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Clarient, Inc. (CLRT) CEO Issues Performance Update; Anticipates Profitable Growth in 2009

Clarient, Inc. is focused on providing the services, resources and critical information necessary to improve the quality and reduce the cost of patient care as well as accelerating the drug development process. Today, the company released the following corporate update to shareholders:

Dear Clarient Shareholders:

After a crucial Allied victory early in World War II, Winston Churchill observed, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

January marked Clarient’s four year anniversary. During that time, we have made tremendous strides in transforming our business from an instrument systems company with one application to a molecular pathology services company with a large menu of Cancer Diagnostic applications. Today, we are merely at the end of the beginning of our work to help defeat cancer. Today, we are at the end of the beginning of our transition to being the premier resource for molecular-testing services for pathologists, oncologists, and the pharmaceutical industry.

Early in 2009, our transformation continues as does the market growth for molecular diagnostics for cancer prognosis and theranosis. Clarient is emerging as a leader with a full menu of advanced tests to analyze and characterize cancer. We are becoming financially stronger, better positioned in a competitive sector, and staffed with more talented people than ever before.

Clarient’s menu of cancer diagnostic services is growing, which is consistent with our long-term strategy. In 2008, we expanded our diagnostic services to include cancer markers for tumors of the colon, prostate, breast and lung. We will continue to increase the breadth and depth of our service menu and to expand our market penetration.

The addition of higher margin services and tests has allowed us to transition our sales mix and drive Clarient towards sustainable profitability. Another key measure of Clarient’s improved financial strength is adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). While the 2008 results are still being audited, for the first time since the beginning of Clarient’s transformation, we expect to report our first positive adjusted EBITDA year in 2008. These operating and financial trends are highly encouraging, however, there’s more work to be done. Managing Clarient’s robust growth demands focus and discipline. The opportunity to emerge as the leader in molecular pathology services has never been more accessible, yet our journey to reach that goal is just beginning.

A top priority for Clarient in 2009 and beyond is to design and implement improved internal controls over financial reporting, especially in our billing, collections and business processes. In mid-2008, we ended our use of third-party billing and collections services. Our transition to internally managed billing and collections operations is largely complete. In the near term, we will continue to manage the challenges with collections and provisions for doubtful accounts. Over time, we expect improved timeliness and information flow. In addition, we foresee realizing net cost savings through reduced bad-debt expense and the elimination of third-party service fees.

Monitoring our progress in controlling expenses and other business processes will be easier in the future. After a thorough analysis of our industry’s best practices, Clarient’s financial statements for YE 2008 and going forward will include more line items about operating expenses.

With our current momentum and expanding sales team, 2009 is shaping up to be a solid year. Some key milestones for 2009 are:

Continued Revenue Growth: Management Guidance for 2009 Fiscal Year is $93M -$98M
Full market launch of the Clarient InsightTM Dx Breast Cancer Profile
Completion of our Sales Force expansion to 40 reps by mid year
Positive EBITDA and Operating Profit for Fiscal 09

Our marketplace is at a major inflection point as more studies uncover the power that diagnostics have to drive therapeutic utility and apply personalized medicine at the point of care. Cancer patients continue to look for answers, and the new administration appears to have a keen insight about the significance of molecular diagnostic testing in improving patient outcomes and reducing overall healthcare costs. Companies like Clarient have the capability and responsibility to provide critical tests to support the quest for information. The launch of the Clarient Insight Dx product line comes at an opportune time as these market trends converge.

The events of 2008 were complex and unprecedented. The U.S. economy faces profound challenges and is sure to change in unforeseen ways. The full impact of these changes will take years to be known and understood. The condition of our economy underscores the importance and urgency with which Clarient must address the issues that we can control. That work is well underway. Unfortunately, people get cancer regardless of the economy. Clarient’s task at hand is to maintain the appropriate financial discipline during these challenging economic times, while aggressively providing the most advanced molecular diagnostic information to clinicians to assist in the management of this deadly disease!

Change is all around Clarient. We welcome it. We thrive on it. Every day, we recognize that we have a unique opportunity to revolutionize molecular-testing services and strive to achieve our ultimate goal – to defeat cancer. Our journey toward enhanced value – for patients, customers, employees and shareholders – is just beginning.

In the meantime, I am personally grateful for the confidence and support of our shareholders, board of directors and employees. With your guidance and energy, 2009 promises to be a great year!

Ron A. Andrews
Chief Executive Officer

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