Dr. Barbara Kinnaird reports

RESPONSE BIOMEDICAL CORP. ANNOUNCES THIRD QUARTER 2015 FINANCIAL RESULTS

Response Biomedical Corp. is releasing its financial results for the third quarter and nine months ended Sept. 30, 2015. Third quarter highlights include a 60-per-cent increase in total revenue, a 10-per-cent increase in product sales, a GAAP (generally accepted accounting principles) net income of $729,000 and a positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $311,000.

"We are pleased to again report both revenue growth over the prior-year quarter and positive adjusted EBITDA for the third quarter," said Dr. Barbara Kinnaird, chief executive officer of Response. "We worked with our national distribution partner in China to continue their purchases from us this quarter, albeit at a reduced rate from the first two quarters of the year. We are helping our partner to work through their excess inventory as we continue to expand our sales and marketing team in China. In addition, we made good progress in our collaboration with Joinstar, earning a $648,000 (U.S.) milestone in the third quarter," noted Dr. Kinnaird. "We also continue to be encouraged by the sales growth in markets outside of China. Finally, our cost cutting and efficiency initiatives have contributed to our improved third quarter gross margin.

"We continue to focus on improving efficiencies and reducing costs while at the same time making strategic investments in high-growth market segments. At the end of the third quarter, we launched a new environmental test to assist customers in detecting Dengue virus infected mosquitoes," said Dr. Kinnaird.

Financial highlights for the third quarter of 2015 include the following:

• Total third quarter revenue of $3.5-million, up 60 per cent from $2.2-million in the third quarter of 2014;
• Third quarter gross margin on product sales of 41.3 per cent, up 9.2 percentage points, compared with 32.1 per cent in the third quarter of 2014;
• 37-per-cent reduction of third quarter operating expenses to $1.8-million, compared to $3.0-million in the third quarter of 2014;
• Third quarter 2015 GAAP net income of $729,000, or seven cents per share, compared with a GAAP net loss of $1,118,000, or 14 cents per share, in the third quarter of 2014. These GAAP figures include a non-cash warrant liability valuation adjustment gain of $890,000 in the third quarter of 2015, and $1,472,000 in the third quarter of 2014;
• Excluding the non-cash warrant liability valuation adjustment, third quarter 2015 adjusted net loss was $161,000, compared with an adjusted net loss of $2.59-million in the third quarter of 2014;
• Third quarter 2015 adjusted EBITDA (a non-GAAP financial measure) of $311,000, compared with a negative adjusted EBITDA of $2,063,000 in the third quarter of 2014.

Financial results for the three months ended Sept. 30, 2015

Product sales increased 10 per cent to $2.4-million for the quarter ended Sept. 30, 2015, compared with $2.2-million for the same quarter in 2014. The increase was primarily due to higher cardiovascular and environmental test sales outside of China offsetting lower sales in China.

Collaborative revenue from the Joinstar collaboration was $1.1-million in the third quarter of 2015, including $648,000 (U.S.) for the fourth milestone of the project received during the quarter. The company is eligible to receive an additional $1.5-million (U.S.) in milestones during the remaining approximately six months of the development project.

Gross margin on product sales increased to 41.3 per cent for the quarter ended Sept. 30, 2015, compared with a gross margin of 32.1 per cent in the same quarter of 2014. This increase is primarily due to increased cardiovascular sales outside of China, which are sold at relatively higher margins than cardiovascular sales in China, along with a decrease in manufacturing overhead costs as a result of the improved efficiencies.

Operating expenses decreased by 37 per cent to $1.9-million for the quarter ended Sept. 30, 2015, compared with $3.0-million in the same quarter of 2014. This decrease is primarily due to severance accrued in 2014, upon the departures of the company's former chief executive officer and senior vice-president of worldwide sales, and a 19-per-cent decrease in salaries and wages due to staff efficiencies, in addition to lower legal and regulatory costs incurred in 2015.

GAAP net income for the quarter ended Sept. 30, 2015, totalled $729,000, or seven cents per basic and diluted share, compared with a GAAP net loss of $1,118,000, or 14 cents per basic share and diluted share, in the comparative 2014 period. The GAAP net income was primarily due to the improved margin and reduced operating expenses described above, along with the additional collaborative revenue earned from the Joinstar collaboration offsetting the decrease in the unrealized gain on the revaluation of the warrant liability.

Adjusted net loss decreased by $2.4-million to an adjusted net loss of $161,000 from an adjusted net loss of $2.6-million in the comparable quarter in 2014, primarily the result of the increase in total revenue and decrease in costs during 2015, in comparison with 2014. The company believes that this non-GAAP measure, along with adjusted EBITDA, may be useful to investors to analyze the results of its business because it excludes the often volatile, non-cash unrealized change in the valuation of the company's warrant liability.

