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Fulgent Genetics Q4 Revenues Fall 14 Percent; Firm Beats Guidance, Expectations

NEW YORK – Fulgent Genetics reported after the close of the market on Wednesday that its fourth quarter 2021 revenues declined 14 percent year over year but exceeded analyst expectations and prior guidance.

Separately, Fulgent announced a strategic investment of up to $40 million in Spatial Genomics as lead investor in that firm's $56 million Series A financing round. Spatial Genomics has been developing sequential fluorescence in situ hybridization technology that Fulgent plans to integrate into its genomic testing platform.

Also, on Thursday morning, Fulgent announced a partnership with Epic Biosciences to link its next-generation sequencing services with Epic's cell analysis platform as part of that firm's DefineMBC liquid biopsy test for metastatic breast cancer.

For the three months ended Dec. 31, Fulgent reported revenues of $251.7 million, down from $295.0 million in Q4 2020 and beating the average Wall Street estimate of $191.1 million. The firm said it delivered 2.5 million billable tests during Q4, compared to approximately 3.2 million in the prior-year period.

Fulgent's chairman and CEO, Ming Hsieh, said in a statement that the fourth quarter "capped a year of tremendous growth and transformation" for the Temple City, California-based firm.

"We once again exceeded our guidance in the quarter as both our core and COVID businesses outperformed our expectations," Hsieh said. "We are pleased with the early progress we are seeing from the strategic initiatives we pursued in recent quarters, including the acquisition of CSI, partnership with Helio Health, and incremental investment in FF Gene Biotech, which are all contributing to growth of our core business," he added.

Paul Kim, Fulgent's CFO, specified on a call with investors on Wednesday that $212 million of the Q4 revenues came from COVID-19 PCR testing, while revenue from the firm's core business totaled $40.1 million, exceeding prior guidance of $32 million. Excluding NGS testing the firm conducted under a US Centers for Disease Control and Prevention SARS-CoV-2 surveillance contract, Q4 core revenue totaled $28.2 million, Kim said.

Chief Commercial Officer Brandon Perthuis said that the CSI integration is now focused on expanding the sales team. Fulgent hired three new representatives to focus on hospital pathologists, he said, with additional positions expected to be filled in Q1. New sales reps and expansion of in-network contracting has opened up 15 states that CSI did not previously have a presence in, Perthuis said.

"With the projected opening of our new oncology-based lab in El Monte, California in the second quarter, we will further expand our sales team," he said. This team will focus on oncologists in the western markets initially, "with the potential to expand into new markets as the laboratory ramps up."

As part of the Spatial Genomics investment, Hsieh will join that firm's board and expects it will launch a seqFISH product for biopharma customers in 2022.

Fulgent reported Q4 net income of $104.3 million, or $3.34 per share, compared to a net income of $166.3 million, or $6.16 per share, in Q4 2020. Adjusted EPS for the recently completed quarter was $3.48, well above the average Wall Street analyst estimate of $2.61 earnings per share.

Q4 R&D expenses increased 63 percent year over year to $7.5 million from $4.6 million, while SG&A expenses more than doubled to $30.3 million from $12.7 million.

For full-year 2021, Fulgent reported $992.6 million in revenues, more than double its revenues of $421.7 million in 2020.

Although COVID-19 testing accounted for the majority of the revenue growth in the year, non-COVID revenues also more than tripled, to $122.6 million. Kim further specified that revenues from the CDC surveillance contract were approximately $30 million for the year.

Fulgent's net income for the year rose to $507.4 million, or $16.38 per share, from $214.3 million, or $8.91 per share, in 2020. Adjusted EPS for 2020 was $16.67, beating the average Wall Street analyst estimate of $15.68 per share. The weighted average number of shares used to calculate earnings for 2021 was about 31.0 million compared to 24.1 million in Q4 2020.

The company's 2021 R&D expenses doubled to $24.2 million from $11.6 million a year ago. SG&A expenses for the year more than doubled to $75.2 million from $30.2 million in 2020.

Fulgent ended the year with $164.9 million in cash and cash equivalents and $770.7 million in marketable securities.

On the call, Perthuis noted that the firm plans "to be aggressive with M&A" to expand its business and reach new markets and technologies. "While we are very excited about our investments in CSI, Helio Health, and Spatial Genomics, we're still just getting started," he said, noting that COVID-19 testing during the Omicron wave in Q4 provided additional capital to fuel M&A going forward.

For Q1 of 2022, the firm expects $245 million in revenues, including core revenue with COVID-19 NGS of $32 million and core revenue without COVID-19 NGS of $22 million.

For full-year 2022, Fulgent expects revenues of approximately $600 million that include an estimated $120 million in core revenue excluding COVID-19 NGS testing. It expects $480 million in COVID testing revenues, including both PCR testing and CDC-contracted surveillance testing, nearly half of which is expected to be realized in the first quarter. The company also expects net income of $6.00 per share and non-GAAP income of approximately $7.00 per share for the year.

In Thursday morning trading on the Nasdaq, Fulgent's shares were down 14 percent at $51.67.