Business Wire | Nov 2, 2020 04:06PM EST

Veracyte Announces Third Quarter 2020 Financial Results

Nov. 02, 2020

SOUTH SAN FRANCISCO, Calif.--(BUSINESS WIRE)--Nov. 02, 2020--Veracyte, Inc. (Nasdaq: VCYT) today announced financial results for the third quarter ended September 30, 2020 and provided an update on recent business progress. For the third quarter of 2020, revenue was $31.1 million, compared to $20.7 million in the second quarter of 2020 and $31.0 million in the third quarter of 2019. Product and testing revenue was $30.3 million, an increase of 79% over the second quarter of 2020 and 13% over the third quarter of 2019.

"We are pleased with the strong rebound in our business during the third quarter, with revenue returning to pre-pandemic levels, led by our Afirma franchise," said Bonnie Anderson, Veracyte's chairman and chief executive officer. "We also achieved important reimbursement and clinical-evidence milestones for our tests, which we believe will help further drive adoption and revenue growth. We also remain on track to launch four new clinical products in 2021. Moreover, we believe we are well-positioned in the near- and long-term with our tests that help patients avoid unnecessary invasive diagnostic procedures and accelerate access to appropriate treatment."

Third Quarter 2020 Financial Results

For the third quarter of 2020:

* Total Revenue was $31.1 million, comprising $30.3 million in testing and product revenue and $0.8 million in biopharmaceutical partnership revenue; * Gross Margin was 67%; * Operating Expenses, Excluding Cost of Revenue, were $24.8 million; * Net Loss and Comprehensive Loss was $4.1 million; * Basic and Diluted Net Loss Per Common Share was $0.08; * Net Cash Provided by Operating Activities was $1.8 million; and * Cash and Cash Equivalents were $345.1 million at September 30, 2020.

For the nine-month period ended September 30, 2020:

* Total revenue was $82.9 million, comprising $77.6 million in testing and product revenue and $5.3 million in biopharmaceutical partnership revenue; * Gross Margin was 64%; * Operating Expenses, Excluding Cost of Revenue were $80.0 million; * Net Loss and Comprehensive Loss was $26.9 million; * Basic and Diluted Net Loss Per Common Share was $0.52; and * Net Cash Used in Operating Activities was $12.0 million.

Third Quarter 2020 and Recent Business Highlights

Commercial Growth and Reimbursement Expansion:

* Grew reported genomic testing volume (Afirma, Percepta and Envisia) to 10,242, an increase of 90% over the second quarter of 2020 and 3% over the third quarter of 2019. * Generated $7.0 million in year-to-date 2020 revenue from our Prosigna breast cancer test, achieving our pre-pandemic, full-year 2020 revenue goal. * Received Advanced Diagnostic Laboratory Test (ADLT) status and new Medicare pricing for the Envisia classifier, beginning October 1, 2020, positioning the test for expanded revenue growth. * Received new CPT codes and preliminary national Medicare pricing for the Afirma Medullary Thyroid Carcinoma (MTC) classifier and the Xpression Atlas, providing a pathway for increased reimbursement. * Obtained coverage for the Prosigna breast cancer test from the Federal Joint Committee (G-BA) in Germany, our third largest European market.

Evidence Development:

* Prosigna:

- Launched the PROCURE study, led by a distinguished, independent scientific committee of breast cancer experts and including input from 180 clinicians throughout Europe, intended to achieve consensus on the evidence supporting the most frequently used breast cancer genomic tests, including Prosigna. - Data from the TransATAC study were published in the Journal of Clinical Oncology elucidating the foundational molecular biology on which the Prosigna test is based and its higher likelihood of predicting long-term risk of recurrence among certain groups of women with early-stage breast cancer, compared to other breast cancer genomic tests.

* Afirma:

- An independent study published in Cytopathology by UCLA researchers showed that use of the Afirma GSC further reduced unnecessary surgeries in thyroid cancer diagnosis compared to the original Afirma test.

* Pulmonology:

- Presented three e-Posters at the American Thoracic Society 2020 Virtual Meeting featuring real-world data that reinforce previous findings suggesting that the Percepta and Envisia classifiers improve the diagnosis of lung cancer and interstitial lung diseases (ILDs). - Published data in the journal CHEST suggesting that the Percepta classifier reduces unnecessary invasive procedures following inconclusive bronchoscopy results for patients with lung nodules and that these results are durable for over one year of follow-up. - Presented an oral and e-Poster presentation at CHEST Annual Meeting 2020 supporting advancement of our lung cancer nasal swab classifier, along with the potential to integrate radiologic data to further augment genomics in the diagnosis of ILDs, including idiopathic pulmonary fibrosis.

Financing:

* Issued and sold 6,900,000 shares of common stock in August 2020 in a registered public offering, including the underwriters' exercise in full of their option to purchase an additional 900,000 shares, at a price to the public of $30.00 per share. Net proceeds from the offering were approximately $194 million.

