Base Business Grows by 58% in Quarter and
120% for the Year, Installed Base Grows by 38 to 413
Analyzers
GenMark Diagnostics, Inc. (Nasdaq:GNMK), a leading
provider of automated, multiplex molecular diagnostic testing
systems, today reported financial results for the fourth quarter
and year ended December 31, 2013.
Revenues for the quarter ended December 31, 2013 were $6.5
million compared with $9.4 million during the fourth quarter of
2012. The 32% decrease in total fourth quarter revenue was
attributable to a decrease in purchases from Natural Molecular
Testing Corporation (NMTC) during the current period, which was
offset by significant growth in both reagent and instrument revenue
from other customers. NMTC accounted for 57% of total revenues in
the quarter ended December 31, 2012 and did not account for
any revenues in the fourth quarter of 2013. Revenue during the
current quarter from the Company’s “Base Business,” which excludes
revenues attributable to NMTC, increased by 58% over the prior year
period. Reagent revenues for the fourth quarter declined 36% to
$5.9 million compared with $9.1 million in the quarter ended
December 31, 2012. Fourth quarter reagent revenue from the
Company’s Base Business increased year-over-year by 56%. Instrument
and other revenues increased by 100% to $0.6 million from $0.3
million in the prior year period, due mainly to sales of XT-8
instruments. The Company placed a total of 38 net new analyzers
during the current quarter to bring its total installed base to
413, all in end-user laboratories within the U.S. market.
“2013 was another year of exceptional execution and performance
for our Company, both in terms of the growth of our Base Business,
as well as the progress we made toward the development of our
NexGen system,” stated GenMark’s President & CEO, Hany
Massarany.
Gross profit for the quarter ended December 31, 2013 was
$2.9 million, or 45% of revenue, compared with a gross profit of
$4.7 million, or 50% of revenue for the same period in 2012.
Operating expenses increased $3.9 million to $13.2 million
during the fourth quarter of 2013 compared with the fourth quarter
of 2012. Research and Development expenses increased $2.2 million
due to the Company’s NexGen platform and assay development
activities. Sales and Marketing expenses increased $0.9 million
mainly due to continued expansion of the Company’s U.S. sales force
ahead of the launch of its NexGen system. General and
Administrative expenses increased $0.8 million primarily due to a
non-recurring charge of $1.6 million to record the impairment of a
long-lived intangible asset related to a license which the Company
terminated in 2013. On a non-GAAP basis, which excludes the effect
of this impairment charge, operating expenses for the fourth
quarter of 2013 were $11.6 million.
Loss per share was $0.26 for the fourth quarter of 2013,
compared with a loss per share of $0.15 in the fourth quarter of
2012. On a non-GAAP basis, the Company’s loss per share for the
fourth quarter of 2013 was $0.21.
The Company ended the year of 2013 with $106.3 million in cash
and investments. The Company intends to continue utilizing its cash
balances to invest in the development of its NexGen platform and
related test menu, and for infrastructure improvements and general
corporate purposes.
FISCAL YEAR 2013 RESULTS
Revenue for the year ended December 31, 2013 was $27.4
million, compared to $20.5 million for the prior year, an increase
of 34%. Reagent revenue for the current year was $25.3 million,
compared to $19.6 million for the prior year, and instrument sales
for the current year were $1.7 million compared to $0.5 million for
the prior year. The Company’s Base Business grew by 120% for the
year ended December 31, 2013 over the previous year.
Gross profit for the year ended December 31, 2013 was $11.5
million, or 42% of revenue, compared with a gross profit of $8.8
million, or 43% of revenue for the prior year. During the current
year, the Company reserved $1.2 million of inventory made for NMTC
and impaired $0.3 million of manufacturing equipment procured to
support NMTC’s previous purchasing volumes. On a non-GAAP basis,
which excludes the effect of these NMTC adjustments, gross profit
for the year ended December 31, 2013 was $13.0 million, or 47%
of revenue.
