Q4 2020 Fluidigm Corp Earnings Call
Ladies and gentlemen, and thank you for standing by and welcome to the Blue dye and fourth quarter of 'twenty and 'twenty financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand the conference your speaker today Agnes Lee. Please go ahead ma'am.
Thank you Joelle and good afternoon, everyone welcome to food on fourth quarter, 'twenty and 'twenty earnings conference call at the close of the market today glued on released its financial results for the quarter ended December 32020. During this call. We will review our results and provide commentary on our financial and operational performance.
Market trends and strategic initiatives and our response to the COVID-19 pandemic presenting.
Presenting for food on today will be crystal and wait.
Our president and CEO and pick from Joe our CFO during the call and subsequent Q&A session. We will make forward looking statements about events and circumstances that have not yet occurred including plans and protections for our business future financial results and market trends and opportunities exam.
Examples include statements about expected financial performance.
<unk> guidance related to revenue product line performance net loss margin operating expenses and investment plans as well as statements about COVID-19 testing opportunity.
And product releases collaborations and partnerships funding sources market.
And revenue growth expectation.
Our expectation on trends and diagnostics and other clinical markets and.
And fluid on strategic plans to access and grow those markets. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations.
Information on these risks and uncertainties and other information affecting our business and operating results is contained in our annual report on form 10-K for the year ended December 31, 20, and 19 as well as our other filings with the SEC.
The forward looking statements on this call are based on information currently available to us and Florida and disclaims any obligation to update these forward looking statements, except as may be required by law.
During the call we will present, some financial information on a non-GAAP basis non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement and understanding of the company's operating results as reported under U S. GAAP.
We encourage you to carefully consider our results under GAAP as well as our supplemental non-GAAP information and a reconciliation between these presentations.
Reconciliations between GAAP and non-GAAP operating results are presented and the table accompanying our earnings release, which can be found on the investors section of our website and will now turn the call over to Chris <unk>, our president and CEO.
Yeah.
Thank you Magnus and good afternoon.
And so I think about everything that's happened in the past year. It is clear that the ongoing global pandemic has affected every aspect of our business driving the need for seamless execution as well as opening new doors and accelerating greater opportunities.
In fact, the pandemic has slipped the entire health care ecosystem on its head.
By leveraging our core competencies and blue diamonds fast emerging as one of the most unique and disruptive forces and life Science technologies.
We now span the spectrum from discovery to diagnostics, the latter of which is opening massive new markets for us to pursue.
Diagnostics and healthcare decision, making are ripe for transformation all pioneer our pioneering technologies will help to propel this paradigm shift as our franchises rapidly evolve and the diagnostic and health care decision, making platforms of choice for laboratories around the world that are working to address the most pressing problems and infectious.
Disease immunology and oncology.
Regarding our fourth quarter I am so proud and higher fluid on team for delivering financial results that were the highest and the company's history relentlessly focusing on employee safety and addressing our customers' urgent COVID-19 related needs.
And our team's actions reflect our shared values and and ethos, we call stepping up including a commitment and a passion to rapidly deploy our technology to combat the pandemic of today, while accelerating our journey and to new diagnostic categories and.
Broader health care decision, making.
We expect 'twenty 'twenty, one to be an incredibly exciting year in terms of new accounts to acquire new markets to penetrate new products and capabilities to deliver new insights and new partnerships to improve channel power.
Customer adoption and overall utilization of our platforms.
Before I turn the call over to Vikram to discuss our fourth quarter and fiscal 'twenty and 'twenty results. Let me first give you an overview of what we're calling vision 2025.
Our updated strategic plan followed.
Followed by more in depth look at our go to market strategy, and both Microfluidics and mass cytometry.
The events of 'twenty and 'twenty have validated our long held perspective that the traditional diagnostics market is going through is going through a seismic shift where new entrants like fluid arm, who bring new testing strategies new channels.
Hi, flexibility lab efficiencies and rapid scaling can capitalize on and enormous addressable market opportunity.
Our board and management team have been working together to refine our long term plan to align with this perspective.
And a short time, we have built new assets that are foundational to diagnostics. We are confident that we have the right assets. The right team the right vision and the right strategy to access the tremendous opportunity before us.
We have believed for some time and.
And recently reaffirmed the Covid will have a profound and continued impact on health care and ways not imagined at the beginning of the outbreak.
Pandemic has made increasingly clear the necessity of new tools for combating infectious disease, and a paradigm shift and disruption and the delivery of diagnostic test results.
Fluid I'm, we are bringing to market and array of new technologies that are increasingly essential and these efforts.
We have proven our ability to deliver high throughput flexible low cost testing solutions by leveraging our differentiated microfluidics technology on.
On a parallel path.
