10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)
x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 For the transition period from ___________ to __________

Commission file number: 001-33509

RESPONSE GENETICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	11-3525548
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1640 Marengo St., 6th Floor, Los Angeles, California	90033
(Address of principal executive offices)	(Zip Code)

(323) 224-3900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

On November 16, 2009, there were 15,297,183 shares of common stock, $.01 par value per share, issued and outstanding.

Response Genetics, Inc.

Form 10-Q

Table of Contents

		Page
		Number
Part I.	Financial Information
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets — December 31, 2008 and September 30, 2009		1
	Unaudited Consolidated Statements of Operations and Comprehensive Loss — Three and nine months ended September 30, 2008 and 2009		2
	Unaudited Consolidated Statements of Cash Flow — Three and nine months ended September 30, 2008 and 2009		3
	Notes to Unaudited Consolidated Financial Statements		4 - 24
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation		25
Item 3.	Qualitative and Quantitative Disclosures About Market Risk		36
Item 4T.	Controls and Procedures		36
Part II.	Other Information
Item 1.	Legal Proceedings		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3.	Defaults Upon Senior Securities		37
Item 4.	Submission of Matters to a Vote of Security Holders		37
Item 5.	Other Information		37
Item 6.	Exhibits		37
Signatures			37
Exhibit Index
	EX-31.1
	EX-31.2
	EX-32

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RESPONSE GENETICS, INC.

CONSOLIDATED BALANCE SHEETS

	December 31, 2008			September 30, 2009
				(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	9,545,000		$	9,299,183
Accounts receivable, net		2,119,496			1,704,362
Prepaid expenses and other current assets		399,612			434,273
Total current assets		12,064,108			11,437,818
Property and equipment, net		1,414,842			1,300,840
Other assets		69,103			69,102
Total assets	$	13,548,053		$	12,807,760
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	545,971		$	871,153
Accrued expenses		513,868			531,259
Accrued royalties		526,712			555,641
Accrued payroll and related liabilities		154,185			373,093
Deferred revenue		2,580,498			2,123,590
Total current liabilities		4,321,234			4,454,736
Deferred revenue, net of current portion		2,355,948			2,277,709
Total liabilities		6,677,182			6,732,445
Commitments and contingencies (Note  6)
Stockholders’ equity
Common stock, $0.01 par value; 50,000,000 shares authorized; 10,239,276 and 15,297,183 shares issued and outstanding at December 31, 2008 and September 30, 2009, respectively		102,393			152,972
Additional paid-in capital		36,805,932			43,542,320
Accumulated deficit		(29,805,729	)		(37,423,960	)
Accumulated other comprehensive loss		(231,725	)		(196,017	)
Total stockholders’ equity		6,870,871			6,075,315
Total liabilities and stockholders’ equity	$	13,548,053		$	12,807,760

The accompanying notes are an integral part of these consolidated financial statements.

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RESPONSE GENETICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2009			2008			2009
Net revenue	$	1,957,030		$	2,259,523		$	5,683,409		$	5,694,988
Operating expenses:
Cost of revenue		1,025,383			1,175,615			2,849,482			3,646,358
Selling and marketing		-			934,946			-			2,759,108
General and administrative		2,101,864			1,305,247			5,580,186			4,453,204
UK operating expenses		688,794			21,645			1,939,828			465,910
UK redundancy costs		-			66,140			-			268,374
Research and development		410,469			726,696			1,719,013			1,734,223
Total operating expenses		4,226,510			4,230,289			12,088,509			13,327,177
Operating loss		(2,269,480	)		(1,970,766	)		(6,405,100	)		(7,632,189	)
Other income (expense):
Interest expense		(58	)		(2,360	)		(3,027	)		(8,199	)
Interest income		76,087			256			319,383			22,157
Other		(2,266	)		-			(3,692	)		-
Net loss	$	(2,195,717	)	$	(1,972,870	)	$	(6,092,436	)	$	(7,618,231	)
Unrealized gain on foreign currency translation		5,270			18,467			-			35,708
Total comprehensive loss	$	(2,190,447	)	$	(1,954,403	)	$	(6,092,436	)	$	(7,582,523	)
Net loss per share — basic and diluted	$	(0.21	)	$	(0.14	)	$	(0.60	)	$	(0.60	)
Weighted-average common shares — basic and diluted		10,239,276			14,599,182			10,239,276			12,594,995

The accompanying notes are an integral part of these consolidated financial statements.

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RESPONSE GENETICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Nine Months Ended September 30,
	2008			2009
Cash flows from operating activities:
Net loss	$	(6,092,436	)	$	(7,618,231	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		524,431			307,585
Share-based compensation		1,186,033			725,066
Loss (gain) on sale of property and equipment		1,427			(48,615	)
Changes in operating assets and liabilities:
Accounts receivable		3,498,702			415,134
Prepaid expenses and other current assets		(34,451	)		(28,405	)
Other assets		(42,749	)		-
Accounts payable		476,132			324,325
Accrued expenses		149,478			16,246
Accrued royalties		210,886			28,929
Accrued payroll and related liabilities		(276,373	)		218,908
Deferred revenue		(3,584,115	)		(535,147	)
Net cash used in operating activities		(3,983,035	)		(6,194,205	)
Cash flows from investing activities:
Purchase of property and equipment		(683,213	)		(193,583	)
Proceeds from sale of property and equipment		-			48,615
Net cash used in investing activities		(683,213	)		(144,968	)
Cash flows from financing activities:
Proceeds from issuance of common stock		-			5,975,279
Capital contributions		-			86,622
Net cash used in investing activities		-			6,061,901
Effect of foreign exchange rates on cash and cash equivalents		(83,451	)		31,455
Net decrease in cash and cash equivalents		(4,749,699	)		(245,817	)
Cash and cash equivalents:
Beginning of period		17,024,209			9,545,000
End of period	$	12,274,510		$	9,299,183
Cash paid during the period for:
Income taxes	$	39,000		$	-
Interest	$	3,027		$	8,199

The accompanying notes are an integral part of these consolidated financial statements.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization, Operations and Basis of Accounting

Response Genetics, Inc. (the “Company”) was incorporated in the state of Delaware on September 23, 1999 as Bio Type, Inc. for the purpose of providing unique molecular profiling services of tumor tissue that has been formalin-fixed and embedded in paraffin wax. In August 2000, the Company changed its name to Response Genetics, Inc.  In November 2006, the Company established Response Genetics Ltd., a wholly owned subsidiary in Edinburgh, Scotland.  On February 9, 2009 we implemented a reduction of workforce (“reduction of workforce”) pursuant to which we have closed our subsidiary in Edinburgh. See Note 13“UK OPERATIONS”.

The Company is a life science company engaged in the research, development, marketing and sale of pharmacogenomic tests for use in the treatment of cancer. Pharmacogenomics is the science of how an individual’s genetic makeup relates to drug response. Tests based on pharmacogenomics facilitate the prediction of a response to drug therapy or survival following surgery based on an individual’s genetic makeup. In order to generate pharmacogenomic information from patient specimens for these tests, the Company developed and patented enabling methods for maximizing the extraction and analysis of nucleic acids and, therefore, accessing the genetic information available from each patient sample. The Company’s platforms include analysis of single biomarkers using the polymerase chain reaction method as well as global gene interrogation using microarray methods from paraffin or frozen tissue specimens. The Company primarily derives its revenue by providing pharmacogenomic testing services to pharmaceutical companies in the United States, Asia and Europe.

The Company’s goal is to provide cancer patients and their physicians with a means to make informed, individualized treatment decisions based on genetic analysis of tumor tissues. The Company’s pharmacogenomic analysis of clinical trial specimens for the pharmaceutical industry may provide data that will lead to a better understanding of the molecular basis for response to specific drugs and, therefore lead to individualized treatment.

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the fiscal year. The financial statements should be read in conjunction with the Company’s audited December 31, 2008 and 2007 consolidated financial statements and accompanying notes included in the Company’s Form 10-K previously filed with the SEC. In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168,  The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the “Codification”). This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes only two levels of U.S. generally accepted accounting principles (“GAAP”), authoritative and nonauthoritative. The FASB Accounting Standards Codification (“ASC”) will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company’s references to GAAP accounting standards but did not impact the Company’s results of operations, financial position or liquidity.

2. Summary of Significant Accounting Policies

Basis of Consolidation

The consolidated financial statements include the accounts of Response Genetics, Inc. and its wholly owned subsidiary, Response Genetics, Ltd., a Scottish corporation, which was incorporated in November 2006. All significant intercompany transactions and balances have been eliminated in consolidation.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies - (continued)

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity at date of purchase of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value due to the short-term nature and liquidity of these instruments. The Company’s cash equivalents are comprised of cash on hand, deposits in banks and money market investments.

Accounts Receivable

Clinical Accounts Receivable

The Company invoices its clients as specimens are processed and any other contractual obligations are met. The Company’s contracts with clients typically require payment within 45 days of the date of invoice. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments. The Company specifically analyzes accounts receivable and historical bad debts, client credit, current economic trends and changes in client payment trends when evaluating the adequacy of the allowance for doubtful accounts. Account balances are charged-off against the allowance when it is probable the receivable will not be recovered. To date, the Company’s clients have primarily been large pharmaceutical companies. As a result, bad debts to date have been minimal. There were no allowances for doubtful accounts recorded at December 31, 2008 and September 30, 2009.

ResponseDX Accounts Receivable

ResponseDX accounts receivable related to Medicare billings is recorded at established billing rates less an estimated billing adjustment, based on reporting models utilizing historical cash collection percentages and updated for current effective reimbursement factors from third party payers and patients. Management performs ongoing evaluations of account receivable balances based on management’s evaluation of historical experience and current industry trends. Management believes that no allowance for doubtful accounts is currently needed. Although the Company expects to collect amounts due, actual collections may differ materially from estimated amounts.

ResponseDX accounts receivable as of September 30, 2009, consisted of the following:

	September 30, 2009
Gross ResponseDX Medicare receivable	$	1,138,824
Less contractual allowances		(737,501	)
Net ResponseDX Medicare accounts receivable	$	401,323

Currently, we recognize ResponseDX revenue from third party and private payors on a cash basis until a collection history can be determined. Until we are reasonably assured about a pattern of collections, we will continue to record revenues from third party payors of ResponseDX on a cash basis.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies - (continued)

Property and Equipment

Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using an accelerated method over the estimated useful lives of the assets. The Company has determined the estimated useful lives of its property and equipment, as follows:

Laboratory equipment	5 to 7 years
Furniture and Equipment	5 to 7 years
Leasehold Improvements	Shorter of the useful life or the lease term

Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the related accounts and the resulting gain or loss is reflected in the statements of operations. During the year ended December 31, 2008 and the nine months ended September 30, 2009, the Company has capitalized costs related to database software development. The Company has not yet placed this database into service and accordingly has not depreciated these software development costs. The Company intends to place those database software costs into service and amortize those costs beginning January 2010 in accordance with ASC 350.40, Internal-Use Software, (formerly SOP 98-1) and the amortization period will be three years using the straight line method.

Revenue Recognition

Revenues are derived from pharmacogenomic testing services provided to pharmaceutical companies and are recognized on a contract specific basis pursuant to the terms of the related agreements. Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 104, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectibility is reasonably assured.

Revenues are recorded on an accrual basis as the contractual obligations are completed and as a set of assays is processed through the Company’s laboratory under a specified contractual protocol. Certain contracts have minimum assay requirements that, if not met, result in payments that are due upon the completion of the designated period. In these cases, revenues are recognized when the end of the specified contract period is reached.

On occasion, the Company may enter into a contract that requires the client to provide an advance payment for specimens that will be processed at a later date. In these cases, the Company records this advance as deferred revenue and recognizes the revenue as the specimens are processed or at the end of the contract period, as appropriate.

We recognize revenue from our ResponseDX tests invoiced to Medicare on an accrual basis and revenue invoiced to third-party payers, including private payors, on a cash basis. We have received our Medicare provider number which allows us to invoice and collect from Medicare. Our invoicing to Medicare is primarily based on amounts allowed by Medicare for the service provided as defined by Common Procedural Terminology (CPT) codes. We recognize revenue from third party and private payors currently on a cash basis until a collection history can be determined. Until we are reasonably assured about a pattern of collections we will continue to record revenues from third party payors of ResponseDX on a cash basis.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies - (continued)

Cost of Revenue

Cost of revenue represents the cost of materials, direct labor, costs associated with processing tissue specimens including pathological review, staining, microdissection, paraffin extraction, reverse transcription polymerase chain reaction, or (“RT-PCR”) and quality control analyses, license fees and delivery charges necessary to render an individualized test result. Costs associated with performing tests are recorded as the tests are processed.

Patent License Fees

The Company has licensed technology for the extraction of mRNA from formalin-fixed, paraffin-embedded tumor specimens from the University of Southern California (“USC”). Under the terms of the license agreement, the Company is required to pay royalties to USC based on the revenue generated by use of this technology. The Company maintains a non-exclusive license to use the polymerase chain reaction (“PCR”), homogenous PCR, and reverse transcription PCR processes of Roche Molecular Systems, Inc. (“Roche”). The Company pays Roche Molecular Systems a royalty fee based on revenue that the Company generates through use of this technology. The Company accrues for such royalties at the time revenue is recognized. Such royalties are included in cost of revenue in the accompanying statements of operations.

Research and Development

The Company expenses costs associated with research and development activities as incurred. Research and development costs are allocated on a pro rata basis using the number of research-only specimens that are processed by the Company versus specimens that are processed and paid for by various third parties via contract. Research and development costs include employee costs (salaries, payroll taxes, benefits, and travel), equipment depreciation and warranties and maintenance, laboratory supplies, primers and probes, reagents, patent costs and occupancy costs.

Income Taxes

Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

ASC 740, Income Taxes, clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. At the date of adoption, and as of December 31, 2008 and September 30, 2009, the Company does not have a liability for unrecognized tax benefits.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies - (continued)

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Stock Compensation (formerly SFAS 123(R), Share- Based Payment) , which requires the measurement and recognition of compensation expense for all share-based payment awards based on estimated fair values.

 Stock-based compensation expense recognized in accordance with ASC 718 was $538,850 and $221,514 for the three months ended September 30, 2008 and 2009, respectively, and $1,186,033 and $725,066 for the nine months ended September 30, 2008 and 2009, respectively. The Company accounts for equity instruments issued to non-employees in accordance with ASC 505, Equity, (formerly EITF 96-18). Under ASC 505, stock option awards issued are measured at fair value using the Black-Scholes option-pricing model.

Management Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Management has identified revenue, stock-based compensation, the assessment of the realizability of deferred income tax assets, and share-based compensation as areas where significant estimates and assumptions have been made in preparing the financial statements.

Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates potential impairment by comparing the carrying amount of the asset with the estimated undiscounted future cash flows associated with the use of the asset and its eventual disposition. Should the review indicate that the asset is not recoverable, the Company’s carrying value of the asset would be reduced to its estimated fair value, which is measured by future discounted cash flows.

Foreign Currency Translation

The financial position and results of operations of the Company’s foreign operations are determined using local currency as the functional currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each period-end. Statement of operations amounts are translated at the average rate of exchange prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity. The Company accounts for deferred revenue related to a specific contract as a nonmonetary obligation using historical exchange rates.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies - (continued)

Comprehensive Income (Loss)

Comprehensive income (loss) encompasses the change in equity from transactions and other events and circumstances from non-owner sources and the Company’s net income (loss). The components of comprehensive loss and accumulated other comprehensive loss comprise net loss and foreign currency translation adjustments as of December 31, 2008 and September 30, 2009 and for the three and nine months ended September 30, 2009 and 2008.

Fair Value of Financial Instruments

Cash and cash equivalents are stated at cost, which approximates fair market value.  Cash equivalents consist of money market accounts, with fair values estimated based on quoted market prices. For additional information see NOTE 15 Fair Value Measurements.

Reclassifications

Prior year amounts in the consolidated financial statements have been reclassified to conform to the current year presentation. Reclassified amounts for 2008 related to UK operations had no impact on the company’s net losses.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies - (continued)

Concentration of Credit Risk and Clients and Limited Suppliers

Cash and cash equivalents consist of financial instruments that potentially subject the Company to concentrations of credit risk to the extent recorded on the balance sheets. The Company maintains cash in United States financial institutions within the insurance limits of the Federal Deposit Insurance Corporation as of September 30, 2009. In addition, the Company has invested its excess cash in money market instruments which are not insured under the Federal Deposit Insurance Corporation but are insured under the Securities Industry Protection Corporation. The Company had approximately $7,240,000 of cash in money market instruments and has not incurred any losses on these cash balances as of September 30, 2009.  At September 30, 2009, approximately $258,000 of cash was held outside of the United States and is uninsured.

Revenue sources that account for greater than 10 percent of revenue are provided below.

	Three Months Ended September 30,										Nine Months Ended September 30,
	2008					2009					2008					2009
	Revenue		Percent of Total Revenue			Revenue		Percent of Total Revenue			Revenue		Percent of Total Revenue			Revenue		Percent of Total Revenue
Taiho Pharmaceutical	$	356,300		18	%	$	260,700		12	%	$	1,183,575		21	%	$	581,050		10	%
GlaxoSmithKline	$	393,233		20	%	$	77,225		*		$	1,024,531		18	%	$	92,525		*
GlaxoSmithKline Biologicals	$	1,070,160		55	%	$	781,707		35	%	$	3,108,309		55	%	$	2,357,234		41	%
The Foundation of Biomedical Research	$	74,175		*		$	180,400		*		$	165,625		*		$	669,750		12	%

*less than 10%

Clients that account for greater than 10 percent of accounts receivable are provided below.

	As of December 31, 2008					As of September 30, 2009
	Receivable Balance		Percent of Total Receivables			Receivable Balance		Percent of Total Receivables
Taiho Pharmaceutical	$	388,275		18	%	$	350,275		21	%
GlaxoSmithKline	$	1,294,768		61	%	$	806,774		47	%
Hitachi Chemical	$	265,415		12	%	$	*		*

             *less than 10%

Many of the supplies and reagents used in the Company’s testing process are procured from a limited number of suppliers. Any supply interruption or an increase in demand beyond the suppliers’ capabilities could have an adverse impact on the Company’s business. Management believes it can identify alternative sources, if necessary, but it is possible such sources may not be identified in sufficient time to avoid an adverse impact on its business. Refer also to Notes 6 and 7 for further discussion regarding these supply agreements.

