Q4 2019 Earnings Call
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Okay.
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Ladies and gentlemen, thank you for spending by can look into the mainstream.
Q4 in fiscal year were 29 <unk> operating results conference call. At this time all participants are in the only mode. After the speakers person patient Derbio question answer session.
That's a question Darren, especially do we need to press star one of your telephone keypad and please be advised todays conference is being recorded.
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No I hand, the conference over to your speaker today.
Vice President of Investor Relations.
You may begin.
Thank you operator, and good afternoon, everyone. Joining me on the call today, It's Brad Gray, our president and CEO.
Bailey our CFO.
Earlier today, we released our financial results for the fourth quarter in fiscal year 29, Jane If you don't have a copy of the press release already there's one available on our website.
During the call we may make various statements that are forward looking in nature.
Including financial projections existing and future collaborations future business growth trends and related factors prospects for expanding in penetrating addressable markets, our strategic focus and objectives and the development status and anticipate a success of recent implant product launches.
Forward looking statements are subject to risks and uncertainties many of which are beyond our control, including the risks and uncertainties described from time to time in order to see filers.
Our results may differ materially from these projections and we undertake no obligation to update these forward looking statements.
I lead on the call today's call will be discussing our 2020 guidance and connecting in connection with the guidance. We've made modifications to our earnings release. Some guidance approach. We believe we'll make it easier to interpret and compare our financial results.
We are prepared to supplement the gap financial measurements selected non-GAAP adjusted measures.
The calculation, which are described in detail or a press release throughout the call all financial measures will be gap unless otherwise indicated.
We're unhealthy analysts and investors model. These changes we posted a reconciliation for each quarter and fiscal year 29 came under the financial tab of our Investor Relations on page.
You can find reconciliations of GAAP to non-GAAP measures as well as the description limitations and rationale for using these measures in our press release as well.
I'd like to remind everybody that will be in Boston next week for the comment Health care Conference. We look forward to seeing many of you there without them turn the call over to Brad.
Thanks, Doug Good afternoon, and greetings from Marco Island, Florida worry or drop just wrapping up the final date of the AGBT conference in a fantastic few days for Nanostring.
Focus this week has been to promote the emerging spatial genomics market and to generate customer interest in our genomics digital spatial profiling or DSP.
Spatial genomics, what's the talk at AGBT with nearly 30 research studies presented a 50% increase over last year, what's your mix being the most well represented platform across these studies.
The company spatial genomics Revolution has been held not just by Nanostring and our Geo mix customers, but numerous other leaders in the field such as the first for speakers of the AGBT plenary session, including NIH Director Francis Collins, who commented on the importance of integrating spatial tools into the research continuum.
We kicked off the meeting on Sunday afternoon, with our second annual spatial genomic summit, which feature genome expressed data presentations by researchers from leading centers such as the Broda Institute The Sanger Institute, the Garvin Institute and Stanford University as well as panel participants by senior scientist from aluminum and biotech.
Correct me.
Or somewhat drew a crowd of more than 170 attendees and increase of more than 60% over the inaugural summit that we held last year. These attendees arrived in Florida early and spend extra time away from home for the opportunity to learn from many Jerome ex early adopters and to imagine the possibilities that are unlocked when the geo.
Your next DSP is used in conjunction with next generation sequencing. We're ngs. They remain engaged for the full for our duration of the summit. Despite the temptation to water outside to Marco Island Lovely Beach, and many followed up throughout the week by visiting us in our suite to learn more about Geo mix.
I could not be more delighted with our AGBT commercial presence and customer engagement and I'll talk show and I'll share more details on the momentum of our genomics DFT launched later in my prepared remarks.
Now I'd like to provide an overview of our strong performance in 2019 and outline our strategic objectives and key milestones for the year ahead.
After that I'll turn the call over to Tom to review, our operating results for the fourth quarter and provide our financial outlook for 2020.
20 or team with a transformative year for Nanostring through our December transaction with various site, we simplified our business streamlined our cost structure and focused our energy our growth opportunities in the research markets with the launch of genomics DSP, we introduced our first new platform in a decade accelerating our broad.
Perfect and service revenue to 24% growth for the full year.
They've got her demand remains robust we grew our installed base to approximately 855 systems in 2019, an increase of about 17% over the prior year encounter placements benefited from our expansion into immunology, and neurology, which accounted for about 30% system sales, we generated record life science can.
Overall sales of about $51.6 million last year, an increase of 18% over 2018, we continued to expand our core business, both within and beyond cancer with the introduction of four new panels throughout the year, including strong launches such as our car T characterization and human organ transplant panel.
This.
