Response Genetics, Inc. Reports Full Year 2008 and Fourth Quarter Financial Results and Provides ResponseDX™ Sales Update

Response Genetics, Inc. (Nasdaq: RGDX), a company focused on the development and sale of molecular diagnostic tests for cancer, today announced consolidated financial results for the 12 months ending December 31, 2008, and the fourth quarter of 2008, as well as an update on the Company’s ResponseDX™ sales activities.

"Response Genetics continues to make great strides as a company. During this past year, we successfully launched our ResponseDX: Lung™ and ResponseDX: Colon™ genetic tests; brought the promise of personalized medicine within reach of today’s physicians and cancer patients; tripled the size of our sales force to cover major national oncology markets; and signed agreements with GlaxoSmithKline and Roche Diagnostics,” said Kathleen Danenberg, Response Genetics president and CEO. "Sales of our ResponseDX diagnostic tests are off to a promising start in 2009 with approximately 500 tests processed in the first quarter compared to approximately 300 tests processed in the fourth quarter of 2008 – a 60 percent increase in tests processed. For the coming year, we look forward to a continued increase in sales of our ResponseDX diagnostic tests and further development of our pipeline.”

Corporate Development Highlights

• ResponseDX Launch – Response Genetics launched its ResponseDX: Lung and ResponseDX: Colon genetic tests to select medical institutions in the Southern California market in March 2008. As of March 2009, the Company has deployed its own national sales force covering major oncology markets in the United States, which is complimented by an additional external sales force per the Company’s agreement with NeoGenomics Laboratories. Since the launch, the Company has processed more than 1,000 ResponseDX tests with a reorder rate of approximately 90 percent.
• Amended and Restated Master Service Agreement with GlaxoSmithKline Naming Response Genetics as a Preferred Provider – In December 2008, Response Genetics signed an amended and restated master service agreement with GlaxoSmithKline, Ltd., extending the existing agreement between the companies for an additional two-year period. Response Genetics was named as the preferred provider of genetic testing services to GlaxoSmithKline and its affiliated companies.
• Agreement with Roche Diagnostics to Support Cancer Test Development – In February 2009, Response Genetics signed a nonexclusive license with Roche Diagnostics for the use of Response Genetics’ patented PCR analysis to assess human epidermal growth factor type 2 (HER2) gene expression. The accurate measurement of HER2 gene expression can assist physicians with treatment decisions for patients with cancers in tissues such as breast.
• Laboratory Consolidation – On February 9, 2009, Response Genetics announced it was closing its United Kingdom facility in order to consolidate operations at its CLIA-certified laboratory in Los Angeles. The Company has eliminated all of its employees in the United Kingdom, a total of nine positions and the reduction of workforce will be completed substantially by March 31, 2009. As a result of this action, Response Genetics expects to realize annual savings of approximately $2.0 million once the consolidation is completed.
• Eight Studies Presented at ASCO 2008 – At the 2008 American Society of Clinical Oncology meeting, Response Genetics announced results from eight studies utilizing the Company’s proprietary technology. Four of the studies presented support the validity for the use of molecular markers found in the ResponseDX: Lung and ResponseDX: Colon panels. Four additional studies were presented to support the validity of molecular markers found in diagnostic tests that are under development by the Company in ovarian, pancreatic and gastric cancer.

Financial Results for the Year Ended December 31, 2008

Total revenue decreased by 9 percent to $7.1 million in the year ended 2008, compared to $7.8 million for the year ended 2007. This decrease was primarily due to a delay in the receipt of clinical samples from pharmaceutical clients, which the Company anticipates receiving in 2009 through 2010.

Cost of revenue for the year ended 2008 was $3.6 million compared with $4.0 million for the year ended 2007, a decrease of 13 percent. Research and development expenses were $2.2 million for the year ended 2008, compared with $2.5 million for the same period in the prior year. General and administrative expenses were $7.9 million for the year ended 2008, compared with $5.2 million for the same period in 2007. Total operating expenses for the year ended 2008, excluding costs related to the operation of the Company’s United Kingdom lab increased to $13.6 million, compared with $11.7 million for the same period last year. The primary reasons for the incremental increase in total operating expenses are costs related to the launch of the Company’s ResponseDX tests and its sales force expansion. Costs related to the operation of the United Kingdom lab for 2008 were $2.5 million of operating costs and $0.9 million of property and equipment costs.

