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World's Richest Doctor's NantHealth (NH) Reports $184 Million Loss For 2016



3/31/2017 7:47:23 AM

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NantHealth Reports 72% Increase in Full Year 2016 Total Net Revenue to $100 Million With SaaS Revenue Increasing More Than 181% and Increasing GPS Cancer Adoption

  • GPS Cancer Adoption by Oncologists Increased in Q4: 264 Oncologists Ordered 1,286 GPS Commercial & Research Tests YTD, with 452 tests in Q4, of which 326 Commercial and 126 Research
    • First Consecutive 100 GPS Cancer Tests Completed at a Single Academic Institution (Feb-Nov 2016) Demonstrating Significant Increase in Identification of an FDA Approved Drug or Clinical Trial for Patients with Refractory Cancer
    • Expanded Adoption of GPS Cancer in Florida with Genomics Laboratory Licensing by the State of Florida in Q4 with 138 tests ordered in 2016
  • GPS Cancer Payor Coverage: Total of Eight Payer Contracts with Self-Employed and Payors Now Cover GPS Cancer; Potential Sales Pipeline of GPS Cancer Payors Increased to 27 in Q4 from 18 in Q3
    • International Association of Fire Fighters (IAFF) endorses GPS Cancer as a benefit for approximately 310,000 IAFF employee members and approximately 300,000 beneficiaries across the US and Canada
    • Pilot Trial with Horizon Blue Cross Blue Shield New Jersey for GPS Cancer Initiated
    • Discussions Underway with CMS for Both Potential Local Coverage Determination (LCD) and National Coverage for GPS Cancer
  • NantOS, Device Connect and NaviNet: Completed 39 Go Live Projects; Number 2 Market Share in Connected Care with over 25,000 Device Connects Licenses Sold to Date with 18 EMRs Integrated Across more than 300 Provider Client Sites
    • Increases NantOS and NaviNet contractual commitments from 35 in Q3 to 96 in Q4
    • Full Year 2016 Total Net Revenue Increased 72% to $100 Million from $58 Million in 2015 With SaaS Revenue Increasing More Than 181%

CULVER CITY, Calif.--(BUSINESS WIRE)--NantHealth, Inc. (NASDAQ-GS: NH), a next-generation, evidence-based, personalized healthcare company, today reported financial results for its fourth quarter and full year ended December 31, 2016. The company began operating as a publicly traded entity in June 2016 when it launched GPS Cancer as a commercial product.

“Our GPS Cancer Test continues to gain coverage in both the commercial health insurance and self-employed payor markets, and we are seeking to build adoption for GPS Cancer among oncologists through our ongoing efforts to educate the medical community about the test’s value”

GPS Cancer – Highlights

  • First Consecutive 100 GPS Cancer Tests (Feb-Nov 2016) Completed in a Single Academic Institution Demonstrating Significant Increase Identification of an FDA Approved Drug or Clinical Trial for Patients with Refractory Cancer
  • Number of covered cancer lives: at December 31, 2016, the number of patients with cancer covered by a payer for GPS testing was approximately 322,000 including lives anticipated upon completion of a pilot project with Horizon Blue Cross Blue Shield
  • Number of GPS Cancer payers: at December 31, 2016 the number of payers covering GPS Cancer was eight. Discussions are in progress with 27 payers, which includes self-insured employers and insurers, increasing from 18 in Q3
  • Potential Local Coverage Determination (LCD) & Potential National Coverage by CMS: Discussions are underway to potentially provide both local coverage and national coverage with CMS and FDA regarding GPS Cancer coverage by Medicare
  • Number of GPS Cancer tests: 1,286 GPS Commercial & Research Tests YTD with 452 ordered in Q4; 233 commercial tests delivered in Q4, up from 154 in Q3. Number of Oncologists Ordering GPS Cancer Increased to 264 in Q4 from 181 in Q3
  • Expanded adoption of GPS Cancer in Florida with the new Genomics Lab licensing agreement with the state
  • The International Association of Fire Fighters (IAFF) has endorsed GPS Cancer, as a valuable benefit that will be accessible for approximately 310,000 IAFF members and 300,000 beneficiaries across the US and Canada
  • 87 GPS Cancer tests were ordered under an agreement with a pediatric cancer research institution in California

“Our GPS Cancer Test continues to gain coverage in both the commercial health insurance and self-employed payor markets, and we are seeking to build adoption for GPS Cancer among oncologists through our ongoing efforts to educate the medical community about the test’s value,” said Patrick Soon-Shiong, M.D., Chief Executive Officer and Chairman of NantHealth.

