- GPS Revenue Exceeds $1.0 Million in
Q3, Up 128% from Q2
- 547 GPS Commercial Tests Ordered in
Q3, Up 44% from Q2
- 204 GPS Tests Ordered in October,
Largest Month of Orders to Date
- Signed New International Reseller,
Expanding Global Coverage to Select Southeast Asia Markets
- Executed on Sale of Provider/Patient
Engagement Assets, Which Resulted in Reduction of Ongoing Operating
Losses of approximately $50 Million on an Annualized Basis
- Total Revenue of $21.8 Million in
Q3, Up 5% from $20.7 Million in Prior Year
- SAAS Revenue of $15.2 Million in Q3,
Up 9% from $14.0 Million prior year
- GAAP Net Loss per Share from
Continuing Operations of $0.20 in Q3, Excludes $0.17 in GAAP Net
Loss per Share from Discontinued Operations as a Result of the Sale
of Provider/Patient Engagement Assets in Q3
NantHealth, Inc. (NASDAQ-GS: NH), a next-generation,
evidence-based, personalized healthcare company, today reported
financial results for its third quarter ended September 30,
2017.
In August 2017, NantHealth sold its provider/patient engagement
assets to Allscripts to focus on core competencies and accelerate
the plan to achieve profitability. As a result, the company has
classified the current and prior period operating results of its
provider/patient engagement business as discontinued operations.
All results presented below represent the company’s continuing
operations.
The company reported 547 GPS Commercial Tests were ordered in
Q3, up from 379 in Q2.
GPS Cancer – Highlights
- New National GPS Cancer Payer:
The company signed a new GPS Cancer reimbursement contract with a
large national employer in October 2017.
- Local Coverage Determination (LCD)
& National Coverage by CMS: Based on data revealing the
inaccuracy of tumor-only sequencing presented by NantHealth at the
World Lung Conference, in Q3 the company formally requested from
the Molecular Diagnostic Services Program (MolDx) coverage for its
tumor-normal DNA sequencing combined with RNA sequencing platform
for lung cancer.
- Expanded International Adoption:
The company is pursuing GPS Cancer partnerships with locally based
resellers. During the quarter, the company entered into an
agreement for GPS Cancer with Singapore-based Asia Genomics, under
which Asia Genomics will distribute GPS Cancer to physicians in
Singapore, Malaysia, Thailand, Vietnam and the Philippines. This
new contract expands GPS Cancer beyond our existing international
coverage in Israel, Italy, Mexico, and the Middle East.
- GPS Cancer Reporting Now Includes a
Validated Assay for Microsatellite Instability (MSI): In tandem
with the FDA’s approval of the use of pembrolizumab with molecular
identification of patients with evidence for MSI, NantHealth is now
offering MSI by sequencing as a validated assay available in all
GPS Cancer orders. The approval of the use of a pharmaceutical
agent for treating cancer based on a molecular characteristic such
as MSI (instead of an anatomical basis of disease) is a new
treatment paradigm in oncology, and expands the growing clinical
utility footprint of precision molecular testing. GPS Cancer, which
is built on tumor-normal sequencing, offers a more precise method
for assessing MSI.
“We are encouraged and heartened by the positive results of an
independent 1,040-patient clinical study performed at the Memorial
Sloan Kettering Cancer Center and recently published in the Journal
of the American Medical Association (JAMA),” said Patrick
Soon-Shiong, M.D., Chief Executive Officer and Chairman of
NantHealth. “Results of the study show that universal sequencing of
a broad panel of cancer-related genes in paired germline and tumor
DNA samples, similar to GPS Cancer, was associated with increased
detection of clinically significant mutations. The study’s
conclusion directly supports our long-held contention and aligns
with the data we presented to MolDx illustrating the need for
tumor-normal sequencing for all cancer patients. We are making
every effort to share this medically important information with
regulatory bodies, the oncology community and insurers.”