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RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2. Summary of Significant Accounting Policies - (continued)

Recent Accounting Pronouncement

In April 2009, the Company adopted a new accounting standard included in ASC 820, Fair Value Measurements and Disclosures, (formerly the FASB issued Staff Position SFAS No. 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments ). ASC 820 requires disclosure about fair value of financial instruments in interim financial statements as well as in annual financial statements. The new standard requires those disclosures in all interim financial statements.  The provisions of the new standard was effective for interim reporting period ended June 30, 2009 and the application of the provisions of the standard did not affect our results of operations or financial condition.

In May 2009, the FASB issued new guidance for subsequent events.  The new guidance, which is part of ASC 855, Subsequent Events, (formerly SFAS No. 165, Subsequent Events) is intended to establish standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. See Note 16 for additional information.   The adoption of ASC 855 resulted in additional quarterly disclosures beginning in the second quarter of 2009 but did not affect the results of operations or financial condition..

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, now ASC 86-20 Sale of Financial Assets, which has not yet been adopted into Codification. SFAS No. 166 removes the concept of a qualifying special-purpose entity (QSPE) from SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and removes the exception from applying FIN 46(R). This statement also clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. This statement is effective for fiscal years beginning after November 15, 2009. As such, the Company plans to adopt SFAS No. 166 effective January 1, 2010. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), now ASC 810 Consolidation,Variable Interest Entities, which has not yet been adopted into Codification. SFAS 167, which amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, (FIN 46(R)), prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (VIE) and eliminates the quantitative model prescribed by FIN 46(R). The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE. SFAS No. 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE. A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE. This statement is effective for fiscal years beginning after November 15, 2009.  The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2009, the FASB issued SFAS No. 168,  The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This standard replaces SFAS No. 162,  The Hierarchy of Generally Accepted Accounting Principles , and establishes only two levels of U.S. generally accepted accounting principles, authoritative and nonauthoritative. The FASB Accounting Standards Codification will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company’s references to GAAP accounting standards but did not impact the Company’s results of operations, financial position or liquidity.

In June 2009, the FASB issued FASB Accounting Standards Update (“ASU”) 2009-01 “Topic 105 – Generally accepted Accounting Principles amendments based on the Statement of Financial Accounting Standards No. 168 - The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” ASU 2009-01 establishes the FASB Accounting Standards Codification as the single source of authoritative nongovernmental U.S. generally accepted accounting principles. The Company adopted ASU 2009-01 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In June 2009, the FASB issued ASU No. 2009-02, “Omnibus Update — Amendments to Various Topics for Technical Corrections” (ASU 2009-02). The FASB issued ASU 2009-02 in order to make technical corrections to the Codification. The Company adopted ASU 2009-02 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In August 2009, the FASB issued ASU No. 2009-03, “SEC Update — Amendments to Various Topics Containing SEC Staff Accounting Bulletins” (ASU 2009-03). The Codification includes certain SEC and SEC staff guidance in order to increase usefulness of the Codification for public companies. The SEC guidance is presented in separate sections and is limited to material on the basic financial statements. ASU 2009-03 includes technical corrections to various topics containing SEC Staff Accounting Bulletins to update cross-references to Codification text. The Company adopted ASU 2009-03 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In August 2009, the FASB issued ASU No. 2009-05, “Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value” (ASU 2009-05). This ASU amends Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of liabilities, and provides clarification regarding required valuations techniques for circumstances in which a quoted price in an active market for the identical liability is not available. The Company adopted ASU 2009-05 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In September 2009, the FASB issued ASU No. 2009-07, “Accounting for Various Topics — Technical Corrections to SEC Paragraphs” (ASU 2009-07). This ASU represents technical corrections to various topics containing SEC guidance based on external comments received. The Company adopted ASU 2009-07 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In August 2009, the FASB issued new guidance relating to the accounting for the fair value measurement of liabilities. The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques: the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements. The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement. The new guidance is effective for interim and annual periods beginning after August 27, 2009. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations or financial position.

11

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

3. Property and Equipment

Property and equipment consists of the following:

	December 31, 2008			September 30, 2009
Laboratory equipment	$	2,198,036		$	2,311,350
Furniture and equipment		451,908			528,831
Leasehold improvements		183,514			188,509
Software development		377,321			371,872
Total		3,210,779			3,400,562
Less: accumulated depreciation and amortization		(1,795,937	)		(2,099,722	)
Total property and equipment, net	$	1,414,842		$	1,300,840

Depreciation expense for the three months ended September 30, 2008 and 2009 was $185,234 and $86,970, respectively and for the nine months ended September 30, 2008 and 2009 was $524,431 and $307,585, respectively.

As a result of the reduction of workforce management implemented on February 9, 2009, management performed a recoverability test of the long-lived assets located at the United Kingdom testing facility in accordance with ASC 360, Property, Plant and Equipment, (formerly SFAS No. 144).  Based on the recoverability analysis performed, the Company recorded a non-cash charge for the impairment of long-lived assets of $0.9 million as of December 31, 2008 to write down the carrying value of the long-lived assets to their estimated fair value of $0. The fair value was estimated based upon offers received from third parties to purchase the long-lived assets.

12

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

	December 31,		September 30,
	2008		2009
Prepaid insurance	$	146,084	$	105,761
Prepaid maintenance contracts		98,513		191,011
Other		155,015		137,501
	$	399,612	$	434,273

5. Loss Per Share

The Company calculates net loss per share in accordance with ASC 260, Earnings Per Share, (formerly SFAS No. 128). Under the provisions of ASC 260, basic net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents then outstanding. Common stock equivalents consist of shares of common stock issuable uponthe exercise of stock options and warrants.

The following table sets forth the computation for basic and diluted loss per share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2009			2008			2009
Numerator:
Net loss	$	(2,195,717	)	$	(1,972,870	)	$	(6,092,436	)	$	(7,618,231	)
Numerator for basic loss  per share		(2,195,717	)		(1,972,870	)		(6,092,436	)	$	(7,618,231	)
Denominator:
Denominator for basic and diluted  loss per share — weighted-average common shares		10,239,276			14,599,182			10,239,276			12,594,995
Basic and diluted loss per share	$	(0.21	)	$	(0.14	)	$	(0.60	)	$	(0.60	)

Outstanding stock options and warrants to purchase 1,762,990 shares and 2,056,490 shares for the periods ended September 30, 2008 and 2009, respectively, were excluded from the calculation of diluted loss per share as their effect would have been antidilutive.

13

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

6. Commitments and Contingencies

Operating Leases

The Company leases office and laboratory space under a noncancelable operating lease that expires on January 31, 2010. The lease contains two two-year options to extend the term of the lease and contains annual scheduled rate increases tied to the Consumer Price Index for the Los Angeles/Long Beach California metropolitan area. In March 2007, the Company entered into a noncancelable operating lease, which expired in March 2009, for office and laboratory space in Scotland. As a result of the reduction in workforce implemented by the Company on February 9, 2009, the Company extended its lease in Scotland for one additional month. For additional information see Note 13 UK Operations. The Company also leases space at 103 South Carroll Street, Suite 2b, Fredrick, Maryland 21701, for administrative purposes. This lease expires on August 31, 2010.  Rent expense, included in cost of revenue, G&A, and R&D, was $163,880 and $84,289 for the three months ended September 30, 2008 and 2009, respectively and was $481,043 and $330,913 for the nine months ended September 30, 2008 and 2009, respectively.

Future minimum lease payments by year and in the aggregate, under the Company’s noncancelable operating leases, consist of the following at September 30, 2009:

Year Ending December 31,
remainder of 2009	$	108,942
2010		36,251
Total	$	145,193

Agreements with Suppliers

The Company purchases certain lab supplies and reagents primarily from three suppliers. Purchases from these companies accounted for approximately 85% and 82% of the Company’s reagent purchases for the period ended September 30, 2008 and 2009, respectively.

Guarantees

The Company enters into indemnification provisions under its agreements with other counterparties in its ordinary course of business, typically with business partners, clients and landlords. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company's activities. These indemnification provisions generally survive termination of the underlying agreement. The Company reviews its exposure under these agreements no less than annually, or more frequently when events indicate. The Company believes the estimated fair value of these agreements is minimal as historically, no payments have been made by the Company under these indemnification obligations. Accordingly, the Company has no liabilities recorded for these agreements as of September 30, 2009.

7. License and Collaborative Agreements

License Agreement with the University of Southern California (“USC”)

In April 2000, as amended in September 2002 and April 2005, the Company entered into a license agreement with USC. Under this agreement, USC granted the Company a worldwide, exclusive license with the right to sublicense, the patents for RGI-1 and related technology, for use in human and veterinary diagnostic laboratory services, the sale of clinical diagnostic products, and the sale of research products to the research community. USC retains the right under the agreement to use the technology for research and educational purposes.

In consideration for this license, the Company agreed to pay to USC royalties based on a percentage of the revenues generated by the use of RGI-1 and related technology.  Royalty expense relating to this agreement amounted to $17,525 and $58,361 for the three months ended September 30, 2008 and 2009, respectively, and $58,105 and $135,369 for the nine months ended September 30, 2008, and 2009, respectively.  Such expense is included in cost of revenue in the accompanying statements of operations.

14

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7. License and Collaborative Agreements  - (continued)

License Agreement with Roche Molecular Systems (“Roche”)

In July 2001, the Company entered into a diagnostic services agreement with Roche to provide the Company with access to Roche’s patented PCR technology. In November 2004, this agreement was replaced by a non-exclusive license to use Roche’s PCR, homogenous PCR, and reverse transcription PCR processes. In consideration for these rights, the Company is obligated to pay royalties to Roche, based on a percentage of net sales of products or services that make use of the PCR technology.  Royalty expense relating to this agreement amounted to $77,637 and $(84,058) for the quarter ended September 30, 2008 and 2009, respectively, and $236,473 and $116,402 for the nine months ended September 30, 2008, and 2009, respectively.  Such expense is included in cost of revenue in the accompanying statements of operations.

In November 2004, the Company entered into an agreement with Roche, pursuant to which the Company is collaborating with Roche to produce commercially viable assays used in the validation of genetic markers for pharmaceutical companies. Specifically, the Company has licensed the rights to Roche to use the pre-diagnostic assays the Company develops in the course of using its RNA-extraction technologies to provide testing services to pharmaceutical companies and to produce diagnostic kits that then can be sold commercially to those pharmaceutical companies. Roche is required to pay the Company royalties of a certain percentage of net sales of such diagnostic kits sold to pharmaceutical companies. Through September 30, 2009, Roche has not been required to pay any royalties to the Company pursuant to this agreement.

Services Agreement with Taiho Pharmaceutical Co., Ltd. (“Taiho”)

In July of 2001, the Company entered into an agreement with Taiho pursuant to which it will provide Taiho with molecular-based tumor analyses for use in guiding chemotherapy treatment for cancer patients using the RGI-1 and for use in its business developing and marketing pharmaceutical and diagnostic products for use against cancer. Pursuant to the agreement, the Company appointed Taiho as the exclusive purchaser in Japan of tests and testing services based upon the RGI-1 using gene expression for (i) any one or the combination of specified molecular markers, (ii) the therapeutic use of specified compounds, or (iii) the diagnosis or therapeutic treatment of specified precancerous and cancerous diseases. The Company also granted Taiho the right to be a non-exclusive purchaser in Japan of tests and testing services based upon the RGI-1 using gene expression, other than those for which Taiho has exclusivity, for, (i) any one or combination of molecular markers, (ii) the therapeutic use of any compound or biological product against cancer, or (iii) the diagnosis or therapeutic treatment of precancerous and cancerous diseases.

In consideration for the testing services provided, Taiho paid an upfront payment at the commencement of the agreement and is obligated to pay regular testing fees, covering the specific services performed on a monthly basis.

Taiho is obligated to purchase a minimum amount of testing services from the Company each calendar quarter. Revenue recognized under this agreement was $356,300 and $441,100 for the quarter ended September 30, 2008 and 2009, respectively, and $1,183,575 and $1,244,800 for the nine months ended September 30, 2008, and 2009, respectively.

15

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7. License and Collaborative Agreements  - (continued)

Services Agreement with SmithKline Beecham Corporation (d.b.a. GlaxoSmithKline or “GSK”)

In January 2006, the Company entered into an agreement with GSK pursuant to which the Company provides services in connection with profiling the expression of various genes from a range of human cancers. Under the agreement, the Company will provide GSK with testing services as described in individual protocols and GSK will pay the Company for such services based on the pricing schedule established for each particular protocol. GSK is obligated to make minimum annual payments to the Company under the agreement and also was obligated to make a non-refundable upfront payment to the Company, to be credited against work undertaken pursuant to the agreement. In January 2006, the Company received an upfront payment of $2,000,000. The contract also provides for minimum annual assay testing requirements over a three year period ending January 2009. The minimum amount of revenue to be recognized during the term, which expired in January 2009, was $6,500,000. The timing of the recognition of these amounts is dependent upon when GSK submits the specimens for testing. The Company recognized $393,233 and $77,225 of revenue under this agreement during the quarter ended September 30, 2008 and 2009, respectively, and $1,024,531 and $92,525 for the nine months ended September 30, 2008, and 2009, respectively.

In December 2008, we amended and restated our master service agreement with GSK. Pursuant to the amendment, the term of the GSK Agreement has been extended for a two-year period, with the option for the parties to extend the GSK Agreement for additional one-year periods, upon their mutual written agreement. In addition, we will become a preferred provider to GSK and its affiliates of genetic testing services on a fee-for-service basis and, in anticipation of the services to be provided, GSK agreed to make a non-refundable upfront payment by December 31, 2008 of approximately $1,300,000 which was received on January 5, 2009 and included as part of deferred revenue as of December 31, 2008 and September 30, 2009. The amount of deferred revenue for this agreement at September 30, 2009 is $1,499,433.

Master Laboratory Test Services Agreement with GlaxoSmithKline Biologicals (“GSK Bio”)

In December 2006, the Company entered into an agreement with GSK Bio pursuant to which it will provide testing services, principally in relation to profiling the expression of various genes from a range of human cancers. The Company will conduct the testing services on tissue specimens provided by GSK Bio. The agreement required that GSK Bio make an upfront payment of $2,620,000, which was received by the Company in December 2006. The agreement further specifies that GSK Bio will pay annual minimum payments in 2007, 2008 and 2009 and that the upfront payment made in December 2006 will be credited against the annual minimum payments in 2007 and 2008. The agreement also provides that any differences between the annual minimum payments made in 2007, 2008 or 2009 and the amounts due to the Company for testing services performed on specimens submitted by GSK Bio during the three years ending December 31, 2009 be credited towards services performed during the year ending December 31, 2010, the final year of the agreement. The minimum amount of revenue to be recognized during the term of this contract, which will expire in December 2010, is approximately $7,300,000. If the Company ceases to provide services under the Amended and Restated Agreement for any reason, the Company shall remit to GSK Bio payment of the then remaining balance of the existing credit within sixty days of the date on which the Company ceased to provide services to GSK Bio.

In December 2007, the Company amended its agreement with GSK Bio whereby GSK Bio would make the remaining minimum payments under the agreement in one lump sum. This payment of approximately $2,722,000 was received in January 2008. The timing of the recognition of these amounts is dependent upon when GSK submits the specimens for testing. The Company recognized $1,070,159 and $781,707of revenue under this agreement during the quarters ended September 30, 2008 and 2009, respectively, and $3,108,309 and $2,357,234or the nine months ended September 30, 2008, and 2009, respectively.

On September 7, 2009, the Company amended and restated its master service agreement with GSK Bio, the vaccine division of GlaxoSmithKline (the “Amended and Restated Agreement”).  Pursuant to the Amended and Restated Agreement, the parties agreed that GSK Bio has accrued an aggregate credit under the terms of the original agreement, which amount shall be allocated towards services rendered to GSK Bio during the remaining term of the agreement as described below.

For each calendar quarter of 2009 and the first two quarters of 2010, €200,000 of the existing credit shall apply to all services rendered to GSK Bio during such calendar quarter.  Pursuant to the Amended and Restated Agreement, GSK Bio may now extend the term of the agreement for an additional one-year period through December 31, 2011.  In the event GSK Bio extends the term through 2011, the then remaining balance of the existing credit shall be divided into six equal quarterly amounts and apply to all services rendered to GSK Bio in each of the last two quarters of 2010 and the four calendar quarters of 2011.  If GSK Bio does not extend the term through 2011, the then remaining balance of the existing credit will instead be divided into two equal quarterly amounts and apply to all services rendered to GSK Bio in each of the last two quarters of 2010.  In all cases, GSK Bio shall remit payment to the Company for all services rendered to GSK Bio in any such calendar quarter that is in excess of the applicable credit amount.  In the event the amount of services rendered to GSK Bio in a calendar quarter does not exceed the applicable credit amount, the existing credit for the following calendar quarter shall be increased by such unused amount.  

The Amended and Restated Agreement further provides that the Company shall provide additional services on a fee-for-service basis, upon GSK Bio’s written request, relating to the bridging of assays/diagnostic tests to third parties that develop, manufacture and sell the commercial diagnostic tests to be used with certain of GSK Bio’s products. The amount of deferred revenue for this agreement at September 30, 2009 is $2,883,456.

16

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

7. License and Collaborative Agreements  - (continued)

Collaboration Agreement with Shanghai BioChip Company, Ltd. (“SBC”)

On March 5, 2007, the Company entered into a collaboration agreement with SBC pursuant to which SBC will provide exclusive pharmacogenomic testing services to the Company’s clients in China.

Pursuant to the agreement, the Company has granted SBC an exclusive license in China to provide services in China using the Company’s proprietary RNA extraction technologies. Subject to consent from USC, the Company will grant SBC an exclusive sublicense to patents licensed from USC for distribution of testing services in China. In turn, SBC will perform RNA extraction from FFPE tissue specimens exclusively for the Company during the term of the agreement.

This agreement has an initial term of five years, with an automatic renewal for an additional three-year term unless either party gives 90 days notice in advance of the renewal date of its intent not to renew. Pursuant to the agreement, SBC will receive a percentage of the gross margin, as defined in the agreement, collected from the Company’s clients in China as compensation for its testing services performed. For the three and nine months ended September 30, 2008 and 2009, respectively no testing services were performed.

Collaboration Agreement with Hitachi Chemical Co., Ltd.