GPS Cancer has shown successful adoption in the research setting. Under CLIA-CAP conditions, NantHealth’s partner NantOmics has completed the analysis of thousands of patient samples with GPS demonstrating the efficacy or resistance thresholds of chemotherapy and targeted therapy agents in cancer treatment [Figure 1]. The significance of these validated findings is the ability to better inform the practicing oncologist of the standard of care which would most likely benefit the patient before treatment begins. Over the last six months, a concerted educational process has been undertaken to demonstrate the clinical utility of GPS Cancer for patients receiving chemotherapy, hormonal therapy, targeted therapy and monoclonal antibody therapy. GPS Cancer is the only comprehensive test covering whole genome tumor/normal sequencing and also transcriptomics and quantitative proteomics. By addressing proteomics at the specific pathway level related to the mechanism of action of the therapeutics, GPS Cancer has the potential to provide actionable information at the point of care.

The unique proteomic profiling within the GPS Cancer test covers a multitude of resistance and sensitivities biomarkers. For example, we have tested 1,709 GPS samples for ERCC1 and that measuring this protein expression can predict the response to platinum based chemotherapy. For example, ERCC1 is found in patients with non-small cell lung cancer (NSCLC). The GPS test can show the exact level of ERCC1 expression in patients and identify those with resistance levels of 75 amol per microgram or above. Research studies show that oxaliplatin, cisplatin, and carboplatin resistance levels are found to be at 75 amol per microgram in which 594 of the 1,709 samples were above the cutoff showing resistance to the drug where it should not be given, helping the patient avoid unnecessary side effects of the drug. Key references showing how these cutoffs were established can be found in our clinical evidence section of GPSCancer.com.

Potential Local Coverage Determination (LCD) and National Coverage for GPS Cancer with CMS

NantHealth continues to make positive advances in discussions with CMS (Centers for Medicare Medicaid Services) and representatives from the MolDX Program for GPS Cancer. In March 2017, NantHealth presented at CMS for both local and national determination on clinical experience with GPS Cancer. The recent positive coverage determination by Palmetto GBA for comprehensive genomic profiling in Non-Small Cell Lung Cancer (NSCLC) is encouraging, and the company believes that the GPS Cancer test can meet the eligibility requirements for payment once NantHealth is in the position to submit claims under this LCD (Local Coverage Determination #36143).

NantOS – Highlights

During the fourth quarter, the company:

  • Completed 19 go-live projects across NantOS and device connects
  • Completed 20 go-live projects, of which 19 were on NaviNet and one on NaviNet Document Exchange
  • Increased, renewed or expanded contractual commitment to 96 current clients from 35 at the end of Q3

Dr. Soon-Shiong added, “Our full year net revenue increased 72%, largely due to growth in SaaS revenue of more than 181%. Our total bookings in total contract value, which includes net new sales, renewals and product expansions, were approximately $28 million in fourth quarter and $74 million for the year. Overall, we finished the year well ahead of plan on this metric.”

Subsequent to the year end, the company exhibited its new suite of oncology solutions and provided demos at the Interoperability Showcase floor, during the HIMSS 2017 Annual Conference & Exhibition, which is recognized as one of the premier healthcare industry conferences, HIMSS17. Independent market research and opinion research company, Black Book Research, awarded the company the honor of #1 in Personalized Healthcare Solutions, Precision Medicine Tools and for achieving Highest Client Satisfaction.

