Revenue Grows Year-Over-Year by 36%, Gross
Margin Increases to 57%
Installed Base Grows to 502
Analyzers
2014 Revenue Guidance Increased to Greater
than $29.0 Million and Gross Margin to Approximately 54%
ePlex™ System Development on Track for
Completion by End of 2014
GenMark Diagnostics, Inc. (Nasdaq:GNMK), a leading
provider of automated, multiplex molecular diagnostic testing
systems, today reported financial results for the quarter ended
September 30, 2014.
Revenues for the quarter ended September 30, 2014 increased
by 36% to $6.3 million compared with $4.6 million during the third
quarter of 2013. Consumable revenue for the third quarter 2014
increased by 52% to $6.0 million. The Company placed 27 net new
analyzers during the current quarter to bring its total installed
base to 502, all in end-user laboratories within the U.S.
market.
“Q3 was another quarter of excellent growth and progress. With
an installed base of more than 500 XT-8 analyzers, we are confident
in the continued market acceptance and support of our eSensor®
detection technology. This unique technology has been fully
incorporated into our ePlex sample-to-answer system, along with DNA
and RNA extraction, purification and amplification. Based on this
and other progess made during the quarter, we remain on track for
completing development of our ePlex system by the end of this
year,” stated GenMark’s President & CEO Hany Massarany.
Gross profit for the quarter ended September 30, 2014 was
$3.6 million, or 57% of revenue, compared with a gross profit of
$0.5 million, or 11% of revenue for the third quarter of 2013 which
was impacted by $1.2 million of charges related to former customer,
NMTC.
Operating expenses for the quarter ended September 30, 2014
were $13.9 million, an increase of $1.1 million compared with the
third quarter of 2013, which included $2.5 million of one-time
expenses related to NMTC. Research and Development expenses
increased $2.5 million due to the Company’s ePlex™ instrument and
assay development activities. General and Administrative expenses
increased $0.3 million primarily due to personnel costs. Sales and
Marketing expenses for the current quarter were $3.2 million.
Excluding a one-time charge in the prior year of $2.5 million,
Sales and Marketing expenses increased $0.7 million mainly due to
continued expansion of the Company’s global commercial sales force
ahead of the launch of ePlex™.
Loss per share was $0.23 for the third quarter of 2014, compared
with a loss per share of $0.30 in the third quarter of 2013. The
loss per share in the current quarter included the reduction of the
Company’s tax reserve of $610,000 due to the expiration of the
statute of limitations associated with an uncertain tax
position.
The Company ended the third quarter of 2014 with $79.2 million
in cash and investments. The Company intends to continue utilizing
its cash balances to invest in the development of its ePlex™ system
and for infrastructure improvements and general corporate
purposes.
The Company also increased its full year 2014 guidance. Total
year revenue is now expected to exceed $29.0 million and gross
margin is expected to be approximately 54%.
INVESTOR CONFERENCE CALL
GenMark will hold a conference call to discuss third quarter
2014 results at 4:30PM 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 22933448
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 the timely
completion of our ePlex™ system and related assay development
projects and our expected 2014 financial results, 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 ePlex™ 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 third quarter of 2014 presented
in accordance with GAAP, GenMark uses the following financial
measures defined as non-GAAP by the SEC: non-GAAP cost of sales,
non-GAAP sales and marketing expenses, non-GAAP operating expenses,
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. UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands, except par
value) September 30,
December 31, 2014 2013
Current assets Cash and cash equivalents $ 25,658 $ 35,723
Marketable securities 53,590 69,866 Accounts receivable - net of
allowances of $2,702 and $2,736, respectively 2,709 2,859
Inventories 1,532 2,102 Prepaid expenses and other current assets
1,229 552
Total current assets
84,718 111,102 Property and equipment, net 10,190 8,591 Intangible
assets, net 1,934 1,197 Restricted cash 758
758 Other long-term assets 118 106
Total assets $ 97,718 $ 121,754
Current
liabilities Accounts payable $ 3,307 $ 3,863 Accrued
compensation 5,132 3,375 Other current liabilities 3,113
2,999
Total current liabilities 11,552
10,237
Long-term liabilities Deferred rent 1,488 1,601 Other
non-current liabilities 114 748
Total liabilities 13,154 12,586
Stockholders’ equity Preferred stock, $0.0001 par value;
5,000 authorized, none issued — — Common stock, $0.0001 par value;
100,000 authorized; 41,726 and 41,520 shares issued and outstanding
as of September 30, 2014 and December 31, 2013, respectively 4 4
Additional paid-in capital 338,415 333,363 Accumulated deficit
(253,859 ) (224,209 ) Accumulated other comprehensive income
4 10 Total stockholders’ equity 84,564
109,168 Total liabilities and stockholders’
equity $ 97,718 $ 121,754
GENMARK
DIAGNOSTICS, INC. UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share
data)
Three Months Ended
Nine Months Ended September 30, September
30, 2014 2013 2014
2013 Revenue Product revenue
$
6,233
$
4,521
$
20,593
$
20,627 License and other revenue 67 116
175 325
Total revenue 6,300
4,637 20,768 20,952 Cost of revenue 2,692
4,138 9,591 12,373
Gross
profit 3,608 499 11,177 8,579
Operating expenses Sales
and marketing 3,159 4,916 9,516 9,830 General and administrative
2,817 2,476 8,760 7,572 Research and development 7,904
5,398 23,297 15,786
Total operating expenses 13,880
12,790 41,573 33,188
Loss
from operations (10,272 ) (12,291 )
(30,396 ) (24,609 )
Other income (expense) Interest
income 228 203 783 413 Interest expense (14 ) (3 ) (18 ) (17 )
Other income (expense) (216 ) 1,297
(611 ) 1,232
Total other income
(expense) (2 ) 1,497 154
1,628
Loss before income taxes (10,274 )
(10,794 ) (30,242 ) (22,981 ) Income tax expense (benefit)
(616 ) 23 (591 ) 30
Net
loss $ (9,658 ) $ (10,817 ) $ (29,651 ) $ (23,011 ) Net loss
per share, basic and diluted $ (0.23 ) $ (0.30 ) $ (0.72 ) $ (0.69
) Weighted average number of shares outstanding, basic and diluted
41,446 35,987 41,273
33,331
Other comprehensive loss Net loss $
(9,658 ) $ (10,817 ) $ (29,651 ) $ (23,011 ) Net unrealized gains
(losses) on marketable securities, net of tax (3 ) 21
6 12
Comprehensive loss $
(9,661 ) $ (10,796 ) $ (29,645 ) $ (22,999 )
GENMARK DIAGNOSTICS, INC.
