Earnings call transcript Q2 2023

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Operator

Good day, and thank you for standing by. Welcome to DermTech’s Second Quarter 2023 Financial Results Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

to Kunszabo, conference Head like speaker to now Steve today, of would hand over the your I Investor Relations. ahead. go please Sir,

Steve Kunszabo

Thank Officer. call DermTech’s With to Officer; and President you, XXXX our Executive Operator. call. Chief Sun, earnings Financial and second Chief me Bret are quarter today’s Kevin Christensen, our on Welcome

matters made Private Reform Act to of Our call statements historical forward-looking not Litigation include of call within the do All considered Securities statements on are today will meaning this that of forward-looking the facts XXXX. relate statements.

may materially call, Forward-looking undertake or during recent factors update today, projections made various obligation are results uncertainties, such statements release from performance in cause subject over are differ today’s based We are Several management’s this most factors, those these and of except described including required as our described change such of and risks SEC. no Actual which statements. expectations contribute future assumptions, the to to by on in law. time. press and could as to statements with that filings differences

today’s second will our earnings press release of on our available and be Our today. Investor Relations quarter website A transcript filings later are on website. SEC XXXX available call

turn me Bret. things let that, With to over

Bret Christensen

before for Thank start forward. to with whirlwind everyone, Steve, jump DermTech you, differently do moving and been the May. thank about some into how I'd like we'll what DermTech joining a in leading It's us. I you, details since things me early I of joined excites

the it than biopsies to providers. care to surgical we care should melanoma. to a been key have one for a just invasive or is solutions The performing needs health believe traditionally have standard we more But technology available current better that of clinicians. find that be XX be First, great challenging with tool

out My and vision part melanoma objective DMT, skin with and the lesion. rules to DMT the against provides with of annually and suspicious deployed The U.S. to we negative as care have predictive product claims Test, cancer for be Melanoma is goal. or melanoma form this X,XXX is XX% and is pathway, the for Melanoma value DermTech actionable lives genomic an aggressive of excellent clinicians execute data most noninvasive, the in a universally

Second, also we're where pursuing by better lesions US, significant need every year melanoma market the ruling reported encourage providing new a patient a Approximately surgical cases We need that patient large unnecessary these resulting in XXX,XXX billion addressable in can earlier. while costs for are experience exists. out procedures lower treatment help testing $X.X costs. in annual suspicious of the may

and X-year genomic melanoma, This risk by of for rate melanoma because DMT decision-making early-stage from whereas drops may a a survival perceive rate correlated changes can an markers diagnosis visual and late-stage clinicians. important changes significantly is are that to survival diagnosis Genomic XX%. aid has XX%, detects with the the increased

improve and we're clinical DMT reinforce making access on-boarding but economic providers, around complete with the to to once tests solid agreements. need still process we health of our benefits expanding our our and Third, insurance progress message the

DMT to comprehensively Many seven covered reviewed with coverage the work during payers. on governmental and several months. progress last top agreements to now but payers. payers current data in-network and have made to XX expand an Overall, approximately we've plans benefit and focused and We've the These policies of must that as have be improved signed issued lives the steps Blues favorable access the XX% XXXX good continue reimbursement. million two large most expanded in $XXX

US. total covered approximately we in lives reach today, Based on our of the coverage XX%

aligns with tests reimbursed and boosting prioritizing intense a have our foundation on We strong revenue. that focus

is volume than footprint, third the monetizing have. billable with reimbursed today path the coupled significant the lives less already volume that fact DMT our supports we covered clearly Our sample of to total

