Q3 2020 HTG Molecular Diagnostics Inc Earnings Call
Greetings and welcome to the H.T.J. Molecular Diagnostics, Inc. Third quarter 2020 earnings call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If anyone should require operator assistance started conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Paul Hart with lifestyle advisors. Thank you you may begin thank you operator.
Earlier today H.T.G. released its financial results for the third quarter ended September 32020.
Before we begin the call let me remind you that the Companys remarks include forward looking statements within the meaning of the federal securities laws, including statements regarding increasing use of already based biomarkers expected growth in the molecular profiling market anticipated growth in the companies are you all profiling business and it related revenue.
<unk> expectations regarding bio pharma programs and collaborations product development and commercialization activities and the impact of any potential recovery from the ongoing COVID-19 pandemic.
These forward looking statements are subject to numerous risks and uncertainties many of which are beyond H.T.G.'s control, including uncertainties regarding the ongoing COVID-19 pandemic and its impacts on H. TG and its customers that may cause actual circumstances events or results to differ materially from those priests.
Acted on today's call.
Factors that could cause events or results to differ materially include those risks and uncertainties described from time to time in the company's SEC filings H.
Each TG cautions listeners not to place undue reliance on any forward looking statements.
TG is providing this information as of the date of this call Tuesday November 10th 2020, and the company undertakes no obligation to update any forward looking statement.
With that I'd like to turn call over to John Weve, Netscape, Chief Executive Officer John.
Thank you Paul and welcome everybody.
Let me begin with an overview of where we are in the near term and how we view our business in the longer term.
This year has been challenging as COVID-19 interrupted our growth trajectory.
At our commitment and belief in our technology has not wavered we.
We continue to see the fundamental macro trend of personalized medicine, driving increasing use of biomarkers and especially our name based biomarkers to guide treatment decisions.
Precision medicine is better for the patient.
Family and the payer molecular profiling is one of the key tools to enable this.
Like you were profiling as a large and fast growing markets in which we believe we will be a player.
Cobalt has had a short term impact on some of our oncology effort.
It's also provided visibility to areas, where biomarker based medicine shouldn't be embraced and other disease areas, including immune response.
And our EPS seek technology continues to be adopted as a platform technology for Ngs based gene expression.
In the short term, we continue to feel the impact of workplace restrictions due to cope at 19.
Work from home restrictions and precautions remain in place for many of our largest customers have impacted our business for the simple reason that lab work can't be done from home.
Fewer people physically in the labs this quarter, Matt fewer customers running our instruments in their facilities and sending us samples for lab services.
This quarter also reflects the historical trend of softness during the summer months, especially in Europe.
While we have seen many begin to slow process of opening back up we're adjusting to the new normal.
In the last few quarters, it's become apparent that the pandemic is going to continue to impact our customers and their businesses for an extended period. So.
So we're remaining nimble and are adjusting to this new environment.
We are looking for where we can leverage our business technology and people without sacrificing our strategic priorities.
We're aggressively looking for new opportunities and making adjustments to our near term objectives to help buffer the impact of COVID-19 on our business.
The six this includes accelerating our customer diversification concludes a larger number of smaller and mid sized biopharma customers and increasing our presence in academic medical centers.
Other opportunities include partnering with the large immune response market by leveraging our current call points and expanding into new call points within the same customer addresses.
And I'm pleased to say, we're starting to see the results of those measures as many of our key metrics in our business show that we're starting to see the signs of Robert robbing a recovery in our business.
Now, let me take a look at our performance for the quarter.
Total revenue for the third quarter was 1.8 million compared with 5.4 million for the same period last year.
Product and product related services revenue or what we refer to as direct revenue was 1.7 million compared to 4.3 million for the same period last year.
Our direct revenue business offered up a few bright spots this quarter as well we continue to see a margin friendly mix shift in business from lab services kits and instruments.
We've also been able to post modest revenue gains in Europe year to date in spite of significant headwinds.
Growth in this region is being driven by many factors, but one tack that that's not especially effective is a focus on existing instrument placements and the related reagent pull through.
