Cgix profile 20131010

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with CEO Panna Sharma

Market Data

Fiscal Year December 31

Industry Healthcare

Market Cap $101.3M

Price/Earnings (ttm) N/A

Price/Book (mrq) 13.8x

Price/Sales (ttm) 18.9x

EBITDA (ttm) ($7.3M)

ROE (ttm) N/A

Institutional Ownership 0.3%

Shares Outstanding 6.0M

Float 3.8M

Avg. Daily Vol. (3 mos.) 126,841

As of October 10, 2013

Income Snapshot

TTM

Revenue $5.4M

Gross Profit $1.0M

Gross Margin 18.6%

Balance Sheet Snapshot ProForma

Cash $12.7M

Debt $6.1M *ProForma takes into account net proceeds of approximately $13.5 million from common stock offering

October 10, 2013 Target Price: $26.75 Recent Price: $16.98

Analyst: Thomas Pfister Email: [email protected] Phone #: 407-644-4256

Cancer Genetics, Inc. (NasdaqCM: CGIX)

On October 8, 2013, CGIX filed an S-1 to raise up to $46 million in common stock.

We view this as positive, as a large capital raise would provide funds that can be

used to accelerate growth of CGIX’s proprietary genomic tests, leading to increased

revenue and potentially reducing the time needed to reach profitability. With a

larger cash reserve, CGIX can accelerate investment in sales and marketing,

achieving faster market penetration and expand geographic coverage to establish a

national footprint. Establishing a national footprint enables CGIX to better compete

with Foundation Medicine (FMI), as CGIX can offer a more complete set of

oncology Dx services than FMI.

CGIX is already receiving reimbursements for its proven, proprietary tests, and

additional cash will allow the Company to expand and deepen relationships with

third-party insurers. Additionally, CGIX can take advantage of expected volume

increases due to the Patient Protection and Affordable Care Act, which is extending

coverage to approximately 32 million previously uninsured people. Higher capacity

utilization will yield increases in gross margins.

This raise also provides funds (up to $6 million) for OncoSpire Genomics, its joint

venture (JV) with the Mayo Clinic. This JV has the potential to provide cutting-edge

IP through the development of next-generation sequencing based oncology testing

panels. We believe the decrease in stock value on October 9 was unwarranted, and

also point out that the selloff was on volume of 291,100, less than the average

volume over the past 14 days of 435,352 (Volume Weighted Average Price

(VWAP) over the last 14 days is $19.50).

Our original valuation had already taken into account additional dilution; as such we

maintain our price target of $26.75 and year end 2016 shares outstanding estimate of

9.6 million. Even taking into account a conservative capital raise price of $17.00 per

share (equal to the VWAP over the past thirty days) would result in a maximum

increase in shares outstanding of 2.7 million, giving the Company total shares

outstanding of only 8.7 million.

http://www.youtube.com/watch?v=jYyo7QC3ivA

http://www.youtube.com/watch?v=jYyo7QC3ivA

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REDCHIP RESEARCH PROFILE

Cancer-focused, commercial stage personalized

medicine and diagnostics company with robust pipeline

is set for rapid revenue expansion and global growth

Cancer Genetics, Inc. (CGIX) is an emerging leader in DNA-based cancer

diagnostics and services some of the most prestigious medical institutions in the

world. The Company’s tests target cancers that are difficult to diagnose and predict

treatment outcomes. These cancers include hematologic, urogenital and HPV-

associated cancers. CGIX also offers a comprehensive range of non-proprietary

oncology-focused tests and laboratory services that provide critical genomic

information to healthcare professionals as well as biopharma and biotech. Its state-

of-the-art reference lab is focused entirely on maintaining clinical excellence and is

both CLIA certified and CAP accredited and has licensure from several states

including New York State. CGIX has established strong research collaborations and

agreements with major cancer centers such as Mayo Clinic, Memorial Sloan-

Kettering, The Cleveland Clinic and the National Cancer Institute. The Company

has also established high-profile clinical trial partnerships with Roche and Gilead

Sciences through its SelectOne program.

Investment Highlights

CGIX has groundbreaking tests in combined $15 billion global market

for hematologic, urogenital, and gynecologic cancers. Cancer Genetics

has developed groundbreaking molecular diagnostic tests for cancer that are

improving patient diagnosis and enabling personalized treatments based on cancer

analysis at its most basic genomic level. Current cancer diagnostics are based on

routinely used sample examinations that tend to be subjective and erroneous, and it

is estimated that only 25%-30% of initial cancer treatments are currently successful.

Molecular diagnostics allows for patients to receive faster and more accurate

diagnosis, as well as more personalized oncology care. It allows payors and vendors

to enjoy cost-savings when oncologists receive the right information at the right

time and it helps pharmaceutical companies to see the high value in personalized

medicine by acknowledging that targeted therapeutics require companion diagnostic

tests. The Company estimates the U.S. hematological, urogenital, and gynecological

cancer markets to be worth $2.2 billion, $3.5 billion, and $1.0 billion, respectively,

giving CGIX an addressable market of $6 billion in the U.S. ($15 billion including

ROW).

Five proprietary oncology tests launched, proving ability to launch and

gain test approval; Eight tests in development provide diversification

and risk reduction. With five market-leading tests launched and eight more being

developed, we believe that CGIX is poised to experience strong revenue growth

over the next few years. Having a larger portfolio of tests reduces the dependence on

any one test for success, thus reducing risk to investors.