For our are XX,XXX relatively reimbursed. tests, of flat stayed percentage but XXXX we roughly at we tests level the annual of volume these which example, for if doubled the

revenue double we test approximately could from the year. last million $XX more Our than generated

in We for with some okay, a revenue and or Selling are trading Price volume Average gains. the growth short-term ASP healthy

again, We'll prioritize growth. test down -- the further volume sustained when when the of revenue we're path

to could received our In reduce settings. and further better healthcare firm. costs on addition technology from is to and focused improve by ECRI nonprofit we've coverage decisions a ECRI, recommendation across technology influence achieve evaluation payers. outcomes commercial coverage favorable wins, a all We recommendation assessment this favorable safety healthcare well-recognized quality, believe

coverage payers in with expected effective several genomic early efforts. through legislative so-called additional and or testing state XXXX visibility of also life-saving for biomarker potentially tests. Our have late Lawmakers in to across states improving advocated US be insurance improves genomic are Bill's access the mandating XXXX. to bills

payer to year. study, designed study X,XXX to Our lesions up is X support cohort up negatively discussions. also the that study TRUST for ongoing XXXX, provide prospective The which additional in follow patients in the X,XXX a we of should of real-world DMT. one to positive to diagnosis of X,XXX assesses with This tested evidence lesions with initiated tested a histopathologic

put a payers. The many into data to DMT reengagement the some made first. tests expect all reimbursed DMP to has support We half the the top in by our success line with scaling foundation we've prioritizing the XXXX. and strong positive streamline with release to results and Across revenue. second organization, come decisions resulting tough operations of grow having to energy Building can

this We're tests more as revenue. make and DMT reposition in has strategy, do. around opportunities. The revenue a we're were we quarter, and but to to sequentially We but tactics consider we a power dermatology, deploying win the with test to need these other reimbursed up believe broad generate adjustments, before around especially DMTs ASP of in array skin platform to is which we the of and have new maximize that noninvasive the good start, the work starting both our genomics in applications business some recognize we the

over First and volume. total for most we've our incentive and perhaps which tests compensation importantly, team revenue driving sales outlined reimbursed

and analytics In extended healthy team reporting providers samples with already our we’ve target payer reimbursed addition, the billable allow to field demand. based to on mid

certain samples we we've others Second, territories reimbursing already broad and dissolved where coverage. have insurance on focus merged to

Over the two to quarters, team last reps roughly we've sales approximately XX trimmed -- our this XX objective. from facilitate

in several We adoption We'll proposition. at broad-based shift the also our conferences, have efforts. build rather on level Third, traction our will DMT to to we're presence marketing change dermatology need to to marketing communicating but on our targeted with going at national tactics enablement be regional we more sales facts. still team recalibrate to spending closely We participate based direct-to-consumer plan conferences coverage. than approach capitalize already and our the ground this value areas improve clinicians, DMTs in should where insurance in more

affairs we records Lastly, concierge support territories and services and the for medical insurance we've billing reduces with increases the which appeals support where in significantly our of improved success infrastructure, including DMT. coverage electronic have payers. also of customers, health friction We've our realigned integration with rate

In our areas business all functional closing, across now believe we right-sized focus. and sharpened the we've

revenue, are energy continuing tests sustaining runway. reimbursed three capital Our grow total concentrated prioritizing to our and volume over and DMT for key cash the to priorities; expand coverage on

strong spend months this and joined excited forward us. ago DermTech generate scrutinize successes dollar return. team, supports to many I’m to every I great three achieving we ensure these to lead it the ahead We'll to have a of look goals and

call With let over more that, for turn the financial Kevin detailed me to review.

Kevin Sun

back the metrics start for I'll key Thanks, I’ll for the operating Bret, our financial profile directionally and by thinking and outlook our our cash runway and reviewing targets. XXXX. good second about of half by afternoon then conclude summarize outlining everyone. quarter, liquidity our

patients XX,XXX. quarter decrease of the resulted we X% reimbursed from Total organization we our on and stopped sequentially noted approximately guidance testing our Types last from sample based year-over-year volume The samples to certain lab and X% decline Skin tests, from and Fitzpatrick accrediting quarter as for second pediatric prioritization

