Exiqon is closing down operations at Oncotech, Inc.
COPENHAGEN, June 7, 2010-Exiqon A/S (NASDAQ OMX Copenhagen: “EXQ”) today announced that its wholly owned subsidiary, Oncotech, Inc. (“Oncotech”), will be pursuing an out-of-court liquidation conducted by a common law Assignment for the Benefit of Creditors. On 17 December 2009, Exiqon announced its intention to divest Oncotech. Exiqon has since been engaged in discussions with numerous parties regarding a possible sale of Oncotech. However, effective May 31, 2010, the Medicare Administrative Contractor in California, Palmetto GBA, has issued an LCD disallowing coverage for Oncotech's EDR tests. In light of this decision by Palmetto GBA, Exiqon has concluded that a divestment cannot be achieved and has decided to discontinue operations at Oncotech.
The decision by Palmetto GBA to disallow coverage for Oncotech's EDR testing is contrary to the policies of contractors' in other regions of the U.S., including for example Pennsylvania which allows similar drug resistance testing by a competitor of Oncotech. The effective date of Palmetto GBA's decision was subsequently extended until end July 2010, but effectively undermines Oncotech's ability to conduct its business on competitive terms.
Exiqon has been in negotiations with multiple parties regarding their potential acquisition of Oncotech. Despite interest and extensive efforts to conclude a transaction on agreed terms, negotiations have been terminated, with the reason given being the uncertainty created by the LCD. Due to the termination of negotiations and the absence of interest from other parties, Exiqon has concluded that a sale of Oncotech, Inc. cannot be achieved in light of the recent circumstances created by Palmetto GBA's decision to discontinue coverage for Oncotech, Inc.'s EDR testing.
The effect of Oncotech on Exiqon's full year's guidance, which includes Oncotech as discontinued business, is adjusted from previously announced expectations of DKK 0.00 to approximately DKK -2 million. The full year guidance for continued business remains unchanged:
For 2010, Exiqon expects total revenue of DKK 80-90 million excluding discontinued operations.
The net loss for the year 2010 is expected to be approximately DKK 40 million including non-cash costs of current incentive programs and depreciations expensed in the amount of DKK 15 million.
The effect of discontinued business, Oncotech, Inc., is expected to be DKK -2 million including reclassification of related exchange rate adjustments of approximately DKK 15 million.
All of the above expectations are based on an average USD/DKK exchange rate of DKK 5.25 for 2010.
Exiqon A/S is exploring available options for securing an optimum financial position in light of the abandoned plans for divesting Oncotech, Inc.
Additional information: Lars Kongsbak, CEO, tel. +45 4566 0888 (cell: +45 4090 2101) Hans Henrik Chrois Christensen, CFO, tel. +45 4566 0888 (cell: +45 4090 2131)
Posted: June 2010