Payer Engagement & Clinical Decision Support Software and
Services:
- Clinical Decision Support: won a
two-year renewal with our largest customer and added two key
customers
- Connected Care and Payer
Engagement: added $5.8 million in recurring revenue through
renewals and new business in Q3
- New Navinet Open and Clinical
Decision Support Customer: implementations announced in Q2
progressing, completion expected in early 2018
“During the quarter, we made excellent progress on the plan to
focus our business on core competencies, enhanced efficiencies and
accelerate toward profitability,” said Ron Louks, Chief Operating
Officer of NantHealth. “Regarding our third quarter financial
performance, the key highlights of our performance were
significantly increased sales of our GPS solution and substantially
lower operating expenses, which were largely due to the sale of our
provider/patient engagement assets combined with our recently
implemented restructuring plan.”
Business and Financial Highlights
- A Restructuring Plan was initiated
in the third quarter to focus on the company’s core
competencies: GPS (Cancer Molecular Profiling Services), Clinical
Decision Support, Connected Care and Payer Engagement. The plan is
expected to generate annualized cost savings of more than $70
million and significantly accelerate timeline to
profitability.
- In August 2017, the company
completed the sale of its provider/patient engagement solutions
business to Allscripts Healthcare Solutions, Inc., resulting in the
elimination of operating losses of approximately $50 million per
year and the receipt of 15 million NantHealth shares of common
stock previously purchased by Allscripts.
For the 2017 third quarter, total net revenue increased to $21.8
million from $20.7 million in 2016 third quarter. Gross profit was
$10.3 million compared with $10.6 million for the prior year third
quarter. Selling, general and administrative expenses substantially
declined to $17.5 million from $22.0 million for the 2016 third
quarter. Research and development expenses decreased to $7.7
million from $10.0 million. Net loss from continuing operations,
net of tax, narrowed to $23.0 million, or $0.20 per share, from
$26.4 million, or $0.22 per share for the 2016 third quarter. Loss
from discontinued operations, net of tax, was $19.4 million, or
$0.17 per share, compared with $10.5 million, or $0.09 per share,
for the prior year third quarter. Net loss was $42.4 million, or
$0.37 per share, compared with $36.9 million, or $0.30 per share,
for 2016 third quarter.
Financial results for the 2017 third quarter included
approximately $2.9 million loss from related party equity method
investment, $0.8 million of corporate restructuring expense, $0.7
million of acquisition related sales incentive, $1.1 million of net
non-cash expense related to convertible notes, and $2.2 million of
intangible amortization, totaling $0.07 per share. On a non-GAAP
basis, adjusted net loss from continuing operations was $14.9
million, or $0.13 per share, for the 2017 third quarter, compared
with $16.2 million, or $0.13 per share, for the 2016 third
quarter.
Conference Call Information and Forward-Looking
Statements
Later today, the company will host a conference call at 1:30
p.m. PT (4:30 p.m. ET) to review its results of operations for the
third quarter ended September 30, 2017. The conference call will be
available to interested parties by dialing 844-309-3709 from the
U.S. or Canada, or 281-962-4864 from international locations,
passcode 7296769. The call will be broadcast via the Internet at
www.nanthealth.com. Listeners are encouraged to visit the website
at least 10 minutes prior to the start of the scheduled
presentation to register, download and install any necessary audio
software. A playback of the call will be archived and accessible on
the same website for at least three months.
Discussion during the conference call may include
forward-looking statements regarding topics such as the company’s
financial status and performance, regulatory and operational
developments, and other comments the company may make about its
future plans or prospects in response to questions from
participants on the conference call.
