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GenMark Reports Fourth Quarter and Full Year 2014 Results

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GenMark Diagnostics, Inc. (Nasdaq:GNMK), a leading provider of automated, multiplex molecular diagnostic testing systems, today announced financial results for the fourth quarter and year ended December 31, 2014.

Revenue for the fourth quarter of 2014 was $9.8 million, an increase of 52% over the prior year period. Full year 2014 revenue grew to $30.6 million, an increase of 59% versus 2013 base business revenue, which excludes revenues from former customer NMTC. During the quarter, 38 additional XT-8 analyzers were placed in end-user laboratories, resulting in a total installed base of 540 analyzers within the U.S. market at year end.

Gross profit for the fourth quarter was $6.0 million, or 61% of revenue, compared with $3.0 million, or 47% of revenue in same period of 2013. Full year 2014 gross profit was $17.5 million, or 57% of revenue.

“We are very pleased with our results in 2014, both in terms of revenue growth and gross margin improvement,” said Hany Massarany, President and Chief Executive Officer of GenMark. “In 2015, we will continue to grow and support our XT-8 business in the US market, while remaining very focused on launching ePlex in Europe in the middle of the year,” added Massarany.

Operating expenses for the fourth quarter of 2014 were $14.7 million compared to $13.3 million in the same period for 2013. The increase was mainly driven by Research and Development expenses as the Company completed the development phase of the ePlex system. For the full year, 2014 operating expenses were $56.5 million, an increase of $9.8 million over 2013 primarily driven by Research and Development investment in ePlex.

Loss per share was $0.21 per share for the fourth quarter of 2014 compared to a loss of $0.26 per share in the same period of 2013. For the full year 2014, loss per share was $0.93.

The Company ended the year with $70.5 million in cash and cash equivalents and intends to continue utilizing its cash balances to invest in the global commercialization of the ePlex platform. As previously announced, the Company also established a debt facility for up to $40 million to provide additional capital to launch ePlex internationally as well as domestically.

Business Outlook

For full year 2015, the Company expects revenue in the range of $38 to $40 million and Gross Margin in the range of 53-55%. The Company expects to place approximately 50 XT-8 analyzers in the first half of 2015.

The Company will be hosting a conference call to discuss fourth quarter results in further detail and release 2015 guidance on Tuesday, February 24, 2015 starting at 4:30 p.m. Eastern Time. 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 61540488 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(R) detection technology, GenMark’s eSensor(R) 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. The eSensor(R) detection technology is also incorporated into GenMark’s sample-to-answer system, ePlexTM. 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 our future financial performance, the timely commercialization of our ePlex system, and the availability of future financing, 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 commercialize our ePlex system and its related test menu in a timely manner, 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.