Operating expenses increased $15.7 million to $46.4 million
during the current year compared with the prior year. Research and
Development expenses increased $8.5 million in the current year due
to the Company’s NexGen platform and assay development activities.
Sales and Marketing expenses increased $6.4 million year-over-year
mainly due to an increase in the Company’s allowance for doubtful
accounts reserve of $2.7 million related to NMTC, and additional
sales personnel costs. General and Administrative expenses
increased $0.7 million year-over-year due to an impairment charge
of $1.6 million related to a license agreement which the Company
terminated in late 2013. On a non-GAAP basis, which excludes
NMTC-related adjustments and this non-recurring intangible asset
impairment charge, operating expenses for the year ended
December 31, 2013 were $42.0 million.
Net loss for the year ended December 31, 2013 was $33.6
million, or a $0.95 loss per share, compared to net loss of $22.1
million, or an $0.84 loss per share, for the prior year. On a
non-GAAP basis, the loss per share for the year ended
December 31, 2013 was $0.82.
INVESTOR CONFERENCE CALL
GenMark will hold a conference call to discuss fourth quarter
and year end 2013 results and the outlook for 2014 at 4:30 PM EDT
today. The conference call and webcast can be accessed live through
the Company’s website under the Investor Relations section and will
be archived for future reference. To listen to the conference call,
please dial 877-312-5847 (US/Canada) or 253-237-1154
(International) and use the conference ID number 6963720
approximately five minutes prior to the start time.
ABOUT GENMARK DIAGNOSTICS
GenMark Diagnostics is a leading provider of automated,
multiplex molecular diagnostic testing systems that detect and
measure DNA and RNA targets to diagnose disease and optimize
patient treatment. Utilizing GenMark’s proprietary eSensor®
detection technology, GenMark’s eSensor® XT-8 system is designed to
support a broad range of molecular diagnostic tests with a compact,
easy-to-use workstation and self-contained, disposable test
cartridges. GenMark currently markets four tests that are FDA
cleared for IVD use: Cystic Fibrosis Genotyping Test, Respiratory
Viral Panel, Thrombophilia Risk Test, and Warfarin Sensitivity
Test. A number of other tests, including HCV Genotyping, 2C19
Genotyping, and 3A4/3A5 Genotyping are available for research use
only. For more information, visit www.genmarkdx.com.
SAFE HARBOR STATEMENT
This press release includes forward-looking statements regarding
events, trends and business prospects, which may affect our future
operating results and financial position. Such statements,
including, but not limited to, those regarding and the timely
completion of our NexGen system and related assay development
projects, are all subject to risks and uncertainties that could
cause our actual results and financial position to differ
materially. Some of these risks and uncertainties include, but are
not limited to, our ability to successfully develop and
commercialize our NexGen system and its related test menu,
constraints or inefficiencies caused by unanticipated acceleration
and deceleration of customer demand, our ability to successfully
expand sales of our product offerings outside the United States,
and third-party payor reimbursement to our customers, as well as
other risks and uncertainties described under the “Risk Factors” in
our public filings with the Securities and Exchange Commission. We
assume no responsibility to update or revise any forward-looking
statements to reflect events, trends or circumstances after the
date they are made.
ABOUT NON-GAAP FINANCIAL MEASURES
GenMark’s management believes that non-GAAP financial measures
provide meaningful supplemental information regarding the Company’s
performance by excluding certain expenses and other items that may
not be indicative of core business results. To supplement the
Company’s financial results for the fourth quarter and year ended
December 31, 2013 presented in accordance with GAAP, GenMark uses
the following financial measures defined as non-GAAP by the SEC:
non-GAAP cost of revenues, non-GAAP sales and marketing expenses,
non-GAAP operating expenses, non-GAAP other income (expense),
non-GAAP gross profit, non-GAAP net loss, and non-GAAP loss per
share. GenMark’s management does not, nor does it suggest that
investors should, consider such non-GAAP financial measures in
isolation from, or as a substitute for, financial information
prepared and presented in accordance with GAAP. GenMark believes
that both management and investors benefit from referring to these
non-GAAP financial measures in assessing GenMark’s performance and
when planning, forecasting and analyzing future periods. These
non-GAAP financial measures also facilitate management’s internal
comparisons to GenMark’s historical performance and our
competitors’ operating results. GenMark believes these non-GAAP
financial measures are useful to investors in allowing for greater
transparency with respect to supplemental information used by
management in its financial and operational decision making.
