MicroRNA-based molecular diagnostic kits developer Rosetta Genomics Ltd. (Nasdaq:ROSG) has published a prospectus to raise up to $35 million, although it will probably raise much less. The company did not disclose the share price for the offering. Aegis Capital is the underwriter.
Since April, Rosetta has held three issues, all at a discount, raising a total of $8 million at $2.50, $3.50, and $11.50 per share. The share price rose 10.6% in early trading today to $12.99, giving a market cap of $10 million.
The offerings came after some investors began to get a whiff of decay at the company. Rosetta had just $730,000 in cash in January 2012 and $103,000 in sales. It also faced relegation from Nasdaq.
That month, however, Rosetta announced a deal for the sale of some intellectual property, and it obtained a $1.75 million rescue loan from a party affiliated with the potential buyer. The collateral was Rosetta's intellectual property, except for the six diagnostic kits already on the market. The commercialization deal did not materialize, however, and the company was stuck with a high-interest loan of 10% and attached assets.
On Friday, Rosetta announced that it repaid the loan, releasing the collateral. Under the release agreement, Rosetta prepaid $145 million in principal and $288,000 in interest and the bondholders agreed to convert the remaining $300,000 in principal into ordinary shares at $1.416 per share no later than July 31, 2012.
The release agreement was made possible by several events. In April, Rosetta raised $1.3 million at $2.25 per share (adjusted retroactively to a subsequent reverse split). In early May, it carried out a 1 to 15 reverse split, and raised an additional $3.5 million. In early June, it announced that it had achieved listing compliance with the Nasdaq Capital Market.
On May 16, one of Rosetta's diagnostic kits obtained Medicare insurance indemnification for the company's miRview mets2 kit for the accurate identification of the primary tumor of origin in primary and metastatic cancer, including cancer of unknown or uncertain primary. The announcement boosted the share price 200%, and restored investor confidence. In these conditions, even a modest announcement of the appointment of a former Johnson & Johsnon executive to Rosetta's board was enough to boost the share to $16, for a 900% gain for the month.
In late May, Rosetta raised a further $6.5 million at a $11.50 per share, and on Friday, it was finally able to release its attached intellectual property. Last week, Medicare established the reimbursement rate for the miRview mets2 kit.
Despite the improvement in the share price, Rosetta still suffers from very low sales, which are actually falling. Although the market seems to believe that Medicare indemnification will boost the company's revenue, the burden of proof is still on it.
Today, Rosetta also announced that the New York State Department of Health has given the company conditional approval for its miRview lung cancer kit, making the test available in all 50 states.
Rosetta CEO Kenneth Berlin told "Globes", "It seems as if our products have been on the market for eons, but they were never properly marketed, because there was no indemnification and our sales team was very small. We're now building our own sales team, and we hope to strong growth. We'll also resume investing in R&D in Israel."
Published by Globes [online], Israel business news - www.globes-online.com - on June 26, 2012
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