2020 Financial Guidance

While Veracyte experienced improved business trends in the third quarter, due to the continued uncertainties with respect to the COVID-19 pandemic, the company will not be providing guidance at this time.

Conference Call and Webcast Details

Veracyte will host a conference call and webcast today at 4:30 p.m. Eastern Time to discuss the company's financial results and provide a general business update. The conference call will be webcast live from the company's website and will be available via the following link: https://edge.media-server.com/mmc/p/rxzuzy8m. The webcast should be accessed 10 minutes prior to the conference call start time. A replay of the webcast will be available for one year following the conclusion of the live broadcast and will be accessible on the company's website at https://investor.veracyte.com/events-presentations.

The conference call can be accessed as follows:

U.S./Canada participant dial-in number (toll-free): (855) 541-0980

International participant dial-in number: (970) 315-0440

Conference I.D.: 3190445

About Veracyte

Veracyte (Nasdaq: VCYT) is a global genomic diagnostics company that improves patient care by providing answers to clinical questions, informing diagnosis and treatment decisions throughout the patient journey in cancer and other diseases. The company's growing menu of genomic tests leverage advances in genomic science and technology, enabling patients to avoid risky, costly diagnostic procedures and quicken time to appropriate treatment. The company's tests in thyroid cancer, lung cancer, breast cancer and idiopathic pulmonary fibrosis are available to patients and its lymphoma subtyping test is in development. With Veracyte's exclusive global license to a best-in-class diagnostics instrument platform, the company is positioned to deliver its tests to patients worldwide. Veracyte is based in South San Francisco, California. For more information, please visit www.veracyte.com and follow the company on Twitter (@veracyte).

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, our statements related to our plans, objectives, expectations (financial and otherwise) or intentions with respect to our Prosigna, Afirma, Percepta, Envisia, and nasal swab tests and products for use in diagnosing and treating diseases. Forward-looking statements can be identified by words such as: "appears," "anticipate," "intend," "plan," "expect," "believe," "should," "may," "will" and similar references to future periods. Actual results may differ materially from those projected or suggested in any forward-looking statements. These statements involve risks and uncertainties, which could cause actual results to differ materially from our predictions, and include, but are not limited to: Veracyte's ability to achieve and maintain Medicare coverage for its tests; the benefits of Veracyte's tests, the applicability of clinical results to actual outcomes and the effects of the COVID-19 pandemic on Veracyte's business and performance. Factors that may impact these forward-looking statements can be found in Item 1A - "Risk Factors" in our Annual Report on Form 10-K filed with the SEC on February 25, 2020 and in our Quarterly Report on Form 10-Q to be filed with the SEC on November 2, 2020. A copy of these documents can be found at the Investors section of our website at www.veracyte.com. These forward-looking statements speak only as of the date hereof and Veracyte specifically disclaims any obligation to update these forward-looking statements or reasons why actual results might differ, whether as a result of new information, future events or otherwise.

Veracyte, Afirma, Percepta, Envisia, Prosigna, "Know by Design" and the Veracyte, Afirma, Percepta, Envisia and Prosigna logos are registered trademarks in the U.S. and selected countries. We have common law rights and pending trademark applications for LymphMark and "More About You."

VERACYTE, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Unaudited)(In thousands of dollars, except share and per share amounts) Three Months Ended September Nine Months Ended September 30, 30,

2020 2019 2020 2019

Revenue:Testing revenue $ 28,270 $ 26,723 $ 70,473 $ 78,798

Product revenue 2,027 - 7,149 -

Biopharmaceutical 824 2,250 5,325 7,840 revenueCollaboration - 2,000 - 4,000 revenueTotal Revenue 31,121 30,973 82,947 90,638

Operatingexpenses:Cost of testing 9,118 9,114 26,157 26,404 revenueCost of product 1,048 - 3,539 - revenueCost of 204 - 572 - biopharmaceuticalrevenueResearch and 4,042 3,643 12,618 10,408 developmentSelling and 10,955 13,088 39,240 39,508 marketingGeneral and 8,546 6,624 24,316 20,448 administrativeIntangible asset 1,274 267 3,822 800 amortizationTotal operating 35,187 32,736 110,264 97,568 expensesLoss from (4,066 ) (1,763 ) (27,317 ) (6,930 )operationsInterest expense (55 ) (58 ) (175 ) (596 )

Other income (3 ) 1,091 627 2,385 (loss), netNet loss and $ (4,124 ) $ (730 ) $ (26,865 ) $ (5,141 )comprehensivelossNet loss per $ (0.08 ) $ (0.02 ) $ (0.52 ) $ (0.11 )common share,basic and dilutedShares used tocompute net loss 54,858,052 48,588,296 51,632,750 45,141,502per common share,basic and dilutedVERACYTE, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)September 30,2020December 31,2019(Unaudited)(See Note 1)AssetsCurrent assets:Cash and cash equivalents$