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Proprietary tests provide more accurate risk assessment and improved

treatment options. As an example of this, the Company’s MatBA®-CLL/SLL

test for chronic lymphocytic leukemia and small lymphocytic lymphoma reported

many additional genomic aberrations and was much more accurate in determining

the recommended treatment aggressiveness. Sub-types of leukemia and lymphoma

have gone up significantly over the last 30 years (according to Genzyme & Nature,

there were 12 sub-types of leukemia & lymphoma 30 years ago, compared with 89

sub-types 2 years ago). In spite of overall advances in medicine, survival rates

remain well under 10% and have shown minimal improvement over the past 30

years. Given the lack of treatment progress, effective genomic profiling seems to be

vital in improving patient prognosis and treatment plans.

The test indicated an 8% increase in unfavorable treatment outcomes (these patients

will need aggressive treatment as their prognostic outlook is poor), and was able to

distinguish between a favorable or an intermediate prognostic outlook, which the

FISH test was unable to do (favorable outlooks can often have a wait and see

approach, while an intermediate outlook would require a more aggressive approach).

Additionally, reporting greater amounts of genomic aberrations helps to better

identity specific cancer sub-types, which can lead to better diagnosis and treatment

protocols.

The Company’s new MatBA® – DLBCL (Diffuse Large B-Cell Lymphoma) test

has strong potential, as Diffuse Large B-Cell Lymphoma makes up approximately

60% of all aggressive lymphoma cases and has genetic mutations, such as double hit

lymphoma, that carry less favorable prognoses. This test is the first of its kind on the

market.

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CGIX currently has the largest array of proprietary tests available for mature B-cell

neoplasms, as evidenced by the chart below:

The Company’s UroGenRA™-Kidney Panel allows a diagnosis based only on a

single needle biopsy, thus preventing the need for costly, invasive, time-consuming,

and sometimes dangerous surgeries. Typical fine-needle aspirates are inconclusive

approximately 30% of the time, while CGIX is able to increase conclusive test

results from 70% to near 100%, representing a strong value proposition to hospitals

and physicians by shortening the time to treatment and improving diagnostic

accuracy. Urogenital cancers represent the largest potential market for CGIX, with a

$3.5 billion overall U.S. market and over 380,000 new cases in the U.S. per annum.

CGIX has also recently launched its FHACT (HPV-Associated Cancer) test. With

regards to FHACT for cervical cancer, this test can allow for doctors to detect

chromosomal instability without performing a colposcopy (approximately 90% of

low-grade cervical lesions regress), which can help to reduce costs. This test is

currently being used in emerging markets that lack a quality gynecological

infrastructure and need more cost-effective testing (India, Eastern Europe, Mexico).

Worldwide, there were 530,000 cases of cervical cancer in 2008, with a death rate of

approximately 52%. Over 85% of new cervical cancer cases and 88% of deaths

occur in developing countries (Source: Globocan 2008 Cancer Fact Sheet). Five

proprietary tests have been launched to date, and CGIX plans to launch at least

another two tests by the end of 2013. In total, the Company has currently

launched/is developing 12 proprietary tests (five for hematologic, three for

urogenital, and four for gynecologic cancers).

Supreme Court ruling on human genes is a positive; CGIX’s patented

algorithms will remain protected. The primary value of CGIX’s patents is in

algorithms that interpret gene activity and events and provide specialized diagnostic

and prognostic data. This is shown in the trial on MatBa®-CLL/SLL, which uses

algorithms to discover various genomic aberrations, which are then interpreted to

provide specific prognostic information. The Company’s slide on its MatBA® tests

shows the range of information that its patented algorithms provide.

CGI Addressable Markets

Estimated New U.S. Cases for

2013

Estimated U.S.

Deaths for 2013

Leukemia 48,610 23,720

Non-Hodgkin Lymphoma

69,740 19,020

Multiple Myeloma 22,350 10,710

Kidney 65,150 13,680

Prostate 238,590 29,720

Bladder 72,570 15,210

Cervical 12,340 4,030

Ovarian 22,240 14,030

Endometrial 49,560 8,190

Total Addressable U.S. Market

601,150 138,310

Source: American Cancer Society, 2013

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The supreme court ruling should also help CGIX in two ways: 1) Market uncertainty

related to the decision has been removed and 2) Biomarkers are no longer patented,

meaning that CGIX can now include these biomarkers in their tests, thus improving

their algorithms; and the Company does not need to pay royalties on patented genes

anymore, which should provide a small improvement to gross margins.

Expand DX™ targets over 4,000 U.S. community hospitals &

laboratories; CGIX estimates there is a $600,000-$800,000 revenue

testing opportunity on average per hospital. Expand DX™ is an initiative

outreach program intended to expand regional laboratories’ pathology services

through collaboration with CGIX. Expand DX™ represents an important future

growth driver as 85% of all U.S. cancer patients are initially diagnosed in

community hospitals, and hospitals would like to capture a greater proportion of this

revenue stream. If CGIX can capture 10% of the potential market, this represents a

revenue opportunity of over $240-$320 million. This program represented 46% of

revenue in FY12.

