Q3 2020 10X Genomics Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the 10 X. genomics third quarter 2020 earnings Conference call.
At this time all participants lines are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session you will need to press Star then one on your telephone please.
Please be advised today's conference is being recorded.
Like to hand, the conference over to use because today the air Jackie director of Investor Relations and strategic finance. Thank you. Please go ahead Sir.
Thank you earlier today, it's actually what makes released financial results for the third quarter ended September Thirtyth 2020.
They do not received this news release or if you would like to be added to the company's distribution list. Please send an email to investors at connection on X. Dot com and.
An archived webcast of this call will be available on the Investor tab of the Companys website connects genomics dot com for at least 45 days following this call.
Before we begin I'd like to remind you that management will make statements. During this call that are.
Forward looking statements within the meaning of federal Securities laws.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated and you should not place undue reliance on forward looking statements additional information regarding these risks uncertainties and factors that could cause results to differ appears in the press release connection on this issue today.
The documents and reports filed by 10 extra nomex from time to time with the Securities and Exchange Commission Tonight.
Connection on EPS disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
Joining the call today, our search Saks off our CEO and co founder and dressing back in here, our Chief Financial Officer. In addition, Brad Crutchfield, our Chief commercial officer will be available for human and with.
With that I'll now turn the call over to Serge.
Thanks, Eric.
Good afternoon, and thank you for joining our call to review our third quarter 2020 results.
On today's call I will start with a review of our financial performance during the third quarter.
Not I will discuss some strategic and operational highlights including updates on recent product launches and acquisitions.
I will also discuss the opportunities that lie ahead, and how were planning and investing to capture those opportunities.
I will now turn the call over to Justin for more detailed look at our financials, including detail on the trends were seeing within our customer base.
Starting with our third quarter results.
Revenues grew to $71.8 million.
Up 17% year over year and up 67% sequentially. This.
The strong growth this quarter was driven primarily by an improved operating environment as many labs around the world continue to reopen for general research.
The medical instruments remain high during the quarter and we saw a rebound in utilization of consumables as more customers return to the lab.
The increase from the prior quarter and was primarily due to the rebound in general Leasers demand.
Overall in the face of a challenging operating environment, we have made incredible progress thus far in 2020.
At the beginning of the year, we laid out our key priorities to drive near term execution scale. The company ended the best ambitiously for the future.
Well this year has turned out much differently than anyone expected, we continue to execute on our strategic goals and have laid the groundwork for an extended set of long term opportunities.
In addition to strong commercial and operational execution, let's use a number of important milestones this year, including multiple product launches the completion of our follow on offering the announcement and closing of two acquisitions and the opening of our manufacturing facilities in Singapore.
Uh huh.
Our vision is based on the premise that this is the center of biology in which many of you matches. Most pressing health challenges will be solved with precision diagnostics targeted therapies and curious to currently intractable diseases.
In order to make those future reality and big advantage of the resulting opportunities we need to build tools that will accelerate our understanding and mastery over the underlying biological systems tools that can measure biology at scale and resolution that matches, it's massive complexity.
Since the start of the single cell resolution a few years ago. It has become increasingly clear that cell heterogeneity intertwined with complex deal networks, you Lipper leases feature of all human tissues.
The future of biological analysis, whether for research or clinical applications.
Lies with the multiplier multiomics measurements there from that large scale with single cell contracts.
We have designed our product platforms to enable this future.
Our chrome and digital platforms provide the means for measuring biology at high resolution and scale.
We will also develop our future platform around in seizure analysis based on a similar vision and to complement our existing platforms.
These three approaches should become essential across a wide range of publications in the coming years and beyond.
Now starting with chromium division for the platform and the value. It delivers is being increasingly validated in the market.
Demand for a common platform continues to expand rapidly we.
We are encouraged with the pace of utilization as existing customers have come back into the lab and are especially pleased by the impressive influx of new customers coming into the tonight's single cell ecosystem.
It is easy to forget that chromium single cell products I've been on the market for only four years and there are already nearly 2000 vintages publications, but it doesn't have made use of our technology.
But basically publications as well as the breadth of studies they describe speak sort of fundamental importance of single celebre purchase and underscores the vast potential overgrown than platform.
Last quarter, there had to many great studies that youve done that across a range of fields, including oncology immunology neuroscience infectious diseases as well as many others.
Here I would like to highlight one paper from researchers at Stanford University, and the University of Pennsylvania, who sought to understand the reasons for North Texas City, that's a common side effect of B cell targeting immunotherapies.
Using chromium the scientists discovered that the target genes for these therapies is also expressed in a small subset of cells in the brain.
This finding has important strategic implications and the demonstrates the crucial value of single cell analysis for developing new medicines.
We executed against our ambitious product roadmap.
Throughout the year and introduced a number of breadth of products on the current platform thus far in 2020.
Let me start targeted gene expression product and the new version of the sales range or analysis, so threat in the second quarter.