More importantly, we made tremendous progress and commercialize NGL mix DSP orders exceeded our expectations and totaled more than 60 systems. During 2019, bringing the total cumulative genomics orders to over 90 systems. This geo mix launch pace is vastly outpacing what we achieved with encounter.
Which did not reach 90 cumulative orders until its 13 quarter.
Q4 was our first full quarter Geo mix installations, and our products and service revenue growth accelerated to more than 40% year over year marked marking our eighth consecutive quarter of double digit growth. We ended the year with 44 systems shipped 35 installed and 24 sites trained.
We intend to build on this momentum in 2020 and are making geo mix commercialization our top priority.
For 2020, we expect Geo mix order volume to increase by about 50% over 2019, equating to about 90, new Geo mix orders this year.
This group will be achieved this growth will be achieved by targeting both customers, who will read out special experiments using encounter and others, who use ngs as the readout.
Overall, the company will focus on for strategic objectives for 2020.
Our first objective is to accelerate the adoption of genomic DSP and translational research translational research described scientific efforts to develop cures for human disease to the search for Biomarkers in the development of therapies translational research has been the core market for Nanostring for a decade as reflected by our large installed base.
Some encounter systems within Biopharma companies, an academic medical centers within translational research the search for Biomarkers is driving the need for spatial analysis of protein NRT expression, a more among via more normal trove of FSP human tissue samples collected during clinical studies.
And held and Biobanks.
Almost every geo mix systems sold to date has gone into translational research and we have substantial momentum and leadership within this market.
In addition to record Geo mix orders in the fourth quarter.
We see a number of positive leading indicators in this market.
One indicator is our tap program, which provides a mechanism for customers to test drive Geo mix ahead of instrument purchase we saw steady sequential growth in top projects throughout 2019 and booked about 50, new projects in the fourth quarter to date, we've completed more than 210 projects for more than 100.
And 25 unique customers.
Our second important indicator is peer reviewed publications, which are also gaining momentum to date. There have been 13 peer reviewed publications that included Geo mix data or rate that is about double the pace achieved during the encounter launch importantly, these shipments publications are taking on a high profile within their fields.
In the past six months genomic studies have been featured on the cover up to a CR publications, starting with clinical cancer research in September and followed by more recently.
In the February issue of the Journal Cancer Research in January two Geo mix enable publications were published simultaneously within the same issue of nature, demonstrating the high the potential for high impact results.
These strong leading indicators along with a steady expansion of our sales funnel and form our expectation for a 50% increase angiomax DSP orders in 2020.
As in 2019 will continue to pace installations to ensure that customers have an exceptional user experience for instance, we had about 20 systems that were shipped in Q4, but we're not installed were trained by year end. So we'll need to temper the pace of shipments have been in Q1 in order to get caught up Tom will provide more details when he reviews.
Our guidance.
Our second strategic objective is to expand Jim its adoption into the discovery market with the mid year launch of next generation sequencing readout.
Discovery researchers represent a distinct customer group often focused on basic biological research to understand pathways structures and mechanisms.
For these customers more information is usually better so the massive increase in already content using ngs readout for Geo mix is compelling.
By putting genomics systems upstream of the installed base of alumina Sequencers will increase our addressable market by approximately 20 fold.
We've been laying the groundwork for our launch into discoveries research over the past several months in November we launched the cancer Transcriptome Atlas through our technology access program.
The cancer Transcriptome Atlas is the first genome exacerbate that has that uses ngs for the readout, allowing the simultaneous analysis of more than 1800 marinades.
We also brought our first to external Ngs early access sites online in Q4 and expect them to provide valuable input as we finalize the commercial software and user interface for Ngs readout.
We used AGBT to unveil our roadmap of Ngs based geometry applications that will be available to discovery market over the coming year.
All 10 Geo mix studies presented during AGBT took advantage of Ngs readout, demonstrating the scalability of the Geo mix platform as well as the flexibility to provide any target and any region on any sample.
Researchers took full advantage of the versatile tools that the genomic software provides for automated region selection demonstrating insights that result from focusing on cell types of interest or the unique geometry of biological structures.
Most of the Geo mix studies presented at AGBT included use of our cancer Transcriptome, App lists which will become commercially available around mid year. This assay will be priced at 1200 $50 per sample and will.
And is expected to appeal to both discovery and translational researchers.
We also unveiled the first data from our whole transcriptome Atlas, which profile 18000 protein coding genes, we plan to develop a whole transcriptome Atlas asaib for both human and mouse, which we expect to be available for trial use under our technology access program by the end of 2020, followed by a full comer.
We will launch in 2021.