Use of Non-GAAP Financial Measures
This news release contains references to Non-GAAP financial
measures, including adjusted net loss and adjusted net loss per
share, which are financial measures that are not prepared in
conformity with United States generally accepted accounting
principles (U.S. GAAP). The Company’s management believes that the
presentation of Non-GAAP financial measures provides useful
supplementary information regarding operational performance,
because it enhances an investor’s overall understanding of the
financial results for the Company’s core business. Additionally, it
provides a basis for the comparison of the financial results for
the Company’s core business between current, past and future
periods. Other companies may define these measures in different
ways. Non-GAAP financial measures should be considered only as a
supplement to, and not as a substitute for or as a superior measure
to, financial measures prepared in accordance with U.S. GAAP.
Non-GAAP per share numbers are calculated based on one class of
common stock and do not incorporate the effects, if any, of using
the two-class method.
About NantHealth, Inc.
NantHealth, Inc., a member of the NantWorks ecosystem of
companies, is a next-generation, evidence-based, personalized
healthcare company enabling improved patient outcomes and more
effective treatment decisions for critical illnesses. NantHealth's
unique systems-based approach to personalized healthcare applies
novel diagnostics tailored to the specific molecular profiles of
patient tissues and integrates this molecular data in a clinical
setting with large-scale, real-time biometric signal and phenotypic
data to track patient outcomes and deliver precision medicine. For
nearly a decade, NantHealth has developed an adaptive learning
system, which includes its unique software, middleware and hardware
systems infrastructure that collects, indexes, analyzes and
interprets billions of molecular, clinical, operational and
financial data points derived from novel and traditional sources,
continuously improves decision-making and further optimizes our
clinical pathways and decision algorithms over time. For more
information please visit www.nanthealth.com.
About GPS Cancer™
GPS Cancer™ is a unique, comprehensive test available through
NantHealth. GPS CoverageGPS Cancer integrates whole genome (DNA)
sequencing, whole transcriptome (RNA) sequencing, and quantitative
proteomics through mass spectrometry, providing oncologists with a
comprehensive molecular profile of a patient’s cancer to inform
personalized treatment strategies. GPS Cancer testing is conducted
in CLIA-certified and CAP-accredited laboratories, and is a key
enabler for Cancer Breakthroughs 2020, the world’s most
comprehensive cancer collaborative initiative seeking to accelerate
the potential of combination immunotherapy as the next generation
standard of care in cancer patients. For more information,
visit www.gpscancer.com and
www.cancerbreakthroughs2020.org.
This news release contains certain statements of a
forward-looking nature relating to future events or future business
performance. Forward-looking statements can be identified by the
words “expects,” “anticipates,” “believes,” “intends,” “estimates,”
“plans,” “will,” “outlook” and similar expressions. Forward-looking
statements are based on management’s current plans, estimates,
assumptions and projections, and speak only as of the date they are
made. Risks and uncertainties include, but are not limited to: our
ability to successfully integrate a complex learning system to
address a wide range of healthcare issues; our ability to
successfully amass the requisite data to achieve maximum network
effects; appropriately allocating financial and human resources
across a broad array of product and service offerings; raising
additional capital as necessary to fund our operations; achieving
significant commercial market acceptance for our sequencing and
molecular analysis solutions; establish relationships with, key
thought leaders or payers’ key decision makers in order to
establish GPS Cancer as a standard of care for patients with
cancer; our ability to grow the market for our Systems
Infrastructure, and applications; successfully enhancing our
Systems Infrastructure and applications to achieve market
acceptance and keep pace with technological developments; customer
concentration; competition; security breaches; bandwidth
limitations; our ability to continue our relationship with
NantOmics; our ability to obtain regulatory approvals; dependence
upon senior management; the need to comply with and meet applicable
laws and regulations; unexpected adverse events; clinical adoption
and market acceptance of GPS Cancer; and anticipated cost savings.
We undertake no obligation to update any forward-looking statement
in light of new information or future events, except as otherwise
required by law. Forward-looking statements involve inherent risks
and uncertainties, most of which are difficult to predict and are
generally beyond our control. Actual results or outcomes may differ
materially from those implied by the forward-looking statements as
a result of the impact of a number of factors, many of which are
discussed in more detail in our reports filed with the Securities
and Exchange Commission.
