Immunicon Corp. (fka IMMCQ)

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Immunicon Corporation Reports Results for the Three and Nine Months Ended September 30, 2007
Friday November 2, 7:00 am ET
Updates Estimated Financial Outlook for the Year 2007

HUNTINGDON VALLEY, Pa.--(BUSINESS WIRE)--Immunicon Corporation (Nasdaq-Global Market:IMMC), which is developing and commercializing proprietary cell and molecular-based human diagnostic and life-science research products with a primary focus on cancer, today announced its results of operations for the three and nine month periods ended September 30, 2007.

On May 31, 2007, Immunicon announced that it had filed a Demand for Arbitration against Veridex, LLC, a wholly-owned subsidiary of Johnson and Johnson, or Veridex, whereby Immunicon is seeking termination of the 20-year exclusive worldwide agreement with Veridex, which currently grants Veridex the right to market, sell and distribute its cancer diagnostic products; rescission of all licenses currently held by Veridex under that agreement; and payment of compensatory and punitive damages based on, “repudiation and fundamental breaches by Veridex of its contractual, agency and other fiduciary obligations to market, sell and distribute Immunicon's cancer diagnostic products.” It is anticipated that this arbitration will be completed before the end of the first quarter of 2008.

Immunicon reported product and service revenue of $4.7 million for the three months ended September 30, 2007, which represented a 160% increase over the $1.8 million in product and service revenue for the three months ended September 30, 2006. Instrument revenue was $3.3 million in the third quarter of 2007 compared to $1.0 million in the third quarter of 2006. Reagent and consumable product sales were $743,000 in the three months ended September 30, 2007 and $488,000 in the three months ended September 30, 2006. Service revenue increased by 107% to $588,000 in the third quarter of 2007 compared to $283,000 in the same period in 2006.

Immunicon delivered 22 CellTracks AutoPrep sample preparation instruments and 23 CellTracks Analyzer II instruments to customers during the quarter ended September 30, 2007 and now has 119 AutoPrep instruments and 130 cell analyzers in service. An instrument system is comprised of one cell analyzer plus one AutoPrep sample preparation device. As of September 30, 2007, we have an instrument backlog of 10 instrument systems. Recognition of revenue related to instrument shipments to customers typically is delayed for a period of several months pending the final evaluation and acceptance of these instruments by customers.

Costs of goods sold were $4.4 million for the three months ended September 30, 2007 compared to $1.9 million for the three months ended September 30, 2006. Immunicon reported a gross profit on product and service sales of $252,000 in the third quarter of 2007 compared to a loss on product sales of $151,000 in the quarter ended September 30, 2006. The gross profit on sales of products and services in the quarter ended September 30, 2007 reflects margin on instrument sales of $233,000 and on services of $276,000 offset by a loss on reagent and consumable sales of $257,000. We completed the outsourcing of our instrument manufacturing activities in the third quarter. Effective April 1, 2007, we increased the list prices for our instruments to $205,000 per instrument system from $150,000. As a result, the gross profit per instrument for the quarter was approximately $6,000.

Research and development expenses for the three months ended September 30, 2007 were $2.6 million compared to $3.1 million in the corresponding three months in 2006. The reduction of $500,000 was principally a result of the decrease in clinical trial and development costs and the utilization of certain research and development personnel to support pharma services activity. The salary cost related to support of pharma services activity is charged to cost of goods sold.

General and administrative (“G&A”) expenses for the quarter ended September 30, 2007 were $6.8 million, compared to $2.7 million for the comparable quarter of 2006. This increase is attributable principally to increases in legal and professional fees of $4.5 million related to our arbitration against Veridex. As of September 30, 2007, we have incurred $5.4 million in costs related to the arbitration.

As disclosed previously, Immunicon issued an aggregate of $30,000,000 in principal amount of unsecured subordinated convertible notes (the “Notes”) and received $27.3 million in proceeds net of related fees and expenses on December 5, 2006. As a result of this financing, Immunicon values certain provisions of the Notes and the related warrants separately in accordance with various accounting guidance documents, including Statement of Financial Accounting Standards 133, “Accounting for Derivative Instruments and Hedging Activities”, and related interpretations including EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” Upon issuance of the Notes, Immunicon recorded a liability of $8.1 million related to the embedded conversion option in the Notes and a liability of $1.9 million related to the value of the warrants. For the quarter ended September 30, 2007, Immunicon has marked-to-market the conversion option and the warrants and have recorded a non-cash increase in income of $3.3 million in the Consolidated Statement of Operations related to the change in valuation of the Notes and the related warrants for the three months ended September 30, 2007. For further description of the Notes and related warrants, please refer to the Current Report on Form 8-K filed by Immunicon with the Securities and Exchange Commission on December 5, 2006.

Interest expense was $1.5 million and $98,000 for the three months ended September 30, 2007 and 2006, respectively. The increase is attributable principally to the non-cash interest expense of $1.5 million related to the issuance of the Notes and related warrants. Interest income was $514,000 and $367,000 for the three months ended September 30, 2007 and 2006, respectively. The increase in 2007 was due to the higher available cash balance for investment in 2007.

For the three months ended September 30, 2007, Immunicon’s net loss was $6.7 million compared to a net loss of $5.6 million for the three months ended September 30, 2006. The loss per share was $0.24 and $0.20 for the three months ended September 30, 2007 and September 30, 2006, respectively. The weighted average common shares outstanding was 27.7 and 27.6 million, respectively, for the three month periods ended September 30, 2007 and September 30, 2006, respectively.

As of September 30, 2007, Immunicon had cash, cash equivalents and investments of $38.6 million.

Financial guidance update

Immunicon is updating its previously announced financial guidance for the year ending December 31, 2007:

* Instrument system placements (a system includes one CellTracks Analyzer II and one CellTracks AutoPrep System) - range of between 65 and 75 system placements
* CellTracks AutoPrep System and CellTracks Analyzer II Instrument revenue - range of between $9 million and $10 million (excludes estimated 2007 EasyCount System revenue)
* Combined reagent, consumable and service revenue – range of between $5 million and $6.5 million
* Net cash expenditures – range of between $20 million and $22 million

We are increasing the revenue guidance for instrument revenue from a range of between $8 million and $9 million due to a higher than previously anticipated rate of instrument placements in the second half of 2007. We are increasing our guidance for cash expenditures from a range of $17.5 million to $20 million to account for expenditures related to the arbitration against Veridex. For the nine months ended September 30, 2007, we have incurred $5.4 million in arbitration-related expenses. While it is difficult to project the extent of arbitration activities and costs, we expect that these activities and costs will increase over the next 3 to 4 months.

The financial guidance estimates shown above reflect current expectations of Immunicon’s management based on available information. These statements are forward-looking and actual results may differ materially, including as a result of the factors more specifically referenced below in the discussion regarding “forward-looking statements.” Estimating the items above is inherently difficult.

A summary of instrument shipments and instruments sold for revenue recognition purposes for the period from product launch to September 30, 2007 is shown below:


Cumulative as of Three months ended Cumulative as of
June 30, 2007 September 30, 2007 September 30, 2007

Instrument shipments


Cell analyzers 107 23 130

CellTracks AutoPreps 97 22 119


Instruments sold (1)


Cell analyzers 102 21 123

CellTracks AutoPreps 87 20 1
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