DermTech Reports Fourth-Quarter and Full-Year 2022 Financial Results; Company Announces CEO Transition Plan

Rhea-AI Summary

DermTech, a leader in precision dermatology, reported its Q4 and full-year 2022 financial results, highlighting a growth in covered lives from 91 million to 124 million. CEO Dr. John Dobak will continue until a successor is appointed. Fourth-quarter assay revenue totaled $2.7 million, a 9% decrease year-over-year, while total revenue decreased by 5% to $3.0 million. The company reported a net loss of $28.2 million or ($0.93) per share. For the full year, total revenue rose 23% to $14.5 million, with a net loss of $116.7 million or ($3.88) per share. DermTech expects its cash runway to last through Q3 2024, amid ongoing operational adjustments.

Positive

• Covered lives increased from 91 million to 124 million.
• Billable sample volume grew 48% in Q4 2022 year-over-year.
• Total revenue increased by 23% for the full year 2022.

Negative

• Assay revenue decreased by 9% in Q4 2022 compared to Q4 2021.
• Net loss increased to $116.7 million for the full year 2022 from $78.3 million in 2021.
• General and administrative expenses rose 37% in Q4 2022 compared to Q4 2021.

- Covered lives increased from 91 million to 124 million and cash runway through the third quarter of 2024

- Dr. John Dobak will continue to serve as CEO until a successor is appointed

- Board initiates comprehensive CEO search

LA JOLLA, Calif.--(BUSINESS WIRE)-- DermTech, Inc. (NASDAQ: DMTK) (“DermTech” or the “Company”), a leader in precision dermatology enabled by a non-invasive skin genomics platform, today reported its fourth-quarter and full-year 2022 financial results. The Company also announced that Dr. John Dobak expects to step away from his role as president, chief executive officer and director under a planned transition.

“We’re off to a great start in 2023, as we’ve grown covered lives from 91 million to 124 million during the last few months,” said John Dobak, M.D., CEO, DermTech. “A nice mix of regional commercial and governmental payers have recognized the clinical and economic value of the DermTech Melanoma Test (DMT). We continue to have positive discussions with payers and believe a recent improvement to the DMT’s NCCN recommendation and support from patient advocacy groups will strengthen our case for coverage.”

Dr. Dobak continued, “We expect to grow DMT volume this year despite the ongoing friction attributable to non-contracted commercial payers and will continue to anchor our effort around monetizing our already significant demand. This focus on steadily improving average selling price (ASP) and generating covered tests is beginning to show positive signs. Our normalized fourth-quarter ASP of $239 was sequentially higher, but we still expect variability going forward. In addition, we believe that payer friction has started to slowly ease, and based on the trends we’ve observed to begin the year, we expect mid-single digit sequential growth in test volumes for the first quarter.”

Dr. Dobak concluded, “We’re guided by strong operating discipline and continue to evaluate ways to adjust expenses as we look ahead to potential catalysts. Considering our revised operating plan and ability to access capital, we now expect our cash runway to take us through the third quarter of 2024.”

Fourth-Quarter 2022 Financial Results

• Billable sample volume grew 48 percent from the fourth quarter of 2021 to approximately 17,460.
• Assay revenue was $2.7 million, down 9 percent from the fourth quarter of 2021, primarily due to changes in collection estimates for tests run in prior periods.
• Total revenue was $3.0 million, a 5 percent decrease from the fourth quarter of 2021, driven by lower assay revenue.
• Cost of assay revenue was $3.3 million, a 9 percent increase from the fourth quarter of 2021, yielding an assay gross margin of negative 22 percent, compared to negative 1 percent for the fourth quarter of 2021.
• Sales and marketing expenses were $13.6 million, a 2 percent increase from the fourth quarter of 2021. The increase was primarily attributable to higher employee-related costs and marketing expenditures.
• Research and development expenses were $5.1 million, a 15 percent decrease from the fourth quarter of 2021, largely due to lower lab and clinical study costs.
• General and administrative expenses were $9.8 million, a 37 percent increase from the fourth quarter of 2021. The increase was driven by higher infrastructure costs due to the Company’s new facility and higher employee-related expenses.
• Net loss was $28.2 million, or ($0.93) per share, which included $5.3 million of non-cash stock-based compensation expense, as compared to $26.1 million, or ($0.88) per share, for the fourth quarter of 2021, which included $3.8 million of non-cash stock-based compensation expense.
• Cash, cash equivalents, restricted cash and short-term marketable securities were $129.8 million as of December 31, 2022. DermTech believes it has sufficient cash and the ability to access capital to fund its current operating plan through the third quarter of 2024.

Full-Year 2022 Financial Results

• Billable sample volume grew 53 percent versus the full-year 2021 to approximately 68,230.
• Assay revenue was $13.8 million, up 25 percent from the full-year 2021, primarily due to higher billable sample volume.
• Total revenue was $14.5 million, a 23 percent increase from the full-year 2021, driven by higher assay revenue.
• Cost of assay revenue was $13.7 million, a 31 percent increase from the full-year 2021, yielding an assay gross margin of 1 percent, compared to 5 percent for the full-year 2021.
• Sales and marketing expenses were $58.7 million, a 56 percent increase from the full-year 2021. The increase was primarily attributable to higher employee-related costs from increased headcount and marketing expenditures.
• Research and development expenses were $24.1 million, a 48 percent increase from the full-year 2021, largely due to higher employee-related and lab costs.
• General and administrative expenses were $36.1 million, a 45 percent increase from the full-year 2021. The increase was driven by higher employee-related and infrastructure costs.
• Net loss was $116.7 million, or ($3.88) per share, which included $18.9 million of non-cash stock-based compensation expense, as compared to $78.3 million, or ($2.71) per share, for the full-year 2021, which included $13.3 million of non-cash stock-based compensation expense.

