GenMark Reports Fourth Quarter and 2010 Results

March 3, 2011

Full Year System Placements More Than Double to 82

CARLSBAD, Calif.--(BUSINESS WIRE)-- GenMark Diagnostics, Inc. (Nasdaq:GNMK) today reported financial results for the fourth quarter and year ended December 31, 2010.

Fourth Quarter 2010 Results:

Revenues for the three months ended December 31, 2010 grew to $787,000, a 157% increase over the same period in 2009. Reagent revenues grew 156% year over year to $721,000, while instrument and other revenues grew 165%. Gross margin improved from a loss of $1.2 million during 2009 to a loss of $939,000 during the 2010 period. Research and development investment increased by 39% to $1.7 million, while spending in sales and marketing declined by $381,000, or 30%, to $911,000 from the prior year. General and administrative expenses declined by 29% to $1.6 million for the year ended December 31, 2010. Net loss per share was $.30. The company used $5.3 million in cash flow from operations during the fourth quarter of 2010 compared to $3.0 million in the prior year. The company was granted a $1.6 million Therapeutic Tax Credit in the period, which was recorded in other assets at year end. Depreciation and amortization was $339,000 and capital expenditures were $462,000. The company ended the fourth quarter with $18.3 million in cash and short-term investments compared to $24.1 million as of September 30, 2010 and $16.5 million as of December 31, 2009.

2010 Results:

Revenues were $2,505,000 for the year ending December 31, 2010, a 151% increase over fiscal 2009. Net loss for the year was $18.4 million, or $1.88 per share, compared to a net loss of $20.0 million and $4.41 per share in 2009.

Reagent sales increased by $1,102,000 to $2,012,000 or 121% higher than 2009, while instrument and other revenue increased to $493,000 or 460% over the prior year. Gross margin loss decreased $1.5 million, or 44%, to $1.9 million for the year compared to the $3.3 million gross margin loss in 2009. Investment in research and development increased $888,000, up 16% over the prior year and investment in commercial activities, primarily related to sales force expansion, increased $1.1 million or 35% over the prior year. General and administrative expense declined by 11% to $7.4 million in 2010 compared to $8.3 million in 2009, primarily due to reduced facility costs and professional fees.

The company used $18.9 million in cash flow from operations in 2010 compared to $15.4 million in the prior year. Depreciation and amortization was $1.1 million and capital expenditures were $1.9 million.

"We continue to be pleased with the growth in our business, particularly in relation to placements of new systems and the associated menu growth, as these are real indicators of the increasing customer acceptance of our solution for multiplexed molecular diagnostic testing" commented Christopher Gleeson, GenMark's Chairman and CEO. Gleeson further stated, "In addition, we are focusing on new test development in R&D, expanding our direct sales force and building a sustainable operational infrastructure, one that will allow us to successfully manage the high growth we expect to see in the years ahead."

INVESTOR CONFERENCE CALL

GenMark will hold a conference call to discuss fourth quarter and 2010 results and the outlook for the current year at 4:30PM EST today. The conference call and webcast can be accessed live through the company's website under the Investor Relations section. To listen to the conference call, please dial (877) 312-5847 (US/Canada) or (253) 237-1154 (International) and use the conference ID number "18654547" approximately five minutes prior to the start time.

ABOUT GENMARK

GenMark, a provider of automated, multiplex molecular diagnostic testing systems, detects and measures DNA and RNA targets to diagnose disease and to optimize the treatment of patients and is focused on developing and commercializing its eSensor detection technology. GenMark's XT-8 System is designed to support a broad range of molecular diagnostic tests with a compact and easy-to-use workstation and self-contained, disposable test cartridges. GenMark has developed five diagnostic tests for use with the XT-8 System, including its Cystic Fibrosis Genotyping Test, Warfarin Sensitivity Test and Thrombophilia Risk Test which have received clearance from the Food and Drug Administration.

SAFE HARBOR STATEMENT

This 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 continued growth in sales of our diagnostic tests, the expansion of our diagnostic test menu, and the continued development of our technology, 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, risks related to our history of operating losses, the need for further financing and our ability to access the necessary additional capital for our business, inherent risk and uncertainty in the protection intellectual property rights, regulatory uncertainties regarding approval or clearance for our products, 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.

GENMARK DIAGNOSTICS, INC.

CONSOLIDATED BALANCE SHEETS

   

As of
December 31, 2010

As of
December 31, 2009

Current assets
Cash and cash equivalents $ 18,329,079 $ 16,482,818
Accounts receivable 677,648 169,842
Inventories 896,809 136,967
Other current assets   2,193,160     992,181  
 
Total current assets 22,096,696 17,781,808
Property and equipment-net 2,702,478 1,381,618
Intangible assets-net of accumulated amortization 70,980 170,051
Other long-term assets   55,355    
 
Total assets $ 24,925,509   $ 19,333,477  
 
Current liabilities
Accounts payable $ 823,242 $ 1,504,905
Accrued compensation 1,171,989 822,388
Other current liabilities   1,249,928     886,032  
 
Total current liabilities 3,245,159 3,213,325
 
Long-term liabilities
Other non-current liabilities   612,932     795,334  
 
Total liabilities   3,858,091     4,008,659  
 
Stockholders' equity
Ordinary shares, £0.23 ($0.3634 as of December 31, 2009) par value; -0- and 7,101,928 shares issued and outstanding as of December 31, 2010 and December 31, 2009, respectively 2,573,857
Deferred shares, £0.0099 ($0.01709 as of December 31, 2009) par value; -0- and 689,478,300 shares issued and outstanding as of December 31, 2010 and December 31, 2009, respectively 11,780,709
Common stock, $.0001 par value; 100,000,000 authorized; 11,728,233 and -0- issued and outstanding as of December 31, 2010 and December 31, 2009, respectively 1,172
Preferred stock, $0.0001 par value; 5,000,000 authorized, none issued
Additional paid-in capital 166,009,084 127,475,450
Accumulated deficit (144,492,881 ) (126,089,889 )
Accumulated other comprehensive loss   (449,957 )   (415,309 )
 