In the third quarter, we launched our next generation immune profiling solution and our gene expression platts attacks a multi on solution.
We have been very encouraged by the initial response for these products.
We launched version two I'll be immune profiling solution in July to provide a number of performance improvements over the previous version.
They immune profiling product allows large scale sequencing of the air immune cell receptors together with multi homing profiling of being in sales.
The new version does that's more receptor players.
Deliver significantly higher gene detection sensitivity, you'll be more insights with more efficiency.
Since launch the rate at which customers have been adopting the new immune profiling solution has been impressive and ahead of our expectations most.
Most customers have been switching to the new version without running head to head comparisons that are customary joining similar upgrade cycles.
This speaks to our reputation in the marketplace and the trust of the customers now both in the Pemex Brown.
Moving now to the multi won't be an expression and attack solution.
The ability to profile that EPS you know in the transcript on from the same sell across large numbers of cells has been the number one request from our customers over the past two years.
The reason this capability has been especially intense interest food sciences is that it provides a path to decipher the rules of epigenetic programming.
Which has been the Holy Grail epigenetic research.
With most of them for the first time ever.
Researchers now have access to a commercial solution I can answer these questions by measuring gene expression and epigenetic programming simultaneously from the same sales of course thousands of cells in parallel.
Since its launch in September of this product has grown lots of interest from our current customers, but also from the epigenetic community more broadly.
We're happy to say that it has exceeded our expectations to date.
The development of the bolt on product was an incredible achievement for the 10 X gene and as a Great example of our competitive advantage. It relies on a number of break there was across multiple disciplines and was only made possible by the tight multidisciplinary calibration and the depth of expertise we have assembled across the company.
The development of multi on resulted in a dozen patent applications.
Our internal expertise together with our customer insights health of being early conviction to invest aggressively in this effort.
And all of this has not resulted in a highly differentiated product that has had an immediate and powerful resonance with the market.
Overall, we remain very early and market penetration for chromium and were excited about the growing breadth of Reis researchers who are interested in single cell approaches.
Our goal is to keep accelerating broad adoption of our products as we move past the early technologies, because the tens of thousands of biologist spanning different fields of study and different types of expertise.
We plan to invest broadly in those vision for market development and product innovation.
And the single cell approaches make their way into labs more broadly.
Holding analytical bottlenecks is becoming an essential part of the customer experience.
With this in mind, we recently launched limited access to our TLX cloud analysis platform.
This platform includes secure collaboration tools scalable storage and compute infrastructure and provides our customers with the best possible speed and ease of use when running analysis pipelines for gene expression and for immune profiling.
These core capabilities come at no additional cost to our customers, which helps to lower the barriers of adoption and democratize single cell analysis.
This is an exciting extension of our highly differentiated software tools from a native environment into the cloud and this is just the start.
Overtime, we will continue to add more features and more capabilities.
Moving on to museums, we continue to be impressed by the level of adoption, who have seen since we launched this product less than a year ago there.
The number of new video customers continued to grow during the third quarter yeah.
Yet even with the influx of new customers repeat museum customers for the first time made up the majority of the vision business as many of our early adopters are increasingly progressing from pilot programs to larger experiments and larger projects.
Underscoring this progress on more than 50 publications on Preprints, describing studies that have made use of the vision technology to date with many of these being published within the last few months. We are encouraged by the breadth and the nasal these publications the validated to high value visit experiments and demonstrate the ability of our customers comprise.
Yes through the workflows successfully and make meaningful discoveries.
Just as we experienced low single cell. We believe these papers will drive broad market adoption and are an indicator for future demand.
These publications have featured in a variety of applications, most notably in oncology and neuroscience, but now in more new areas as well for.
For example, just recently in nature researchers use vizio in conjunction with chromium based analysis. The study acute respiratory distress syndrome, known as Aer DS in influenza patients.
In this study researchers uncovered a new special stable fibroblast cells and the mechanism through which they drive that will response by the immune system.
The findings are just the new potential approach to develop therapies to preserve lung function and improved clinical outcomes.
Overall vision is a very early in its lifecycle and we are making extensive investments in market development and product development to drive adoption of the platform in the second quarter were launched HD compatibility with visium, allowing whole transcriptome spatial analysis and the immunofluorescence bridging deduction to be performed in the same.
Tissue in.
In October we also launched our targeted gene expression on Visium.
This cadence of product introductions introductions will continue into next year and beyond.
Development of the vizio effort be solution remains on schedule.
We are preparing to launch the product in the first half of 2021.
And while we aren't ready to give exact product details of this time. The early performance data we have seen to date has exceeded our expectations.
We have many other products in development and are very excited about our vision roadmap.
And while both chrome Elysium remain early in their adoption looking further out to the future. We have identified in feature analysis as a logical next step following in the footsteps of our existing platforms.
So that and we were excited to announce acquisitions of record and Cortana, which combined with our early work in this area will form the foundation for the development of our third product platform in the emerging in C field.