We expect these whole transcriptome offerings to accelerate uptake across the discovery continuum and to drive the next leg of growth in 2021 and beyond.
The obvious response to our roadmap was extremely positive as discovery customers made it clear that the ability to span from focused panels. The whole transcriptome content is a unique and powerful advantage for geo mix.
Our third objective for the year is to maintain the momentum in our encounter business encounter demand remains robust at an average of about 125, new system placements annually over the last several years. This linear growth in our installed base has fueled healthy growth in consumable revenue as existing sites maintained there.
Utilize consumable pull through and new sites come online.
In 2020, we expect the dynamics of the encounter business to be very similar to those in 2018, and 2019, except without the distraction and the expense of Prosigna and the encounter diagnostic business.
We expect to once again placed approximately 125 encounter systems and for consumable pull through to be similar to 2019, when adjusting for the impact of airside transaction.
We expect to launch at least for new encounter panels, this year and to grow the adoption of panels that were introduced late last year.
To meet this continued encounter growth we have recently opened a state of the art manufacturing facility and Bothell, Washington, which will double our consumer may consumable manufacturing footprint and expand our instrument storage and quality and do you see space by four fold.
Our fourth strategic objective is to identify the key applications for our hybrid seek platform and to pursue partnerships that can support our emerging commercial strategy.
Key applications that are focus include infectious disease testing, which is described in to peer reviewed publications last year as well as the application of Haven seek to specialized research applications.
Updates on this program will be limited as we plan to focus most of our energy and communications on Geo mix.
In addition to the four strategic objectives that I've outlined another goal for the year as to demonstrate a meaningful step on our path towards breakeven.
This will be enabled by the combination of accelerating revenue growth operating expense discipline and the elimination of cost US showed is associated with our encounter diagnostic business Tom will expand on these as part of our outlook for 2020.
With that I'll now turn it over to Tom Thanks, Brad.
Ill start with a review of our fourth quarter in fiscal 2019 results and conclude with our outlook for 2024th quarter of 2019 product and service revenue was 33.6 million representing year over year growth of 42% in December 2019, we completed our transaction with various site under which we now recognized about.
One third of the previous Prosigna revenue over the same unit sold on a pro forma basis for the effect of this transaction year over year product and service revenue growth was 48%.
Product and service revenue included record instrument revenue of 13.8 million.
Our fourth quarter instrument revenue included 7.8 million from 34 genomic system shipped during the quarter, representing an average revenue per genomic system of about $230000.
Q4 life Sciences consumables revenue was 14.9 million, representing 14% year over year growth and driven by strong encounter panel sales life Science consumables revenue also included approximately $700000 of genomics consumable shipped in Q4.
Q4, Prosigna revenue was $2 million sales and dollars were approximately 10% lower as compared to the prior year, which reflects the start in December of our new transfer pricing arrangement with their site.
Q4 encounter consumable pull through was approximately $79000 with approximately 70000 contributed by life Sciences consumables at approximately 9000 by Prosigna absent the December impact of the various site transfer pricing arrangement for Cigna Q4 pull through would've been approximately $12000 total.
Q4 pull through would've been approximately $82000.
Service revenue was 3 million, representing 18% growth over the prior year driven by strong demand for our Geo mix tap service.
Gross margin on products and service revenues, 56%, an improvement as compared to prior year and driven primarily by increased life Sciences consumable sales and our instrument sales mix turning to operating expenses. The Versailles transaction resulted in onetime gains and costs during the fourth quarter transaction costs incurred were recorded.
The cross general and administrative expense research and development and other expense. In addition increases in stock based compensation in part driven by the increase in our stock price have impacted comparisons of our GAAP reported expenses across periods.
For the fourth quarter total stock based compensation expense was 4.8 million up from $2.8 million in the prior year period.
Q4, R&D expense was $18 million, an increase of 9% over the prior year, excluding the impact of transaction related expenses and stock based compensation R&D expense was approximately in line with the prior year.
Q4, SG, an expense was $26.9 million, an increase of 33% over the prior year period, excluding the impact of transaction related expenses and stock based compensation SGT increased approximately 20% driven primarily by investment in the Geo mix launch.
For the full year 2019 products and service revenue was 103.7 million representing year over year growth of 24% as reported and 27% pro forma gross margin was 58% inline with our guided range.
2019, R&D expense was about $1 million above our updated guidance as a result of restructuring expenses related to the Verisign transaction.
SGT expense was about $3 million above our updated guidance with approximately 1 million related to various site at approximately 1 million related to Geo mix commercial efforts.
Cash used in operating activities in for capital expenditures as approximately 60 million in line with our guidance, we exited the quarter with approximately 157 million in cash cash equivalents of short term investments.
