Q2 2020 Fluidigm Corp Earnings Call
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I would the electric at all but a conference to host Ms. Agnes Lee Director of Investor Relations Relations.
Thank you Christian good afternoon, everyone welcome to fluid on second quarter 2020 earnings Conference call.
Most of the market today Fluidigm the least its financial results for the quarter ended June 30, 2020. During this call. We will review our results and provide commentary on our financial and operational performance market trend strategic initiative and our response to the Cobiz 19 pandemic presenting for fluid on today.
We'll be Chris like weight, our president and CEO and Vikram joke, our CFO.
During the call in subsequent <unk> session, we will make forward looking statements about events and circumstances that have not yet occurred including plan some projections for our business future financial results in market trends and opportunity.
Examples include statements about expected financial performance than anticipated positive impact of various strategic and operational initiatives funding expectations under various.
Agreements regulatory processes prospects for our products and technology potential customers and collaborators and trends in competition market research funding and customer demand.
These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectation.
Information on these risks and uncertainties and other information affecting our business. An operating result is contained in our annual report on form 10-K for the year ended December 31, 2019, as well as our other filings with the FCC.
The forward looking statements in this call are based on information currently available to us and Fluidigm disclaims any obligation to update these forward looking statements, except as may be required by law.
During the call. We will also present some financial information on a non-GAAP basis non-GAAP information is not prepared under a comprehensive set of accounting rule and should only be used to supplement and understanding of the company's operating results as reported under U.S. cap.
We encourage you to carefully consider our results under GAAP, that's walls or supplemental non-GAAP information and a reconciliation between beach presentation.
Reconciliations between GAAP and non-GAAP operating results are presented in the table accompanying our earnings release, which can be found in the best her section of our website I will now turn the call, Chris our president and CEO.
[noise]. Thank you I Miss good afternoon last 90 days have presented an incredibly challenging operating environment.
With lab closures rippling across the globe and impacting every facet of our business.
In the face of these challenges wrought by the pandemic our team has been both creative and resilient exceeding our business performance expectations. Despite disruptive shelter in place mandates and new complexities in our personal lives.
I'm extremely proud of the commitment and dedication of our team members have risen to the occasion, serving both our direct customers struggling to adapt as well as the global population they support.
Since the early hours of the crisis, we've deployed a simple three part daily operating plan first we have focused on employee health and safety.
I'm pleased to report we have not had a single confirmed cobot 19 infection among our employees.
Second we've aligned much of our organizational energy got cobot 19 market needs, which has allowed us to be focused nimble and move fast.
Sure we've implemented a prudent cash conservation bottle that included cost savings measures and the redirection of internal resources to a streamlined set of key objectives, while we pursued non dilutive funding.
This playbook deliver results I will focus my prepared remarks on our market facing activities in core strategy.
While vikram will cover the details of our quarterly performance.
Fortunately fluid I pivoted in recent years from a general use analytical instrument orientation toward business model more focused on commercializing solutions linked to key biological questions, especially questions relating to the immune system.
We believe that understanding at harnessing the power of the immune system is critical to disease research diagnosis and treatment.
Our thesis remains intact for oncology and hundreds of other diseases and in fact, the Sars koby to outbreak.
Illustrated the relevance of our strategy.
At its core this virus is a pathogen that induces a complex immune response.
The technology tool kit, we built in the last few years, coupled with our infrastructure investments and commercial operations manufacturing regulatory affairs and quality systems provided us a perfect launching pad to support clinical diagnostics population scale infectious disease research.
We made tremendous progress on these strategies in a span of 90 days, including filing an emergency use authorization with the FDA without compromising our business proposition and in oncology or other diseases.
The company 19, molecular diagnostic screening surveillance and testing market has grown dramatically with 700 800000 tests per day being conducted in the United States alone.
However, testing supply side constraints have impacted daily testing volume and clinical reference lab turnaround times reflect growing backlogs.
We and others believe that the United States should be testing 3 million people are more day to fully contain a monitor infection.
Plus new market needs are emerging for returned to work in schools screening and pan respiratory panel to delineate between multiple circulating pathogens.
More tests and suppliers are needed to rebalance the equation.
Recently, the FDA published guidelines for developing these panels.
To achieve these ambitious targets more tests are required, especially tests that increase accessibility and patient compliance such as our saliva based approach.
Furthermore, our approach radically reduces pressure on the industrial supply chain for reagents and swap collection kits.
Taking a small step back I'd like to provide a thumbnail sketch of our molecular testing strategy.
We're deploying a hub and spoke strategy for panel expansion, giving us multiple shots on goal in this rapidly growing market.
The hub the Biomark Juno platform, coupled with our unique integrated fluidic circuits enable small labs to operate as medium scale labs immediate scale labs to absorb testing volumes. The previously where the demand at the top 20 clinical labs.
Offer a fraction of the capital on labor costs of many alternative solutions.