In seizure analysis refers to the sequencing all measurement of large numbers of different molecules, including R&D DNA and proteins derived.
Directly in their native tissue and was sub cellular resolution.
This is unlike most current analytical techniques, which require the molecules to be removed from tissue before measurement and analysis.
You see two approaches in sales developing an integrated system with capability is a highly complementary to both chromium vizio.
We see two methods have analytics within existing IC of fish based pathology workflows, but offer much higher levels of multiplexing and vastly greater amounts of biological information.
We believe that this technology will enable powerful molecule analysis tools, which will support discoveries made by the chromium vision platforms broadened the range of customers and enable new translational and clinical applications.
Based on our in depth assessment of CJOL landscape and our own internal R&D efforts, we determined that acquiring the recording our comment was the right path to address this compelling opportunities.
With these acquisitions Pemex scan key technological advances.
Teams with deep expertise and talent as well as a comprehensive intellectual property portfolio, including over 110 foundational patents covering a variety of insitu approaches.
As we look to the future when do simply that more tissue samples will be analyzed using at least one of these approaches chromium Visium Orencia June Onest for basic science research offer clinical applications.
And while our existing platforms have already been adopted by large numbers of customers. It is important to remember that we're still very early and chrome and market penetration and even early elysium. We're.
We continue to be excited by the rapid adoption of Carmen and are highly encouraged by the early trajectory of Visium.
And we intend to invest aggressively in both platforms to fully realize their potential.
In parallel we'll invest in future over the coming years to create a new platform with performance and the user experience that pemex customers have come to expect.
Since our IPO, we have laid the groundwork to position ourselves to take advantage of the viant vast opportunities, we see unfolding in coming decades.
As we move into 2021, we will continue to invest across our business to realize the full potential lease opportunities.
This includes investments in R&D and to continue our rapid pace of product development and innovation across all of our platforms and intellectual property to protect our products and scientific advancements in our commercial organization to continue to build our sales and service infrastructure and adequately addressed interest we're seeing from a variety of markets.
Including Biopharma and translational.
And finally in our operational capabilities to make sure that we have a foundation to support our future growth.
As we sit here today I have more confidence than ever in our strategy.
Strongly believe that the resolution of scale, the ultimate buyer products will be essential in helping to understand biology and advanced human health.
The interest and excitement for our products reinforced our conviction in our mission and an immense opportunities that lie ahead for tenax, both now and well into the future.
With that I will now turn the call over to Justin for more details on our financials.
Thank you search.
Total revenue for the three months ended September Thirtyth, 2020, with $71.8 million compared to $61.2 million for the prior year period, representing a 17% increase year over year.
Snuggles revenue was $60.6 million, which increased 22% over the prior year period.
Instrument revenue was $9.7 million, which decreased 7% over the prior year period.
Service revenue was $1.6 million, which increased 46% over the prior year period.
The increase in consumable revenue this quarter was primarily driven by growth in the instrument installed base.
So this was partially offset by decreased demand due to lab closures related to COVID-19.
Instrument revenue was primarily impacted by lower instrument placements during the quarter were partially offset by a by a slightly higher ASP due to shipments of chromium connect.
Service revenue increased due to a larger number of instruments coming off from their initial one year warranty and on the paid service contracts.
North America revenue for the third quarter was $42.4 million, which increased 18% over the prior year period.
EMEA revenue for the third quarter was $15.5 million, which increased 28% over the prior year period.
Hey, APAC revenue for the third quarter was $14 million, which increased 6% over the prior year period.
We saw modest improvements in both the academic and Biopharma markets throughout the quarter as researchers continue to return to the lab.
We ended the second quarter with approximately 60% of our accounts opened for general research and at the end of the third quarter. We estimated that the number of customer labs opened a general research increased to approximately 80%.
With many operating at reduced capacity.
Currently we estimate that approximately 85% of customer labs are open for general research in varying capacities.
Now turning to the rest of the income statement.
Gross profit for the third quarter was $57.4 million compared to a gross profit of $45.7 million for the prior year period.
Gross margin for the third quarter was 80% compared to 75% for the prior year period.
The gross margin increase was primarily driven by lower accrued royalties related to ongoing litigation.
Total operating expenses for the third quarter were $122.7 million, an increase of 124% from $54.8 million for the third quarter of 2019.
This includes a $40.6 million charge to in process research and development expense, resulting from the Cortana acquisition.
Outside of the charge related to Cortana. The increase in operating expenses was primarily attributable to increased personnel related expenses due to ongoing expansion within R&D and the commercial organizations, including stock based compensation increased legal expenses and expenses related to our ongoing carbonite.
Teen employee testing program.
R&D expenses for the third quarter, excluding the charge related to CCAR, Tata were $30.1 million compared to $22.2 million for the third quarter of 2019. This was driven primarily by $5.5 million of increased personnel related expenses, including.