a adjustment as estimates sample in lower revenue million downward in revenue lower was X% largely from up prior and Test XX% billable ASP run prior to year-over-year period periods, volume. million, on resulting to Test $X.X down higher revenue well changes as sequentially due test for collection adjustments. was $X.X

second million trial high-margin technology. and awareness agreements contract revenues of our It's linked are period. clinical important with The the customers. to remain new biopharma is increase revenue progress Sticker customers. a biopharma quarter, that Nonetheless, remember the large was from million two year uneven deals $X.X increase these the from our ago $X.X in to as Smart up to Contract during it's way usage great of

million, Total X% revenue higher fell the on revenue year-over-year on up test sequentially primarily second for XX% contract revenue. to Total quarter revenue. and test was $X.X lower

up but volume turn sequentially XX% to was our success Medicare in second the $XXX continue XX% revenue XXXX quarter and in test X% ASPs year-over-year, of down collection grew into ASP Drilling XX% higher second per sequentially. sample billable the to first, quarter, of proportion to sample better due the from Medicare drivers;

$XXX, Certain a adjustments, period ASP payment quarter. second their have quarter to adjustment non-contracted prior up reduce the commercial was rates, on to for leading continue modestly which Normalizing payers downward would sequential for been basis.

administrative recognizing payers. In coverage we're the half favorable variability from the signed non-contracted believe XXXX, first policy steps lag start new and forward, paid. a financial coverage commercial we We still seen agreement to benefit up cases to and we've going final the payments primarily payer in a due fluctuating expect wrapping from both where in getting of

penetrated had first X,XXX ordering months, approximately the dermatology we approximately target X% we the the market ordering second last X,XXX in quarter, X,XXX of quarter. clinicians Second, our during down With from unique current unique XX of XX% clinicians clinicians.

the number was samples to quarterly average first quarter in utilization in our period. Third, X.X% X.X order per versus clinical second quarter the tests ago year the of in and sequentially billable unique or ordered in up X.X% average

test expenses. Cost of XX%. next was due test costs to was infrastructure year-over-year of a cost revenue higher from gross million, yielding XX% on lab increase in margin materials operating primarily increase, The Focusing expenses. a our and new revenue of $X.X higher test negative

were from due of to million employee-related attributable is clinical million, the decrease to study and were second compared or $X.X $XX.X development a previous year. decline than Research Sales and The expenses to higher marketing quarter year reduced XX% largely XX% and which lower were the million, $XX.X million, period, XX% $X.X expenditures. the and marketing expenses ago lower was primarily XXXX. General administrative expenses costs.

and restructuring booked restructuring approximately approximately and G&A, increased The increase million of million compensation charge additional nonrecurring approximately restructuring $X.X to new CEO's actions expense was non-cash marketing facility. The to entire and related even in also costs infrastructure included departure, from functions. the $X.X $X.X sales our million our of $X.X former though to the severance costs million related by driven charges stock-based was

operating for quarter Fourth expenses. be rate of the set forward moving and new benchmark a XXXX will will run

the that of stock-based quarter compared expect have quarter to winding Net loss million, certain expense. net a expense included non-cash loss which of down million costs stock-based included which compensation XXXX $XX.X XXXX, compensation may the We from of programs. $XX.X third for for $X.X of same $X.X million the period of second limited non-cash was million

to Moving our now XXXX outlook.

DMT anticipate when slowly due tick last plan XXXX. to relatively compared and up, continue and we flat full to tests. to reimbursed our have of ASP compared XXXX We to ASP will revenue increase for to volumes test and year test revenue prioritization year to in be begun

potential Providing wins coverage non-contracted possible difficult payers. delays additional recent and to specific to by guidance due tightening remains related

when anticipate for emphasizing volume We noted, revenue a Brett revenue meaningful inflection have okay volume we're we short-term and point. in growth the trading healthy As again gains. some growth ASP reached