Transitioning to 2020 guidance as Doug mentioned, we've made modifications to our earnings release and guidance approach that we believe we'll make it easier to interpret impair our financial results Versailles transaction led to onetime gains and costs that were recorded in Q4. In addition in 2019, we implemented changes too.
Our stock based compensation plan that coupled with the recent rise in our stock price impact of the amount of expense required to be recorded and therefore, the comparability of our operating expenses across periods. As a result, we have prepared as a supplement to our GAAP financial measures selected non-GAAP or adjusted measures the calculation of which is this.
Ascribed a detailed in our press release.
These measures make adjustments for three main items first for onetime gains and costs related to various site seconds for collaboration revenue as we've encountered diagnostic rights now owned by Vera site and the completion of our land collaboration that revenue will no longer be immaterial part of our future business third for stock.
Based compensation, which is a noncash item and can be challenging to estimate measures include adjusted operating expenses and adjusted earnings before interest taxes, depreciation and amortization or adjusted EBITDA.
Adjusted EBITDA as a measure we use internally to evaluate business trends and profitability as a supplement to GAAP operating and net income or loss in order to health analysts and investors model. These changes we posted a reconciliation for each quarter and of the full year 2019 on our Investor Relations homepage.
With that backdrop will transition to the specifics of our 2020 outlook.
Sensing with revenue, we expect 2020 product and service revenue of 124 to 131 million representing annual growth of 20% to 26% taking account of the Versailles transaction impact pro forma annual revenue growth is expected to be 26% to 34%.
We expect 90 496 million of that revenue to come from our base and counter business, we expect encounters trajectory to be consistent with the last two years with instrument revenue approximately in line with 2019, we expect total consumable pull through of approximately $65000 per installed system, which reflects the new pricing we.
Receive for signal for the terms as a fair site transaction and would imply total encounter consumables revenue inclusive of prosigna of approximately $60 million in 2020.
Note that in 2020, we will report Prosigna revenue together with life Sciences consumables and no longer as a separate revenue line item in our earnings releases or SEC filings, we expect to see a similar seasonal pattern roughly 45% of encounter revenue recorded in the first half of the year and 55% in the second half.
We expect Geo mix revenue of 30 to 35 million with approximately $25 million to $30 million derived from instrument sales at approximately $5 million from consumables with Geo mix. We also expect to see a seasonal pattern of roughly 45% of revenue recorded in the first half of the year and 55% in the second half.
We expect adjusted gross margin to be in the range of 54% to 55%, which would approximate be approximately flat compared to 2019, when considering the impact of the various I transaction on Prosigna gross margins.
Transitioning to expenses and profitability in 2020, we expect to post and approximately 15% reduction in total adjusted operating expenses year over year. This positive step realize the full impact of actions that we've taken in late 2019 in early 2020 to Rebase, our operating expenses in support of our longer range business.
Profitability objectives.
Started starting with adjusted research and development expense, we expect to record 46 to 48 million, a 24% to 27% reduction compared to 2019, adjusted R&D expense, reflecting the full year impact of the Verisign related reductions we made in December and our plans to refocus R&D investments in spatial genomics.
Yes.
For adjusted selling general and administrative expenses, we expect to record 76 to 78 million a reduction of 6% to 8% as compared to 2019 adjusted SG today expense, reflecting the full year impact of the verisign related reductions.
Turning to adjusted EBITDA, We expect to recorded improved adjusted EBITDA loss of 46 to 51 million in 2020, reflecting the combined benefit of the expected revenue growth and reduced expenses that expected range represents a 37% to 43% improvement compared to 2019.
Lastly, cash used in operating activities.
For capital expenditures as expected total between 55 and $60 million in 2020, which is approximately flat as compared to 2019 and reflects the offsetting effects of our improved adjusted EBIT da and the conclusion of our land collaboration.
For the first quarter, we expect product and service revenue of approximately 25 to 28 million, representing pro forma product and service revenue growth of 26% to 41%.
This wider than usual quarterly range reflects uncertainty as to the impact of Cobot 19, our Q1 results as recently as yesterday there were additional reports of potential travel and other restrictions that may impact countries, where we do business both in and outside of Asia.
At this time, we've elected to set our full year guidance, assuming any impact will be reflected primarily in the first quarter or current range reflects base and counter revenue of 19 to 21 million, which assumes an approximately one to 2 million dollar impact of potential business disruption due to covert 19.
Our Q1 range also includes $6 million to $7 million Angiomax revenue, which reflects a more tempered pace of instruments shipments as we catch up on installs and training for system shipped in Q4.
