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DermTech Reports Second-Quarter 2022 Financial Results; Company Updates Full-Year 2022 Outlook

DermTech, Inc. (NASDAQ: DMTK) (“DermTech” or the “Company”), a leader in precision dermatology enabled by a non-invasive skin genomics platform, today reported its second-quarter 2022 financial results and updated its full-year 2022 outlook.

“We continued to set records for many of our key operating and financial metrics in the first half of 2022 despite numerous headwinds,” said John Dobak, M.D., CEO, DermTech. “Our sales and marketing team continues to be very effective in driving commercial traction, as evidenced by robust billable sample volume and new ordering clinician growth in the second quarter. We also streamlined our laboratory processes, which reduced the per unit cost for our DermTech Melanoma Test (DMT) by 28% sequentially. However, we are revising our full-year 2022 outlook to reflect a lower average selling price (ASP) for our DMT. The ASP pressure is primarily the result of Medicare billing code edits, which are expected to be improved in the coming quarters, as well as less favorable collection patterns from commercial payors. Overall, we are seeing good activity with commercial payors and believe we will expand our covered lives footprint by the end of the year.”

Dr. Dobak continued, “In addition, while we continue to deploy the bulk of our capital to support our robust commercial growth, we have also undertaken a diligent review of our entire business and now expect total operating expenses to be flat in the second half of the year. We will continue to focus on core investments and set a high bar for capital allocation to maximize our cash runway and work through the ASP pressure. We believe we have excellent long-term growth prospects and that 2022 remains a pivotal year as we leverage our commercial scale.”

Second-Quarter 2022 Financial Results

  • Billable sample volume grew 56 percent from the second quarter of 2021 to approximately 18,320.
  • Assay revenue was $4.1 million, up 43 percent from the second quarter of 2021, primarily due to higher billable sample volume.
  • Total revenue was $4.2 million, a 36 percent increase from the second quarter of 2021, driven by higher assay revenue.
  • Cost of assay revenue was $3.2 million, a 24 percent increase from the second quarter of 2021, yielding an assay gross margin of 22%, compared to 11% for the second quarter of 2021.
  • Sales and marketing expenses were $15.0 million, a 90 percent increase from the second quarter of 2021. The increase was primarily attributable to higher employee-related costs from increased headcount and marketing expenditures.
  • Research and development expenses were $6.9 million, a 92 percent increase from the second quarter of 2021, largely due to higher employee-related and lab costs.
  • General and administrative expenses were $8.9 million, a 41 percent increase from the second quarter of 2021. The increase was driven by higher employee-related and infrastructure costs.
  • Net loss was $29.6 million, or ($0.99) per share, which included $4.8 million of non-cash stock-based compensation expense, as compared to $17.1 million, or ($0.59) per share, for the second quarter of 2021, which included $3.5 million of non-cash stock-based compensation expense.
  • Cash, cash equivalents, restricted cash and short-term marketable securities were $177.4 million as of June 30, 2022. DermTech believes it has sufficient capital to fund its current operating plan through the first quarter of 2024.

Other Business Highlights

  • In July 2022, DermTech announced the appointment of Kirk D. Malloy, Ph.D. and Mark C. Capone, M.S. to the Company’s board of directors. These appointments expanded DermTech’s board of directors to eight members.
  • In June 2022, Dr. Loren Clarke, DermTech’s chief medical officer, presented study data illustrating how genomic technology can enhance melanoma detection and improve patient care at America’s Health Insurance Plans 2022.
  • In May 2022, Michael Howell, Ph.D., the Company’s chief scientific officer, presented new research at the Society for Investigative Dermatology’s annual meeting. Dr. Howell’s presentation, titled “A Novel Expression Based, Non-Invasive Method to Differentiate Atopic Dermatitis and Psoriasis,” focused on the viability of conducting non-invasive skin sampling with the DermTech Smart Sticker™ to differentiate atopic dermatitis from psoriasis.

2022 Outlook

The Company updated its full-year 2022 outlook for assay revenue and now expects between $16 million and $19 million.

Conference Call Information

As previously announced, the Company will host a conference call to discuss its results at 5:00 p.m. ET on Monday, August 8, 2022. Callers should dial (800) 715-9871 (U.S. only) or (647) 932-3411 (international). The conference call ID is 3999249. The conference call will also be simultaneously 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,” “believes,” “predicts,” “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 revenue growth, financial outlook and future financial performance, ability to maintain or improve its operating efficiency, implications and interpretations of any study results, expectations regarding reimbursement or cash collection patterns from Medicare from commercial payors and related billing practices or number of covered lives, and DermTech’s ability to expand its product offerings and develop pipeline products. 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 and commercial payors; (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; (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.

