- Restructuring Plan Implemented To
Focus on Cancer Decision Support and Artificial Intelligence
Platform
- Integration of Four Pillars: GPS
Cancer, Eviti Clinical Decision Support, Connected Care and
Provider/Payer Engagement
- Sale of Patient/Provider Portal to
Allscripts
- Expected to Significantly Accelerate
Timeline to Profitability
- Synergies of Restructuring and
Headcount Reduction to Result in Cost Savings Anticipated to Exceed
$70 million Annually
- GPS Continues to Grow
- 379 GPS Commercial Tests Ordered in
Q2
- 264 GPS Commercial Tests Delivered
in Q2
- GPS Tests Ordered in July, Largest
Month in Orders to Date
- The number of Oncologists that Have
Ordered the Test has Grown to 432
- Documentation and Validation of GPS
Cancer Coverage has been Completed and Will be Filed in this
Quarter to CMS for Coverage
- Q2-2017 Revenue Increased 17% to
$26.2 Million from Q1-2017
- Gross Profit Increased 175% to $9.6
Million from Q1-2017
NantHealth, Inc. (NASDAQ-GS: NH), a next-generation,
evidence-based, personalized healthcare company, today reported
financial results for its second quarter ended June 30, 2017.
NantHealth said today that it has taken a series of methodically
analyzed actions, planned over the past nine months post initial
public offering (IPO), to focus the business on its core
competencies of artificial intelligence and be the leading cancer
company driving 21st century delivery of care. The restructuring
included integrating the multiple acquisitions and partnership with
NantOmics made prior to its IPO to focus on Cancer machine learning
systems and artificial intelligence, including GPS Cancer
ProteoGenomic Molecular Profiling Solution, the nation’s only
CLIA-CAP machine learning diagnostic assay, and Eviti Clinical
Decision Support currently covering over 23 million lives, with
Connected Care and Provider/Payer Engagement services.
The company said that it has signed an agreement with Allscripts
to sell its provider/patient engagement assets, which will enable
the company to integrate the remaining engineering teams to focus
on cancer. The sale of assets and restructuring implementation will
result in significant reduction of operating losses. The
consideration for the sale of assets includes the conveyance of 15
million NantHealth shares previously purchased by Allscripts.
Between synergies and the transfer of some number of personnel to
Allscripts together with NantHealth’s internal consolidation,
headcount will be reduced by approximately 300 staff. This sale and
other steps the company has taken, including integration of the
acquired businesses and synergies saved from same, is expected to
result in annualized cost savings of more than $70 million.
GPS Cancer – Highlights
NantHealth said that GPS adoption continues to grow with the
largest month of orders to date in July. The company said that 379
GPS commercial tests were ordered in Q2, with 264 GPS delivered;
and that it added 6,300 Covered Lives under a new regional
agreement with the International Association of Fire Fighters at
the end of Q1.
- Number of GPS Cancer payers: At
June 30, 2017, the company’s expanded sales team developed a
late-stage pipeline that includes several national and regional
health plans with contract signings expected by year end.
- Local Coverage Determination (LCD)
& National Coverage by CMS: Discussions are continuing for
both local and national coverage with CMS and FDA regarding GPS
Cancer coverage by Medicare. The company is encouraged following
multiple detailed meetings with CMS in which the accuracy and
comprehensiveness of the GPS Cancer solution, as well as its
clinical utility, were presented. The documentation and validation
for review for coverage by CMS has been completed and will be filed
this quarter.
- Expanded international adoption:
The company is pursuing GPS Cancer partnerships with locally based
resellers. Post quarter end, the company added Sistemas Medicos
Nacionales as the first international payer to cover GPS Cancer for
patients, bringing a new standard of care to Mexico.
- Increased field sales and clinical
team: In Q2, the company continued to add experienced
professionals to the field sales team, including international
sales, that call on oncologists; increased clinical support for
oncologists engaged with the company’s GPS Cancer team.
