On February 26, 2020 NanoString Technologies, Inc. (NASDAQ:NSTG), a leading provider of life science tools for translational research, reported financial results for the fourth quarter and year ended December 31, 2019 (Press release, NanoString Technologies, FEB 26, 2020, View Source [SID1234554824]).
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Fourth Quarter Financial Highlights
Product and service revenue of $33.6 million, 42% year-over-year growth. Pro forma growth1 was 48% and reflects the impact of the Veracyte transaction on revenue recorded for Prosigna IVD kits
Instrument revenue of $13.8 million, including $7.8 million of GeoMx Digital Spatial Profiler (DSP) instrument revenue, 136% year-over-year growth
Life Science consumable revenue of $14.9 million, 14% year-over-year growth
Total consumable revenue of $16.9 million, including $2.0 million of Prosigna, 11% year-over-year growth. Pro forma growth was 16%
Service revenue of $3.0 million, 18% year-over-year growth
Full Year 2019 Financial Highlights
Product and service revenue of $103.7 million, 24% year-over-year growth. Pro forma growth was 27%
Instrument revenue of $31.1 million, including $10.0 million of GeoMx DSP instrument revenue, 45% year-over-year growth
Life Science consumable revenue of $51.6 million, 18% year-over-year growth
Total consumable revenue of $61.0 million, including $9.4 million of Prosigna IVD kits, 14% year-over-year growth. Pro forma growth was 18%
Service revenue of $11.6 million, 32% year-over-year growth
"Our record product and service revenue in 2019 was driven by the successful launch of GeoMx DSP and the continued momentum of our core nCounter business," said Brad Gray, president and CEO of NanoString. "Customer interest in GeoMx has exceeded our expectations and we expect to see an acceleration in systems orders when we begin selling GeoMx into the basic discovery market in mid-2020."
Recent Business Highlights
GeoMx DSP Platform
Generated approximately 60 GeoMx DSP instrument orders in 2019, bringing total cumulative orders received to more than 90 instruments
Shipped a total of 44 GeoMx instruments in the second half of 2019, and recorded the first consumable orders
Accumulated 12 peer-reviewed publications of studies utilizing GeoMx DSP technology, including two recent immune-oncology publications in the journal Nature
Began offering GeoMx Cancer Transcriptome Atlas service using read-out by Next Generation Sequencing (NGS) through GeoMx Technology Access Program
Announced the development of NGS-based capabilities that are expected to enable discovery research customers to use GeoMx DSP to analyze the whole transcriptome in selected regions of interest
nCounter Platform
Grew installed base to approximately 855 nCounter Analysis Systems at December 31, 2019, representing 17% growth over the prior year
Commercialized five new gene expression panels during 2019, including CAR-T Characterization, Human Organ Transplant, Metabolic Pathways and Fibrosis panels
Surpassed 3,200 cumulative peer-reviewed publications utilizing nCounter technology
Financial
Concluded the year with approximately $157 million in cash, cash equivalents and short-term investments
Completed transaction with Veracyte, Inc. to sell assets related to Prosigna and exclusively license certain nCounter-based diagnostic assets and rights, for initial consideration totaling $50 million in cash and Veracyte stock
Reduced operating costs through the Veracyte transaction, resulting in an approximate $12 million net improvement in the company’s operating loss on an annualized, pro forma basis
The Veracyte transaction resulted in the recording of transaction-related gains and charges in the fourth quarter of 2019. These gains and charges, and the impact of other items such as collaboration revenue and stock-based compensation, may make it more challenging to compare the company’s operating results across periods. As a result, the company has elected to present selected non-GAAP, or adjusted, financial measures, including Adjusted EBITDA. A reconciliation of adjusted financial measures to the nearest comparable GAAP financial measure can be found in the notes and table at the end of this press release.
The company, based on its plans and initiatives for 2020, expects to record results approximately as follows.
Total product and service revenue of $124 to $131 million, representing growth of 20% to 26% as compared to 2019 and pro forma growth of 26% to 34% compared to 2019
GeoMx DSP revenue of $30 to $35 million, with $25 to $30 million derived from instrument sales and approximately $5 million from sales of consumables
Adjusted gross margin on product and service revenue of 54% to 55%
Adjusted research and development expenses of $46 to $48 million, representing a reduction of 24% to 27% as compared to 2019
Adjusted selling, general and administrative expenses of $76 to $78 million, representing a reduction of 6% to 8% as compared to 2019
Adjusted EBITDA loss of $46 to $51 million, an improvement of 37% to 43% as compared to 2019
Supplemental Information
Where expected future results are presented on an adjusted basis, change percentages are compared to the adjusted result from the prior year. As a supplement to the table above, the company has posted to the investor relations section of the company’s website, at www.nanostring.com, adjusted financial measures as compared to nearest comparable GAAP financial measure for each quarter of and the full year 2019.
Conference Call
Management will host a conference call today beginning at 1:30 pm PT / 4:30 pm ET to discuss these results and answer questions. Individuals interested in listening to the conference call may do so by dialing (866) 211-0364 for domestic callers, or (647) 689-6861 for international callers. Please reference Conference ID 3797821. To listen to a live webcast, please visit the investor relations section of the company’s website at www.nanostring.com. A replay of the call will be available beginning February 26, 2020 at 7:30pm ET through midnight ET on March 5, 2020. To access the replay, dial (800) 585-8367 or (416) 621-4642 and reference Conference ID: 3797821. The webcast will also be available on the company’s website for one year following the completion of the call.
Non-GAAP, or Adjusted, Financial Information
The company believes that the presentation of non-GAAP, or adjusted, financial information provides important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. Reconciliation of adjusted financial measures to the most directly comparable financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. A reconciliation of adjusted guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding certain expenses that may be incurred in the future. For further information regarding why the company believes that these adjusted measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to "Notes Regarding Non-GAAP Financial Information" at the end of this press release.
1 As used in this press release, "pro forma growth" percentages are calculated by comparing the applicable period-over-period financial results to reflect the impact of the Veracyte transaction as if such transaction had occurred at the beginning of each respective period. Further disclosure regarding the terms and pro forma impact of the Veracyte transaction can be obtained in the company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 4, 2019.