Q3 2020 Quanterix Corp Earnings Call

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Good afternoon, ladies and gentlemen, thank you for standing by and welcome to decline Sorry Corporation. He was the thing you do any earnings call. At this time. All participants are you know he sent on me mode. They do we will conduct a question and answer session and instructions will follow at the time if anyone.

It should be quite assistance during the conference. Please press Star then zero on your thoughts, though in California, I thought a reminder, this conference call maybe recorded I wouldn't I'd like to turn the conference over to your speaker today Mr. I'm more football yes, a little concerning please go ahead Sir.

Thanks, Tommy welcome everyone and thanks for joining us today with me on today's call is given to Lawsky have chairman and CEO before.

Before we begin I would like to remind you about a few things Oh, yes, two problems business, while today and him, but all things that release can be found on our website.

Also I'm sleeping Cyto.

Today's call will be recorded and would be a reasonable.

That's a source of section of our website.

Today's call May contain forward looking statements that are based on management's beliefs and assumptions and on information available as of today. If this call. We may not actually achieve the plans intentions or expectations disclosed in our forward looking statements forward looking statements.

Involve known and unknown risks uncertainties assumptions and other factors that may cause our actual results performance or achievements to be materially different from any future results performance or achievements expressed or implied by the forward [laughter].

The risks and uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission.

Dementia uhm as well.

Sure Uhm NFL levels have been able to reveal 16 years before dementia and familial patients.

All Zheimer Cascades, which that there's a real early detection opportunity and also serum NFL continued its evolution and M. S disease progression and even it's found it's way in the Covid and some of the publication showing that if you lost taste and smell and neuro function. We these scientists been able to measure it with our NFL.

And it was obviously a lot of excitement going on right now around I, just can't imagine from Biogen as being another key market mover in this whole landscape of neuro products.

The next slide basically illustrates our continued revenue Ah sent in as you know, we pivoted towards really putting a lot of focus on our accelerator to support overall customers activities given some of the issues that we know are out there with customer labs. During this pandemic.

And you can see that we've already surpassed significantly are full year revenue from last year with the third quarter results and we've now run 128 phase went through three drug trials inside of the accelerator.

Also you can see our instrument placements continue to evolve mostly again focused on neurology, but we're beginning to see expansion an oncology and certainly at some point, we'll start to see some infectious disease as well because of the pivot into covid and trying to support.

Our position in this important evolving landscape. We also had the approval in Q3 of the Novartis drug.

Sometimes and mass drug approval is a secondary surrogate endpoint and the normative study showing what NFL levels do between ages seven to 70 has been completed and Switzerland will be key to anything we do have moving forward around getting the FDA to sanction NFL is a disease progression marker.

Hopefully for a single site IBT will be our pursuit primarily in 2021.

And the Cobot Arena, we won 18.2 million in Q3, we've won the initial grant of a couple of million for feasibility and the end of Q2, and then we were rewarded to scale. This antigen test up which is showing incredible utility and blood drive blood spots as well, which is the area that we.

Eric can eliminate a lot of the PE and potentially even enable homecare sampling. So we're really excited that the NIH has seen the potential and this test and has invested aggressively in scaling this up which we also see the benefit of scaling up can also help us with a lot of the trials that we're running in our research.

Side of our business, both in neuro and encoded.

Also we've secured and already have begun major IR b.

You could review Board studies with one of the largest payers in the United States for Cobot running five different IR bees at the current moment inside of our accelerator lab.

In addition, the accelerators, we shown has grown and Weve built our China physician recently naming a new general manager of our Asia Pacific business.

HTS performance continues to evolve.

Improve which is a key to our strategy and we continue to trade in revenue as well as new system sales you may have seen a major announcement around Abbott, where we have a nonexclusive license with them now, which pretty significant advance given that Abbott as one of the Premier Big Dthree.

Plus we were able to do it in a nonexclusive way with major upfront payment I think its a $10 million upfront payment for this license that longer term they will try to deploy and bring out instrument platforms to have some low end side and we also were very successful raising capital this quarter, a $100 million on once again.

And one of them the largest up rounds that we've had plus.

We've continued to advance post that rounds with Omega many of these major announcements.

When you look inside of our revenue when you remove some of the onetime effects.

I can see here that we have very strong.

Lab.