We are seeing customers gradually starting to return to their laboratories, it's small and in some cases it may only be a day or two a week, but this was an improvement over what we've seen last couple of quarters. We.
We track and forecasts this very carefully and are seeing more and more customers reserve resuming some semblance of normal work schedules.
Our current expectations as long as there's not another wave of complete shutdowns does that in the coming quarters more and more customers will be returning to work in oncology trials will get back on track, allowing us to regain our growth momentum that we had that we had before the pandemic.
Collaborative development services revenue continued on its expected reduced trajectory with revenue of 76000 for the third quarter compared with 1.1 million million for the same period last year.
We remain very active with our sales efforts in this area and we believe that as people return to work each TG will eventually contract new collaborations.
Now, let me take a closer look at our profiling business.
In spite of reduced activity by our existing customers. They do remain actively engaged with our sales teams in.
In addition, we recognized revenue from several new customers during the quarter approximately 20% of our Q3 customers were new.
First orders are usually small, but they do graduate the larger revenue opportunities over time.
This is a great example of how our sales teams employee new tactics and measured and measures that are starting to yield results simmer.
Similarly on the publications front, we now have more than 225 publications that reference H. TG I'd see technology, a 42% increase from the approximate 158, we had Q3 2019.
We believe the growth in customers and growth in publications reinforces our message. The H.T.G. technology is a cutting edge and scientifically integral part of the research process. These.
These metrics give us confidence that our strategy is working with data showing that our customers are starting to return to their laboratories. We believe there will be increased demand in the market for our products.
In Biopharma, we continued to see the number of active programs time out due to work from home restrictions.
As a reminder for US to include a program and our active programs metric the first needs to be a pharma sponsored trial.
Also needs to be traceable and clinical trials dot Gov.
Finally, it needs to have generated revenue for H. TG, then the last 12 months.
So with so many trials delayed and pharma not onsite running samples or sending samples to H T. G projects have started at the time out.
Especially because many of our biopharma customers are on the coast or the impact of COVID-19 was more pronounced.
With that in mind, we finished the quarter was 55 active programs down from 88 at the end of 2019.
This is a net loss of 33 programs, including 50 programs that have timed out however.
However, 20 programs have been extended.
We've also signed up 17 new programs.
So the numbers are actually more encouraging and at first glance and another promising indicator that our sales measures are starting to deliver results, especially as it relates to customer diversification and biopharma.
Turning to our strategic milestones and product development, we continue to operate at a very high level.
First we're very pleased to have achieved a milestone to produce a white paper on technical feasibility of our approximate 20000 gene whole transcriptome edge sick animal, which internally we call W. TTX.
Some of the high points of that White paper are demonstrated a H.T.G.'s edgeseq technology is highly scalable and allows measurement of the entire human transcriptome, while maintaining all of its advantages such as low sample input extraction free chemistry, and the ability to test low quality FSP tissue.
Prototype whole transcriptome panel demonstrated good directional alignment with Arnie seek it.
Generate a differential expression data that were highly correlated to those generate it also using arnie seek additionally, excellent accuracy of differential expression analysis using spiked in reference material was also demonstrated.
This proof of concept study has underscored our view that the H. TG I'd Chic technology is a robust alternative to arnie seek for gene expression profile profiling with all the advantages. It offers the traditional extracted aren't a based G. D methodologies. This.
The study also demonstrated that our technology can measure it the entire human transcriptome out of a single kind of tissue.
This is exciting as we are building what we believe is a game changing product for H T G and the market.
We believe we can enable translational researchers biomarker leads in Biopharma and diagnostic companies, who have medical content. They used the w. TTX almost like an ornate operating system.
As with our existing products W. TTX uses less sample has an easier to implement workflow has a faster turnaround time and greatly simplifies bio informatics versus traditional aren't they seek.
Wttg X has been designed to a clinical greater performance for precision the Reaper and reproducibility.
In addition, if our customers want to down select the smaller panels from the W. TTX probes can simply be selected from the W. TTX and incorporate it into smaller more sequencer efficient panels with minimal revalidation as the assay chemistry and approach sequence design remains the same.
