August 5, 2011

GenMark Diagnostics Reports Second Quarter 2011 Results

Reagent Revenues Grow 104% and Placements Increase by 17 to 119

CARLSBAD, Calif.--(BUSINESS WIRE)-- GenMark Diagnostics, Inc. (Nasdaq:GNMK) today reported financial results for the second quarter ended June 30, 2011.

Revenues for the three months ended June 30, 2011 were $901,000 and net loss per share was $0.39 per share compared with $665,000 and a net loss of $0.60 per share during the second quarter of 2010. The 35% year-over-year increase in total revenue reflects an increase in the number of systems in the field, growth in the company's test menu and a significant increase in the number of tests sold. Reagent revenues for the second quarter grew 104% year-over-year to $825,000 from $404,000, while instrument and other revenues decreased $185,000 due mainly to lower partnering contract revenue. The Company placed net 17 analyzers during the quarter.

The gross margin loss of $393,000 for the three months ended June 30, 2011 as compared to a loss of $84,000 for the same period in 2010 and a loss of $743,000 in the first quarter of 2011 was driven by the transfer and expansion of manufacturing operations to the company's new facility in Carlsbad. The gross loss improvement compared with the first quarter of 2011 was primarily due to the now completed closure of duplicative manufacturing facilities in Pasadena. All operations are now consolidated in Carlsbad, CA.

Operating expenses increased $265,000 to $5.3 million during the second quarter of 2011, due primarily to increased clinical trial costs and spending for new product development, specifically our Hepatitis C genotyping and Respiratory Viral Panel tests.

The Company ended the second quarter with $43.5 million in cash compared with $18.3 million at year-end. The Company raised net proceeds of $31.7 million through a follow-on equity offering in June 2011 and used $8.0 million in cash flow from operations during the first six months of 2011 compared with $9.1 million in the first six months of 2010. The Company intends to use a portion of the offering proceeds to invest more heavily in its sales force, research and development, and other infrastructure improvements during the second half of 2011 compared with spending levels in the first half of the year.

During the first six months of 2011, depreciation and amortization expense was $622,000; capital expenditures and other investing activities were $974,000; and the Company drew $2.0 million on its loan facility.

"The second quarter of 2011 was another strong quarter for GenMark Diagnostics," commented Hany Massarany, GenMark's President and CEO. "During the quarter, we significantly grew revenue, particularly in our core reagents, expanded our installed base, as well as advanced key product development programs. Our successful follow-on fundraising will allow us to accelerate product development and commercial activities during the remainder of 2011 and then next year as we look to execute our high growth strategy," Massarany further stated.

INVESTOR CONFERENCE CALL

GenMark will hold a conference call to discuss second quarter 2011 results and the outlook for the current year at 9:00AM ET today. The conference call and webcast can be accessed live through the company's website under the Investor Relations section and will be available for replay through August 25, 2011. To listen to the conference call, please dial (877) 312-5847 (US/Canada) or (253) 237-1154 (International) and use the conference ID number "83859663" approximately five minutes prior to the start time.

ABOUT GENMARK

GenMark Diagnostics is a leading provider of automated, multiplex molecular diagnostic testing systems that detect and measure DNA and RNA targets to diagnose disease and optimize patient treatment. GenMark's eSensor® XT-8 system supports a broad range of molecular diagnostic tests with a compact, easy-to-use workstation and self-contained, disposable test cartridges. GenMark tests that are FDA cleared for IVD use include the Cystic Fibrosis Genotyping Test, Warfarin Sensitivity Test, and Thrombophilia Risk Test. A Respiratory Viral Panel (RVP) is currently undergoing a clinical trial and tests for HCV Genotyping, 2C19, and KRAS are in development. For more information, visit www.genmarkdx.com.

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 of 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.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)
 
       

As of
June 30, 2011

       

As of
December 31, 2010 (A)

Current assets

 

Cash and cash equivalents $ 43,517 $ 18,329
Accounts receivable, net of allowance of $87 and $39 at June 30, 2011 and December 31, 2010, respectively 640 678
Inventories, net 1,206 897
Other current assets   495     2,193  
 
Total current assets 45,858 22,097
Property and equipment, net 3,195 2,702
Intangible assets, net 1,403 1,460
Other long-term assets   80     55  
 
Total assets $ 50,536   $ 26,314  
 
Current liabilities
Accounts payable $ 2,866 $ 823
Accrued compensation 1,288 1,172
Other current liabilities   1,575     1,945  
 
Total current liabilities 5,729 3,940
 
Long-term liabilities
Loan payable 2,000
Other non-current liabilities   1,083     1,307  
 
Total liabilities $ 8,812   $ 5,247  
 
Stockholders' equity
Common stock, $.0001 par value; 100,000,000 authorized; 20,474,570 and 11,723,512 issued and outstanding as of June 30, 2011 and December 31, 2010, respectively 2 1
Preferred stock, $0.0001 par value; 5,000,000 authorized, none issued
Additional paid-in capital 198,951 166,009
Accumulated deficit (156,715 ) (144,493 )
Accumulated other comprehensive loss   (514 )   (450 )
 
Total stockholders' equity   41,724     21,067  
 
Total liabilities and stockholders' equity $ 50,536   $ 26,314  
 

(A) Includes adjustment to 12/31/10 balance sheet-see accompanying tables and footnote 1


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GENMARK DIAGNOSTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)
 
   

Three Months Ended
June 30,

   

Six Months Ended
June 30,

2011

 

2010 (B)

2011 (B)  

2010 (B)

Product Revenue $ 866 $ 523 $ 1,559 $ 907
License and other revenue  

35

    142     100     168  
 
Total revenue 901 665 1,659 1,075
Cost of sales   1,294     749     2,795     1,189  
 
Gross loss   (393 )   (84 )   (1,136 )   (114 )
 
Operating expenses
Sales and marketing 1,220 1,285 2,439 2,454
General and administrative 1,810 2,015 3,933 4,195
Research and development   2,292     1,757     4,856  

 

3,226  
 
Total operating expenses   5,322     5,057     11,228