The largest lapse may benefit from our value proposition as they consider capacity or venue expansion.
The first spoke on our business flywheel is the often misunderstood laboratory developed test model.
LD cheese or the workhorses of many labs.
Our Microfluidic solutions are flexible.
Our instruments I season reagents can be mixed and matched to lap specific needs as well as made it to diverse test samples nasal fair deal anterior nasal saliva and others.
In the U.S. and many other markets for coated 19 testing the labs complete validation of the configured solution file for emergency use authorization or the local equivalent unless instructed otherwise they can initiate clinical testing.
The biggest obstacle is generally the time to validate and deploy the test.
As an example, the U.S. we reported five customers file you ways. During Q2, we enabled more than 100000 coping 19 tests in the second quarter.
With notable acceleration exiting the quarter.
We expect these early adopter accounts to further ramp and we anticipate scaling up more customers and this model throughout the second half a year.
Many of these customers were due to the fluid on platform I spent a quarter setting up their systems validating their test, we now see them ramping up their consumables volumes. This was born out with the number of new Biomarks, you know installations in the quarter.
The second spoke is commercializing a fluidigm design single Plex Cobot 19 test kit.
We filed our advance a dx Sars koby two tests for emergency use authorization on June 12, as previously announced.
Our collaboration with Washington University accelerated development of a novel extraction free saliva test combining their access to clinical samples with our technology producing a full E waste submission package in a matter of weeks.
Remaining close communication with the FDA.
Given our pioneering technology and extraction free saliva test, we're pleased with the level of engagement. We have received from the FDA as they complete their review.
We are prepared for immediate commercialization and ramp up upon authorization. In addition, we are positioned to service the emerging population screening market.
In the month of July shipments of our Cobot 19 associated reagents and I have sees exceeded the number we sold last quarter and we anticipate accelerating demand.
The third spoken or wheel is a constructive partnership with the defense Advanced Research project agency or DARPA within the department of Defense Mount Sinai Icahn School of Medicine.
Our previously announced partnership focuses on it epigenetic characterization, an observation or Echo program and includes financial support for development of pathogen detection solutions based on our technology.
The Echo program progressed in Q2.
And consortium members have provided updates to government stakeholders and regulators communication details are being coordinated by DARPA.
This program is independent of our other you a programs. However, the assay will run on our Biomark platform and represents a future menu expansion.
We are grateful for this partnership and excited about the future.
We envision adding more spokes on the wheel as the year progresses, including panels for pan respiratory screening.
Our recent Raddatz award.
Includes funding for a novel Barcoding method that will further enhance our market leading test throughput per system.
Approach could increase throughput price I see into the range of 24 to 48000 tests per day on a single Biomark Juno combination, allowing labs to flex across the continuum of testing volumes without changing platforms.
As innovation could be a game changer for the largest labs and we believe our approach could have significant advantages over other pooling methods.
With this level of extraordinary throughput, we believe our technology will help address the massive number of samples inundating reference labs has returned to work and other population surveillance programs to pick up steam.
We anticipate the new Barcoding Cobot 19 configuration will have research use only IDE clinical versions and may be applicable across multiple testing sample types beyond saliva.
Our covered 19 initiatives extend beyond virus detection testing.
Induced immune response and the coated 19 infected population is an important medical scientific question.
We are engaged on multiple fronts.
Our technology is being used for protein based biomarker research combining biomark powered microfluidics with Oh link proteomics panels. Furthermore, our mass cytometry platforms, both suspension and imaging are generating impactful data.
We've been able to government and medical institutions, North America Europe, the middle Eastern Asia to initiate immune profiling studies of thousands of cobot 19 infected cohorts.
For suspension mass cytometry.
The Max part direct immune profiling assays, the 2019 best New product cell biology provides an amazing backbone for the large multi site studies required to assess immune response and the cobot infected population.
Voting common reagent kits and a simple for.
The same assay provides a useful tool for supporting vaccine and therapy strategies by providing immune profiling data.
Our focus over the last few years on unit placements and NCR designated research centers and top global research organizations is paying dividends.
A notable example, this trend is the recent announcement of a 10 institution NIH prospective study of 2000 infected people using our technology.
We've continued to build on our best Cytometry product line in Q2, we added six Max part direct expansion panels that are tailored for infectious disease and immuno oncology research.
These panels can be combined with the Max par direct immune profiling assays in the same dry format in a single tube and offering data analysis and as little as five minutes.
Tuesday, we announced a collaboration with de Novo software to offer a new streamline software package for mass cytometry data analysis and in June we announced a collaboration with Bethel Laporte laboratories to expand our antibody catalog.
On the imaging side, we see meaningful opportunities as researchers study post mortem tissue samples using our panels and catalog antibodies.
Through our custom panel surface therapeutic insights, we can provide data for those customers, who did not have access to an instrument or reagents.
The speed of breadth of this kobin related research is evident with 13, Cobot 19 publications and five clinical trials using sites off technology under way through July.