Also as Brad mentioned in his remarks, we currently expect Geo mix system orders to grow by approximately 50%. This year, which was referred expectation of 15 plus orders in Q1.
This number of expected order is consistent with the typical Q4 to Q1 seasonal pattern we've experienced within counter.
Correct Q estimates for Q1 Geo mix revenue at system orders at this time assume a negligible cobot 19 impact on Geo mix.
Now I'll turn the call back over to Brad for closing comments.
Thanks, Tom in closing 2019 was a transformative year and 2020 is off to a great start the Geo mix roadmap unveiled this week secures our leadership in translational research and provides a strong entry into the discovery markets.
We're set up for acceleration in our revenue growth in 2020, while making important steps on the path to breakeven I.
I look forward to updating you on our progress over the course of the year with that I'd like to open the lineup for questions.
Ladies and gentlemen, as a reminder question you would need to start wondering telephone keypad to withdraw your question.
Please stand by Moby Dick you may roster.
Our first question comes from the line.
From Cowen and company.
Hi, guys. This is Adam we chefs on for Doug. Thanks for taking my question.
Your guidance of 90, new geometry orders for 2020 would be more on quarterly basis than the 20, you generated in Q4 19 or the 15 you generated in Q3 19. So just trying to understand if you believe that inflection or as me timed with the launch of your new products such as your upcoming Ngs compatibility or is it more broad based just trying to understand your line of.
Containing number for 2020.
I think we have good line of sight dating this number for 2020 most of our instrument sales. This year, we'll continue to go into the translational market and are already supported by the funnel that we've been building.
In the translational markets over over the.
Almost 12 month period since the launch last April.
We have great leading indicators of that strength.
Coming both through our our our funnel, which increases every week and the great leading indicator of technology access program test drives that have been done in by customers, who are interested and potentially person purchasing the genomics.
In addition, we will begin to benefit from the entry into the discovery markets through the opening up of Ngs read out that benefit will accrue in terms of orders largely in the second half and will further further increase the overall momentum of the business.
But overall in terms of pacing throughout the year I'd say, if you look at the 50% year on year increased I would expect that to be spread pretty evenly throughout the quarters of the year as Tom mentioned that would imply about a 15 plus.
Set of orders in Q1 up from the 10 plus that we did in Q1 2019.
Thanks, Brad divestiture to various I removed the material amount of operating expense as evidenced by year 2020, Opex Guide you vaulted chosen to de prioritize the heightened seek program relative to geo mix rather than investing in both I think you've mentioned, there's just a lot of exciting around GL makes and you're choosing to capitalize on that in the near term was there any thought to maintain.
Turning to heightened seek development program, considering the restructured pn out and I believe that pass you've talked about a profitability of right at around 200 million in revenue because it happened sooner now.
Yes, so I want to be really clear, we are continuing to invest in high that seek while we are not investing perhaps at the pace on $1 per quarter basis that we did at the peak of that program when we were.
Collaborating closely with Lam research, we are continuing to invest in that program and we do believe that that chemistry will have an important part of our future product lineup.
That being said with Geo mix, we have really once a once in a career opportunity to transform an entirely new field of spatial genomics and we and the board and the entire management team are excited to fully capitalize on that opportunity on behalf of our shareholders. So we have moved resources, we have reduced the number of resource.
Is on Hyve and seek and move them over towards Geo mix and we'll continue to do so.
If you look carefully at the guidance that Tom provided I think you will start to see the the mathematical underpinnings of how we will achieve.
Cash flow breakeven at the 200 million dollar revenue Mark I think we're showing that really for the first time here in this guidance that being said I do not think that we are.
Youre, we're constraining our operating expense enough to breakeven any faster than that I mean that remains our goal and the divestiture of the diagnostic business to various site was just one important step along that goal I think in a few in the years ahead look for us to grow our product and service revenue at it at a substantially faster rate.
Than we grow operating expenses, but we remain.
Sort of guided by the idea of cash flow breakeven at 200 million and product and service revenue.
Okay, great and.
And then maybe at the close on kind of virus I appreciate the commentary on the potential impact of that take Q1 revenue, but has there been any updated thoughts on your exposure to China from a supply chain perspective.
Yes, so we've been obviously carefully looking at both our exposure from which had supply chain perspective, and the disruption that our customers are feeling that could lead to delays in orders or or deliveries.
I'm glad to say, we don't have any major supply chain challenges at this point.
Most of our interest our instruments themselves are assembled and manufactured in North America and in Japan, where we have not yet seeing a major disruption, but we're obviously keeping an eye on that and we'll we'll let you know if anything changes.
Great. Thank you.
Our next question comes from the line of Catherine Sean.