FINANCIAL TABLES FOLLOW
NantHealth, Inc. Condensed Consolidated Balance
Sheets (Dollars in thousands, except per share amounts)
September 30, December 31,
2017 2016 (Unaudited)
Assets Current assets Cash and cash equivalents $ 73,493 $
157,573 Accounts receivable, net 12,037 11,673 Inventories 974
1,685 Deferred implementation costs 1,121 606 Related party
receivables, net 500 693 Prepaid expenses and other current assets
4,224 3,356 Current assets of discontinued operations -
9,992 Total current assets 92,349 185,578
Property, plant, and equipment, net 19,984 20,129 Deferred
implementation costs, net of current 4,374 3,201 Goodwill 114,625
114,625 Intangible assets, net 71,621 78,812 Investment in related
party 160,542 207,197 Related party receivable, net of current
1,798 1,971 Other assets 1,834 2,195 Noncurrent assets of
discontinued operations - 70,683 Total
assets $ 467,127 $ 684,391
Liabilities and
Stockholders' Equity Current liabilities Accounts payable $
4,099 $ 6,039 Accrued and other current liabilities 19,968 20,032
Deferred revenue 9,200 9,600 Related party payables, net 5,502
8,082 Current liabilities of discontinued operations -
13,496 Total current liabilities 38,769 57,249
Deferred revenue, net of current 6,807 11,127 Related party
liabilities 10,011 5,612 Related party promissory note 112,666
112,666 Related party convertible note, net 7,847 7,564 Convertible
notes, net 73,787 70,810 Other liabilities 8,495 820 Noncurrent
liabilities of discontinued operations - 6,949
Total liabilities 258,382 272,797
Stockholders' equity Common stock, $0.0001 par value
per share, 750,000,000 shares authorized; 106,963,706 and
121,250,437 shares issued and outstanding at September 30, 2017 and
December 31, 2016, respectively (Including 6,976 shares of
restricted stock) 11 12 Additional paid-in capital 880,801 886,334
Accumulated deficit (671,599 ) (475,273 ) Accumulated other
comprehensive income (468 ) 521 Total
stockholders' equity 208,745 411,594
Total liabilities and stockholders' equity $ 467,127 $
684,391
NantHealth, Inc. Condensed
Consolidated Statements of Operations (Dollars in thousands,
except per share amounts)
Three
Months Ended Nine Months Ended September 30,
September 30, 2017 2016
2017 2016
(Unaudited) Total net revenue $ 21,760 $ 20,662 $
64,378 $ 62,558 Total cost of revenue 11,472
10,036 32,643 33,214
Gross profit 10,288 10,626
31,735 29,344
Operating
Expenses: Selling, general and administrative 17,521 22,034
54,181 88,860 Research and development 7,749 9,960 25,051 36,519
Amortization of software license and acquisition-related assets
1,054 1,054 3,163
3,162 Total operating expenses 26,324
33,048 82,395 128,541
Loss from operations (16,036 ) (22,422 ) (50,660 ) (99,197 )
Interest expense, net (4,067 ) (1,415 ) (12,049 ) (4,760 ) Other
income (expense), net 60 104 308 541 Loss from related party equity
method investment including impairment loss (2,942 )
(2,604 ) (46,353 ) (7,893 ) Loss from continuing
operations before income taxes (22,985 ) (26,337 ) (108,754 )
(111,309 ) Provision for (benefit from) income taxes 30
55 85 (19,203 ) Net loss
from continuing operations (23,015 ) (26,392 ) (108,839 ) (92,106 )
Loss from discontinued operations, net of tax (19,383
) (10,482 ) (44,738 ) (32,045 ) Net loss $
(42,398 ) $ (36,874 ) $ (153,577 ) $ (124,151 )
Net
income (loss) per share (1): Continuing
operations Basic and diluted - common stock $ (0.20 ) $ (0.22 ) $
(0.91 ) $ (0.90 ) Discontinued operations Basic and diluted
- common stock $ (0.17 ) $ (0.08 ) $ (0.37 ) $ (0.29 ) Total