Market entry acceleration from the Company’s recent agreement with

MultiPlan. MultiPlan contracts with 900,000 healthcare providers and has an

estimated 57 million consumers using their products. CGIX’s average

reimbursement per test is currently in a wide range (approximately $1,000 to $5,000

per test), and we believe that collaborating with MultiPlan will bring this total closer

to the industry average of $2,500 to $3,500 per test, causing increases in average

revenue per test and gross margins.

Closed clinical trial contracts increased from $0.2 million at the end of

1Q12 to $7.2 million at the end of 1Q13. CGIX’s Select One™ has two high

profile clinical trial partnerships to date with Roche and Gilead Sciences. Closed

clinical trial contracts have increased substantially over the last year, underscoring

the increasing importance of companion and biomarker diagnostics in the

development of oncology treatments. According to Company data, cancer drugs

with associated biomarkers are expected to increase from 21% in 2011 to 55% in

2016. Increases in the amount of oncology drugs associated with biomarkers, along

with these drugs advancing to later stage clinical trials, should drive impressive

growth in this program.

DNA probes being sold to emerging markets; recent manufacturing

move to India better positions the Company to serve Asian markets

while lowering costs. Recently, the Company has moved manufacturing for

DNA probes to India in order to be able to offer low-cost, high-quality testing to

emerging markets. Such measures indicate CGIX’s ability to target international

markets, which currently make up about 9% of CGIX’s revenue. Outside of selling

DNA probes to emerging markets, the Company has also expanded internationally

through partnerships with Nikon Instruments (selling into the Italian market) and

CGIX has stated that it is currently pursuing other large international partnerships.

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Development partnerships with premier research organizations help

ensure a robust pipeline of advanced molecular diagnostics tests. In

May 2013 CGIX and Mayo Clinic announced a 50/50 joint venture called

OncoSpire Genomics. Initial focus will be on hematologic and urogenital cancers,

with a final goal of commercializing diagnostic cancer tests using next-generation

sequencing. Mayo Clinic chose to partner with CGIX due to CGIX’s proven ability

to create premier cancer tests for hematologic and urogenital cancers. CGIX has

partnered with other premier research organizations to develop tests; and validate

the existing portfolio with thought leaders. These relationships include:

Multibillion dollar M&A activity is taking place in molecular

diagnostics. Big pharmaceutical companies have demonstrated relevant interest in

diagnostic companies, such as CGIX. Cancer Genetics’ market-leading testing

portfolio in three different multibillion markets (hematological, urogenital, and

gynecological cancer), potential to give value both during patient diagnosis and

pharmaceutical development, and development partnerships with leading research

organizations could make the Company a strong acquisition candidate.

Target Acquirer Deal Value Date

Verinata Illumina $450 Million Jan-13

DeCode Genetics AmGen $415 Million Dec-12

Gen-Probe Hologic $3,700 Million May-12

Genoptix Novartis AG $470 Million Jan-11

Celera Quest Diagnostics $344 Million Mar-11

Dako Agilent Technologies $2,200 Million May-12

Clarient GE Healthcare $580 Million Oct-10

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Market

Molecular Diagnostics (MDx) is a new class of diagnostic tests that identify nucleic

acids or proteins to test the status of a disease. These nucleic acids or protein, which

belong to individual patients or foreign organisms, help determine a specific

therapy, the risk of developing a specific disease, or other health conditions. MDx is

the fastest growing segment within the in-vitro diagnostics (IVD) space, driven by

accuracy, high sensitivity, fast turnaround time, easy workflow, and cost-effective

testing. According to Kalorama, the market for MDx is estimated to have crossed

$9.7 billion in 2012, and has an expected compounded annual growth rate of 13% in

the next five years, reaching $17.6 billion.

United Healthcare estimates that national spending for genetic and molecular

diagnostics will reach between $15 and $25 billion by 2021. According to United

Healthcare, as of 2010 clinical laboratory tests influenced about 70 percent of health

care decisions, but only eight percent of spending from clinical laboratory services

is currently used on genetic and molecular diagnostics. However, genetic and

molecular diagnostics are expected to make up a greater percentage of this going

forward. A white paper by Rina Wolf of Dark Daily estimates a 10% increase in

new molecular diagnostic tests offered per year, along with a 20% increase in annual

utilization, which compares favorably to the 1-3% per year growth expected for

non-genetic diagnostic tests.

The key growth driver in MDx is oncology. These high value tests command

premium pricing but provide critical information to help physicians make relevant

clinical decisions, which ultimately leads to both lower overall treatment costs and

higher quality treatment decisions. With the potential to reduce overall health care

costs, high value MDx tests are growing in popularity, hence driving spending on

IVD. Currently, Roche, Qiagen Netherlands, and Becton Dickinson are the three

largest molecular diagnostics companies (based on 2012 revenues), but numerous

companies are entering the market by offering more complex and expensive tests

with greater accuracy and predictive prognostic capabilities. While competition in

the space continues to increase, CGIX’s tests are, in many cases, the first of their

kind in their respective oncology field. This first mover advantage should allow the

Company to create strong relationships with community hospitals and cancer care

centers as these tests are introduced to the market.