In Q4, we expect to take that technology to the market with an early access program.
The final product for full commercialization remains on track for a mid 2021 launch.
Also in the quarter, we introduced a new application on our precision immuno oncology panel that identify signatures that measure 23 unique immune and stromal cell sites, allowing for immuno phenotype wing of the tumor micro environment.
We believe having these I mean phenotypes available to researchers will allow them to character I characterize responders or nonresponders based on an R&D molecular profile more easily than if they had to build their own pipelines and classifiers.
We will continue to bring more apps for our preexisting panels to drive utility to make them easier to use for our customers.
Lastly, we have renamed and repositioned. Our previously described auto immune panel, what we now call our immune response panel.
Panel is a powerful tool to help translational researchers and biopharma better understand the immune response not only in oncology, but also in auto immune disorders, such as lupus in our AG and infectious disease areas, including overnight team.
We continue to work at a very high level and product development and look forward to continuing to achieve our technical milestones as the year progresses.
This quarter, we started to see the results of some of our strategy shifts that we made in response to COVID-19, and although our revenue was down as expected. We are very encouraged by our new customer growth and by the fact that we're starting to see our legacy customers returned to their laboratories.
I've said before that I expect HD GE to emerge through all of this as a stronger and better company and.
And with more customer growth and diversification.
Better penetration of our instruments with Getz.
An exciting new product pipelines were producing the results that justify that confidence.
With that it's my pleasure to turn the call over to our CFO Shaun Mcmeans for a review of our financials Sean Thanks.
Thanks, Joe total revenue for the third quarter of 2020 was 1.8 million versus 5.4 million for the same period in 2019.
Direct revenue defined as product and product related services revenue in our financial statements was 1.7 going from third quarter 2014, compared to 44.3 million in Q3 of 2019.
This decrease was primarily result of a decrease in product related services revenue associated with slower turn of our biopharma customers for code shutdowns.
Additionally in 2019 this product related services revenue included significant levels of sample procurement subcontracted laboratory services revenue for the farmer customer program, which did not recur in 2020.
Collaborative development services revenue decreased over the third quarter in 2019 by 1 million, reflecting very limited activity on existing program subsequent to 2019.
Ongoing revenue reflects completion of remaining contracted development tasks on these programs as we await further decisions on these programs.
We do expect a continuing impact from COVID-19 on our revenue through at least the rest of 2020, especially the revenue from our large pharma customers.
We are hopeful based on ongoing discussions with their customers. The programs planned prior to cope with 19 will be restarted in future periods. Once our customers operations returned to pre trove of levels.
Our cost of product and product boy that services revenue decreased to 941000 in the third quarter of 2020, compared with 2.9 million for the same period in 2019.
In addition to the lower revenue. This reflects a decrease in low margin subcontracted laboratory services revenue in 2020 compared to the prior year.
Research and development expense decreased approximately 1.3 million in the third quarter of 2020 compared to the same period in 2019.
Primarily related to the decrease in Flubber development services revenue and the ongoing impact of first half staff reductions.
Cost related to these programs are recorded in research and development expense.
Our continued new product related research and development expenses unrelated to our club the development programs.
Were approximately 1.2 million for the third quarter of 2020, compared with 2 million for the same period in 2019.
This decrease primarily reflects the impact of development staff reductions in the first half of 2020, along with lower programming costs and travel and 2019.
Despite the complications created by Carbonite team our development team successfully met the year to date milestones.
Our operating loss for the third quarter of 2020 was 5.2 million compared to 4.6 million for the same period in 2019.
Net loss per share was seven cents for the third quarter of 2020 and 15 cents for the same period in 2019.
This reduction reflects additional shares of common stock and warrants for common stock sold in an underwritten public and private offering in September 2019.
Common stock sold in 2020 through our at the market facility.
At September 30.
We had approximately 71.1 million shares of common stock outstanding.
We ended Q3 was 30.5 million in cash cash equivalents and short term available for sale securities.
I will now turn the call back to John for closing comments.
Thank you Sean.
This has been an unprecedented time.
