Dr. Anthony Holler reports

RESPONSE BIOMEDICAL CORP. ANNOUNCES FIRST QUARTER 2015 FINANCIAL RESULTS

Response Biomedical Corp. has released its financial results for its first quarter ended March 31, 2015.

"We are pleased to report that our product revenue this quarter increased 28 per cent over the same quarter last year. This increase was a result of our focused effort on distribution channel management, initiated in late 2014, and our strategic decision to invest in aggressive promotional reader placements to increase our customer base and long-term test sales. The reader placement initiative temporarily reduced our gross margin, which we expect to return to higher levels in future quarters," said Response's interim chief executive officer, Dr. Anthony (Tony) Holler. "Through these strategic sales initiatives and the ongoing Joinstar collaboration, we are focused on accelerating our path forward and leveraging our success in our key market, China. Indeed in Q1, our total revenue, including Joinstar collaboration activity, increased 38 per cent over the same quarter last year."

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

• Total Q1 revenue of $3.5-million, up 38 per cent from $2.6-million in Q1 2014;
• Q1 gross margin on product sales of 33.5 per cent, down 10.2 percentage points, compared with 43.7 per cent in Q1 2014, primarily related to promotional reader placements;
• Q1 2015 GAAP (generally accepted accounting principles) net loss of $1.1-million, or 11 cents per share, compared with a GAAP net loss of $1.5-million, or 19 cents per share, in Q1 2014;
• Excluding the non-cash warrant liability valuation adjustment, Q1 2015 adjusted net loss was $1.2-million compared with $1.4-million in Q1 2014;
• Q1 2015 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization; a non-GAAP financial measure) loss of $600,000, compared with $800,000 in Q1 2014.

Financial results for the three months ended March 31, 2015:

• Product sales increased 28 per cent to $3.3-million for the quarter ended March 31, 2015, compared with $2.6-million for the same quarter in 2014. The increase was primarily due to higher instrument and cardiovascular test sales in China.
• Collaborative revenue from the Joinstar collaboration was $300,000 in Q1 2015. The company is eligible to receive an additional $2.2-million (U.S.) in milestones during the remaining approximately 12 months of the development project.
• Gross margin on product sales decreased to 33.5 per cent for the quarter ended March 31, 2015, compared with a gross margin of 43.7 per cent in the same quarter of 2014. This decrease is primarily due to reader placement promotions that were implemented in the fourth quarter of 2014 and continued into the first quarter of 2015, as well as an increase in inventory provisions versus the comparable period. The company's manufacturing cost-reduction initiatives continue, with further production automation on schedule for implementation later in 2015.
• Operating expenses decreased by 5 per cent to $2.2-million for the quarter ended March 31, 2015, compared with $2.3-million in the same quarter of 2014. This decrease is primarily due to reduced compensation-related costs in 2015 as result of senior management restructuring completed in 2014.
• As a result of the changes described above, adjusted EBITDA for the quarter ended March 31, 2015, improved to negative $600,000 compared with negative $800,000 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. Response 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.
• GAAP net loss for the quarter ended March 31, 2015, totalled $1.1-million, or 11 cents per basic and diluted share, compared with $1.5-million, or 19 cents per basic share and diluted share, in the comparative 2014 period. The decrease in GAAP net loss was primarily due to higher gross profit due to the increase in collaborative revenue and the decrease in operating expenses mentioned above.
• Adjusted net loss decreased by $200,000 to $1.2-million from $1.4-million in the comparable quarter in 2014. The company also 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.
• Cash and cash equivalents as of March 31, 2015, were $1.4-million compared with $4.0-million as of March 31, 2014.

For a further discussion of the company's financial results for the first quarter ended March 31, 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 (Canada) or EDGAR (United States). 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)

                                                           Three months ended
                                                                March 31,
                                                           2015          2014

Product sales                                       $     3,271   $     2,559
Collaborative revenue                                       269             -
Total revenue                                       $     3,540   $     2,559
Cost of sales                                             2,176         1,440
Gross profit                                        $     1,364   $     1,119
Gross margin on product sales                              33.5%         43.7%
Operating expenses                                        2,152         2,268
Other expenses (excluding unrealized loss (gain)
on revaluation of warrant liability)                        367           213
Adjusted net (loss)                                 $    (1,155)  $    (1,362)
Unrealized loss (gain) on revaluation of warrant
liability                                                   (55)          161
Net and comprehensive (loss) for the period         $    (1,100)  $    (1,523)
(Loss) per share -- basic and diluted               $     (0.11)  $     (0.19)

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