Business Wire | Feb 17, 2021 04:07PM EST

Veracyte Announces Fourth Quarter and Full-Year 2020 Financial Results

Feb. 17, 2021

SOUTH SAN FRANCISCO, Calif.--(BUSINESS WIRE)--Feb. 17, 2021--Veracyte, Inc. (Nasdaq: VCYT) today announced financial results for the fourth quarter and full year ended December 31, 2020 and provided an update on recent business progress.

"Our revenue and genomic testing and product volume continued to rebound from the pandemic during the fourth quarter and we entered 2021 with strong momentum across our business," said Bonnie Anderson, Veracyte's chairman and chief executive officer. "We are on track to launch multiple new products this year, including our noninvasive nasal swab test and Percepta Genomic Atlas in lung cancer.

"Additionally, we expect our pending acquisition of Decipher Biosciences, with its market-leading products in urologic cancers, will significantly accelerate our revenue growth by expanding our reach into seven of the ten most common cancers, further solidifying our global leadership in cancer genomic diagnostics. We look forward to welcoming Decipher's employees when the transaction closes and to strengthening our executive leadership team with the addition of Dr. Tina Nova, Decipher's president and CEO."

Fourth Quarter 2020 Financial Results

For the three months ended December 31, 2020, compared to the prior year:

* Total Revenue was $34.5 million, an increase of 16%; * Gross Margin was 68%, an increase of 2 percentage points; * Operating Expenses, Excluding Cost of Revenue, were $31.4 million, an increase of 13%; * Net Loss and Comprehensive Loss was $8.0 million, compared to $7.5 million; * Basic and Diluted Net Loss Per Common Share was $0.14, versus $0.15; * Net Cash Provided by Operating Activities was $2.3 million, compared to $1.8 million; and * Cash and Cash Equivalents were $349.4 million at December 31, 2020.

For the year ended December 31, 2020, compared to the prior year:

* Total Revenue was $117.5 million, a decrease of 2%; * Gross Margin was 65%, a decrease of 5 percentage points; * Operating Expenses, Excluding Cost of Revenue, were $111.4 million, an increase of 13%; * Net Loss and Comprehensive Loss was $34.9 million, compared to $12.6 million; * Basic and Diluted Net Loss Per Common Share was $0.66, versus $0.27; and * Net Cash Used in Operating Activities was $9.7 million, compared to $3.2 million.

2020 Full-Year and Recent Business Highlights

Commercial Growth

* Grew revenue to $34.5 million in the fourth quarter, an increase of 16% compared to the same period in 2019. * Product revenue grew to $9.8 million for 2020, exceeding our expectations. * Achieved genomic testing and product volume of 13,130 tests in the fourth quarter, a 14% increase compared to the fourth quarter of 2019. * Received new Medicare reimbursement rate of $5,500 for the Envisia Genomic Classifier, which went into effect on October 1, 2020, following the test's designation by the Centers for Medicare & Medicaid Services as an Advanced Diagnostic Laboratory Test (ADLT). * Received reimbursement approval from the German government for the Prosigna(r) Breast Cancer Gene Signature Assay, making the test accessible for all breast cancer patients in Germany with HR+/HER2- early-stage breast cancer.

Evidence Development

* Published ten studies in leading peer-reviewed journals supporting our genomic tests in four disease areas (lung cancer, breast cancer, thyroid cancer and interstitial lung diseases, including idiopathic pulmonary fibrosis). * Launched the PROCURE study, led by an independent scientific committee of breast cancer experts and including input from 180 clinicians throughout Europe, to help achieve consensus on the evidence supporting the most frequently used breast cancer genomic tests, including Prosigna.

Pipeline Advancement/Collaborations

* Unveiled new preliminary performance data at an R&D Day event for our noninvasive nasal swab test for early lung cancer detection and our Percepta Genomic Atlas for informing treatment decisions at the time of lung cancer diagnosis. * Expanded our strategic collaboration with the Lung Cancer Initiative at Johnson & Johnson to include a focus on the NOBLE trial. The 9,000-patient, prospective, multicenter clinical study is designed to distinguish genomic and other differences in lung cancer development, which may fuel Veracyte's development of future tests.

Decipher Acquisition

* Announced we have entered into an agreement to acquire Decipher Biosciences, a commercial-stage precision oncology company focused on urologic cancers, further solidifying Veracyte's global leadership in the genomic cancer diagnostics market while accelerating revenue growth. * Under terms of the acquisition agreement and following Veracyte's exercise of an option to substitute cash for the entire stock portion of the consideration, the company will pay Decipher security holders $600 million in cash, subject to customary purchase price adjustments. * The acquisition is expected to close on or before April 1, 2021, subject to regulatory approval and the satisfaction of other customary conditions.