net income (loss) per share Basic and diluted - common stock $
(0.37 ) $ (0.30 ) $ (1.28 ) $ (1.19 ) Basic and diluted -
redeemable common stock N/A N/A
N/A $ 0.74
Weighted average shares
outstanding (1): Basic and diluted - common stock
115,924,122 121,245,440
119,745,231 108,359,973 Basic and diluted -
redeemable common stock N/A N/A
N/A 6,686,653
Footnote: (1)
The net income (loss) per share and weighted average shares
outstanding for the nine months ended September 30, 2016, have been
computed to give effect to the LLC Conversion that occurred on June
1, 2016, prior to the Company’s initial public offering ("IPO"). In
conjunction with the LLC Conversion, (a) all of the Company’s
outstanding units automatically converted into shares of common
stock, based on the relative rights of the Company's pre-IPO
equityholders as set forth in the Company's limited liability
company agreement and (b) the Company adopted and filed a
certificate of incorporation with the Secretary of State of the
state of Delaware and adopted bylaws. The Company adopted and filed
an amendment to its certificate of incorporation with the Secretary
of State of the state of Delaware to effect a 1-for-5.5 reverse
stock split of its common stock on June 1, 2016. The net
loss per share for the common stock for the nine months ended
September 30, 2016 reflects $4,958 in accretion value allocated to
the redeemable common stock. The redeemable common stock contained
a put right, which expired unexercised on June 20, 2016. As a
result of and as of that date, the shares were no longer redeemable
and were included in common stock.
NantHealth,
Inc. Supplemental Revenue Schedule (Dollars in
thousands)
Three Months Ended
Nine Months Ended September 30, September 30,
2017 2016 2017 2016 (Unaudited)
Revenue: Software and hardware $ 1,162 $ 2,065 $ 4,408 $
6,077
Software-as-a-service
15,200 14,000 44,863 41,809 Total
software-related revenue 16,362 16,065 49,271 47,886 Maintenance
2,696 1,979 8,182 6,979 Sequencing and molecular analysis 1,025 77
1,985 122 Other services 1,677 2,541 4,940
7,571 Total net revenue $ 21,760 $ 20,662 $ 64,378 $ 62,558
Cost of Revenue: Software and hardware $ 443 $ 528 $
596 $ 668 Software-as-a-service 5,859 4,159
17,143 14,791 Total software-related cost of revenue 6,302
4,687 17,739 15,459 Maintenance 274 112 564 621 Sequencing and
molecular analysis 1,757 570 4,807 929 Other services 1,996 2,623
5,504 9,309 Amortization of developed technologies 1,143
2,044 4,029 6,896 Total cost of revenue $
11,472 $ 10,036 $ 32,643 $ 33,214
NantHealth,
Inc. Non-GAAP Net Loss and Non-GAAP Net Loss Per Share
(Dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30, 2017
2016 2017
2016 (Unaudited) Net loss from
continuing operations $ (23,015 ) $ (26,392 ) $ (108,839 ) $
(92,106 ) Adjustments to GAAP net loss: Loss from related party
equity method investment including impairment loss 2,942 2,604
46,353 7,893 Stock-based compensation expense from continuing
operations (170 ) 3,576 (485 ) 40,455 Corporate restructuring from
continuing operations 807 362 2,396 2,298 Acquisition related
compensation expense - - - 4,814 Acquisition related sales
incentive 727 567 2,061 2,027 Change in fair value of derivatives
liability (6 ) - (245 ) - Non-cash interest expense related to
convertible notes 1,121 - 3,260 - Intangible amortization from
continuing operations 2,197 3,098 7,192 10,058 Securities
litigation costs 500 - 685 - Impacts of the conversion from a
limited liability company to a corporation on benefit from income
taxes - - -
(19,533 ) Total adjustments to GAAP net loss from continuing
