Response Genetics (NASDAQ:RGDX) has just announced that it has received approval from the New York State Department of Health to offer, market and report results of its ResponseDX tests to healthcare providers in the State of New York. This is a huge announcement for the company. Why? Well because New York is the third most populated state in the U.S. and the addition of this license to provide testing here will most certainly contribute to the continued growth of the company's ResponseDX sales in 2015. In just the last quarter, the company hit another sales record with its ResponseDX line. I fully expect new sales records in 2015 on the back of this news.
When I covered Response Genetics in depth I laid out a clear analysis showing the turn around the company was undergoing. The last quarter was clearly an indication that the thesis was playing out. However, the stock has clearly moved in the opposite direction of the company. That said, I had predicted that Response Genetics would be awarded approval by the New York State Department of Health and its Wadsworth Centers before the end of the year. It was one pending catalyst that I thought could spark some life into the stock.
The news is incredibly bullish. It is not easy to do lab testing in New York State. New York is the only U.S. state that requires an independent regulatory review process including clinical and technical evaluation for laboratory developed tests. It conducts one of the most demanding investigations including validation of laboratory developed tests and an on-site inspection of each laboratory seeking a New York State clinical laboratory permit.
This is a huge positive for the company and I expect to see the benefits beginning to hit revenues by spring of 2015. There are still some issues, for example shareholder equity is below the $2.5 cutoff required for Nasdaq listing. But the company is working on a plan for submission to Nasdaq which it believes will enable it to regain compliance with the rule. Response intends to provide Nasdaq with such a plan on or before the January 8, 2015 deadline. If the plan is accepted, Nasdaq can grant Response an extension of up to 180 calendar days from November 24, 2014 to prove they are in compliance. This issue is forcing management to care about shareholders.
So, we have a management that has to respond to shareholders now. We have growing revenues. The year 2014 has brought in a tremendous number of new contracts and deals. It has been capped by this much needed approval by New York State. This has truly been a turnaround year for the company and the stock, in my opinion, is an incredible opportunity sitting just above its 52-week low. We have a good company, but a broken stock. It won't take long for this situation to rectify itself.
Disclosure: The author is long RGDX.
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