Total stockholders' equity   21,067,418     15,324,818  
 
Total liabilities and stockholders' equity $ 24,925,509   $ 19,333,477  
 

GENMARK DIAGNOSTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

       
 
Three Months Ended
December 31,
Year Ended
December 31,
  2010     2009     2010     2009  
Product Revenue $ 773,409 $ 281,410 $ 2,340,996 $ 910,527
License and other revenue   14,073     25,000     163,872     87,889  
Total revenue 787,482 306,410 2,504,868 998,416
Cost of sales   1,726,400     1,464,348     4,377,701     4,332,299  
 
Gross loss   (938,918 )   (1,157,938 )   (1,872,833 )   (3,333,883 )
 
Operating expenses
Sales and marketing 911,432 1,292,871 4,282,521 3,181,762
Research and development 1,675,406 1,208,289 6,522,112 5,633,717
General and administrative   1,592,431     2,239,016     7,353,802     8,288,762  
 
Total operating expenses   4,179,269     4,740,176     18,158,435     17,104,241  
 
Loss from operations   (5,118,187 )   (5,898,114 )   (20,031,268 )   (20,438,124 )
 
Other income
Foreign exchange gain (loss) gain 171,558 (1,110 ) 303,523
Interest income (expense) (16,510 ) 1,325 (582 ) 33,222
Therapeutic Discovery Credit   1,645,292         1,645,292      
 
Total Other Income 1,628,782 172,883 1,643,600 336,745
Loss before income taxes (3,489,405 ) (5,725,231 ) (18,387,668 ) (20,101,379 )
(Provision) benefit for income taxes   (10,275 )   97,577     (15,324 )   138,770  
 
Net loss $ (3,499,680 ) $ (5,627,654 ) $ (18,402,992 ) $ (19,962,609 )
 
Net loss per share, basic and diluted $ (.30 ) $ (1.07 ) $ (1.88 ) $ (4.41 )
Weighted average number of shares outstanding 11,731,874 5,242,586 9,796,588 4,526,758
 
Condensed Consolidated statements of comprehensive loss for the three and twelve months ended December 31, 2010 and 2009
Net loss $ (3,499,680 ) $ (5,627,654 ) $ (18,402,992 ) $ (19,962,609 )
Foreign currency translation adjustment       153,856     (34,647 )   (93,682 )
 
Comprehensive loss $ (3,499,680 ) $ (5,473,798 ) $ (18,437,639 ) $ (20,056,291 )
 

GENMARK DIAGNOSTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

       
Three Months Ended
December 31,
Year Ended
December 31,
  2010     2009     2010     2009  
Cash Flows from Operating Activities:
Net Loss $ (3,499,680 ) $ (5,627,654 ) $ (18,402,992 ) $ (19,962,609 )
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 338,681 400,411 1,063,311 1,569,074
Loss from disposal of property and equipment 18,462 8,462
Impairment losses 956,494 1,505,642
Share-based compensation 433,683 325,492 1,552,871 1,311,033
Change in operating assets and liabilities:
Accounts receivable (145,271 ) (71,362 ) (507,806 ) (51,068 )
Inventories (125,276 ) 613,194 (651,130 ) 1,227,383
Other current assets (1,586,820 ) (47,422 ) (1,404,305 ) 315,985
Accounts payable (612,318 ) 345,987 (1,058,342 ) (857,307 )
Accrued and other current liabilities   (73,496 )   98,087     547,670     (510,168 )
 
Net Cash used in operating activities   (5,270,497 )   (2,988,311 )   (18,860,723 )   (15,443,573 )
 
 
Cash flow from investing activities
Proceeds from the sale of property and equipment 10,000
Purchase of property and equipment   (462,249 )   (423,534 )   (1,859,877 )   (1,068,671 )
 
Net Cash used in investing activities   (462,249 )   (423,534 )   (1,859,877 )   (1,058,671 )
 
 
Cash flows from financing activities
Proceeds from issuance of ordinary shares and common stock 15,672,809 27,600,000 24,132,807
Costs incurred in conjunction with Initial Public offering (82,310 ) (4,990,937 )
Proceeds from stock option exercises           4,734      
 
Net Cash used in financing activities   (82,310 )   15,672,809     22,613,797     24,132,807  
 
Effect of foreign exchange rate changes       162,851     (46,936 )   29,797  
 
Net increase (decrease) in cash and cash equivalents (5,815,056 ) 12,423,815 1,846,261 7,660,360
Cash and cash equivalents at beginning of period   24,144,135     4,059,003     16,482,818     8,822,458  
 
Cash and cash equivalents at end of period $ 18,329,079   $ 16,482,818   $ 18,329,079   $ 16,482,818
 

Supplemental cash flow disclosures

Cash (paid) received from income taxes $ (3,097 ) $ 5,049 $ 181,162
Cash received for interest $ 11,507 $ 1,325 $ 25,025 $ 33,222
 

Noncash investing and financing activities

Reclassification of deposits on systems in other current assets, and inventory to property and equipment in 2010 and 2009, respectively $ 288,962 $ 256,909
IPO costs incurred but not paid $ 100,880 $ 100,880
Transfer of systems from property and equipment into inventory $ 31,270 $ 108,712
Fixed asset acquisitions included in accounts payable $ 275,799 $ 275,799

GenMark Diagnostics, Inc.
Christopher Gleeson
Chairman and Chief Executive Officer
760-448-4312

Source: GenMark Diagnostics, Inc.

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