Stock based compensation and $1.6 million increase in expenses related lab materials supplies and equipment.
And its GNS expenses for the third quarter were $51.5 million compared to $32.6 million for the third quarter of 2019 with the increase driven primarily by $9.6 million of increased personnel related expenses, including stock based compensation.
$7.6 million of increased legal expense.
Operating loss for the third quarter was $65.3 million compared to a loss of $9.1 million for the third quarter of 2019.
This includes $13.8 million of stock based compensation for the third quarter of 2020 compared with $3.9 million.
Stock based compensation expense for the third quarter of 2018.
Net loss for the period was $65.8 million compared to a net loss of $9.6 million for the third quarter of 2018.
We ended the quarter with $769 million in cash and cash equivalents, which includes net proceeds of $482 million from our September follow on offerings and is net of restricted cash.
Well, we are encouraged by the results this quarter the remains near term uncertainty related to COVID-19, and as such we will refrain from reinstating guidance at this time.
However, as we did last quarter, we would like to offer some color on quarterly trends today.
As of the end of last week, our overall orders for the fourth quarter are trending approximately 35% up from the fourth quarter of 2019.
While we are generally optimistic this represents our best view of the business as we stand here today.
It does not contemplate the impact of rising case counts potentially leading to increased shutdowns or reduced customer lab capacity.
And neither does it contemplate the potential for customers to exhaust higher than normal budgets at year end.
The increase in lab capacity, if the situation improves.
Turning to cash flow for the fourth quarter, we expect several onetime expenditures beginning with the payment of $100 million in cash upon closing of the re core acquisition, our $30 million payment for the land acquisition in Pleasanton and potential litigation related payments.
At this point I will turn it back to search.
Thanks, Justin.
Before we wrap up the call I want to thank everyone at Sevenx for you'll continue to dedication and incredible efforts this past quarter.
Despite numerous obstacles and challenges you have executed superbly and achieved a remarkable number of key milestones in just a few short months.
Looking ahead, we're now in a better than ever position to execute on our ambitious mission. We remain committed to building on commercializing technology is needed to accelerate the master of biology, and a bounce human health.
With that we'll now open it up for questions operator.
Thank you as a reminder to ask the question you on each of our farther along on your touched on Vodafone to withdraw your question from the queue. Please press the pound key based.
Based and Bob away compiled Accuen a roster.
Our first question comes Encyclopedia thing with JP Morgan Your line is now open.
Hey, good afternoon, I'll start with recourse starting just wondering if you talk a little bit about optimizing the technology throughput.
Throughput is one issue I think thats been.
Flagged as something that needs to be improved on so where do you think throughput can go on and then your other ways you could leverage the sequencer as well on the backend beyond kind of the fully integrated system in other words could it be couple of NPL partnered up with come into compliance.
So it's too early to talk about specific to the product configuration.
Specifications at this point, we are very much focused on into.
Integrating the teams and the and the technologies across the three different size to meet core or Tom and Tenax.
We certainly very we haven't as I'd like to get indicated we are very excited about the potential of the LNG in what they can do and.
I feel pretty bullish, especially in the long term of addressing all the whatever concerns that people might bring up around this technology.
So.
We will update the market does.
In the future as soon as we proceed through integration and once we kind of.
Established integrated the teams and our product development process.
I think it's too early to talk about the sort of anything on that.
Back on sequencing, our configurations are up from them and the rest of them.
Okay, and then I'm wondering if you could just talk to interest.
For for the base business from translational customers postage HD launch and.
Hi, how you think about that kind of market playing out.
So yes, I mean, we're very excited by the market and certainly the traction and translational the interest in the translational side of the business.
We have talked about previously Butler.
We'll go for operational research network. So it's a set of customers have come to us with one to two.
Promoted the use cases and TJ each other use cases, when translational framework. The yeah. The biggest probably requirement within that market is FOP compatibility and that's certainly something that we're working on and excited by the progress and upcoming Thats year like with so but overall the longer on that right now.
And kind of as we looked at a long run it looks very promising but the level of interest now and the level of excitement about the future of above.
Okay, and then last one for Justin if I kind of look at kind of how things have progressed here you are down 30% or sell the second quarter and that you know a flattish in July and then 70% for the third quarter plays a big September acceleration can you, maybe just talk to kind of momentum coming out of the quarter on I know you talked about lab laboratory.
Our ability in the percentage of sites that are open, but as we see cases going back up I guess, what's the risk of seeing slowing a bit here versus some of that can you saw in September.
So we closed Q3 with about 80% of customers open and as of right now we're at about 85%. So and there is some positive momentum towards openings, but.
But as of late we have seen that seemed the case counts continue to rise. So there is some uncertainty as to how this will play out over the next few weeks. So I think that theres the potential downside of perhaps the openings reversing and having some closures, but theres also the upside.
Side of.