Coming into 2020, HDD had strong growth momentum in our core business of molecular profiling and we're in the process of reloading, our biopharma pipeline to pursue additional companion diagnostic opportunities the new pharma collaborations.
Since March we have been impacted by work from home regulations that have reduced the number of samples coming to HPG is very old lab for processing and hampered ability of our customers. We have our instruments the by kids and run samples in their laboratories.
Our business has also been impacted as a number of clinical trials have slowed or stopped.
So weve adapted our.
Our company culture will not allow us to be a victim.
We've taken steps to diversify our customer base.
Taken steps to find market opportunities beyond oncology that had been less impacted by COVID-19.
We've taken steps to increase our installed base of instruments to enable more samples to be run in our customer's facilities.
We've worked aggressively with our lead users and collaborators to continue to grow our publication base.
And we've not taken our eye off the key value creation product development initiatives like exciting new applications on our existing panels and continued successful milestone achievement on our whole transcriptome W. TTX product.
We've done all this despite reduced revenue at our targeted cash burn rate.
I believe we made the appropriate adjustments the weather this storm and.
We're starting to see the results.
As we learn to operate in our COVID-19 World, We believe our oncology customers and now our new immune response customers will continue to come back to work slowly building the growth momentum for our business and.
And hcg will be here stronger more capable and soon with an exciting whole transcriptome W. TTX platform technology that we believe will transform the market opportunities for HPG.
With that I'd like to open up the call for questions.
Thank you, ladies and gentlemen at this time well be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad a confirmation total indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the Q.
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Our first question comes from the line of Kristen Costco with Cantor Fitzgerald. Please proceed with your question.
Hi, John and Sean Thanks, So much for taking the question. So I wanted to ask about the whole transcriptome panel. So you presented a lot of evidence, including this recent white paper talking about you know the key differences with Arnie feet.
As well as you know the potential advantages. So I wanted to ask once this becomes launched in mid 2021, we're not going to be some of the key metrics are items that you will look to collect from your customers to learn.
Any other potential advantages, especially in this situation since they might be you know switching from Arnie, Steve can you know how might that collection of information help further advertise the product.
Hi, Christian Thanks. This is John Great question.
I answered a couple of different ways. One we were excited by this product because today, if you're doing biomarker discovery, you're likely doing it if that's an irony gene expression.
Hi, Mark.
Marker on aren't I see and so we then have to go in and trying to displace arnie sake as they move to a smaller more manageable Pat a panel or we believe with the whole transcriptome. We suddenly have a platform technology that can go from discovery or through a buyer.
A marker development and if need be all the way to the clinic with a companion diagnostic.
Again, with a kind of a faster better cheaper way to do that.
So it's a bit of a new play for fresh TG and I think it opens up the entire.
Billion dollar arent, a molecular profiling business that that weve size this to be.
The other so so in regards to key metrics for us it's going to be in a couple areas. One is going to be the number of customers that are actually bringing this technology on and then two it also opens up other disease states because up until this point, 99% of the efforts of hcg event on.
Ontology and as we've seen especially recently immune response as.
As well as other disease areas like transplant diabetes.
And the like are also attractive markets for on a gene gene expression and wind up with a universal product. That's not just a cancer product, we think that it opens up that so we will also be.
Very closely monitoring and learning quickly and adapting about other disease areas that we're also repositioning the company into.
So customer adoption [laughter].
Okay, great. Thanks, Yeah, and I know in the in the press release, when you announced the White paper you also talked about the rare disease market, which you know were seeing a lot more trials and a lot more F.D.A. and you may incentives for companies to focus on these indication. So how are you looking to you know learn about new customers out there that are in this you know on.
Calls you field, where you've had most of your your focus and then are you doing any efforts now ahead of this launch you know in six months or so in the middle of next year.
Great. One so one of the things that companies like us to do is we have an early access program and that's really the next stage for the development of this program and we'll continue the technical development I do believe the heavy lifting there as is mostly done now it's around characterizing that.
Formats of the device if you will with how I read depths and are there differences in tissue types differences and sample types et cetera. So that when we do fully launch we've got no very.