now review profile $XX.X stock issuances, $X.X securities million, which under balance cash, and approximately marketable $XX our restructuring savings or into during cost lastly, runway facility cash the we quarter actions, restricted of sheet. At includes Based million the on million And had have annualized quarter the of $XX from net end, and believe of cash period. we we from XXXX. million to first liquidity in of at-the-market our a ATM equivalents, cash expected our proceeds

and to out runway grow that ASP and during to In the DMT cash If cash addition effort progress the and our our revenue making we're XXXX our factor rest is around ASP growing our push runway. even these of and driving further. runway. revenue potential through XXXX, helps a the revenue extended summary, winning and and extend key solid savings, in preserve have cash significant have reorienting In we even with expense

the turn Bret. Now I'll back call to

Bret Christensen

Kevin. Thanks,

that story Before joined and I'll up wrap move encapsulates patient an Q&A, to share we powerful DermTech. I why especially

DMT The One recently on apply was double the Stage look one how an colleagues pathologists then physician but with of previously The physician on staff smart sticker it his positive, to correlation lesions melanoma. the where who and volunteered not our the the came own apply DMT. training to sales A reps used the that melanoma. X correctly a our he of believe of determined test doctor strong two sent was lesion hadn't office melanoma at biopsy was indicating gene back ambiguous. to did like his was

Importantly, The genome is in been He's he's current potentially lesion saving his his that as melanoma the the need practice. lesion for career. the and standard was has challenging a an medical doctors began captures in shared the expertly since identified is cancer with lesions his critical like precision us hundreds looked of the that nothing diagnosed with life. he's physician's excise story using visual professional. assessment genomics previously DMT for of the credited even This also disease as and trained us

to Now I'll back things Q&A. operator for turn the

Operator

Instructions] please first for One our Thank you question. moment [Operator

question Street Capital Our of Flaten Markets. first Thomas Lake from will come

open. line is Your

Thomas Flaten

Hey, if I a us we through could the guys. help taking should margins. quarter. wondering for how gross think was thanks on Congrats question, think you about Kevin,

You've on test profitable obviously account volume. but Can ASPs think facility for, the your to through help just you should got us as that? grow focus you new

Kevin Sun

Yes.

in infrastructure into higher. wages increase But new primarily to per lab, the also that moved was the COGS for new we're reduce initiatives we've due higher those our forward. expected, test going the working As now lab, various COGS on to were costs

are test, PCR because the give with forecast. before, to ASPs. the as a have But to you using a And is we PLA And a per we not onboarding ready As forward. X-gene of ASPs challenge we of we're technologies. is COGS kind primary say these reducing well of tied a gross estimating margin margin coverage, what unit going know, delays we can assay committed as because said combination as new to our COGS as

guidance $XXX cost reduction. to combination ready to those a not items, from opportunity of as both it give as it because now. is unit reduce have well We that specific the just we're per roughly But improvement ASP it's

Thomas Flaten

said Got you were think and was new territories, coverage? it. sense you comment line, some down to territories some wondering I nodes on you And XX territories in do have you the or what percentage-wise then but I I ask there on were the now. a looks Could you coverage kind other give could where like the to of idealized these way, better of if

Bret Christensen

Bret. it's Thomas,

went what did of have few really from today. do roughly quarters that is territories we territories So around reimbursement. those XX ago a to we said our we we XX to point where And best align the is

And so out and universal in each every Medicare is is with certainly, territory, it territory. but varies there

We'll is the areas. down coverage maybe But just of sales territory, that then change those expand coverage spend merged some on and number. a force got And with the commercial Medicare. is in territories commercial improve as why few to for that as did ROI which where well the best well just believe payers dissolve by varies we the get does and now, to we've as future, the look we in to as

so territories, the information so the physicians that right appropriately better with mix that reps also we of And coverage the target we but aligned provided right

Kevin Sun

the XX% local basis Yes. the And Plan. definitely territory regional kind or best varies have territory percent state in leverage but area. specific state of well We a territory, of covered it as on as might Medicare by say of with some by that Blues lives XX%, and more