Accelerator lab growth, which is what we pointed out earlier and this was for two reasons. One is co bid and they are using our labs too is we had a lot of each dx transitions, where there was validation work going on in our customers and they were utilizing our accelerator lab, which we don't pull out the consumables, but a large portion of that.

Revenue would be consumables you.

Utilized in the laboratory for the accelerator support of our customers trials and we did get back to instrument growth in consumable growth in Q3, which we find to be a real productive advance you can also see that a full year basis. We've continued to evolve we certainly are over a lot of that.

Q2 challenge, but on a full year basis, you can see our mix is now about 40% consumables, 40% services and about 25% instruments.

When you look at the actual geographic geography customer disease demographics, you can see that our growth was actually strongest in Europe, but North America was close second in Q3 and this is actually the 12 month trailing revenue and you can see that about 60% of our revenue is coming from.

Of biotech and it continues to grow rapidly with all these trials, particularly in the neuro sector and also beginning in oncology and you can see that from a disease specificity standpoint, we're still mostly neurology, but oncology is coming up.

Very rapidly, particularly with a lot of the trial work going on in the accelerator.

Now moving strategically we've talked a lot about moving the life sciences and the medical landscape into a digital opportunity for measuring Allysa digital Lysa is a lot of what we've done and this chart depicts slide nine how we've increased the sensitivity by a thousand.

Oh, and we've recently announced four months go another hundred acts and we've got a prototype that we're rolling out Thats really probably a year year and a half away from being fully deployed but this is a big advance, allowing us to reach down underneath of what the traditional levels of sensitivity work to see new proteins of relevance and then too.

Reduce the invasiveness of the testing in the samples with the sensitivity to increase the Tam and this is we think going to lead to a fairly significant.

Revolution in proteomics lift this deployment, we are moving as you can see from the left the right hand side of the slide from Hi, and base business liquid.

Hi, Oxys cerebral spinal fluid tap spinal taps as well as even radiation from imaging down to really noninvasive early detection and the protein. Once again, we believe captures many of the environmental triggers and there's a lot more proteins in there our genes and we think there are much more phenotypic which makes him.

Highly relevant and so we're really advancing the field of proteomics with the sensitivity and creating a lot of translation not only in these drug trials, but ultimately we believe for the clinic. This.

This slide is slide weve used for really five years to depict on the X axis.

When you can detect the disease and you can see the cancer and neurology or all the way over to the right and they are typically very much the latest stage lethal disease is to be detected and you can see how many publications. We now have using biomarkers to get at an earlier detection and depicted on the bottom you can see some Lola movies.

Concentration.

Correction levels to levels that you can see these diseases much earlier than on the Y axis. The invasiveness once again by creating that be the sensitivity of some rollout, we can reach and and see answers in blood and saliva urine that you couldn't see without really invasive procedures and that combination is.

Really what we believe is allowing us to ship cancer neurology, even co bid and infectious disease further to the left and earlier.

In lower invasive testing, which we think in the end creates significant tams and opportunities to disrupt the way medicines practice. The initial deployment of these the sensitivity in this capability is to help drug companies recruit Ben.

Better cohorts of patients that are more specific to the disease and the drug that they're actually try to get approval and to get cohorts when the diseases earlier stage, one and it's easier for a drug to be effective and it also allows lower dose.

Dosing, which allows lower toxicity is a combination of higher efficacy lower toxicity leads to a 300% improvement and the areas that these biomarkers are deployed and on the right. You can see the number of see our old instruments now being that have been placed 55 of them running these phase one through three trials.

Over a thousand been run across the CR Rose and you can see that we mentioned earlier 128 have been running our own facilities. This.

Won't accept that for a drug trial and so we've been able to move many of these markers into chair them in plasma as.

As evidenced on the right hand side with check marks and most of these now uhm, except for the ones in black have already been shown and publications by these various researches around the world as well as the pharma companies on the right have use cases.

C N. These biomarkers and blood and almost 100% of the publications utilizing particularly NFL are all done with the smaller technology and also <unk> now we acquired them a year ago. It's their antibody pair that is also utilize hundred percent of those publications are showcasing.

<unk> us and the antibody as well as in the instrument now this is a game changing slides, but through times. This in the last 18 months, we've been public we've been publicized as having technologies that have been able to see all 's <unk> very early in the Cascade on the bottom.

Left for the publication rent F. L showcased 16 years before symptoms on familial patient that had genotype that they knew when they were gonna get dementia based on their their jeans and then they ran trials and this NFL was able to reveal it there were several technologies deploying pikau 217 that we're able to.

