DermTech Reports Third-Quarter 2023 Financial Results

Published

- Average selling price (ASP) for the DermTech Melanoma Test (DMT) increased 24 percent year-over-year - Test revenue increased 8 percent versus the third quarter of 2022 - 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 third-quarter 2023 financial results.

“We’re just a few months into our strategy of prioritizing reimbursed tests and growing revenue and are seeing faster progress than we expected,” said Bret Christensen, CEO, DermTech. “We significantly improved many of our key performance indicators in the third quarter. We grew ASP and test revenue on a year-over-year and sequential basis. In addition, we expanded our Medicare proportion of billable samples from 23 percent to a record high of 27 percent in the last two quarters and increased our proportion of tests that are reimbursed.”

Christensen continued, “We believe monetizing our already significant demand is the best way to reach a meaningful revenue inflection point while managing our balance sheet. Our operating expenses substantially declined in the third quarter even with solid revenue growth, and excluding non-recurring costs related to our restructuring actions, our net cash burn declined from approximately $100 million for the full-year 2022 to approximately $65 million annually based on the third quarter run rate – a 35 percent decrease. Overall, we believe revenue should grow year-over-year in 2023 and our cash runway should extend into the first quarter of 2025.”

Christensen concluded, “The powerful patient stories where we’ve had a role in potentially saving a life are why we push ahead. The patient need is great with approximately 200,000 new cases of melanoma reported every year in the U.S. We’re confident there is a place for our test in every dermatologic practice to aid in clinician decision making and will carry forward our vision for the DMT to be deployed universally as part of the melanoma care pathway.”

Third-Quarter 2023 Financial Results

  • Billable sample volume declined 13 percent from the third quarter of 2022 to approximately 15,710.
  • Test revenue was $3.7 million, up 8 percent from the third quarter of 2022, primarily due to a higher ASP for the DMT.
  • Total revenue was $3.9 million, a 10 percent increase from the third quarter of 2022, driven by higher test revenue.
  • Cost of test revenue was $3.7 million, a less than 1 percent increase from the third quarter of 2022, yielding a test gross margin of 1 percent, compared to negative 6 percent for the third 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 $8.1 million, a 44 percent decrease from the third quarter of 2022. The decrease was primarily attributable to lower employee-related and marketing expenditures.
  • Research and development expenses were $3.6 million, a 37 percent decrease from the third quarter of 2022, largely due to lower employee-related and lab supplies costs.
  • General and administrative expenses were $8.3 million, a 6 percent decrease from the third 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 $19.2 million, or ($0.57) per share, which included $3.2 million of non-cash stock-based compensation expense, as compared to $28.8 million, or ($0.96) per share, for the third quarter of 2022, which included $4.9 million of non-cash stock-based compensation expense.
  • Cash, cash equivalents, restricted cash and short-term marketable securities were $71.7 million as of September 30, 2023. During the third quarter, the Company generated net proceeds of approximately $0.5 million from the issuance of 302,598 shares of common stock in at-the-market (ATM) offerings at a weighted average price of $2.55 per share. DermTech believes it should have sufficient cash resources to fund its planned operations into the first quarter of 2025.

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, November 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 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,” “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; 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 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 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; 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.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

Test revenue

$

3,692

 

 

$

3,433

 

 

$

10,682

 

 

$

11,098

 

Contract revenue

 

223

 

 

 

140

 

 

 

690

 

 

 

426

 

Total revenues

 

3,915

 

 

 

3,573

 

 

 

11,372

 

 

 

11,524

 

Cost of revenues:

 

 

 

 

 

 

 

Cost of test revenue

 

3,661

 

 

 

3,644

 

 

 

11,361

 

 

 

10,410

 

Cost of contract revenue

 

82

 

 

 

50

 

 

 

175

 

 

 

111

 

Total cost of revenues

 

3,743

 

 

 

3,694

 

 

 

11,536

 

 

 

10,521

 

Gross profit/(loss)

 

172

 

 

 

(121

)

 

 

(164

)

 

 

1,003

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

8,123

 

 

 

14,632

 

 

 

36,573

 

 

 

45,076

 

Research and development

 

3,595

 

 

 

5,702

 

 

 

11,891

 

 

 

18,955

 

General and administrative

 

8,264

 

 

 

8,806

 

 

 

35,359

 

 

 

26,258

 

Total operating expenses

 

19,982

 

 

 

29,140

 

 

 

83,823

 

 

 

90,289

 

Loss from operations

 

(19,810

)

 

 

(29,261

)

 

 

(83,987

)

 

 

(89,286

)

Other income:

 

 

 

 

 

 

 

Interest income, net

 

641

 

 

 

485

 

 

 

2,186

 

 

 

700

 

Change in fair value of warrant liability

 

5

 

 

 

4

 

 

 

4

 

 

 

126

 

Total other income

 

646

 

 

 

489

 

 

 

2,190

 

 

 

826

 

Net loss

$

(19,164

)

 

$

(28,772

)

 

$

(81,797

)

 

$

(88,460

)

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

 

33,835,370

 

 

 

30,096,261

 

 

 

32,073,448

 

 

 

29,969,435

 

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

$

(0.57

)

 

$

(0.96

)

 

$

(2.55

)

 

$

(2.95

)

DERMTECH, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data) (Unaudited)

 

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

37,230

 

 

$

77,757

 

Short-term marketable securities

 

30,970

 

 

 

48,411

 

Accounts receivable

 

3,605

 

 

 

4,172

 

Inventory

 

1,196

 

 

 

1,757

 

Prepaid expenses and other current assets

 

2,928

 

 

 

3,940

 

Total current assets

 

75,929

 

 

 

136,037

 

Property and equipment, net

 

5,611

 

 

 

6,375

 

Operating lease right-of-use assets

 

52,889

 

 

 

56,007

 

Restricted cash

 

3,467

 

 

 

3,488

 

Other assets

 

 

 

 

168

 

Total assets

$

137,896

 

 

$

202,075

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

1,703

 

 

$

2,419

 

Accrued compensation

 

5,773

 

 

 

7,894

 

Accrued liabilities

 

1,946

 

 

 

3,464

 

Short-term deferred revenue

 

236

 

 

 

109

 

Current portion of operating lease liabilities

 

2,941

 

 

 

1,634

 

Current portion of finance lease obligations

 

37

 

 

 

116

 

Total current liabilities

 

12,636

 

 

 

15,636

 

Warrant liability

 

1

 

 

 

5

 

Long-term finance lease obligations, less current portion

 

42

 

 

 

53

 

Operating lease liabilities, long-term

 

52,153

 

 

 

54,028

 

Total liabilities

 

64,832

 

 

 

69,722

 

Stockholders’ equity:

 

 

 

Common stock, $0.0001 par value per share; 100,000,000 and 50,000,000 shares authorized as of September 30, 2023 and December 31, 2022, respectively; 34,241,523 and 30,297,408 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

 

3

 

 

 

3

 

Additional paid-in capital

 

477,778

 

 

 

456,171

 

Accumulated other comprehensive income/(loss)

 

127

 

 

 

(774

)

Accumulated deficit

 

(404,844

)

 

 

(323,047

)

Total stockholders’ equity

 

73,064

 

 

 

132,353

 

Total liabilities and stockholders’ equity

$

137,896

 

 

$

202,075

 

 

Steve Kunszabo DermTech (858) 291-1647 steve.kunszabo@dermtech.com

Source: DermTech, Inc.

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