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

August 08, 2022 at 16:01 PM EDT

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 Stickers^TM. 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