NEW YORK – German rare disease company Centogene on Thursday reported a 13 percent year-over-year revenue decrease in Q3 caused mainly by non-recurring upfront payments by two pharmaceutical partners a year ago.
"We're driving solid performance that is much better than what it might appear on paper," said Centogene CEO Arndt Rolfs during a conference call to discuss the financial results.
Centogene, headquartered in Rostock, Germany, reported its quarterly earnings for the first time as a public company, following the completion of its initial public offering in the US on Nov. 7, in which it raised approximately $47.1 million in net proceeds. Rolfs said the funding will go towards investments such as biomarker development programs. "Additionally, we believe that the increased visibility that we'll get as a public company and the credibility that comes along with meeting US SEC requirements will go a long way in accelerating partnership discussions," he said.
For the period ended Sept. 30, Centogene booked €11.6 million ($12.9 million) in revenues, down from €13.4 million in Q3 of 2018. The decrease was caused primarily by non-recurring upfront payments totaling €4 million during last year's third quarter from pharmaceutical partners Evotec International and Denali Therapeutics.
Of total revenues, €6.8 million came from diagnostics, up 11 percent from €6.1 million last year, and €4.8 million from pharmaceutical partnerships, down 33 percent from last year.
Approximately 51 percent of diagnostics revenues derived from whole-exome sequencing and whole-genome sequencing; 40 percent came from standard genetic tests (including single-gene, copy number variant, and mutation quantification tests) and sequencing panels; and 9 percent resulted from noninvasive prenatal testing.
CFO Richard Stoffelen said during the call that the company recently began to de-emphasize NIPT. "The NIPT business is not a core of our business nor central to our mission of generating medical insights around rare diseases," he explained. "While we previously entered this space for certain strategic reasons, this year, we have shifted our focus to growing our core genetic diagnostics business."
Rolfs highlighted a joint research agreement with Pfizer during the call that the company announced on Nov. 13. "I'm truly excited about the prospect of the partnership and also what it demonstrates in terms of Centogene's expertise and capabilities," he said.
Under the agreement, which came with an upfront payment and includes additional payments for future research projects, Pfizer will gain access to Centogene's rare disease database and repository for the discovery and validation of novel drug targets. "While we have been working with Pfizer for a number of years, this new agreement is a much broader partnership and is a testament to the depth and robustness of CentoMD and our medical knowledge in this field," Rolfs said.
In addition, Centogene announced an agreement with PTC Therapeutics on Nov. 18 to provide diagnostic testing services to the pharma firm.
Rolfs also noted that Centogene's rare disease repository has grown to approximately 465,000 patients from 340,000 patients a year ago. "This knowlegebase is the heart of our company, and this demonstrates the continued growth of our company," he said. It includes CentoMD, which has 375,000 analyzed patient cases with genetic, proteomic, metabolomic, and clinical information. Rolfs pointed out that the database contains patients from a wide range of ethnic bakgrounds, and from more than 120 countries, and that the clinical information is structured and can be queried.
Over the past year, Centogene has signed up 10 additional pharmaceutical partners, bringing the total number to 38 as of the end of September. While revenues coming in from some of these partners may currently be small, Rolfs said, "it's much easier to expand the partnerships than to establish a new partner relationship."
Finally, in July, the company sold its headquarters in Rostock and leased them back for several years, resulting in a €10.8 million repayment of loans the firm had taken out for the construction of the building. "This was a decision we made to ensure that we have enough capability to invest in the growth of the company," Rolfs said.
Centogene's Q3 net loss was €4.3 million, or €13 per share, up from €1.2 million, or €4 per share, during the year-ago period.
The company had €2.0 million in R&D expenses in Q3, up 43 percent over the previous year, primarily due to expenses associated with the expansion of its proprietary information platform and the development of new products and solutions. SG&A expenses totaled €6.7 million, down 8 percent from €7.3 million a year ago, due in part to a decrease in share-based compensation expenses.
Centogene ended the quarter with €6.1 million in cash and cash equivalents.
For full-year 2019, Centogene expects revenues to grow by approximately 20 percent. It also anticipates to have more than 40 pharmaceutical partners in total, and to grow its data repository to about 500,000.
Centogene's shares were up about 4.5 percent in morning trading on the Nasdaq.