Customers, having the normal seasonal year end budget expenditures are the seasonality increase that we that we typically see in most years and so we'll have to see how those those two factors play out as we close out the year.
Tyco. This is Brad maybe I'll, just give you a little bit of color on the UK because that's that's one that has gone into more us stay or sort of.
Mode of of shutdowns hitting I think we're seeing this across Europe in general is the labs are not shutting down although there are some.
Severe restrictions on social engagements restaurants things like that but the labs in the schools are staying open and and I think there has been a fair amount of work the c. diff that there isn't a lot of spread within the last given the fact, the pp is really the normal with.
Within these environments.
Okay. That's helpful. Thanks.
Thank you. Our next question comes from Derik de Bruin with Bank of America. Your line is now open.
Hey, Thanks. This is Mike Chris can offer Derek.
I appreciate the questions I'll start with the Vivian you provided some interesting color there on reorders comprising the majority of demand in the quarter for the first time.
Could you give us a little more color on sequential growth from one Q2 Q3 Q. How many customers are ordering now and also is a busy on sort of helping you penetrate beyond that traditional chromium installed base are you starting to see.
Some some additional customers coming in or is it still mostly a lot of overlap there.
In terms of Ah demo a answer the first was the last question first.
Finally, see continuing to see very nice influx of new tenants customers.
In fact, I would say the fractions grow that might have grown the sales quarter and you know.
These are again kind of going back to tyco's question.
Translational kind of oriented researchers I think to some kind of driving a lot of us interest coming into our ecosystem. So that's about it does that sort of trajectory is still there there is as strong as it was before if not stronger.
And in terms of kind of the the usage that sequential I mean that the platform is growing.
Currently increasing and nine traction its a little you know the last few quarters have been a little bit hard to.
Two analysts again because of quoted them because this is a new product, but definitely growing and growing very nicely.
[music].
So.
Yeah overall is good and the trajectory, especially going into next year looks really promising.
Okay, and then adjusts.
Just maybe one for you, especially following the the.
Secondary offering this quarter over almost 800 million on the on the balance sheet, even after some of the deals Youve done you did in the quarter. So clearly a lot of focus in the prepared remarks on investing in the business, but it seems like you're more than lot of capitalized for that so.
Is there incremental spend beyond.
What we've been modeling previously, which particular areas are you focusing on to add.
Data and add to above and beyond and then could you give a little more color about additional platforms or or vertical that we could expand inorganically through M&A.
Following on the investment and then the true.
Hi.
Hey, Mike Good good question.
Yes.
Investments in R&D in the commercial or is something that we've been.
For sizing on almost every call and I think with each successive call.
We have more and more conviction each time on the opportunities that lie that lie ahead of us and so you know when Tobin first hit we took a pause and we assess the areas that we could invest in we made sure that we had identified properly all the different cost levers and all the different scenarios.
Those that that this could play out, but now coming out of Covance coming out of the follow on offering.
And the two acquisitions I don't think that we've.
Had more conviction than we do now.
That now is the right time to invest for the future. So I think with with each successive call.
There's there's more investments that we that we plan to make and so it is probably above and beyond.
What folks have been thinking about in the past.
How about the capital deployment side on the M&A angle or should we expect continued cadence of sort of technology platforms.
So on the other question I would say our philosophy going it goes back to starting with with.
With the goal of pushing out the frontiers of biology lessons was generally a kind of working backwards from their sales of what technology is to get developed.
And as part of that I would think about M&A again in that context, we.
We don't have a specific target for acquiring some number of companies every year or every quarter.
But in the context of kind of the over arching missile the company and we are certainly see M&A as part of our.
Largest rather geo product development than the leash.
Okay, great. Thanks.
Okay.
Thank you. Our next question comes from Doug Schenkel of Cowen. Your line is now open.
Hey, good afternoon guys.
So.
I'm I'm just trying to reconcile a few of your comments you talked about I think 35% year over year order growth.
For Q4 arm at least three last week.
You indicated that 85% of labs are open, but with varying levels of activity.
So I'm just trying to simply put kind of figure out what how I actually triangulate between these data points and what we should drop into the model.
Importer for Q4, it's also important as we kind of think about the trajectory.
Heading into next year, so could could you talk about your specific to orders.
Typically how long does it take for an order to convert and is there any difference in terms of the patterns, you're seeing between capital and consumables and then simply put.
You generated Q3 revenue numbers that were ahead of consensus expectations existing consensus I believe was for 18% year over year growth in Q4.
If I just look at your commentary would you volunteered on order growth in the quarter is it is it fair to say that you are not precisely guiding but certainly indicating that you're comfortable with a bigger number than what the street was modeling for the fourth quarter.
Hey, Doug This is Justin of start with I'll start with that and then we'll see if I.
I understand I, just want to add anything.
As far as the but 35% year over year order growth trend.
Really what we're doing is just sharing with you what we're currently seeing right now and that's as of the end of last week.
