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DermTech Reports Fourth-Quarter 2023 Financial Results

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DermTech, Inc. (NASDAQ: DMTK) reported strong financial results for the fourth quarter of 2023, with a 38% increase in test revenue and a 31% increase in total revenue. The average selling price (ASP) for the DermTech Melanoma Test (DMT) rose by 55% year-over-year. The company plans to focus on revenue growth in 2024 and has achieved significant cost reductions. Despite a decline in billable sample volume, DermTech remains optimistic about its technology's impact on melanoma evaluation and healthcare costs.
Positive
  • 38% increase in test revenue and 31% increase in total revenue for the fourth quarter of 2023.
  • 55% year-over-year increase in the average selling price (ASP) for the DermTech Melanoma Test (DMT).
  • Cost reductions of approximately $40 million in annualized total operating expenses compared to 2022.
  • Focus on revenue growth in 2024 and emphasis on existing customers and reimbursed tests.
  • Optimism about the technology's impact on melanoma evaluation, healthcare costs, and patient experience.
Negative
  • 11% decline in billable sample volume from the fourth quarter of 2022.
  • Negative test gross margin of 7% due to increased cost of test revenue.
  • Net loss of $19.1 million for the fourth quarter of 2023.

The reported increase in the average selling price (ASP) for DermTech's Melanoma Test by 55 percent year-over-year is a strong indicator of the company's pricing power and value perception among its customers. Additionally, the 38 percent increase in test revenue compared to the previous quarter signifies a robust demand trajectory despite a decline in billable sample volume. It is noteworthy that the company has strategically focused on maximizing revenue through existing customers and reimbursed tests, which has led to an expansion in their Medicare billable samples.

A critical factor for investors is the company's operational efficiency. The planned $40 million in annualized total operating expense reductions reflects a proactive approach to cost management. This, coupled with a reduced net loss and lower expenses across sales and marketing, research and development and general and administrative categories, suggests improved financial discipline and could signal a positive outlook for operational performance going forward.

The financial stability of the company is underlined by its cash position, with sufficient resources to fund operations into the first quarter of 2025. This provides a cushion for the company to continue its growth strategies without the immediate need for additional capital raising, which is generally reassuring for investors.

DermTech's non-invasive skin genomics technology represents a significant advancement in precision dermatology, particularly for melanoma evaluation. The technology's potential to enhance the standard of care while lowering healthcare costs and improving patient experience aligns with the broader industry trend towards personalized medicine and cost-effective healthcare solutions. The reported increase in ASP suggests that the market is recognizing the value of this technology, which could lead to wider adoption and increased market penetration.

From a research and development perspective, the reported decrease in expenses may raise questions about the company's future innovation pipeline. However, it could also reflect a strategic shift towards commercialization and scaling of existing products rather than early-stage research. It will be crucial for the company to balance cost reductions with the need to invest in ongoing innovation to maintain its competitive edge in the precision dermatology space.

The dermatology diagnostics market is witnessing a growing emphasis on non-invasive testing methods, which are seen as a key area for growth. DermTech's focus on enhancing ASP and revenue growth aligns with market trends where differentiation based on technology and outcomes is increasingly valued. The reported financial results, particularly the expansion of the Medicare proportion of billable samples, reflect the company's strategic alignment with market opportunities in the healthcare reimbursement landscape.

However, the decline in billable sample volume may indicate challenges in market adoption or competitive pressures. It will be important for DermTech to continue to leverage its commercial efforts to not only maintain but also expand its customer base. The company's emphasis on reimbursed tests is a strategic move that may help to mitigate the impact of volume declines and ensure sustainable revenue growth.

- Average selling price (ASP) for the DermTech Melanoma Test (DMT) increased 55 percent year-over-year

- Test revenue increased 38 percent versus the fourth quarter of 2022

- Estimated cash runway into the first quarter of 2025

SAN DIEGO--(BUSINESS WIRE)-- DermTech, Inc. (NASDAQ: DMTK) (DermTech or the Company), a leader in precision dermatology enabled by a non-invasive skin genomics technology, today reported its fourth-quarter 2023 financial results.

“We reported sustained improvement in many of our key performance indicators during the second half of last year and will continue emphasizing average selling price (ASP) and revenue growth in 2024,” said Bret Christensen, CEO, DermTech. “We’ve aligned our commercial effort with the aim to maximize revenue by focusing on existing customers and reimbursed tests. We expanded our Medicare proportion of billable samples from 23 percent to an all-time record high of 28 percent in the last three quarters.”

Christensen continued, “We’ve also delivered on our commitment to find additional operating efficiencies and being diligent with the allocation of our resources. We now plan to achieve approximately $40 million in annualized total operating expense reductions compared to 2022, as a result of our restructuring actions during the last several months.”

