CHICAGO – While Sema4 continues to operate in the red, the firm issued some rosy projections this week in connection with its first quarter financial results, based on its $623 million acquisition of GeneDx from Opko Health last month, as well as a corporate restructuring.
In a conference call Thursday, recently installed CEO Katherine Stueland — the former head of GeneDx — discussed a new operating model in the wake of the acquisition. It replaced an earlier plan to have Stueland and Sema4 founder Eric Schadt serve as co-CEOs. Instead, Schadt became president and chief R&D officer when the acquisition closed April 29.
"This integrated and flattened organization is designed to support three pillars that put us on an accelerated path to profitability," Stueland said, namely driving growth at scale, improving operating efficiency, and delivering transformational partnership deals. Operating efficiency includes improving revenue collection, driving down cost of goods sold, and reducing cash burn, she explained.
"Our long-term path to profitability is centered on focused execution, improved lab operations, opportunities in revenue-cycle management, and enhanced payor engagement," CFO Isaac Ro added.
To this end, Schadt will focus on improving the company's technology and advancing analytics and artificial intelligence initiatives, as well on as expanding partnerships with organizations in healthcare and life sciences.
"I am equally excited to get back to my roots and focus on what I love and am most passionate about," Schadt said. "I look forward to driving our data platform forward and transforming clinical practice and therapeutic innovation with current and future partners."
Also with an eye on growing the business, Stamford, Connecticut-based Sema4 in February brought in Jerry Conway to serve as senior VP of market access.
"We're now a more diverse, stronger company with a faster path to profitability," Ro said.
Still, Sema4 cut its workforce by about 10 percent during Q1, resulting in layoffs for more than 100 people based on a regulatory filing showing that the firm had 1,200 employees at the end of 2021. However, management said that the GeneDx acquisition resulted in a doubling of the company's sales force to about 175 representatives.
"Although the decision [to eliminate jobs] was incredibly difficult, these changes enable us to execute with a greater degree of precision and simplicity to deliver on our mission," Stueland said.
This and other cost-saving measures the company has undertaken will allow Sema4 to end the year with at least $200 million in cash. This "extends our runway well into 2024 and ensures we can continue to invest in building our data platform in service of health systems, biopharma partners, and, ultimately, patients," Stueland said.
Sema4 said that as of March 31, it had $315 million in cash and equivalents plus $900,000 in restricted cash. The firm has not yet drawn on a $125 million revolving credit facility it has available, and operational efficiencies from the restructuring will reduce the company's cash burn by about $50 million this year.
The company saw strong performance from GeneDx for the first quarter, Stueland said, but those results were not reflected in the quarterly report due to the timing of the acquisition.
Sema4 expects greater than 55 percent growth in diagnostic testing volume year on year when including the contribution of GeneDx for the last eight months of 2022. Although the firm shut down its COVID-19 testing business in Q1, it has seen an increase in testing volume overall, particularly in women's health and oncology.
With GeneDx now in the fold, Sema4 will look for unspecified synergies between the two legacy businesses, according to Schadt.
At the time of the acquisition announcement in January, clinical exomes accounted for 30 percent of GeneDx's revenue, though the firm estimated then that this share will grow to 80 percent in a few years. Schadt said this week that the merger will also strengthen Sema4's Centrellis database with the addition of 2.1 million curated phenotypes and nearly 350,000 clinical exomes that GeneDx has generated to date.
Despite the acquisition and restructuring, the company's vision has not changed. "We believe the rapid advancement in genomics and AI, along with the exponentially growing oceans of molecular imaging and clinical data, could and should be integrated into an information platform able to deliver a broad array of insights that drive more efficient treatment decisions and therapeutic development," Schadt said.
"We are making substantial progress toward our mission of standardizing precision medicine within [our partner] health systems," he added.
Sema4 had said in March, when it released its Q4 2021 results, that it held a meeting with its four health system partners — Mount Sinai Health System, NorthShore University HealthSystem, AdventHealth, and Avera Health — early this year. The event "allowed us to establish a formal network to collaborate around implementing precision medicine as the standard of care," Schadt said.