Content analysis
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H.S. junior Avg
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New words:
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Removed:
adjusting, app, biopharma, calculated, cancellation, closely, College, Connect, downloading, expansion, gain, home, independent, initiate, input, international, lack, largely, linked, low, measuring, medically, overhead, peer, person, pertaining, phone, picture, practice, prevalence, reclassified, refund, reintroduce, restriction, reviewed, send, spending, subscribing, valuation
Financial report summary
?Risks
- We are a company with a history of net losses; we expect to incur net losses in the future and may never achieve profitability.
- We have a limited operating history and we expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make our future performance difficult to predict.
- We expect to continue to incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to compliance initiatives and corporate governance practices.
- Our commercial success could be compromised if customers do not pay our invoices or if commercial payors, including managed care organizations and Medicare, do not provide coverage and reimbursement, breach, rescind, or modify their contracts or reimbursement policies, reimburse at a low rate, or delay payments for the DMT and our planned future tests.
- There is substantial doubt about our ability to continue as a going concern. We will need to raise additional capital, which may not be available on acceptable terms, if at all, to fund our existing operations, commercialize our products, and expand our operations. If we are unable to raise additional capital when and as needed, we may be required to further curtail our operations, liquidate or otherwise dispose of assets, wind-down or cease operations entirely. In these circumstances, investors may not receive full value, or any value, for their investment.
- Our cash, cash equivalents and short-term marketable securities are subject to economic risk.
- We maintain cash deposits in excess of federally insured limits. Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.
- If clinicians, including dermatologists, decide not to order the DermTech Melanoma Test, or our future tests, we may be unable to generate sufficient revenue to sustain our business to achieve or sustain profitability.
- We expect to continue to incur significant expenses to develop and market our existing and planned tests, which could make it difficult for us to achieve and sustain profitability.
- If we are unable to successfully execute our marketing strategy for the DermTech Melanoma Test and are unable to gain acceptance in the market, we may be unable to generate sufficient revenue to sustain our business.
- The telemedicine market is immature and unpredictable, and if it does not develop, if it develops more slowly than we expect, if it encounters negative publicity or if limitations on reimbursement or difficulties in obtaining regulatory approvals impede our ability to utilize a telemedicine channel, the growth of our business will be harmed.
- If we cannot enhance our tests to keep pace with rapid advances in technology, medicine and science, our operating results and competitive position could be harmed.
- We rely on a limited number of suppliers and, in some cases, a single supplier, for certain of our laboratory substances, equipment and other materials, and any delays or difficulties securing these materials could disrupt our laboratory operations and materially harm our business.
- The DMT employs a novel diagnostic platform and may never be widely accepted by its intended markets.
- If the DMT does not perform as expected, as a result of human error or otherwise, it could have a material adverse effect on our operating results, reputation, and business.
- We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
- If we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenues or achieve and sustain profitability.
- If we are unable to identify collaborators willing to work with us to conduct clinical utility studies, or the results of those studies do not demonstrate that a test provides clinically meaningful information and value, commercial adoption of the DMT may be slow, which would negatively impact our business.
- We are undergoing a management transition.
- The loss of key members of our executive management team could adversely affect our business.
- Most of our management has limited experience in operating a public company.
- There is a scarcity of experienced professionals in our industry. If we are not able to retain and recruit personnel with the requisite technical skills, we may be unable to successfully execute our business strategy.
- Our inability to attract, hire, and retain a sufficient number of qualified sales professionals would hamper our ability to launch and increase demand for the DMT.
- We may encounter manufacturing problems or delays that could result in lost revenue.
- If we cannot support demand for the DMT and our planned future tests, including successfully managing the evolution of our technology and manufacturing platforms, our business could suffer.
- If we were to be sued for product liability or professional liability, we could face substantial liabilities that exceed our resources.
- If we use biological and hazardous materials in a manner that causes injury or violates laws or regulations, we could be liable for damages or subject to enforcement actions.
- We may acquire other businesses, form joint ventures, or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt, or cause us to incur significant expense.
- International expansion of our business would expose us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.
- Cybersecurity incidents, cyberattacks and other information technology failures could result in loss of data, compromise of confidential information and adverse effects to our business, financial results and our ability to continue operations.
- We may have to comply with laws governing the use and disclosure of genetic testing information.
- We depend on our information technology and telecommunications systems, and any failure of these systems could harm our business.
- We rely on FedEx and UPS for the distribution of our Smart Stickers to customers and to transport specimens back to our laboratory facility and, if FedEx or UPS incurs any damage to their facilities, labor strike or inability to deliver our products as needed, it could have a material and adverse effect on our results of operations and business.
- Inflation may adversely affect us by materially increasing our costs.
- Political uncertainty may have an adverse impact on our operating performance and results of operations.