“We remain focused on extending coverage and driving physician
engagement for our GPS Cancer solution around the world,” said
Patrick Soon-Shiong, M.D., Chief Executive Officer and Chairman of
NantHealth. “We strongly believe that GPS will result in extended
and improved quality of life. Internationally, we are pursuing
opportunities through partnerships with locally based resellers and
we have added a seasoned sales executive to aid our efforts. Post
quarter end, Sistemas Medicos Nacionales became the first
international payer to cover GPS Cancer for patients, bringing a
new standard of care to Mexico. On the domestic front, our efforts
include introducing pilot programs with commercial insurance and
self-insured payers to accelerate coverage adoption. In addition,
we are continuing to add experienced professionals to our sales and
clinical support teams to further drive GPS physician adoption
nationwide. I am pleased to report that the team has developed a
deep, late-stage pipeline that includes national and regional
health plans, and new orders are trending favorably as a result of
the increased resources. We are gaining traction with physicians,
and the number of oncologists that have ordered the test has grown
to 432 as of the end of the second quarter.”
Payer Engagement & Clinical Decision Support Software and
Services:
- Eviti (Clinical Decision Support)
covered lives increased to approximately 23.4 million at the end of
Q2 from 22.5 million at the end of Q1.
- The company signed a three-year
contract extension with Blue Cross and Blue Shield of Nebraska
(BCBSNE) for Payor engagement SaaS services. The agreement also
adds Navinet Open Document Exchange solution to its existing set of
solutions in use by this customer.
- Added a new Navinet Open customer with
the execution of an agreement with Medical Mutual of Omaha.
- The company executed an agreement with
a new payer customer intended for nationwide deployment of
NantHealth’s Clinical Decision Support solutions nationwide.
“We are very pleased to extend and expand our relationship with
BCBSNE, the largest commercial insurer in the state of Nebraska and
a long-time client of NantHealth. The agreement renews the contract
for NaviNet Open and adds NantHealth’s Document Exchange solution,”
said Ron Louks, Chief Operating Officer of NantHealth. “Regarding
our second quarter financial performance, increased sales in our
software and hardware business was the key growth driver for both
total net revenue and gross margin compared with the first
quarter.”
Business and Financial Highlights
- A Restructuring Plan was implemented
in the third quarter to focus on the company’s core
competencies and position the artificial intelligent platform to
focus on cancer: GPS (Cancer Molecular Profiling Solution) and
Clinical Decision Support, Connected Care and Payer Engagement.
Synergies of the restructuring plan and headcount reduction to
result in cost savings anticipated to exceed $70 million annually
and significantly accelerate timeline to profitability.
- On August 3, 2017, entered into an
agreement with Allscripts Healthcare Solutions, Inc. under
which NantHealth agreed to sell its provider/patient engagement
solutions business. The agreement is subject to customary closing
conditions and is expected to close in the third quarter of
2017.
On a sequential quarterly basis, total net revenue increased
$3.7 million, or 17%, from $22.5 million, largely due to higher
sales of software and hardware. For the 2017 second quarter, total
net revenue was $26.2 million, compared with $31.5 million for the
2016 second quarter. The decline was primarily due to a $5.2
million decrease in sales of services outside the company’s core
business lines. On a sequential quarterly basis, gross profit
increased $6.1 million, or 175%, from $3.5 million. Gross profit
rose to $9.6 million compared with $9.3 million for the prior year
second quarter.
Selling, general and administrative expenses declined to $22.9
million from $47.2 million for the 2016 second quarter. Research
and development expenses decreased to $11.8 million from $24.3
million. For the second quarter of 2017, the company recorded loss
from related party equity method investment of $38.9 million, which
included a $36.0 million non-cash impairment charge as a result of
the company’s determination that the fair value of its investment
in NantOmics had declined below its carrying value as of June 30,
2017. The decline in the fair value of the company’s investment in
NantOmics was primarily caused by delays in GPS revenue growth. In
last year’s second quarter, the company recorded loss from related
party equity method investment of $2.4 million. Net loss was $70.1
million, or $0.58 per share, compared with $54.1 million, or $0.54
per share, for 2016 second quarter.