On July 26, 2007, the Company entered into a collaboration agreement with Hitachi Chemical Co., Ltd. (“Hitachi”), a leading diagnostics manufacturer in Japan (the “Hitachi Agreement”). Under the terms of this agreement, Hitachi will begin using the Company's proprietary and patented techniques to extract genetic information from formalin-fixed paraffin-embedded (“FFPE”) tissue samples collected in Southeast Asia, Australia and New Zealand. As part of this collaboration agreement, the Company will provide Hitachi with the technical information and assistance necessary to perform the testing services. Hitachi also plans to introduce the Company to potential new testing services customers in the region to expand the testing of FFPE clinical samples in Asia. The Southeast Asian countries covered under this agreement include Japan, North Korea, South Korea, Taiwan, Mongolia, Pakistan, Bangladesh, Sri Lanka, Nepal, Singapore, Malaysia, Indonesia, Brunei, Thailand, Myanmar, Laos, Cambodia, Vietnam and the Philippines (the “Territory”).

This Agreement has an initial term expiring on March 31, 2010, with an automatic renewal for one year at the end of the original period under the same terms and conditions. Pursuant to the agreement, Hitachi will receive a percentage of the revenue, as provided in the agreement, collected from the Company's clients in the Territory, for its testing services performed which totaled $57,830 for the third quarter and nine months ended September 30, 2008, and $334,824 and $1,025,982 of expense for the third quarter and nine months ended September 30, 2009, respectively.  

Hitachi is responsible for expenses related to the cost of laboratory equipment and modification to the laboratory facilities, as well as the cost of reagents. The Company has provided to Hitachi required laboratory equipment which Hitachi has agreed to pay the Company and is included as part of accounts receivable totaling $248,799 at December 31, 2008.  This amount was paid during April 2009.

17

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Stock Option Plan

In March 2000, the Company adopted a Stock Option Plan (the “2000 Plan”) as approved by its board of directors. Under the 2000 Plan, the Company may grant options to acquire up to 1,600,000 shares of common stock. In connection with the adoption of the 2006 Employee, Director and Consultant Stock Plan, as further discussed below, the Company will grant no additional options under its 2000 Plan under which options to purchase 190,000 shares remained outstanding as of September 30, 2009. Although no more options may be granted under the 2000 Plan, the terms of the 2000 Plan continue to apply to all outstanding options. The Company also granted options to purchase 16,000 shares of common stock to two consultants which were granted under separate agreements outside of the 2000 Plan.

On October 26, 2006, the Board of Directors of the Company approved, and on May 1, 2007, reapproved, the adoption of the 2006 Employee, Director and Consultant Stock Plan (the “2006 Stock Plan”). The stockholders approved the 2006 Stock Plan on September 1, 2007. Under this plan, the Company may grant up to a maximum of 2,160,000 options to purchase the Company’s common stock. As of September 30, 2009, there were 409,510 options available to grant under the 2006 Stock Plan.

Employee options vest according to the terms of the specific grant and expire 10 years from the date of grant. Non-employee option grants to date vest typically over a 2 to 3 year period. The Company had 1,956,490 options outstanding at a weighted average exercise price of $5.12 at September 30, 2009. There were 892,069 nonvested stock options with a weighted average grant date fair value of $3.48 outstanding at September 30, 2009.

The Company estimated share-based compensation expense for the nine months ended September 30, 2009 and 2008 using the Black-Scholes model with the following weighted average assumptions:

	Nine Months Ended  September 30, 2008			Nine Months Ended  September 30, 2009
Risk free interest rate		3.54 – 5.03	%		3.01	%
Expected dividend yield		—			—
Expected volatility		65.28 – 77.4	%		67.0	%
Expected term (in years)		7			6
Forfeiture rate		5	%		5	%

The following table summarizes the stock option activity for the nine months ended September 30, 2009:

	Number of Shares			Weighted Average Exercise Price		Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding, December 31, 2008		1,586,490		$	6.24		7.98		—
Granted (Unaudited)		477,000		$	1.35
Exercised (Unaudited)		—		$	—
Forfeited (Unaudited)		(107,000	)	$	5.03
Outstanding, September 30, 2009 (Unaudited)		1,956,490		$	5.12		7.78	$	142,500
Exercisable, September 30, 2009 (Unaudited)		1,064,421		$	6. 49		6.84	$	30,450

  The weighted-average grant-date fair value of options granted during the three months ended September 30, 2008 was $2.11.  There were no options granted or exercised during the three months ended September 30, 2009.  The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2008 and 2009 was $2.15 and $0.84, respectively.  There were no options exercised during the three and nine months ended September 30, 2008 and 2009.

As of September 30, 2009, there was $1.9 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan.  That cost is expected to be recognized over a weighted-average period of 2.34 years.

18

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

8. Stock Option Plan  - (continued)

Information about stock-based compensation included in the results of operations for the three and nine months ended September 30, 2008 and 2009 are as follows:

	Three Months Ended September 30				Nine Months Ended September,30
	2008		2009		2008		2009
Cost of revenue	$	78,216	$	53,646	$	223,511	$	181,335
General and administrative		439,229		152,114		876,919		485,414
Research and development		21,405		15,754		85,603		58,317
Totals	$	538,850	$	221,514	$	1,186,033	$	725,066

9 .. Common Stock Warrants

The Company issues warrants to purchase common shares of the Company either as compensation for services, or as additional incentive for investors who may purchase common stock. The value of warrants issued for compensation is accounted for as a non-cash expense to the Company at the fair value of the warrants issued.

In June 2007, in conjunction with the initial public offering, the Company issued 100,000 warrants to purchase 100,000 shares of its common stock at an exercise price of $7.70, for proceeds of $100, to the underwriters as part of the initial public offering.

There were no warrants granted during the three months and nine ended September 30, 2008 and 2009.

The following table summarizes all common stock warrant activity during the three months ended September 30, 2009:

	Number of Shares		Weighted Average  Price		Remaining Contractual Life (years)
Outstanding, December 31, 2008		100,000	$	7.70		3.50
Outstanding, September 30, 2009		100,000	$	7.70		2.75
Exercisable, September 30, 2009		100,000	$	7.70		2.75

19

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

  10. Income Taxes

Deferred income taxes result from temporary differences between income tax and financial reporting computed at the effective income tax rate. The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. Management periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred tax assets are realizable, the valuation allowance will be reduced.

We file U.S. federal, U.S. state, and foreign tax returns. Our major tax jurisdictions are U.S. federal and the State of California and are subject to tax examinations for the years 2001 through 2008.

11. Segment Information

The Company operates in a single reporting segment, with operating facilities in the United States and the United Kingdom.  Our United Kingdom facility ceased operations on April 30, 2009.

The following enterprise wide disclosure was prepared on a basis consistent with the preparation of the financial statements. The following tables contain certain financial information by geographic area:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2009		2008		2009
Revenue:
United States	$	456,395	$	1,036,716	$	1,225,899	$	2,086,954
Europe		1,070,160		781,707		3,108,310		2,357,234
Japan		430,475		441,100		1,349,200		1,250,800
Totals	$	1,957,030	$	2,259,523	$	5,683,409	$	5,694,988

	December 31, 2008		September 30, 2009
Long-lived assets: Net
United States	$	1,414,842	$	1,300,840
	$	1,414,842	$	1,300,840

20

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

12. Net ResponseDX Revenue

Net ResponseDX revenue for the three and nine months ended September 30, 2009 was comprised of the following:

	Three			Nine
	Months			Months
	Ended			Ended
	September 30,2009			September 30,2009
Gross patient service revenue	$	2,865,342		$	5,134,653
Contractual allowances		(1,950,693	)		(3,510,916	)
Net patient service revenue	$	914,649		$	1,623,737

ResponseDX revenues recorded during the three and nine months ended September 30, 2008 were $58,597.  The Company began recording revenues for ResponseDX during the third quarter ended September 30, 2008.

Cost-Containment Measures

Both government and private pay sources have instituted cost-containment measures designed to limit payments made to providers of health care services, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect the Company.

Regulatory Matters

Laws and regulations governing Medicare programs are complex and subject to interpretation. Compliance with such laws and regulations can be subject to future governmental review and interpretation, as well as significant regulatory action including fines, penalties and exclusions from certain governmental programs. The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing.

A portion of the Company’s revenues are derived from Medicare for which reimbursement rates are subject to regulatory changes and government funding restrictions. Although the Company is not aware of any significant future rate changes, significant changes to the reimbursement rates could have a material effect on the Company’s operations.

21

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

13.  U.K. Operations

On February 9, 2009, management implemented a reduction of workforce (“Reduction of Workforce”) pursuant to which the Company has closed its United Kingdom testing facility to consolidate services at its CLIA-certified laboratory facilities in Los Angeles.  In connection with the Reduction of Workforce, the Company incurred expenses associated with redundancy costs of approximately $268,000. These costs are included in the Company’s statement of operations for the nine months ended September 30, 2009. Additionally, management performed a recoverability test of the long-lived assets located at the United Kingdom testing facility in accordance with ASC 360, Property, Plant and Equipment  . Based on the recoverability analysis performed, the Company recorded a non-cash charge for the impairment of long-lived assets of $0.9 million as of December 31, 2008 to write down the carrying value of the long-lived assets to their estimated fair value of $0. The fair value was estimated based upon offers received from third parties to purchase the long-lived assets.  Our lease for our United Kingdom testing facility expired on March 31, 2009. We extended the lease, pursuant to its terms, for an additional month, in order to facilitate the winding down of our operations in the United Kingdom. The Reduction of Workforce was substantially completed on March 31, 2009. We undertook the Reduction of Workforce as part of a strategic plan to increase operational efficiency in conjunction with the consolidation of our services at our Los Angeles facilities and it will not affect our genetic testing services or current partnership agreements. 

14. Private Placement

On February 27, 2009, the Company entered into a Purchase Agreement with certain affiliates of Special Situations Funds for the private placement of 2,000,000 newly-issued shares of the Company's common stock at a per share price of $1.00. The closing of the sale of the Shares occurred on March 2, 2009.  The aggregate offering price of the shares was $2 million and the Company received the funds on March 2, 2009.

In connection with the Special Situations Funds Private Placement, we also entered into a Registration Rights Agreement, dated February 27, 2009, with the Purchasers (the "Registration Rights Agreement") pursuant to which the Company filed a registration statement with the Securities and Exchange Commission ("SEC") to register the 2,000,000 shares for resale, which registration statement became effective on June 30, 2009.

On July 22, 2009, the Company entered into a Purchase Agreement with certain funds managed by Lansdowne Partners Limited Partnership for the private placement of 3,057,907 newly-issued shares of the Company's common stock at a per share price of $1.30. The closing of the sale of the shares occurred on July 22, 2009.  The aggregate offering price of the shares was approximately $4 million and the Company received the funds on July 23, 2009.  In connection with the acquisition of the shares, the Purchasers were granted certain preemptive rights permitting them to maintain their percentage ownership interests in connection with future issuances of the Company’s capital stock, subject to various exceptions and limitations. 

In connection with the Lansdowne Private Placement, we also entered into a Registration Rights Agreement, dated July 22, 2009, with the Purchasers (the "Registration Rights Agreement") pursuant to which the Company filed a registration statement with the SEC to register the 3,057,907 shares for resale, which registration statement became effective on November 3, 2009.  The Company also granted certain "piggyback" registration rights to Lansdowne which are triggered if the Company proposes to file a registration statement for its own account or the account of one or more shareholders until the earlier of the sale of all of the shares or the shares become eligible for sale under Rule 144(b)(1) without restriction. 

22

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

  15. Fair Value Measurements

On January 1, 2009, the Company adopted ASC 820 (formerly SFAS No. 157) which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. In February 2008, the FASB deferred the effective date of ASC 820 by one year for certain non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted the provisions of ASC 820, except as it applies to those nonfinancial assets and nonfinancial liabilities for which the effective date has been delayed by one year. ASC 820 establishes a three-level valuation hierarchy of valuation techniques that is based on observable and unobservable inputs. Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. The first two inputs are considered observable and the last unobservable, that may be used to measure fair value and include the following:

Level 1 - - Quoted prices in active markets for identical assets or liabilities.

Level 2 - - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of September 30, 2009, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including its cash and cash equivalents. The fair value of these assets and liabilities was determined using the following inputs in accordance with ASC 820 at September 30, 2009:

	Fair Value Measurement as of September 30, 2009
	Total	Level 1		Level 2		Level 3
Description	$	$		$		$
Money market accounts (1)	7,240,403		7,240,403		-		-

(1)           Included in cash and cash equivalents on the accompanying consolidated balance sheet.

16. Related Party Transactions

While employed at USC, Kathleen Danenberg, president, chief executive officer and director, developed and patented (United States Patent 6,248,535; Danenberg , et al., Method For Isolation of RNA From Formalin-Fixed Paraffin-Embedded Tissue Specimens) an extraction method that allowed reliable and consistent isolation of RNA from FFPE suitable for RT-PCR. USC retains ownership of this patent but has exclusively licensed this technology to the Company. In consideration for this license, the Company is obligated to pay royalties to USC, as a percentage of net sales of products or services using the technology, and to meet a certain minimum in royalty payments. Pursuant to USC policy, the inventors of technology owned by the University and then licensed for commercialization are paid a portion of royalties received by the University from the licensed technology. USC therefore pays a portion of royalties received from the Company to Ms. Danenberg in recognition of her invention. Amounts paid to Ms. Danenberg amounted to $29,993 and $5,465 for the nine months ended September 30, 2008 and 2009, respectively.

17. Subsequent Event

The Company has performed an evaluation of subsequent events through November 16, 2009, the date the Company filed these financial statements.

23

RESPONSE GENETICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

18.   Correction of errors

In the course of preparing the financial statements for the third quarter ended September 30, 2009, management identified certain prior period errors.  The errors related to an overstatement of net revenues in the amount $278,123.  In accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, management evaluated the materiality of the errors from qualitative and quantitative perspectives and concluded that the errors were not material to any prior periods.   The correction of the errors in the current period is material to the third quarter financial statements but is not anticipated to be material to the full fiscal year or the trend of financial results.  Accordingly, management has corrected the errors in the third quarter of 2009.  The impact of the adjustments to correct the errors to the specific line items of the financial statements for the three months and nine months ended September 30, 2009 was as follows:

	Increase
	(Decrease)
Statement of operations:
Net revenue	$	(278,123	)
Operating loss		278,123
Net loss		278,123
Net loss per share – basic and diluted		0.02
Balance Sheet:
Deferred revenue	$	278,123
Total liabilities		278,123
Accumulated deficit		(278,123	)

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Item 2: Managements Discussions and Analysis

Special Note Regarding Forward Looking Statements

Certain statements in this report constitute “forward-looking statements.” These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of Response Genetics, Inc. to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Specifically, the actions of competitors and customers and our ability to execute our business plan, and our ability to increase revenues is dependent upon our ability to continue to expand our current business and to expand into new markets, general economic conditions, and other factors. You can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues,” or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We undertake no obligations to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

The following discussion of our financial condition and results of operation should be read in conjunction with our unaudited financial statements and related notes to the financial statements included elsewhere in this Quarterly Report on Form 10-Q as of September 30, 2009 and our audited financial statements for the year ended December 31, 2008 included in our Annual Report on Form 10-K previously filed with the SEC. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward looking statements.

Overview

 Response Genetics, Inc. (the “Company”) was incorporated in the state of Delaware on September 23, 1999 as Bio Type, Inc. for the purpose of providing unique molecular profiling services of tumor tissue that has been formalin-fixed and embedded in paraffin wax. In August 2000, we changed our name to Response Genetics, Inc.   In November 2006, we established Response Genetics Ltd., a wholly owned subsidiary in Edinburgh, Scotland. On February 9, 2009 we implemented a reduction of workforce pursuant to which we closed our subsidiary in Edinburgh. See "liquidity and capital resources" for additional information.

Clinical studies have shown that not all cancer chemotherapy works effectively in every patient, and that a number of patients receive therapy that has no benefit to them and may potentially even be harmful. Our goal is to provide cancer patients and their physicians with a means to make informed, individualized treatment decisions based on genetic analysis of tumor tissues. Our pharmacogenomic analysis of clinical trial specimens for the pharmaceutical industry may provide data that will lead to a better understanding of the molecular basis for response to specific drugs and, therefore lead to individualized treatment. We are focusing our efforts in the following areas:

· Commercialization of our ResponseDX ™ tests;

· Developing additional diagnostic tests for assessing the risk of cancer recurrence, prediction of chemotherapy response and tumor classification in cancer patients; and

· Expanding our pharmacogenomic testing services business into and creating a standardized and integrated testing platform in the major markets of the healthcare industry, including outside of the United States.

Our patented technologies enable us to reliably and consistently extract the nucleic acids RNA and DNA from tumor specimens that are stored as formalin-fixed and paraffin-embedded, or FFPE, specimens and thereby to analyze genetic information contained in these tissues. This is significant because the majority of patients diagnosed with cancer have a tumor biopsy sample stored in paraffin, while only a small percentage of patients’ tumor specimens are frozen. Our technologies also enable us to use the FFPE patient biopsies for the development of diagnostic tests. To our knowledge, we were the first company to generate clinically relevant information regarding the risks of recurrence of cancer or chemotherapy response using approximately 30,000 genes available from microarray profiling of FFPE specimens.

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ResponseDX™

The outcome of cancer chemotherapy is highly variable due to genetic differences among patients. Some patients respond well with tumor shrinkage and increase in life span. Other patients do not obtain benefit from the same therapy but may still experience toxic side effects as well as delay in effective treatment and psychological trauma.

At present most chemotherapy regimens are administered without any pre-selection of patients on the basis of their particular genetics. However recent development of very sensitive molecular technologies has enabled researchers to identify and measure genetic and biochemical factors in patients’ tissues that may predict the probability of success or failure of many currently used anti-cancer agents. In order to increase the chances of a better chemotherapy outcome for cancer patients, we are developing genetic tests that will measure predictive factors for tumor response in tumor tissue samples. We have begun offering tests for non-small cell lung cancer (NSCLC) (ResponseDX: Lung Ô ) and colorectal cancer (CRC) (ResponseDX: Colon Ô ) and gastric and gastroesophageal (GE) cancer  (ResponseDX: Gastric Ô ) patients’ tumor tissue through our laboratory located in Los Angeles, California, which is certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA), and we anticipate offering additional tests for ovarian, and pancreatic cancer in the future. These tests are proprietary based tests which serve to help oncologists make optional therapeutic decisions for cancer patients. The results from our tests may help oncologists choose among chemotherapy regimens to treat their cancer patients. On September 29, 2008, we announced an exclusive agreement with NeoGenomics Laboratories (OTCBB: NGNM) whereby NeoGenomics will offer our proprietary ResponseDx:Colon and ResponseDx: Lung tests nationwide. Under the terms of the agreement NeoGenomics will be the national exclusive clinical reference laboratory authorized to offer our proprietary tests through NeoGenomics national sales force and our sales team. Currently, our recently formed sales team has been expanded to 11 sales people located in the West Coast, Midwest, and East Coast areas of the United States.