Very tight protocols that we can recommend to customers, but between now and then there's a tremendous amount of customer work that we'll be doing to run our customer samples and began engaging thought leaders and key opinion leaders that literally have them help us better understand how they were.
I'd like to use the product in in you know in many cases, probably in parallel with our neighbours see and then also what other disease areas do they think we should also be looking at what other sample types should we be looking at so that's really the the next big body of work is really our kind of our market.
I'll admit teams are now that we've got.
Prototype assays that we can run here in Tucson, They will be now engaging people that we've already got on the list, but we actually now can actually start start to run samples generate data and learn the best way to position the product in the market.
Okay, great. Thanks, and then the last question from me is how do you think about you know DNA versus our NAND and some of these segments as well.
Good question I think it depends upon the disease state.
As as as is well known in oncology, obviously, the last decade deck in a decade and a half its been a DNA game specifically around mutations. It's also it's still going to stay a DNA game I think as you look at liquid biopsy. However, 50% of patients don't have an actionable mutation so there.
They're they're looking at pathways in the like your sub types presents additional opportunities for clinicians to to look at deferring differential treatments for those patients and I do think aren't able also work its way into liquid biopsy.
So in oncology.
It's a multiomics world I think you need DNA I think you need Arnie I think any protein and as I've said over and over again, what we're just trying to do is to build the best gene expression profiling chemistry, and workflow and we believe we have it now in other disease areas like auto immune.
That's not a DNA game because its not mutations that are actually yeah, you're right that are helpful. As you're looking at immune response or cytokine storm.
Storms or the like that is absolutely going to be in our in a game and the protein game.
So we believe Theres theres, new market opportunities for HPG in those areas and then as we mentioned we also think infectious disease. We can take a look at building viral panels. We can look at respiratory virus response and diseases like you know what.
What we've got here with Covance, but others as well so we can actually develop.
Profiles and sub types to look at why some people responded one way and why some people respond another when they when they when they have a bacterial or viral infection. So I do think the W. TTX just is going to open up the entire market as opposed to just the oncology market, but again.
Then I still also believe it is a multi almac world.
And researchers need all the tools.
And we just want to have again, the best in class one for Arnie gene expression.
Great. Thank you again.
Thank you.
Our next question comes from the line of Alex and Ani with Craig Hallum. Please proceed with your question.
Great Good afternoon, everyone.
John what are the next timelines here for the old transcripts on test and then we've got the proof of concept data that you reiterated that mid 2021 launch what else should we expect between now and then.
Yeah, you're going to see that this the start of our early access program.
Between now and the end of the year sometime late December early January.
You should probably look for another probably definitive white paper that will probably be the last one that essentially will be.
GAAP.
Design lock in other words the final.
Gene content probe designs assay conditions will be will be locked and then you'll see a fall comparisons aren't AC are.
We're going to strive to have that out before JPM right.
Right now we're on the we're on plan to do that but yeah, theres always things that could come up. So you know our emphasis that I always give our product at all my guys are as quality first timing second costs third so I don't want to I don't want to force them to do something that's that's out order.
And then and then from there I think we will start to take it out and look to then fine.
Find commercial adopters of the technology in in Q1 and in Q2 and again, we are still on path for June.
June June July ish launch follow on you know full.
Full throttles up for the product.
Yeah, and maybe expand on what the what the sales strategy will be when this is launched.
Next year is this is this still give you a razor razorblade task sold through the Edgeseq system or its again it should be sold through the clinical lab and maybe expand on what the sales force. It through the sales force is primarily going to be calling on these as pharmaceutical it academic labs OEM labs.
Just help us out there.
A great question out so it depends upon the segment that we're serving so for the academic medical centers, it's going to be positioned in two places first and translational research it will be positioned as a more efficient and easier to implement.
Platform technology versus aren't they seek for bile.
Biomarker discovery.
Signature discovery.
It would be and then you can down select the smaller panels that are more sequencer efficient so that that's the one market. The other market it will be positioned denizen in actually in the CLIA lab.
Of the academic medical centers to be actually use almost as an OEM substrate that they then can build their own signatures to.
And and bring up.
