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GenMark Diagnostics Reports First Quarter 2020 Results

CARLSBAD, Calif., May 04, 2020 (GLOBE NEWSWIRE) -- GenMark Diagnostics, Inc. ("GenMark" or the "Company") (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 (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.