Cancer Genetics (CGIX) operates in a completely different space than Facebook (FB), and while other companies are postponing their IPOs or withdrawing them all together, this name is still looking to start trading this week. It's possible that underwriters think because the offering is so small, there will still be plenty of available capital to participate in the IPO. Cancer Genetics is pricing 4 million shares in a range of $11.00 to $13.00. It hopes to raise $48 million, giving the company a total market cap of $111.9 million. The deal is underwritten by William Blair & Company, Baird, Needham & Company, and First Analysis Securities.
Cancer Genetics' Business
Cancer Genetics seeks to sell its proprietary cancer screening tests, MatBA-CLL and MatBA-SLL. It plans to seek FDA approval to expand the commercial use of these tests to other laboratories and testing sites. The time horizon for completion of the studies and tests necessary for regulatory approval from the FDA is a little more than two years. This will open up the market and dramatically increase revenue from these diagnostic products.
These tests target difficult to diagnose cancers including hematological, urogenital and HPV-associated cancers. It has commercially launched MatBA-SLL, its microarray test for chronic lymphocytic leukemia (CLL), and MatBA-CLL, its test for risk stratification in small lymphocytic lymphoma (SLL), late last year and early this year, respectively. The revenues so far have been immaterial to its results of operations.
Cancer Genetics' Revenue
The company is set to go public on May 18, the same day as Facebook. But this company is tiny, especially in comparison to Facebook. Like many early-stage biotech companies, Cancer Genetics is not profitable and had a net loss of 11.9 million on revenues of just $3 million. It has only recently begun selling its proprietary microarray tests, MatBA-CLL and MatBA-SLL. So until now, 87% of its revenues were derived from its non-proprietary oncology testing services, which are sold to a small number of oncologists and pathologists mostly in the eastern U.S. And 10% of its revenue came from government grants, with the remaining 3% from sales of its DNA probes, which are only sold outside the U.S.
Cancer Genetics' Competition
The company's competition comes primarily from diagnostic methods that have been used by oncologists and pathologists for years. Cancer Genetics will have to convince those medical professionals that its methods of testing are superior and provide better results than previous methods. In addition, many companies offer similar testing products and/or are currently researching gene profiles, gene expression, and protein biomarkers in cancers, which could lead to competitive products. Some of the larger companies involved in genetics diagnostic sales or research are CombiMatrix (CBMX), Quest Diagnostics (DGX), Abbott Laboratories (ABT), Johnson & Johnson (JNJ), Roche Molecular Systems (RHHBY), Genomic Health (GHDX), Myriad Genetics (MYGN), and Response Genetics (RGDX).
How to Trade Cancer Genetics
This company is one of those highly speculative stocks that is going to be very volatile. It is selling a very small amount of shares, just 4 million, and after the offering will only have around 9 million outstanding. That low float will only add to its volatility. On the bright side, it is capitalized (not including the IPO cash) enough to continue operations through December of this year. Investors may also like that it has just started sales of its primary products, and those sales could increase rapidly. Investors of late have been less and less likely to pay for growth possibilities. With everyone focused on Facebook right now, Cancer Genetics will probably price below the range and open lower. I would put my money into Facebook shares instead.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.