Rosetta Genomics, Ltd. (Rosetta Genomics) has reported total operating expenses of $15.6 million for the year-end 2008, compared with the total operating expenses of $11 million in the previous year-end 2008. It has also reported a net loss of $9.5 million, or $0.79 loss per share, for the year-end 2008, compared with the net loss of $14.7 million, or $1.32 loss per share, in the previous year-end 2008.

Highlights of the fourth quarter of 2008 and recent weeks include:

Introducing the company’s first three cancer diagnostic tests in the US, miRview mets, miRview squamous and miRview meso;

Signing an exclusive distribution agreement for these tests with Teva Pharmaceuticals Ltd. for Israel and Turkey;

Unveiling initial data relating to miRscreen colon, a noninvasive colon cancer screening diagnostic that will be the company’s primary product-development focus in 2009.

“During the fourth quarter we were proud to bring considerable development work to fruition as we commercialized multiple molecular diagnostic products based on our proprietary and versatile technology platform,” said Amir Avniel, president and chief executive officer of Rosetta Genomics. “The US introduction of our first three miRview tests during December of 2008 and the subsequent distribution agreement with Teva Pharmaceuticals mark the transition of Rosetta Genomics to a commercial company. Our miRview line of tests now offer physicians the unique advantages microRNAs hold as sensitive and specific biomarkers for more than 200,000 lung and metastatic cancer patients annually in the US.

“These tests leverage Rosetta Genomics’ proprietary microRNA technologies, for which more than 80 patent applications are in process; we also have two issued patents and three Notices of Allowance. Importantly, our underlying serum-microRNA platform is extremely sensitive. It has demonstrated detection sensitivity on the order of a single molecule, single nucleotide specificity and up to 700-fold test-to-control increase of certain serum-microRNA biomarkers.

“As we take pride in our commercial progress, we are constantly advancing new products through our pipeline. In early 2009 we unveiled miRscreen colon and reported the first-ever in vivo efficacy data for a systemic microRNA therapeutic for liver cancer. This year we expect to expand our commercial capabilities based on the same model we are using with Teva while focusing our energies on bringing our noninvasive colon cancer screening diagnostic to market in late 2009 or early 2010.”

Avniel added, “Our colon cancer screening test will potentially target more than 90 million Americans annually,[2] and therefore holds tremendous financial potential. It will differentiate individuals with colon cancer from those without by detecting microRNA biomarkers in a test that is based on a simple blood draw. We believe that noninvasive testing is the future of our industry. We also believe our noninvasive colon cancer screen is so important that we have elected to accelerate its development.”

The company expects the following three key milestones related to the development and commercialization of miRscreen colon:

First, by the end of the second quarter the company expects to conclude the discovery phase, in which the company will finalize the microRNA content of the test. In this phase, the company will continue screening dozens of samples from colon cancer patients of various stages, as well as age-matched controls. In the past several months the company has improved our microRNA panel for high-throughput screening to include additional potential markers, specifically focusing on more novel cancer and colon cancer related microRNAs the company has discovered.

Second, by the end of the third quarter the company expects to complete the assay development phase. In this phase, as the company has done with its first three products and will translate the discovery results into an assay. This means the company will finalize the list of biomarkers, the design of the plate, the various controls and QC parameters, as well as the optimal interpretation of the assay results for a colon cancer detection test.

And third, should the company be successful in developing this test, the company expect the product to be commercially available in the US. through our CLIA-certified lab in late 2009 or early 2010. Within this timeframe the company also expects to publicly present scientific data on the accuracy of our product.

“While these are ambitious goals, we believe our unique technology platform will enable us to successfully achieve them, as evidenced by the speedy time to market with our first three products,” commented Avniel. “But let me caution that there are risks along the way in developing and ultimately commercializing this product. From a technical perspective, this is a complicated test and will be the first product of its kind to be commercialized, and we can provide no assurance that we will be able to successfully develop this product in this timeframe, or at all.”

Beginning in 2010 Rosetta Genomics plans to continue work with various paraffin block-based tests it has previously discussed, either on its own or in conjunction with a corporate partner, as well as potentially with other noninvasive screening diagnostics.

Financial Overview

Revenues for the fourth quarter of 2008 were $806,000. Revenues for 2008 were $1.5 million. Operating loss for the fourth quarter of 2008 was $4.5 million (including a non-cash expense of $285,000 related to stock-based compensation and $850,000 goodwill impairment due to Parkway Clinical Laboratories), compared with an operating loss of $3.5 million (including a non-cash expense of $311,000 related to stock-based compensation) for the corresponding quarter of 2007. Operating loss for the year ended December 31, 2008 was $14.9 million (including a non-cash expense of $1.0 million related to stock-based compensation and $850,000 goodwill impairment due to Parkway Clinical Laboratories), compared with operating loss of $11.0 million (including a non-cash expense of $1.0 million related to stock-based compensation) for 2007.

Research and development expenses were $2.1 million for both the fourth quarter of 2008 and for the fourth quarter of 2007, and remain the company’s largest expense accounting for 43% of 2008 fourth quarter operating expenses, and 55% of 2008 operating expenses. Research and development expenses for the year ended December 31, 2008 were $8.7 million, compared with $6.4 million for 2007.

On a non-GAAP basis, excluding stock-compensation expense, goodwill impairment and capital gains, the net loss for the 2008 fourth quarter was $3.4 million or $0.29 per ordinary share, and for the year it was $13.2 million or $1.10 per ordinary share. This compares with the comparable figures for the 2007 fourth quarter and year of $2.9 million or $0.24 per ordinary share, and $8.6 million or $0.77 per ordinary share, respectively. On a GAAP basis, the net income for the 2008 fourth quarter was $1.1 million or $0.09 per ordinary share, and for the year it was a net loss of $9.5 million or $0.79 per ordinary share. This compares with the GAAP net loss for the 2007 fourth quarter and year of $8.2 million or $0.69 per ordinary share, and $14.6 million or $1.32 per ordinary share, respectively.

As of December 31, 2008 the company had $15.7 million in cash, cash equivalents, short- and long-term bank deposits and marketable securities.

During the fourth quarter of 2008 Rosetta Genomics received $7.4 million from Credit Suisse for the repurchase of all remaining Auction Rate Securities the company bought in 2007, as part of a settlement agreement Credit Suisse reached with the Attorney General of the State of New York and the North American Securities Administrators Association Task Force. The impairment charge that was recorded in 2007 was reversed in the fourth quarter, and the company recorded a capital gain of $5.6 million on these securities.

Rosetta Genomics, an Israel-based developer of therapeutic products based on micro-ribonucleic acid (microRNAs).