GNMK - GenMark Diagnostics Reports First Quarter 2020 Results

May, 04 2020 04:05 PM GenMark Diagnostics Inc.

CARLSBAD, Calif., May 04, 2020 (GLOBE NEWSWIRE) -- GenMark Diagnostics, Inc. ("GenMark" or the "Company") (Nasdaq: GNMK), a leading provider of automated, multiplex molecular diagnostic testing systems, today announced financial results for the quarter ended March 31, 2020.

First Quarter 2020 Financial Highlights

Total revenue of $38.7 million, an increase of 80% over the first quarter of 2019
- ePlex revenue of $34.3 million, an increase of approximately 119% over the first quarter of 2019
Gross margin of 42%, compared to 27% in the first quarter of 2019

Recent Operational Highlights

Placed 54 net new ePlex analyzers in the first quarter of 2020, expanding the global installed base to 581 as of March 31, 2020
Increased average annuity per ePlex analyzer to approximately $214,000, up 29% versus the first quarter of 2019
Granted Emergency Use Authorization (EUA) for ePlex COVID-19 test on March 19th
Awarded $749,000 in BARDA funding to develop ePlex RP2 Panel
Appointed Scott Mendel as CEO, effective May 2, 2020

“Our 2020 key priorities of strong revenue growth, margin expansion, and technology development remain intact despite the COVID-19 pandemic,” said Scott Mendel, President and Chief Executive Officer. “We made significant strides on all fronts during the first quarter by delivering molecular diagnostic solutions that enable better patient outcomes for critically ill patients.”

First Quarter Financial Results
Revenue was $38.7 million in the first quarter of 2020, an increase of 80% versus $21.5 million in the first quarter of 2019.

Gross profit was $16.2 million, or approximately 42% of revenue, compared with $5.9 million, or 27% of revenue in the same period of 2019.

Operating expenses for the first quarter of 2020 were $21.2 million compared to $16.8 million in the same period of 2019. Approximately $4.6 million of this increase resulted from nonrecurring charges associated with organizational changes including the departure of the former CEO.

Loss per share was $0.12 for the first quarter of 2020, compared to a $0.21 loss per share in the first quarter of 2019. Loss per share for the first quarter of 2020 after non-recurring charges was $0.04 compared to $0.21 in the first quarter of 2019.

Cash and investments were $47.1 million as of March 31, 2020.

Guidance for Full Year 2020
GenMark is increasing total revenue expectations for the full year 2020 to $120 to $130 million.

The Company now expects global ePlex placements to range from 175 to 200 net new analyzers with an annuity per analyzer remaining at $130,000 to $135,000.

Gross margin guidance is increasing to the 38% to 40% range. Operating expense expectations continue to be approximately $65 million to $70 million. Cash usage in operations is projected to be in the range of $5 million to $10 million.

Webcast and Conference Call Information
GenMark will be hosting a conference call to discuss first quarter results in further detail on Monday, May 4, 2020 starting at 4:30 p.m. ET. The conference call will be concurrently webcast. The link to the webcast will be available on the GenMark Diagnostics, Inc. website at www.genmarkdx.com 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 2190875 approximately five minutes prior to the start time.

About GenMark Diagnostics
GenMark Diagnostics (NASDAQ: GNMK) is a leading provider of multiplex molecular diagnostic solutions designed to enhance patient care, improve key quality metrics, and reduce the total cost-of-care. Utilizing GenMark's proprietary eSensor^® detection technology, GenMark's eSensor XT-8^®and ePlex^® systems are designed to support a broad range of molecular diagnostic tests with compact, easy-to-use workstations and self-contained, disposable test cartridges. GenMark’s ePlex: The True Sample-to-Answer Solution™ is designed to optimize laboratory efficiency and address a broad range of infectious disease testing needs, including respiratory, bloodstream, and gastrointestinal infections. 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 the Company’s future operating results and financial position. Such statements, including, but not limited to, those regarding its future financial performance, achievement of profitability targets, plans and objectives of management, the timely and effective commercialization and clinical impact of the Company’s ePlex system, and the impact of the COVID-19 pandemic on the Company's business are all subject to risks and uncertainties that could cause actual results and financial position to differ materially. Some of these risks and uncertainties include, but are not limited to, GenMark’s ability to successfully commercialize the Company's ePlex system and its related test menu in a timely manner, constraints or inefficiencies caused by unanticipated acceleration and deceleration of customer demand, the Company’s ability to successfully expand sales of its product offerings outside the United States, and third-party payor reimbursement to its customers, and the effects and potential effects of the COVID-19 pandemic on the Company’s business, cash flow, liquidity and results of operations and legislative or regulatory developments affecting the Company’s industry, as well as other risks and uncertainties described under the “Risk Factors” in GenMark’s public filings with the Securities and Exchange Commission. The Company assumes no responsibility to update or revise any forward-looking statements to reflect events, trends or circumstances after the date they are made.