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

Assay revenue

$

4,147

 

 

$

2,910

 

 

$

7,665

 

 

$

5,100

 

Contract revenue

 

86

 

 

 

209

 

 

 

286

 

 

 

543

 

Total revenues

 

4,233

 

 

 

3,119

 

 

 

7,951

 

 

 

5,643

 

Cost of revenues:

 

 

 

 

 

 

 

Cost of assay revenue

 

3,236

 

 

 

2,604

 

 

 

6,766

 

 

 

4,575

 

Cost of contract revenue

 

37

 

 

 

20

 

 

 

61

 

 

 

51

 

Total cost of revenues

 

3,273

 

 

 

2,624

 

 

 

6,827

 

 

 

4,626

 

Gross profit

 

960

 

 

 

495

 

 

 

1,124

 

 

 

1,017

 

Operating expenses:

 

 

 

 

 

 

 

Sales and marketing

 

15,001

 

 

 

7,907

 

 

 

30,444

 

 

 

14,419

 

Research and development

 

6,915

 

 

 

3,594

 

 

 

13,253

 

 

 

5,845

 

General and administrative

 

8,878

 

 

 

6,301

 

 

 

17,452

 

 

 

11,473

 

Total operating expenses

 

30,794

 

 

 

17,802

 

 

 

61,149

 

 

 

31,737

 

Loss from operations

 

(29,834

)

 

 

(17,307

)

 

 

(60,025

)

 

 

(30,720

)

Other income/(expense):

 

 

 

 

 

 

 

Interest income, net

 

149

 

 

 

35

 

 

 

215

 

 

 

69

 

Change in fair value of warrant liability

 

105

 

 

 

170

 

 

 

122

 

 

 

(1,519

)

Total other income/(expense)

 

254

 

 

 

205

 

 

 

337

 

 

 

(1,450

)

Net loss

$

(29,580

)

 

$

(17,102

)

 

$

(59,688

)

 

$

(32,170

)

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

 

29,964,849

 

 

 

28,979,148

 

 

 

29,904,972

 

 

 

28,070,539

 

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

$

(0.99

)

 

$

(0.59

)

 

$

(2.00

)

 

$

(1.15

)

 

June 30, 2022

 

December 31, 2021

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

120,333

 

 

$

176,882

 

Short-term marketable securities

 

53,457

 

 

 

48,449

 

Accounts receivable

 

5,962

 

 

 

3,847

 

Inventory

 

1,432

 

 

 

480

 

Prepaid expenses and other current assets

 

2,681

 

 

 

3,166

 

Total current assets

 

183,865

 

 

 

232,824

 

Property and equipment, net

 

4,916

 

 

 

4,549

 

Operating lease right-of-use assets

 

23,694

 

 

 

7,744

 

Restricted cash

 

3,470

 

 

 

3,025

 

Other assets

 

167

 

 

 

167

 

Total assets

$

216,112

 

 

$

248,309

 

Liabilities and Stockholders’ Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

861

 

 

$

2,880

 

Accrued compensation

 

7,818

 

 

 

5,120

 

Accrued liabilities

 

3,272

 

 

 

1,227

 

Short-term deferred revenue

 

1,310

 

 

 

1,380

 

Current portion of operating lease liabilities

 

1,693

 

 

 

1,453

 

Current portion of finance lease obligations

 

134

 

 

 

121

 

Total current liabilities

 

15,088

 

 

 

12,181

 

Warrant liability

 

24

 

 

 

146

 

Long-term finance lease obligations, less current portion

 

111

 

 

 

136

 

Operating lease liabilities, long-term

 

22,312

 

 

 

6,148

 

Total liabilities

 

37,535

 

 

 

18,611

 

Stockholders’ equity:

 

 

 

Common stock, $0.0001 par value per share; 50,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 30,038,447 and 29,772,922 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

3

 

 

 

3

 

Additional paid-in capital

 

445,491

 

 

 

436,183

 

Accumulated other comprehensive loss

 

(865

)

 

 

(124

)

Accumulated deficit

 

(266,052

)

 

 

(206,364

)

Total stockholders’ equity

 

178,577

 

 

 

229,698

 

Total liabilities and stockholders’ equity

$

216,112

 

 

$

248,309

 

 

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