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Diagnostic Tests for Other Cancers

In addition to ResponseDX: Lung, ResponseDX: Colon,and ResponseDX: Gastric, we are developing and intend to commercialize tests for other types of cancer that identify genetic profiles of tumors that are more aggressive and recur rapidly after surgery. We also are identifying genetic profiles of tumors that are more or less responsive to a particular chemotherapy. Following the development of tests to predict the risk of recurrence after surgery, we intend to develop tests to determine the most active chemotherapy regimen for the individual patient at risk. Once developed and after obtaining any necessary regulatory approvals, we intend to leverage our relationships in the healthcare industry to market, sell or license these tests as a means for physicians to determine the courses of cancer treatment.

Expansion of our pharmacogenomic testing services business

We have started the expansion of our pharmacogenomic testing services business into major markets of the healthcare industry outside of the United States. We have a service laboratory in Japan, and are working to potentially establish a service laboratory in China, through collaboration with some of our current clients in the pharmaceutical industry. The pharmaceutical industry is in need of standardized integrated worldwide analysis of clinical trial specimens. It is important to the pharmaceutical industry and the regulatory agencies that the same analytical methods are used for each clinical trial sample around the world so that the data can be easily compared and used for global drug development. Also, export of clinical trial specimens to the United States is restricted from some areas of the world, such as China. Our goal is to offer an analysis of patient specimens and generate consistent data based on integrated common platforms and technology into the major markets of the healthcare industry including outside of the United States.

There are no assurances that we will be able to continue making our current ResponseDX tests available, or make additional ResponseDX tests available; will be able to develop and commercialize tests of other types of cancer; or will be able to expand our pharmacogenomic testing service business.

We anticipate that, over the next 12 months, a substantial portion of our capital resources and efforts will be focused on research and development to expand our series of diagnostic tests for cancer patients, to establish a laboratory overseas in collaboration with certain of our current pharmaceutical clients, sales and marketing activities related to our ResponseDX diagnostic tests, and for other general corporate purposes.

Research and development expenses represented 13% and 14 % of our total operating expenses for the nine months ended September 30, 2009 and September 30, 2008, respectively. Major components in research and development expenses for the nine months ended September 30, 2009 included supplies and reagents for our research activities, personnel costs, occupancy costs, equipment warranties and service, patent fees,  and sample procurement costs.

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Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from those estimates under different assumptions or conditions. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our financial statements.

Revenue Recognition

Revenues are derived from services provided to pharmaceutical companies and from revenues generated from our ResponseDX tests. Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 104, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured.

Revenues from pharmaceutical company contracts are recorded on an accrual basis as the contractual obligations are completed and as a set of assays is processed through our laboratory under a specified contractual protocol. Certain contracts have minimum assay requirements that, if not met, result in payments that are due upon the completion of the designated period. In these cases, revenues are recognized when the end of the specified contract period is reached.

On occasion, we may enter into a contract that requires the client to provide an advance payment for specimens that will be processed at a later date. In these cases, we record this advance as deferred revenue and recognize the revenue as the specimens are processed or at the end of the contract period, as appropriate.

We recognize a portion of product revenue from our ResponseDX tests invoiced to Medicare on an accrual basis and to third-party payors, including private payors on a cash basis. We have received our Medicare provider number which allows us to invoice and collect from Medicare. Our invoicing to Medicare is primarily based on amounts allowed by Medicare for the service provided as defined by Common Procedural Terminology (CPT) codes. We recognize revenue from third party and private payors currently on a cash basis until a collection history can be determined. Until we are reasonably assured about a pattern of collections we will continue to record revenues from third party payors of ResponseDX on a cash basis. We continue to process samples for ResponseDX testing services. Currently we are processing more samples for ResponseDX testing services than revenue is being recorded. This is primarily due to timing and recognition of revenue from third party payors until a collection history can be established.

We are subject to potentially significant variations in the timing of revenue recognized from period to period due to a variety of factors including: (1) the timing of when specimens are submitted to us for testing; and (2) the specific terms, such as minimum assay requirements in any given period, advance payment requirements, and terms of agreements, as set forth in each contract we have with significant clients.

License Fees

We have licensed technology for the extraction of RNA and DNA from FFPE tumor specimens from USC in exchange for royalty fees on revenue generated by use of this technology. These royalties are calculated as a fixed percentage of revenue that we generate from use of the technology licensed from USC. Total license fees due under the royalty agreement to USC were $135,369 and $57,781 for the nine months ended September 30, 2009 and September 30, 2008, respectively. We also maintain a non-exclusive license to use Roche’s polymerase chain reaction (PCR), homogenous PCR, and reverse transcription PCR processes. We pay Roche a fixed percentage royalty fee for revenue that we generate through use of certain applications of this technology. Royalties accrued under this agreement totaled $116,402 and $236,473 for the nine months ended September 30, 2009 and September 30, 2008, respectively.

We are subject to potentially significant variations in royalties recorded in any period. While the amount paid is based on a fixed percentage from revenues of specific tests pursuant to terms set forth in the agreements with USC and Roche, the amount due is calculated based on the revenue we recognize using the respective licensed technology. As discussed above, this revenue can vary from period to period as it is dependent on the timing of the specimens submitted by our clients for testing.

28

Accounts Receivable

We invoice our pharmaceutical clients as specimens are processed and any other contractual obligations are met. Our contracts with pharmaceutical clients typically require payment within 45 days of the date of invoice. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our clients to make required payments. We specifically analyze accounts receivable and historical bad debts, client credit, current economic trends and changes in client payment trends when evaluating the adequacy of the allowance for doubtful accounts. Account balances are charged-off against the allowance when it is probable the receivable will not be recovered. To date, our clients have primarily been large pharmaceutical companies. As a result, bad debts to date have been minimal.

We bill Medicare and third-party payors for ResponseDX upon completion of the required testing services. As such, we take assignment of benefits and the risk of collection with Medicare and third-party payors. As we continue to generate revenues from ResponseDX, we will monitor the collection history from third party payors. Until we are reasonably assured about a pattern of collections, we will continue to record revenues from third party payors of ResponseDX on a cash basis.

While we have not had  credit losses in the past, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and financial health of specific customers. We consider all available information in our assessments of the adequacy of the reserves for uncollectible accounts. 

Income Taxes

We estimate our tax liability through calculations we perform for the determination of our current tax liability, together with assessing temporary differences resulting from the different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in our balance sheets. Our management then assesses the likelihood that deferred tax assets will be recovered in future periods through future operating results. To the extent that we cannot conclude that it is more likely than not that the benefit of such assets will be realized, we establish a valuation allowance to adjust the net carrying value of such assets. The carrying value of our net deferred tax assets assumes that we will be able to generate sufficient future taxable income, based on management’s estimates and assumptions. These estimates and assumptions take into consideration future taxable income and ongoing feasible tax strategies in determining recoverability of such assets. Our valuation allowance is subject to significant change based on management’s estimates of future profitability and the ultimate realization of the deferred tax assets.

Results of Operations

     Correction of Errors

In the course of preparing the financial statements for the third quarter ended September 30, 2009, management identified certain prior period errors.  The errors related to an overstatement of net revenues in the amount $278,123.  In accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, management evaluated the materiality of the errors from qualitative and quantitative perspectives and concluded that the errors were not material to any prior periods.   The correction of the errors in the current period is material to the third quarter financial statements but is not anticipated to be material to the full fiscal year or the trend of financial results.  Accordingly, management has corrected the errors in the third quarter of 2009. 

Quarters Ended September 30, 2009 and 2008

Revenues.   Revenues were $2,259,523 for the quarter ended September 30, 2009, as compared to $1,957,030 for the comparable period in 2008, an increase of $302,493 or 15%. This increase was generated primarily through growth in the number of Response DX assays processed by our laboratory. Revenues from ResponseDX were $914,650 for the quarter ended September 30, 2009 compared to $58,597 in the third quarter of 2008.  This increase in Response DX related revenues was partially offset by a decrease in revenue related to our pharmaceutical clients of $553,559 in the third quarter of 2009 as compared to the third quarter of 2008. The decrease in our pharmaceutical client revenue was generated primarily due to a delay in receipt of samples to be tested from our pharmaceutical clients which we expect to receive later in 2009 and 2010. For the quarter ended September 30, 2009, two of our clients, GSK and Taiho, accounted for approximately 58% of our revenue, as compared to approximately 95% of our revenue for the quarter ended September 30, 2008.

Cost of Revenues.   Cost of revenues for the quarter ended September 30, 2009 were $1,175,615 as compared to $1,025,383 for the quarter ended September 30, 2008, an increase of $150,232 or 14.7%. This increase is primarily related to an increase of $276,994 in processing costs associated with our sample processing relationship with Hitachi in Japan, offset by a reduction of $93,870 in consulting expenses and $57,004 in lab supply and reagent costs.

Research and Development Expenses .   Research and development expenses were $726,696 for the quarter ended September 30, 2009, as compared to $410,469 for the same period in 2008, an increase of $316,227 or 77.0%. This increase resulted primarily from an increase in personnel costs of $171,968, an increase of $59,278 in lab supplies and reagents, and an increase of $69,638 in consultation fees. We expect research and development expenses to increase as we continue work to develop additional aspects of our technology and to study diagnostic indicators for various forms of cancer.

29

General and Administrative Expenses.   General and administrative expenses totaled $1,305,247 for the quarter ended September 30, 2009, as compared to $2,101,864 for the comparable period in 2008, a decrease of $796,617 or 38%. This decrease resulted primarily from a reduction of $74,432 in staff salary and benefits expenses, a decrease in stock option expense of $287,115, a reduction of $106,585 in business consulting expenses, a $116,938 decrease in insurance expenses, a $54,893 reduction in depreciation and amortization expenses. We expect general and administrative expenses to increase as a result of the need to hire additional administrative personnel due to higher legal, accounting, compliance and related expenses associated with being a public company and to support the growth of ResponseDX.

Sales and Marketing Expenses: Historically, the Company has included sales and marketing expenses in the general and administrative expense category.  With the hiring of a sales force to bring our ResponseDX assay to market the Company has commenced with the quarter ended March 31, 2009 to report expenses associated with our sales and marketing efforts separately.  For the quarter ended September 30, 2009 our sales and marketing expenses totaled $934,946.  These expenses primarily were comprised of $540,505 in personnel costs, $83,668 for business meetings and travel related expenses, and $202,702 in marketing costs such as press releases, promotional event costs and marketing materials.  We expect that sales and marketing costs will continue to increase as we expand our sales and marketing activities in order to gain clinical acceptance of our ResponseDX assays.

U.K. Operating Costs and U.K. Impairment of Property and Equipment:   In December, 2008, we made the decision to increase the operational efficiency of the Company by consolidating our UK operations with our US operations.  Based on this decision we implemented a reduction of workforce pursuant to which we have closed our UK testing facility and consolidated testing services in our laboratory facilities located in Los Angeles.  As a result of the implementation of the reduction of workforce management performed a recoverability test of the long-lived assets located at the United Kingdom testing facility. Based on the recoverability analysis performed, the Company recorded a non-cash charge for the impairment of long-lived assets of approximately $0.9 million as of December 31, 2008 to write down the carrying value of the long-lived assets to their estimated fair value of $0. The fair value was estimated based upon offers received from third parties to purchase the long-lived assets.  The operating costs related to our UK lab, which were previously included in general and administrative expenses, were $21,645 for the quarter ended September 30, 2009 compared to $688,794 for the same period in 2008. Additionally, in connection with the reduction of workforce we incurred expenses related to redundancy costs of $66,140 in the quarter ended September 30, 2009.

Interest Income:   Interest income was $256 for the quarter ended September 30, 2009, compared with $76,087 for the same period in 2008. This $75,831 decrease was due to lower average cash and cash equivalent balances and lower rates of return during the period ending September 30, 2009.

Nine Months Ended September 30, 2009 and 2008

Revenues:   Revenues were $5,694,988 for the nine month ended September 30, 2009, as compared to $5,683,409 for the comparable period in 2008, an increase of $11,579 or 0%. This increase was attributable to a $1,623,737 in net revenue associated with our new ResponseDX assays processed by our laboratory. This increase was partially offset by a $1,553,561 decrease in revenues from pharmaceutical clients. The decrease in our pharmaceutical client revenue was generated primarily due to a delay in receipt of samples to be tested from our pharmaceutical clients which we expect to receive later in 2009 and 2010.  For the nine months ended September 30, 2009, two of our clients, GSK and Taiho, accounted for approximately 63% of our revenue, as compared to approximately 97% of our revenue for the nine months ended September 30, 2008.

Cost of Revenues:   Cost of revenues for the nine month period ended September 30, 2009 were $3,646,358 as compared to $2,849,482 for the same period ended September 30, 2008, an increase of $796,876 or 28.0%. This increase is primarily related to an increase of $968,152 associated with our sample processing relationship with Hitachi in Japan.  This increase was partially offset by a $93,870 reduction in business consulting expenses, a $42,176 reduction in employee stock option expenses and a $36,344 reduction in costs associated with processing fluorescence in situ hybridization assays and bioinformatics.

Research and Development Expenses.   Research and development expenses were $1,734,223 for the nine month period ended September 30, 2009, as compared to $1,719,013 for the same period in 2008, an increase of $15,210 or 0.1%. This increase resulted primarily from an increase in personnel costs of $38,878, and an increase in consultation fees of $135,764 offset by a decrease in royalties and patent fees of $91,970, a reduction in employee stock option expense of 27,286 and a reduction in equipment related costs of $26,420. We expect research and development expenses to increase as we continue work to develop additional aspects of our technology and to study diagnostic indicators for various forms of cancer.

30

General and Administrative Expenses.   General and administrative expenses totaled $4,453,204for the nine month period ended September 30, 2009, as compared to $5,580,186 for the comparable period in 2008, a decrease of $1,126,982 or 24.4%. This decrease resulted primarily from a reduction of salary and benefits costs of $225,923, a decrease in stock option expense of $391,505, a reduction of $363,813 in business consulting fees, , a reduction of $145,811 in legal and accounting fees.   We expect general and administrative expenses to increase as a result of the need to hire additional administrative personnel and due to higher legal, accounting, compliance and related expenses associated with being a public company and to support the growth of ResponseDX.

Sales and Marketing Expenses: Historically, the Company has included sales and marketing expenses in the general and administrative expense category.  With the hiring of a sales force to bring our ResponseDX assay to market the Company has commenced with the quarter ended March 31, 2009 to report expenses associated with our sales and marketing efforts separately.  For the nine month period ended September 30, 2009 our sales and marketing expenses totaled $2,759,108.  These expenses were primarily comprised of  $1,441,291 in personnel costs, $270,458 for business meetings and travel related expenses, $545,784 in marketing costs such as press releases, promotional event costs and marketing materials, and $251,771 in royalty and license fees.  We expect that sales and marketing costs will continue to increase as we expand our sales and marketing activities in order to gain clinical acceptance of our ResponseDX assays.

U.K. Operating Costs and U.K. Impairment of Property and Equipment.   In December, 2008, we made the decision to increase the operational efficiency of the Company by consolidating our UK operations with our US operations.  Based on this decision we implemented a reduction of workforce pursuant to which we have closed our UK testing facility and consolidated testing services in our laboratory facilities located in Los Angeles.  As a result of the implementation of the reduction of workforce management performed a recoverability test of the long-lived assets located at the United Kingdom testing facility. Based on the recoverability analysis performed, the Company recorded a non-cash charge for the impairment of long-lived assets of $0.9 million as of December 31, 2008 to write down the carrying value of the long-lived assets to their estimated fair value of $0. The fair value was estimated based upon offers received from third parties to purchase the long-lived assets.  The operating costs related to our UK lab, which were previously included in general and administrative expenses, were $465,910 for the nine month ended September 30, 2009 compared to $1,939,828 for the same period in 2008. Additionally, in connection with the reduction of workforce we incurred expenses related to redundancy costs of $268,374 through the nine month period ended September 30, 2009.

Interest Income.   Interest income was $22,157 for the nine month period ended September 30, 2009, compared with $319,383 for the same period in 2008. This $297,226 decrease was due to lower average cash balances and lower rates of return during the period ending September 30, 2009.

Income Taxes.   As of September 30, 2009 and 2008, a full valuation allowance has been recorded for the deferred tax assets since we do not believe the recoverability of the deferred income tax assets in the near future is more likely than not.

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Liquidity and Capital Resources

We incurred net losses of $7,618,231 and $6,092,436 during the nine months ended September 30, 2009 and 2008, respectively. Since our inception in September 1999, we have incurred cumulative losses and as of September 30, 2009, we had an accumulated deficit of $37,423,960. We have not yet achieved profitability and anticipate that we will likely incur additional losses.  We cannot provide assurance as to when will achieve profitability. We expect that our cash and cash equivalents will be used to fund  our selling and marketing activities primarily related to our ResponseDX tests, research and development, and general  corporate purposes. As a result, we will need to generate significant revenues to achieve profitability.  Until we can generate and maintain sufficient revenues to finance our cash requirements, which we may never do, we expect to finance additional cash needs primarily through public or private equity offerings, strategic collaborations, and other financing opportunities as they may arise.  We do not know whether additional funding will be available on acceptable terms, if at all.  If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate selling and marketing activities or research and development programs.

In addition, we expect to use our capital to fund research and development and to make capital expenditures to keep pace with the expansion of our research and development programs and to scale up our commercial operations. The amount and timing of actual expenditures may vary significantly depending upon a number of factors, such as the progress of our product development, regulatory requirements, commercialization efforts, and the amount of cash used by operations. We expect that we will continue to generate revenue through our pharmacogenomic testing services and through ResponseDX testing services business provided to pharmaceutical clients and to the users of our ResponseDX testing services which partially include oncologists, hospitals, and cancer care centers.  These revenues are not guaranteed and are not expected to substantially offset the costs associated with our expansion efforts.

Following is a summary of recent events and the expected impact these events may or have had on our liquidity and future realization of revenues.

Contract amendments

On December 26, 2008, we amended and restated our master service agreement with GlaxoSmith Kline, Ltd. ("GSK"), a leading pharmaceutical manufacturer (the "GSK Agreement"). Pursuant to the amendment, the term of the GSK Agreement has been extended for a two-year period, with the option for the parties to extend the GSK Agreement for additional one-year periods, upon their mutual written agreement. In addition, we will become a preferred provider to GSK and its affiliates of genetic testing services on a fee-for-service basis and, in anticipation of the services to be provided, GSK agreed to make a non-refundable upfront payment of approximately $1,300,000 which was received on January 5, 2009. This payment was classified as deferred revenue and will be used for future work undertaken in the period beginning on January 1, 2009 and ending on December 31, 2010.  The amount of deferred revenue for this agreement at September 30, 2009 is $1,499,433.