Hi, guys actually tons here soon on for Katherine just wondering at AGBT as we had heard linear spatial competitors talk about enabling protein analysis and asset the capabilities. In 2021. So can you just to remind us how you're viewing your.
Competitive positioning specifically in the discovery market. Thanks.
Yes, so yes, I think we did hear a lot here at AGBT about spatial excitement about spatial and of course with that with that comes new product offerings, and new product Roadmaps and the overall spatial genomics area.
I would again divided into the translational and discovery markets bump in the translational market, we feel very secure and our leadership genomics provides exists today not in the future, but today the exact combination of.
The ability to look at any sample meeting, both FSP and fresh frozen any targets, meaning our today or protein on any region as related to the sophisticated regional selection tools and side Geo mix. Other competitors are beginning to lay out a roadmap that emulate some of those features.
But the timeline of that roadmap is such that we think we will be able to continue to extend our leadership, including in protein expression in the translational market before some of those capabilities.
Our available in ways that translational customers are likely to embrace.
The discovery market is different we are the new come or the discovery market, we feel very confident and the roadmap we've outlined but we see we see more competition in that market in the year ahead and.
It's incumbent on us to demonstrate the full power of Geo mix when combined with next generation sequencing, which we feel we've done an excellent job of here.
Great and then.
Do you have any sense that you'll see some the customers holding off on in humans order until you see the whole transcriptome online do you think they'll go ahead in order and the timing in anticipation of this capability.
I think.
Overall, we think the unveiling of the whole transcriptome capability on our roadmap increases customer interest in purchasing Geo mix systems. It does not decrease it.
It's hard to predict the exact timing of when all the interest we're generating a discovery will manifest as orders.
I'll begin to see that in the second half I would expect.
And we'll have more commentary on the mix of instrument orders between the translational and discovery markets as the year goes on but to answer your question I don't think.
So that the unveiling of whole transcriptome in any way hurts.
The momentum of Geo mix it helps it.
I understood and then last one for me and understanding is still early but any qualitative feedback you guys provide from some of that really act access on the sequencing read out thanks.
Well I mean, I think the best feedback that we is the 10 studies that were all presented here. This week all of which use ngs read out most of those were done with the Ngs capability was affected here in our Seattle facilities, but sold was done by our early customers who actually received.
The full pipeline and been able to.
Run the sequencing data themselves and if you. If you were here you would have seen overwhelmingly enthusiastic presentation of those results and really positive reception of them.
And so I think is a great showing.
Ngs read out across both cancer from so dumb and whole transcriptome data here. This weekend, it's all positive so far.
Great. Thanks appreciate it.
Next question comes on line of Dean Brennan from you.
Okay.
Great. Thanks, Thanks for taking my question that's appreciated.
Brad I know you gave a lot of information during the prepared remarks in some of the community PDC view again.
If we think about whatever information you provided on the sales funnel.
The first question does team talking about the 90 orders.
Good visibility in the funnel you just remind us again.
You mentioned some qualitative factors during the prepared remarks, but.
What can you share with us today about metrics on the sales funnel and kind of how thats maybe expanded on overtime.
Yes, our sales funnel for genomics expands every week.
We have whole teams now dedicated to marketing efforts to lead qualification efforts.
And it Doesnt just grow at major conferences like we're holding here as it grows every single week and it grew substantially over the course.
From 2019 to the beginning in 2020, and if we apply our basic funnel metrics and the conversion rate that we're seeing.
Current funnel.
It supports that 50% increase in orders this year.
We're not done obviously generating new leads just just this week. We had 170 participants is validated their interest in spatial by sitting in a dark room for four hours. When there was an 80 degree beach day happening 100 yards away.
Interestingly, we recorded the spatial summit that took place on Sunday and we used the recordings to host earlier this week.
What we call a geo casts a set of summits in 11 cities simultaneously around Europe. We had another 275 people watch replays of some of the summit presentations and engage with us there.
We have similar plans in North America over the weeks ahead. So we are both generating leads at a very rapid pace and we're Paul find those into the sales funnel.
And feel that that underpins the guidance that we provided.
Great Thanks for that and given the arm.
Hi, My name is with regarding the publication have you seen conversion rate pick up I'm sure. It's a complex formula dependent upon the pipeline.
Comer, that's expressing just was wondering what you can turn on conversion rates.
No I mean, it's so early that.
You can't parsed conversion, let rates to finally over time so.
We feel good about the conversion rate.
We've seen the technology access program in the test driving type of.
Offering that we have become an important part of converting interest into.
Actual orders I don't think anything has changed there for a moment for the past several quarters, we've talked about about 30% of our instrument orders coming through technology access program test drives.