On the cash management front, we did an effective job of reducing cash burn through opex initiatives. Despite lower revenues compared to Q2 2019 at Q1 2020.
We benefited from cash inflows based on milestones from our ongoing DARPA contract.
And Noncovered related program.
We're keeping a close eye on cash management, but not at the expense of growth.
More recently.
In Q3, we unlocked non dilutive funding for investment in critical capabilities that will enable us to quickly scale and support this massive cobot 19 related revenue opportunity, while providing new assets for further expansion of the diagnostics market over the long term.
Last Friday, we announced a letter contract with the NIH.
Rapid acceleration of diagnostics program or products.
We were among seven companies to be selected under this $1.5 billion program funded through the cares Act.
Fluidigm was awarded an up to $37 million project under the NIH robotics initiatives.
Initial 12 million is available upon achievement of milestones under the existing letter contract and the remaining funds are linked to performance targets in the definitive contract a process called definitive nation and government parlance.
The award supports two discrete activities.
Won a major expansion of our manufacturing capacity and to commercialization of a novel Barcoding Cobot 19 testing method on the biomarker.
The full project scope unlocks fluidigm production capacity of more than 1 million Cobot 19 tests per day by the end of the first quarter of 2021.
The racks advanced Tech program fast tracks development and commercialization of innovative technologies to significantly increase the U.S. testing capacity Sars Toby too.
There are ambitious goal envisioned 6 million test each day in the United States by December 20 Twond.
We're very proud of and successfully bedded in.
In the rigorous radek selection or shark tank process emerging from a pool of 640 applications.
We have kicked off the project and anticipate initial funding in August pending achievement of a validation milestones.
I look forward to providing updates as we meet major project milestones and I anticipate adding testing capacity throughout the next six months.
Overall, we accomplished a great deal in 90 days.
Our covered 90 business initiatives generated new revenue streams and expanded our customer base.
These accomplishments, particularly our partially mitigated the headwinds to our core business in Q2.
Due to the pandemic, we did see a direct impact on new bass cytometry unit sales and consumables usage in our installed base, but our business dashboards suggest customers are returning to their labs with notable upticks and service calls and reagent orders in June.
If these trends continue we could have new tailwinds later in the year.
Turning to longer term opportunities our work in testing is opening up new quarter worse for us with relationships and public health and government agencies.
As well as CLIA testing labs, both public and private sector.
We have all the ingredients for a durable infectious disease business.
Our team continues to innovate on a long term infectious disease strategy, but a number of elements are clear.
Increasing our instrument installations pursuing new recurring revenue streams and broadening our customer base continues to be the key elements of our Microfluidics turnaround story.
The pandemic has accelerated this process and as sharpening our focus and infectious disease.
We will target the laboratory developed test market and steadily explain to expand our fluid on branded testing menu more broadly to CLIA labs.
We will have product line extensions to service emerging market segments, such as population surveillance Barcoding and syndromic panels.
And in time, we will likely continue the regulatory journey into the five 10-K and see if the markets.
The acceleration of Biomark Juno instrument placements provides us with a foothold for future real time, PCR testing and next generation sequencing library prep revenue.
Furthermore growth in our installed base with increased exposure to CLIA labs allows us to recruit new partners for future clinical and research applications. After the pandemics sides.
The covered 19 clinical testing opportunity represents a large serviceable market for us of one to 2 billion and general population screening could add billions more.
With modest market penetration, we believed that we can deliver significant revenue growth in our franchise.
We are well positioned to execute on a product roadmap to meet testing needs as we enter the fall and winter and beyond and we will provide updates in the future as we hammer out the deal to details about durable long term strategy.
In summary, we envision an even stronger business when we when we emerge from this pandemic.
I'd now turn the call over to Vikram, our CFO for a complete review of our financial results.
Thanks, Chris and good afternoon, everyone total revenue was $26.1 million in Q2, 2020, and 8% decline compared to Q2 2019.
Changes in foreign exchange rates had minimal impact on revenues for the second quarter of 2020.
Product and service revenue of $22.5 million declined 20% compared to Q2 2019.
At the beginning of the second quarter, we estimated approximately 60% to 70% for global academic research community.
As either closed or working at a slower pace as we entered the latter part of Q2, we experienced a limited amount of customer Reopenings and exited June with an estimated 30% to 40% of our global academic research community either remaining closed over looking at a slower pace.
Many basic research projects remain on holds but have not been canceled.
Customer activity still depend on when the community returns to a new normal and the availability of budgets.
Second quarter revenues reflected significant headwinds from customer lab closures slowdown in ordering patterns reprioritization and increased customer oversight of budgets in some cases and slowdowns in some of our key accounts.
We also saw the beginnings of covert 19 tailwinds in the quarter.
Both mass cytometry, and Microfluidics revenues declined year over year the decline in micro fluidics revenue was significantly tempered by these tailwinds.