Thomas Flaten

taking Excellent. questions. appreciate Thank I the you you

Operator

next question of the Nowak Capital from question. Thank of line moment our you. next for Group. will Craig-Hallum And One please our come Alex

is open. line Your

Unidentified Analyst

everyone. [ph] Alex. is afternoon, on for This Albert Hi, Hu good

the has on been payers with getting Bret, the to biggest teams national those big full your can challenge of one clinical being this board. restructuring at DermTech, for push the wins? you're coverage being how first quarter for you through DermTech impaired So walk

Bret Christensen

Thanks Yes. question. the Sure, Albert. for

was and DermTech to actually And with start, be lives me the have going things are the had is that while covered important Let with discussions I saying to of payers. we us, we I those already by got though, really to I to when commercial big one payers the good said continue quite level achieved. impressed of

continuing lives million making have lives we get covered the the new those We drive And at around higher share fair lives, tests is currently sure that this that to XXX in XX%. covered which really but door today. focus of also is our more mirrors closely reimbursed covered about

of So payers reimbursed. less are XX% get today the of tests those again, from than covered lives, a third and but we

So that's the focus. short-term

payers we get far As with convincing. our come health where the very look to data, the around. they're economic at payers, and going conversations as we it's most to -- the recent progress national And believe

these earlier those a did TRUST payers. but things back X take so them good we'll some We to get but this negative time, continue chances also have of we go later from And year, year. and this have ECRI conversations data we few when decisions policy with to release with

get And optimistic we're going so there. to we're

out For and reimbursed that, in really short tests focus the term. need there, we are just in closely now, that got the going that really, the that's lives make we've strong sure to mirrors be to door, really the

Unidentified Analyst

is into we've you. from item to fit Okay. DMT the Got practice. And clinics an heard how

So regard to what making changes this? you sort marketing are in of

Bret Christensen

take one can well. as I Albert, that Yes,

-- to thing find on the this it's And do side we tenure me dermatologists is as believe message said office tough is tell this to important. to really biopsies. need I thing we And a remarks, in proposition dermatologists why So the one air melanoma. really tech short clear. value is lot the my at a I've Look, in to setting. is is of the so of really a And in learned convincing Derm my to

miss setting. to the want melanoma in don't office You

a there's you some they you -- a lot they'd where sure also follow. there's because sensitive to up to doing again, lesions don't prefer make want of There's cosmetically that don't biopsies lot and of a safe, biopsy, But of those that, -- miss of end melanoma. be areas, photo to

of That this for starting that where them, we're for value dermatologists practice. into in we'll on. those not win-win want biopsy. there's areas, and their look against But edge early integrating a me, Melanoma look, for later the cases to is expand And those this a in tells We and that's practice there's clear with every clear get to to DermTech everybody. place And Test. me a some work some in to to is they're utilization hesitant proposition

Unidentified Analyst

And here. questions it. two Got got more I

So during changes the reiterate sales after compensation and you that company. part? Can call, structure these you mentioned some of you joined rep the

Thank you this And us can next new this the year during expect I the readouts just touched give you. year? on you latest the this again, on should me, question is, know trials, please. we the what to call, second clinical study for reiterate but or

Bret Christensen

sure. Yes,

the I So, change volume I the And -- there and on, have that previous the incentives incentives been aligned in the sales is we've the was out right honestly, spoken across early the to specifically about focus And a that volume, rep opening organization move, lot honestly. mentioned the is revenue. about called was that But in really simply earnings calls. remarks, incentives.

to drive got You've volume.

show You've got to demand.

in show payers to for your marketplace. got You've the demand product

DermTech critical of to got in your a to really Melanoma dermatologists is that you've volume aware. life the You've with get cycle And early on like product, all Test. patients comfortable product and get using means got

with XX% to covered focus of lives, the around though, going revenue. for us Now is be

out of plan we've my simply I in is aligned volume. new and sales end. a have And comp just incentives off And not the revenue force remarks, that based specifically, opening called that so that to just

also it's change needed value to focus us reimbursed the the the have to message it's tests more in to that that going it proposition. to improvement those that's to used to do is conversations dermatologists most probably immediate the just going -- we're the of being going again, of be way with I right of happen. that's the difficult door. And and getting the that's And that short-term, think make sure facilitates the in the force difficult conversations all or What in more

