DermTech, Inc.

Fourth quarter 2023 test revenue increased 38% year over year to $3.7 million, with total revenue up 31% to $3.9 million. Billable sample volume declined 11% to approximately 15,580, while ASP rose 55% to $238 per sample; Medicare share of billable samples increased from 27% to 28%. Cost of test revenue was $3.4 million, up 4%, producing a 7% test gross margin, the highest in six quarters. Net loss was $19.1 million versus $28.2 million a year ago, and operating expenses included $8.4 million of sales and marketing, $3.3 million of R&D, and $8.4 million of G&A. For 2024, management expects total operating expenses of approximately $80 million, about a $40 million annualized reduction versus 2022, and cash burn of $55 million to $60 million annually based on the Q4 run rate. Cash, cash equivalents, restricted cash and marketable securities were $59.3 million at year-end, with runway into the first quarter of 2025.

Bret Christensen said the company is seeing sustained improvement in key performance indicators and believes the strategy shift toward reimbursed tests is working. He emphasized the commercial reset: tighter sales focus, fewer targets, compensation tied to reimbursed tests and revenue, and a smaller sales territory footprint, now about 55 territories versus roughly 60. He also highlighted payer progress, including about 42 million new covered lives in 2023 and favorable coverage decisions from two Blues plans, and pointed to TRUST 2's 99.7% NPV as a key tool to reengage payers.

Kevin Sun focused on the financial reset and improving operating leverage. He detailed Q4 ASP of $238, 15,580 billable samples, 7% gross margin, and net loss of $19.1 million, then said the company expects an approximately $40 million annualized reduction in total operating expenses versus 2022 and about $80 million of 2024 operating expenses. He also said cash burn should fall to $55 million to $60 million annually, with cash runway into Q1 2025. On COGS, he said TERT discontinuation should help costs, and Q4 per-test COGS fell about 6% sequentially to the lowest level since moving into the new lab.

Analysts focused on the 2024 volume outlook, payer adoption, and whether higher ASP can offset lower test counts. Management said volumes could be flat to modestly down in the first half of 2024 because of the sales restructuring and new tactics, and declined to give detailed revenue guidance. They said TRUST 2, with 20,000-plus patients and 99.7% NPV, should help restart or advance discussions with national payers and other non-covered plans over the next several months.