We saw growth in overall bookings and revenue in July 2020.
Compared to the prior year, primarily attributable to covert 19 related opportunities for micro fluid products.
Excluding these opportunities our base business in both mass cytometry, and Microfluidics continued to experience headwinds.
On the pandemic in July.
With that context, I will move into the details of our second quarter financial performance.
Mass cytometry product and service revenue of $12.5 million into second quarter decreased 28% year over year, mainly due to lower instrument revenues.
We continue to experience delays in orders and constrained sales due to lap closures that began in Q1 and extended through much of Q2.
In addition, we are facing budget and funding constraints with some budgets being prioritized for corporate banking activities.
Consumable sales decreased year over year and were slightly down sequentially, but were helped by record sales up our Mexico, our direct immune profiling assay related to covert 19 immune profiling studies.
Microfluidics product and service revenue of $10 million decreased 8% year over year.
A slowdown in key account activity was significantly offset by covert 19 testing related tailwinds that benefited both instrument and consumable whose revenue.
Microfluidic instrument revenue grew year over year.
Turning now to a regional perspective, and the main drivers for the Q2 2020 performance compared to the prior year period.
Asia Pacific revenue declined 5% to 5.6 million driven by lower Microfluidics and mass cytometry instrument revenues.
Americas revenue grew 25% to $13.9 million, including 3.5 million development Grant and license revenue.
[noise] product and service revenue declined 6% to 10.4 million driven by lower mass cytometry revenue offset by higher Microfluidics revenue related to covert 19 testing.
The majority of Fourq over 19 micro Fluidic sales this quarter, we're in the U.S.
EMEA revenue declined by 42% to $6.6 million, driven by lower mass cytometry instrument and mitral fluidics consumable goods revenues.
The decline in micro Fluidics consumables was partially offset by a modest tailwind from consumable sales related to customer developed covert 19 debts.
As you May remember, we had a notably strong Q2 last year in EMEA due to imaging mass cytometry instrument placements and Microfluidics consumables.
Doug My commentary on the regions in the second quarter foreign exchange rates had less than the 1% negative impact on the EMEA revenues.
As I noted earlier, we reported develop and grant and license revenue of 3.5 million in Q2.
Included $3 million of development revenue associated with an OEM supply and development agreement with a customer.
Under this agreement, which provides upfront and periodic milestone payments of up to 11.7 million during the development stage.
Lumidigm is developing products based on our Microfluidics technology for this customer.
Moving now to operating performance product and service margin was 52.5% in the second quarter of 2020 compared to 54.5% into year ago periods, and 53.8% into first quarter of 2020.
GAAP product and service margin, both sequentially and year over year was negatively impacted by fixed amortization over lower revenue, which more than offset lower service costs and improved manufacturing efficiencies.
Non-GAAP product and service margin was 67.1% in the second quarter of 2020.
Bid to 66.4% in the year ago period, and 67.3% into first quarter of 2020.
The year over year increase in non-GAAP product and service margin was primarily due to lower service costs.
And improved manufacturing efficiencies across Microfluidics and mass cytometry consumables.
This was partially offset by an unfavorable product mix and higher mass cytometry instrument costs due to lower factory utilization.
Operating expenses on a GAAP basis into 2022nd quarter decreased by 3% year over year to $29.1 million.
Operating expenses on a non-GAAP basis of 24.7 million decreased by 7% compared to the year ago period.
The degrees and GAAP and non-GAAP operating expenses was due primarily to the implementation of cost reduction programs in response to the impact of the covert 19 pandemic on our business.
GAAP operating loss for the 2022nd quarter.
It was $13.7 million compared to 14.6 million for the same period last year.
The year over year decrease in GAAP operating loss was primarily due to the decrease in operating expenses and the margin impact of other revenue in the second quarter of 2020.
Partially offset by lower product and service revenue.
The non-GAAP operating loss for the second quarter was 6.1 million compared to 7.7 million for the year ago period.
Please note that the reconciliation tables between our GAAP and non-GAAP measures have provided at the end of our earnings press release that was issued earlier today.
Moving on now to cash flow and the balance sheet.
Cash and cash equivalents short term investments and restricted cash at the ended the second quarter of 2020 totaled $46.5 million compared to 49.6 million.
At the end of the first quarter of 2020.
Afflicting, a net decrease of $3.1 million into second quarter.
Cash flow in the second quarter of 2020 included $4 million related to the development agreement noted earlier and reflected strong collections of customer receivables.
Day sales outstanding declined to 34 days at the end of the second quarter compared to 47 days at the end of the first quarter.
Accounts receivable declined by $4.4 million to 10 million at the ended the second quarter.
Net inventory increased by $2.6 million to 18.9 million due to higher than expected mass cytometry inventory as well as microfluidics inventory builds to support the Covidien gene testing opportunity.
Last week, we announced that Fluidigm was selected for 37 million dollar project under the NIH Red ex initiative that Chris is already discussed we have executed a letter contract with the NIH providing for initial funding.
