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Veracyte Q4 Revenues Up 30 Percent on Higher Afirma Gene Expression Classifier Volume

NEW YORK (GenomeWeb) — Veracyte reported after the close of the market on Wednesday that fourth quarter revenues rose 30 percent year over year, driven by strong growth in demand for the company's Afirma gene expression classifier (GEC) test, which is used in thyroid cancer diagnosis.

For the three-month period ended Dec. 31, Veracyte's revenues grew to $18.3 million from $14.0 million in Q4 2015, surpassing the analyst consensus estimate of $17.5 million.

"We have just completed our fourth consecutive year of at least 30 percent annual revenue growth, since becoming a public company," Veracyte CEO Bonnie Anderson said on a conference call with analysts following the release of the earnings.

The company has gathered momentum heading into 2017, driven by several recent coverage decisions from Blue Cross Blue Shield plans for the Afirma GEC, and final Medicare coverage policies for the Percepta classifier, which is used in lung cancer screening and diagnosis, Anderson added in a statement, noting that the two products "will fuel our revenue growth in 2017."

The firm reported Afirma Gene Expression Classifier volume of 6,313 in Q4, an increase of 13 percent over the prior-year period.

The company said that as of the end of February 2017, it had more than 70 million Blues plan members under coverage and nearly 25 million under contract. Veracyte added that as of the end of February, it had expanded overall covered lives for the Afirma GEC by 50 million to nearly 225 million, and overall contracted lives by 25 million to more than 155 million.

The company also achieved draft Medicare coverage policies for the Percepta Bronchial Genomic Classifier. It expects that two final policies will become effective in March.

In October 2016, the firm launched the Envisia Genomic Classifier at the CHEST annual meeting in conjunction with the presentation of new data suggesting the test's ability to significantly improve the diagnosis of idiopathic pulmonary fibrosis without the need for risky, expensive surgery.

In September 2016, Veracyte presented data at the American Thyroid Association meeting that it said demonstrated the potential for a next-generation Afirma GEC, planned for 2017 introduction, to "substantially increase" the percentage of patients with benign thyroid nodules who may be able to avoid unnecessary surgery.

Data were also published in the Journal of the National Cancer Institute suggesting the potential for the "field of injury" technology behind Veracyte's Percepta classifier to enable lung cancer detection using a simple, non-invasive nasal swab test, the firm added.

On the call, Anderson noted that Veracyte signed an agreement in February with Quest Diagnostics, "which we believe will help us to further accelerate Affirma growth."

She noted that the partnership will allow Quest to "offer the Affirma GEC to its physician customers throughout the country, who can refer patient samples to Veracyte for genomic testing when initial cytopathology results are inconclusive." Quest serves approximately half of the physicians and hospitals in the US.

Anderson said that 2016 proved to be a pivotal year because Veracyte now has three commercial products, developed within the span of six years. "We remain on track to generate revenue from all three of those products and to generate positive operating income by the end of 2018," she said.

Veracyte's net loss in the fourth quarter narrowed to $4.4 million, or $.14 a share, from $8.0 million, or $.29 per share, in 2015, beating the average Wall Street estimate for a loss per share of $.26.

The company's R&D spending in the quarter grew 9 percent to $3.6 million from $3.3 million, while SG&A spending dipped 6 percent to $11.5 million from $12.2 in the prior-year quarter.

For full-year 2016, Veracyte's revenues were up 31 percent to $65.1 million from $49.5 million in 2015, beating the analyst consensus estimate of $64.3 million.

For 2016, the firm reported Afirma Gene Expression Classifier volume of 23,237, an increase of 20 percent over the prior year.

The firm posted a net loss for the year of $31.4 million, or $1.09 per share, versus a net loss of $33.7 million, or $1.30 per share, for FY 2015. Analysts had expected a loss of $1.23 per share for the year.

Veracyte's R&D costs in 2016 grew 20 percent to $15.3 million from $12.8 million in 2015, and SG&A expenses for the year increased 9 percent to $52.0 million from $47.9 million.

At the end of 2016, Veracyte had cash and cash equivalents totaling $59.2 million.

Looking ahead, the company said it expects annual 2017 revenue to be in the range of $76 million to $84 million. Analysts are expecting revenues of $80.3 million for the year.

In a note to investors on Thursday, Leerink Research analyst Puneet Souda wrote that the investment bank is "encouraged by the progress and pathway to broader Afirma adoption." He noted that the Quest agreement is likely to drive further revenue ramp in the second half of 2017 and "broaden access to [an] already developing standard of care for thyroid cancer diagnostics."

Veracyte shares were up more than 3 percent to $8.31 in Thursday morning trading on the Nasdaq.