That will continue and then that then what we look for as good strong sequential growth in technology access program test drives, which really over the course of 2019 grew almost 20% sequentially every quarter. So those are the kind of indicators that we see.
Not really in a position provide too much more color than that but that's that's quite a lot to work with.
Got let me just wanted to more.
Although in the previous question, maybe two ago. It was a question related to the competitive landscape and obviously those given the size of the market a lot of companies.
Okay related to protein you mentioned.
That we should expect even more innovation routine to how you're doing it translational hopeful I was kind of unclear from the needs of whether or not there was some improvements to be expected.
Thanks, Dan I Didnt, I don't think I alluded to any improvements though.
We're not standing still I guess on the on the protein read out the primary thing. We're doing now is continuing to add antibodies to our library. So today I think we have about 200 antibodies that are available to select from we have a team that is dedicated to continuing to validate and label antibodies. We of course have our partnership with App candles.
Just antibody manufacturer out there.
So for protein for us at this stage, it's really about growing the size of library. So that our customers have just a tremendous number proteins to choose from.
And I think we have a nice had started there now.
Got it okay.
Let me be last one just on the discovery side, what's your plan to.
To address that market in terms of the sales force is that Bacon dropbox because it you mean, you're going after relatively I don't know how much overlap there is with the and have a market for that discovery markets. Im just wondering what you can share with us today.
How you how you attack that market into possible that market develops faster than the translational market and just given your experience when you're under your belt targeting about market. Thanks.
Yes, so that any operating expense associated with a launch into discovery is baked into our guidance.
You know the same sales reps, who carry encounter and Geo mix for translational customers will also be the sales reps, who are targeting the discovery market and the discovery market is usually different researchers within similar institutions to academic institutions to what we've had in the past so.
Where we might go to.
Good at Harvard University of one day and talk to a cancer research or we could go Harvard University Tomorrow and talk to a biological researcher. So we havent felt the need to make a major headcount increase what we have done of course is as as is redirect our small group of specialists salesforce.
Sorry, Geo mix technical sales specialists.
Towards the cultivation of the those customers would be interested in the Ngs readout.
Yes, as as Weve been now in the genomics launch for about 10 or 11 months most of our sales reps have become capable of selling geo mix to translational customers without much handholding from our technical sales specialists that frees them up to focus on the new offerings like the Ngs read.
So.
Yes, that's the way that we're kind of evolving the salesforce in terms of the pacing. It's just too early to say whether adoption discovery will be faster than adoption and translation, we'll we'll we'll be able to update data thier goes on.
Great. Okay. Thanks, a lot congrats.
Thank you.
I can be having question sorry superstar, what do you telephone keypad.
A question comes from line and then from Stifel.
Hi, guys. This kind of denied benevolent a phone from Navios. Thank you for taking my question.
Yes.
You mentioned that the about 60% mostly completed projects do you think DSP were pretty unique account.
Just to find it and finding that that that.
One of your any Catalans remains about the same for you have Neal top go get bottlers.
You've seen in key staff.
The I'd say today, the fraction of new task orders is greater than 60% at this stage. Most we're trying to evolve the technology access program away from its original mix of doing large studies that were designed to really answer scientific questions and result in terms of papers.
Toward something Thats really meant to be simple fast relatively modestly scaled test drives and as a result people who want to do large geometry product projects and not owned an instrument. We're redirecting them to one of several to several CR rose who've adopted Geo mix.
Allowing them to service that so we can continue to direct our technology access program towards potential instrument customer. So I expect that number to continue to go up in terms of the percentage of people who are.
Coming along to take their first test drive.
That's helpful.
Can you comment on the positive made from the transition.
Diagnostics business data side.
In addition to the commercial product line for already mentioned the signal Markham's mix.
Your stand to benefit from collaborations that have been paid aside from biopharma companies like the one but they both from the amount.
The pharma.
Why do they add is still in the item before me before if I take a mccann mutation okay.
I am not expand.
Well you know, we the we will participate as needed and those collaborations.
That our participation will be I think largely focused on the manufacturing of the consumables as that sort of contract manufacturer I.
I would not say that we stand to be a primary beneficiary of those efforts. That's really the that's really the role of their side and the team that day that they have.
So any benefit that we would experience is built into our guidance and is relatively immaterial in size.
Okay and then the last one from me from me.
Now that you're coming out from Combi AGBT conference kind of view for us what does that have come from two for already bands that are going to be employed on for for based on for the DSP platform. The here and then on the high potency side.
When can we have paid an update on potential application from Barton I understand thank you.
Sure. So for Geo mix you are the nets major conference will be a CR, which this year happens I believe in late April.