Financial results for the 2017 second quarter included
approximately $38.9 million loss from related party equity method
investment, $1.6 million of corporate restructuring expense, $1.1
million of net non-cash expense related to convertible notes and
$4.6 million of intangible amortization, totaling $0.38 per share.
On a non-GAAP basis, adjusted net loss was $22.5 million, or $0.18
per share, for the 2017 second quarter, compared with $16.5
million, or $0.15 per share, for the 2016 second quarter.
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
second quarter ended June 30, 2017. 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 67325779. 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 topics such as the company’s
financial status and performance, regulatory and operational
developments, and other comments the company may make about its
future plans or prospects in response to questions from
participants on the conference call.
Use of Non-GAAP Financial Measures
This news release contains references to Non-GAAP financial
measures, including adjusted net loss and adjusted net loss per
share, which are financial measures that are not prepared in
conformity with United States generally accepted accounting
principles (U.S. GAAP). The Company’s management believes that the
presentation of Non-GAAP financial measures provides useful
supplementary information regarding operational performance,
because it enhances an investor’s overall understanding of the
financial results for the Company’s core business. Additionally, it
provides a basis for the comparison of the financial results for
the Company’s core business between current, past and future
periods. Other companies may define these measures in different
ways. Non-GAAP financial measures should be considered only as a
supplement to, and not as a substitute for or as a superior measure
to, financial measures prepared in accordance with U.S. GAAP.
Non-GAAP per share numbers are calculated based on one class of
common stock and do not incorporate the effects, if any, of using
the two-class method.
About NantHealth, Inc.
NantHealth, Inc., a member of the NantWorks ecosystem of
companies, is a next-generation, evidence-based, personalized
healthcare company enabling improved patient outcomes and more
effective treatment decisions for critical illnesses. NantHealth's
unique systems-based approach to personalized healthcare applies
novel diagnostics tailored to the specific molecular profiles of
patient tissues and integrates this molecular data in a clinical
setting with large-scale, real-time biometric signal and phenotypic
data to track patient outcomes and deliver precision medicine. For
nearly a decade, NantHealth has developed an adaptive learning
system, which includes its unique software, middleware and hardware
systems infrastructure that collects, indexes, analyzes and
interprets billions of molecular, clinical, operational and
financial data points derived from novel and traditional sources,
continuously improves decision-making and further optimizes our
clinical pathways and decision algorithms over time. For more
information please visit www.nanthealth.com.
About GPS Cancer™
GPS Cancer™ is a unique, comprehensive test available through
NantHealth. GPS CoverageGPS Cancer integrates whole genome (DNA)
sequencing, whole transcriptome (RNA) sequencing, and quantitative
proteomics through mass spectrometry, providing oncologists with a
comprehensive molecular profile of a patient’s cancer to inform
personalized treatment strategies. GPS Cancer testing is conducted
in CLIA-certified and CAP-accredited laboratories, and is a key
enabler for Cancer Breakthroughs 2020, the world’s most
comprehensive cancer collaborative initiative seeking to accelerate
the potential of combination immunotherapy as the next generation
standard of care in cancer patients. For more information,
visit www.gpscancer.com and
www.cancerbreakthroughs2020.org.