The lifecycle for the development of a cancer molecular diagnostic assay through

the different stages of regulatory scrutiny typically takes four to five years,

approximately half the time required to bring a new drug to market. Given that the

process is twice as fast, and it only involves a fraction of drug development costs,

there is a significant incentive for MDx companies to innovate and bring new tests

to market. This also lowers the risk involved with a MDx development company,

relative to a biotech firm.

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The geographical distribution of MDx is centralized around industrialized countries;

however, emerging markets, in particular the BRIC nations, are growing rapidly.

While we don’t believe that CGIX’s proprietary tests will be cost effective in most

emerging markets, the Company has recently moved the manufacture of its lower

cost FISH probes to India. This should provide a combination of low cost

manufacturing and a geographical location that will provide excellent logistics to

emerging Asian economies.

The FDA has made progress in forming a path and encouraging biomarker

discovery and development. With FDA interest increasing, it may become more

common in the future for the FDA to prefer that clinical trials be performed in

conjunction with biomarkers, thus increasing the value of genetic testing.

Additionally, the FDA is increasing the use of biomarkers to test for toxicity, which

signals that the industry is on the rise and of increasing interest in the

pharmaceutical industry.

The use of MDx is becoming particularly important for clinical trial design and

development, and a report by Global Industry Analysts states that they believe

clinical development will represent the fastest growing segment of the global

biomarkers market, representing a 26.5% CAGR from 2012-2017. The discovery

and following of biomarkers, particularly detectable by the use of molecular

diagnostics, allows for a more in depth study during a clinical trial process.

Companion diagnostics are assays intended to assist with treatment decisions based

on the efficacy and/or safety of a specific compound or class of compounds for

specific patient populations. According to Next Generation Pharmaceutical, if

widely adopted the use of companion diagnostics could significantly alter both the

drug development process and the factors governing the successful

commercialization of specific therapeutics. Particularly in oncology, the use of

biomarkers could improve the rate of success in late-stage clinical trials (up to 70%

of cancer drugs that pass phase 2 clinical trials fail to pass phase 3). The FDA has

approved multiple cancer treatments that required a companion diagnostic test for a

patient to take the drug (a few examples of these are vemurafenib, combined with

the BRAF V600E mutation test for metastatic melanoma, and crizotinib, combined

with the ALK gene rearrangement test for late-stage non-small cell lung cancer).

Roche is recognized as one of the industry leaders in molecular diagnostics, and

Paul Brown, CEO of Roche Molecular Diagnostics, indicated the importance of

having companion diagnostics during clinical trials in a 2011 interview with Biotech

SF: “Internally, between diagnostics and pharma, we have about 160 projects now

where we have companion diagnostic or biomarker with a project. It’s basic to the

structure having these two pieces under the same umbrella.”

Valuation Conclusion

CGIX has a robust pipeline of proprietary cancer tests that should continue to grow

and improve over time, both through the Company’s internal R&D and its

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partnerships such as the joint venture with Mayo Clinic, OncoSpire Genomics. The

molecular diagnostic tests that CGIX currently has out on the market have been

proven through clinical testing to be superior to the current standard of testing. In

addition to this, the Company has been expanding their sales pipelines through

multiple partnerships that allow it to sell to community hospitals and laboratories in

the United States, pharmaceutical and biotech companies in clinical trials, and

various developed and emerging countries around the globe. The molecular

diagnostic testing market is projected to increase substantially over the next few

years, and CGIX is poised to take advantage of the growth both through the

development of new therapies using biomarkers and hospitals and doctors

attempting to make more accurate decisions while saving time and lowering costs.

In addition to this, strong M&A activity in the industry should ensure that CGIX

trades at a healthy P/S multiple, and this should persist as big pharmaceutical and

biotech companies look to acquire molecular diagnostic companies, given the

growing importance of biomarkers in both treating cancer and developing new and

improved therapies.

To determine a revenue ramp for CGIX, we believe the best two comparables to be

Genomic Health (Oncotype DX Breast Cancer test) and Genoptix (acquired in

January 2011 for $470 million, blood and bone marrow cancer tests). Both of these

companies exhibited similar revenues to CGIX in 2005, and subsequently ramped

up their revenues rather significantly following the launch of their proprietary

cancer tests.

Genoptix Inc. (GXDX) 2005 2006 2007 2008 CAGR

Net Revenue $5.19 $24.02 $59.33 $116.17 117.51%

Selling and Marketing Exp. $4.23 $6.26 $11.65 $20.07

YOY Revenue Growth Rate 363% 147% 96%

Source: Company filings, in millions

Genomic Health Inc. (GHDX) 2005 2006 2007 2008 CAGR

Net Revenue $5.20 $29.17 $64.03 $110.58 114.72%

Selling and Marketing Exp. $15.35 $24.63 $36.46 $46.67

YOY Revenue Growth Rate 461% 119% 73%

Source: Company filings, in millions

We believe that CGIX has the potential to match the above revenue ramp, with one

caveat being that achieving this sales ramp is likely dependent on receiving

sufficient financing. This will be needed in order to spend additional funds on sales

and marketing; a lower budget will likely result in lower revenue growth. Based on

our discussions with management, we believe that CGIX will look to keep costs

under control, and thus we believe that CGIX’s spending on sales and marketing

will more closely resemble GXDX rather than GHDX. However, relative to the

above companies, CGIX has a larger portfolio of molecular diagnostic tests, giving

the potential for larger test volume sales. Additionally, international sales should

exhibit strong growth, driven by its partnerships with Nikon Instruments and rapidly

increasing demand for molecular diagnostic tests in emerging economies. Also, the

rapid increases in the use of companion diagnostics in clinical trials gives CGIX a