On September 7, 2009, the Company amended and restated its master service agreement with GlaxoSmithKline Biologicals (“GSK Bio”), the vaccine division of GlaxoSmithKline (the “Amended and Restated Agreement”).  Pursuant to the Amended and Restated Agreement, the parties agreed that GSK Bio has accrued an aggregate credit under the terms of the original agreement, which amount shall be allocated towards services rendered to GSK Bio during the remaining term of the agreement as described below.

For each calendar quarter of 2009 and the first two quarters of 2010, €200,000 of the existing credit shall apply to all services rendered to GSK Bio during such calendar quarter.  Pursuant to the Amended and Restated Agreement, GSK Bio may now extend the term of the agreement for an additional one-year period through December 31, 2011.  In the event GSK Bio extends the term through 2011, the then remaining balance of the existing credit shall be divided into six equal quarterly amounts and apply to all services rendered to GSK Bio in each of the last two quarters of 2010 and the four calendar quarters of 2011.  If GSK Bio does not extend the term through 2011, the then remaining balance of the existing credit will instead be divided into two equal quarterly amounts and apply to all services rendered to GSK Bio in each of the last two quarters of 2010.  In all cases, GSK Bio shall remit payment to the Company for all services rendered to GSK Bio in any such calendar quarter that is in excess of the applicable credit amount.  In the event the amount of services rendered to GSK Bio in a calendar quarter does not exceed the applicable credit amount, the existing credit for the following calendar quarter shall be increased by such unused amount.  

The Amended and Restated Agreement further provides that the Company shall provide additional services on a fee-for-service basis, upon GSK Bio’s written request, relating to the bridging of assays/diagnostic tests to third parties that develop, manufacture and sell the commercial diagnostic tests to be used with certain of GSK Bio’s products. The amount of deferred revenue for this agreement at September 30, 2009 is $2,883,456.

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Private placements

On February 27, 2009, we entered into a Purchase Agreement with certain affiliates of Special Situations Funds for the private placement of 2,000,000 newly-issued shares of the Company's common stock at a per share price of $1.00. The closing of the sale of the Shares occurred on Monday, March 2, 2009 and we received the funds on the same date.

In connection with the Special Situations Funds Private Placement, we also entered into a Registration Rights Agreement, dated February 27, 2009, with the Purchasers (the "Registration Rights Agreement") pursuant to which the Company filed a registration statement with the Securities and Exchange Commission ("SEC") to register the 2,000,000 shares for resale, which registration statement became effective on June 30, 2009.

On July 22, 2009, we entered into a Purchase Agreement with certain funds of Lansdowne Partners Limited for the private placement of 3,057,907 newly-issued shares of the Company's common stock at a per share price of $1.30. The closing of the sale of the Shares occurred on July 23, 2009. The aggregate offering price of the shares was approximately $4 million.   In connection with the acquisition of the Shares, the Purchasers were granted certain preemptive rights permitting them to maintain their percentage ownership interests in connection with future issuances of the Company’s capital stock, subject to various exceptions and limitations. We received the funds on July 23, 2009.

In connection with the Lansdowne Private Placement, we also entered into a Registration Rights Agreement, dated July 22, 2009, with the Purchasers (the "Registration Rights Agreement") pursuant to which the Company filed a registration statement with the SEC to register the 3,057,907 shares for resale, which registration statement became effective on November 3, 2009.  The Company also granted certain "piggyback" registration rights to Lansdowne which are triggered if the Company proposes to file a registration statement for its own account or the account of one or more shareholders until the earlier of the sale of all of the shares or the shares become eligible for sale under Rule 144(b)(1) without restriction. 

UK operations

On February 9, 2009, management implemented a reduction of workforce (“Reduction of Workforce”) pursuant to which the Company has closed its United Kingdom testing facility to consolidate services at its CLIA-certified laboratory facilities in Los Angeles.  In connection with the Reduction of Workforce, the Company incurred expenses associated with redundancy costs of approximately $268,374 These costs are included in the Company’s statement of operations for the nine months ended September 30, 2009. Our lease for our United Kingdom testing facility expired on March 31, 2009. We extended the lease, pursuant to its terms, for an additional month, in order to facilitate the winding down of our operations in the United Kingdom. The Reduction of Workforce was substantially completed on March 31, 2009. We undertook the Reduction of Workforce as part of a strategic plan to increase operational efficiency in conjunction with the consolidation of our services at our Los Angeles facilities and it will not affect our genetic testing services or current partnership agreements. 

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Comparison of nine months ended September 30, 2009 and 2008

As of September 30, 2009, we had $9,299,183 in cash and cash equivalents, working capital of $6,983,082 and an accumulated deficit of $37,423,960.

Cash flows provided by operating activities

During the nine months ended September 30, 2009, the Company generated negative cash flows from operations of $6,194,205 compared to cash flows used in operations activities of $3,983,035 from operations in the nine months ended September 30, 2008. The reasons for using more cash in operating activities was due mainly to the increase in net loss of $1,525,795, and in combination, a decrease in receivables, increases in accounts payable and accrued expenses, an increase in accrued payroll and related liabilities, and a decrease in deferred revenue.

The decrease in accounts receivable, of $415,134, related mainly to an amendment entered into the fourth quarter of 2008 to the contract with GSK. In this amendment GSK agreed to make a non-refundable upfront payment of approximately $1,300,000 which was received on January 5, 2009.  This payment may be credited against future work undertaken in the period beginning January 1, 2009 and ending on December 31, 2010.

The decrease in deferred revenue related to a decrease in advance billings to our customers, along with recognition of deferred revenue totaling $535,147.

The increase in accounts payable and accrued expenses primarily resulted from increased sales and marketing and business development activities related to the launch of ResponseDX.

The change in accrued payroll and related liabilities is primarily due to an increased number of employees at September 30, 2009.

Cash flows used in investing activities

Net cash used in investing activities was $144,968 for the quarter ended September 30, 2009 and $683,213 for the quarter ended September 30, 2008. This decrease was attributable to reduced need for capital equipment purchases in our laboratories.

Cash flows used in financing activities

Cash flows from financing activities for the nine months ended September 30, 2009 provided net cash of $6,061,901 related to the sale of common stock.  There were no financing activities undertaken in the nine months ended September 30, 2008.

  Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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Recent Accounting Pronouncements

In April 2009, the Company adopted a new accounting standard included in ASC 820, Fair Value Measurements and Disclosures, (formerly the FASB issued Staff Position SFAS No. 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments ). ASC 820 requires disclosure about fair value of financial instruments in interim financial statements as well as in annual financial statements. The new standard requires those disclosures in all interim financial statements.  The provisions of the new standard was effective for interim reporting period ended June 30, 2009 and the application of the provisions of the standard did not affect our results of operations or financial condition.

In May 2009, the FASB issued new guidance for subsequent events.  The new guidance, which is part of ASC 855, Subsequent Events, (formerly SFAS No. 165, Subsequent Events) is intended to establish standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. See Note 16 for additional information.   The adoption of ASC 855 resulted in additional quarterly disclosures beginning in the second quarter of 2009 but did not affect the results of operations or financial condition..

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, now ASC 86-20 Sale of Financial Assets, which has not yet been adopted into Codification. SFAS No. 166 removes the concept of a qualifying special-purpose entity (QSPE) from SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and removes the exception from applying FIN 46(R). This statement also clarifies the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. This statement is effective for fiscal years beginning after November 15, 2009. As such, the Company plans to adopt SFAS No. 166 effective January 1, 2010. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), now ASC 810 Consolidation,Variable Interest Entities, which has not yet been adopted into Codification. SFAS 167, which amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, (FIN 46(R)), prescribes a qualitative model for identifying whether a company has a controlling financial interest in a variable interest entity (VIE) and eliminates the quantitative model prescribed by FIN 46(R). The new model identifies two primary characteristics of a controlling financial interest: (1) provides a company with the power to direct significant activities of the VIE, and (2) obligates a company to absorb losses of and/or provides rights to receive benefits from the VIE. SFAS No. 167 requires a company to reassess on an ongoing basis whether it holds a controlling financial interest in a VIE. A company that holds a controlling financial interest is deemed to be the primary beneficiary of the VIE and is required to consolidate the VIE. This statement is effective for fiscal years beginning after November 15, 2009.  The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2009, the FASB issued SFAS No. 168,  The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This standard replaces SFAS No. 162,  The Hierarchy of Generally Accepted Accounting Principles , and establishes only two levels of U.S. generally accepted accounting principles, authoritative and nonauthoritative. The FASB Accounting Standards Codification will become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company’s references to GAAP accounting standards but did not impact the Company’s results of operations, financial position or liquidity.

In June 2009, the FASB issued FASB Accounting Standards Update (“ASU”) 2009-01 “Topic 105 – Generally accepted Accounting Principles amendments based on the Statement of Financial Accounting Standards No. 168 - The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” ASU 2009-01 establishes the FASB Accounting Standards Codification as the single source of authoritative nongovernmental U.S. generally accepted accounting principles. The Company adopted ASU 2009-01 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In June 2009, the FASB issued ASU No. 2009-02, “Omnibus Update — Amendments to Various Topics for Technical Corrections” (ASU 2009-02). The FASB issued ASU 2009-02 in order to make technical corrections to the Codification. The Company adopted ASU 2009-02 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In August 2009, the FASB issued ASU No. 2009-03, “SEC Update — Amendments to Various Topics Containing SEC Staff Accounting Bulletins” (ASU 2009-03). The Codification includes certain SEC and SEC staff guidance in order to increase usefulness of the Codification for public companies. The SEC guidance is presented in separate sections and is limited to material on the basic financial statements. ASU 2009-03 includes technical corrections to various topics containing SEC Staff Accounting Bulletins to update cross-references to Codification text. The Company adopted ASU 2009-03 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In August 2009, the FASB issued ASU No. 2009-05, “Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value” (ASU 2009-05). This ASU amends Subtopic 820-10, Fair Value Measurements and Disclosures-Overall, for the fair value measurement of liabilities, and provides clarification regarding required valuations techniques for circumstances in which a quoted price in an active market for the identical liability is not available. The Company adopted ASU 2009-05 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In September 2009, the FASB issued ASU No. 2009-07, “Accounting for Various Topics — Technical Corrections to SEC Paragraphs” (ASU 2009-07). This ASU represents technical corrections to various topics containing SEC guidance based on external comments received. The Company adopted ASU 2009-07 during the quarter ended September 30, 2009, and its application did not affect our results of operations or financial condition.

In August 2009, the FASB issued new guidance relating to the accounting for the fair value measurement of liabilities. The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques: the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements. The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement. The new guidance is effective for interim and annual periods beginning after August 27, 2009. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations or financial position.

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ITEM 3. Qualitative and Quantitative Disclosures about Market Risk.

Not applicable as we are a smaller reporting company.

ITEM 4T. Controls and Procedures.

Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were adequate and effective. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

None.

ITEM 1A. Risk Factors

Not applicable as we are a smaller reporting company.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 On July 22, 2009, the Company entered into a Purchase Agreement with certain funds managed by Lansdowne Partners Limited Partnership for the private placement of 3,057,907 newly-issued shares of the Company's common stock at a per share price of $1.30. The closing of the sale of the shares occurred on July 22, 2009.  The aggregate offering price of the shares was approximately $4 million and the Company received the funds on July 23, 2009.  In connection with the acquisition of the shares, the Purchasers were granted certain preemptive rights permitting them to maintain their percentage ownership interests in connection with future issuances of the Company’s capital stock, subject to various exceptions and limitations. 

In connection with the Lansdowne Private Placement, we also entered into a Registration Rights Agreement, dated July 22, 2009, with the Purchasers (the "Registration Rights Agreement") pursuant to which the Company filed a registration statement with the SEC to register the 3,057,907 shares for resale, which registration statement became effective on November 3, 2009.  The Company also granted certain "piggyback" registration rights to Lansdowne which are triggered if the Company proposes to file a registration statement for its own account or the account of one or more shareholders until the earlier of the sale of all of the shares or the shares become eligible for sale under Rule 144(b)(1) without restriction. 

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ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. Submission of Matters to a Vote of Security Holders.

None.

ITEM 5. Other Information.

None.

ITEM 6. Exhibits.

10.1	Amended and Restated Master Agreement for the supply of Laboratory Test Services by and between GlaxoSmithKline Biologicals and the Company, dated as of September 7, 2009.
31.1	Certification of Principal Executive Officer Pursuant to Section 302.
31.2	Certification of Principal Financial Officer Pursuant to Section 302.
32	Section 906 certification of periodic financial report by Chief Executive Officer and Chief Financial Officer.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RESPONSE GENETICS, INC.
DATE: November 16, 2009	By:	/s/ Kathleen Danenberg
		Kathleen Danenberg
		President and Chief Executive Officer (Principal Executive Officer)
DATE: November 16, 2009	By:	/s/ Thomas Stankovich
		Thomas Stankovich
		Chief Financial Officer (Principal Financial Officer)

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EX-10.1

AMENDED AND RESTATED MASTER AGREEMENT FOR THE

SUPPLY OF LABORATORY TEST SERVICES

THIS AMENDED AND RESTATED MASTER LABORATORY TEST SERVICES AGREEMENT (the “Agreement”) is made the 10 day of August, 2009 (“Effective Date”) between: GLAXOSMITHKLINE BIOLOGICALS, a company having its principal office at 89 rue de l’Institut, 1330 Rixensart, Belgium (“GSK BIO”); and RESPONSE GENETICS INC., a company incorporated in the State of Delaware, whose principal place of business is situated at 1640 Marengo Street, Suite 600, Los Angeles, CA 90033 (“RGI”).

WHEREAS, the Parties entered into that certain Master Agreement dated December 1, 2006 (the “Original Agreement Effective Date”) (as amended on November 29, 2007, the “Original Agreement”); and

WHEREAS, the Parties wish to amend and restate in its entirety the Master Agreement as is set forth herein.

NOW THEREFORE, in consideration of the covenants and obligations expressed herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound the Parties agree as follows:

ARTICLE I - DEFINITIONS AND INTERPRETATIONS

In this Agreement the following expressions shall have the following meanings:

“Affiliate” with respect to a person shall mean any other person that directly, or indirectly through one of more intermediaries, controls, is controlled by or is under common control with such person; for the purposes of this clause 1.1 only, “control” and, with correlative meanings, the terms “controlled by” and “under common control with”, shall mean (a) the possession, directly or indirectly, of the power to direct the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and/or (b) the ownership, directly or indirectly, of at least fifty percent (50%) of the voting securities or other ownership interest of a person.

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“Agreement” means this Agreement between GSK BIO and RGI for the supply of Services by RGI.

“Confidential Information” shall mean any and all commercial and technical information relating to any of the existing or planned products, businesses, research and/or development activities, customers and suppliers of either Party whether in written, verbal or any other form, tangible or intangible, which either Party may acquire or may have access from time to time, provided such information is marked as “Confidential and Proprietary” and provided that information which is orally disclosed shall be confirmed in writing within thirty (30) days from oral disclosure. Confidential Information includes  and is  not limited to: (a) any information generated in connection with the provision of the Services (such as the results or findings thereof and the contents of any report) under this Agreement, (b) information concerning inventions, discoveries, concepts, ideas, techniques, processes, designs, specifications, drawings, diagrams, models, samples, flow charts, computer programs, algorithms, data, databases, studies, mathematical calculations, finances and plans, customer lists, business plans, contracts, marketing plans, production plans, distribution plans, system implementation plans, business concepts, supplier information, business procedures and business operations and all materials related thereto; (c) the existence, contents or terms of this Agreement, (d) all know-how and intellectual property, (e) all unpublished copyrightable material, (f) any use, variation, application, reduction to practice, or any discussion and any other communication thereof regarding or relating to the Information, and (g) any information concerning how any part of the above information is related to and/or fits together with any other part of the above information, or any other technology or business; Notwithstanding the foregoing, the Parties  agree that any and all data, reports, laboratory work sheets, results, materials or information provided by either Party  or its Affiliates or Third Parties on behalf of a Party and any other documents or information furnished to a Party, or to which  a Party  is given access, by the other Party or its Affiliates or such Third Parties in connection with the performance of this Agreement, or prepared or generated by a Party  in connection with performing any and all Studies (as defined in Section 1.1.1. below) hereunder, shall be deemed to be the Confidential Information  of  the Party which owns such disclosed information.

“Effective Date” means the date first given above.

“Party” shall mean GSK BIO or RGI as the context requires and “Parties” shall mean both GSK BIO and RGI.

“Person” and words signifying persons shall be construed as to include individuals, firms, bodies corporate, joint ventures, governments, states or agencies of state or any undertaking (whether or not having separate legal personality and irrespective of the jurisdiction in or under the laws of which it was incorporated or exists).

“Purpose” shall mean the provision of the Services pursuant to this Agreement and the evaluation by the Parties of whether to add other projects and services to this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

Page 2 of 39

“Relevant Staff” shall mean employees and sub-contractors involved in providing the Services and named in the relevant Schedule or otherwise agreed to in writing by GSK BIO.

“Services” means the services to be provided by RGI pursuant to this Agreement at the request of GSK BIO (as amended from time to time in accordance with the provisions of this Agreement) and such other services as may from time to time be agreed upon by RGI and GSK BIO, including Testing Services, consultation and tissue storage, in connection with this Agreement and as further detailed and agreed upon in a SOW pursuant to Article II below.

“Term” means that this Agreement shall commence on the Original Agreement Effective Date and shall continue until the later of: (i) 31. December 2011, (ii) or until the completion of the recruitment phase of GSK BIO’s [***] or (iii) the provisions of Section 3.2 are satisfied, unless sooner terminated in accordance with the provisions hereof.

“Testing Services” means RGI’s business, among other things, of conducting molecular-based tumor tissue profiling using a proprietary and patented process developed by RGI which involves a complex molecular analysis of specific molecular markers that provides valuable tumor specific gene expression information obtained from a paraffin preserved fresh or frozen tissue sample, which can help the physician choose the most appropriate therapy for a patient prior to starting treatment or assist a pharmaceutical company in identifying the appropriate candidate patient population suitable for a therapy in development.

