Amid the COVID-19 pandemic, Genmark Diagnostics Inc., of Carlsbad, Calif., has offered a preliminary look at its first-quarter results. And it is forecasting hopeful news, increasing its full-year guidance to a range of $112 million to $122 million. That's up from a previous prediction of $100 million to $110 million.
In an April 4 note, William Blair analyst Brain Weinstein updated his analysis on stocks his organization covers and the exposure they face in a potentially prolonged pandemic. Genmark was rated as having low exposure, particularly with the potential for more Eplex placements in laboratories interested in solutions. "[L]onger term[,] this should boost growth as this seeds the market with the platform,” he explained.
Indeed, the quarter saw the placement of 54 Eplex analyzers. As a result, the company has a global installed base of more than 580, representing an increase of 48% vs. the first quarter of 2019. The company reported March 19, that the U.S. FDA had issued emergency use authorization for the company’s Eplex SARS-CoV-2 Test.
The test was developed for the qualitative detection of SARS-CoV-2 virus in nasopharyngeal swab samples for patients suspected of COVID-19. The test is exclusively for use on the Eplex system, which provides an automated solution to the diagnostic process, with the capacity to process up to 96 tests per eight-hour shift, according to the company.
“Genmark is honored to play an important role in fighting the COVID-19 global pandemic,” said Scott Mendel, the company’s interim president and CEO. "Our sample-to-answer test enables health care providers to determine if a patient has COVID-19 in under two hours and is a critical diagnostic solution for hospitals.”
He also highlighted excellent top-line growth, as well as improved gross margins as a result of substantial manufacturing yields, progress on direct material cost reduction and enhanced production volumes. “Given the strength of our first quarter results and the recurring revenue aspect of our business, we are raising full year revenue guidance by $12 million. We will continue to assess the duration of the elevated RP/COVID-19 demand while also evaluating the impact on implementations of our BCID [blood culture identification] panels,” concluded Mendel.
The company noted that these results are preliminary and subject to further internal review.
Quickly assembled team
During the company’s March 2 fourth-quarter earnings call, Mendel noted that the company quickly developed Eplex test kits designed for detection of the virus. “While not on our scheduled road map, we quickly assembled the team, and in less than one month, they designed, manufactured and shipped initial tests to customers for validation of our test design,” he explained.
The call featured a question from Weinstein, who asked for more color on the test. Mendel described it as a single target test. "Speed was our primary objective, and so that's why we chose that path.” He added that the company is considering rolling it into its broader respiratory panel, particularly if the virus continues or proves seasonal.
“From a manufacturing perspective, we have been ramping up our manufacturing capacity all throughout 2019 and even prior to that, and we feel that we have the appropriate capacity to handle the potential increase in volumes,” Mendel said.
At the time, Weinstein said his team was “thrilled” with the company’s efforts on this front, yet he expressed concern over whether the panel would “be all that impactful to the business.” He pointed to the price point, which was about $125, as well as manufacturing limitations. While he did not view it as likely that the company would see revenue in excess of $10 million from the product, he did see promise. "[W]e do believe this could result in a handful of millions of dollars of revenue to Genmark, and this could wind up helping place many new systems that ultimately could drive recurring revenues across the company’s testing menu.”
He also noted that the company appeared undervalued, adding that the coronavirus might have highlighted the stock, which investors might have been overlooking. "That alone may be the biggest victory longer term.”
Genmark’s news comes as the Institute for Health Metrics and Evaluation, which the White House coronavirus task force cites, updated its COVID-19 projections as of April 8. Larry Biegelsen, of Wells Fargo, highlighted the projections, noting the lower number of cumulative deaths, less peak hospital resource utilization, and earlier peak hospital resource utilization compared with prior projections, “all of which are good news in general and for med-tech stocks in our view.”