To approximately $12 million subject to the completion and delivery of certain validation milestones prior to execution of a definitive contract. This project seeks to expand production capacity and throughput capabilities for covert 19 testing using fluidigms Microfluidics technology.
At quarter end, the borrowing base under our asset base revolving credit facility was $7.3 million, none of which was utilized.
We continue to be focus on preserving our liquidity to cost control measures. In addition, we have secured access to non dilutive sources of funding as noted earlier.
We are expecting our net cash burn to be between nine and 12 million for the rest of the year in excluding the cash flow effects of the Red ex project and assuming that dsos returns to historical levels.
Based on historical seasonality patterns, we expect the majority of this outflow to occur in the third quarter.
We have withdrawn or annual guidance in light of the uncertainties surrounding the ongoing and evolving Kobin 19 endemic we expect to update our outlook at such time as the effects of the pandemic on our business becomes clear.
To help guide investors on revenue, we can provide a little color on our thinking as of today.
As Chris mentioned in his remarks, we believe we have a large market opportunity for our Kobin 90, clinical testing and population screening solutions.
The adoption of our platform for customer develop test has already begun.
Mainly in the Americas, and we saw strong placements of Microfluidics instruments and consumables sales in the second quarter.
There is significant upside revenue and cash flow potential in the second half of 2020, and we expect to have better visibility on our outlook over the next several months.
In addition, we believed that the trend of Reopenings that we saw the ended the second quarter will continue into the third quarter.
As customers return to work, we expect to pick up in orders followed in subsequent periods by revenue increases.
However, the timing of this recovery remains uncertain.
We continue to expect that due to the length of the selling cycle. Some capital purchases in our base that is non covered related business that were expected to have been made in 2020 would move to 2021.
We do not expect to catch up the loss consumables business.
Based on these assumptions, we expect 2020 product and service revenue to be lower than in 2019, but improving sequentially in the second half.
2021 should be a stronger you as our customers come back to a more normal state with their current projects, assuming vaccines and patient treatments are in place.
Of course, our outlook and all of these expectations depend on the outcome of many factors.
Including the timing and base of four customers returned to work and the timing of D.A. emergency use authorization.
And with that I will turn the call back to Chris for closing remarks.
Great. Thank you Vic from this pandemic has completely transformed our world in the Blink of an API and our Hearts go out to all the global citizens impacted.
However, it has created an opportunity for us showcase the power Fluidigms technologies products and solutions for the greater good.
We are well positioned to be at the forefront of addressing population scale testing needs as well as enabling a deeper understanding of the human immune systems response to infection.
We trust there will be a durable response from all governments and public health agencies to monitor contain and treat future pathogen outbreaks and fluidigm will be a trusted partner in these efforts in the years to come.
We are an unwavering in our fundamental business thesis understanding of unlocking the power of the immune system is critical to improving life for all Fluidigm is uniquely positioned to measure a central genomic and Proteomic information and transition these insights into new health care paradigms.
From an operational perspective, we had success in the last quarter, we've unlocked multiple sources of non dilutive funding funding, while prudently managing our liquidity.
We implemented cost savings initiatives to see us through this pandemic without compromising on growth initiatives.
We are building a strong foundation to meet diverse cobot 19 testing needs across large market segments and.
In parallel we are extending our mass cytometry franchise into immune response profiling of infectious disease populations.
We remain committed to important disease markets, including cancer.
We believe that our investments in infectious disease strengthen our entire innovation portfolio and improve the risk reward of the company for investors.
We are grateful for the incredible determination and tireless efforts of global researchers healthcare workers public health organizations private sector life Sciences employees and government agencies, who we're all working together with a common good.
As always I think are more than 500 employees for their contributions this past quarter.
I'm proud of how the team has risen to the challenge.
With that I'll open the line for questions.
Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key ordinary Touchtone teller.
If your question Thats been answered all you wish to remove yourself from the Q. Please press the pound Keith.
I will first question is from sung Ji Nam from B T. Aging your line is open.
Hi, Thanks for taking the questions, maybe starting with the mass cytometry business.
Actually the therapeutic insights services I was wondering if you could maybe give us an update on how that's progressing if you're making.
Hi attraction, there and if there was any contribution.
To revenues this quarter.
From that.
Sure No problem, maybe vikram I'll start with that and you can add some color if you'd like so yes. Thank you first for the question Sungy therapeutic insights did contribute in the quarter measurement period, and we did conduct a number four projects are for customers, including programs related to coated related research. So think we're very cleat pleased and weve.
Clearly in my mind at least validated the market opportunity that exists in the need and the opportunity in front of us for expanding on the promise of the services business and.
And we've also expanded the similar operation and into the Japanese market and so I think we're very pleased with what we are today anything else you like that.
Sorry, I was in me no we had some marginal.
Revenue impact in the quarter not significant.
