GlobeNewswire Inc | Oct 28, 2020 04:05PM EDT

October 28, 2020

CARLSBAD, Calif., Oct. 28, 2020 (GLOBE NEWSWIRE) -- GenMark Diagnostics, Inc. (Nasdaq: GNMK), a leading provider of automated, multiplex molecular diagnostic testing systems, today announced financial results for the quarter ended September30, 2020.

Third Quarter 2020 Highlights

-- Total revenue of $42.6 million, an increase of 104% over the third quarter of 2019 ePlex revenue of $38.0 million, an increase of 187% over the third quarter of 2019Average annuity per analyzer of $193,000, up 82% over the third quarter of 2019 -- Gross margin of 39%, compared to 34% in the third quarter of 2019 -- Cash and investments were $137.3 million as of September30, 2020, an increase of $4.5 million over June 30, 2020 Delivered $6.3 million in positive cash flows from operating activities -- Placed net 70 ePlex analyzers, concluding the quarter with a global installed base of more than 720 ePlex analyzers, an increase of 47% over the third quarter of 2019 -- ePlex Respiratory Pathogen Panel 2 (RP2), one of the first rapid-result multiplex panels to identify 21 respiratory pathogens, including SARS-CoV-2, received Emergency Use Authorization (EUA) RP2 drove the majority of the placements and revenue for the quarter

The GenMark team once again delivered meaningful progress on each of the strategic objectives established at the outset of this year, including another quarter of strong revenue growth, cash flow positivity, and further menu development, said Scott Mendel, President and Chief Executive Officer. I am especially encouraged by the significant number of customers that have transitioned to ePlex RP2, which enables comprehensive diagnosis for effective patient management. These transitions are important because they include multi-year contracts that increase our highly predictable revenue stream.

Guidance for Full Year 2020GenMark increased its total revenue guidance for the full year 2020 to a range of $165 million to $168 million. This compares to the previously stated range of $155 million to $165 million.

The Company expects to achieve the top end of both its global ePlex placement guidance of 230 to 250 net new analyzers and annuity per analyzer of $175,000 to $200,000.

Gross margin is expected to be in upper end of the Companys previously stated range of 38% to 40%. Operating expenses are expected to be at the high end of the Companys previously stated range of $70 million to $75 million.

Cash usage excluding financing activities for the year continues to be projected in the range of $10 million to $15 million.

Webcast and Conference Call InformationGenMark will be hosting a conference call to discuss third quarter results in further detail today starting at 4:30 p.m. ET. The conference call will be concurrently webcast. The link to the webcast is available on the Company website at www.genmarkdx.comunder the investor relations section and will be archived for future reference. To listen to the conference call, please dial (877) 312-5847 (US/Canada) or (253) 237-1154 (International) and use the conference ID number 1067506 approximately five minutes prior to the start time.

About Emergency Use AuthorizationThe GenMark ePlex SARS-CoV-2 Test and ePlex RP2 have been made available under an emergency access mechanism called an Emergency Use Authorization (EUA). The EUA is supported by the Secretary of Health and Human Services (HHSs) declaration that circumstances exist to justify the use of in vitro diagnostics (IVDs) under EUA for the detection and/or diagnosis of COVID-19. An IVD made available under an EUA has not undergone the same type of review as an FDA cleared IVD. However, based on the totality of scientific evidence available, it is reasonable to believe that this IVD may be effective in the detection of COVID-19. The EUAs for these tests are in effect for the duration of the COVID-19 emergency, unless terminated or revoked (after which the tests may no longer be used). An FDA cleared IVD should be used instead of an IVD under EUA, when applicable and available.

About GenMark DiagnosticsGenMark Diagnostics (NASDAQ: GNMK) is a leading provider of multiplex molecular diagnostic solutions designed to enhance patient care, improve key quality metrics, and reduce the total cost-of-care. Utilizing GenMark's proprietary eSensor detection technology, GenMark's eSensor XT-8 and ePlex systems are designed to support a broad range of molecular diagnostic tests with compact, easy-to-use workstations and self-contained, disposable test cartridges. GenMarks ePlex: The True Sample-to-Answer Solution is designed to optimize laboratory efficiency and address a broad range of infectious disease testing needs, including respiratory, bloodstream, and gastrointestinal infections. For more information, visit www.genmarkdx.com.

Safe Harbor StatementThis press release includes forward-looking statements regarding events, trends and business prospects, which may affect our future operating results and financial position. Such statements, including, but not limited to, those regarding our ability to secure enduring revenue streams extending beyond the COVID-19 pandemic, regulatory submissions and approvals, and plans and objectives of management, are all subject to risks and uncertainties that could cause our actual results and financial position to differ materially. Some of these risks and uncertainties include, but are not limited to, disruptions to our manufacturing operations and/or supply chain, our ability to achieve our updated financial and operational performance guidance, our ability to successfully obtain regulatory clearance for ePlex RP2 and commercialize our ePlex system and its related test menu in a timely manner, constraints or inefficiencies caused by unanticipated acceleration and deceleration of customer demand, our ability to retain customers beyond the COVID-19 pandemic, our ability to successfully expand sales of our product offerings outside the United States, and third-party payor reimbursement to our customers, as well as other risks and uncertainties described under the Risk Factors in our public filings with the Securities and Exchange Commission. We assume no responsibility to update or revise any forward-looking statements to reflect events, trends, or circumstances after the date they are made.