Christensen concluded, “We have a great technology that can significantly enhance the standard of care for evaluating melanoma, while also lowering healthcare costs and providing a better patient experience. We continue to be inspired by the patient stories we often hear where we’ve made a significant difference in their lives.”

Fourth-Quarter 2023 Financial Results

  • Billable sample volume declined 11 percent from the fourth quarter of 2022 to approximately 15,580.
  • Test revenue was $3.7 million, up 38 percent from the fourth quarter of 2022, primarily due to a higher ASP for the DMT.
  • Total revenue was $3.9 million, a 31 percent increase from the fourth quarter of 2022, driven by higher test revenue.
  • Cost of test revenue was $3.4 million, a 4 percent increase from the fourth quarter of 2022, yielding a test gross margin of 7 percent, compared to negative 22 percent for the fourth quarter of 2022. Cost of test revenue increased primarily because of higher infrastructure costs related to the Company’s new facility.
  • Sales and marketing expenses were $8.4 million, a 38 percent decrease from the fourth quarter of 2022. The decrease was primarily attributable to lower employee-related and marketing expenditures.
  • Research and development expenses were $3.3 million, a 34 percent decrease from the fourth quarter of 2022, largely due to lower employee-related and lab supplies costs.
  • General and administrative expenses were $8.4 million, a 14 percent decrease from the fourth quarter of 2022. The decrease was driven primarily by lower employee-related costs, offset by higher infrastructure costs related to the Company’s new facility.
  • Net loss was $19.1 million, or ($0.56) per share, which included $3.2 million of non-cash stock-based compensation expense, as compared to $28.2 million, or ($0.93) per share, for the fourth quarter of 2022, which included $5.3 million of non-cash stock-based compensation expense.
  • Cash, cash equivalents, restricted cash and short-term marketable securities were $59.3 million as of December 31, 2023. DermTech believes it should have sufficient cash resources to fund its planned operations into the first quarter of 2025, not to exceed 12 months from the February 29, 2024 filing date of the Company’s Form 10-K.

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, February 29, 2024. 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 technology. 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 using its Smart StickersTM. DermTech develops and markets products that facilitate the assessment of melanoma. 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,” ”aim,” “runway,” "outlook," “anticipate,” “intend,” “plan,” “strive," “may,” “will,” “sustain,” “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; expectations regarding DermTech’s potential growth, scale, patient reach, financial outlook, including its cash runway and future financial performance DermTech’s ability to increase its test volume, revenue and the proportion of reimbursed billable tests and control or reduce cost, expenses and cash burn, including as a result of DermTech’s recent restructuring actions; and expectations regarding agreements with or reimbursement or cash collection patterns from government payers (including Medicare) or commercial payers and related billing practices or number of covered lives. 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 capital when and as needed or on acceptable terms; (3) the existence of favorable or unfavorable clinical guidelines for DermTech’s tests; (4) the reimbursement of DermTech’s tests by government payers (including Medicare) 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; (9) DermTech’s ability to continue as a going concern and (10) 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,

 

 

2023

 

2022

 

2023

 

2022

Revenues:

 

 

 

 

 

 

 

 

Test revenue

 

$

3,702

 

 

$

2,692

 

 

$

14,384

 

 

$

13,790

 

Contract revenue

 

 

222

 

 

 

302

 

 

 

912

 

 

 

728

 

Total revenues

 

 

3,924

 

 

 

2,994

 

 

 

15,296

 

 

 

14,518

 

Cost of revenues:

 

 

 

 

 

 

 

 

Cost of test revenue

 

 

3,431

 

 

 

3,292

 

 

 

14,792

 

 

 

13,702

 

Cost of contract revenue

 

 

53

 

 

 

58

 

 

 

228

 

 

 

169

 

Total cost of revenues

 

 

3,484

 

 

 

3,350

 

 

 

15,020

 

 

 

13,871

 

Gross (loss) profit

 

 

440

 

 

 

(356

)

 

 

276

 

 

 

647

 

Operating expenses:

 

 

 

 

 

 

 

 

Sales and marketing

 

 

8,422

 

 

 

13,598

 

 

 

44,995

 

 

 

58,674

 

Research and development

 

 

3,348

 

 

 

5,097

 

 

 

15,239

 

 

 

24,052

 

General and administrative

 

 

8,422

 

 

 

9,828

 

 

 

43,781

 

 

 

36,086

 

Total operating expenses

 

 

20,192

 

 

 

28,523

 

 

 

104,015

 

 

 

118,812

 

Loss from operations

 

 

(19,752

)

 

 

(28,879

)

 

 

(103,739

)

 

 

(118,165

)

Other income:

 

 

 

 

 

 

 

 

Interest income, net

 

 

660

 

 

 

641

 

 

 

2,846

 

 

 

1,341

 

Change in fair value of warrant liability

 

 

1

 

 

 

15

 

 

 

5

 

 

 

141

 

Total other income

 

 

661

 

 

 

656

 

 

 

2,851

 

 

 

1,482

 

Net loss

 

$

(19,091

)

 

$

(28,223

)

 

$

(100,888

)

 

$

(116,683

)

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

 

 

34,326,638

 

 

 

30,245,264

 

 

 

32,641,376

 

 

 

30,038,959

 

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

 

$

(0.56

)

 

$

(0.93

)

 

$

(3.09

)

 

$

(3.88

)

DERMTECH, INC.