Further, our reconciliations of non-GAAP to GAAP operating results,
which are included on the attached tables, are presented solely to
assist a reader in understanding the impact of the various
adjustments to our GAAP operating results, individually and in the
aggregate, and are not intended to place any undue prominence on
our non-GAAP operating results.
GENMARK DIAGNOSTICS, INC. CONSOLIDATED BALANCE
SHEETS (In thousands, except par value)
As of December 31, 2013
2012 Current assets
(Unaudited)
Cash and cash equivalents $ 35,723 $ 51,250 Investments 69,866 —
Restricted cash — 1,343 Accounts receivable - net of allowances of
$2,736 and $30 2,859 3,190 Inventories 2,102 1,993 Prepaid expenses
and other current assets 552 226
Total current assets 111,102 58,002 Property and equipment,
net 8,591 7,074 Intangible assets, net 1,197 1,832 Restricted cash
758 — Other long-term assets 106 1,108
Total assets $ 121,754 $ 68,016
Current
liabilities Accounts payable 3,863 2,445 Accrued compensation
3,375 3,076 Loan payable 37 638 Other current liabilities
2,962 3,015
Total current liabilities
10,237 9,174
Long-term liabilities Deferred rent 1,601 1,725
Loan payable, net of current portion — 63 Other noncurrent
liabilities 748 604
Total
liabilities 12,586 11,566
Stockholders’ equity Preferred stock, $0.0001 par value;
5,000 authorized, none issued — — Common stock, $0.0001 par value;
100,000 authorized; 41,520 and 32,753 shares issued and outstanding
as of December 31, 2013 and December 31, 2012, respectively 4 3
Additional paid-in capital 333,363 247,449 Accumulated deficit
(224,209 ) (190,566 ) Accumulated other comprehensive loss
10 (436 ) Total stockholders’ equity 109,168
56,450 Total liabilities and stockholders’
equity $ 121,754 $ 68,016
GENMARK
DIAGNOSTICS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS (In thousands, except per share data)
Three Months Ended Twelve
Month Ended December 31 December 31, 2013
2012 2013 2012
Revenue
(Unaudited)
(Unaudited)
(Unaudited)
Product revenue $ 6,577 $ 9,335 $ 27,204 $ 20,211 License and other
revenue (125 ) 108 200
258
Total revenue 6,452 9,443 27,404 20,469 Cost of
revenues 3,521 4,762 15,894
11,640
Gross profit 2,931
4,681 11,510 8,829
Operating expenses Sales and marketing 2,988 2,114 12,818
6,378 General and administrative 3,940 3,063 11,512 10,806 Research
and development 6,274 4,099
22,060 13,536
Total operating expenses
13,202 9,276 46,390
30,720
Loss from operations (10,271 )
(4,595 ) (34,880 ) (21,891 )
Other income
(expense) Interest income 304 25 717 42 Interest expense (2 )
(17 ) (19 ) (90 ) Other income (expense) (649 ) (1 )
583 (16 )
Total other income (expense)
(347 ) 7 1,281 (64 )
Loss before income taxes (10,618 ) (4,588 ) (33,599 )
(21,955 ) (Provision) for income taxes (14 ) (105 )
(44 ) (148 )
Net loss $ (10,632 ) $ (4,693 ) $
(33,643 ) $ (22,103 ) Net loss per share, basic and diluted $ (0.26
