DermTech, Inc. (NASDAQ: DMTK) (“DermTech” or the “Company”), a leader in precision dermatology enabled by a non-invasive skin genomics platform, today reported its third-quarter 2022 financial results.

“We achieved meaningful year-over-year billable sample volume growth, but sequential growth was flat due to headwinds caused by limited commercial payer coverage,” said John Dobak, M.D., CEO, DermTech. “Despite these challenges, we have more positive activity with payers now than we’ve ever had and are confident we’re on the path to meaningfully growing covered lives in the U.S. We remain closely engaged with commercial payers and believe that we’ll potentially add 30 to 40 million covered lives by the end of the first quarter of 2023. We’ve recently executed an agreement with a large regional payer and have received an excellent policy from a prominent laboratory benefits manager. We’ve also completed price negotiations with a national government payer that runs the largest integrated health care system in the U.S. We’ve spent productive time with national payer medical directors and have several scheduled comprehensive reviews with medical policy teams in the upcoming months, which we see as additional, important potential business catalysts.”

Dr. Dobak continued, “We believe the value proposition of our DermTech Melanoma Test (DMT) continues to be embraced by our customers, but growth in utilization with certain customers is tempered because of typical payor tactics to impede our adoption momentum. Due to these factors, we expect to finish 2022 below our previous guidance range. It’s difficult to provide a revised forecast due to commercial payer collection challenges which affect estimating ASP and the potential for additional changes in estimates for anticipated cash collections, but we do expect to achieve at least $13 million in assay revenue for the full-year 2022.”

Dr. Dobak concluded, “I also want to emphasize that we’ve further strengthened our operating discipline and are adjusting expenses to be in-line with our tempered near-term revenue trajectory. With these modifications to our operating plan and our ability to access capital, we can extend our cash runway multiple quarters beyond the first quarter of 2024.”

Third-Quarter 2022 Financial Results

• Billable sample volume grew 54 percent from the third quarter of 2021 to approximately 18,080.
• Assay revenue was $3.4 million, up 16 percent from the third quarter of 2021, primarily due to higher billable sample volume.
• Total revenue was $3.6 million, an 18 percent increase from the third quarter of 2021, driven by higher assay revenue.
• Cost of assay revenue was $3.6 million, a 27 percent increase from the third quarter of 2021, yielding an assay gross margin of (6%), compared to 3% for the third quarter of 2021.
• Sales and marketing expenses were $14.6 million, a 49 percent increase from the third quarter of 2021. The increase was primarily attributable to higher employee-related costs from increased headcount and marketing expenditures.
• Research and development expenses were $5.7 million, a 29 percent increase from the third quarter of 2021, largely due to higher employee-related and lab costs.
• General and administrative expenses were $8.8 million, a 42 percent increase from the third quarter of 2021. The increase was driven by higher employee-related and infrastructure costs.
• Net loss was $28.8 million, or ($0.96) per share, which included $4.9 million of non-cash stock-based compensation expense, as compared to $20.1 million, or ($0.68) per share, for the third quarter of 2021, which included $3.7 million of non-cash stock-based compensation expense.
• Cash, cash equivalents, restricted cash and short-term marketable securities were $152.8 million as of September 30, 2022.

Other Business Highlights

• In October 2022, the Company presented on leveraging skin gene and protein expression profiles in clinical research at the Biomarkers & Precision Medicine USA Congress, held from October 3-4 in San Diego. By non-invasively capturing genomic and proteomic material in the epidermis, DermTech’s Smart Sticker^TM leverages skin gene and protein expression profiles in a clinical research setting to identify biomarkers that may be useful in stratifying a disease and determining patient response to a selected target therapeutic.
• In September 2022, DermTech presented on the value of decentralization in clinical trials at Outsourcing in Clinical Trials Southern California, held from September 28-29 in San Diego. The meeting emphasized how the traditional approach to clinical trials can be inconvenient and inaccessible for patients. By leveraging DermTech’s innovative Smart Sticker™, DermTech Stratum enables remote and non-invasive skin sample collection. Decentralizing clinical trials may ultimately lead to greater patient satisfaction, a more diverse patient population, better patient retention and cost savings.

Conference Call Information

As previously announced, the Company will host a conference call to discuss its results at 5:00 p.m. ET on Thursday, November 3, 2022. For participants interested in asking questions during the teleconference, please register. After registering for the event, a confirmation e-mail will be sent with a meeting invitation and access information. Registration is open during the live teleconference, but advance registration is advised. For participants interested in listening only, please register for the webcast. For those unable to participate in the live call and webcast, a webcast replay will be available on the Company’s website shortly after the conclusion of the call.

About DermTech

DermTech is a leading genomics company in dermatology and is creating a new category of medicine, precision dermatology, enabled by its non-invasive skin genomics platform. DermTech’s mission is to improve the lives of millions by providing non-invasive precision dermatology solutions that enable individualized care. DermTech provides genomic analysis of skin samples collected non-invasively using our Smart Stickers^TM. DermTech markets and develops products that facilitate the early detection of skin cancers and is developing products that assess inflammatory diseases and customize drug treatments. For additional information, please visit DermTech.

Forward-Looking Statements

This press release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The expectations, estimates, and projections of DermTech may differ from its actual results and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” "outlook," “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, expectations and evaluations with respect to: the performance, patient benefits, cost- effectiveness, commercialization and adoption of DermTech’s products and the market opportunity for these products, DermTech’s positioning and potential revenue growth, financial outlook and future financial performance, ability to maintain or improve its operating efficiency and reduce operating expenses, implications and interpretations of any study results, expectations regarding agreements with or reimbursement or cash collection patterns from Medicare or commercial payers and related billing practices or number of covered lives, and DermTech’s ability to expand its product offerings and develop pipeline products. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside of the control of DermTech and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the outcome of any legal proceedings that may be instituted against DermTech; (2) DermTech’s ability to obtain additional funding to develop and market its products; (3) the existence of favorable or unfavorable clinical guidelines for DermTech’s tests; (4) the reimbursement of DermTech’s tests by Medicare and commercial payers; (5) the ability of patients or healthcare providers to obtain coverage of or sufficient reimbursement for DermTech’s products; (6) DermTech’s ability to grow, manage growth and retain its key employees and maintain or improve its operating efficiency and reduce operating expenses; (7) changes in applicable laws or regulations; (8) the market adoption and demand for DermTech’s products and services together with the possibility that DermTech may be adversely affected by other economic, business, and/or competitive factors; and (9) other risks and uncertainties included in the “Risk Factors” section of the most recent Annual Report on Form 10-K filed by DermTech with the Securities and Exchange Commission (the “SEC”), and other documents filed or to be filed by DermTech with the SEC, including subsequently filed reports. DermTech cautions that the foregoing list of factors is not exclusive. You should not place undue reliance upon any forward- looking statements, which speak only as of the date made. DermTech does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based.

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