Investor Relations Contact
Leigh Salvo
(415) 937-5404

GENMARK DIAGNOSTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)


March 31, 2020

December 31, 2019
ASSETS:
Current Assets:



Cash and cash equivalents
$
26,261


$
44,360

Short-term marketable securities
20,805


9,100

Accounts receivable, net of allowances of $405 and $376, respectively
25,721


16,759

Inventories, net
9,927


11,301

Prepaid expenses and other current assets
1,800


1,877

Total current assets
84,514


83,397





Property and equipment, net
19,580


20,419

Intangible assets, net
1,284


1,432

Restricted cash
758


758

Noncurrent operating lease right-of-use assets
4,511


4,642

Other long-term assets
945


825

Total assets
$
111,592


$
111,473





LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:



Accounts payable
$
10,333


$
12,249

Accrued compensation
7,396


7,493

Current portion of long-term debt
3,431


—

Current operating lease liability
1,856


1,842

Other current liabilities
3,793


2,732

Total current liabilities
26,809


24,316





Long-term debt
66,210


69,145

Noncurrent operating lease liability
5,513


5,796

Other noncurrent liabilities
57


53

Total liabilities
98,589


99,310





Stockholders' equity:



Preferred stock, $0.0001 par value; 5,000 authorized, none issued
—


—

Common stock, $0.0001 par value; 100,000 authorized; 61,333 and 60,255 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
6


6

Additional paid-in capital
534,177


526,294

Accumulated deficit
(521,241
)

(514,233
)
Accumulated other comprehensive income
61


96

Total stockholders’ equity
13,003


12,163

Total liabilities and stockholders’ equity
$
111,592


$
111,473

GENMARK DIAGNOSTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share data)


Three Months Ended

March 31,

2020

2019
Revenue:



Product revenue
$
38,685


$
21,371

Other revenue
57


162

Total revenue
38,742


21,533

Cost of revenue
22,590


15,670

Gross profit
16,152


5,863

Operating expenses:



Sales and marketing
6,140


5,909

General and administrative
8,938


4,521

Research and development
6,079


6,343

Total operating expenses
21,157


16,773

Loss from operations
(5,005
)

(10,910
)
Other income (expense):



Interest income
132


133

Interest expense
(2,091
)

(1,276
)
Other expense
(29
)

(11
)
Total other expense
(1,988
)

(1,154
)
Loss before provision for income taxes
(6,993
)

(12,064
)
Income tax expense
15


16

Net loss
$
(7,008
)

$
(12,080
)
Net loss per share, basic and diluted
$
(0.12
)

$
(0.21
)
Weighted average number of shares outstanding, basic and diluted
60,666


56,581





Other comprehensive loss:



Net loss
$
(7,008
)

$
(12,080
)
Other comprehensive income (loss):



Foreign currency translation adjustments, net of tax
(39
)

(6
)
Net unrealized gains on marketable securities, net of tax
4


2

Total other comprehensive income
(35
)

(4
)
Total comprehensive loss
$
(7,043
)

$
(12,084
)

GENMARK DIAGNOSTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


Three Months Ended March 31,

2020

2019
Operating activities:



Net loss
$
(7,008
)

$
(12,080
)
Adjustments to reconcile net loss to net cash used in operating activities:



Depreciation and amortization
1,799


1,812

Net amortization (accretion) of premiums/discounts on investments
12


(21
)
Amortization of deferred debt issuance costs
596


366

Stock-based compensation
5,620


2,544

Provision for bad debt
29


—

Non-cash inventory adjustments
434


634

Other non-cash adjustments
(79
)

(16
)
Changes in operating assets and liabilities:



Accounts receivable
(8,979
)

2,355

Inventories
920


(131
)
Prepaid expenses and other assets
51


—

Accounts payable
(1,558
)

(1,043
)
Accrued compensation
(550
)

(2,475
)
Other current and non-current liabilities
1,108


(126
)
Net cash used in operating activities
(7,605
)

(8,181
)
Investing activities:



Purchases of property and equipment
(952
)

(333
)
Purchases of marketable securities
(14,613
)

