NEW YORK (GenomeWeb) – GenMark Diagnostics reported after the close of the market on Thursday that its third quarter revenues rose 7 percent year over year, driven by strength in sales of its eSensor XT-8 and ePlex molecular diagnostics systems.
For the three months ended Sept. 30, the firm reported revenues of $11.6 million, up from $10.8 million a year ago, but short of the consensus Wall Street estimate of $14.6 million.
"With strong sales funnels and continued positive customer feedback regarding the overall performance of ePlex, we remain optimistic about our opportunity to accelerate our revenue growth rate and capture market share in the global multiplex molecular diagnostics market," GenMark President and CEO Hany Massarany said in a statement.
In a conference call to discuss financial results, Massarany said, "We've gained valuable insights through our early commercialization efforts of ePlex in both Europe and the US."
In Europe, he said, revenue recognition for expected placements was slowed by a longer than expected customer evaluation and validation process prior to implementation of ePlex in routine clinical use. In some cases, the process takes 180 days, the firm said. "In the US, which has previously represented all of our business [through XT-8 sales], this process has historically averaged approximately 90 days," Massarany said.
He noted that although the firm is experiencing delays in booking revenue in Europe for the ePlex system and respiratory panel, it is satisfied with the early adoption of ePlex in the US, "the world's largest market" for its products, and it anticipates that "this will help offset lower European driven revenues" as the firm moves into 2018.
Placements in the US, with only one quarter in the market, represented more than 70 percent of all ePlex placements, he added.
Earlier in the year, the firm had received 510(k) clearance from the US Food and Drug Administration for the ePlex instrument and its respiratory pathogen panel, and a CE mark for blood culture gram positive, gram negative, and fungal panels.
The firm has identified assay software-related improvements to the manufacture of its BCID panels that it expects will improve yield and reliability. "We are taking the time necessary to implement these improvements before commencing our clinical studies for FDA submission," Massarany said, adding, "As a result, we now plan to commence blood culture ID clinical studies shortly with FDA submission now expected at midyear 2018."
GenMark noted that it placed 65 ePlex analyzers in the third quarter, the first full quarter since the platform was launched in the US. The firm said that it finished the quarter with an installed base of 147 ePlex analyzers in US and European labs. It expects to exit 2017 with between 185 and 200 ePlex placements.
The firm's net loss widened to $15.4 million, or a loss of $.28 per share, from a net loss of $12.1 million, or $.27 a year earlier, and short of analysts' average estimate for a loss of $.26 per share.
GenMark's R&D costs fell 12 percent to $10.2 million from $11.6 million in Q3 2016, and its SG&A costs rose 35 percent to $8.7 million from $6.5 million.
GenMark ended the quarter with $27.2 million in cash and cash equivalents, and $59.8 million in marketable securities.
For 2017, the company expects revenue in the range of $51 million to $53 million. The average analyst expectation is that the company will book $64.1 million for the year.
Investment bank Raymond James today downgraded GenMark's shares to Market Perform from Outperform. Its analyst Nicholas Jansen said that the combination of slower European traction, a shift to more rentals that impacts cash burn, and a delay in US menu expansion by one to two quarters "are too much for patience to overcome."
Canaccord Genuity analyst Mark Massaro said in a research note that with GenMark's US rollout of ePlex, the investment bank believes that the molecular diagnostics company is "well positioned to penetrate" a total available market of about $2.5 billion. He said that he believes that GenMark can achieve at least 10 percent market penetration over time, which is the equivalent of at least $250 million per year.
GenMark's shares were down more than 35 percent to $4.70 in Friday morning trading on the Nasdaq.