- Changes in health care law and policy may have a material and adverse effect on our financial condition, results of operations, and cash flows.
- Our business could be adversely impacted by our failure or the failure of clinicians to comply with the ICD-10-CM Code Set.
- Billing for the DMT is complex, and we must dedicate substantial time and resources to the billing process to be paid for the DMT; long payment cycles and changes in claims processing practices of Medicare, Medicaid, and/or other commercial payors, or other payment delays, could hurt our cash flows and increase our need for working capital.
- Our business could be harmed by the loss, suspension, or other restriction on a license, certification, or accreditation, or by the imposition of a fine or penalties, under CLIA, its implementing regulations, or other state, federal, and foreign laws and regulations affecting licensure or certification, or by future changes in these laws or regulations.
- If the FDA were to begin requiring approval or clearance of the DMT and our planned future tests, or our proprietary specimen collection kit, we could incur substantial costs and time delays associated with meeting requirements for premarket clearance or approval.
- We are subject to numerous federal, local and foreign laws and regulations; complying with laws pertaining to our business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties and a material adverse effect to our business and operations.
- Our services present the potential for embezzlement, identity theft or other similar illegal behavior by our employees, consultants, service providers or commercial partners.
- Clinical research is heavily regulated and failure to comply with human subject protection regulations may disrupt our research program leading to significant expense, regulatory enforcement, private lawsuits, and reputational damage.
- We could be adversely affected by alleged violations of the Federal Trade Commission Act or other truth-in-advertising and consumer protection laws.
- Medical product manufacturers’ use of social media platforms presents new risks.
- Our collaborators may assert ownership or commercial rights to inventions we develop from our use of the biological materials which they provide to us, or otherwise arising from the collaboration.
- If we are unable to maintain intellectual property protection, our competitive position could be harmed.
- We may face intellectual property infringement claims that could be time-consuming and costly to defend, and could result in the loss of significant rights, the implementation of an injunction, and the assessment of treble damages.
- Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
- Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.
- There is no assurance that we will continue satisfying the listing requirements of the Nasdaq Capital Market.
- Future issuances of equity securities may dilute the interests of our security holders and reduce the price of our securities.
- We may amend the terms of our publicly traded warrants currently trading on the Pink Market under the ticker symbol “DMTKW,” or the publicly traded warrants, in a manner that may be adverse to holders with the approval by the holders of a majority of the then outstanding publicly traded warrants, and as a result, the exercise price of the publicly traded warrants could be increased, the exercise period could be shortened and the number of shares purchasable upon exercise of a publicly traded warrant could be decreased, all without your approval.
- We may redeem your unexpired publicly traded warrants prior to their exercise at a time that is disadvantageous to you, thereby making your publicly traded warrants worthless.
- Because we have no current plans to pay cash dividends on our shares for the foreseeable future, you may not receive any return on investment unless you sell your shares for a price greater than that which you paid for it.
- If securities or industry analysts cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, the price and trading volume of our securities could decline.
- Provisions of our charter documents or Delaware law could delay or prevent an acquisition of us, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change our management.
- The price of our common stock has been and may continue to be volatile and may fluctuate substantially.
Management Discussion
- Test revenues increased $0.3 million, or 7%, to $3.7 million for the three months ended March 31, 2024, compared to $3.4 million for the three months ended March 31, 2023. The increase in test revenues was primarily driven by an increase in average selling price due to an increase in covered lives, prioritization of billable sample volume with contracted payors, and lower revenue adjustments for tests run in prior periods.
- Billable samples decreased to approximately 15,360 for the three months ended March 31, 2024, compared to approximately 17,800 for the three months ended March 31, 2023. Sample volume is dependent on two major factors: the number of clinicians who order a test in any given quarter and the number of tests ordered by each clinician during the period. The number of ordering clinicians and the utilization per clinician can vary based on a number of factors including the types of skin cancer conditions presented to clinicians, clinician reimbursement, office workflow, market awareness, clinician education and other factors. We are also currently prioritizing volume in geographies where we have payor coverage versus overall volume growth as one factor to potentially increase average selling price. The decrease in sample volume was due in part to our prioritization of reimbursed tests instead of total volume, the overall reduction in the size of our sales force, and our cessation of testing pediatric patients and patients with certain Fitzpatrick skin types. We anticipate that the reduction in sales territories from our Restructuring Plans may further reduce billable sample volumes and revenues in 2024.
- Contract revenues with pharmaceutical companies increased $0.1 million to $0.2 million for the three months ended March 31, 2024, compared to $0.1 million for the three months ended March 31, 2023. The increase is attributable to a higher number of kit shipments to our contract research customers. Contract revenues can be highly variable as it is dependent on the pharmaceutical customers’ clinical trial progress, which can be difficult to forecast due to variability of patient enrollment, drug safety and efficacy and other factors.