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stronger additional revenue stream that was not available to GXDX and GHDX

from 2005-2008. Our revenue projections for CGIX up through 2016 are listed

below:

Cancer Genetics (CGIX) 2012 2013E 2014E 2015E 2016E CAGR

Net Revenue $4.30 $7.53 $18.81 $46.09 $101.40 88.15%

Selling and Marketing $1.40 $2.50 $7.50 $14.50 $27.20

YOY Revenue Growth Rate 75% 150% 145% 120%

Source: Company filings, RedChip estimates, in millions

Ticker Name Price Market Cap P/E P/S P/B Revenue (ttm) Rev/Share (ttm)

TROV TROVAGENE INC 7.13 134.4 N/A 247.5 N/A 0.54 0.04

EXAS EXACT SCIENCES CORP 9.83 695.0 N/A 167.7 4.5 4.14 0.07

ROSG ROSETTA GENOMICS LTD 3.21 31.5 N/A 91.9 1.1 0.29 0.04

ATOS ATOSSA GENETICS INC 2.04 31.8 N/A 44.6 3.8 0.71 0.05

FMI FOUNDATION MEDICINE, INC 30.42 826.6 N/A 42.7 15.4 19.34 1.14

GNMK GENMARK DIAGNOSTICS INC 12.04 394.1 N/A 12.7 8.4 31.01 0.97

GHDX GENOMIC HEALTH INC 29.70 909.5 519.4 3.7 6.5 245.86 7.83

SQNM SEQUENOM INC 2.55 294.2 N/A 2.3 N/A 129.87 1.13

Median 517.0 44.7 5.5

CGIX CANCER GENETICS INC 16.98 101.3 N/A 18.9 13.8 5.37 0.92

Source: Bloomberg, Company Filings, As of October 10, 2013

While the P/S multiple is heavily skewed by companies that only generate limited

revenue, we believe that the multiples of more developed molecular diagnostics

companies (SQNM, GHDX, GNMK) provide a good proxy for acceptable trading

multiples. We have decided to take near the median P/S from those 3 companies

(4.0x) to value CGIX.

Since there is strong M&A activity in the industry we also turn to recent transactions

to better estimate a P/S multiple:

Target Acquirer EV/Revenue Enterprise Value of Deal Ttm Revenue at time of

Acquisition

Gen-Probe Hologic Inc. 6.4x 3,757.47 586.58

Genoptix Novartis AG 1.6x 318.09 196.35

Celera Quest Diagnostics 2.7x 340.84 128.14

Clarient GE Healthcare 4.1x 447.08 110.12

Source: Bloomberg, dollar values in millions

While the transaction multiples also encompass a wide range, we believe that given

the strengths for CGIX that we have noted throughout the report, the Company

deserves to be valued at a 4.0x P/S multiple. We apply this to our 2016 revenue

estimate of $101.4 million. Discounting this total by 20% per year and applying a

4.0x P/S multiple, we derive a 2016 fair company value of $257.1 million. Research

by Benchmark Co., LLC assigned a 25% per annum discount rate to CGIX

comparable Exact Sciences (EXAS); given that CGIX has a large portfolio of cancer

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tests (EXAS only has one test for colorectal cancer), and CGIX also receives

revenue from clinical trial services (EXAS does not), we believe that CGIX

deserves a lower discount rate. We also understand the possible need of financing

the Company is likely to encounter in the coming years as the Company continues to

expand its product line. If CGIX completes its proposed $15 million equity raise

with Aegis, its shares outstanding should increase to approximately 5.6 million.

Given the probability that CGIX may complete additional equity raises in the future

to support increase in sales and marketing and R&D expenses, we estimate total

year-end 2016 shares outstanding of 9.6 million. This gives us a final near-term

target price per share of $26.75.

In addition to the above revenue projections, we believe that investors can receive

further upside from the Company’s 50% ownership in OncoSpire Genomics. The

joint-venture’s goal is to develop diagnostic cancer tests using next-generation

sequencing; as this JV is further developed with Mayo Clinic, the potential for

cutting-edge IP could make this an attractive buyout target for a large

pharmaceutical, biotech, or medtech firm. This upside is not currently reflected in

our target price.

Management & Board

Raju S.K. Chaganti, Ph.D., Founder & Chairman

Dr. Chaganti is the Company’s founder and has served as the chairman of its board

of directors since inception. Dr. Chaganti is an internationally recognized leader in

cancer cytogenetics and molecular genetics. He is a co-discoverer of patents for the

cloning of two genes rearranged in lymphoma translocations, BCL6 and BCL8, and

an additional two patents for the detection of translocations for the FISH

classification of kidney cancers. Dr. Chaganti currently is the incumbent of the

William Snee E. Chair at the Memorial Sloan- Kettering Cancer Center, where he is

on the faculty of the Department of Medicine and Cell Biology Program. He is a

professor at the Gernster Sloan- Kettering Graduate School of Biomedical Sciences

at Cornell University Medical College. He was the chief of Memorial Sloan-

Kettering Cancer Center’s cytogenetics service, which he established in 1976 as one

of the earliest genetically-based cancer diagnostic services in the country.