As a result of the changes described above, adjusted EBITDA for the quarter ended Sept. 30, 2015, improved to $300,000, compared with negative $2.1-million in the same quarter of 2014. Adjusted EBITDA excludes, for the applicable periods, interest expense, interest income, income tax, depreciation and amortization, stock-based compensation expense, and the non-cash unrealized gain or loss on the revaluation of the warrant liability. The company believes that this non-GAAP measure may be useful to investors to analyze the results of the company's business as it excludes the often large quarterly non-cash gains and losses associated with revaluations of its warrant liability; these gains and losses are driven by stock price changes, and are unrelated to the company's business operations and cash flows.

Financial results for the nine months ended Sept. 30, 2015

Product sales increased 18 per cent to $9.3-million for the nine months ended Sept. 30, 2015, compared with $7.8-million for the same period in 2014. The increase was primarily due to higher instrument and cardiovascular test sales in China during the first half of the year.

Collaborative revenue from the Joinstar collaboration was $2.1-million in the nine months ended Sept. 30, 2015. The company is eligible to receive an additional $1.5-million (U.S.) in milestones during the remaining approximately six months of the development project. The Joinstar collaboration commenced in the fourth quarter of of 2014; thus, there was no revenue from this source in the comparable period in 2014.

Gross margin on product sales decreased to 38.2 per cent for the nine months ended Sept. 30, 2015, compared with a gross margin of 40.8 per cent in the same period of 2014. This decrease is primarily due to increased cardiovascular sales in China, which are sold at relatively lower margins and a significant increase in promotional reader placement programs implemented in the first quarter of 2015.

Operating expenses decreased by 19 per cent to $5.8-million for the nine months ended Sept. 30, 2015, compared with $7.1-million in the same period of 2014. This decrease is primarily due to the severance costs accrued in 2014, as a result of the resignation of the former chief executive officer and senior vice-president of sales in 2014, lower salaries and wages due to staff efficiencies, and lower legal and regulatory work associated with the timing of clinical and regulatory work being done in 2015. As a result of the changes described above, adjusted EBITDA for the nine months ended Sept. 30, 2015, improved to $286,000, compared with negative $3.1-million in the same period of 2014.

GAAP net loss for the nine months ended Sept. 30, 2015, totalled $373,000, or four cents per basic and diluted share, compared with $2.4-million, or 30 cents per basic share and diluted share, in the comparative 2014 period. The decrease in GAAP net loss was primarily due to an increase in total revenue and a decrease in operating expenses offset by a decrease in the unrealized gain on revaluation of the warrant liability.

Adjusted net loss decreased during the nine months ended Sept. 30, 2015, by $3.5-million to $1.2-million, from $4.7-million in the comparable period in 2014.

Cash and cash equivalents as of Sept. 30, 2015, were $2.9-million, compared with $1.7-million as of Sept. 30, 2014.

For a further discussion of the company's financial results for the three and nine months ended Sept. 30, 2015, please refer to the company's consolidated financial statements, and related management discussion and analysis, which can be found on the company's website, SEDAR and EDGAR. Information at these sites is typically available within 72 hours of the distribution of the news release.

                                   SELECTED FINANCIAL DATA 
          (in thousands of Canadian dollars, except per-share data and as indicated)

                                          Three months ended Sept. 30,         Nine months ended Sept. 30,
                                                  2015           2014               2015             2014

Product sales                                  $ 2,425        $ 2,199            $ 9,259          $ 7,835
Collaborative revenue                            1,103              -              2,075                -
Total revenue                                    3,528          2,199             11,334            7,835
Cost of sales                                    1,423          1,494              5,719            4,639
Gross profit                                     2,105            705              5,615            3,196
Gross margin on product sales                     41.3%          32.1%              38.2%            40.8%
Operating expenses                               1,875          2,994              5,798            7,144
Other expenses (excluding unrealized loss 
(gain) on revaluation of warrant liability)        391            301                985              755
Adjusted net (loss)                               (161)        (2,590)            (1,168)          (4,703)
Unrealized loss (gain) on revaluation of 
warrant liability                                 (890)        (1,472)              (795)          (2,350)
Net income (loss) and comprehensive 
income (loss) for the period                       729         (1,118)              (373)          (2,353)
Earnings (loss) per share, basic                $ 0.07        $ (0.14)           $ (0.04)         $ (0.30)
Earnings (loss) per share, diluted              $ 0.07        $ (0.14)           $ (0.04)         $ (0.30)

We seek Safe Harbor.