Financing

* Issued and sold 8,547,297 shares of common stock, including 1,114,864 shares sold upon full exercise of the underwriters' option to purchase additional shares, at a price to the public of $74.00 per share. The net proceeds to Veracyte from the offering were approximately $593.8 million. * Veracyte intends to use a portion of the net proceeds from the offering, together with its existing cash and cash equivalents, to finance its acquisition of Decipher and intends to use the remaining net proceeds of the offering for working capital and other general corporate purposes, including to acquire or invest in complementary businesses, technologies or other assets.

2021 Outlook

Pending the completion of the acquisition of Decipher Biosciences, which is assumed to occur by April 1, 2021, Veracyte expects total combined revenue in 2021 to be approximately $190 million to $200 million, representing growth of approximately 65% over 2020 at the midpoint of the range.

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/p7geixt9. 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.: 7487201

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 anticipated product launches for 2021; our financial and operating results for the year ending December 31, 2021; our plans, objectives, expectations (financial and otherwise) or intentions with respect to the anticipated acquisition of Decipher; the expected timing for completion of the transaction; and the expected benefits of the proposed transaction. 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 Veracyte's filings with the Securities and Exchange Commission, including the risks set forth in its annual report on Form 10-K for the year ended December 31, 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."

nCounter is the registered trademark of NanoString Technologies, Inc. in the United States and other countries and used by Veracyte under license.

VERACYTE, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(Unaudited)(In thousands of dollars, except share and per share amounts) Three Months Ended December 31, Twelve Months Ended December 31,

2020 2019 2020 2019

Revenue:Testing revenue $ 31,497 $ 28,557 $ 101,970 $ 107,355

Product revenue 2,696 923 9,845 923

Biopharmaceutical 343 250 5,668 8,090 revenueCollaboration - - - 4,000 revenueTotal Revenue 34,536 29,730 117,483 120,368

Operatingexpenses:Cost of testing 9,756 9,673 35,913 36,077 revenueCost of product 1,382 446 4,921 446 revenueCost of 49 - 621 - biopharmaceuticalrevenueResearch and 4,586 4,443 17,204 14,851 developmentSelling and 13,149 14,183 52,389 53,691 marketingGeneral and 12,413 8,581 36,729 29,029 administrativeIntangible asset 1,273 601 5,095 1,401 amortizationTotal operating 42,608 37,927 152,872 135,495 expensesLoss from (8,072 ) (8,197 ) (35,389 ) (15,127 )operationsInterest expense (54 ) (81 ) (229 ) (677 )

Other income, net 82 820 709 3,205

Net loss and $ (8,044 ) $ (7,458 ) $ (34,909 ) $ (12,599 )comprehensivelossNet loss per $ (0.14 ) $ (0.15 ) $ (0.66 ) $ (0.27 )common share,basic and dilutedShares used tocompute net loss 58,023,753 49,095,703 53,239,231 46,138,177 per common share,basic and diluted VERACYTE, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands)December 31,2020December 31,2019(Unaudited)(See Note 1)AssetsCurrent assets:Cash and cash equivalents$

349,364

$

159,317

Accounts receivable18,461

19,329

Supplies4,657

6,806

Prepaid expenses and other current assets3,197

2,235

Total current assets375,679

187,687

Property and equipment, net8,990

8,933

Right-of-use assets - operating lease7,843

8,808

Finite-lived intangible assets, net59,924

65,019

Goodwill2,725

2,725

Restricted cash603

603

Other assets1,399

1,437

Total assets$

457,163

$

275,212

Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable$

3,116

$

2,328

Accrued liabilities11,705

13,734

Current portion of deferred revenue371

-

Current portion of operating lease liability1,589

1,407

Total current liabilities16,781

17,469

Long-term debt810

694

Deferred revenue, net of current portion829

-

Acquisition-related contingent consideration7,594

6,088

Operating lease liability, net of current portion9,917

11,506

Total liabilities35,931

35,757

Total stockholders' equity421,232

239,455

Total liabilities and stockholders' equity$

457,163

$

275,212

VERACYTE, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands) December 31, December 31, 2020 2019 (Unaudited) (See Note 1)AssetsCurrent assets:Cash and cash equivalents $ 349,364 $ 159,317

Accounts receivable 18,461 19,329

Supplies 4,657 6,806

Prepaid expenses and other current assets 3,197 2,235

Total current assets 375,679 187,687

Property and equipment, net 8,990 8,933

Right-of-use assets - operating lease 7,843 8,808

Finite-lived intangible assets, net 59,924 65,019

Goodwill 2,725 2,725

Restricted cash 603 603

Other assets 1,399 1,437

Total assets $ 457,163 $ 275,212

Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable $ 3,116 $ 2,328

Accrued liabilities 11,705 13,734

Current portion of deferred revenue 371 -

Current portion of operating lease liability 1,589 1,407

Total current liabilities 16,781 17,469

Long-term debt 810 694

Deferred revenue, net of current portion 829 -

Acquisition-related contingent consideration 7,594 6,088

Operating lease liability, net of current portion 9,917 11,506

Total liabilities 35,931 35,757

Total stockholders' equity 421,232 239,455

Total liabilities and stockholders' equity $ 457,163 $ 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.(1) The condensed balance sheet at December 31, 2019 has been derived from theaudited financial statements at that date included in the Company's Form 10-Kfiled with the Securities and Exchange Commission dated February 25, 2020.VERACYTE, INC.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited)(in thousands of dollars)Twelve Months Ended December 31,2020