Yes, HCR is the most important conference of the year for Nanostring to engage with translational oncology research customers, it's that meeting at which we launched Geo mix last year and it's the place where we'll really be unveiling.
The cancer Transcriptome Atlas and a commercial way.
We also know already that we have that some of our customers who've been working with the Geo mix system will have some exciting data that are presenting of aware of at least two oral presentations. So far that had been awarded to Geo mix customers.
And so stay tuned I think we'll have a lot of demonstration of what the technology is capable of at that time.
And that's probably about as much as I can comment on so.
On the Geo mix fraud.
For had been seek.
I think don't expect a lot in the way of updates until probably the second half of the year as we start to enter meetings like a its HCCI and.
The conference, where we've traditionally provider our technical updates I.
I don't think we'll probably have a lot to updates to provide until the second half.
Okay. Thank you.
Next question comes from Atlanta to the Queen from Jpmorgan.
Hi, good afternoon, guys congrats on coming out of a successful AGBT.
Thank you.
I just had a question regarding Geo mix as peak is looking from your guidance of 25 to 30 million of instrument revenue for 2020. It seems to suggest an uptick in ASP compared to the two tothirty cadence realizing for Q. So could you just help us understand a little bit.
It better.
Lying assumptions here and where do you feed your mix ASP going in the next couple of years et cetera.
Actually might have competition. Thanks.
Sure I'll take the quick one the first one quickly. So we've mentioned as we mentioned in the last couple of calls we've been working through some of the early June which priority site orders that we took back in 2018, which were at which were bought part of bundles and so the ASP relative peace relative to those orders were slightly lower than what we expect to realize this year.
So we've gone from 220.
In the Q3 Q3 ASP approximately to about two thirds of this quarter or to what is in furthered our guidance is about to 40 ish or so.
Throughout the course.
This year off of a base price of 295, which is pretty consistent with the types of discounts that we see on other platforms that was a little bit less than other platforms. Given the early stage of this but generally speaking that's the trend that has built in to our assumptions I can let Brad comment on some of the longer term.
ASP trends, we might see yep yep. So for now I think pricing is we're a good position with respect to pricing on Geo mix.
If you compare our instrument to the other spatial genomic instrument out there from fluid odd.
Gee genomics looks like a bargain by comparison in terms of the capital expenditure Thats required.
The other major competitor has chosen a format that does not have instrumentation at all so while so it's not really it sort of an apples and oranges type of comparison in terms of the competitive dynamic so.
Optimistic that we will be able to maintain instrument pricing.
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By way of reference.
We've maintained the list price of the encounter system at $235000 for the base Max and its equivalent now for a decade and discounting has been relatively consistent over that whole period. So I think we have a good history of maintaining instrument pricing discipline in our traditional core business and I anticipate the same.
And the spatial business.
Great. Thank you.
Last question comes from the line of pain Brennan from UBI.
Hey, guys one follow up with one just on so.
In terms of the presentations are at AGBT or other research at your your customers are doing.
And what cases are the customers finding new important things. They wouldn't have found if they had not done this space will approach because I know early on it was really validation, but the key is going to be finding new signatures that they can find so maybe can you just discuss at a little bit number one and then also I think the question that wasn't as what we just put this quarter in terms of placements between the types.
For the end market customers CRL biopharm of academic thanks.
Yes. The second question first so our mix of end market is continued to be about 60% academic and 40% Biopharma plus CRL with most of those being bought biopharma.
So that's helped remarkably stable over the period of time that we've been taking orders for the Geo mix system.
In terms of the biology biological insights coming off geometry.
I think there their incredible and they're they're happening in almost every case, none of the 10 presentations give inherent AGBT were technical validations and nature. They were not designed to compare geometry performance against traditional you know immunohistochemistry, our other profiling.
They were all focused on biological insights one of our presentations that was was given.
Just two nights ago for instance, successfully identified a new potential diagnostic marker and the development of melanoma.
This was done by identifying markers that.
Our expressed more frequently as melanoma develops and in particular little by looking at expression and the non melanoma sells the keratinocytes, which experienced damage as the melanoma develops and so it's not usually the place where people look for biomarkers, but using spatial profiling one.
As identified that seems very intriguing if you look at our peer review literature of the 13 peer reviewed papers only one of those papers is a technical paper that designed to simply have described the performance of the system every other publication as a biomarker publication that identifies new.
Allergy using the tools so.
We really see this is a very productive instrument in terms of new biomarker identification and where we've moved past the stage of simply having people benchmark our performance.
Versus other platforms.
Great. Thank you.
At this time there are no more questions.
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