On August 9, 2018 NantHealth, Inc. (NASDAQ-GS: NH), a next-generation, evidence-based, personalized healthcare company, reported financial results for its second quarter ended June 30, 2018 (Press release, NantHealth, AUG 9, 2018, View Source [SID1234528596]).

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Molecular Analysis – Highlights

In Q2 2018, at AHIP, the company’s Chief Medical Officer, Sandeep Reddy, M.D., and Vice President of Sales, Kristin Lee, presented "Demystifying the Convergence of Precision Medicine and Value-Based Care," which highlights the challenges and opportunities posed by precision medicine and value-based care and how health plans can navigate their convergence
In Q2 2018, at ASCO (Free ASCO Whitepaper):
Launched Liquid GPS, a powerful next-generation tool for blood-based tumor profiling and quantitative monitoring
Co-presented, with Shumei Kato, M.D., and Razelle Kurzrock, M.D., both at the University of California San Diego, data on next-generation sequencing of paired DNA and RNA analysis in patients with rare cancers
Co-presented data on three-fold overestimation of tumor mutation burden (TMB) using a 248 gene list as a panel to impute TMB
Co-presented, with Sumanta Pal, M.D., at City of Hope, findings on how targeting immune checkpoints can improve clinical trial design across a variety of tumor types
Co-presented findings on how 17 percent of DNA next generation sequencing (NGS) 50 gene panel variants are not expressed in RNA sequencing
Commercially Launched the Precision Insights Portal: GPS and Eviti
Precision Insights Portal is a web-based application for molecular test ordering and results and the only solution available to blend guidelines-based regimen information powered by Eviti with personalized insights from GPS Cancer
"The newest generation of clinical trials in immune oncology focus on novel checkpoint targets, T cells, and NK cells and NantHealth’s liquid tumor profiling service provides unparalleled data on quantitative expression of these and other related targets," said Dr. Reddy. "Circulating cell-free RNA is the newest frontier in the liquid biopsy field and NantHealth is proud to lead the way in these clinical trials."

Software and Services Highlights:

Payer Engagement (NaviNet):
In Q2 2018, closed a SaaS contract with major east coast-based health plan — expected to be a significant revenue contributor to the Payer Engagement business
In June 2018, launched Provider Initiated Document Exchange, which streamlines and automates the delivery of information between providers and payers; and, Authorizations Appeals, a product for automating the authorizations appeals process
Clinical Decision Support (Eviti):
Developed and deployed the Precision Insights Portal, the only solution available to blend guidelines-based regimen information powered by Eviti, with personalized insights from GPS Cancer, as mentioned above
Software release 7.0 successfully launched in May, with expanded policy guidance information for radiation oncology and drug management of high cost/abuse drugs, differentiating Eviti from the competition on standard of care policy guidance
Connected Care:
In Q2 2018, showcased medical device integration (MDI) product portfolio (including DeviceConX, VitalsConX and HBox) at Vitalis, the largest e-health event in Scandinavia
"Our Software as a Service business continued to generate solid year over year revenue growth," said Paul Holt, Chief Financial Officer of NantHealth. "Looking ahead, we are optimistic about several significant opportunities in our SaaS and software sales pipelines and the potential of our recently launched products."

Business and Financial Highlights

The company adopted a new revenue recognition standard on January 1, 2018. Please note that the financial results presented below include both amounts "as presented," which reflect implementation of the new revenue recognition standard, as well as amounts prior to the impact of the new revenue recognition standard to allow for comparability against historical results. Starting in fiscal year 2019, the company will no longer present its GAAP and Non-GAAP financial results under the previous revenue recognition standard. For additional information and reconciliations of our financial results between the new and previous revenue recognition standard, see the additional tables included in this press release and in the company’s Form 10-Q to be filed with the Securities and Exchange Commission.

For the 2018 second quarter, total net revenue as presented was $22.0 million. Total 2018 second quarter net revenue prior to the impact of the new revenue recognition standard decreased 10% to $21.2 million from $23.5 million in 2017 second quarter. The prior year quarter included approximately $4.0 million in revenue recognized from the completion of a large implementation. Gross profit as presented was $11.5 million, or 52% of total net revenue. Gross profit prior to the impact of the new revenue recognition standard was $10.7 million, or 50% of total net revenue, compared with $13.9 million, or 59% of total net revenue, for the prior-year second quarter. Selling, general and administrative (SG&A) expenses as presented were $18.4 million. SG&A prior to the impact of the new revenue recognition standard was $18.4 million compared with $19.2 million in 2017 second quarter. Research and development (R&D) expenses as presented decreased to $5.9 million from $8.4 million; the new revenue recognition standard did not impact R&D expenses.

Net loss from continuing operations, net of tax, as presented was $21.8 million, or $0.20 per share. Net loss from continuing operations, net of tax, prior to the impact of the new revenue recognition standard narrowed to $22.5 million, or $0.21 per share, from $57.7 million, or $0.48 per share for the 2017 second quarter. Loss from discontinued operations, net of tax, as presented was $1.6 million, or $0.01 per share, compared with $12.4 million, or $0.10 per share; the new revenue recognition standard did not impact loss from discontinued operations. Net loss as presented was $23.4 million, or $0.21 per share. Net loss prior to the impact of the new revenue recognition standard was $24.1 million, or $0.22 per share, compared with $70.1 million, or $0.58 per share, for 2017 second quarter.

For the 2018 second quarter, on a non-GAAP basis, adjusted net loss from continuing operations as presented was $11.1 million, or $0.10 per share, for the 2018 second quarter. On a non-GAAP basis, adjusted net loss from continuing operations prior to the impact of the new revenue recognition standard was $11.8 million, or $0.11 per share, compared with $13.1 million, or $0.11 per share, for the 2017 second quarter.

In August 2017, NantHealth sold its provider/patient engagement assets to Allscripts to focus on core competencies and accelerate the plan to achieve profitability. As a result, the company has classified the current and prior period operating results of its provider/patient engagement business as discontinued operations. All results presented below represent the company’s continuing operations.

Conference Call Information and Forward-Looking Statements

Later today, the company will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) to review its results of operations for the second quarter ended June 30, 2018. The conference call will be available to interested parties by dialing 844-309-3709 from the U.S. or Canada, or 281-962-4864 from international locations, passcode 3132409. The call will be broadcast via the Internet at www.nanthealth.com. Listeners are encouraged to visit the website at least 10 minutes prior to the start of the scheduled presentation to register, download and install any necessary audio software. A playback of the call will be archived and accessible on the same website for at least three months.

Discussion during the conference call may include forward-looking statements regarding topics such as the company’s financial status and performance, regulatory and operational developments, and other comments the company may make about its future plans or prospects in response to questions from participants on the conference call.

Use of Non-GAAP Financial Measures

This news release contains references to Non-GAAP financial measures, including adjusted net loss and adjusted net loss per share, which are financial measures that are not prepared in conformity with United States generally accepted accounting principles (U.S. GAAP). The Company’s management believes that the presentation of Non-GAAP financial measures provides useful supplementary information regarding operational performance, because it enhances an investor’s overall understanding of the financial results for the Company’s core business. Additionally, it provides a basis for the comparison of the financial results for the Company’s core business between current, past and future periods. Other companies may define these measures in different ways. Non-GAAP financial measures should be considered only as a supplement to, and not as a substitute for or as a superior measure to, financial measures prepared in accordance with U.S. GAAP. Non-GAAP per share numbers are calculated based on one class of common stock and do not incorporate the effects, if any, of using the two-class method.