LD t. tasks under CLIA that they would then have validated in the U.S. This this product and again, that's why we built that under design control to a very high.
Yes standard if you will from a from a performance perspective. So that's the academics translational research CLIA lab in pharma, we expect that this will kind to replace almost all of our customers.
Panels. This becomes the universal R&D gene expression platform that you probably shouldn't use so why why why no risk.
Risk missing a pathway or risk missing something that could be relevant, especially as your.
Developing datasets.
Because it's not going to be that much more expensive to use than two or 3000 gene panel.
And so and then if you.
The ability to get all of that data an entire transcriptome off one cut a tissue I think makes it a very very very attractive.
Alternative Darren I seek which uses a lot more sample and so that would be our intention there and then if so if a signature is then develop that they want to move forward with you all on for for the next set of collaboration I fully expect they would then down select to a smaller and I'll call. It hundreds to maybe a thousand.
Genes.
Because you why burn all that sequence our capacity if you don't have to offer.
And again that that assay transfer is going to be a lot easier because the probe designs not going to change nor will the assay chemistry change. So you are bridging studies are much simpler versus if you're if you're doing your discovery today on aren't I see and then you're trying to port that assay either to HPG airport it over to Nanostring Oreo.
Reported overdone Pcr.
There is a chemistry change and there's there's a probe sequence change and so there is there is a lot more risk or that bridging study. So I think we give pharma kind of a.
A one platform answer at least as it really revolves around aren't a gene expression that go from discovery all the way to a companion diagnostic and then the last market that you called out is really the.
The people who already have content.
And are starting to bring up gene expression tests and and in that market.
It might be they bring in our boxes and our cats, but it might also be.
Yes, they've already got automation, so that might look a lot more like a licensing agreement a limited distribution limited field of use distribution agreement and then selling them reagents or perhaps say a.
Royalty on their test so the value capture I think in the first two markets the academic and pharma will probably be.
Either services or or kits and instruments as we play almost as an OEM provider to other.
Pest developers I think it will be more of a licensing agreement type transaction.
Okay very very helpful. And then just kind of going out and looking at the quarter here in the sales perspective, just given the results of some of the life Science names and I guess, even looking at and we'll make a neogenomics on their cancer research business I'm, just trying to I'm just struggling to understand why Youre group of customers fail to return.
And to work in Q3, I, just kind of digging into it do you think some of the pharma companies are returning to work and are dropping technologies and dropping aid CJ pro finalist or just any any help.
Pars out why some of these customers are returned that work when we're seeing other companies announced that they are seeing return that work.
Yeah, I think it's hard to compare us to some others I mean folks that have clinical.
Revenues, yes, those clinical revenues are going to come back I mean, how far quicker and project revenues out of pharma.
We were very very very highly leveraged by a couple of very big customers of ours that our one on one on the east coast and one on the West coast that even today remain closed.
They're just you know we are they are they are pushing back work.
And it if anything it exposed to us I think that we were too.
Two focused on some of the big guys and on the coasts and we started immediately when we saw this happening in early Q, knowing it was going to sustain in early Q2 on a customer diversification.
Strategy, because we need we knew we needed to get into summer.
Some of the smaller.
Biotechs and other farm US now, we do track pretty aggressively.
The the status of things and just to kind of ballpark in our pharma business. We are seeing now at the end of <unk>.
The Q3, yes.
About a quarter of the pharma customers are back so they're they're they're turning back on which is up from probably single digit.
And then we're seeing people that are in a day or two a week almost half of them. So we're seeing our market you know almost three quarters of our pharma business is coming back online and we're seeing that this quarter and then some of the orders that are coming through in the academic market the rate.
Ratios are almost the same which is.
Again, an increase in October from where we were in say June or July and then in Europe, which I think is it has a lot to do with why we've been able to hold on pretty good now about 90% of Europe is fully open.
So were you know that that's why I think we maintain momentum so were you know cautiously.
Cautiously optimistic that we've added new customers, which was part of our strategy and then as our existing customers return to work.
We expect that we're going to get back.
And to that that growth mode that we've seen and then the question is going to be is how quickly can we make up.