GENMARK DIAGNOSTICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
As of December 31,
2014 2013
Current assets (Unaudited)
Cash and cash equivalents $ 36,855 $ 35,723
Marketable securities 33,651 69,866
Accounts receivable – net of allowances of $2,702 and $2,736, respectively 4,889 2,859
Inventories 2,137 2,102
Prepaid expenses and other current assets 575 552
Total current assets 78,107 111,102
Property and equipment, net 11,052 8,591
Intangible assets, net 1,870 1,197
Restricted cash 758 758
Other long-term assets 183 106
Total assets $ 91,970 $ 121,754
Current liabilities
Accounts payable $ 3,468 $ 3,863
Accrued compensation 5,172 3,375
Loan payable 37
Other current liabilities 3,653 2,962
Total current liabilities 12,293 10,237
Long-term liabilities
Deferred rent 1,445 1,601
Other noncurrent liabilities 208 748
Total liabilities 13,946 12,586
Stockholders’ equity
Preferred stock, $0.0001 par value; 5,000 authorized, none issued
Common stock, $0.0001 par value; 100,000 authorized; 41,859 and 41,520 shares issued and outstanding as of December 31, 2014 and December 31, 2013, respectively 4 4
Additional paid-in capital 340,502 333,363
Accumulated deficit (262,472 ) (224,209 )
Accumulated other comprehensive income (loss) (10 ) 10
Total stockholders’ equity 78,024 109,168
Total liabilities and stockholders’ equity $ 91,970 $ 121,754
GENMARK DIAGNOSTICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands, except per share data)
Three Months Ended Twelve Month Ended
December 31 December 31,
2014 2013 2014 2013
Revenue (Unaudited) (Unaudited) (Unaudited)
Product revenue $ 9,735 $ 6,577 $ 30,328 $ 27,204
License and other revenue 91 (125 ) 266 200
Total revenue 9,826 6,452 30,594 27,404
Cost of revenues 3,827 3,420 13,127 15,570
Gross profit 5,999 3,032 17,467 11,834
Operating expenses
Sales and marketing 3,112 2,988 12,629 12,818
General and administrative 3,018 4,041 12,069 11,836
Research and development 8,526 6,274 31,823 22,060
Total operating expenses 14,656 13,303 56,521 46,714
Loss from operations (8,657 ) (10,271 ) (39,054 ) (34,880 )
Other income (expense)
Interest income 37 124 244 403
Interest expense (1 ) (2 ) (20 ) (19 )
Other income (expense) 27 (469 ) (6 ) 897
Total other income (expense) 63 (347 ) 218 1,281
Loss before income taxes (8,594 ) (10,618 ) (38,836 ) (33,599 )
Income tax expense (benefit) 18 14 (573 ) 44
Net loss $ (8,612 ) $ (10,632 ) $ (38,263 ) $ (33,643 )
Net loss per share, basic and diluted $ (0.21 ) $ (0.26 ) $ (0.93 ) $ (0.95 )
Weighted average number of shares outstanding, basic and diluted 41,569 40,957 41,346 35,253
Other comprehensive loss
Net loss $ (8,612 ) $ (10,632 ) $ (38,263 ) $ (33,643 )
Net unrealized losses on marketable securities, net of tax (14 ) (16 ) (20 ) (4 )
Comprehensive loss $ (8,626 ) $ (10,648 ) $ (38,283 ) $ (33,647 )
GENMARK DIAGNOSTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year ended December 31,
2014 2013 2012
Operating activities: (Unaudited)
Net loss $ (38,263 ) $ (33,643 ) $ (22,103 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,656 2,530 1,198
Amortization of premiums on marketable securities 702 314
Stock-based compensation 5,796 3,893 2,352
Provision for bad debt 2,721 (24 )
Non-cash inventory adjustments 450 1,779 (482 )
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
Other non-cash adjustments 185
Changes in operating assets and liabilities:
Accounts receivable (2,030 ) (2,390 ) (2,068 )
Inventories (229 ) (1,313 ) 880
Prepaid expenses and other assets (184 ) (119 ) 68
Accounts payable 85 1,343 728
Accrued compensation 1,797 951 1,811
Other liabilities (537 ) (544 ) 1,397
Net cash used in operating activities (29,572 ) (23,796 ) (16,243 )
Investing activities
Change in restricted cash 585 (1,343 )
Purchase of marketable securities (28,054 ) (76,190 ) (1,000 )
Payments for intellectual property licenses (350 ) (882 ) (1,327 )
Purchases of property and equipment (5,726 ) (4,270 ) (3,476 )
Proceeds from sales of marketable securities 7,497 6,643
Maturities of marketable securities 56,050 1,550 5,000
Net cash provided by (used in) investing activities 29,417 (72,564 ) (2,146 )
Financing activities
Proceeds from issuance of common stock 812 86,547 48,300
Cost incurred in conjunction with public offering (5,510 ) (3,211 )
Proceeds from borrowings 166 991
Principal repayment of borrowings (56 ) (766 ) (1,984 )
Proceeds from stock option exercises 531 396 223
Net cash provided by financing activities 1,287 80,833 44,319
Net (decrease) increase in cash and cash equivalents 1,132 (15,527 ) 25,930
Cash and cash equivalents at beginning of period 35,723 51,250 25,320
Cash and cash equivalents at end of period $ 36,855 $ 35,723 $ 51,250
Non-cash investing and financing activities:
Property and equipment purchased with capital lease $ $ $ 109
Transfer of systems from property and equipment into inventory $ 256 $ 575 $ 223
Property and equipment costs incurred but not paid included in accounts payable $ 124 $ 603 $ 592
Leasehold improvements related to lease incentives $ $ $ 1,359
Intellectual property acquisition included in other noncurrent liabilities $ 550 $ 450 $
Offering costs incurred but not paid included in other liabilities 65
Supplemental cash flow disclosures:
Cash paid for interest $ 20 $ 19 $ 90
Cash received for interest $ 244 $ 403 $ 42
Cash paid for income taxes, net $ 24 $ 21 $ 91

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