And that. to so field that's the in what we've done change

line prospective thing patients data, negative my Also, X,XXX as to called that's up We conversation a at and add far Kevin doing with out an following and is have opening given X, year. as anticipate be the result the negative clinical sometime here. The the those has top probably us going readout some year, by that a which to remarks trial decision. of Trust in payers later DMT a to of opportunity that was I back patients for the coverage us for a end to again, to go X,XXX this And one revisit year. things looking

Kevin Sun

we organization, in Yes. stopped we changes too, due from samples And accrediting testing from as pediatrics. mentioned to guidance our

so did the study usage. a Melanoma using obviously, but a kick DMT allows to for try is is more very genomics our to utility And population. good for pediatric data. in gather we pediatrics the very candidate approach around off like rare non-invasive a

Unidentified Analyst

Good Thank guys. luck. you,

Operator

Instructions] One [Operator for please question. our Thank you. next moment

Brackmann question Andrew William next will come Blair. from Our of

line open. Your is

Unidentified Analyst

is Andrew. This guys. for Hi, online Dustin

ask are question the considered lawmakers. Just I mentioned by biomarker being that want about bills you the first to

impacted what what there? impact volumes if have would ASP most passed? that And would gets Just be potentially in states legislation on those

Bret Christensen

around health -- Dustin, planned, is companies insurance And that situation. a are proposed to Hey, or pass fluid critical have Brett. either this biomarkers. legislation there offer states cover It's tests that many requiring

for to these actively legislation. way many back the a And many again, The tests. a number involved are in are process this it's of those around fluid. state to haven't covered, in cover you that state an language from to and table the bills states to will to XX along push if pass the so The is of look standpoint that us be of at vary payers that probably go there's it with to-date, and certainly list but the legislative It's pretty count types opportunity, growing a language and some already. and

Unidentified Analyst

light quarter at more two mentioned for then to walk to of Kevin, Can the OpEx we item? OpEx run rate fourth you is annualized by going kind the restructuring just through And midpoint the financial XX.X% questions the In will just the savings. expect. be real where reductions should of that be us. Understood. you

ATM guys facility that should second, you forward you tapped be? here? that then should you. in or using quarter. And see the going where How think from So we Thank the

Kevin Sun

Yes.

As mentioned, organization. affected across restructuring we the departments really most the

while results was So into even There effects and expenses impacts marketing for trending charge financial on quarter, you within down. itself G&A. was the the the are booked and and sales could see the R&D

So the it that the that and sales reduction the marketing sales line. be the force targeted items. and OpEx it's DTM. with will of broad programs of and down the there restructuring, and versus the marketing again, line. of enablement, initiatives line with a natural type big very all changes was more But of the impact And And on the up a the pipeline suspension impacts Brett prioritization outlined and really part to of activities commercial then on focus has R&D

ATM. the On

evaluate the ATM the deploying continue the options flexibility valuations strategies since evaluate be fluid, as important we've to the as we So on a provide We'll capitalize improving thoughtful expense to the capital options are that ATM lowest test the reductions one to way. reduce taken operating the to mindful volumes. focus ATM, as used our future. through current in of restructuring part of relevant cost The reimbursed those in of steps And and of environment. and in the we've we considerations it's business cash burn some

Unidentified Analyst

That's it Okay. from Great. us. Thank you, Kevin.

Operator

the Thank the Q&A itself. of you. conference conclude you also concludes this will This call session for conference, Thank participating. the and all

and pleasant day. disconnect, now a have may You

DermTech (DMTKQ) 3 Aug 232023 Q2 Earnings call transcript