Dr. Chaganti received a Ph.D. in biology (genetics) from Harvard University

Graduate School of Arts and Sciences and completed his post-doctoral training at

the Medical Research Council of Great Britain. Additionally, he completed a

sabbatical in the Department of Tumor Biology at Karolinska Institute Stockholm,

focusing on experimental murine and tumorgenesis as well as immunology. Dr.

Chaganti is American Board of Medical Genetics certified in medical genetics, with

a subspeciality in clinical cytogenetics.

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Panna Sharma, Director, President & CEO

Mr. Sharma became a member of the Company’s board of directors and its Chief

Executive Officer in May of 2010. Mr. Sharma was at TSG Partners, a specialty life

sciences consultancy and advisory company, from 2001 to 2010, where he was the

Managing Partner and founder. At TSG he led the development of strategic

initiatives, corporate growth strategy and corporate turnarounds for both public and

private companies. He also led over 70 buy- and sell-side transactions for life

sciences, healthcare and biopharma companies. At TSG, he established the Global

Diagnostics Index, the Global Biotools Index and several other life science capital

markets indices that are still used today.

Prior to founding TSG, Mr. Sharma was the Chief Strategy Officer for iXL

Enterprises, Inc. (“iXL”), a public e-business consultancy where he led strategy

development and acquisitions activity and was part of the management team that

aided in taking the company public in June 1999. At iXL, he also managed the

specialty e-business strategy practices group that grew from under $4 million in

revenue in 1998 to over $75 million in 2000. From 1996 to 1998, Mr. Sharma was a

partner at Interactive Solutions, Inc., a marketing and strategy consultancy focused

on health care and financial services in Cambridge, Massachusetts, that was sold to

Omnicom, Inc., one of the largest global market analysis and marketing companies.

Prior to that time, Mr. Sharma served as a consultant to Putnam Investment

Management, LLC and Bank of America Corporation. Mr. Sharma has also served

on the board of directors of EpicEdge, a health care and government focused IT

services firm, from 2001 to 2003 and as chairman of the Advisory Board for

EndoChoice, a global leader for the gastrointestinal treatment market from 2008 to

2010. Mr. Sharma attended Boston University from 1987 to 1992 in the University

Professor’s Program.

Elizabeth Czerepak, CFO

Ms. Czerepak brings 18 years of pharmaceutical industry experience and nine years

of venture capital experience to Cancer Genetics. Elizabeth co-founded Bear

Stearns Health Innoventures (BSHI), a $212 million venture capital fund that led

investments in 13 biotechnology companies, seven of which she served as a board

member. Concurrent to BSHI, she held the position of Managing Director of Bear,

Stearns & Co., and later JPMorgan, where she was an NASD Registered

Representative. Earlier, Elizabeth held senior positions in licensing, business

development, and finance at BASF Pharma, Hoffmann-La Roche, and Merck & Co.,

where she led or supported over 30 licensing and M&A transactions, including

Roche’s acquisition of PCR technology from Cetus, and the licensing of the P53

gene from Johns Hopkins University. Elizabeth holds an MBA from Rutgers

University and a B.A. magna cum laude from Marshall University and is a member

of the Licensing Executives Society.

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Jane Houldsworth, Ph.D., VP of R&D

Dr. Houldsworth came to CGIX in 2007. She has a long standing interest in the

biology and genetics of lymphoma and male germ cell tumors, with over 20 years’

experience in translational research. Dr. Houldsworth has published more than 50

peer-reviewed papers and 15 chapters. She continues to consult on academic

research projects and is a reviewer for multiple scientific journals. She is an active

member of the American Society of Hematology and American Association for

Cancer Research. Dr. Houldsworth was awarded several grants from the National

Institutes of Health, Lance Armstrong Foundation and other private foundations. In

2005, Dr. Houldsworth attained her New York State certificate of qualification as a

laboratory director for oncology, molecular and cellular tumor markers. Before

coming to CGIX, Dr. Houldsworth was an Associate Attending Geneticist and an

Associate Laboratory Member at Memorial Sloan-Kettering Cancer Center in Dr.

Chaganti’s laboratory.

Lan Wang, M.D., Medical Director

Dr. Wang came to CGIX in 2007. Her career focus is in diagnostic

hematopathology, centered on lymphomas and leukemias. Dr. Wang is an active

member of the Society of Hematopathology, United States and Canadian Academy

of Pathology and the College of American Pathologists. Her work has been

published in numerous peer-reviewed publications. Dr. Wang is certified by the

American Board of Pathology in Anatomical and Clinical Pathology, as well as

Hematopathology. In New Jersey, Dr. Wang holds a Medical License and

Bioanalytical Laboratory Director License from the Board of Medical Examiners.

She also has a Certificate of Qualification from New York State as a Laboratory

Director in Histopathology, Cytopathology, Hematology, Immunohematology,

Oncology-Molecular and Cellular Tumor Markers, and Cellular Immunology-

Malignant Leukocyte Immunophenotyping. Dr. Wang holds the position of Staff

Pathologist/Hematophathologist and serves as a cancer liaison physician at Chilton

Memorial Hospital in New Jersey.