So uhm as early as 20 years and you can see there's a lot of publicity this year around the the <unk> series in the Middle we had some publications come out game changing one on pizza out 181, which we've now launched it actually shows the correlation is blood between the images of amyloid as well as the image.

<unk> of a cow opposite so images of cow and the of the brain images of the brain for amyloid have been correlated to.

<unk> 181, and all the time or patience and blood and that's what is shown on the bottom is the correlation between the C. S. F of 181, P child, and blood and on the right hand side. The advances that we've been hearing and reading about from Biogen is clearly advancing the drug and they have and <unk>.

Creasing the dosing of as you can imagine reduces the level of the Peach, how 181 in the cerebral spinal fluid and the reason for the arrow going over to the left is that correlation from the cerebral spinal fluid into for blood, which we think longer term creates a lot of promise around a blood test that can be used as a screen to help.

Move patients into.

Drugs get approved for Alzheimer's and so it's not just using these technologies did drugs approved but then it's gonna be an opportunity to monitor their progress with the drug as well as some day may be be even being health screens. The N F. L. The number of trials continues to expand particularly for and that's multiple screw.

Joseph but it is being utilized as we mentioned already knows eimers as well as T. B I traumatic brain injury, an M S as well as Alice and frontal temporal dementia and Parkinson's.

Now we've also pivoted as we mentioned into Covid and it really kind of started with the recognition of this side of time technology, we had the measure cytokines and see cytokines storm earlier many of the researchers in the hot zones used our technology to reveal that and are predicted to help strat.

To five patients that we're gonna go serious versus be able be stable.

We then got.

A lot of interests from an outside peer group to build astrology assay, which we've done and but the the number one area that we're really focused right now is on and answered Jim Test, which was mentioned that then I H discovered this and helped US and are helping US now <unk> and further scale. It and then the fourth category on the right Interestingly NFL as <unk>.

Well <unk> is going to potentially play a role for longterm disease impairment the covid could be creating for many that have any really had symptoms other than maybe lots of taste and smell. So there's a lot of interest in all four of these categories of our Biomarkers and so some day, we think that could be a comprehensive look at the disease looking at these different.

To biomarkers for each patient and ultimately we see a lot of research opportunities because there's a lot of questions that haven't been answered on this virus what level of antibodies when the vaccines come out are sufficient to prevent infection, how durable will those antibodies b, what's the role of your innate immune system, how fatigued all the a native.

Noon system B as a result of Covid. So many of the peer groups are very concerned about the long term implications and we think our research is gonna reveal some pretty important tools for that research. This is just a slide showing how challenging it is today to measure the you know.

Whether someone has the virus, particularly before symptoms you can see that it's estimated in some publications that the false negative rate, meaning you're told that you don't have the virus. If you don't have symptoms can be as high as 80% to 90% of the time when you actually have it you're told that you don't because of sampling error of the virus.

Onto the nasal pharyngeal so seen it in blood could represent an opportunity and that's a lot of the focus that mood brought to this and we're also looking to try to expand the window of being able to see the virus and there's new interest as well as checking therapies and seeing if the antigen level from our measurement come down as the therapies applied and blood.

Which is.

Potentially an endpoint opportunity for drug trials in therapy trials in the future. So we're excited about that opportunity as well.

Working with the FDA around moving to lessen base of samples, though is a challenge and it. It represents you know a lot of effort and we've got great relationships with the NIH as well as the F. D. A now and we are very happy that we're trying to advance the ability to see this effectively in less than base of samples and someday home.

Care, we think will be a great place to be testing and pulling out samples, but you know we may not actually do the test there, but we'll do the sampling from home and then get the answers from centralized labs.

So just payer group advance is pretty important for us because they're really looking for outcomes and early detection can change the way they deploy health care and it also can be a way to improve outcomes by getting to diseases earlier, and lengthen life and so across all of the different categories starting with Covid.

We are really excited about running these irb's for the payer groups because it can represent a whole new way for the value chain to capitalize and leverage the opportunity that are biomarkers with bleau and based on this early detection potentially homecare could represent and so where there's none biomarkers in therapy and places like M. S diabetes.

Covid, we think that can be deployed now within these health care groups. If if there's a known biomarker, but not a known therapy. There's a lot of members. We think can get into drug trials to help that early detection of of members with these disease Cascades to help these drug trials and and finally, we think of long term study is in the offing, where we are.

