Clarient Inc. (CLRT), which transformed itself from a medical device provider with single application to a cancer diagnostics company offering a wide range of advanced tests, may not be a widely followed stock. But given the company's current momentum, it may be a healthy bet in this sick economy.
The National Cancer Institute estimates that about ten million Americans have or have had some form of cancer. Cancer diagnostic tests can locate the origin of cancer in the body, identify cancer cell types, find out whether the cancer has spread, predict symptoms and identify the appropriate treatment. Clarient anticipates the market for advanced cancer diagnostic testing to increase from the current estimated $2.0 billion to over $3.0 billion by 2012.
Company Overview
Founded in 1993, Clarient Inc. was formerly known as ChromaVision Medical Systems. ChromaVision, which went public in July of 1997 at about $11.50 per share, was focusing in developing and marketing Automated Cellular Imaging System in its initial days. Automated Cellular Imaging System, or ACIS, is an automated digital microscope system, which allows physicians to detect cancer and better understand the specific traits of individual cancer tumors.
In due course of time, ChromaVision expanded its business model, and along with selling its cancer-detecting cellular imaging systems to labs, the company began offering full oncology diagnostics to its customers. In December 2004, the company opened a new, fully licensed state-of-the-art advanced cancer laboratory, Clarient Diagnostic Services. Embarking on an aggressive business transition, ChromaVision also changed its name to Clarient on March 15, 2005. Public investment firm Safeguard Scientifics Inc. (SFE) owns a 58% stake in Clarient.
In March 2007, Clarient sold its ACIS instrument business to privately held Carl Zeiss Micro Imaging Inc. for $12.5 million, which marked the completion of the company's three-year evolution from an equipment sales model to a diagnostic services model. Clarient's services are covered by Medicare and health insurance providers in the United States. The company generates revenues primarily from billing insurers, pathologists and patients for the diagnostic services.
Market Opportunities
Diagnostic tests provide information about a patient's vulnerability to disease, the probable progression of disease, and a patient's likely response to drugs. Diagnostic tests are driving the move toward personalized medicine. Personalized medicine is a shift from the "one-size-fits-all approach", whereby a doctor can tailor a patient's treatment by avoiding using a certain drug, prescribing another, or altering a dose to match the body's genetics.
Roche/Genentech's cancer drug Herceptin, and Pfizer's HIV therapy Maraviroc are examples for targeted therapies that use a companion diagnostic test. Theranostic or companion diagnostic test refers to a specific test that assists physicians in selecting the right drug for the right patient. For example, Herceptin is approved by the FDA for patients whose tumours overexpress the HER2 gene.
Personalized medicine helps to better manage a patient's disease or predisposition towards a disease and according to pharmacy benefit managers, "personalized medicine" is expected to gain further momentum in 2009.
Clarient focuses on 4 most common types of cancer -- breast, prostate, lung and colon cancers. Since many cancers are treatable, there is a large demand for cancer diagnostic tests. Growing incidences of cancer in an aging population can be expected to increase cancer diagnostic testing, which bodes well for cancer diagnostic companies like Clarient.
Well-stocked Quiver
The company offers a broad menu of specialized technologies such as image analysis, FISH (flourescence in situ hybridization), flow cytometry, cytogenetics and molecular diagnostics.
In December of 2008, Clarient launched a second gene mutation test for colorectal cancer known as BRAF test. The first gene mutation test for colorectal cancer known as KRAS test was launched last July.
Studies have shown that metastatic colorectal cancer patients with a mutation in KRAS gene or BRAF gene do not respond to anti-EGFR (epidermal growth factor receptors) therapies like ImClone Systems' Erbitux and Amgen Inc.'s (AMGN) Vectibix. Therefore KRAS test could help doctors to detect the mutated gene in deciding the type of treatment.
According to the company, since its launch, the KRAS test for colorectal cancer has been widely accepted in the market, with a current revenue run rate of over $5 million per year. The newly launched BRAF test is expected to complement the KRAS test.
