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DermTech Reports Fourth-Quarter and Full-Year 2022 Financial Results; Company Announces CEO Transition Plan

- Covered lives increased from 91 million to 124 million and cash runway through the third quarter of 2024

- Dr. John Dobak will continue to serve as CEO until a successor is appointed

- Board initiates comprehensive CEO search

DermTech, Inc. (NASDAQ: DMTK) (“DermTech” or the “Company”), a leader in precision dermatology enabled by a non-invasive skin genomics platform, today reported its fourth-quarter and full-year 2022 financial results. The Company also announced that Dr. John Dobak expects to step away from his role as president, chief executive officer and director under a planned transition.

“We’re off to a great start in 2023, as we’ve grown covered lives from 91 million to 124 million during the last few months,” said John Dobak, M.D., CEO, DermTech. “A nice mix of regional commercial and governmental payers have recognized the clinical and economic value of the DermTech Melanoma Test (DMT). We continue to have positive discussions with payers and believe a recent improvement to the DMT’s NCCN recommendation and support from patient advocacy groups will strengthen our case for coverage.”

Dr. Dobak continued, “We expect to grow DMT volume this year despite the ongoing friction attributable to non-contracted commercial payers and will continue to anchor our effort around monetizing our already significant demand. This focus on steadily improving average selling price (ASP) and generating covered tests is beginning to show positive signs. Our normalized fourth-quarter ASP of $239 was sequentially higher, but we still expect variability going forward. In addition, we believe that payer friction has started to slowly ease, and based on the trends we’ve observed to begin the year, we expect mid-single digit sequential growth in test volumes for the first quarter.”

Dr. Dobak concluded, “We’re guided by strong operating discipline and continue to evaluate ways to adjust expenses as we look ahead to potential catalysts. Considering our revised operating plan and ability to access capital, we now expect our cash runway to take us through the third quarter of 2024.”

Fourth-Quarter 2022 Financial Results

  • Billable sample volume grew 48 percent from the fourth quarter of 2021 to approximately 17,460.
  • Assay revenue was $2.7 million, down 9 percent from the fourth quarter of 2021, primarily due to changes in collection estimates for tests run in prior periods.
  • Total revenue was $3.0 million, a 5 percent decrease from the fourth quarter of 2021, driven by lower assay revenue.
  • Cost of assay revenue was $3.3 million, a 9 percent increase from the fourth quarter of 2021, yielding an assay gross margin of negative 22 percent, compared to negative 1 percent for the fourth quarter of 2021.
  • Sales and marketing expenses were $13.6 million, a 2 percent increase from the fourth quarter of 2021. The increase was primarily attributable to higher employee-related costs and marketing expenditures.
  • Research and development expenses were $5.1 million, a 15 percent decrease from the fourth quarter of 2021, largely due to lower lab and clinical study costs.
  • General and administrative expenses were $9.8 million, a 37 percent increase from the fourth quarter of 2021. The increase was driven by higher infrastructure costs due to the Company’s new facility and higher employee-related expenses.
  • Net loss was $28.2 million, or ($0.93) per share, which included $5.3 million of non-cash stock-based compensation expense, as compared to $26.1 million, or ($0.88) per share, for the fourth quarter of 2021, which included $3.8 million of non-cash stock-based compensation expense.
  • Cash, cash equivalents, restricted cash and short-term marketable securities were $129.8 million as of December 31, 2022. DermTech believes it has sufficient cash and the ability to access capital to fund its current operating plan through the third quarter of 2024.

Full-Year 2022 Financial Results

  • Billable sample volume grew 53 percent versus the full-year 2021 to approximately 68,230.
  • Assay revenue was $13.8 million, up 25 percent from the full-year 2021, primarily due to higher billable sample volume.
  • Total revenue was $14.5 million, a 23 percent increase from the full-year 2021, driven by higher assay revenue.
  • Cost of assay revenue was $13.7 million, a 31 percent increase from the full-year 2021, yielding an assay gross margin of 1 percent, compared to 5 percent for the full-year 2021.
  • Sales and marketing expenses were $58.7 million, a 56 percent increase from the full-year 2021. The increase was primarily attributable to higher employee-related costs from increased headcount and marketing expenditures.
  • Research and development expenses were $24.1 million, a 48 percent increase from the full-year 2021, largely due to higher employee-related and lab costs.
  • General and administrative expenses were $36.1 million, a 45 percent increase from the full-year 2021. The increase was driven by higher employee-related and infrastructure costs.
  • Net loss was $116.7 million, or ($3.88) per share, which included $18.9 million of non-cash stock-based compensation expense, as compared to $78.3 million, or ($2.71) per share, for the full-year 2021, which included $13.3 million of non-cash stock-based compensation expense.