Response Genetics’ net loss for the 12 months ended 2008 was $9.5 million or $0.93 per share, compared with a net loss of $5.1 million, or $0.78 per share, for the 12 months of 2007.

Financial Results for the Fourth Quarter Ended December 31, 2008

Total revenue decreased by 41 percent to $1.4 million in the fourth quarter of 2008, compared with $2.4 million in the fourth quarter of 2007. This decrease was primarily due to a delay in the receipt of clinical samples from pharmaceutical clients, which the Company anticipates receiving in 2009 through 2010.

Cost of revenue for the fourth quarter of 2008 was $744,873, compared with $1,129,473 for the fourth quarter of 2007. Research and development expenses were $436,756 for the fourth quarter of 2008, compared with $566,293 for the same period in the prior year. General and administrative expenses of $2.3 million for the fourth quarter of 2008 increased from $1.3 million for the fourth quarter of the prior year. Total operating expenses for the fourth quarter of 2008, excluding costs related to the operation of the Company’s United Kingdom lab increased to $3.5 million, compared with $3.0 million for the same period last year. Costs related to the operation of the United Kingdom lab for the fourth quarter of 2008 were $537,859 of operating costs and $893,326 of property and equipment impairment costs.

Cash and Cash Equivalents

Cash and cash equivalents at December 31, 2008 were $9.5 million compared to $17.0 million at December 31, 2007. As previously announced, Response Genetics completed an amended master service agreement with GlaxoSmithKline, Ltd. in December 2008. On January 5, 2009, the Company received payment of $1.3 million from GlaxoSmithKline related to the amended agreement.

Additionally, as previously announced, Response Genetics completed a private placement of 2 million newly issued common shares at a per-share price of $1.00. The Company received payment of $2.0 million from this private placement on March 2, 2009.

About Response Genetics, Inc.

Response Genetics, Inc. ("RGI”) (the "Company”) (Nasdaq: RGDX) is focused on the development and sale of molecular diagnostic tests for cancer. RGI’s technologies enable extraction and analysis of genetic information from genes derived from tumor samples stored as formalin-fixed and paraffin-embedded specimens. In addition to diagnostic testing services, RGI generates revenue from the sales of its proprietary analytical pharmacogenomic testing services of clinical trial specimens to the pharmaceutical industry. The Company was founded in 1999 and its principal headquarters are located in Los Angeles, California. For more information, please visit www.responsegenetics.com.

Forward-Looking Statement Notice

Except for the historical information contained herein, this press release and the statements of representatives of RGI related thereto contain or may contain, among other things, certain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements relating to the drivers of the Company’s fourth quarter and annual results, statements with respect to the Company’s plans, objectives, projections, expectations and intentions, such as the ability of the Company to analyze cancer samples, the potential for using the results of this research to develop diagnostic tests for cancer, the usefulness of genetic information to assist in tailoring treatment to patients, the ability of the Company to continue to make its ResponseDx:Lung(TM) and ResponseDX:Colon(TM) tests available, the Company’s intent to invest in its business and the areas in which it expect to make such investments, financial guidance, including expectations regarding the number of tests delivered, revenues, and net loss, the Company’s expectations regarding future sales, the outcome, success or results of studies, the applicability of study results to actual outcomes, the Company’s intention to develop additional diagnostics based on study results, and other statements identified by words such as "projects,” "may,” "could,” "would,” "should,” "believes,” "expects,” "anticipates,” "estimates,” "intends,” "plans” or similar expressions.

These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission. Actual results, including, without limitation, actual sales results, if any, or the application of funds, may differ from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control). The Company undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise, except as required by law.