Gonna monitor with a payer group their membership and the Biomarkers over a long period of time and as diseases come into that peer group. The membership group, we can look back and see what biomarkers could've revealed that that could really be a great way for biomarker research to occur.

The sensitivity the earlier you see disease that in itself. We already have pointed out creates the ability to to use this technology for very exciting ways to see disease earlier, the less invasiveness going from cerebral spinal fluid to blood Vincent, let's say, a dry blood spot or even saliva that increases.

Pam the ability to multiplex ticked away sensitivity. So the more multiplex and we can do a more disease specificity you can create so the more sensitivity you have the more you can create utility for these biomarkers. You also can dilute samples to eliminate matrix effects to allow the false positives and false negative rates to improve.

Dramatically so the ability to dilute can create a lot better specificity in the technology and then finally the ability to quantitative versus just stated a biomarkers there instead of being qualitative and quantitative and we think that in the area of research, particularly for strategy how much of those antibodies is actually there versus current individually.

A patient versus the amount of buyers and being able to quantitate. Those we think adds a lot of it on the damage. This slide this illustrates that there's been a lot of movement in the genomics landscape over the last 25 years for very good reasons. The genomic Revolution started.

Sequence in next generation sequencing has led to a lot of really productive companies with many value added assets on the right hand side. We just wanted to showcase it in the protein World Quantenna straddles the end of this pipeline for proteins and we're doing a lot of drug trials as weve as Rick pointed out primarily in brain and in cobot area.

Currently and as you see those those different proteins to find their way into equity products like the Siemens the roche's.

Abbott's they protein products and the LDP labs, as well as health screenings, and we've set up we think a lot of good non exclusive relationships with many of these companies on the right hand side to further advance the technology and create greater opportunities for to advance and we think that moving to the right.

Like what we see happening with driving premium with the protein is a real important opportunity for this entire landscape. So we're very excited about a lot of the interest to further fuel proteomics, even with ups upstream technologies and allow more to advance downstream. So when you look at our Tam we see it as a $1 billion Tam primarily focused the co.

The $200 million and neuro traffic million. This is on the research side of our business and as we've been saying longer term, we want to continue a 30% to 40% CAGR and that growth in that landscape. We are deploying to the right now.

Now the cobot in neuro trying to find pathways for things like the all timers and math and the neuro and even encoded given the NIH is supportive of EPS for the antigen. We're looking at possible ways to help the the world and the nation for the co good opportunity and it was about 1200 proteins. We showed early on that.

That have evolved into about 200 proteins on the right hand side longer term, we think that this protein revolution really hits there could be as much as 90 billion based on some consulting research that we're having done right now ultimately maybe as many as 1000 protein could find their way if you could expand them into diagnostics. So in summary going back to the.

The telephone going through the iPhone, we've seen a lot of advances and the computer systems on the top and certainly we watch the genomic revolution, just bring a lot of value to investors, but more importantly is transforming the way patients can look at cancer and look at many of the elements. They have today and there's been a lot of advances occurring.

And associated cost of about $5 million per quarter, or Q4, Twentytwenty and first half of Twentytwenty, one, which we will continue to exclude from our non-GAAP financials.

Just store growth 18.8 million in Q3, Twentytwenty and non-GAAP operating expenses, which primarily exclude nonrecurring expenses associated with our Vibex grant revenue totaled $17.5 million.

Brookside, where there's no real regulatory a reimbursement risk and we feel like gets up a solid place to create value for investors with a great backstop, but there is absolutely we've been calling it an aspirational opportunity to start to migrate into diagnostics and Covid has enabled us a showcase opportunity to help the world.

With our incredibly inspired employee base, but also further demonstrate what this technology can do and help us advance into many of the the different disease sectors that we know our technology can disrupt so this slide just shows that we have a very formidable market opportunity as we've outlined we think work.

Rivaling and creating a new category with our sensitivity in proteomics and we have been penetrating this market and that we can see being 1 billion today of Chan, but he have all been very productively into a very large tan numbers as you can see on the slides. We also are better linking they DNA R RNA to the protein.

We have a first question from the line also we need from as the deal Leerink. Your line is open you may ask your question.

Mm mm a mall this is Scott the folly on for it for me Thanks for taking my questions.

Your data and I'm I'm intrigued by this.

This particular advance that it does look like pita 181, and cerebral spinal fluid.