Consolidated Balance Sheets (in thousands, except share and per share data)

 

 

 

 

 

 

 

December 31, 2023

 

December 31, 2022

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

36,741

 

 

$

77,757

 

Short-term marketable securities

 

 

19,123

 

 

 

48,411

 

Accounts receivable

 

 

2,584

 

 

 

4,172

 

Inventory

 

 

1,004

 

 

 

1,757

 

Prepaid expenses and other current assets

 

 

2,300

 

 

 

3,940

 

Total current assets

 

 

61,752

 

 

 

136,037

 

Property and equipment, net

 

 

4,988

 

 

 

6,375

 

Operating lease right-of-use assets

 

 

51,722

 

 

 

56,007

 

Restricted cash

 

 

3,468

 

 

 

3,488

 

Other assets

 

 

 

 

 

168

 

Total assets

 

$

121,930

 

 

$

202,075

 

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

1,484

 

 

$

2,419

 

Accrued compensation

 

 

6,664

 

 

 

7,894

 

Accrued liabilities

 

 

2,017

 

 

 

3,464

 

Short-term deferred revenue

 

 

196

 

 

 

109

 

Current portion of operating lease liabilities

 

 

3,069

 

 

 

1,634

 

Current portion of finance lease obligations

 

 

17

 

 

 

116

 

Total current liabilities

 

 

13,447

 

 

 

15,636

 

Warrant liability

 

 

 

 

 

5

 

Long-term finance lease obligations, less current portion

 

 

38

 

 

 

53

 

Operating lease liabilities, long-term

 

 

51,270

 

 

 

54,028

 

Total liabilities

 

 

64,755

 

 

 

69,722

 

Stockholders’ equity:

 

 

 

 

Common stock, $0.0001 par value per share; 100,000,000 and 50,000,000 shares authorized as of December 31, 2023 and 2022, respectively; 34,524,677 and 30,297,408 shares issued and outstanding at December 31, 2023 and 2022, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

480,929

 

 

 

456,171

 

Accumulated other comprehensive income/(loss)

 

 

178

 

 

 

(774

)

Accumulated deficit

 

 

(423,935

)

 

 

(323,047

)

Total stockholders’ equity

 

 

57,175

 

 

 

132,353

 

Total liabilities and stockholders’ equity

 

$

121,930

 

 

$

202,075

 

 

Steve Kunszabo

DermTech

(858) 291-1647

steve.kunszabo@dermtech.com

Source: DermTech, Inc.

FAQ

What was the year-over-year increase in the average selling price (ASP) for the DermTech Melanoma Test (DMT)?

The ASP increased by 55% year-over-year.

What was the percentage increase in test revenue for the fourth quarter of 2023?

Test revenue increased by 38%.

What is the ticker symbol for DermTech, Inc.?

The ticker symbol is DMTK.

What was the net loss for the fourth quarter of 2023?

The net loss was $19.1 million.

What is the estimated cash runway for DermTech into the first quarter of 2025?

The estimated cash runway extends into the first quarter of 2025.

What is the focus of DermTech for revenue growth in 2024?

The company plans to focus on revenue growth by emphasizing existing customers and reimbursed tests.

DermTech, Inc.

NASDAQ:DMTK

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Diagnostic Imaging Centers
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SAN DIEGO

About DMTK

dermtech is a molecular diagnostic dermatology company focused on developing non-invasive gene expression tests to aid the clinical diagnosis of skin cancer and other skin conditions. dermtech operates a clia (clinical laboratory improvement amendments) licensed laboratory located at the company’s la jolla, ca headquarters. dermtech’s technology allows for the analysis of skin biopsy samples collected non-invasively using an adhesive patch. current dermatologic diagnosis is primarily based on subjective visual pattern recognition that is prone to error and results in a substantial number of unnecessary surgical procedures. dermtech’s pigmented lesion assay (pla) provides physicians with a non-invasive option for the biopsy of clinically atypical pigmented lesions using an adhesive patch rather than a scalpel. dermtech provides highly accurate, objective information to the physician to improve patient care and comfort and reduce costs. the pla is used for the detection of melanoma in at