“Third Party” shall mean any Person who is not a Party hereto or any of their Affiliates References to recitals, clauses and, if applicable, schedules and exhibits are to the recitals and clauses of and, if applicable, the schedules and exhibits to, this Agreement.  To the extent that there is conflict between or ambiguity relating to any schedule or exhibit to this Agreement and the remainder of this Agreement, the wording of the schedule or exhibit shall prevail.

Any schedules and exhibits to this Agreement form part of this Agreement and shall have the same force and effect as if expressly set out in the body of the Agreement and any reference to the Agreement shall include the schedules and exhibits.  Schedules and exhibits may not be added to this Agreement except by the express written consent of both Parties.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

Page 3 of 39

Words denoting the singular shall include the plural and vice versa and words denoting any gender shall include all genders unless the context otherwise requires.

A reference to any Party shall include a reference to the legal successors to the whole or a substantial part of its undertaking and its permitted assignees.

References to any statute or statutory provision shall, unless the context otherwise requires, be construed as a reference to that statute or provision as from time to time amended, consolidated, modified, extended, re-enacted or replaced.

The headings preceding the text of the various provisions of this Agreement are for convenience of reference only and are not intended to, nor do they, define, limit or in any other way describe the scope of this Agreement or the intent of the provisions hereof.

The use of the term “include” or “including” means “including but not limited to”.

ARTICLE II - STATEMENT OF WORK; STUDY DIRECTOR

2.1          Statement of Work

(a)           RGI agrees to perform a study or studies  which will involve Testing Services (hereinafter referred to as  “Study”) from time to time in accordance with a Statement of Work in the form of Exhibit B attached hereto (“SOW”), for the benefit of GSK BIO or any Affiliate of GSK BIO.   The Parties hereby agree that the SOW’s attached hereto as Exhibit C are in effect as of the Effective Date.  Each SOW shall include as attachments (i) a detailed protocol document (“Protocol”) which shall be provided by GSK BIO or prepared by RGI under GSK BIO’s direction and approved in writing by GSK BIO, and which shall be attached to each SOW as Schedule I, and (ii) a pricing schedule in the form of Schedule II to the SOW attached hereto (“Pricing Schedule”).  An SOW shall not be effective unless it has been agreed upon in writing by both Parties.

(b)           The Pricing Schedule shall be based upon the Testing Services Fee Schedule set forth in Exhibit A. Each SOW shall specify the Study design, information desired, estimated duration of the applicable Study, milestones and reporting (if applicable) and all other relevant matters pertinent to completion of such Study (except for pricing), and shall be deemed a part of this Agreement and is incorporated herein by reference.  Each Pricing Schedule attached to a SOW shall specify the cost to GSK BIO of the Services RGI is to perform in connection with such Study and shall be deemed a part of this Agreement and is incorporated herein by reference.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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(c)           If requested by GSK BIO, RGI shall consult with GSK BIO to assist GSK BIO in developing any Study design in a manner consistent with current regulatory guidelines.  RGI represents that any such Study design and/or the results from any such Study shall satisfy the requirements of the U.S. Food and Drug Administration (“FDA”) and the European Medicines Agency (“EMEA”) at the time the Study design is completed.

2.2          Study Director

(a)           RGI shall appoint a study director (“Study Director”) to be responsible to oversee the completion of each Study by RGI.  The Study Director shall coordinate performance of the applicable Study with a representative designated by GSK BIO (“GSK BIO Representative”), which GSK BIO Representative shall have responsibility over all matters relating to the performance of such Study on behalf of GSK BIO.

(b)           Unless otherwise agreed to in the applicable SOW, or by the Study Director and GSK BIO Representative, all communications between RGI and GSK BIO regarding the conduct of each Study pursuant to a SOW shall be addressed to or routed directly through the applicable Study Director and GSK BIO Representative.   RGI may substitute its Study Director and GSK BIO may substitute the GSK BIO Representative, as the case may be, during the course of a particular Study by providing written notice thereof to the other Party.

2.3          Corrective MeasuresIf, at any time during the term of this Agreement, RGI becomes aware that the applicable SOW was not followed, or that RGI otherwise made a material error or material mistake in conducting Testing Services, RGI agrees to notify GSK BIO of such occurrence in writing promptly  following the day such discovery is made.  Upon receipt of such notice, GSK BIOwill notify RGI in writing, within a reasonable time, not to exceed two (2) business days, whether corrective measures which may include retesting are required to ensure validity of results, and GSK BIO will not be invoiced for any necessary corrective measures.  RGI agrees to implement necessary corrective measures promptly.  The retest data will be reported by RGI to GSK BIO within a reasonable time from the receipt by RGI of notification from GSK BIO that retesting is required.

ARTICLE III – APPOINTMENT

3.1          This Agreement will commence with effect, as defined herein, from the Original Agreement Effective Date and will continue for the Term, as defined in this Agreement, or until terminated in accordance with the provisions of Article X.  Should GSK BIO wish to extend the term of this Agreement, the Parties will discuss such extension in good faith.

3.2          Notwithstanding the foregoing, however, such Term shall continue in force with respect to all Studies being conducted under SOWs which have an effective date and have been received by RGI prior to the expiration of the Term, until all such Studies have been completed, and the final report and any other pertinent Study-related documents for such Studies required from RGI hereunder have been received by and completed to the reasonable satisfaction of GSK BIO.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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ARTICLE IV - COMPENSATION

4.1          GSK BIO agrees to pay RGI according to the payment schedule set forth in the Pricing Schedule as part of each SOW.  The Pricing Schedule shall be based on the unit pricing provided in Exhibit A and shall specify the timing of the issuance of invoices applicable to the SOW.  Absent an alternative arrangement agreed upon by the Parties for a particular SOW, RGI may issue invoices to GSK BIO on a monthly basis for Services provided pursuant to the Agreement.  All payments due hereunder shall be paid by GSK BIO within sixty (60) days from the end of a month in which an accurate, complete invoice is received by GSK BIO. Absent terms in the SOW to the contrary, nothing in this Agreement shall be interpreted to require RGI to initiate performance of any SOW or to require GSK BIO to pay for work conducted pursuant to any SOW prior to the execution of the relevant SOW by RGI.  RGI shall be entitled to interest at the prime rate as published by Barclays Bank (London) from time to time plus one percent(1%) per annum for any payments not timely made to it under this Agreement.  In the event that GSK BIO contests the validity or accuracy of amounts invoiced to it under the Agreement, no interest payments shall be required for amounts later determined to have been inappropriately invoiced.

4.2          Prices and fees set forth in this Agreement will remain fixed during the Term.

4.3          GSK BIO will pay RGI in consideration of the Services performed pursuant to this Agreement the following:

(a)           For microdissection of tumor or normal tissue and isolation of RNA or DNA, GSK BIO shall pay a fee of €[***] per sample.

(b)          For other Services, GSK BIO shall pay according to the fee schedule set forth in Exhibit A hereto.

(c)           Samples may include pre- and post-treatment biopsies as well as adjacent normal tissue excised from samples sent for analysis.  Pre- Post- and Normal are considered three different types of samples.

(d)          Samples will be provided by GSK BIO for analysis and shall meet  mutually agreed upon specified criteria for tumor content and slide preparation which includes, but is not limited to, providing compliance with sample preparation instructions, and compliance with packaging, delivery and shipping requirements and instructions. RGI will make reasonable efforts to pre-screen the samples for sufficiency prior to analysis and if RGI in its discretion eliminates insufficient or deficient samples prior to performing any analysis, RGI will not charge GSK BIO for that sample.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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(e)           Samples, for the purposes of this Agreement, may include samples from any GSK BIO-funded source or sponsored samples deemed of interest to GSK BIO.

4.4          (a)           The Parties hereby agree that as of December 31, 2008 GSK BIO has accrued an aggregate credit of € [***](the “Existing Credit”) with RGI towards Services that have yet to be rendered to GSK BIO.  All other amounts which previously have been paid to RGI will remain with RGI and are not refundable or applicable to any future services or other activity under this Agreement.  The Existing Credit shall be allocated towards Services rendered to GSK BIO during the remaining Term of the Agreement as set forth in this Section 4.4

(b)           In 2009 and the first two quarters of 2010, RGI shall apply €200,000 Eurosof the Existing Credit in each calendar quarter towards all Services rendered to GSK BIO during such calendar quarter. In the event that the sum of all Services rendered to GSK BIO in any such calendar quarter year exceeds €200,000, then GSK BIO shall remit payment to RGI for such excess Services.  In the event the amount of Services rendered to GSK BIO in any such calendar quarter does not exceed €200,000, the applicable portion of the Existing Credit for the following calendar quarter shall be increased by such unused amount.

(c)           If GSK, in its sole discretion, determines that it wishes for RGI to continue to provide GSK services under this Agreement for 2011 as well (and GSK shall notify RGI in writing by July 31, 2010 as to such determination), the then-remaining balance of the Existing Credit for shall be divided into six (6) equal quarterly amounts spanning over the last two (2) quarters of 2010 and the four (4) quarters of 2011 and utilized pursuant to the foregoing process.  If GSK determines that it does not wish RGI to provide such services in 2011, the then-remaining balance of the Existing Credit would instead be divided into two (2) equal quarterly amounts spanning over the last two (2) quarters of 2010 and utilized pursuant to the foregoing process; provided any excess Existing Credit remaining at the end of 2010 shall be rolled over to the following calendar quarter(s) pursuant to the foregoing process for so long as RGI provides GSK Services under this Agreement.  Provided, in any event, if RGI ceases for any reason to provide GSK services under this Agreement, then RGI shall remit to GSK payment of all remaining Excess Credit within sixty (60) days after the date on which RGI ceased to provide Services to GSK.

ARTICLE V - PERFORMANCE OF THE SERVICES – SERVICE PROVISIONS

5.1          RGI (either in its [***] Laboratory subject to the provisions of clause 5.16, in its US-based laboratory or in any other laboratory RGI may set up in the future, provided RGI’s selection (in RGI’s reasonable discretion) of a laboratory aside from its Los Angeles, CA, USA facility shall in no way increase the cost of, delay or compromise the services is provides GSK under this Agreement) shall use its best efforts to provide a turnaround time of five (5) business days for performance of the Testing Services.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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5.2          To assist RGI to expeditiously perform the Testing Services, GSK BIO will use reasonable efforts to transmit samples to RGI for testing as follows:

(a)                  Regarding samples from GSK’s [***] clinical studies GSK BIO will transmit these samples according to the patient recruitment;

(b)                  Regarding all other samples GSK BIO will transmit these in equal numbers each quarter   If samples for any one quarter are anticipated to exceed [***] (prospective and retrospective), GSK BIO shall give written notice to RGI of how many samples it expects to deliver and of what mutually agreeable genes it will be requesting analysis at least two (2) quarters in advance so as to allow RGI sufficient time to supplement resources (personnel, equipment, materials, etc.) and/or to develop probes or primers, as necessary, in order to analyze the samples expected.  If GSK BIO provides such notice to RGI, then GSK BIO shall use its best efforts to deliver to RGI for testing samples equaling the projected sample number.

5.3          RGI will perform the Testing Services in accordance with good laboratory art.  RGI also will comply with the applicable laws, regulations, and guidelines governing the performance of the Testing Services, including those relating to Good Laboratory Practices.  RGI further will comply with all laws, regulations and guidelines applicable to the care and use of experimental animals.  

5.4          RGI shall use reasonable efforts to provide facilities, supplies and staff necessary to complete each Study as provided in the applicable SOW, as it may be modified as provided herein, and in accordance with the terms of this Agreement.

5.5          GSK BIO’s representatives may visit RGI’s laboratory and premises at reasonable times, on reasonable prior notice, and with reasonable frequency during normal business hours to observe the progress of any Study, and any and all information and results derived therefrom.  RGI shall assist GSK BIO in scheduling such visits such as an audit of RGI by GSK QA/QC.

5.6          All reports prepared by RGI hereunder shall be prepared in a format  specified in the applicable SOW and shall be considered to be Confidential Information of GSK BIO.  GSK BIO shall have access to all documentation, records, raw data, specimens or other work product generated as part of the performance of each Study.  RGI agrees to maintain appropriate records in paper or magnetic form, in a manner which complies with regulatory requirements.

5.7          In its performance of the Services for GSK BIO hereunder and for SmithKline Beecham Corporation under the RGI/SBC Agreement dated January 17, 2006 (as amended), RGI agrees to dedicate the same level of priority to comparable Services requested by GSK BIO and SmithKline Beecham Corporation for analysis of their respective clinical samples.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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5.8          RGI agrees to comply with all provisions of the Generic Drug Enforcement Act of 1992. RGI further agrees to submit to GSK BIO, upon request upon completion or termination of the Testing Services, a certification that neither RGI nor any of its employees has been debarred by the FDA under the provisions of the Act and that RGI did not use in any capacity in connection with the Testing Services any individual debarred by the FDA under the provisions of the above referenced Act.

5.9          Should applicable government regulatory requirements be changed during the term of this Agreement, RGI shall make reasonable efforts to satisfy the new requirements.  In the event that compliance with such new regulatory requirements necessitates a change in the SOW for a Study, RGI shall submit to GSK BIO a revised technical and cost proposal for GSK BIO’s acceptance prior to making any changes in the SOW for such Study.

5.10        In the event of a conflict in government regulations, GSK BIO shall, upon request by RGI, designate which regulations it wishes RGI to follow in its performance of a particular Study.

5.11        RGI agrees to use reasonable care in safeguarding, inventorying and handling all SOW data, materials and supporting documentation (hereinafter collectively termed “Study Archives”) originating from any SOW conducted under this Agreement by RGI, whether written or physical (such as notebooks, original or raw data, protocols, interim or final report copies).  The Study Archives shall be considered to be Confidential Information of GSK BIO.   RGI will maintain the samples provided to it for testing under this Agreement in accordance with the usual and customary standards for maintaining such materials.  Upon request by GSK BIO, RGI will provide sample materials to GSK BIO or a copy of documents from the Study Archives, at GSK BIO’s expense.  To the extent that samples are transferred to GSK BIO, responsibility for maintaining such samples will then be undertaken by GSK BIO.  The samples and Study Archives are to be retained and archived by RGI for a period of not less than ten (10) years following the completion of the relevant SOW.

5.12        Following the end of the relevant ten (10) year retention period, RGI further agrees that no samples or records originating from any Services conducted under this Agreement and retained in RGI’s possession as Study Archives will be permanently disposed of or destroyed by RGI without the prior written permission of GSK BIO.  GSK BIO agrees that such written permission will not be unreasonably withheld; provided, however, that in lieu of the granting of permission for such disposal, GSK BIO shall have the right at the time such permission for disposal is requested by RGI to claim such materials and to have RGI transmit such materials to GSK BIO, by a carrier of GSK BIO’s choice and at GSK BIO’s expense.  In the event RGI requests such permission to dispose of the samples or Study Archives from GSK BIO under the provisions of notice contained in this Agreement, and no response is received from GSK BIO within four (4) weeks, RGIshall be deemed to have received from GSK BIO permission for permanent disposal.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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5.13        GSK BIOmay, at a reasonable time upon reasonable prior notice, obtain access to the samples and Study Archives, provided that GSK BIOcomplies with RGI’s reasonable access and control procedures relating to such materials.

5.14        RGI represents that each of its personnel, employees, agents, representatives, subcontractors or invitees who shall perform any Study hereunder shall abide by the provisions of Article 4 hereof while performing Services.  RGI agrees that each of its personnel, employees, agents, representatives, subcontractors or invitees who shall perform any Study hereunder shall be at least eighteen (18) years old or of legal age to enter into a contract, whichever is older.  Each Party agrees to abide by the human rights provisions set forth in Exhibit D.

5.15        RGI shall, commencing on the date that is [***] after the Effective Date, every forty-five (45) days submit to GSK BIO [***].  Such statements shall (i) contain the information set forth in Exhibit E, (ii) constitute RGI Confidential Information, (iii) shall not be used for any purpose except to evaluate and engage in discussion with RGI concerning this Agreement, and (iv) will be disclosed only to GSK BIO employees who are required to have the information in order to evaluate or engage in said discussions.  GSK BIO acknowledge that their employees who receive this information are aware that the U.S. securities laws would prohibit any person who has material non-public information about a company from purchasing or selling, directly or indirectly, securities of such company (including entering into hedge transactions involving such securities), or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities.  GSK BIO agrees that they will not use or permit any third party to use, and that they will use reasonable efforts to assure that none of their employees will use or permit any third party to use, any of the above information provided to them in contravention of applicable laws.  Upon request, GSK BIO will promptly redeliver to the RGI or certify the destruction of all the written Confidential Information, including any copies which have been made (provided GSK BIO may retain one copy for the sole purposes of determining its obligations under this Agreement), and will further deliver to RGI a duly authorized notice indicating that the requirements of this sentence have been satisfied in full.

5.16        Upon GSK BIO’s written request, the Parties shall in good faith negotiate an amendment to this Agreement providing for RGI using commercially reasonable efforts to develop a laboratory (with GSK bearing the reasonable costs associated with developing said laboratory, including reimbursement to RGI for its time and out-of-pocket expenses associated with such efforts and equipment costs therefor, in each instance consistent with the provisions of Schedule 5.16) located in [***] that is run by [***] (or another Third Party reasonably acceptable to GSK BIO), with such laboratory performing Services in [***] for samples collected in [***]; provided that the Existing Credit shall not be applicable towards Services provided in such laboratory in [***].

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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5.17        (a)           Upon GSK BIO’s written request, RGI shall in good faith and without delay, commence and complete the activities outlined in Exhibit F relating to the bridging of the assays/diagnostic tests to the Third Party(ies) that is(are) developing and will manufacture and sell the commercial diagnostic test(s) to be used with GSK BIO’s [***].  Additionally, subject to the provisions of Section 5.17(c), upon GSK BIO’s written request, RGI shall in good faith and without delay, commence and complete the activities outlined in Exhibit F relating to the transfer of the assays/diagnostic tests to a Third Party of GSK’s choosing.  GSK BIO shall accept responsibility for the bridging/transfer activities and RGI makes no representations or warranties, express or implied, that the assays and/or diagnostic tests will not infringe any Third Party patent or other proprietary rights.  RGI shall grant to GSK (and such Third Party(ies) a covenant not-to-sue for its intellectual property (including patents and know-how) that are necessary for GSK (or its designated Third Party) to practice such assays/diagnostic tests on terms and conditions that are reasonable and customary in the industry.  GSK BIO shall reimburse RGI for its time and out-of-pocket expenses associated with such bridging/transfer activities pursuant to the fee schedule included in Exhibit F.