Okay great.
And with.
This.
All right now.
Easy answer here, but in terms the ft, the way I forget Santana assay.
How should we think about the timeline I have you have you gotten any feedback and given.
Your.
The buybacks.
Brand could this.
Prioritize will review the review of Yours.
Product.
In this environment.
Maybe I'll start with that Vikram, and you're going to additional color if you'd like the the conversations with the active ongoing so theres not a direct correlation or straight line to draw between products and our ongoing conversations with the FDA with regards to our current single play.
It's emergency use authorization submission.
I think we're very comfortable with the the tone and tenor of the dialogue that's occurring.
They enter the final final stages overview.
Okay, and then lastly, and respiratory panel.
Talking about earlier.
Able to comment on kind of what the timeline for de availability of that piano could that be.
Well before the next to Steven.
Yes, the goal of this program.
For Penn respiratory is to have an in place for the current oncoming upcoming flu season in North America. So that is though that is the program goal.
Great. Thank you so much.
Thank you.
Thank you. The next question is from the end Brennan from you'd be Thats your line itself.
Hi, Jason on for Dan how are you.
So my first question will be on.
What type of coking acting volume do you envision.
The second half and then got 2021, and then I guess is it fair to assume you like no other SP range for the test.
I'll take the second one.
Yes so.
Well, we've given some indication of where our range of pricing is for the emergency use configuration of our product.
That product is approximately in the 17 to $22 range.
And so it just depends on volume supply contract agreements et cetera et cetera.
And.
The laboratory developed test of version or configuration, our product is generally it a little bit lower price point, but it's not dramatically lower so it generally those fall within the seven to $12 range on a blended basis.
As far as testing volumes and modeling I think thats, probably the most challenging obstacle.
And I'll certainly one I'm encouraged vikram to weigh in.
As he sees fit and so we had very good seeding of accounts in the Q2 time period, we began to see those opportunities or ramp in the back half as we exited.
The Q2 period and we've seen good strength through the first month of the current quarter and on top of that we continue to layer on stand up more accounts, so kind of anticipating what their relative ramp rates.
He influence on their acquisition of samples.
Each of their business models makes a pretty challenging us for us to forecast what we have given a good suggestion is that the the capacity.
Currently is not a constraint for us to deliver tests into the marketplace.
The right ex investments is really critical is it really incredibly important part of the story, because what radisys, Don and as they recognized and gotten very intimately familiar with the potential to technology the traction of the technology.
They have stepped in to ensure that so we can provide a continuous increasing amounts of tests into the marketplace as the as art is our install base grows and we activate even more accounts within our existing installed base. So I think it's very difficult for you. Unfortunately, a forecast which is part of the reason why I think there.
Has provided a wide range of outcomes and made it very difficult for us to provide a forward looking guidance sort of that you'd like to address.
Yes sure.
Without quantifying the opportunity and we can say that we are developing a funnel. We continue to increase the size of the funnel right no much of the activity is on supporting the lab developed tests that we talked about.
As this one of the spokes into hub and spoke.
Model the other spoke.
We have started placing instruments, even on the way spoke to seconds as folk and.
Both of them are resulting in customers kicking the tires and getting ready we stand ready to start commercialization of the you a products upon receiving FDA authorization. However, the lab developed tests. It has no says dependency and they are proceed.
Eating a base. So we're very satisfied with the base of the funnel development and we see that there's a large potential there is a big shortage of test right now in the United States. There is a supply chain issue with many of the test that are currently being offered in the market.
Because of the solution that we are presenting that is based on saliva. So therefore it does not include.
Swaps and also does not depend on R&D extraction reagents. So we believe our solution offers a very attractive.
Alternative value proposition here that solve some of the supply chain issues and also we believe.
Good good increase testing compliance on the part of the patients because a lot of as such a he's much easier sample to give compared to needs of for engine swaps. So in summary, I would say, we perceive a large market opportunity and a large revenue potential in the second half of this year.
The timing is based on a variety of factors, including the timing of the authorization of the various you AIDS.
From the FDA as well as the and as well as the product development that you have alluded to from the point of view of starting with a single blacks product than moving onto a multiplex and then moving on further to panels.
Okay great.
For that in terms of.
Equally program can you provide an update where that stands I belief press reports back in April.
DARPA expected of flow you weigh in to Q and that obviously hasn't happened. So I guess can you provide an update on where that program that is right now.
Sure and it's an I. I would love to build again, the elaborate and greater context beyond what I shared in the prepared remarks, I think department of defense has been posting updates on their website as things progress and so unfortunately.
Organization owns the primary communication to the markets, but we continue to provide all updates to all stakeholders involved and are pleased with the progress.
Okay, and if I can just squeeze one more in.
What is like a customer demand for Biomark currently looking like given that the cold because is rolling out on the platform has replaced.
Definitely more instruments into Q1 kind of what's your outlook for the second half.
Biomark placements.