Orders are up 35% up from where they were a year ago.
And that's been pretty stable coming out of the I guess coming out of the first couple of weeks. So.
Of Q4, and so we talked about some of the upsides and downsides that can materialize.
By quarter end I do think that there is some danger and just fully extrapolating that 35% over the over.
Over the Q4 19 revenue because the ended the quarter Theres Theres typically this.
Seasonality, which results in a large number of orders coming through in the last in the last couple of weeks and we had that in Q4 of 2019, and we're uncertain as to what degree we're going to have that in Q4 of.
2020.
And so we thought the best that we can do is to share with you. What we were currently sales and then also share with you.
The risks and opportunities that we see as well.
Hey, Doug This is Brad let me just add one of the other part of your question is you really talked about the sort of sales cycle and that sort of forward looking visibility I mean, typically right now our sales cycles are less than six months, obviously and as we get involved and maybe some larger orders some potential moving into clinical studies those.
Take a lot longer because a lot more detail of contractual aspect for them, but overall roughly about six months and the only other risks that I would sort of bad as we look at the fourth quarter and we certainly experiences is just moving freight around is the challenges. We go to recognize revenue around the end of the quarter because ultimately.
With the restrictions that are in place and of course those are changing on sometimes you just don't have the flight to get stuff shipped out. So those those are that's one other thing that tempers our are forward looking.
View of our business.
Okay, and maybe just one more on non news I think I'd imbedded in my question.
A question about capital versus consumables in that order number is there. Some is there are major difference between capital versus consumables or is it pretty much the same across the board it.
It's pretty much a safety sales I mean, obviously you have a repeat aspect of your of the consumables, but and the only sort of thing I would say is that chromium connected $260000 hasn't probably another a little bit longer sales cycle relative to the way that has to be approved but even that is is well within the realm and life.
Sciences.
That.
That sort of six month timeframe to see orders get through and in some cases in U.S. its a lot shorter than that.
Okay. That's helpful. Thank you for all that detail and then just a couple of bar are really just a two parter on Reed core I'm just curious if the.
The announcement of that acquisition has had any impact on discussions with <unk>.
Really existing or potential.
New accounts and then yeah in terms of just timelines on the instrument launch anything you could share on kind of the earliest we might see something from a from a new instrument standpoint on a stand alone.
Stand alone a nod and GE us not alumina dependent sequencing launch via via the real core acquisition.
So again I'll answer the second question first.
Ill like we are as I've indicated that these acquisitions just happened, whereas in the process of integrating the teams and technologists and so again, it's too early to talk about the new time frames or the status of the problem is that.
That could come out of this platform I would reiterate where generally like fundamentally does probably.
More so than even before we went into the acquisition so.
Overall, we are feeling.
Bullish about the the.
The potential of the where the bottom is going to go up.
But again I would caution or that we're not yet at this stage, we're focused on integrating the platform and.
Putting together plans for the not the not ready yet to talk about specifics.
And I'll, let Brad down so that give us to be at the customer dynamic question. Yes. This is interesting because obviously, even generally with spatial that certainly within C. There is a general pool of the market because it's intuitively interesting in the Murphy papers and some things that were out in 2014 2015, So there's a lot of interest with.
Tata has a service business and it's had some.
Some really interesting research has this been spawn from that so were we certainly customer seem to be excited because there is a view that we can take this technology and gives a given a 10 x. experience and that's something that we were looking forward to doing but again, a big part of we're doing right now is just setting expert.
Asia This is way out.
And then you know, but obviously you know engaging the customers to understand what they're interested in what it is about the technology that can help them answer pivotal question to their research.
Okay. Thanks again guys.
Thank you. Our next question comes from Patrick Donnelly with Citi. Your line is now open.
Thanks, guys.
Maybe one for you just in terms of kind of the year end look you've mentioned a few times.
The budget uncertainty going into the end of the year would usually that call. It budget flush I guess one of customer conversations band around that I'm sure you've tried to feel it out a little bit in terms of what customer expectations are going into year end. So would love your perspective, there and then if you have it might be for you were just with just the percentage of revenues that come maybe in that last month before.
Q I know, it's a bit outsized relative to your commentary about 2019. So if you have a ballpark on that would be helpful as well.
All right. So let me give you.
We got to the sort of the ended the quarter impact that somewhat a result of co that we've gotten to see this early because the NIH had their ended the fiscal year.
In the end of Q3, and we certainly saw a tremendous amount of pent up spending that could have been consumed or spent.
While they were out of the labs and as NIH came back there was an interest in fact, we had large interest on chromium connex, because a walkway automation means a lot and they had money to bring that to bringing that to a reality and the so if we look at the end of the fourth quarter, we have a lot of custom.
It is now that have moved the same path to the idea of getting back in the lab and now we're really trying to make up from last time and lot of time in some cases is spending money in Q. So they don't lose it.