(b)          To the extent RGI has any contracts or agreements with any Third Parties that are necessary or useful for the ongoing performance of such assays/diagnostic tests performed as part of the Services associated with the existing SOW’s related to GSK BIO’s [***] (including to the extent applicable, for the avoidance of doubt, the RGI agreement [***], then RGI shall use its commercially reasonable efforts to (upon GSK’s request) provide rights (either via sublicense, assignment or transfer of such agreement as GSK and RGI may agree) under such contracts or agreements (or the relevant portion thereof) to GSK BIO (or such Third Party, as GSK BIO may request) solely as part of such bridging/transfer activities.  Notwithstanding the foregoing if Third Party consent is required prior to such provision of rights, then RGI shall use its good faith efforts to obtain such consents.  Upon the transfer, assignment or sublicense of such agreements, GSK BIO agrees to abide by any and all obligations under such transferred, assigned or sublicensed agreements, including all financial obligations arising out of such agreements which relate to the bridging and transfer obligations, and GSK BIO further agrees to require its Third Party designees to abide by any and all obligations under such agreements.

(c)           Notwithstanding the foregoing, RGI shall not be obligated to undertake any of the aforementioned bridging or transfer activities solely to the extent it believes in good faith that such activities could breach one or more then-existing Third Party agreements.  In such circumstances, RGI shall consult in good faith with GSK BIO regarding the issues, including providing GSK BIO (under confidence) with true and correct copies of the applicable Third Party agreement(s) (and any amendments thereto and other relevant materials), if permitted to do so. If, after consulting with GSK BIO, RGI is unwilling to proceed for materially adverse good faith reasons, then it shall not be obliged to proceed with such bridging or transfer activities.  For the avoidance of doubt, RGI shall perform all aspects of the aforementioned bridging or transfer activities that are not subject to this Section 5.17(c)

(d)           If after reviewing the aforementioned Third Party agreements (and any amendments thereto and other relevant materials) GSK BIO maintains its request to RGI to continue with such bridging or transfer activities and RGI is not unwilling to proceed with such bridging or transfer activities for materially adverse good faith reasons, then [***].

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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(e)           The obligations set forth in this clause 5.17 shall survive the termination of this Agreement until the time the provisions of Section 3.2 are satisfied.

ARTICLE VI – CONFIDENTIALITY

6.1          Save as otherwise provided in this Agreement, any Confidential Information which is disclosed by or on behalf of either Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) at any time after the date of this Agreement shall remain the property of the Disclosing Party and the Receiving Party hereby undertakes:

(a)           to use the Confidential Information received from the Disclosing Party and subject to the provisions of Section 6 hereto, solely and exclusively for the Purpose; and

(b)           to maintain the confidentiality of the Confidential Information and not to disclose it directly or indirectly to any other company, organization, individual or Third Party other than in the case of GSK BIO, to an Affiliate, save as permitted by clause 5.2; and

(c)           at the request of the Disclosing Party to return, delete or destroy all copies of the Confidential Information, in whatever form it is held, provided that the Receiving Party may retain one copy of the Confidential Information for the sole purpose of determining its obligations under this Agreement but may make no further use of such Confidential Information whatsoever.

6.2          Notwithstanding clause 6.1, if RGI is the Receiving Party, it may disclose Confidential Information to any of its Relevant Staff who need to know the Confidential Information in order to fulfill the Purpose, provided that RGI shall procure that each such person to whom or which Confidential Information is to be disclosed:

(a)           is made aware of the obligations contained in this Agreement prior to such disclosure; and

(b)          agrees to abide by such terms of this Agreement as if it were a Party to it.

6.3          Nothing in clause 6.1 shall preclude disclosure of any Confidential Information required by any governmental, quasi-governmental or regulatory agency or authority or court entitled by law to disclosure of the same, or which is required by law to be disclosed.  The Receiving Party shall promptly notify the Disclosing Party when such requirement to disclose has arisen to enable the Disclosing Party to seek an appropriate protective order and to make known to the said agency or authority or court the proprietary nature of the Confidential Information and to make any applicable claim of confidentiality in respect thereof.  The Receiving Party agrees to co-operate in any appropriate action which the Disclosing Party may decide to take.  If the Receiving Party is advised to make a disclosure in accordance with this clause 5.3 it shall only make a disclosure to the extent to which it is obliged.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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6.4          The provisions of clause 5.1 shall not apply to any Confidential Information which:

(a)           the Receiving Party can demonstrate by its written records, was already in the possession of the Receiving Party and at its free use and disposal or generally and conveniently available to the public prior to its disclosure by the Disclosing Party hereunder (through in each case no fault of the Receiving Party or any of its Affiliates or no breach of this Agreement by the Receiving Party); or

(b)           is purchased or otherwise legally acquired by or becomes available to the Receiving Party at any time from a Third Party which is not prohibited from disclosing such Confidential  Information; or

(c)            comes into the public domain, otherwise than through the fault of the Receiving Party or at the time of disclosure is in the public domain; or

(d)           the Receiving Party can demonstrate by its written records was developed by or for the Receiving Party independently of the disclosure of Confidential Information by the Disclosing Party or its Affiliates.

6.5          The obligations of each Party in this Article VI shall survive for a period of ten (10) years from the date of disclosure of such information.  Each of the Parties agrees that damages may not be an adequate remedy for breach of this Article VI and that, accordingly, each Party shall be entitled to seek injunctive or other equitable relief.

ARTICLE VII - INTELLECTUAL PROPERTY

7.1          Except as otherwise provided herein, all title to any and all inventions, improvements and data, whether or not patentable, and copyrightable works, which result from the performance of any Study hereunder shall reside with GSK BIO, subject to the remaining provisions of this Article VII.

7.2          RGI shall promptly disclose to GSK BIO all inventions and improvements (whether patentable or not) and all copyrightable works made by it which are governed by this clause 7.1.  RGI agrees, upon GSK BIO’s written request, to cooperate at GSK BIO’s expense in formally assigning title to GSK BIO to such inventions, improvements and copyrightable works, and to assist GSK BIO in obtaining patent or copyright protection to such intellectual property.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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7.3          Subject to the remaining provisions of this Article VII, RGI agrees that alloriginal works of authorship prepared by or for RGI in the performance of any Study hereunder shall be works for hire, and GSK BIO shall own such works and all copyrights therein.  For any original such works of authorship that, under the copyright laws of the United States, may not be considered works for hire, RGI agrees to reasonably cooperate with GSK BIO in protecting its rights in such works.  Such works shall be deemed to be the property of GSK BIO, and shall be included in the Confidential Information of GSK BIO under this Agreement.

7.4          Subject to this clause 7.4. RGI owns, and GSK BIO acknowledges RGI’s ownership of, (i) the Testing Services, including RGI’s proprietary process for analyzing the samples and producing the gene expression values, and all of the materials which comprise same, and any accompanying patent information owned by RGI, (ii) all intellectual property associated therewith (the “Intellectual Property”), and (iii) any algorithms or scales created and used by RGI in producing or developing the gene expression values (“algorithms”), and agrees that it shall not do or suffer to be done any act or thing or undertake any action anywhere that in any manner might infringe, or impair the validity, scope, or title of RGI in the Testing Services, algorithms or Intellectual Property which may be owned by RGI at any time.  It is understood that neither GSK BIO nor any Affiliate shall acquire or claim title to the Testing Services, algorithms, research and development, or the Intellectual Property by virtue of this Agreement. However, any improvements or modifications thereto which are developed during the course of RGI’s performance of the Services under the Agreement, will be jointly owned by the Parties and GSK BIO may, at its discretion and expense, seek patent protection for such jointly owned inventions. In case GSK BIO does not wish to seek such patent protection, it shall inform RGI thereof and RGI may seek patent protection at its own expense.

7.5          For the avoidance of doubt, the gene expression values produced and/or developed by the Testing Services (“gene expression values”), as well as all designs, developments, ideas, discoveries, inventions and information designed, developed, discovered, invented, produced or originated by GSK BIO independent of RGI in the course of or as a result of GSK BIO’s use or analysis of the gene expression values provided to GSK BIO by RGI pursuant to this Agreement shall be the sole property of GSK BIO.  All such designs, developments, ideas, discoveries, inventions and information shall be part of the Confidential Information of GSK BIO.  In the event GSK BIO decides, at its discretion, to seek patent, copyright or other protection (whether in the United States or elsewhere) in relation to any of same, or to publish the gene expression values, GSK BIO shall acknowledge RGI’s ownership of the property set forth in clause 7.4, as appropriate, that the Testing Services and process by which the gene expression values were produced are proprietary to RGI, and that the gene expression values were produced using RGI’s proprietary process, as the case may be.  .RGI shall reasonably cooperate with GSK BIO in the filing of any necessary applications and in otherwise applying for, obtaining or maintaining patent, copyright or other protection subject to GSK BIO’s acknowledgement, as set forth in this paragraph, and to GSK BIO bearing all necessary costs and expenses in relation thereto.

7.6          If any of the Intellectual Property owned by RGI is necessary in order to reasonably use the gene expression values owned by GSK BIO according to this Agreement, RGI will grant GSK BIO a non-exclusive, fully paid up, irrevocable, world wide license with the right to sublicense to use such Intellectual Property solely for the purpose of using GSK BIO’s gene expression values.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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7.7          RGI shall be entitled to utilize the gene expression values (although GSK BIO retains ownership of the gene expression values) only for the purposes of this Agreement, and anydesigns, developments, ideas, discoveries, inventions and information designed, developed, discovered, invented, produced or originated by RGI independent of GSK BIO in the course of or as a result of RGI’s use of the gene expression values provided to GSK BIO by RGI pursuant to this Agreement shall be the sole and absolute property of GSK BIO.  All such designs, developments, ideas, discoveries, inventions and information shall be part of the Confidential Information of GSK BIO. RGI shall reasonably cooperate with GSK BIO in the filing of any necessary applications and in otherwise applying for, obtaining or maintaining patent, copyright or other protection with regard to any such designs, developments, ideas, discoveries, inventions and information, subject to GSK BIO’s bearing all necessary costs and expenses in relation thereto.

7.8          The Parties shall observe all copyrights in written material, including computer software, belonging to the other Party or any Third Party and will not make any unauthorized copies of such material or software.

7.9          Each Party acknowledges that the other Party owns certain inventions, processes, know-how, trade secrets, improvements and other intellectual property which have been independently developed by each Party and which relate to that Party’s business or operations.  It is acknowledged that the intellectual property owned by either Party on the date of this Agreement will remain the exclusive property of the owning Party.

7.10        GSK BIO shall provide RGI with sufficient amounts of all compounds, materials, samples or other substances (collectively, the “Test Materials”) with which to perform each Study,as well as sufficient and comprehensive data as may be reasonably required by RGI concerning the stability, proper storage and safety requirements with respect to such Test Materials. Such Test Materials shall remain the property of GSK BIO at all times and shall be properly stored by RGI in accordance with the SOW or as otherwise agreed by the Parties.

7.11        Upon completion of any Study, upon request by GSK BIO, any remaining untested samples of the Test Materials provided for such Study shall be returned to GSK BIO for retention in compliance with applicable regulatory requirements.

ARTICLE VIII - RELATIONSHIP OF THE PARTIES

8.1          It is understood that in the performance of this Agreement RGI will be acting in the capacity of an independent contractor and that nothing in this Agreement shall be construed as creating any contract of employment or relationship of principal and agent between GSK BIO and RGI or GSK BIO or any of the Relevant Staff.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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8.2          RGI shall perform this Agreement solely as an independent contractor, and as such shall select, engage and discharge its employees and otherwise direct and control the performance of the Studies.  Neither RGI nor anyone employed by it shall be, represent, act, or purport to act as, or be deemed to be, the agent, representative, employee, or servant of GSK BIO nor shall GSK BIO nor anyone employed by it be, represent, act, or purport to act as, or be deemed to be, the agent, representative, employee, or servant of RGI.

8.3          Neither GSK BIO nor RGI shall have authority to make any statement, representation, or commitment of any kind or to take any action binding upon the other Party without the other Party's prior written authorization.

ARTICLE IX- REPRESENTATION AND WARRANTIES – INDEMNIFICATION

9.1          RGI represents and warrants that RGI and the Relevant Staff:

(a)           have the appropriate level of expertise and qualifications and the necessary ability to undertake the work required under this Agreement; and

(b)           are not prevented or restricted by any obligations owed to a Third Party or otherwise in any way from performing the Services; and

(c)           owns and/or controls all the necessary rights, including patent rights, for the performance of the Services in accordance with this Agreement.

9.2          In addition RGI represents that all members of the Relevant Staff are contractually bound to assign to RGI all inventions, improvements and any other intellectual property rights that may be developed or conceived by the Relevant Staff or that may otherwise arise during the performance of the Services under this Agreement and that none of the Relevant Staff have any rights thereto that could impair or jeopardize the applicability or enforcement of the provisions laid down in Article VII above.

9.3          Each Party represents and warrants that it has the right to enter into this Agreement and is not in conflict with any Third Party obligation during the performance of the Study under this Agreement.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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9.4          In addition to any other indemnification provided herein, RGI agrees to indemnify, defend and hold GSK BIO and its affiliates, shareholders, officers, directors, employees, agents, successors and assigns harmless from and against any and all Third Party claims, suits, actions, liabilities, losses, costs, reasonable attorneys' fees, expenses, judgments or damages, whether ordinary, special or consequential (collectively, the “Indemnified Amounts”), arising out of (i) RGI's negligence in the performance of any Study and/or Services, (ii) any wrongful acts or omissions in the performance by RGI of any Study and/or Serviceshereunder, whether such actions are of RGI, its employees, agents, representatives, subcontractors or invitees, or (iii) any material breach of this Agreement by RGI, its employees, agents, representatives, subcontractors or invitees.

9.5          In addition to any other indemnification provided herein, GSK BIO agrees to indemnify, defend and hold RGI and its affiliates, shareholders, officers, directors, employees, agents, successors and assigns harmless from and against any and all Indemnified Amounts arising out of  (i) GSK BIO's negligence in the conduct of the activities to be performed by GSK BIO under this Agreement, (ii) any wrongful acts or omissions in the conduct of the activities to be performed by GSK BIO under this Agreement, whether such actions are of GSK BIO, its employees, agents, representatives, subcontractors or invitees, or (iii) any material breach of this Agreement by GSK BIO, its employees, agents, representatives, subcontractors or invitees.

9.6          Where claims relate to those by third Parties and in the event either Party incurs, or expects to incur expenses, damages, claims or liability for which it is entitled hereunder to seek indemnification from the other Party, the Party claiming indemnification (the “Indemnitee”) shall promptly notify the other Party (the “Indemnitor”) and shall permit the Indemnitor, at the Indemnitor’s sole discretion, to settle any such claim or suit and agrees to the complete control of the defense or settlement of such claim or suit by the Indemnitor, and the Indemnitor shall not be responsible for any legal fees or other costs incurred other than as provided in this Agreement provided, however, that the Indemnitor may not settle such claim or suit in any manner that would require payment by the Indemnitee, or would materially adversely affect the rights granted to the Indemnitee hereunder, or would materially conflict with the terms of this Agreement, or adversely affect other of its products, without first obtaining the Indemnitee’s prior written consent, which consent shall not be unreasonably withheld.  The Indemnitee, its employees, consultants and agents, shall cooperate fully with the Indemnitor and its legal representatives in the investigation and defense of any claims or suits covered by the indemnification provisions of this Agreement.  Neither Party will be liable for any loss of actual or anticipated income or profits or for any special, indirect or consequential loss or damages.

9.7          Nothwithstanding anything to the contrary in this Agreement or the Original Agreement, RGI (and its Affiliates and shareholders) hereby releases and forever hold GSK BIO (and its Affiliates) harmless from any and all claims, losses or damages related to or arising out of RGI having opened, operated, and subsequently closed that certain laboratory in the [***].

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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ARTICLE X – TERMINATION

10.1        GSK BIO shall have the absolute and unconditional right, in its sole judgment and discretion, to terminate this Agreement and/or any Study performed under this Agreement for any reason, with or without cause, such termination to be effective on the next anniversary date of the Effective Date provided at least ninety (90) days prior written notice is given to RGI.

10.2        Either Party (“the Non-Defaulting Party”) may terminate this Agreement by notice in writing if (a) the other Party commits or permits a material breach of this Agreement which is incapable of remedy, or if capable of remedy, the breaching Party fails to cure that breach within ninety (90) days after receiving written notice thereof from the Non-Defaulting Party; or (b) the other Party ceases to exist as a going concern as a result of bankruptcy or insolvency proceedings.

10.3        Subject to clause 7.5. above, if GSK BIO terminates this Agreement pursuant to clause 10.1 above, GSK BIO shall be permitted to use the technology used by RGI in performance of the Services solely for the purpose of completing any unperformed services pursuant to any then outstanding and pending SOW during the remainder of the existing Term (with no renewals permitted).  To the extent that GSK BIO requests RGI’s assistance in such use of the technology, and RGI agrees to provide such assistance, then GSK BIO shall provide appropriate compensation to RGI for such assistance.

10.4       In the event of termination of this Agreement and/or any Study performed under this Agreement, RGI shall use all reasonable efforts to minimize any further costs and RGI shall be reimbursed only for the Services actually performed and the expenses actually and reasonably incurred as of the effective date of such termination.  RGI will within sixty (60) days after the date of such termination reimburse any amounts overpaid by GSK BIO (including any remaining Existing Credit).

10.5       Upon termination of this Agreement, if requested by the other Party, each Party shall immediately deliver up to the other Party or, if the other Party agrees, destroy all copies of and other embodiments of any of the Confidential Information and all other correspondence, documents, specifications, and any other property belonging to the other Party which may be in its/his/her possession.  One archival copy of such materials may be maintained in the possession of legal counsel for the Party.

10.6        (a)          Expiration or termination of this Agreement or the Term for any reason shall terminate all outstanding obligations and liabilities between the Parties arising from this Agreement except that the provisions ofArticles I, IV,VI, VII, VIII, X, XII, and Sections 3.2, 5.6, 5.11, 5.12, 5.17 and 9.4 through 9.7 shall survive such expiration or termination for the time period specified in such provisions or if no such time period is specified, five (5) years after the date of expiration or termination.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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(b)          Termination or expiration of this Agreement for whatever reason in accordance with the provisions hereof shall not affect the accrued rights of the Parties, and shall not limit remedies that may be otherwise available in law or equity.

10.7        The Parties may terminate this Agreement at any time by mutual agreement in writing, executed by both Parties.