Yeah, It was a little bit distorted, but vikram I think you got it all I think he's asking.
I'd like to take the I, Yeah, I can start off Chris and then you can add some color. Yes, we are seeing strong placements of biomarks. So in both in the second quarter and in the pipeline that we are developing.
In advance of the.
Covert 19 testing and related there are two in Q2 itself. So so the answer in short is yes, we are seeing stronger demand for blood biomarks as well as junos.
In this in this field.
Thank you.
Next question is from Stephen Mom from Piper Sandler Your line is open.
Okay, great. Thank you Hey, Chris from.
Hey, Steve.
Right.
Just a few questions mostly follow up questions from a from the prior people but.
Speaking about the you know biomark and Junos.
For Cobot 19 can you give us a sense of the consumables pull through from these users versus maybe other users non cope with users.
Yeah, we can we can give you some sense some in the pull through for.
The coated users is going to it has significant headroom obviously from what we've illustrated so I think we're very much in the early days of the ramp up in those customers achieving a full theoretical capacity or functional capacity.
Of the system, but.
Yeah, we have other high throughput applications.
Ones in agricultural bio sciences, and genotype being et cetera. The Oh link application is also quite well if it's a different chipsets, but it's also it's all depends on if we're optimizing by the number of samples or the number of targets.
You are trying to target. So as you know this is a 192 dot 24, cheaptickets optimized for throughput of samples so when the basis of pure samples.
As the this has significant upside potential for and the cobot application has will will push the upper limits of the system.
And I think as you probably recognize with the discussion on.
Barcoding.
The barcoding throughput could be four to eight acts expansion of testing throughput per system per day on the platform, which was far exceed anything we've ever realized on this technology stack.
Okay. That's helpful and maybe just a follow up question on on.
On that bar coding.
Is the intent and then too.
You know get that.
You know Barcoding done and then you're going to upgrade the installed base is it a kit or software.
I appreciate it yes, yes, so we'll have to say with one caveat is that because of the proprietary nature in the.
Super competitiveness right now, we're not going to provide probably have many details for you.
That's what we can kind of landscape for you as a couple of key things. One is first off it provides.
Well not require any hardware changes more acquire any software changes.
And have some very modest modifications to the existing kits. It also has the potential to work across the continuum. So not just for our saliva application.
And you way, but potentially for other product configurations.
So it's a pretty powerful approach in a very novel approach and there's also a number of very interesting technical advantages that our approach is going to provide compared to the pooling approaches that have so far been through with the FDA. So I think we could afford potentially very significant advantages and limits of detection as well as.
The ability to kind of and avoid dropout rates and I'll have to optimize for prevalence rates and various geographies around the country. So I think it's a recapture many details this moment, but that was certainly an area that the products team was quite keen on capitalizing on and can go directly to draw.
Messing, what's going to be I think an amazing story, that's going to come out of Theres the clinical testing market.
Now that's flowing through all the labs, which is quite impressive number but the the population screening sample volume that requires a step function increase in testing capacity and supply into the market and so novel approaches like this are going to be critical or meeting the nation needs.
For this very important application so.
I think until that these technologies have been coming to market Theres Guy that's going to be a it's a bit of an enabling up this market. So this market will take off as these technologies come into the market and enable that capability. So we're very excited about it clearly provides for the common good.
It will provide across the continuum. So it may be that there are new customer segments that are going to appear that are not not necessarily upgrade kits that may be different types of customers that are attracted to these various segments clinical testing versus population.
Screening for instance that May end up being different types of labs. So I think the snow the future that's obvious to do some upgrading.
Your words, but essentially introducing this technology or this process to existing install customers, but I think it's going to depend on their specific business model and whether or not they're going to be looking too.
Captured that many samples today and if there are optimized for assessing and processing of is that many samples a day versus some of the other larger established players and maybe some new market participants that are going to come in specifically for this application.
Okay, no no sometimes like an exciting.
And your development there.
Maybe just to stay on the Rad excess funding can you tell us what the timeframe is on the.
And the breakdown of the remaining 25 million.
[noise] Vikram do want to take up.
Yes so.
Red axes, following a very optimized approach right now given the tremendously urgent need for extending testing.
So what they have done is to facilitate the immediate commencement of projects to entered into this two step formula which is not typically being the case.
With the NIH and broadly speaking government contracting in the past so what they've done is have had an initial letter contract that allows the the project to commence.
And it's subject to certain.
Certain milestones that had to be met but in parallel we are working on what they call definitive vision.
And we will work on definitive using the contract, but we have to go through a couple of steps so dryer.
So that's I think as much as we can we can see the probably the whole project itself runs about I would say roughly speaking about a year.
Into 2021 from from where we are right now.
Okay, Great that's helpful about nine months right.
More like nine months, so from a little more like nine month, Yeah. So were we should anticipate being completed towards the end of the first quarter.
