On February 22, 2024 Veracyte, Inc. (Nasdaq: VCYT) reported financial results for the fourth quarter and full year ended December 31, 2023 (Press release, Veracyte, FEB 22, 2024, View Source [SID1234640376]).

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"We closed 2023 with another quarter of excellent results, driven by our Afirma and Decipher businesses," said Marc Stapley, Veracyte’s chief executive officer. "Looking to 2024 and beyond, we will leverage our Veracyte Diagnostics Platform to continue to drive near- and long-term revenue. With multiple growth catalysts over the coming years and with our strong financial discipline, we expect to achieve positive cash flow for the third consecutive year and going forward."

Key Business Highlights

Grew total test volume to 33,836 in the fourth quarter and 126,977 for the full year 2023, an increase of 21% and 24%, respectively, compared to the prior year periods.
Enhanced our Endocrinology offering in 2023 with the launch of TERT promoter mutation testing for Afirma, the introduction of our Afirma GRID research tool, and enhancements to our online physician ordering portal.
Continued to strengthen the body of evidence for Decipher Prostate in 2023, adding 8 publications and 16 abstracts to the clinical-evidence library, reinforcing Decipher’s status as the only molecular test to receive Level 1 evidence designation in the National Comprehensive Cancer Network’s (NCCN) prostate cancer guidelines.
Acquired C2i Genomics Inc., adding whole-genome minimal residual disease (MRD) capabilities to our novel Veracyte Diagnostics Platform and expanding our ability to serve patients across the cancer care continuum.
Signed an agreement with Illumina to develop some of our tests as in vitro diagnostics (IVDs) for use on their NextSeq 550Dx next-generation sequencing (NGS) instrument, as part of our multi-platform strategy to accelerate global expansion of our tests as IVDs.
Published the clinical validation study for our Percepta Nasal Swab test in CHEST.
For the full year, generated $44 million of cash from operations and ended the year with $216 million of cash and cash equivalents.
Fourth Quarter 2023 Financial Results

Total revenue for the fourth quarter of 2023 was $98.2 million, an increase of 22% compared to $80.3 million reported in the fourth quarter of 2022. Testing revenue was $90.4 million, an increase of 29% compared to $70.3 million in the fourth quarter of 2022, driven primarily by the strong performance of our Decipher Prostate and Afirma tests. Product revenue was $3.7 million, an increase of 13% compared to $3.2 million in the fourth quarter of 2022. Biopharmaceutical and other revenue was $4.1 million, a decrease of 39% compared to $6.8 million in the fourth quarter of 2022.

Total gross margin for the fourth quarter of 2023, including the amortization of acquired intangible assets, was 66%, compared to 61% in the fourth quarter of 2022. Non-GAAP gross margin, excluding the amortization of acquired intangible assets and other acquisition related expenses was 70%, compared to 67% in the fourth quarter of 2022.

Operating expenses, excluding cost of revenue, were $100.3 million, which included an impairment charge of $32.0 million associated with the impairment of HalioDx developed biopharmaceutical services technology, customer relationships and customer backlog finite-lived intangible assets, compared to $54.1 million in the fourth quarter of 2022. Non-GAAP operating expenses, which excludes cost of revenue, amortization of acquired intangible assets, impairment charges, other acquisition related expenses, and other restructuring costs, grew 28% to $65.6 million, including a technology access fee of $3.5 million to develop our IVD kitted tests on an NGS platform, compared to $51.1 million in the fourth quarter of 2022.

Net loss for the fourth quarter of 2023 was $28.3 million, and basic and diluted net loss per common share was $0.39, which includes the aforementioned $32.0 million impairment charge. Net cash provided by operating activities in the fourth quarter of 2023 was $15.6 million, an improvement of $5.8 million compared to the same period in 2022.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading "Note Regarding Use of Non-GAAP Financial Measures."

Full Year 2023 Financial Results

Total revenue for 2023 was $361.1 million, an increase of 22% compared to $296.5 million in 2022. Testing revenue was $326.5 million, an increase of 30% compared to $250.5 million in 2022, driven primarily by the strong performance of our Decipher and Afirma tests. Product revenue was $15.6 million, an increase of 23% compared to $12.6 million in 2022. Biopharmaceutical and other revenue was $18.9 million, a decrease of 43% compared to $33.4 million in 2022, driven by the reduction of customer projects given overall spending constraints across the industry.

Total gross margin for the full year 2023, including the amortization of acquired intangible assets, was 64%, compared to 59% in 2022. Non-GAAP gross margin, excluding the amortization of acquired intangible assets and other acquisition related expenses was 69%, compared to 66% in 2022.

Operating expenses, excluding cost of revenue, were $315.5 million, an increase of 46% compared to $216.8 million in 2022. Non-GAAP operating expenses, which excludes cost of revenue, amortization of acquired intangible assets, impairment charges, other acquisition related expenses and other restructuring costs, grew 20% to $240.7 million compared to $200.3 million in 2022.

Net loss for the full year 2023 was $74.4 million and basic and diluted net loss per common share was $1.02, which includes impairment charges of $68.3 million in the year. Net cash provided by operating activities in 2023 was $44.2 million, an increase of $36.7 million compared to 2022.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading "Note Regarding Use of Non-GAAP Financial Measures."

2024 Financial Outlook

The company is maintaining full-year 2024 total revenue guidance of $394 million to $402 million and, consistent with prior guidance, expects cash, cash equivalents and short-term investments at the end of the year to be $230 million to $234 million.

Conference Call and Webcast Details

Veracyte will host a conference call and webcast today at 4:30 p.m. Eastern Time to discuss the company’s financial results and provide a general business update. The conference call will be webcast live from the company’s website and will be available via the following link: View Source The webcast should be accessed 10 minutes prior to the conference call start time. A replay of the webcast will be available for one year following the conclusion of the live broadcast and will be accessible on the company’s website at View Source

The conference call dial-in can be accessed by registering at the following link: https://register.vevent.com/register/BI38de228ea0a04e0ab786cfe56be5ca1b