ARTICLE XI – FORCE MAJEURE

11.1        In this Agreement, “force majeure” shall mean any cause preventing either Party from performing any or all of its obligations which arises from or is attributable to acts, events, omissions or accidents beyond the reasonable control of the Party so prevented including, without limitation, strikes, lock-outs or other industrial disputes (whether involving the workforce of the Party so prevented or of any Third Party), act of God, war, terrorism, riot, civil commotion, malicious damage, compliance with any law or Governmental order, rule, regulation or direction, accident, breakdown of plant or machinery, fire, flood or storm (each a “Force Majeure Condition”).

11.2        Subject to clause 11.3, each Party shall be released from its obligations under this Agreement to the extent that its performance hereunder is delayed, hindered or prevented by force majeure.  If either Party is prevented or delayed in the performance of any of its obligations under this Agreement by force majeure, that Party shall forthwith serve notice in writing on the other Party specifying the nature and extent of the circumstances giving rise to force majeure, and shall subject to service of such notice and to clauses 11.3 and 11.4, have no liability in respect of the performance of such of its obligations as are prevented by the force majeure event during the continuation of such events, and for such time after they cease as is necessary for that Party, using all reasonable endeavors, to recommence its affected operations in order for it to perform its obligations.

11.3        The Party claiming to be prevented or delayed in the performance of any of its obligations under this Agreement by reason of force majeure shall use all reasonable endeavors to bring the force majeure event to a close or to find a solution by which the Agreement may be performed despite the continuation of the force majeure event.

11.4        If either Party is prevented from performance of its obligations for a continuous period in excess of three (3) months due to force majeure, the other Party may terminate this Agreement forthwith on service of written notice upon the Party so prevented, in which case neither Party shall have any liability to the other except that rights and liabilities which accrued prior to such termination shall continue to subsist.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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11.5        Notwithstanding anything in this Article 11 to the contrary, no Force Majeure Condition shall relieve GSK BIO of the obligation to pay for Testing Services which have already been completed by RGI.

ARTICLE XII – MISCELLANEOUS

12.1        Notice.

(a)           Any notice required by this Agreement to be given to either Party shall be in writing and shall be served by being addressed to the address of the other Party stated in this Agreement or such other address as may from time to time have been notified by a notice given in accordance with this clause.  Any notice or other document to be given under this Agreement shall be deemed to have been duly given if left at or sent to the address, or if more than one is designated by a Party, to the addresses, referred to in clause 12.2 by: hand or courier; first class post, express or other fast postal service (airmail if abroad); or registered post; or facsimile or other electronic media.

(b)           Any such notice or other document shall be deemed to have been received by the addressee five (5) working days following the date of dispatch of the notice or other document by or, where the notice or other document is sent by hand or courier or is given by facsimile or other electronic media, simultaneously with the delivery or transmission.  To prove the giving of a notice or other document it shall be sufficient to show that it was dispatched.

(c) The initial details for the purposes of clause 12.1 are:

For GSK BIO

GlaxoSmithKline Biologicals S.A.

Parc de la Noire Epine

Avenue Pascale 2/6

B-1300 Wavre

Belgium

Attn: Vice President, Procurement

With copies to:

GlaxSmithKline Biologicals S.A.

Parc de la Noire Epine

Avenue Pascale 2/6

B-1300 Wavre

Belgium

Attn: Vice President and General Counsel, Legal Department

For RGI

Attn: Kathleen Danenberg

1640 Marengo Street Suite 600

Los Angeles, CA 90033

Fax: 323-224-3096

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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12.2       Governing Law And Jurisdiction. This Agreement will be governed by and construed in accordance with the laws of Belgium, without regard to its conflict of laws or choice of laws principles.  The Parties agree that any disputes arising under this agreement shall be presented exclusively before the courts of the State of California in the United States in cases RGI is the respondent, and in Nivelles, Belgium, in cases GSKBIO is the respondent.  Each Party hereby submits itself to the personal jurisdiction and venue of such courts in connection with any such proceedings, and agrees to accept service of process by mail.

12.3        Entire Agreement, Amendment Or Variation.

(a)           This Agreement sets out the entire agreement and understanding between the Parties regarding the subject matter of this Agreement and supersedes all prior discussions, arrangements and agreements, whether oral or in writing or which may be inferred from the conduct of the Parties.

(b)          No other terms and conditions (including any standard terms and conditions of GSK BIO, RGI or their Affiliates) shall apply in relation to this Agreement or the provision of the Services or of any other Services by RGI to GSK BIO, save for any additional terms and conditions specifically agreed to in writing hereafter by the Parties.

(c)           Any amendment or modification to this Agreement shall be made in writing and signed by both Parties.

12.4        Validity/Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision, which shall remain in full force and effect.  The Parties shall use their reasonable efforts to achieve the purpose of the invalid provision by a new legally valid stipulation.

12.5        Assignment.  Either Party may assign this agreement in whole or in part, provided that, if RGI wishes to assign this agreement in whole or in part, it shall first obtain the prior written consent of GSK BIO, which shall not be unreasonably withheld.

12.6        Waiver.  The failure of either Party to exercise any right or remedy under this Agreement shall not be deemed to be a waiver of such right or remedy.  Any waiver in respect of any breach of any provision of this Agreement which is made in writing shall be valid but shall not be construed to be a waiver of any succeeding breach of such a provision.

12.7        Announcements.  Neither Party shall publish the existence or subject matter of this Agreement without the prior written consent of the other Party, such consent not to be  unreasonably withheld or delayed.  No oral or written release of any statement, information, advertisement or publicity matter having any reference to either GSK BIO or RGI, express or implied, shall be used by the other Party or on the other Party's behalf, unless and until such matter shall have first been submitted to and received the approval in writing of the Party whose name is being used.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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12.8        Permits.  RGI shall obtain and pay for all permits, governmental fees, and licenses necessary for it to performthe Studies hereunder and shall obtain all required inspections, authorizations and approvals prior to commencement of any Study hereunder.

12.9        Records.  RGI agrees to maintain for a period of two (2) years after the termination or expiration of this Agreement adequate records of, and copies of all receipts for expenses incurred in connection with, the performance of the Services and allow access to GSK BIO and its authorized representatives to inspect such records and receipts upon reasonable notice.

12.10      Laboratory Visits.  GSK BIO’s representatives may visit RGI’s facilities at reasonable times, on reasonable prior notice, and with reasonable frequency, during normal business hours to observe the progress of the Testing Services.  RGI will assist GSK BIO in scheduling such visits.

12.11      FDA.EMEA Visits.

(a)       At GSK BIO’s request, a representative of RGI shall accompany GSK BIO to FDA/EMEA to explain or discuss any and all aspects of the Testing Services.  Such visit or visits to the FDA/EMEA shall be arranged at times mutually agreeable to GSK BIO and RGI.  All reasonable travel and living expenses incurred by RGI in connection with such visits shall be reimbursed by GSK BIO.

(b)       RGI shall notify GSK BIO of any request from FDA/EMEA, other federal or state agencies or any other Third Party to inspect or otherwise gain access to the information, gene expression values, clinical samples, or materials pertaining to the Services performed by RGI under this Agreement.  RGI shall notify GSK BIO of such request prior to permitting any Third Party access, unless prior notice is not reasonably feasible.

(c)       RGI agrees to permit inspection of such information, gene expression values, clinical samples, or other materials by authorized representatives of FDA/EMEA and as otherwise required by law.  During such inspections, RGI shall provide appropriate scientific and quality assurance support.  RGI shall promptly send GSK BIO a copy of any inspection reports received by RGI as a result of any such inspection.

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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12.12     Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

SIGNATURE PAGE FOLLOWS

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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IN WITNESS whereof the Parties have executed this Agreement on the date above written.

Signed for and on behalf of GlaxoSmithKline Biologicals SA by

/s/ Marcel Laubacher	Signature	Date	01/09/2009
Name: Marcel Laubacher
Title: Vice President Procurement
Signed for and on behalf of Response Genetics Inc. by
/s/ Kathleen Danenberg	Signature	Date	07/09/2009
Name : Kathleen Danenberg
Title : Chief Executive Officer

Portions of this Exhibit were omitted and have been filed separately with the Secretary of the Commission pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

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Response Genetics List of Services

EXHIBIT A

TESTING SERVICES FEE SCHEDULE

RGI Services	Cost	Explanation of Service
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

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RGI Services	Cost	Explanation of Service
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]

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EXHIBIT B

  FORM TASK ORDER/STATEMENT OF WORK AND SCHEDULES

TASK ORDER/STATEMENT OF WORK REFERENCE NUMBER ………….

This TASK ORDER/STATEMENT OF WORK is effective  ____________, 200__ (the “Effective Date”) between

__________________ (“Contractor”), with offices located at  _______________________,

and

GlaxoSmithKline Biologicals SA, with offices located rue de l’Institut 89, B-1330 Rixensart, Belgium (“GSK”).

BACKGROUND

GSK and Contractor are parties to a Master Agreement (or are Affiliates of the parties to the Master Agreement) with an effective date of __________.  The terms and conditions of that Master Agreement are used by GSK and Contractor, by executing this Task Order/Statement of Work, to contract for the laboratory research services described in this Task Order/Statement of Work.

The following shall apply in this Task Order/Statement of Work and to the Study which is the subject of this Task Order/Statement of Work:

CONTRACTOR’S NAME: Response Genetics, Inc.

CONTRACTOR’S ADDRESS: 1640 Marengo St.,#600, Los Angeles, CA 90033

CONTRACTOR’S TELEPHONE NO.:+1-323-224-3900

CONTRACTOR’S TAX ID #:113525548

TEST NAME:

STUDY TITLE (if applicable):

GSK PROTOCOL NUMBER (if applicable) :

CONTRACTOR MONITOR :

GSK REPRESENTATIVE :

Period of Performance of the Services :  From [day] [month] [year]  To [day] [month] [year]

1.           THE SERVICES

Contractor agrees to perform the Services as described in the Protocol, task description, and/or Study proposal in Schedule A, attached and incorporated by reference as part of this Task Order/Statement of Work, and in accordance with the terms of the Master Agreement.

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2.           COMPENSATION

In consideration for its performance of Services under this Task Order/Statement of Work, GSK shall pay Contractor in accordance with the payment schedule as documented in Schedule B, attached and incorporated by reference as part of this Task Order/Statement of Work.

3.           ARCHIVING SPECIFICATIONS

Anticipated date of Study completion of work as detailed in schedule A :

4.           TERM; TERMINATION

This Task Order/Statement of Work shall continue until the Services are completed or until terminated as provided in the Master Agreement.  The performance schedule is summarized below with the major milestones and delivery dates (modify as needed):

Start date:

First sample delivered

Final sample delivered

Final assay complete

Final Report:

5.           INCORPORATION BY REFERENCE

The terms and conditions of the Master Agreement are hereby incorporated by reference into and made a part of this Task Order/Statement of Work.  All defined terms within the Master Agreement shall have the same meaning when used in this Task Order/Statement of Work.  If any provisions of this Task Order/Statement of Work are in direct conflict with this Master Agreement so that the provisions of both cannot be given effect, the terms of this Task Order/Statement of Work shall govern the specific issue.

6.           NOTICE.  In addition to the recipients of notice listed in the Master Agreement, notices applicable to this Task Order/Statement of Work Agreement shall be sent to (list all relevant contacts at both Contractor and GSK including study director below):

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If to Contractor: Name: Address: Facsimile: Copy to: If to GSK: Name: Address: Facsimile: Copy to:

7.           ADDITIONAL TERMS.        Include any additional project-specific terms.]

8.           ENTIRE AGREEMENT.  This Task Order/Statement of Work, including the incorporated terms of the Master Agreement, represents the entire and integrated agreement between Contractor and GSK-Biologicals and supersedes all prior negotiations, representations or agreements, either written or oral, regarding the Study.

GLAXOSMITHKLINE BIOLOGICALS SA	CONTRACTOR’S NAME
By:	By:
Name:	Name:
Title:	Title:

Date: Date:

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TASK ORDER/STATEMENT OF WORK

EXHIBIT A

DESCRIPTION OF THE SERVICES

The Contractor shall perform ………. According agreed Standard ……as detailed below.

Test Performance Assessment

Screening Step

Technical Bridge

Clinical Bridge

Test name

Contractor or GSK Standard Operating Procedure number

Validation plan

Specific Quality Standard (if negative)

Reporting

Timings

Prices (see schedule B)

Archiving

Responsibility

Test Routine

Test name

Contractor or GSK Standard Operating Procedure number

Study title

Planned number samples

Timings:

Turnaround time

Timetable

Archiving

Prices (see schedule B)

Reporting

Responsibility

Specific Quality Standard (if negative)

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TASK ORDER/STATEMENT OF WORK

EXHIBIT B

PAYMENT/PAYMENT SCHEDULE

Payment schedule should be generally cost neutral throughout study period

Invoices should be dispatched regularly at monthly intervals throughout the course of the analyses.

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EXHIBIT C

SOW’s In Effect as of the Effective Date

Study title/Description TO	Task Order reference	PO#	TO amount
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]
[***]	[***]	[***]	[***]

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Exhibit D

HUMAN RIGHTS

(A) Each Party shall not employ engage or otherwise use any child labor in circumstances such that the tasks performed by any such child labor could reasonably be foreseen to cause either physical or emotional impairment to the development of such child in all countries in which it operates or sources goods;

(B) Each Party shall not use forced labor in any form (prison, indentured, bonded or otherwise) and staff are not required to lodge papers or deposits on starting work;

(C) Each Party shall comply with all applicable environment, safety and health regulations and provide a safe and healthy workplace, presenting no immediate risks to its staff.  Any housing provided by a Party to its workers is safe for habitation.  Each party shall provide access to clean water, food, and emergency healthcare to its workers in the event of accidents or incidents at the Contractor’s workplace;

(D) within the customs and practices of the countries in which each Party operates, each Party shall not discriminate against any worker on any ground (including race, religion, disability or gender).  Each Party shall not engage in or support the use of corporal punishment, mental, physical, sexual or verbal abuse and does not use cruel or unusual disciplinary practices in the workplace;

(E) Each Party shall pay each employee at least the minimum wage, or the prevailing industry wage, (whichever is the higher) and provide each employee with all legally mandated benefits;

(F) Each Party shall comply with the laws on working hours and employment rights in the countries in which it operates;

(G) Each Party has identified all the hazardous or toxic waste that it or its contractors or agents produce, and it is confident that all waste is disposed of by competent bodies via authorized disposal routes; and

(H) Each Party shall not engage in any activities which may cause  harm to either  those living in the vicinity to its operations or the environment.

Each Party shall upon request furnish the other with any documents reasonably requested in relation to the above.

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EXHIBIT E

FORM OF [***]

SLIDE 1

[***]

SLIDE 2

[***]

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SLIDE 3

[***]

SLIDE 4

[***]

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EXHIBIT F

BRIDGING AND TRANSFER ACTIVITIES

	Cost	Explanation
Equipment and Supplies
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
Testing Services
[***]	[***]	[***]
Consulting Fees
[***]	[***]	[***]
[***]	[***]	[***]
Training
[***]	[***]	[***]
[***]	[***]	[***]
Travel
[***]	[***]	[***]

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SCHEDULE 5.16

	Cost	Explanation
Equipment and Related Expenses
[***]	[***]	[***]
[***]	[***]	[***]
Bridging/Testing Services
[***]	[***]	[***]
[***]	[***]	[***]
Consulting Fees
[***]	[***]	[***]
Training and Travel
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
[***]	[***]	[***]
Document Translation
[***]	[***]	[***]

Page 37 of 39

TRAVEL AND EXPENSE REIMBURSEMENT GUIDELINES

1. GSK will, to the extent provided for under its written agreement with Supplier, reimburse Supplier for out-of-pocket expenses actually and reasonably incurred by Supplier’s personnel in connection with GSK-authorized travel and for lodging, car rental and meals while away from home performing services directly on behalf of GSK.

2. Local travel expenses should not exceed $[***] per session for occasion when facilitators are utilized who will have Local Travel expenses and $[***] for occasions when facilitators are utilized who will have Non-Local travel expenses.

3. All Supplier expenses for which reimbursement is sought must be approved in advance by GSK.

4. All expenses over $[**] must be accompanied by a written receipt and an explanation as to why the expenses were incurred.

5. Reimbursement of Supplier’s expenses is subject to the following conditions:

(a) Air and train travel only by economy (coach) class or actual fare, whichever is less;

(b) Lodging at hotels that are generally considered medium cost (i.e.,Marriott, Ramada, etc.);

(c) When rental cars are required, economy or compact class rental automobiles are to be used;

(d) Meals at restaurants are generally considered medium priced, taking into account that no more than $50 will be allowed for any day that a Supplier’s staff member is required to perform work on behalf of GSK when a overnight stay is required; and

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(e) Any other expenses specifically authorized under Supplier’s agreement with GSK or expressly agreed to in writing by GSK’s Representative.

6. Expenses incurred in excess of the above, or otherwise not permitted hereunder, shall be borne by Supplier unless authorized by GSK in writing.  Expenses related to general Supplier overhead and back office work, such as administrative efforts, general management expenses and any other expenses not directly related to GSK’s work, will not be reimbursable by GSK.

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EX-31.1

Exhibit 31.1

CERTIFICATION

 I, Kathleen Danenberg, certify that:

1. I have reviewed this quarterly  report on Form 10-Q of Response Genetics, Inc. for the period ended September 30, 2009;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant , including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant ’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant ’s internal control over financial reporting that occurred during the registrant ’s most recent fiscal quarter (the registrant’s issuer ’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant ’s internal control over financial reporting; and

5. The registrant ’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant ’s auditors and the audit committee of the registrant ’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant ’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2009

/s/ Kathleen Danenberg

Kathleen Danenberg

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

 I, Thomas Stankovich, certify that:

1. I have reviewed this quarterly  report on Form 10-Q of Response Genetics, Inc. for the period ended September 30, 2009;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant , including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant ’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant ’s internal control over financial reporting that occurred during the registrant ’s most recent fiscal quarter (the registrant’s issuer ’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant ’s internal control over financial reporting; and

5. The registrant ’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant ’s auditors and the audit committee of the registrant ’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant ’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s  internal control over financial reporting.

Date: November 16, 2009

/s/ Thomas Stankovich

Thomas Stankovich

Chief Financial Officer

EX-32

Exhibit 32

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Response Genetics, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report for the period ended September 30, 2009 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 16, 2009	/s/ Kathleen Danenberg
	President and Chief Executive Officer
Dated: November 16, 2009	/s/ Thomas Stankovich
	Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification “accompanies” the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.