And this might be more of an evident even in pharma. We are seeing a lot of interest in biopharma, who have budgets that they want to consume to balance their year over year spend so in general I think people now I actually be quite honestly I think that was slower than I expected back in early may I thought once they lab started open.
It would just move very quickly it certainly took a lot lot longer and most of Q Ah well into early.
Early part of Q3, but now we really seen that sort of let's get back. This get you know people are competitive get papers out.
Post docs people, finishing research so that it's.
I hesitate at all as a business as usual, but it does tend to more of a dynamic in the market.
Hey, Patrick Dennis just I'll take the second part.
We haven't shared before percent that would fall in the in the final weeks, but I, but I can tell you is that typically we see the the orders pick up.
Around the second week of December and carry through through the end through the end of the year.
Okay.
Thank you. Our next question comes from David West suburb of Guggenheim Securities. Your line is now open.
Hey, guys. Thanks for taking the question I just want to continue with that concept and sorry, I asked a very similar question on last calls, but you know as we're going back and we looked at our models you know last year you know.
That is our openings slowed a little slower than usual, but wouldn't 2021 look like what we originally thought 2020 would look like but with some added pent up demand and you know as we go out into 2021.
Our 2022, I mean, we should not look relative to the same now I I get that you know we always have second wave of Cove it but as the same you know as we've discussed NIH funding. It's exactly the same and I realize that you guys have to be a little bit conservative here, but it seems like your customer bases is almost exam.
Only that the.
Risk the reception your product from your customer base looks pretty much actually maybe even ahead of what we thought.
To begin the year.
[laughter] glow questions embedded in there. They are I would say if your question is around what is the 2021 look like and whether it's sort of a.
Whilst into back to what the year would have been without Covance I didn't know it would be certainly pretty much sure. The viewed that way because there was also quite a bit of essentially last time that happened in 2020.
Right. If you think about sort of research at the customer dynamics.
Let's face.
Yeah, So I mean, the reduced placements people who have us.
Have not run the experiments.
Some of those experiments certainly there is some amount of pent up demand, but there certainly is some with rooms or just sort of gone. So I don't think you can sort of just the kind of imagine the bonds that are completely out of the way it would have been otherwise.
Because we have lost some time.
Okay, all right I'll I'll move on and maybe to follow up you a little bit off line on that it just didn't in terms of of upsizing the Tam Fareed core.
I I appreciate that this is going to take a little bit time, but do you feel like when you're when you sized the Tam for the <unk> the.
The acquisition. It did you use it did the volume that you'd see in say fish I H.C.N. and just kind of apply premium to that and in terms of how we size the market because to me. It seems like this is a little bit beyond the reach of sequencing and more on the the mikasa the market, but with a plan.
Premium to it and then in terms of sticking with FIS to seek.
You know you've locked up a lot of technology is with this do you feel like you know with all the patents you've acquired you've pretty much locked up 15, because as a special technology. Thank you.
So I would say in terms of size in the market I think youre on the right.
I tried I mean, that's certainly how we've looked looked at things for.
Sure and I think there's a dumb the potential of this market is quite an onerous because again, you're bringing a lot more content and information that could be extracted from the samples.
So in terms of locking up few sales, yes, I mean for sure, but now let's say, it's more broadly than us. So this idea stays cover in seed show more more broadly just then just as a club.
All kind of all the other major approaches as well.
Thank you.
Thank you. Our next question comes from Dan areas with Stifel. Your line is now open.
Hey, guys. Good afternoon surge or grab from new Vizio and customers are you guys able to ship product to the lab and then have them get up and running through a remote support effort or do you find that there is generally some in person handholding that's needed there I'm just wondering if the lack of an install and training need it.
Kinda proving meaningful for you guys in the current environment access restrictions and such.
Oh, the spread I'll take that so we're busy and we never given that we contemplated a much wider use case given there was a relatively low barrier to entry obviously know instrument, we actually plan to do this entirely virtual when we built the see the tools to do that so it really hasn't changed anything so we were able to onboard.
Customers, we do that with a fairly extensive usually multipart hours of sort of online.
Steps or or or training that the customer goes through on a self paced level and then we actually have enough that that will engage them again now virtually over a almost a full day, just making sure we get them up and then we obviously follow them as they adopt the technology over the coming weeks.
Okay helpful.
And then maybe just can I ask about some color on the V. Two immune profiling kit where are you seeing initial traction I'm not sure. If you want to put a dollar amount on what you're seeing there, though I would certainly listen if you did.
But can you just sort of help us maybe with some context on the contribution potential versus some of your other assays your kids.
And maybe whether we should think about for Q contribution being up quarter over quarter, just given the pace of code work et cetera. Thanks, Yeah. I mean, just you sounded that did it has a particular utilization obviously infectious disease, but in general are you profiling product has been growing quite nicely as.
Yes, again has a lot of apio applications.