) $ (0.15 ) $ (0.95 ) $ (0.84 ) Weighted average number of shares
outstanding, basic and diluted 40,957 31,775
35,253 26,215
Other
comprehensive loss Net loss $ (10,632 ) $ (4,693 ) $ (33,643 )
$ (22,103 ) Net unrealized gains on available-for-sale investments,
net of tax (16 ) — (4 ) —
Comprehensive loss $ (10,648 ) $ (4,693 ) $ (33,647 ) $
(22,103 )
GENMARK DIAGNOSTICS, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands, except per share data)
Three Months Ended Twelve Month
Ended December 31 December 31, Adjusted
Financial Data: 2013 2012
2013 2012 Cost of revenues $
3,521 $ 4,761 $ 15,894 $ 11,640 Inventory reserve(1) — — (1,183 ) —
Impairment of production equipment(2) — —
(302 ) —
Non-GAAP cost of
revenues $ 3,521 $ 4,761 $ 14,409 $ 11,640
Gross profit $ 2,930 $ 4,681 $ 11,510 $ 8,829
Inventory reserve(1) — — 1,183 — Impairment of production
equipment(2) — — 302
—
Non-GAAP gross profit $ 2,930 $ 4,681
$ 12,995 $ 8,829
Non-GAAP gross
margin % 45 % 50 % 47 % 43 %
Total operating
expenses 13,202 9,276 46,390 30,720 Inventory reserve(1) — —
(19 ) — Allowance of doubtful accounts(3) — — (2,702 ) — Impairment
of intangible asset(4) (1,624 ) —
(1,624 ) —
Non-GAAP operating expenses $
11,578 $ 9,276 $ 42,045 $ 30,720
Total other income (expense) $ (347 ) $ 7 $ 1,281 $ (64 )
Preferred stock sale(5) (9 ) — (1,392 ) — Elimination of foreign
currency translation adjustments upon liquidation of foreign
subsidiary(6) 450 — 450
—
Non-GAAP other income (expense) $ 94
$ 7 $ 339 $ (64 )
Net loss $
(10,632
)
$
(4,695
)
$ (33,643 ) $ (22,103 ) Inventory reserve(1) — — 1,202 — Impairment
of production equipment(2) — — 302 — Allowance of doubtful
accounts(3) — — 2,702 — Impairment of intangible asset(4) 1,624 —
1,624 — Preferred stock sale(5) (9 ) — (1,392 ) — Elimination of
foreign currency translation adjustments upon liquidation of
foreign subsidiary(6) 450 — 450
—
Non-GAAP net loss $
(8,567
)
$
(4,695
)
$ (28,755 ) $ (22,103 )
Net loss per share, basic and
diluted $ (0.26 ) $ (0.15 ) $ (0.95 ) $ (0.84 ) Inventory
reserve(1) — — 0.04 — Impairment of production equipment(2) — —
0.01 — Allowance of doubtful accounts(3) — — 0.08 — Impairment of
intangible asset(4) 0.04 — 0.03 — Preferred stock sale(5) — — (0.04
) — Elimination of foreign currency translation adjustments upon
liquidation of foreign subsidiary(6) 0.01 —
0.01 —
Non-GAAP net loss per
share, basic and diluted $ (0.21 ) $ (0.15 ) $ (0.82 ) $ (0.84
)
(1) Reflects nonrecurring charges related to inventory
specifically made for NMTC
(2) Reflects nonrecurring charges related to the Company’s
procurement of additional manufacturing equipment to support NMTC’s
prior purchasing patterns
(3) Reflects nonrecurring charges related to outstanding amounts
owed by NMTC
(4) Reflects a nonrecurring impairment charge related to the
termination of a license agreement
(5)Reflects a nonrecurring realized gain on sale of Advanced
Liquid Logic, Inc. preferred stock to Illumina. Inc.