Weiyi Chen, Ph.D., HCLD (ABB), Molecular Diagnostics Director

Dr. Chen came to CGIX in 2005. Her scientific focus has been on the identification

and characterization of genomic alterations in B-cell lymphoma and their prognostic

implications using modern molecular techniques, including microarrays. While at

MSK, she was trained in the Molecular Diagnostic Laboratory at the New York

Presbyterian Hospital and Memorial Sloan-Kettering Cancer Center. Dr. Chen is

certified as a High-complexity Clinical Laboratory Director (HCLD) from the

American Board of Bioanalysis (ABB), and holds a certificate of qualification as a

laboratory director from the New York State Department of Health. She is an active

member of the Association of Molecular Pathology.

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Pal Singh-Kahlon, Ph.D., FACMG, Cytogenetics Director

Dr. Singh-Kahlon joined CGIX in 2010 and brings more than 30 years of experience

in clinical cytogenetics. He has over 20 years of experience in director positions,

including seven years in cancer, at leading commercial cytogenetics laboratories,

LabCorp and Genzyme, and earlier at the University of California School of

Medicine in San Francisco. Dr. Singh-Kahlon is an active member of the American

College of Medical Genetics, American Society of Human Genetics and the

Association of Molecular Pathology.

Cory Hickmon, Director of National Clinical Sales

Mr. Hickmon brings over 23 years of oncology sales and sales leadership experience

to CGIX. His focus for the past 21 years has been the esoteric oncology testing

market, with much of his career devoted to building and leading successful sales

teams in the rapidly growing genetic and genomic space. Mr. Hickmon began his

career with Impath, a recognized leader in the area of oncology and pathology

esoteric testing. After several promotions, he became the Midwest Regional

Manager in 1998, where he was in charge of all sales activities for one third of the

U.S. market. In this role, he was involved in one the earliest targeted therapy

marketing campaigns in the country, the launch of Her-2/neu which qualified

patients for Herceptin therapy. In 2004, Impath was acquired by Genzyme Genetics,

and Mr. Hickmon was promoted to Southwest Regional Director. In this role, he

oversaw two unique sales forces; one focused on oncology, the other in the growing

area of reproductive genetic and molecular testing. His skills in building out sales

teams were used as Genzyme went through rapid expansion during this time. In

2010, Genzyme Genetics was purchased by LabCorp. Cory graduated from the

University of Houston with a B.B.A. in Finance.

Edmund Cannon, Director

Mr. Cannon is founder and President of the Clinical Research Center of Cape Cod,

which specializes in finding institutional review board approved, consented

specimens for the diagnostics and pharmaceutical industries, and in setting up

studies to support FDA submissions for pharmaceutical and biotechnology

companies. Previously, Mr. Cannon was a marketing and operations consultant for

Franey Medical Labs. Mr. Cannon also formerly had the most national sales for

Pharmacia Diagnostics Inc., and was a vice president and co-founder of Alletess,

Inc. Mr. Canon has a degree from Boston State College and attended a Master’s

program at Providence College.

Keith Brownlie, CPA, Director

Keith Brownlie, CPA has been a director since July 24, 2013. Mr. Brownlie

currently serves as a member of the Board of Directors of Epicept Corporation, a

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publicly traded, specialty pharmaceutical company focused on the clinical

development and commercialization of pharmaceutical products for the treatment of

cancer and pain, a position he has held since April 2011. From 1974 to 2010, Mr.

Brownlie worked with the accounting firm of Ernst & Young LLP where he served

as audit partner for numerous public companies and was the Life Sciences Industry

Leader for the New York metro area where he was involved with over 100 public

and private financings and M&A transactions. Mr. Brownlie received a BS in

Accounting from Lehigh University and is a Certified Public Accountant in the state

of New Jersey. Mr. Brownlie co-founded the New Jersey Entrepreneur of the Year

Program and was Vice President and Trustee of the New Jersey Society of CPAs. In

addition, he served as accounting advisor to the board of the Biotechnology Council

of New Jersey.

John Pappajohn, Director

Mr. Pappajohn is a pioneer in the venture capital industry. In 1969, Mr. Pappajohn

founded Equity Dynamics, Inc., a financial consulting entity, and Pappajohn Capital

Resources, a venture capital firm, both in Des Moines, Iowa. Mr. Pappajohn has

been involved in over 100 start-up companies and has served as a director of over 40

public companies, many in the bioscience and health-related industries. He currently

serves on the boards of the following public companies: American CareSource

Holdings, Inc., since 2004, ConMed Healthcare Management, Inc. since 2005, and

CNS Response, since 2009. Previously, Mr. Pappajohn served on the boards of

PharmAthene, Inc., from 2007 until July 2011, Careguide, Inc., from 1995 until

2010, and SpectraScience, Inc., from 2007 until 2009. Mr. Pappajohn has a BSC

degree in business from the University of Iowa.

Andrew Pecora, M.D., Director

Dr. Pecora currently serves at the John Theurer Cancer Center at Hackensack

University Medical Center as Chief Innovations Officer, Professor and VP of

Cancer Services. From 2001 to 2011, Dr. Pecora served as the Chairman and

Director of the John Theurer Cancer Center. Since 1996, he has been Managing

Partner of Northern New Jersey Cancer Associates, which is a private physicians

practice group affiliated with Hackensack University Medical Center. Since August

2011, Dr. Pecora has served as Chief Medical Officer of NeoStem, Inc., which

acquired Progenitor Cell Therapy, LLC in 2011. Prior to the acquisition, Dr. Pecora

had served from 1999 to 2011 as Chairman, CEO and Chief Medical Officer of

Progenitor Cell Therapy and as a member of the board.