UNAUDITED RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In thousands, except per share data)
Three Months Ended Nine
Months Ended September 30, September 30,
Adjusted Financial Data: 2014
2013 2014 2013 Cost of
sales
$
2,692
$
4,138
$
9,591
$
12,373
Inventory reserve (1) — (852 ) — (1,182 ) Impairment of production
equipment (2) — (302 ) (302 )
Non-GAAP cost of sales
$
2,692
$
2,984
$
9,591
$
10,889
Gross profit
$
3,608
$
499
$
11,177
$
8,579
Inventory reserve (1) — 852 — 1,182 Impairment of production
equipment (2) — 302 —
302
Non-GAAP gross profit
$
3,608
$
1,653
$
11,177
$
10,063
Non-GAAP gross margin % 57 % 36 % 54 % 48 %
Total operating expenses
$
13,880
$
12,790
$
41,573
$
33,188
Inventory reserve (1) — (19 ) — (19 ) Allowance for doubtful
accounts (3) — (2,472 ) —
(2,702 )
Non-GAAP operating expenses
$
13,880
$
10,299
$
41,573
$
30,467
Total other income (expense) (2 )
$
1,497
$
154
$
1,628
Preferred stock sale (4) — (1,383 ) —
(1,383 )
Non-GAAP other income (expense)
$
(2
)
$
114
$
154
$
245
Net loss
$
(9,658
)
$
(10,817
)
$
(29,651
)
$
(23,011
) Inventory reserve (1) — 871 — 1,201 Impairment of production
equipment (2) — 302 — 302 Allowance for doubtful accounts (3) 2,472
2,702 Preferred stock sale (4) (1,383 )
(1,383 )
Non-GAAP net loss
$
(9,658
)
$
(8,555
)
$
(29,651
)
$
(20,189
)
Net loss per share, basic and diluted
$
(0.23 )
$
(0.30 )
$
(0.72 )
$
(0.69 ) Inventory reserve (1) — 0.02 — 0.04 Impairment of
production equipment (2) — 0.01 — 0.01 Allowance for doubtful
accounts (3) — 0.07 — 0.08 Preferred stock sale (4) —
(0.04 ) — (0.04 )
Non-GAAP net loss
per share, basic and diluted
$
(0.23 )
$
(0.24 )
$
(0.72 )
$
(0.60 )
(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 Sales and Marketing charges related to
outstanding amounts owed by NMTC
(4) Reflects nonrecurring realized gain on sale of Advanced
Liquid Logic, Inc. preferred stock to Illumina. Inc.
The Company makes reference to “non-GAAP” results in the prior
year periods, which exclude the impact of adjustments associated
with NMTC’s bankruptcy 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 prior year financial results reflects operating results that
are more indicative of the Company’s 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. UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Ended September 30,
2014 2013 Operating
activities Net loss $ (29,651 ) $ (23,011 ) Adjustments to
reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,870 1,912 Amortization of premiums
on marketable securities 577 133 Stock-based compensation 4,478
2,697 Provision for bad debt — 2,720 Non-cash inventory adjustments
517 675 Changes in operating assets and liabilities: Accounts
receivable 151 (1,885 ) Inventories 209 (216 ) Prepaid expenses and
other current assets (691 ) (263 ) Accounts payable (318 ) 570
Accrued compensation 1,757 29 Other liabilities (1,131 )
(861 ) Net cash used in operating activities (22,232 )
(17,500 )
Investing activities Change in restricted cash —
585 Payments for intellectual property licenses (350 ) (888 )
Purchases of property and equipment (3,699 ) (3,273 ) Purchases of
marketable securities (28,054 ) (52,841 ) Proceeds from sales of
marketable securities 7,497 4,250 Maturities of marketable
securities 36,250 800 Net cash provided
by (used in) investing activities 11,644 (51,367 )
Financing
activities Proceeds from issuance of common stock 373 86,247
Costs incurred in conjunction with public offering — (5,180 )
Principal repayment of borrowings (51 ) (706 ) Proceeds from
borrowings — 166 Proceeds from stock option exercises 201
364 Net cash provided by financing activities
523 80,891
Net increase (decrease)
in cash and cash equivalents (10,065 ) 12,024 Cash and cash
equivalents at beginning of period 35,723
51,250 Cash and cash equivalents at end of period $ 25,658
$ 63,274
Non-cash investing and financing
activities Transfer of instruments from property and equipment
to inventory $ 156 $ 431 Property and equipment costs included in
accounts payable $ 364 $ 308 Intellectual property acquisitions
included in other noncurrent liabilities $ 550 $ 556
Supplemental cash flow disclosures Cash paid for income
taxes, net $ 27 $ 8 Cash received for interest $ 783 $ 413 Cash
paid for interest $ 18 $ 17
GenMark Diagnostics, Inc.Hany Massarany,
760-448-4358President/Chief Executive Officer
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