(12,014
)
Maturities of marketable securities
2,900


7,800

Net cash used in investing activities
(12,665
)

(4,547
)
Financing activities:



Proceeds from issuance of common stock, net of offering costs
2,160


—

Principal repayment of borrowings
(23
)

(35,116
)
Proceeds from borrowings
—


50,000

Payments associated with debt issuance
(100
)

(3,588
)
Proceeds from stock option exercises
103


430

Net cash provided by financing activities
2,140


11,726

Effect of exchange rate changes on cash, cash equivalents, and restricted cash
31


20

Net decrease in cash, cash equivalents, and restricted cash
(18,099
)

(982
)
Cash, cash equivalents, and restricted cash at beginning of year
45,118


37,044

Cash, cash equivalents, and restricted cash at end of period
$
27,019


$
36,062

Non-cash investing and financing activities:



Transfer of systems to property and equipment from inventory
$
21


$
351

Property and equipment included in accounts payable
$
874


$
36

Supplemental cash flow information:



Cash paid for income taxes, net
$
19


$
44

Cash paid for interest
$
1,541


$
761

GENMARK DIAGNOSTICS, INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In thousands)


Three Months Ended March 31,

2020

2019
GAAP net loss
$
(7,008
)

$
(12,080
)
Nonrecurring charges:



Severance payments and stock-based compensation resulting from reorganization¹
566


—

Severance payments and stock-based compensation due to our former President and CEO upon his departure from the Company²
4,047


—

Total nonrecurring charges
4,613


—

Adjusted non-GAAP net loss
$
(2,395
)

$
(12,080
)




GAAP and non-GAAP weighted average shares outstanding - basic and diluted
60,666


56,581





GAAP net loss per share - basic and diluted
$
(0.12
)

$
(0.21
)
Nonrecurring charges:



Severance payments and stock-based compensation resulting from reorganization
0.01


—

Severance payments and stock-based compensation due to our former President and CEO upon his departure from the Company
0.07


—

Total nonrecurring charges
0.08


—

Adjusted non-GAAP net loss per share - basic and diluted
$
(0.04
)

$
(0.21
)

¹ Severance payments and stock-based compensation expense resulting from the elimination of certain positions within the Company. Stock-based compensation expense resulted from the acceleration of the vesting of restricted stock units awarded to certain individuals.

² Severance payments and stock-based compensation expense resulting from the departure of the Company's former President and CEO. The Company will be making a $1 million severance payment to the Company's former President and CEO on October 1, 2020 and will be providing reimbursement for group health insurance premium payments pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") for 1 year following the separation date. The Company recognized $3 million in stock-based compensation expense resulting from the acceleration of the vesting of the outstanding unvested portion of restricted stock units and market-based stock units.

Use of Non-GAAP Financial Information

In addition to results reported under GAAP, we provide certain non-GAAP financial measures consisting of adjusted non-GAAP net loss and adjusted non-GAAP basic and diluted net loss per share. Non-GAAP net loss consists of the net loss reported in our Unaudited Condensed Consolidated Statement of Comprehensive Loss adjusted for nonrecurring severance payments and stock-based compensation expense from the elimination of certain positions and the departure of our former President and CEO. Adjusted non-GAAP basic and diluted net loss per share reflects the net loss per share reported in our Unaudited Condensed Consolidated Statement of Comprehensive Loss adjusted for the loss per share resulting from nonrecurring severance payments and stock-based compensation expense from the elimination of certain positions and the departure of our former President and CEO.

We believe that use of these non-GAAP financial measures can assist investors in understanding the results from our core operations by providing additional insight into the impact of nonrecurring activities on our GAAP financial measures. We believe that the use of these non-GAAP financial measures enhances the comparability of our current period results to our historical Unaudited Condensed Consolidated Financial Statements, as well as to the results of other public companies.

The use of these non-GAAP financial measures are not measurements of financial performance under GAAP and have been included solely for informational and comparative purposes. Other companies may define these non-GAAP financial measures differently and, as a result, our non-GAAP financial measures may not be directly comparable to the non-GAAP measures of other companies. We reconciled non-GAAP net loss and adjusted non-GAAP basic and diluted net loss per share to GAAP net loss and GAAP net loss per share, respectively, which we believe to be the most directly comparable GAAP financial measures. Reconciliations of non-GAAP and GAAP financial measures should be considered together with our Unaudited Condensed Consolidated Financial Statements.

Company Name:	GenMark Diagnostics Inc.
Stock Symbol:	GNMK
Market:	NASDAQ
Website:	genmarkdx.com

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