocol to support the ongoing clinical development program.”