This news release contains certain statements of a
forward-looking nature relating to future events or future business
performance. Forward-looking statements can be identified by the
words “expects,” “anticipates,” “believes,” “intends,” “estimates,”
“plans,” “will,” “outlook” and similar expressions. Forward-looking
statements are based on management’s current plans, estimates,
assumptions and projections, and speak only as of the date they are
made. Risks and uncertainties include, but are not limited to: our
ability to successfully integrate a complex learning system to
address a wide range of healthcare issues; our ability to
successfully amass the requisite data to achieve maximum network
effects; appropriately allocating financial and human resources
across a broad array of product and service offerings; raising
additional capital as necessary to fund our operations; achieving
significant commercial market acceptance for our sequencing and
molecular analysis solutions; establish relationships with, key
thought leaders or payors’ key decision makers in order to
establish GPS Cancer as a standard of care for patients with
cancer; our ability to grow the market for our Systems
Infrastructure, NantOS and NantOS apps; successfully enhancing our
Systems Infrastructure, NantOS or NantOS apps to achieve market
acceptance and keep pace with technological developments; customer
concentration; competition; security breaches; bandwidth
limitations; our ability to continue our relationship with
NantOmics; our ability to obtain regulatory approvals; dependence
upon senior management; the need to comply with and meet applicable
laws and regulations; unexpected adverse events; clinical adoption
and market acceptance of GPS Cancer; and anticipated cost savings.
We undertake no obligation to update any forward-looking statement
in light of new information or future events, except as otherwise
required by law. Forward-looking statements involve inherent risks
and uncertainties, most of which are difficult to predict and are
generally beyond our control. Actual results or outcomes may differ
materially from those implied by the forward-looking statements as
a result of the impact of a number of factors, many of which are
discussed in more detail in our reports filed with the Securities
and Exchange Commission.
NantHealth, Inc. Condensed Consolidated Balance
Sheets (Dollars in thousands, except per share amounts)
June 30,
2017
December 31,
2016
(Unaudited) Assets Current assets Cash and cash
equivalents $ 92,669 $ 160,353 Accounts receivable, net 11,345
13,728 Inventories 2,165 2,217 Deferred implementation costs 4,207
3,336 Related party receivables, net 1,136 899 Prepaid expenses and
other current assets 5,228 5,046 Total
current assets 116,750 185,579 Property, plant, and equipment, net
31,773 29,139 Deferred implementation costs, net of current 8,882
7,910 Goodwill 131,068 131,068 Intangible assets, net 109,287
119,126 Investment in related party 163,786 207,197 Related party
receivable, net of current 1,869 1,971 Other assets 2,033
2,317 Total assets $ 565,448 $ 684,307
Liabilities and Stockholders' Equity Current
liabilities Accounts payable $ 1,195 $ 6,720 Accrued and other
current liabilities 18,686 25,231 Deferred revenue 18,699 17,216
Related party payables, net 11,368 8,082
Total current liabilities 49,948 57,249 Deferred revenue,
net of current 12,244 17,238 Related party liabilities 8,521 5,612
Related party promissory note 112,666 112,666 Related party
convertible note, net 7,750 7,564 Convertible notes, net 72,763
70,810 Other liabilities 1,741 1,574
Total liabilities 265,633 272,713
Stockholders' equity Common stock, $0.0001 par value per
share, 750,000,000 shares authorized; 121,953,800 and 121,250,437
shares issued and outstanding at June 30, 2017 and December 31,
2016, respectively (Including 6,976 shares of restricted stock) 12
12 Additional paid-in capital 885,654 886,334 Accumulated deficit
(586,452 ) (475,273 ) Accumulated other comprehensive income