CEO Transition Plan

Dr. John Dobak will continue to serve as president, chief executive officer and director until the earlier of the date the Board appoints a successor and September 30, 2023. The Board has initiated a comprehensive search to identify Dr. Dobak’s replacement.

“I’m extremely proud of what we’ve accomplished during my 11-year tenure as CEO having built a strong foundation for DermTech,” said John Dobak, M.D., CEO, DermTech. “We’ve achieved widespread product adoption, secured broad payer coverage and scaled the organization for the future. I’m looking forward to finding a successor that will carry my vision forward and bring the genomic revolution to dermatologic care. I’d like to thank my team and the board for their dedication and perseverance. I’m excited about DermTech’s bright future.”

“On behalf of the board, I want to thank John for his valuable contributions to DermTech over the past eleven years,” said Matt Posard, DermTech’s chairman. “We are grateful to have John’s continuing leadership and support during the CEO transition.”

Conference Call Information

As previously announced, the Company will host a conference call to discuss its results at 5:00 p.m. ET on Thursday, March 2, 2023. For participants interested in asking questions during the teleconference, please register. After registering for the event, a confirmation e-mail will be sent with a meeting invitation and access information. Registration is open during the live teleconference, but advance registration is advised. For participants interested in listening only, please register for the webcast. For those unable to participate in the live call and webcast, a webcast replay will be available on the Company’s website shortly after the conclusion of the call.

About DermTech

DermTech is a leading genomics company in dermatology and is creating a new category of medicine, precision dermatology, enabled by its non-invasive skin genomics platform. DermTech’s mission is to improve the lives of millions by providing non-invasive precision dermatology solutions that enable individualized care. DermTech provides genomic analysis of skin samples collected non-invasively using our Smart StickersTM. DermTech markets and develops products that facilitate the early detection of skin cancers and is developing products that assess inflammatory diseases and customize drug treatments. For additional information, please visit DermTech.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The expectations, estimates, and projections of DermTech may differ from its actual results and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” "outlook," “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predict,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, expectations and evaluations with respect to: the performance, patient benefits, cost- effectiveness, commercialization and adoption of DermTech’s products and the market opportunity for these products, DermTech’s positioning and potential growth, financial outlook and future financial performance, ability to maintain or improve its operating efficiency and reduce operating expenses, the sufficiency of DermTech’s cash and ability to access capital to fund its operating plan, implications and interpretations of any study results, expectations regarding agreements with or reimbursement or cash collection patterns from Medicare, government payers or commercial payers and related billing practices or number of covered lives, DermTech’s ability to expand its product offerings and develop pipeline products, and expectations regarding the search for, transition to and future contributions of a successor CEO. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside of the control of DermTech and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the outcome of any legal proceedings that may be instituted against DermTech; (2) DermTech’s ability to obtain additional funding to develop and market its products; (3) the existence of favorable or unfavorable clinical guidelines for DermTech’s tests; (4) the reimbursement of DermTech’s tests by Medicare, government payers and commercial payers; (5) the ability of patients or healthcare providers to obtain coverage of or sufficient reimbursement for DermTech’s products; (6) DermTech’s ability to grow, manage growth and retain its key employees and maintain or improve its operating efficiency and reduce operating expenses; (7) changes in applicable laws or regulations; (8) the market adoption and demand for DermTech’s products and services together with the possibility that DermTech may be adversely affected by other economic, business, and/or competitive factors; and (9) other risks and uncertainties included in the “Risk Factors” section of the most recent Annual Report on Form 10-K filed by DermTech with the Securities and Exchange Commission (the “SEC”), and other documents filed or to be filed by DermTech with the SEC, including subsequently filed reports. DermTech cautions that the foregoing list of factors is not exclusive. You should not place undue reliance upon any forward- looking statements, which speak only as of the date made. DermTech does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based.

DERMTECH, INC.