Investor Relations Contact Leigh Salvo

(415) 937-5404 ir@genmarkdx.com

GENMARK DIAGNOSTICS, INC.UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except par value)

September December 30, 31, 2020 2019ASSETS:Current Assets: Cash and cash equivalents $ 57,809 $ 44,360 Short-term marketable securities 79,468 9,100 Accounts receivable, net of allowances of $511 and 16,231 16,759 $376, respectivelyInventories, net 19,570 11,301 Prepaid expenses and other current assets 2,836 1,877 Total current assets 175,914 83,397 Property and equipment, net 26,210 20,419 Intangible assets, net 989 1,432 Restricted cash 1,646 758 Noncurrent operating lease right-of-use assets 8,845 4,642 Other long-term assets 986 825 Total assets $ 214,590 $ 111,473 LIABILITIES AND STOCKHOLDERS' EQUITY:Current liabilities: Accounts payable $ 21,241 $ 12,249 Accrued compensation 13,074 7,493 Current operating lease liability 2,741 1,842 Other current liabilities 3,614 2,732 Total current liabilities 40,670 24,316 Long-term debt 70,743 69,145 Noncurrent operating lease liability 8,912 5,796 Other noncurrent liabilities 308 53 Total liabilities 120,633 99,310 Stockholders? equity: Preferred stock, $0.0001 par value; 5,000 authorized, ? ? none issuedCommon stock, $0.0001 par value; 100,000 authorized;71,286 and 60,255 shares issued and outstanding at 7 6 September30, 2020 and December31, 2019,respectivelyAdditional paid-in capital 622,951 526,294 Accumulated deficit (529,153 ) (514,233 )Accumulated other comprehensive income 152 96 Total stockholders? equity 93,957 12,163 Total liabilities and stockholders? equity $ 214,590 $ 111,473

GENMARK DIAGNOSTICS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS(In thousands, except per share data)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Revenue: Product revenue $ 41,985 $ 20,659 $ 119,798 $ 59,941 Other revenue 661 259 1,676 884 Total revenue 42,646 20,918 121,474 60,825 Cost of revenue 26,103 13,868 72,928 41,339 Gross profit 16,543 7,050 48,546 19,486 Operating expenses:Sales and 4,979 6,279 17,404 17,991 marketingGeneral and 5,367 4,765 18,927 14,217 administrativeResearch and 7,463 6,294 21,179 20,386 developmentTotal operating 17,809 17,338 57,510 52,594 expensesLoss from (1,266 ) (10,288 ) (8,964 ) (33,108 ) operationsOther income (expense):Interest income 81 126 322 438 Interest expense (2,073 ) (1,527 ) (6,201 ) (4,331 ) Other income 13 (19 ) (16 ) (34 ) (expense)Total other (1,979 ) (1,420 ) (5,895 ) (3,927 ) expenseLoss beforeprovision for (3,245 ) (11,708 ) (14,859 ) (37,035 ) income taxesIncome tax expense (17 ) (33 ) 61 28 (benefit)Net loss $ (3,228 ) $ (11,675 ) $ (14,920 ) $ (37,063 ) Net loss pershare, basic and $ (0.05 ) $ (0.20 ) $ (0.23 ) $ (0.65 ) dilutedWeighted averagenumber of shares 71,103 57,718 66,117 57,161 outstanding, basicand diluted Othercomprehensive loss:Net loss $ (3,228 ) $ (11,675 ) $ (14,920 ) $ (37,063 ) Othercomprehensive income (loss):Foreign currencytranslation 56 (46 ) 27 (37 ) adjustments, netof taxNet unrealizedgain (loss) onmarketable (4 ) ? 29 8 securities, net oftaxTotal othercomprehensive 52 (46 ) 56 (29 ) income (loss)Total $ (3,176 ) $ (11,721 ) $ (14,864 ) $ (37,092 ) comprehensive loss

GENMARK DIAGNOSTICS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)

