NEW YORK (GenomeWeb) – Veracyte reported after the close of the market on Monday that its third quarter revenues rose 34 percent year over year, as its genomic testing volume rose 23 percent during the same period.
For the three months ended Sept. 30, the South San Francisco, California-based company reported Q3 revenues of $23.5 million, up from revenues of $17.5 million a year ago and beating the average analyst estimate of $21.5 million.
Genomic testing volume was 8,006 for the quarter. Veracyte noted that it completed its national transition from the Afirma Gene Expression Classifier (GEC) to the Genomic Sequencing Classifier (GSC), retiring all GEC testing and accelerating the adoption of the Afirma Xpression Atlas for surgical and treatment decisions. The firm also said it increased the number of physicians ordering its Percepta bronchial genomic classifier to nearly 200 as of Sept. 30.
"We delivered another quarter of strong revenue and genomic volume growth for our Afirma and Percepta classifiers, which are changing practice in the diagnosis of thyroid and lung cancer," Veracyte Chairman and CEO Bonnie Anderson said in a statement. "In addition, we are thrilled that we recently received draft Medicare coverage for our third product, the Envisia Genomic Classifier."
On a conference call with analysts following the release of the earnings, Anderson noted that testing volume for the Percepta Classifier is up 21 percent sequentially from the second quarter, and that Veracyte is on track to deliver its previously projected 500 to 1,000 Percepta test results in Q4. She also said that the company expects to receive a finalized local coverage determination for the Envisia classifier in 2019.
The firm's Q3 net loss narrowed to $4.5 million, or $.12 per share, from $7.0 million, or $.21 per share, in Q3 2017. Analysts had expected a loss per share of $.25.
Veracyte's Q3 R&D expenses rose 13 percent to $3.4 million from $3.0 million in the year-ago quarter, while its SG&A costs for the quarter rose 18 percent to $15.8 million from $13.4 million in Q3 2017.
The company ended the quarter with $77.8 million in cash and cash equivalents.
For full-year 2018, Veracyte increased its revenue guidance to a range of $90 million to $91 million from its previous guidance range of $87 million to $89 million. Analysts are expecting revenues of $88.1 million for the year.
During the call, Anderson also shared the company's plans to move the Percepta Classifier to Veracyte's RNA sequencing platform in 2019. "This, along with the progress we are making in developing a nasal swab test for early lung cancer detection — which will leverage the field of injury technology on which our Percepta Classifier is based — remain exciting avenues for the future of our business addressing significant market and patient opportunities to improve care and lower costs," she added. "We look forward to sharing more about these efforts in the coming months."
Analysts reacted positively to the firm's earnings news. In a note to investors on Tuesday, Leerink's Puneet Souda said that Veracyte delivered an "outstanding quarter," driven by Afirma with 7,606 tests and Percepta with 374 tests.
He also noted that several things drove the adoption of the Afirma test this quarter, including uptake of the improved Afirma GSC test and broader reimbursement. "With penetration for Afirma [approximately] 42 percent — we believe there is still room to grow as physicians continue to depend on the test and ASP is expected to increase further," he wrote.
William Blair's Brian Weinstein concurred, reiterating his Outperform rating on the company's shares. Together, Veracyte's Afirma, Percepta, and Envisia products address a market that's expected to grow to be worth $3 billion by 2020, he said, adding, "In sum, we are encouraged by Veracyte's scientific innovation and see potential for upside from the company's emerging lung franchise. As a result of these factors, along with what we see as a reasonable valuation of 2.9 times our updated 2019 revenue target of about $112 million, we recommend purchase of this innovative and under-owned company."
Veracyte's shares rose 23 percent to $11.60 in Tuesday morning trading on the Nasdaq.