Has played a a nice correlate to the effect of increasing the dose reduces the level of of Pita 181 in the cerebral spinal fluid as we commented on in earlier slides and I think that the fact that there is some level biomarker usage occurring even if it's M. C S out.

Creates an opportunity because of all the correlates of work that's been done the last four years and blood for this to become a lesson base of opportunity. So I think that we are looking at many pharma companies in general looking at the ambulance thesis that was almost being shut down as not really being irrelevant.

Same would be true and the Alzheimers community. We believe that there's evidence narrowed the generation would slow down at the drug could be effective in the area of all simers and so downstream how do you get people into the drug more efficiently than imaging <unk> spinal fluid taps Hey Ah.

<unk> could be a good first level screen secondary.

Showcasing this technology sensitivity and capability for some of the traditional.

Report for a lower cost antigen type test that's got a lot of sensitivity and precision we actually think that this could create more demand for the H. The x.'s as we move forward either in research or if we further evolve into die.

Diagnostics, we would try to utilize partners third party.

I'll call them more like LD T. labs that have infrastructure, we're going to try to evolve our HTS deployment for at least the co bid landscape.

Either research customers or customers that have experienced using this platform to give it up just a higher level of performance and utility, but I think in general that's going to lead to new sales either in our euro.

In the neurology trials is another area, where we think there will be increased.

Bleeding volume to continue into queue for as well as you Michelle half of 2021.

Yeah.

We can move to the next question if there's any other questions.

Thank you. So we do have another question from the line of Chris from Cohen <unk>, Let me ask you a question.

Hey, Kevin M. Thanks for taking my questions. This is Chris offered day today I apologize if you justice during your prepared remarks, where I think we're juggling about eight earnings cause this afternoon.

But first maybe just to follow up on the prior question. I think you were previously targeting 75 H D. As in S. P. R X S. P accident S. R X systems. This year now is that still the plan and now are there any bottlenecks in terms of being able to get an instrument shift and installed in the current environment.

Yeah, I I would say in general you know two two was all obviously, a major headwind and we still have a lot of risk around.

What happens with this virus moving forward does it affect and shut down any labs and we're starting to see the potential of that quote some closures and our European operation, which those can affect our ability to.

Install but I do think that the overall numbers that we cited going into the year for H D X still feel pretty productive given some of the new opportunities that were focused on.

All did you have other thoughts on this question.

No I think <unk> fix it up correctly right because in two one earnings call. We we have to David 75, H D X as in 75 aesthetics plus S. B Xs at that point, we had reduced it from 90 before it and also reduced 50% good roughly 40%.

Mix and we are still in line of sight with those numbers that we have shown during O. Two one earnings call and as I said, when you get really close to 50% of our installed base in H D X by here in the way that you know we don't get you set up the by the second wave and Ah.

See if they'd lockdowns with things company will stay lived to be all today you have a good line of sight to get those numbers, we should building up to one earnings call.

Okay, Great maybe just moving onto Avenue.

What time is have you committed to regarding development and commercialization of of products and how much of that as an abbott's hands versus yours, well I'll just leave it there and asked and I follow up after.

Yeah, I I would say that we've not communicated any details. It's it's a very minor level of communication around this relationship except to some of the financial terms.

I I would say that they're incredibly motivated by what smaller can do.

And I would expect that you know this is going to lead to them deploying this technology into some new form factors sometime over the next several years. So it's a it's a longer term opportunity, but you know for us It was a big validation to be able to achieve this on a non-exclusive beige.

<unk> in a market that really has three premier large IBD distributed Ivy D players and and to give them an opportunity for our technology to evolve inside of other channels to market is 22 billion dollar landscape across these these.

Large three or four no diagnostic IBD houses so to establish this foothold is important and again, we have a very strong relationship with the Abietene. We've been working on this for a couple of years and it's they have a new C E O and a lot of excitement.

Right now around this opportunity, which I think could go well for us in the long term.

Thank you and say there are no further questions on the line and I'm getting a call back to him you can't football Huh.

Possibly back to Kevin too close okay.

Sure Yep, Hey, thanks, so much for everything that you guys are done with us to the Investor Group. We look forward to further you know evolving our discussions our performance in our story, where very committed to driving growth in this landscape and feel very honored to have a chance to be working.

All of you and stay safe out there and and we'll talk soon thank you very much.

Maybe you can cancel Monday's concludes today's conference call give me not disconnect.

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