CEO Transition Plan

Dr. John Dobak will continue to serve as president, chief executive officer and director until the earlier of the date the Board appoints a successor and September 30, 2023. The Board has initiated a comprehensive search to identify Dr. Dobak’s replacement.

“I’m extremely proud of what we’ve accomplished during my 11-year tenure as CEO having built a strong foundation for DermTech,” said John Dobak, M.D., CEO, DermTech. “We’ve achieved widespread product adoption, secured broad payer coverage and scaled the organization for the future. I’m looking forward to finding a successor that will carry my vision forward and bring the genomic revolution to dermatologic care. I’d like to thank my team and the board for their dedication and perseverance. I’m excited about DermTech’s bright future.”

“On behalf of the board, I want to thank John for his valuable contributions to DermTech over the past eleven years,” said Matt Posard, DermTech’s chairman. “We are grateful to have John’s continuing leadership and support during the CEO transition.”

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, March 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 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,” “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, DermTech’s positioning and potential growth, financial outlook and future financial performance, ability to maintain or improve its operating efficiency and reduce operating expenses, the sufficiency of DermTech’s cash and ability to access capital to fund its operating plan, implications and interpretations of any study results, expectations regarding agreements with or reimbursement or cash collection patterns from Medicare, government payers or commercial payers and related billing practices or number of covered lives, DermTech’s ability to expand its product offerings and develop pipeline products, and expectations regarding the search for, transition to and future contributions of a successor CEO. 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, government payers 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. Consolidated Statements of Operations (in thousands, except share and per share data)
	Three Months Ended December 31,								Twelve Months Ended December 31,
	2022				2021				2022				2021
Revenues:
Assay revenue	$	2,692			$	2,969			$	13,790			$	11,023
Contract revenue		302				196				728				815
Total revenues		2,994				3,165				14,518				11,838
Cost of revenues:
Cost of assay revenue		3,292				3,013				13,702				10,464
Cost of contract revenue		58				27				169				100
Total cost of revenues		3,350				3,040				13,871				10,564
Gross (loss) profit		(356	)			125				647				1,274
Operating expenses:
Sales and marketing		13,598				13,330				58,674				37,575
Research and development		5,097				5,990				24,052				16,261
General and administrative		9,828				7,164				36,086				24,836
Total operating expenses		28,523				26,484				118,812				78,672
Loss from operations		(28,879	)			(26,359	)			(118,165	)			(77,398	)
Other income/(expense):
Interest income, net		641				44				1,341				151
Change in fair value of warrant liability		15				262				141				(1,088	)
Total other income/(expense)		656				306				1,482				(937	)
Net loss	$	(28,223	)		$	(26,053	)		$	(116,683	)		$	(78,335	)
Weighted average shares outstanding used in computing net loss per share, basic and diluted		30,245,264				29,732,059				30,038,959				28,884,874
Net loss per share of common stock outstanding, basic and diluted	$	(0.93	)		$	(0.88	)		$	(3.88	)		$	(2.71	)

DERMTECH, INC. Consolidated Balance Sheets (in thousands, except share and per share data)
	December 31, 2022				December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	77,757			$	176,882
Short-term marketable securities		48,411				48,449
Accounts receivable		4,172				3,847
Inventory		1,757				480
Prepaid expenses and other current assets		3,940				3,166
Total current assets		136,037				232,824
Property and equipment, net		6,375				4,549
Operating lease right-of-use assets		56,007				7,744
Restricted cash		3,488				3,025
Other assets		168				167
Total assets	$	202,075			$	248,309
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,419			$	2,880
Accrued compensation		7,894				5,120
Accrued liabilities		3,464				1,227
Short-term deferred revenue		109				1,380
Current portion of operating lease liabilities		1,634				1,453
Current portion of finance lease obligations		116				121
Total current liabilities		15,636				12,181
Warrant liability		5				146
Long-term finance lease obligations, less current portion		53				136
Operating lease liabilities, long-term		54,028				6,148
Total liabilities		69,722				18,611
Stockholders’ equity:
Common stock, $0.0001 par value per share; 50,000,000 shares authorized as of December 31, 2022 and 2021; 30,297,408 and 29,772,922 shares issued and outstanding at December 31, 2022 and 2021, respectively		3				3
Additional paid-in capital		456,171				436,183
Accumulated other comprehensive loss		(774	)			(124	)
Accumulated deficit		(323,047	)			(206,364	)
Total stockholders’ equity		132,353				229,698
Total liabilities and stockholders’ equity	$	202,075			$	248,309

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230302005816/en/

Steve Kunszabo

DermTech

(858) 291-1647

steve.kunszabo@dermtech.com

Source: DermTech, Inc.

FAQ

What were DermTech's financial results for Q4 2022?

DermTech reported Q4 2022 assay revenue of $2.7 million, a 9% decrease year-over-year, with a net loss of $28.2 million.

How much did DermTech's covered lives increase?

DermTech's covered lives increased from 91 million to 124 million.

What is DermTech's outlook regarding its cash runway?

DermTech expects its cash runway to last through the third quarter of 2024.

What was DermTech's net loss for the full year 2022?

DermTech reported a net loss of $116.7 million or ($3.88) per share for the full year 2022.

What is the current status of DermTech's CEO?

Dr. John Dobak will continue as CEO until a successor is appointed.