Diagnostic Company Veracyte Weighs Sale For French Subsidiary, Analyst Says 'Walking Away' Is A Long-Term Positive

On Monday, Veracyte Inc VCYT reported adjusted earnings of 36 cents. That’s up from 21 cents a year ago, beating the consensus of 11 cents.

The global diagnostic company reported sales of $118.6 million, up from $98.2 million a year ago. It beat the consensus of $116.77 million.

Testing revenue was $112.2 million, an increase of 24% year over year, driven by the strong performance of Decipher and Afirma tests. Total volume increased by 22% to 41,271 tests and testing volume by 25% to 39,107 tests.

Veracyte is evaluating its ownership and operations of its Marseille, France-based subsidiary, Veracyte SAS. The company's activities include its immune-oncology biopharma business, contract development and manufacturing, and support for its IVD development and manufacturing. 

Veracyte recently notified Veracyte SAS that, as its sole shareholder, it is considering no longer funding the French entity. Accordingly, Veracyte SAS will engage with its works council over the next few months, as required by French law.

Seeking external buyer(s) for a potential divestiture of all or part of the French entity's activities is an option that is actively being explored.

William Blair analyst Andrew Brackmann writes, “While this adds a bit of uncertainty about the total company revenue and margins, we think walking away (or selling) could be a long-term positive.”

The analyst says the French subsidiary earns about $4 million in revenue each quarter but has $7 million in fixed costs, leading to a $5 million operating loss. Selling the unit or filing for bankruptcy could help Veracyte reduce costs.

Guidance: The company expects 2025 testing revenue of $470 million to $480 million, or 12% to 15% year-over-year growth.

The guidance implies testing revenue growth of 14% to 16%, adjusted for the impact of the paused Envisia test.

Given the number of variables impacting its Marseille, France operations, the company is not providing total revenue guidance now. It expects to provide its total revenue outlook for 2025 once there is more clarity on the timing and impact of the process underway.

The company also expects its adjusted EBITDA margin to be approximately 21.6% in 2025, compared to 20.6% in 2024.

Price Action: VCYT stock is down 2.90% at $38.23 during the premarket session on last check Tuesday.

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