Last month, the company launched Clarient Insight Dx Prostate Cancer Profile - a new gene expression test for prostate cancer, which was developed using a patented technology of Health Discovery Corp. The exclusive rights for the new gene expression test for prostate cancer will be retained by Clarient, which may be developed in future in conjunction with Health Discovery Corp. (HDVY).
According to the company, the new test could assist physicians in more accurately identifying the presence of prostate cancer in patients with both positive and negative biopsy results. Biopsy is one of the tests performed to confirm the type of cancer, its location, and stage of development. Though biopsy is a very accurate method of identifying cancer, it sometimes fails to detect cancer if the tumors are very small. In the United States alone, there are over 1 million prostate cancer tissue biopsy procedures performed annually.
Clarient has been working to increase its service offerings and expand its market penetration.
The long-awaited Insight Dx Breast Cancer Profile is expected to be launched this year. Dx Breast Cancer Profile is a breast cancer test, the first molecular test available that is applicable to all stages of operable breast cancer. Analysts estimate the potential market for breast cancer tests that identify recurrence risk to be between $300 million and $400 million annually in the U.S. The breast cancer test will be sold by Clarient through an exclusive license agreement with privately-owned Prediction Sciences.
Financial Metrics
The company has incurred operating losses every year since its inception. Though Clarient has reduced its operating losses, it expects to continue to incur losses as a result of expansion of its laboratory services. The company's accumulated deficit as of September 30, 2008 was $152.6 million and its total stockholders' deficit was $2.8 million.
In the third quarter ended September 30, 2008 Clarient's net loss narrowed to $2.21 million or $0.03 per share from $2.88 million or $0.04 per share in the year-ago period. Revenue for the quarter increased 59% to $18.99 million from $11.94 million in the comparable period a year before. The increase in revenue was driven by higher testing volume, favorable service mix and higher Medicare reimbursement rates.
Testing volumes for the third quarter of 2008 increased by 53% over the year-ago period. During the third quarter of 2008, breast prognostics/solid tumor testing volumes increased 27%, leukemia/lymphoma volumes rose 73%, and PCR/molecular testing increased 208%.
Gross margin for the third quarter of 2008 rose an impressive 62%, helped by volume growth, especially in high-value tests, as well as higher reimbursement rates and increased employee productivity. Gross margin was 52% in the comparable year-ago quarter.
The company is slated to report its fourth-quarter and full year financial results on March 4. Analysts polled by Thomson Reuters expect the company to report a loss of $0.03 per share and revenue of $17.85 million. The company expects to report its first positive adjusted EBITDA year in 2008.
Last October, Clarient lifted its revenue growth guidance for the full year of 2008 to a range of 55% to 60% from its prior forecast of 45% to 55% over 2007. That was the company's second revision of revenue growth guidance. In August, the company had boosted its revenue growth outlook to 45% to 55% from its previous revenue growth guidance of 30% to 40% over 2007. The company had generated $42.99 million in revenue in 2007.
Looking ahead to 2009, Clarient anticipates revenue to range between $93 million and $98 million.
Competition
Clarient faces competition from diagnostic industry stalwarts like Laboratory Corporation of America Holdings (LH) and Quest Diagnostics Inc. (DGX). Other primary competitors of the company in oncology diagnostics include Genzyme Corp. (GENZ), Genoptix Inc. (GXDX), and Genomic Health Inc. (GHDX).
Debt
The company had a debt of $21.73 million as of September 30, 2008 compared to $18.15 million as of December 31, 2007. As part of its initiative to refinance its credit facilities, the company extended the maturities of $19.25 million in existing credit facilities with Gemino Healthcare Finance LLC and Comerica Bank. Clarient has extended an $8 million revolving credit facility with Philadelphia-based Gemino to February 27, 2009, which was originally due on January 31, 2009.
Stock Performance
After touching a two-year low of $0.82 last November, shares of CLRT have more than doubled and currently trade around $1.88 -- above its 50-day and 200-day moving averages. CLRT recently broke out above its 200-day moving average of $1.76 and has overhead resistance around the $1.97 level. In the last twelve months, the stock has traded in the range of $0.82 - $2.35.
For comments and feedback contact: editorial@rttnews.com
June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.