Nine Months Ended September 30, 2020 2020 2019Operating activities: Net loss $ (14,920 ) $ (37,063 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization 5,439 5,393 Net amortization (accretion) of premiums/ 138 (134 ) discounts on investmentsAmortization of deferred debt issuance costs 1,699 1,266 Stock-based compensation 10,474 8,840 Provision for bad debt, net of recoveries 156 93 Non-cash inventory adjustments 1,238 1,653 Other non-cash adjustments 71 175 Changes in operating assets and liabilities: Accounts receivable 376 993 Inventories (10,156 ) (5,471 ) Prepaid expenses and other assets (1,076 ) (857 ) Accounts payable 7,382 345 Accrued compensation 4,862 (406 ) Operating lease liabilities (188 ) ? Other current and non-current liabilities 1,176 (398 ) Net cash provided by (used in) operating 6,671 (25,571 ) activitiesInvesting activities: Purchases of property and equipment (7,874 ) (1,193 ) Purchases of marketable securities (89,340 ) (26,735 ) Proceeds from sales of marketable securities 1,193 ? Maturities of marketable securities 17,670 26,880 Net cash used in investing activities (78,351 ) (1,048 ) Financing activities: Proceeds from issuance of common stock, net of 78,079 2,837 offering costsPrincipal repayment of borrowings (45 ) (35,070 ) Proceeds from borrowings ? 50,000 Payments associated with debt issuance (100 ) (3,588 ) Proceeds from stock option exercises 8,105 432 Net cash provided by financing activities 86,039 14,611 Effect of exchange rate changes on cash, cash (22 ) 30 equivalents, and restricted cashNet increase (decrease) in cash, cash 14,337 (11,978 ) equivalents, and restricted cashCash, cash equivalents, and restricted cash at 45,118 37,044 beginning of yearCash, cash equivalents, and restricted cash at $ 59,455 $ 25,066 end of periodNon-cash investing and financing activities: Transfer of systems to property and equipment $ 649 $ 1,492 from inventoryProperty and equipment included in accounts $ 2,843 $ 147 payableRight-of-use assets obtained in exchange for new $ 4,689 $ ? operating lease liabilitiesSupplemental cash flow information: Cash paid for income taxes, net $ 94 $ 85 Cash paid for interest $ 4,611 $ 2,890

GENMARK DIAGNOSTICS, INC.UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(In thousands)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019GAAP net loss $ (3,228 ) $ (11,675 ) $ (14,920 ) $ (37,063 ) Nonrecurring charges:Severance paymentsand stock-basedcompensation ? ? 566 ? resulting fromreorganization^1Severance paymentsand stock-basedcompensation dueto our former ? ? 4,047 ? President and CEOupon his departurefrom the Company^2Total nonrecurring ? ? 4,613 ? chargesAdjusted non-GAAP $ (3,228 ) $ (11,675 ) $ (10,307 ) $ (37,063 ) net loss GAAP and non-GAAPweighted averageshares outstanding 71,103 57,718 66,117 57,161 - basic anddiluted GAAP net loss pershare - basic and $ (0.05 ) $ (0.20 ) $ (0.23 ) $ (0.65 ) dilutedNonrecurring charges:Severance paymentsand stock-basedcompensation ? ? 0.01 ? resulting fromreorganizationSeverance paymentsand stock-basedcompensation dueto our former ? ? 0.06 ? President and CEOupon his departurefrom the CompanyTotal nonrecurring ? ? 0.07 ? chargesAdjusted non-GAAPnet loss per share $ (0.05 ) $ (0.20 ) $ (0.16 ) $ (0.65 ) - basic anddiluted

1 Severance payments and stock-based compensation expense resulting from the elimination of certain positions within the Company. Stock-based compensation expense resulted from the acceleration of the vesting of restricted stock units awarded to certain individuals.2 Severance payments and stock-based compensation expense resulting from the departure of the Company's former President and CEO. The Company made a $1 million severance payment to the Company's former President and CEO on October 1, 2020 and will be providing reimbursement for group health insurance premium payments pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") for 1 year following the separation date. The Company recognized $3 million in stock-based compensation expense resulting from the acceleration of the vesting of the outstanding unvested portion of restricted stock units and market-based stock units.

Use of Non-GAAP Financial InformationIn addition to results reported under GAAP, we provide certain non-GAAP financial measures consisting of adjusted non-GAAP net loss and adjusted non-GAAP basic and diluted net loss per share. Non-GAAP net loss consists of the net loss reported in our Unaudited Condensed Consolidated Statement of Comprehensive Loss adjusted for nonrecurring severance payments and stock-based compensation expense from the elimination of certain positions and the departure of our former President and CEO. Adjusted non-GAAP basic and diluted net loss per share reflects the net loss per share reported in our Unaudited Condensed Consolidated Statement of Comprehensive Loss adjusted for the loss per share resulting from nonrecurring severance payments and stock-based compensation expense from the elimination of certain positions and the departure of our former President and CEO.

We believe that use of these non-GAAP financial measures can assist investors in understanding the results from our core operations by providing additional insight into the impact of nonrecurring activities on our GAAP financial measures. We believe that the use of these non-GAAP financial measures enhances the comparability of our current period results to our historical Unaudited Condensed Consolidated Financial Statements, as well as to the results of other public companies.

The use of these non-GAAP financial measures are not measurements of financial performance under GAAP and have been included solely for informational and comparative purposes. Other companies may define these non-GAAP financial measures differently and, as a result, our non-GAAP financial measures may not be directly comparable to the non-GAAP measures of other companies. We reconciled non-GAAP net loss and adjusted non-GAAP basic and diluted net loss per share to GAAP net loss and GAAP net loss per share, respectively, which we believe to be the most directly comparable GAAP financial measures. Reconciliations of non-GAAP and GAAP financial measures should be considered together with our Unaudited Condensed Consolidated Financial Statements.