But in general I think that what we saw in this quarter was the fact that it was alluded to our search alluded to that we had people that immediately had been using version one for a long time immediately transitioned to version two without any sort of testing we saw a little bit of that when we did the same thing with our our expression.
Again expression product, but I think people now and a lot of them are the same customers and trust is the fact that the product would work accordingly, and it does give them a lot more sensitivity, but then also the flexibility that they want to save on sequencing. They can do it too. It's again exactly the same thing we had with gene expression. The other thing that some.
Important about this is that we had been very reluctant to move some of our legacy Jim again, an immune profiling onto nexgen because we knew we had this version two coming and we didn't want to.
Push them down a path of making a switch and then and then being taking that product away from them.
So now that we've done that this really clears the ways that we can be essentially 100% cut over legacy Gen by the end of the year.
Okay, and then if I could just stick one more quick and there maybe for Serge just on in Q2 within the body of work that exists today, the focus more on a DNA or protein I'm sure. It's mix, but I'm just sort of curious about where the foundation is being laid or has been laid there.
Yeah, I don't think we're ready to talk about those yet I mean, most of the work if you look at where what the companies have actually shown data form work sometimes to be R&D focus.
But as far as what we're planning for the future the sort of always spoke about.
Okay got it thank you.
Thank you and our next question compensated for <unk> with Morgan Stanley. Your line is now open.
Hey, guys good evening.
So I'm just going back to the the cobot a bad question. Brad can you talk about sort of any specific pockets EPS impact way up from the resurgence, especially in Europe. One of your competitors called out you know a little bit of a headwind there and I think you mentioned earlier I'm sort of shipping.
Trade issues, particularly across borders and so on so I was wondering if if you're actually seeing signs of that or is that just something that could happen and hence you know you're being a little bit conservative in terms of framing the fourth quarter here.
I think so as far as the headwind you know obviously, we're watching that there's a lot of this is very you know on a daily basis, but so far we just have not seen as I said earlier made sure that we are seeing any labs.
Shut down or close and in fact, I think over time the efficiency of people learning how to work in a reduction and see a lot of the times. We're using lab do we say lab at 25% that just means that only 25% and people can be in that lab any one time, they are able to use rotation.
And get back up to some reasonable capacity. So we continue to.
See that happening as adding to justin's I'd describe that its terms in terms of around a given quarter. It's always a challenge there is always a challenge sometimes and moving product out you know we love our customers to order earlier, we you know the ended the quarter push is there and then yeah. We.
We definitely and at the end of Q2 and certainly the end of Q3 had to be a lot more careful in planning shipments in as much to make sure that we meet our commitments to our customers. So I don't think there's anything hugely acute with fourth quarter I wouldn't I'm, hoping that it wouldnt be any worse than what we experienced I think Q2.
Was probably the biggest challenge of the Q2 to Q3, but it's just something we got to be well aware of as a risk.
Got it that's helpful.
In terms of what.
What you're seeing out of.
Asia, I mean, specifically, China, I mean, I'm I think it's it's a high teen sort of revenue exposure for you if I'm not mistaken can you just walk us through the pace of the recovery in the Boston normalization, specifically in China.
Yeah, you know its amazing.
China is gone almost I would say sort of effectively.
100% in the in the context of the fact that people are opening up our labs are open we're making sales calls people are going to conferences.
And so that that is good there is a little bit of a disruptive and the funding as the government Repositions you know so they can do sort of massive testing when they deal with some of these outbreaks, but in general we feel like China is kind of reach back to where it was.
Yes.
Ahead of the.
Covance, which has been a year ago, if you think about it.
Got it and then one final one on on chromium Sps Yeah, I'm just done in the past you've spoken about sort of a degree of discounting with larger consumer votes purchases.
How should we think about that.
That specific driver of the model for you you know when we sort of juxtapose that with the chromium connect launch here, obviously comes with higher ASP is and I think on an earlier call. You guys had mentioned sort of the walkway automation being particularly attractive during the pandemic, how do we balance sort of those two opposing forces.
As we think about the Sps are with 'em over the medium term here.
And so for.
Three Sps we had talked about in the past had during Q2, we gave deeper discounts primarily related to sales where the industry was going to be using Tobin research and historically when we have given larger discounts when it's attached to a larger consumable order.
But if we look at just the chromium controller by itself.
The ASP actually increased from from Q2 to Q3, because a smaller percent of our business was was driven by Ur cobot sales.
But then when you combine and calculate an ASP off of the chromium connecting the regular chromium controller, obviously with a with a list price that's in the mid two hundreds for the chromium connect that's going to bring the A.S.P. up but.
But still when you look at the overall percent of the chromium connect Oh broker set of all instruments. So it's still a relatively small number.
So it does have some impact and we're still basically staying within the range that we were near the range that we've talked about in the past and the 50 to $55000 range on a blended basis.
Got it appreciate the color guys. Thanks.
Thank you and I'm showing no further questions in the queue at this time, ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
[music].
[music].
[music].