Financial Highlights

For the 2016 full year, total net revenue increased 72% to $100.4 million from $58.3 million in 2015. Gross profit rose 19% to $28.0 million from $23.5 million for 2015. Selling, general and administrative (SG&A) expenses were $120.7 million compared with $69.0 million for the prior year. Research and development (R&D) expenses increased to $61.6 million from $23.8 million last year. For the full year 2016, the company recorded loss from related party equity method investment of $41.0 million. This includes a $29.8 million impairment charge related to the company’s investment in NantOmics, which was driven by the impact of the delay in the sales growth of the GPS test compared with the company’s expectations at the time of its investment in NantOmics. Net loss for 2016 was $184.1 million, or $1.69 per share, compared with $72.0 million, or $0.99 per share, for 2015. We expect to continue to incur operating losses over the near term as we drive adoption of GPS Cancer, expand our commercial operations, and invest further in NantHealth solutions.

Financial results for 2016 included approximately $54.0 million in non-cash, stock-based compensation expense, $41.0 million loss from related party equity method investment, and $22.8 million of intangible amortization, equal to $1.05 per share in total, offset by $23.3 million net income tax benefit adjustments, equal to $0.21 per share. On a non-GAAP basis, for 2016, adjusted net loss was $81.0 million, or $0.69 per share, compared with $53.6 million, or $0.54 per share, in the prior year.

For the 2016 fourth quarter, total net revenue increased 18% to $24.1 million from $20.4 million in last year’s fourth quarter. Gross profit was $4.3 million compared with $9.6 million, for the 2015 fourth quarter. SG&A expenses were $21.3 million compared with $16.6 million for the prior year fourth quarter. R&D expenses increased to $12.8 million from $7.2 million in the comparable quarter of last year. For the fourth quarter of 2016, the company recorded loss from related party equity method investment of $33.1 million, which includes the $29.8 million impairment charge mentioned above. Net loss for the 2016 fourth quarter was $60.0 million, or $0.49 per share, compared with $17.9 million, or $0.35 per share, for the 2015 fourth quarter.

Financial results for the 2016 fourth quarter included approximately $5.5 million of intangible amortization and $5.0 million in non-cash, stock-based compensation expense, equal to $0.09 per share in total, offset by $4.5 million net income tax benefit adjustment, equal to $0.04 per share. On a non-GAAP basis, for the 2016 fourth quarter, adjusted net loss was $21.6 million, or $0.18 per share, compared with $10.9 million, or $0.10 per share, in the prior year.

In December 2016, we issued convertible notes to a related party and others for net proceeds of $9.9 million and $92.8 million, respectively, after deducting underwriting discounts and commissions and other offering costs of $4.3 million.

Other Corporate Highlights

  • In December, together with NantKwest and NantOmics, we announced the public availability of QUILT Programs (Quantum Immuno-oncology Lifelong Trial), aimed to harness and orchestrate all elements of the immune system through the testing of novel treatment combinations, within the national clinical trials database, www.ClinicalTrials.gov. QUILT utilizes GPS Cancer - a unique, comprehensive set of tests integrating quantitative proteomics, and whole genome (DNA) and transcriptome (RNA) sequencing—to provide oncologists with a full molecular profile of each patient’s cancer not only for an initial biopsy before the trial begins, but throughout the trial process to fully understand how each therapy impacts the patient’s tumor activity.
  • In December, we entered into an exclusive reseller agreement for GPS Cancer advanced molecular analysis with Lunatus, a company focused on linking international healthcare companies and regional healthcare professionals in Arabian Gulf and Middle East markets.
  • In November, we entered into an exclusive reseller agreement for GPS Cancer tests with Sorgente, the market leader in biobank, stem cell and now molecular profiling testing in Italy.

Conference Call Information and Forward-Looking Statements

Later today, the company will host a conference call at 1:30 p.m. PT (4:30 p.m. ET) to review its results of operations for the fourth quarter and full year ended December 31, 2016. The conference call will be available to interested parties by dialing 844-309-3709 from the U.S. or Canada, or 281-962-4864 from international locations, passcode 92890709. The call will be broadcast via the Internet at www.nanthealth.com. Listeners are encouraged to visit the website at least 10 minutes prior to the start of the scheduled presentation to register, download and install any necessary audio software. A playback of the call will be archived and accessible on the same website for at least three months.

Discussion during the conference call may include forward-looking statements regarding such topics as, but not limited to, the company’s financial status and performance, regulatory and operational developments, and any comments the company may make about its future plans or prospects in response to questions from participants on the conference call.

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