operations 8,118 10,207 61,217
48,012 Net loss - Non-GAAP from continuing
operations $ (14,897 ) $ (16,185 ) $ (47,622 ) $ (44,094 )
Weighted average shares outstanding (1) 115,924,122 121,245,440
119,745,231 108,359,973 Weighted average Series F/redeemable stock
(1)(2) — — —
6,686,653 Shares outstanding - Non-GAAP (1)
115,924,122 121,245,440 119,745,231
115,046,626
Net loss per share from
continuing operations - Non-GAAP (1) $
(0.13 ) $ (0.13 ) $
(0.40 ) $ (0.38 )
Reconciliation of Net Loss per Common Share to Net Loss per
Common Share - Non-GAAP (Unaudited): Three Months Ended
Nine Months Ended September 30, September 30,
2017 2016
2017 2016 Net loss per
common share from continuing operations - GAAP $ (0.20 ) $ (0.22 )
$ (0.91 ) $ (0.90 ) Adjustments to GAAP net loss per common share
from continuing operations: Loss from related party equity method
investment including impairment loss 0.03 0.02 0.39 0.07
Stock-based compensation expense from continuing operations — 0.03
— 0.37 Corporate restructuring from continuing operations 0.01 —
0.02 0.02 Acquisition related compensation expense — — — 0.04
Acquisition related sales incentive 0.01 — 0.02 0.02 Non-cash
interest expense related to convertible notes 0.01 — 0.03 —
Intangible amortization from continuing operations 0.01 0.04 0.04
0.10 Securities litigation costs — — 0.01 — Impacts of the
conversion from a limited liability company to a corporation on
benefit from income taxes — — — (0.18 ) Accretion to redemption
value of Series F/redeemable common stock — — — 0.05 Dilution from
Series F/redeemable common stock — —
— 0.03 Total adjustments to GAAP net
loss per common share from continuing operations 0.07
0.09 0.51 0.52
Net
loss per common share from continuing operations - Non-GAAP (1)
$ (0.13 ) $ (0.13 )
$ (0.40 ) $ (0.38 )
(1) The net loss per common share - non-GAAP,
weighted average shares outstanding, weighted average Series F
units/redeemable stock, and shares outstanding - non-GAAP have been
computed to give effect to the LLC conversion that occurred June 1,
2016 prior to our IPO. In conjunction with the LLC Conversion, (a)
all of our outstanding units automatically converted into shares of
common stock, based on the relative rights of our pre-IPO
equityholders as set forth in the limited liability company
agreement and (b) we adopted and filed a certificate of
incorporation with the Secretary of State of the state of Delaware
and adopted bylaws. We filed an amended certificate of
incorporation to effect a 1-for-5.5 reverse stock split of our
common stock on June 1, 2016. (2) The weighted average
shares outstanding have been further adjusted to account for the
redeemable Series F units (converted to common stock in conjunction
with the LLC conversion), whose Put Right expired on June 20, 2016.
Prior to June 20, 2016, these units/shares of common stock were
classified as redeemable members’/stockholders’ equity in the
balance sheet, and as such, were not included in the
weighted-average shares outstanding prior to June 20, 2016. The Put
Right expired June 20, 2016, and the shares were no longer
redeemable and are included in shareholders’ equity following that
day. The weighted-average shares are adjusted to include the
redeemable common stock in the weighted average shares outstanding
for the entire period.
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version on businesswire.com: http://www.businesswire.com/news/home/20171109006565/en/
NantHealth, Inc.Investor Contact:Robert
Jaffe424.288.4098rjaffe@rjaffeco.com
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