601 521 Total stockholders' equity
299,815 411,594 Total liabilities and
stockholders' equity $ 565,448 $ 684,307
NantHealth, Inc. Condensed Consolidated Statements
of Operations (Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016
2017 2016 Total net
revenue $ 26,230 $ 31,490 $ 48,739 $ 50,941 Total cost of
revenue 16,672 22,240 35,701
35,278
Gross profit 9,558
9,250 13,038 15,663
Operating Expenses: Selling, general and
administrative 22,944 47,248 43,822 74,621 Research and development
11,846 24,322 25,245 35,016 Amortization of software license and
acquisition-related assets 1,814 1,813
3,628 3,628 Total operating expenses
36,604 73,383 72,695
113,265 Loss from operations (27,046 ) (64,133
) (59,657 ) (97,602 ) Interest expense, net (4,013 ) (1,758 )
(7,982 ) (3,256 ) Other income (expense), net 57 (77 ) 330 261 Loss
from related party equity method investment including impairment
loss (38,885 ) (2,375 ) (43,411 )
(5,289 ) Loss before income taxes (69,887 ) (68,343 ) (110,720 )
(105,886 ) Provision for (benefit from) income taxes 177
(14,211 ) 459 (18,609 ) Net loss
$ (70,064 ) $ (54,132 ) $ (111,179 ) $ (87,277 )
Net
income (loss) per share (1): Basic and diluted - common stock $
(0.58 ) $ (0.54 ) $ (0.91 ) $ (0.91 ) Basic and diluted -
redeemable common stock N/A $ 0.25 N/A
$ 0.49
Weighted average shares outstanding
(1): Basic and diluted - common stock 121,756,108
104,072,198 121,687,454
101,846,445 Basic and diluted - redeemable common stock
N/A 9,419,152 N/A
10,066,719
Footnote:
(1)
The net income (loss) per share and
weighted average shares outstanding for the three and six months
ended June 30, 2016, have been computed to give effect to the LLC
Conversion that occurred on June 1, 2016, prior to the Company’s
initial public offering ("IPO"). In conjunction with the LLC
Conversion, (a) all of the Company’s outstanding units
automatically converted into shares of common stock, based on the
relative rights of the Company's pre-IPO equityholders as set forth
in the Company's limited liability company agreement and (b) the
Company adopted and filed a certificate of incorporation with the
Secretary of State of the state of Delaware and adopted bylaws. The
Company adopted and filed an amendment to its certificate of
incorporation with the Secretary of State of the state of Delaware
to effect a 1-for-5.5 reverse stock split of its common stock on
June 1, 2016.
The net loss per share for the common
stock for the three and six months ended June 30, 2016 reflects
$2,333 and $4,958, respectively in accretion value allocated to the
redeemable common stock. The redeemable common stock contained a
put right, which expired unexercised on June 20, 2016. As a result
of and as of that date, the shares were no longer redeemable and
were included in common stock.
NantHealth, Inc. Supplemental Revenue Schedule
(Dollars in thousands) (Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017
2016 Revenue: Software and hardware $ 3,446 $
4,149 $ 4,091 $ 4,823 Software–as-a-service 15,281
15,181 30,512 28,882 Total software-related revenue
18,727 19,330 34,603 33,705 Maintenance 4,693 4,512 7,855 7,650
Sequencing and molecular analysis 450 45 960 45 Other services
2,360 7,603 5,321 9,541 Total net
revenue $ 26,230 $ 31,490 $ 48,739 $ 50,941
Cost of
Revenue: Software and hardware $ 528 $ 435 $ 840 $ 674
Software-as-a-service 6,226 9,314 13,459
13,737 Total software-related cost of revenue 6,754 9,749
14,299 14,411 Maintenance 954 743 1,816 1,273 Sequencing and
molecular analysis 1,512 359 3,050 359 Other services 4,647 7,492
10,325 11,057 Amortization of developed technologies 2,805
3,897 6,211 8,178 Total cost of revenue $
16,672 $ 22,240 $ 35,701 $ 35,278
NantHealth,
Inc. Non-GAAP Net Loss and Non-GAAP Net Loss Per Share
(Dollars in thousands, except per share amounts) (Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016
2017 2016 Net loss $ (70,064 ) $
(54,132 ) $ (111,179 ) $ (87,277 ) Adjustments to GAAP net loss:
Loss from related party equity method investment including
impairment loss 38,885 2,375 43,411 5,289 Stock-based compensation
expense 637 43,691 887 43,788 Corporate restructuring 1,593 179
1,813 2,145 Acquisition related compensation expense — — — 4,814
Acquisition related sales incentive 671 40 1,334 1,461 Change in
fair value of derivatives liability (24 ) — (239 ) — Non-cash
interest expense related to convertible notes 1,088 — 2,139 —
Intangible amortization 4,619 5,710 9,839 11,806 Impacts of
intangibles amortization and the conversion from a limited
liability company to a corporation on provision for (benefit from)
income taxes 141 (14,386 ) 374
(18,914 ) Total adjustments to GAAP net loss 47,610
37,609 59,558 50,389
Net loss - Non-GAAP $ (22,454 ) $ (16,523 ) $ (51,621 ) $
(36,888 ) Weighted average shares outstanding (1)
121,756,108 104,072,198 121,687,454 101,846,445 Weighted average
Series F/redeemable stock (1)(2) — 9,419,152
— 10,066,719 Shares outstanding
- Non-GAAP (1) 121,756,108 113,491,350
121,687,454 111,913,164
Net
loss per share - Non-GAAP (1) $ (0.18 )
$ (0.15 ) $ (0.42 )
$ (0.33 ) Reconciliation of Net Loss
per Common Share to Net Loss per Common Share - Non-GAAP
(Unaudited): Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016
2017 2016 Net loss per common
share - GAAP $ (0.58 ) $ (0.54 ) $ (0.91 ) $ (0.91 ) Adjustments to
GAAP net loss per common share: Loss from related party equity
method investment including impairment loss 0.32 0.02 0.36 0.05
Stock-based compensation expense 0.01 0.42 0.01 0.43 Corporate
restructuring 0.01 — 0.01 0.02 Acquisition related compensation
expense — — — 0.05 Acquisition related sales incentive 0.01 — 0.01
0.01 Change in fair value of derivatives liability — — — — Non-cash
interest expense related to convertible notes 0.01 — 0.02 —
Intangible amortization 0.04 0.06 0.08 0.13 Impacts of intangibles
amortization and the conversion from a limited liability company to
a corporation on provision for (benefit from) income taxes — (0.14
) — (0.19 ) Accretion to redemption value of Series F/redeemable
common stock — 0.02 — 0.05 Dilution from Series F/redeemable common
stock — 0.01 —
0.03 Total adjustments to GAAP net loss per common share
0.40 0.39 0.49
0.58
Net loss per common share - Non-GAAP (1)
$ (0.18 ) $ (0.15 )
$ (0.42 ) $ (0.33 )
(1)
The net loss per common share - non-GAAP,
weighted average shares outstanding, weighted average Series F
units/redeemable stock, and shares outstanding - non-GAAP have been
computed to give effect to the LLC conversion that occurred June 1,
2016 prior to our IPO. In conjunction with the LLC Conversion, (a)
all of our outstanding units automatically converted into shares of
common stock, based on the relative rights of our pre-IPO
equityholders as set forth in the limited liability company
agreement and (b) we adopted and filed a certificate of
incorporation with the Secretary of State of the state of Delaware
and adopted bylaws. We filed an amended certificate of
incorporation to effect a 1-for-5.5 reverse stock split of our
common stock on June 1, 2016.
(2)
The weighted average shares outstanding
have been further adjusted to account for the redeemable Series F
units (converted to common stock in conjunction with the LLC
conversion), whose Put Right expired on June 20, 2016. Prior to
June 20, 2016, these units/shares of common stock were classified
as redeemable members’/stockholders’ equity in the balance sheet,
and as such, were not included in the weighted-average shares
outstanding prior to June 20, 2016. The Put Right expired June 20,
2016, and the shares were no longer redeemable and are included in
shareholders’ equity following that day. The weighted-average
shares are adjusted to include the redeemable common stock in the
weighted average shares outstanding for the entire period.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170810006132/en/
NantHealth, Inc.Investor Contact:Robert Jaffe,
424.288.4098rjaffe@rjaffeco.com
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