2019

Operating activitiesNet loss$

(34,909

)

$

(12,599

)

Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization7,944

4,117

Gain on disposal of property and equipment-

(23

)

Stock-based compensation12,995

9,807

Amortization of debt issuance costs-

83

Interest on end-of-term debt obligation216

229

Write-down of excess supplies1,088

-

Noncash lease expense964

1,034

Revaluation of acquisition-related contingent consideration1,506

-

Impairment loss1,000

-

Effect of foreign currency on operations(34

)

-

Changes in operating assets and liabilities:Accounts receivable955

(6,161

)

Supplies1,061

(3,404

)

Prepaid expenses and other current assets(970

)

154

Other assets37

(351

)

Operating lease liability(1,407

)

(1,205

)

Accounts payable711

(141

)

Accrued liabilities and deferred revenue(868

)

5,228

Net cash used in operating activities(9,711

)

(3,232

)

Investing activitiesPurchases of property and equipment(2,837

)

(2,756

)

Purchase of equity securities(1,000

)

-

Cash paid for acquisition-

(40,000

)

Proceeds from disposal of property and equipment-

23

Net cash used in investing activities(3,837

)

(42,733

)

Financing activitiesProceeds from the issuance of common stock in a public offering, net193,831

137,848

Payment of long-term debt(100

)

(24,900

)

Payment of finance lease liability-

(308

)

Payment of taxes on vested restricted stock units(3,845

)

(977

)

Proceeds from the exercise of common stock options and employee stock purchases13,709

15,624

Net cash provided by financing activities203,595

127,287

Net increase in cash, cash equivalents and restricted cash190,047

81,322

Cash, cash equivalents and restricted cash at beginning of period159,920

78,598

Cash, cash equivalents and restricted cash at end of period$

349,967

$

159,920

Supplementary cash flow information of non-cash investing and financing activities:Shares issued for purchase consideration for a business combination$

-

$

10,000

Deferred purchase consideration for a business combination$

-

$

6,088

Purchases of property and equipment included in accounts payable and accrued liabilities$

294

$

226

Supplementary cash flow information:Cash paid for interest on debt$

13

$

332

Cash paid for tax$

112

$

35

VERACYTE, INC.CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited)(in thousands of dollars) Twelve Months Ended December 31, 2020 2019

Operating activitiesNet loss $ (34,909 ) $ (12,599 )

Adjustments to reconcile net loss to net cash used inoperating activities:Depreciation and amortization 7,944 4,117

Gain on disposal of property and equipment - (23 )

Stock-based compensation 12,995 9,807

Amortization of debt issuance costs - 83

Interest on end-of-term debt obligation 216 229

Write-down of excess supplies 1,088 -

Noncash lease expense 964 1,034

Revaluation of acquisition-related contingent 1,506 - considerationImpairment loss 1,000 -

Effect of foreign currency on operations (34 ) -

Changes in operating assets and liabilities:Accounts receivable 955 (6,161 )

Supplies 1,061 (3,404 )

Prepaid expenses and other current assets (970 ) 154

Other assets 37 (351 )

Operating lease liability (1,407 ) (1,205 )

Accounts payable 711 (141 )

Accrued liabilities and deferred revenue (868 ) 5,228

Net cash used in operating activities (9,711 ) (3,232 )

Investing activitiesPurchases of property and equipment (2,837 ) (2,756 )

Purchase of equity securities (1,000 ) -

Cash paid for acquisition - (40,000 )

Proceeds from disposal of property and equipment - 23

Net cash used in investing activities (3,837 ) (42,733 )

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 - (308 )

Payment of taxes on vested restricted stock units (3,845 ) (977 )

Proceeds from the exercise of common stock options and 13,709 15,624 employee stock purchasesNet cash provided by financing activities 203,595 127,287

Net increase in cash, cash equivalents and restricted 190,047 81,322 cashCash, cash equivalents and restricted cash at 159,920 78,598 beginning of periodCash, cash equivalents and restricted cash at end of $ 349,967 $ 159,920 period Supplementary cash flow information of non-cashinvesting and financing activities:Shares issued for purchase consideration for a $ - $ 10,000 business combinationDeferred purchase consideration for a business $ - $ 6,088 combinationPurchases of property and equipment included in $ 294 $ 226 accounts payable and accrued liabilitiesSupplementary cash flow information:Cash paid for interest on debt $ 13 $ 332

Cash paid for tax $ 112 $ 35

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

349,364

$

159,317

Restricted cash603

603

Total cash, cash equivalents and restricted cash$

349,967

$

159,920

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