On March 14, 2018 NantHealth, Inc. (NASDAQ-GS: NH), a next-generation, evidence-based, personalized healthcare company, reported financial results for its fourth quarter and full year ended December 31, 2017 (Press release, NantHealth, MAR 14, 2018, View Source;p=RssLanding&cat=news&id=2338113 [SID1234524772]).
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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.
GPS Cancer – Highlights
Test Growth: The company reported 606 GPS Commercial Tests were ordered in Q4, up from 547 in Q3.
New National GPS Cancer Payer: In Q1 2018, the company signed a new GPS Cancer reimbursement contract with a large, national healthcare IT company.
New Lab Services Arrangement: In Q1 2018, the company signed a laboratory services agreement with a 20+ facility hospital system for the availability of GPS Cancer testing to its patient community.
Expanded International Adoption: In Q1 2018, the company signed a strategic reseller agreement with a partner in the United Kingdom for the provision of molecular analysis services for clinical studies and other research initiatives.
FDA Submission: In Q1 2018, NantHealth submitted a 510K premarket notification application to the FDA for tumor/normal DNA sequencing.
Company to Provide GPS Cancer Molecular Analysis to the University of California San Francisco (UCSF) to Support Research Initiative Focused on Metastatic Breast Cancer: This study will allow UCSF researchers to utilize advancements made in molecular technology to examine the potential clinical feasibility of molecular profiling, including gene mutations and gene expression in the context of patient care. The biopsy materials collected will also allow researchers to examine immune markers within the tumor architecture. Results of the clinical study to be presented at major medical conferences.
"We continue to make excellent progress on a number of operational fronts," said Patrick Soon-Shiong, M.D., Chief Executive Officer and Chairman of NantHealth. "The number of ordered GPS Commercial Tests continued to grow in our fourth quarter from the previous quarter and February 2018 was the largest month of orders in the company’s history. Moreover, we have entered into a number of contracts in the first quarter of 2018, including a reimbursement contract with a new, national GPS Cancer Payer, a laboratory services agreement with a large, multi-facility hospital system and a strategic reseller agreement with a partner in the United Kingdom. We also recently completed the submission of a 510K premarket notification application to the FDA for tumor/normal DNA sequencing."
Software and Services Highlights:
Payer Engagement:
In Q4 2017, the company signed a three year NaviNet renewal contract with a total contract value of more than $1.2 million and also went live with one of its largest customers for its new Document Exchange solution.
In Q1 2018, the company signed another NaviNet renewal contract with a total contract value of approximately $17 million.
Clinical Decision Support: In Q4 2017, the company signed an expanded services contract with an existing, national insurance carrier customer, with the potential to extend the availability of the Eviti solution to an additional 2.4 million lives.
Connected Care:
In Q4 2017, the company signed a device connectivity license contract extension with an existing customer, with the potential to expand its solution to additional facilities within the customer’s 74 hospital system.
The company’s pipeline for device connectivity sales continues to progress, with numerous international opportunities developing through its strategic resellers in Europe and Asia.
The company presented "The Future of Device Connectivity Across the Continuum of Care" at the Healthcare Information & Management Systems Society (HIMSS) Annual Conference & Exhibition 2018.
"We reported a strong fourth quarter with revenues increasing on a reduced cost base. Importantly, our SaaS business continues to grow and generate healthy gross margins," said Ron Louks, Chief Operating Officer of NantHealth. "We’ve had a remarkable turnaround in our quarterly operating results. We are proud of what our organization has been able to accomplish over the second half of 2017 and look forward to continuing this momentum in 2018."
Business and Financial Highlights
For the 2017 fourth quarter, total net revenue increased 25% to $22.3 million from $17.8 million in 2016 fourth quarter. Gross profit was $13.4 million, or 60% of total net revenue, compared with $7.0 million, or 39% of total net revenue, for the prior-year fourth quarter. Selling, general and administrative (SG&A) expenses were $20.8 compared with $16.4 million. Research and development (R&D) expenses decreased to $8.8 million from $10.8 million. Net loss from continuing operations, net of tax, significantly narrowed to $22.6 million, or $0.21 per share, from $48.4 million, or $0.40 per share for the 2016 fourth quarter. Income from discontinued operations, net of tax, was $0.9 million, or $0.01 per diluted share, versus loss from discontinued operations, net of tax, $11.5 million, or $0.09 per share, for the prior-year fourth quarter. Net loss was $21.6 million, or $0.20 per share, compared with $60.0 million, or $0.49 per share, for 2016 fourth quarter.
Financial results for the 2017 fourth quarter included approximately $4.0 million loss from related party equity method investment, $0.7 million of acquisition related sales incentive, $1.2 million of net non-cash expense related to convertible notes, $2.2 million of intangible amortization and $8.6 million of stock-based compensation expense, totaling $0.16 per share. On a non-GAAP basis, adjusted net loss from continuing operations was $7.8 million, or $0.07 per share, for the 2017 fourth quarter, compared with $14.4 million, or $0.12 per share, for the 2016 fourth quarter.
For the 2017 full year, total net revenue increased 8% to $86.7 million from $80.4 million in 2016. Gross profit rose to $45.2 million, or 52% of total net revenue, compared with $36.3 million, or 45% of total net revenue, for the prior year. SG&A expenses were $75.0 compared with $105.3 million. R&D expenses decreased to $33.9 million from $47.3 million. Net loss from continuing operations, net of tax, was $131.4 million, or $1.12 per share, from $140.5 million, or $1.30 per share for 2016. Loss from discontinued operations, net of tax, was $43.8 million, or $0.37 per share, compared with $43.6 million, or $0.39 per share, for the prior year. Net loss was $175.2 million, or $1.49 per share, compared with $184.1 million, or $1.69 per share, for 2016.
Financial results for the 2017 full year included approximately $50.3 million loss from related party equity method investment including impairment loss, $2.4 million for corporate restructuring, $2.7 million of acquisition related sales incentive, $4.4 million of net non-cash expense related to convertible notes, $9.4 million of intangible amortization and $8.1 million of stock-based compensation expense, totaling $0.66 per share. On a non-GAAP basis, adjusted net loss from continuing operations was $55.3 million, or $0.47 per share, for the 2017 full year quarter, compared with $58.2 million, or $0.50 per share, for the 2016 full year.
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 fourth quarter and full year ended December 31, 2017. 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 2987414. 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.