Consolidated Statements of Operations

(in thousands, except share and per share data)

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

Assay revenue

$

2,692

 

 

$

2,969

 

 

$

13,790

 

 

$

11,023

 

Contract revenue

 

302

 

 

 

196

 

 

 

728

 

 

 

815

 

Total revenues

 

2,994

 

 

 

3,165

 

 

 

14,518

 

 

 

11,838

 

Cost of revenues:

 

 

 

 

 

 

 

Cost of assay revenue

 

3,292

 

 

 

3,013

 

 

 

13,702

 

 

 

10,464

 

Cost of contract revenue

 

58

 

 

 

27

 

 

 

169

 

 

 

100

 

Total cost of revenues

 

3,350

 

 

 

3,040

 

 

 

13,871

 

 

 

10,564

 

Gross (loss) profit

 

(356

)

 

 

125

 

 

 

647

 

 

 

1,274

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

13,598

 

 

 

13,330

 

 

 

58,674

 

 

 

37,575

 

Research and development

 

5,097

 

 

 

5,990

 

 

 

24,052

 

 

 

16,261

 

General and administrative

 

9,828

 

 

 

7,164

 

 

 

36,086

 

 

 

24,836

 

Total operating expenses

 

28,523

 

 

 

26,484

 

 

 

118,812

 

 

 

78,672

 

Loss from operations

 

(28,879

)

 

 

(26,359

)

 

 

(118,165

)

 

 

(77,398

)

Other income/(expense):

 

 

 

 

 

 

 

Interest income, net

 

641

 

 

 

44

 

 

 

1,341

 

 

 

151

 

Change in fair value of warrant liability

 

15

 

 

 

262

 

 

 

141

 

 

 

(1,088

)

Total other income/(expense)

 

656

 

 

 

306

 

 

 

1,482

 

 

 

(937

)

Net loss

$

(28,223

)

 

$

(26,053

)

 

$

(116,683

)

 

$

(78,335

)

Weighted average shares outstanding used in computing net loss per share, basic and diluted

 

30,245,264

 

 

 

29,732,059

 

 

 

30,038,959

 

 

 

28,884,874

 

Net loss per share of common stock outstanding, basic and diluted

$

(0.93

)

 

$

(0.88

)

 

$

(3.88

)

 

$

(2.71

)

DERMTECH, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

 

 

December 31,

2022

 

December 31,

2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

77,757

 

 

$

176,882

 

Short-term marketable securities

 

48,411

 

 

 

48,449

 

Accounts receivable

 

4,172

 

 

 

3,847

 

Inventory

 

1,757

 

 

 

480

 

Prepaid expenses and other current assets

 

3,940

 

 

 

3,166

 

Total current assets

 

136,037

 

 

 

232,824

 

Property and equipment, net

 

6,375

 

 

 

4,549

 

Operating lease right-of-use assets

 

56,007

 

 

 

7,744

 

Restricted cash

 

3,488

 

 

 

3,025

 

Other assets

 

168

 

 

 

167

 

Total assets

$

202,075

 

 

$

248,309

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

2,419

 

 

$

2,880

 

Accrued compensation

 

7,894

 

 

 

5,120

 

Accrued liabilities

 

3,464

 

 

 

1,227

 

Short-term deferred revenue

 

109

 

 

 

1,380

 

Current portion of operating lease liabilities

 

1,634

 

 

 

1,453

 

Current portion of finance lease obligations

 

116

 

 

 

121

 

Total current liabilities

 

15,636

 

 

 

12,181

 

Warrant liability

 

5

 

 

 

146

 

Long-term finance lease obligations, less current portion

 

53

 

 

 

136

 

Operating lease liabilities, long-term

 

54,028

 

 

 

6,148

 

Total liabilities

 

69,722

 

 

 

18,611

 

Stockholders’ equity:

 

 

 

Common stock, $0.0001 par value per share; 50,000,000 shares authorized as of December 31, 2022 and 2021; 30,297,408 and 29,772,922 shares issued and outstanding at December 31, 2022 and 2021, respectively

 

3

 

 

 

3

 

Additional paid-in capital

 

456,171

 

 

 

436,183

 

Accumulated other comprehensive loss

 

(774

)

 

 

(124

)

Accumulated deficit

 

(323,047

)

 

 

(206,364

)

Total stockholders’ equity

 

132,353

 

 

 

229,698

 

Total liabilities and stockholders’ equity

$

202,075

 

 

$

248,309

 

 

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