NEW YORK (GenomeWeb) – NanoString Technologies reported after the close of the market Tuesday that its second quarter revenues increased 51 percent year over year.
Shares in NanoString fell in Wednesday morning trade, however, on concerns about reimbursement for its Prosigna test.
The Seattle-based molecular diagnostics firm brought in total revenues of $10.9 million for the three months ended June 30, up from $7.2 million in the second quarter of 2013. It beat the average Wall Street estimate of $10.2 million.
"Our momentum increased through the second quarter as we continue to execute our strategy to become an integral part of cancer research and diagnostics," CEO Brad Gray said during an earnings call following the release of the results.
He noted that NanoString is "rapidly growing our installed base of nCounter Systems in both research and clinical labs," a trend that "validates the company's strategy of combining cancer research and diagnostics on a single platform provided by a single company."
NanoString's instrument revenue for the quarter was up 52 percent to $3.8 million versus $2.5 million for Q2 2013, while consumables sales increased 36 percent to $5.9 million from $4.3 million. The company said that it now has 220 of its nCounter systems installed worldwide.
Earlier this year, NanoString launched its Prosigna Breast Cancer Prognostic Gene Signature Assay services. The assay runs on NanoString's nCounter Dx Analysis System and is based on the PAM50 gene signature. It assesses the gene expression profile of cells found in a woman's breast cancer tissue.
NanoString announced separately on Tuesday that the Australian Therapeutic Goods Administration has approved the test, enabling NanoString to market it for clinical use in that country. Prosigna is already authorized for clinical use in the US, Canada, Europe, and Israel.
CFO Jim Johnson said on the call that NanoString recognized $181,000 in Prosigna kit sales in Q2, up from $61,000 in the first quarter. He said the company expects Prosigna revenues to "ramp gradually, as more clinical lab providers come online, our sales team begins to educate ordering physicians, and we begin to gain reimbursement."
NanoString posted a net loss of $14.1 million, or $.78 per share, for the quarter, compared to a loss of $7.8 million, or $13.69 per share, for Q2 2013. On a non-GAAP basis, NanoString posted a loss per share of $.58, beating the consensus Wall Street estimate for a loss of $.65.
The firm's R&D spending in the quarter jumped 47 percent to $5.3 million from $3.6 million, while its SG&A expenses nearly doubled to $12.9 million from $6.7 million. Johnson attributed the jump in expenses to "Prosigna launch costs, including establishment of an oncology sales force; expansion of the laboratory-focused commercial organization; and other increased corporate costs."
NanoString finished the quarter with $21.2 million in cash and cash equivalents and $58.4 million in short-term investments.
The firm said that it expects to report FY 2014 revenues of between $45 million and $50 million, and a net operating loss in the range of $40 million to $50 million.
Shares of NanoString were down around 9 percent at $11.20 in Wednesday morning trade on the Nasdaq.
Leerink Partners analyst Dan Leonard this morning reduced his price target on NanoString's stock to $21 from a previous $23 but maintained an Outperform rating. He said that reimbursement uncertainty surrounding Prosigna was the reason for lowering the target.
"We now find it highly unlikely that Palmetto, who makes Medicare coverage decisions, will approve Medicare payment for Prosigna before inclusion of the test in National Comprehensive Cancer Network guidelines," he wrote in a note.
He added that the NCCN is expected to review and update its guidelines in the fourth quarter of this year. He noted that although NanoString is submitting claims to two other Medicare contract administrators who cover 8 million lives, the bank has trimmed its Q4 Prosigna forecast to $875,000 from $1.3 million.