DermTech, Inc.

Q4 2023 hard numbers: test revenue increased 38% year over year to $3.7 million; total revenue increased 31% to $3.9 million; billable sample volume declined 11% to approximately 15,580; ASP increased 55% to $238 per sample; contract revenue was $0.2 million versus $0.3 million; cost of test revenue was $3.4 million, up 4%, producing a 7% test gross margin, the highest in six quarters; sales and marketing expense was $8.4 million, down 38%; R&D was $3.3 million, down 34%; G&A was $8.4 million, down 14%; net loss was $19.1 million versus $28.2 million last year, and included $3.2 million of non-cash stock-based compensation. At year-end, cash, cash equivalents, restricted cash and marketable securities were $59.3 million. Forward guidance: management said DMT volumes could be flat to modestly down in the first half of 2024 versus the same period last year, did not give specific revenue guidance, and said 2024 operating expenses are currently estimated to be approximately $80 million. Cash burn is estimated at $55 million to $60 million annually based on the Q4 run rate, and cash runway is expected into the first quarter of 2025, not to exceed 12 months from the 10-K filing date.

Bret Christensen struck an upbeat but cautious tone, saying the company is seeing sustained improvement in key performance indicators and that the new commercial approach is helping the top line. He emphasized a strategy shift toward reimbursed tests, higher ASP, and deeper relationships with fewer targets, including reducing territories from about 60 to roughly 55. He also highlighted payer progress, including 42 million new covered lives in 2023, favorable Blues coverage decisions, and TRUST 2 data as a way to reengage national payers.

Kevin Sun focused on the financial mix shift and cost actions. He said test revenue rose 38% to $3.7 million on a 55% increase in ASP to $238, while volume declined 11% to about 15,580; test gross margin was 7%, the highest in six quarters, and COGS per test fell about 6% sequentially. He also cited lower operating expenses across sales and marketing, R&D, and G&A, said annualized operating expense reductions should be about $40 million versus 2022, and reiterated year-end liquidity of $59.3 million with cash burn expected at $55 million to $60 million annually.

Analysts focused on the near-term volume outlook, the $40 million operating expense reduction, payer wins, and what TRUST 2 could change in reimbursement discussions. Management said first-half 2024 volumes could be flat to modestly down because of the sales restructuring and new tactics, and declined to provide more specific revenue guidance. On payers, Bret said TRUST 2’s 99.7% NPV and large cohort should help reopen conversations with national payers and others without positive policies, while Kevin said recent payer wins are starting to pay some claims but administrative and billing hurdles still limit full payment.