That 233 quarter gap that.
We've just gone through but I do think we hit bottom and we're on our way up right now.
Okay. That's that's very helpful. And then just two more questions is that the pdps that to Pdps. Your work away do you think those contracts. So I guess are those contracts still active in our install programs that should come back online.
Thinking in 2021.
Theres still active whether or not they're going to they're they'll move forward I still don't know.
The longer they go obviously, the more nervous I become and.
Yeah. Those are those you know we have to keep working them and we have to get new ones.
That's that's abundantly clear we have been in a drought.
We kinda yes.
Not by fault.
But the Cajun situation hurt us and now we know Weve reposition that agreement. So now were there our distributor which is what we need.
And our sales team now is free to go in there and yes I.
Do deals off the Illumina Sequencers and Thats, what we have to make happen and it's abundantly clear that yeah.
Thats an appliance.
Okay got it and then shot I missed it how many shares were issued in the quarter through the through the ATM and the other financing agreement that you have in place.
We raised approximately two and a half million dollars for the quarter Alex.
Prices north of 60 cents.
Okay got it thank you.
Thank you Alex.
Our next question comes on the line of Puneet Souda with EPS VB Leerink. Please proceed with your question.
Hey, guys. This is what's the entrepreneur today, thanks for taking the questions that I want to follow back up on the whole transcriptome Carroll area.
Just a question on the economics, and just kind of what your expectations are now looking forward and if we can expect any acceleration in cash burn.
Over the next couple of quarters as we look towards commercialization.
Yeah, I'll start with some of it and I will turn it to the Sean I actually think most of the risk.
Of the of the development of that product is behind us.
When we started I wasn't we weren't sure of a lot of variables and we've kind of checked the boxes on most of the design.
[noise] criteria, so I feel very comfortable that were not staring at any unexpected.
It looks in regards to increase cost matter of fact, I think as we go forward were expecting pretty much a steady state.
R&D line without it a substantial increase in in in that and well where we're at maybe without the risk you go into two technical as now we need to understand by tissue type. How many reads are we going to have to throw at each of each of those sample types. Both both by disease and then.
By sample type.
And then that then determines the sequencer cost in sequence or efficiency.
And now there will be there will be puts and takes on that and that's the body of work that's kind of in front of us right now but.
Well, we're we're expecting a product that's going to yet.
Yes, maybe a few hundred dollars more than what were our current panels.
We still think that positions itself well underneath aren't a seek price points in the market.
And we're expecting very similar gross margins for the on the product side, which is that 80% to 90% product margin.
And then Sean Great thing out Oh, yes.
All right. So you.
No no nothing to add other than we're still targeting that 5 million per quarter burn and.
We've we've managed that over the last three quarters and.
No showed there.
There should be no material uptick in spending.
Obviously, we meet or cash and Opex, along with Capex, just just to make sure that we're we're hearing to the 5 million per quarter burn target.
Great. Thank you I appreciate that and then kind of shifting gears a little bit can you still.
Just looking at some of the positive trends that you highlighted in the non oncology opportunities.
I guess, how much of a contribution of the two performance in the quarter and how can we expect that.
Moving forward.
Yes.
Yes, so we picked up quite a bit of a new business and and immune response. So specifically lupus is an area that is an area of focus and we've got a fairly large pharma client that has us looking at some yes.
Yep.
Peyton lupus or not Lucas cobot samples for patients because they are trying to understand disease progression and on how best to manage these these folks.
And so that that is just starting.
So were and but they're fairly large sample cohorts I want the one thing that's different about autoimmune and disease response versus oncology is the cohorts or are in the thousands.
In regards the number of samples for us oncology, usually a in our clinical trial might be a few hundred samples. So these are really really big markets and to some extent we're learning.
As we go but we've been very encouraged and.
About about that and also these are these are different sample types. These are in many cases.
Some sort of a blood based sample type.
We're working with so we're pushing it into a different sample than Weve worked before and we're very pleased that the assays work and.
It continues to give us encouragement that we're going to be able to push this technology into markets beyond oncology.
Great and then just last one on the there you mentioned that.