Dr. Pecora has also been a Professor of Medicine at the University of Medicine and

Dentistry of New Jersey since 2004. Additionally, Dr. Pecora is a scientific advisor

for numerous state, national and international organizations. He is a Diplomate of

the American Board of Internal Medicine, subspecialty of hematology and

subspecialty of oncology, a member of the National Blue Cross and Blue Shield

16


Quality Centers for Transplant Experts Panel, a fellow of the Academy of Medicine

of New Jersey, a fellow of the American College of Physicians and a member of the

American Society of Bone Marrow Transplantation, American Society of Clinical

Oncology and American Society of Hematology. Dr. Pecora co-founded and served

as Chairman of Amorcyte, Inc., a biotech company developing cell therapies for

cardiovascular disease. He serves as chairman of the board of Tetralogics, Inc., a

company developing small molecules to treat cancer. He has served on the board of

directors of the American Society of Bone Marrow Transplant and Cytotherapy and

was a member of Accreditation Committee of the Foundation for Accreditation of

Hematopoietic Cell Therapy. He has been a member of several National Heart, Lung

and Blood Institute/National Cancer Institute state of the science meetings in

transplantation and stem cell therapies. Dr. Pecora is actively involved as principal

investigator and coinvestigator in many national research studies. He has been

invited to present his work at various scientific meetings and continues to contribute

to the published literature. Dr. Pecora received his medical degree from the

University of Medicine and Dentistry of New Jersey. He went on to complete his

medical education in internal medicine at New York Hospital and in hematology

and oncology at Memorial Sloan- Kettering Cancer Center. He is board certified in

internal medicine, hematology and oncology.

Franklyn Prendergast, M.D., Ph.D., Director

Dr. Prendergast is the Edmond and Marion Guggenheim Professor of Biochemistry

and Molecular Biology and Professor of Molecular Pharmacology and Experimental

Therapeutics at Mayo Medical School and the director of the Mayo Clinic Center

for Individualized Medicine. From 1994 to 2006, he served as a director of Mayo

Clinic Cancer Center. He has held several other teaching positions at Mayo Medical

School since 1975. Dr. Prendergast has served for the NIH on numerous study

section review groups; as a charter member of the Board of Advisors for the

Division of Research Grants, now the Center for Scientific Review; the National

Advisory General Medical Sciences Council; and the Board of Scientific Advisors

of the National Cancer Institute. He held a Presidential Commission for service on

the National Cancer Advisory Board. Dr. Prendergast also has served in numerous

other advisory roles for the NIH and the National Research Council of the National

Academy of Sciences, and he is a member of the board of directors of the

Translational Genomics Research Institute and the Infectious Disease Research

Institute. Dr. Prendergast has served on the board of directors of Eli Lilly & Co.

since 1995 and is a member of the board’s science and technology and public policy

and compliance committees. He also currently serves on the boards for DemeRx,

Inc., a private drug development company, and Ativa, a diagnostic technology

company. Dr. Prendergast obtained his medical degree with honors from the

University of West Indies and attended Oxford University as a Rhodes Scholar,

earning an M.A. degree in physiology. He obtained his Ph.D. in Biochemistry at the

University of Minnesota.

17


Tommy Thompson, Director

Mr. Thompson is the former Health and Human Services Secretary of the United

States and served as the Governor of Wisconsin for four terms. Mr. Thompson is

building on his experience as Health and Human Services Secretary to develop

innovative solutions to the health care challenges facing American families,

businesses, communities, states and the nation as a whole. From 2005 until 2009, he

served as a senior advisor at Deloitte & Touche and the founding chairman of the

Deloitte Center for Health Solutions, which researches and develops solutions to

some of our nation’s most pressing health care and public health related challenges.

Since 2005, Mr. Thompson has served as a senior partner at the law firm of Akin,

Gump, Strauss, Hauer, & Feld LLP. Mr. Thompson has been chairman of the board

of Logistics Health, Inc. since January 2011, and served as president from February

2005 to January 2011. He also serves on the board of directors of the following

public companies: CareView Communications, Inc., as chairman since 2005,

Centene Corporation, C.R. Bard, Inc., since 2005 and United Therapeutics

Corporation, since 2010. Mr. Thompson was formerly a director of AGA Medical

Corporation, CNS Response, PURE Bioscience, SpectraScience, VeriChip

Corporation and Voyager Pharmaceutical Corporation. Mr. Thompson received his

B.S. and J.D. from the University of Wisconsin-Madison.

Additional Information

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Company Contact Info:

Cancer Genetics, Inc.

201 Route 17 North, 2nd Floor

Rutherford, NJ 07070

(201) 528-9200

www.cancergenetics.com

Investor Contact Info:

RedChip Companies, Inc.

500 Winderley Place, Suite 100

Maitland, FL 32751

(407) 644-4256

www.redchip.com

Economy & Finance

Cgix profile 20131010