Okay, great that passes that expectation okay. That's all my questions I appreciate to appreciate our interim other question Doug Congratulations.
Yes. Thanks.
We had a follow up question from Dan Fannon. Your line is open.
Hi, Thank you may get on again I.
Just one of them all up around.
So I believe you up on the 500 bottom works and small currently how many lag.
Well realistically premium.
What I consider doing cold assessing all those boxes like what percentage of those boxes.
I would be shifted.
Yes.
I guess all to this is Chris I'll start maybe vikram can comment on it I think the key question I guess I have to kind of rephrase. Your question is are which aspect of coated based testing. So theres the clinical testing and there's these surveillance and monitoring aspect of the cobot market.
So returned to school et cetera, there there are different types of applications for Copel testing. So what do you have in mind is it the clinical question your winnowing going on or I don't put words in your mouth what are you thinking.
Yeah.
Basically we are you said the clinical.
Okay, well so for the current clinical market I would anticipate that a smaller percentage of our platform of the existing installed base will be migrated to clinical based applications I think a lot of the clinical story is coming out of new placements.
And but we must as decrements already comment on how to quite an acceleration of new unit placements tied to clinical applications of this.
Then have a very robust pipeline continuing throughout each of the quarter or each the each quarter. After the balance of the here. So.
That number is accelerating very quickly as far as the conversion of existing existing installed base to preclinical based testing suspect that will be a relatively small portion of it.
The reason why parsed out the question is because I have a point of view and I think we have a point of view that population screening an act it doesn't necessarily require a CLIA lab and so activating the nascent or actually in our case of very large academic and research community that needs to serves needs such as the returns school.
Hi returned to work and community based monitoring potentially presents a incredible national Asa frac to be activation. So I think its depends on which kind of used case, we're talking through.
It's something we'll probably see us though your plays out.
Okay. That's helpful and if I could just shipped to the LDP today can you I don't recall to you said I'm glad are actually running belting Pizza is currently and how do you expect that trend through.
I'd like a doubling or could you give any quantitative guidance for that.
So the question is about out of the existing installed base or the number of people that stood up in the second quarter on LD cheese, what would be the acceleration.
Currently running Dolby today, and how many do you expect by you're right.
[noise] I'm not sure we're in a position to give a lot more color on that.
This time I know, it's across you have any additional comments.
No no exactly we I would say that the see a lot of potential number one number to be on potential we are actually.
Building a firm pipeline.
The timing remains somewhat uncertain and over the next few months I think we'll have a lot more clarity on the timing I think the issue is timing, it's not a question of whether there's potential or not.
So we have a.
Fairly high degree of confidence about the test the utility the value proposition that.
Very differentiated from whatever is out in the market the the significant unmet need from a testing perspective.
I think where we already know is simply not in a position to give.
A definitive.
Timeline as to how quickly the market adoption would take place. So I think that will become clear over the next few months.
Yeah. The only the thing I wanted to add on this is that it's kind of tricky because.
Many people started the laboratory developed test path, because we did not have an emergency use authorization product in place. So these labs had the flexibility to run either LD t. configuration in some cases some of them started with nasal ferrand deal, which was the more conventional approach at the moment in which they started out on that journey.
And as the saliva product becomes available than they already have the infrastructure. They don't require any changes. So they can adopt the emergency use authorization. So for our perspective, it's very difficult to.
Anticipate what the mix shift will look like between laboratory developed test versus are you a single flex product or any of the follow on products that we've already talked about.
Okay, and if I could just one more in this kind of goes back.
The DARPA program into epigenetic toes.
No I believe the uniqueness of this approach is it that it could detect the virus is one recently we've done so their religion.
You know we run the completely but some diligence adjusted that individuals that don't become just until around 33.
We think could limit the opportunity for this does is that your understanding or are we just not looking at this correctly.
I can't comment on that particular quite a question that you're asking I can only say that what we seem to know about kind of the changes virtually every day so.
I don't know how to respond in that regard I.
I think that.
As we kind of reinforce all the elements I think we're proposing and we are delivering a whole continuum of different molecular testing technologies that and tests that are designed to answer different questions.
Address different use cases.
Different prevalence rates and different communities potentially adapt around emerging strains and changes at basically new markers as we learn more about the virus.
So I think thats one of the powers of our platform is that there's a very flexible and rapidly adaptable to as we learn new information.
When we continue to learn new things every day so I.
I think without we're probably going to wrap up the line, but really appreciate the questions.
[noise] I'm I'm showing no further questions at this time I would think flights he turned across the spectrum is actually exceed 40 closing.
Thank you Christian we'd like to thank everyone for attending our call today, a replay of this call will be available on the Investor section of our website. This concludes the column we look forward to the next update following the close the third quarter 2020, please reach out to US. If there are further question kidnapped.
The new and everyone Christian you may now close the call.
Thinking then ladies and gentlemen, this concludes todays conference. Thank you for your participation and type of wonderful day, you may now disconnect.
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