NEW YORK – GeneDx's stock took off by more than 45 percent on Tuesday after the company announced it had reached profitability on a non-GAAP basis during the third quarter, driven by increased revenue from diagnostic exome and genome sequencing tests.
For the quarter ended Sept. 30, the Stamford, Connecticut-based genetic testing firm booked $76.9 million in revenues, a 44 percent year-over-year increase compared to $53.3 million during the year-ago quarter. Revenues, which were all from diagnostic tests, significantly topped the average Wall Street estimate of $65.0 million.
"As we walk through the door of profitability, we're entering a new phase of growth for GeneDx," CEO Katherine Stueland told investors in a call recapping the Q3 financial results. "We are bullish on our ability to keep expanding our footprint in the pediatric outpatient setting and begin extending our reach into new clinical settings in the years to come."
Exome and genome tests, which accounted for 33 percent of all tests this quarter, contributed $60.0 million to GeneDx's third-quarter revenues, up 76 percent from $34 million in Q3 2023. The testing volume increased 46 percent to 19,262 tests from 13,216 last year.
By the end of Q3, the company had collectively sequenced over 700,000 clinical exomes and genomes, Stueland said, more than 100,000 of which were sequenced in the last six months.
Hereditary cancer tests brought in $3.3 million in revenues, down 27 percent from $4.5 million a year ago, with test volume dropping to 4,672 from 8,556 last year.
Other panel tests generated $13.8 million in revenues, up 30 percent from $10.6 million last year, while test volume stayed similar at 35,095 tests compared to 35,861 in Q3 2023.
According to GeneDx CFO Kevin Feeley, the average reimbursement rate for exome and genome tests after all denials was approximately $3,100 during Q3, up from $2,800 in the last quarter and approximately $2,600 in the same quarter of last year.
The company also pointed out that during the quarter, four more US states — Indiana, Connecticut, Texas, and Florida — added coverage of exome or genome sequencing to their Medicaid programs, bringing the total number of states covering such testing for pediatric outpatients to 30. Feeley anticipates the company will see the impact of these new policies in 2025.
In addition, GeneDx said that the Centers for Medicare & Medicaid Services last month issued guidance on health coverage requirements for children to state Medicaid agencies. Under the Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) benefit, Medicaid-enrolled children are entitled to needed medical services, including diagnostics like exome and genome sequencing, the firm said.
In the neonatal intensive care unit, GeneDx is also seeing "a steady increase in rapid whole-genome [testing] volume quarter over quarter," Stueland said. The company previously inked a partnership with Epic to integrate its rapid whole-genome sequencing test for NICU patients with Epic's Aura specialty diagnostics suite. "We expect to begin receiving orders through Aura in the first half of 2025, with revenue kicking in during the second half of the year," Stueland said.
Having now provided genomic newborn screenings for more than 15,000 infants as part of two large research studies called GUARDIAN and Early Check, GeneDx is also setting its eyes on that market.
"We believe in a world where every newborn's genome can be sequenced at birth, and we're confident we will lead this opportunity to revolutionize the traditional approach to newborn screening by adding genomic sequencing," Stueland said.
Despite initial proof of concept from the ongoing newborn screening studies, Stueland acknowledged that it is still "going to take a lot of work" for the company to establish that market. "The key question, of course, is going to be, 'Who is going to pay for it?'" Stueland said. "We think that it is going to take us several years to really continue to make sure that policymakers appreciate it, that we can figure out exactly what that pull-through strategy is going to be."
The firm's R&D expenses for the quarter fell 18 percent to $11.7 million from $14.3 million a year ago while SG&A costs almost stayed flat at $43.1 million compared to $42.9 million last year.
Net loss for the quarter narrowed significantly to $8.3 million, or $.31 per share, compared to a net loss of $42.3 million, or $1.64 per share, in Q3 2023. Analysts, on average, had expected a net loss of $.21 per share.
Adjusted net income rose to $1.2 million in Q3, marking the first positive quarter on that basis since inception, Feeley told investors.
Encouraged by the Q3 results, the company again raised its full-year revenue guidance to between $284 million and $290 million from a previous range of $255 million to $265 million. It now expects to burn between $60 million and $65 million in net cash this year, less than its earlier estimate of $65 million to $70 million.
GeneDx ended the quarter with $57.9 million in cash and cash equivalents and $58.6 million in marketable securities.
In afternoon trading on the Nasdaq, the company's stock was up 45 percent at $81.29.