Focusing recently and just kind of diversifying your customer base into the smaller and mid size.
Customers I guess, how much upside do you see there in terms of kind of like a new store same store.
Type of dynamic just I mean, obviously smaller closer as larger scope of business, but.
Just curious on your thoughts looking forward.
Yes, I mean, obviously, we're not playing to lose any of our big big current customers, but.
Yes through the through the first.
Three quarters, we added four new names to our pharma pharma client list and in Q4, you know leased if sales delivers on what they are saying no. We will deliver that plus maybe 50% and some of those are some are some pretty big names.
So, but we're just you know I guess, what I'm trying to.
It's we want to go after the folks we think have great new compounds.
And we've also gotten some great help from some of our investors that have also made some introductions for us.
So I would look to see that our customer diversification will continue and again I'm very.
I'm comfortable that between the new customer adds and then the legacy customers coming back online, we're really setting a stage I think for a pretty good year in 2021 barring another shutdown.
That's great. Thank you very much.
Thank you.
Our next question comes from the line of Yi Chen with H.C. Wainwright. Please proceed with your question.
Thank you for taking my questions. My first question is would you say be.
Upcoming launch up the whole transcriptome Panto EMEA 2021 is also dependent on the citroen.
Situation up the call good.
First of all good good to hear you actually this one I feel really good about I mean, I know we have complete I should quickly we have like 95% control over our timelines. This is around us executing.
We're psus were susceptible little bit because we buy probes and if something happens to our pro vendor that that could cause a delay.
We're susceptible to if we are if our Sequencers go down and we got to have alumina, our thermal come inherent provide service switch and Kobin days is more difficult than noncovered days, but to a great extent. We you know we've got flexibility we can do weekends to catch that up so I think we're.
We're comfortable with our target launch date of mid 2021.
But would you say.
The covis situation infuse severe at that time.
The potential sales of the panel and the second second half of 2021 would be affected due to.
The situation of your customers.
Yeah, that's absolutely true if our customers stop coming back to work yeah that again.
And so it's hard to use our products if yes, no one's in the labs and so what we are seeing I mean, we're really seeing people getting used to working in this new environment.
I think if there are temporary shutdowns. So for example, the UK kind of shut things down for a couple of weeks, but I saw three orders come through from the UK. This week. This.
This week and last so.
It's I think people are figuring out how to get back to work and if we do have enough pushbacks because a co bid I think there'll be regionalized and I don't think they're going to be you know the three month draconian.
Responses that.
People were originally thinking about when when this thing first started in March April.
Got it and regarding your large customers who are currently.
So to close.
Indicated that they plan to remain close to the Cobi 19, either completely eliminated or they will try to store open the line ups. When there is about things available.
Are they will regardless of the situation next year do we will try to gradually be opened the lapse in the first half of next year.
Good question I want to make sure I'm clear.
We're seeing both of those big customers starting to come back a day or two a week so they're not fall.
So there you know, they're not zero, which is what they were maybe for the Q2.
We're now so they're starting their revenue is starting to return.
It's just not what it was in 2019.
And so and then yes, they have communicated to us that office staff they.
They expect to stay at home well into next year.
But you know they also are dependent upon getting things out of their laboratory. So.
He can't shut down a pharmaceutical company for a year and so I think they also are finding ways to bring people in with lower density may in and hence that's why just it's a day or two a week. So they can.
Keep a safe working environment for their employees.
Got it thank you.
Yes.
There are no further questions in the queue I'd like to hand, the call back to management for closing remarks.
Sure well first I would like to thank everyone for joining us today.
The analysts and.
And everyone else in particular I have to again, thank the HDD employees, who just continuing to show tremendous loyalty and dedication to this company.
I'd also like to thank our shareholders for their encouragement and support as.
As previously mentioned and I get a lot of phone calls and I appreciate it when when there's some.
Some introductions that are made and last I really want to thank our board of directors, who have been extremely helpful. In guidance and counsel to me into management. During this unprecedented unprecedented time in the history of our company.
And we look forward to updating you again in our next earnings call. So thank you very much.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.