(6) Reflects a nonrecurring accumulated other comprehensive loss
realized upon liquidation of foreign subsidiary
The Company makes reference in this release to “non-GAAP”
results, which exclude the impact of adjustments associated with
NMTC’s bankruptcy, the impairment of an intangible asset, the
realization of an accumulated comprehensive loss, and the one-time
gain realized upon the sale of the Company’s investment in a
private company. The Company believes that excluding these items
and their related effects from its financial results reflects
operating results that are more indicative of the Company’s ongoing
operating performance while improving comparability to prior
periods, and, as such, may provide investors with an enhanced
understanding of the Company’s past financial performance and
prospects for the future. This information is not intended to be
considered in isolation from, or as a substitute for, statement of
comprehensive loss, net loss, net loss per share or expense
information prepared in accordance with GAAP.
GENMARK DIAGNOSTICS, INC. CONSOLIDATED STATEMENTS
OF CASH FLOWS (In thousands)
Year ended December 31, 2013
2012 2011 Operating activities:
(Unaudited)
Net loss $ (33,643 ) $ (22,103 ) $ (23,970 ) Adjustments to
reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,530 1,198 1,326 Amortization of
premiums on investments 314 — — Stock-based compensation 3,893
2,352 1,872 Provision for bad debt 2,721 (24 ) — Non-cash inventory
adjustments 1,779 (482 ) 517 Gain on sales of investment in
preferred stock (1,392 ) — — Elimination of cumulative foreign
currency translation adjustments upon liquidation of foreign
subsidiary 450 — — Impairment of intangible asset 1,624 — — Changes
in operating assets and liabilities: Accounts receivable (2,390 )
(2,068 ) (420 ) Inventories (1,313 ) 880 (1,742 ) Prepaid expenses
and other current liabilities (119 ) 68 1,846 Accounts payable
1,343 728 378 Accrued compensation 951 1,811 979 Other liabilities
(544 ) 1,397 —
Net cash used
in operating activities (23,796 ) (16,243 )
(19,214 )
Investing activities Change in restricted
cash 585 (1,343 ) — Purchase of available-for-sale securities
(76,190 ) (1,000 ) — Payments for intellectual property licenses
(882 ) (1,327 ) (734 ) Purchases of property and equipment (4,270 )
(3,476 ) (1,376 ) Proceeds from sales of marketable securities and
preferred stock 6,643 — —
Maturities (purchases) of short-term
investments
1,550 5,000 (5,000 )
Net cash
used in investing activities (72,564 ) (2,146 )
(7,110 )
Financing activities Proceeds from issuance
of common stock 86,547 48,300 34,533 Cost incurred in conjunction
with public offering (5,510 ) (3,211 ) (2,854 ) Proceeds from
borrowings 166 991 2,000 Principal repayment of borrowings (766 )
(1,984 ) (417 ) Proceeds from stock exercises 396
223 —
Net cash provided by financing
activities 80,833 44,319
33,262 Effects of foreign exchange rate changes —
— 53
Net (decrease) increase
in cash and cash equivalents (15,527 ) 25,930 6,991 Cash and
cash equivalents at beginning of period 51,250
25,320 18,329 Cash and cash equivalents at end
of period $ 35,723 $ 51,250 $ 25,320
Non-cash investing and financing activities: Property and
equipment purchased with capital lease $ — $ 109 $ — Transfer of
systems from property and equipment into inventory $ 575 $ 223 $ 46
Property and equipment costs incurred but not paid included in
accounts payable $ 603 $ 592 $ 76 Leasehold improvements related to
lease incentives $ — $ 1,359 $ — Intellectual property acquisition
included in other noncurrent liabilities $ 450 $ — $ — Offering
costs incurred but not paid included in other liabilities 65 — —
Supplemental cash flow disclosures: Cash paid for interest $
19 $ 90 $ 95 Cash received for interest $ 717 $ 42 $ 21 Cash
received for income taxes, net $ 2 $ — $ 3 Cash paid for income
taxes $ 21 $ 91 $ —
GenMark Diagnostics, Inc.Hany Massarany,
760-448-4358President/Chief Executive Officer
GenMark Diagnostics (NASDAQ:GNMK)
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