345,080

$

159,317

Accounts receivable17,629

19,329

Supplies4,456

6,806

Prepaid expenses and other current assets3,150

2,235

Total current assets370,315

187,687

Property and equipment, net8,914

8,933

Right-of-use assets - operating lease8,094

8,808

Finite-lived intangible assets, net61,197

65,019

Goodwill2,725

2,725

Restricted cash603

603

Other assets2,303

1,437

Total assets$

454,151

$

275,212

Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable$

1,932

$

2,328

Accrued liabilities10,445

13,734

Current portion of operating lease liability1,542

1,407

Total current liabilities13,919

17,469

Long-term debt756

694

Acquisition-related contingent consideration6,420

6,088

Operating lease liability, net of current portion10,331

11,506

Total liabilities31,426

35,757

Total stockholders' equity422,725

239,455

Total liabilities and stockholders' equity$

454,151

$

275,212

(1) The condensed balance sheet at December 31, 2019 has been derived from the audited financial statements at that date included in the Company's Form 10-K filed with the Securities and Exchange Commission dated February 25, 2020.

VERACYTE, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands) September 30, December 31, 2020 2019 (Unaudited) (See Note 1)AssetsCurrent assets:Cash and cash equivalents $ 345,080 $ 159,317

Accounts receivable 17,629 19,329

Supplies 4,456 6,806

Prepaid expenses and other current assets 3,150 2,235

Total current assets 370,315 187,687

Property and equipment, net 8,914 8,933

Right-of-use assets - operating lease 8,094 8,808

Finite-lived intangible assets, net 61,197 65,019

Goodwill 2,725 2,725

Restricted cash 603 603

Other assets 2,303 1,437

Total assets $ 454,151 $ 275,212

Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable $ 1,932 $ 2,328

Accrued liabilities 10,445 13,734

Current portion of operating lease liability 1,542 1,407

Total current liabilities 13,919 17,469

Long-term debt 756 694

Acquisition-related contingent consideration 6,420 6,088

Operating lease liability, net of current portion 10,331 11,506

Total liabilities 31,426 35,757

Total stockholders' equity 422,725 239,455

Total liabilities and stockholders' equity $ 454,151 $ 275,212

(1) The condensed balance sheet at December 31, 2019 has been derived from the audited financial statements at that date included in the Company's Form 10-K filed with the Securities and Exchange Commission dated February 25, 2020.

VERACYTE, INC.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited)(in thousands of dollars) Nine Months Ended September 30,

2020 2019

Operating activitiesNet loss $ (26,865 ) $ (5,141 )

Adjustments to reconcile net loss to net cash used inoperating activities:Depreciation and amortization 5,919 2,836

Gain on disposal of property and equipment - (23 )

Stock-based compensation 9,354 6,965

Amortization of debt issuance costs - 83

Interest on end-of-term debt obligation 162 174

Write-down of excess supplies 1,088 -

Noncash lease expense 714 810

Revaluation of acquisition-related contingent 332 - considerationEffect of foreign currency on operations (17 ) -

Changes in operating assets and liabilities:Accounts receivable 1,742 (10,445 )

Supplies 1,262 (3,206 )

Prepaid expenses and other current assets (923 ) 185

Other assets 134 (142 )

Operating lease liability (1,040 ) (881 )

Accounts payable (534 ) 2,505

Accrued liabilities (3,300 ) 1,258

Net cash used in operating activities (11,972 ) (5,022 )

Investing activitiesPurchases of property and equipment (1,949 ) (1,656 )

Purchase of equity securities (1,000 ) -

Proceeds from disposal of property and equipment - 23

Net cash used in investing activities (2,949 ) (1,633 )

Financing activitiesProceeds from the issuance of common stock in a public 193,831 137,848 offering, netPayment of long-term debt (100 ) (24,900 )

Payment of finance lease liability - (229 )

Payment of taxes on vested restricted stock units (3,161 ) (810 )

Proceeds from the exercise of common stock options and 10,114 12,413 employee stock purchasesNet cash provided by financing activities 200,684 124,322

Net increase in cash, cash equivalents and restricted 185,763 117,667 cashCash, cash equivalents and restricted cash at 159,920 78,598 beginning of periodCash, cash equivalents and restricted cash at end of $ 345,683 $ 196,265 period Supplementary cash flow information:Purchases of property and equipment included in $ 355 $ 821 accounts payable and accrued liabilityInterest paid on debt $ 3 $ 330

CASH, CASH EQUIVALENTS AND RESTRICTED CASH(Unaudited)(In thousands of dollars)September 30, 2020December 31, 2019Cash and cash equivalents$

345,080

$

159,317

Restricted cash603

603

Total cash, cash equivalents and restricted cash$

345,683

$

159,920

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CONTACT: Investor and Media Contact:

CONTACT: Tracy Morris Vice President of Corporate Communications & Investor Relations 650-380-4413 tracy.morris@veracyte.com