And mass cytometry, we're moving closer to health care from a research routes. We are uniquely positioned to provide health care insights through a proven technology that elucidate a deeper understanding of the immune response disease pathology and increasingly turns these insights into treatment strategies.
We are focused on accelerating market adoption of both Microfluidics and mass cytometry diagnostics and healthcare oriented labs, we are incorporating the lessons we learned from Covid.
And applying them to a broader spectrum of diseases.
We have many options for growth and we will be selective and the areas. We pursue with our resources. We expect the long term growth rates of both of our franchises to exceed 20% with a $12 billion to $15 billion immediately addressable market and molecular diagnostics complementing our existing approximately $3 billion market opportunity.
We have and exciting array of new products, and our pipeline and we'll start to unveil them to the marketplace in 'twenty and 'twenty one.
This is a direct result of our conscious shift to higher growth.
Higher return on investment offerings, we're targeting next generation health care decision tools, including diagnostics and applied markets research throughout our portfolio. We believe there is an opportunity to increase our footprint across thousands of new labs, including general CLIA testing labs flow cores, and clinical and <unk> anatomical but.
Apologies.
We are now at the Dawn of a revolution powered by digital health that will transform the health care ecosystem.
We are committed to helping clinicians and emerging digital help providers deliver more informed healthcare decisions and better serve their patients by expanding access to broad testing and connecting clinicians more directly with their patients are.
Our investments are focused on transformative partnerships technologies and capabilities to achieve optimal patient outcomes as we navigate the current pandemic and apply the lessons we have learned to other applications and health care decision, making.
Now I'd like to take a closer look at our Microfluidics and mass cytometry business lines.
Let me start with Microfluidics Microfluidics.
And our game plan and solidifying our leadership position as the next generation Diagnostics company.
We will do this and four primary ways.
First we will advance our technological innovation to simplify our workflow serve the decentralized market and acquire new accounts.
We will expand into new channels, such as digital health care and telemedicine providers.
Third we will build upon the beachhead that we've established and labs to penetrate new markets.
These labs already utilize our innovative diagnostics systems and are looking for a next generation testing menu for the post Covid era, and therefore fourth we will introduce new capabilities and diagnostic content as we expand our menu to new therapeutic areas, which will drive a higher proportion of recurring revenue.
Although the Covid pandemic caused significant disruption to our business. It also presented opportunities for us to prove the advantages of our unique technology to new accounts.
Over the course of 'twenty and 'twenty we.
We were able to help revolutionize testing for the benefits of patients and first responders around the country and around the world.
We believe Covid testing represents a five to 10 year market opportunity that high levels of testing are required in concert with vaccination and the testing should be maintained for national surveillance as well as and industries such as travel.
In other words more vaccinations does not mean fewer tests.
During the year, we saw strong demand for the markets first commercially available saliva based COVID-19 testing kits, leading to broad based improvements across the business.
Microfluidics revenue grew 89% from Covid testing alone and we sold $2 2 million Covid tests over the past six months.
These results are truly a testament to our ability to rapidly scale bring new tests to market and acquire new customers.
I strongly believe that the impact of Covid on health care will be profound and the ripples will continue to be felt for a long time to come.
<unk> has disrupted the diagnostics industry, creating new opportunities for digital health providers and demonstrating the need for high throughput cost effective and flexible testing technology that can be rapidly adapted as new information arises such as new viral sequences, new pathogens and population stratification with differentiated treatment plans and.
Informed by companion tests and datasets.
While these unprecedented times.
Represent an inflection point for the broader industry. Our business has also reached a key inflection point that will redefine our future.
And we now have the capability to build a durable diagnostics business powered by Microfluidics subsidized by Covid testing demand and non dilutive funding.
Our path to grow is clear we must keep focusing on our strengths, we are and innovation leader for neat saliva diagnostics and collection.
Our cost effective solutions are best in class and are ready to be deployed on a mass scale.
We can provide a highly dynamic range of lab throughput and.
And our technology is extremely flexible.
This proprietary technology is what enables rapid iteration of panels assays and tests.
<unk> that drive recurring revenue to adapt to new viral strains and new diagnostic content and form better treatment decisions and support vaccine implementation.
In fact, we have and extensive runway to continued growth as we further advance the transformation of our Microfluidics franchise and.
And to a durable diagnostics platform.
This strategy shift will launch longer term revenue acceleration in the business broadened our customer base and increased recurring revenue.
And this diagnostics Revolution, we will not work alone for.
And for example in 'twenty and 'twenty. In addition to building a network of testing partners to increase access to saliva based COVID-19 testing to communities. We also secured new partnerships for building new capabilities.
Access and new markets.
Penetrating new labs, and developing new products.
This work will continue in 'twenty and 'twenty one.
Over the coming months, we intend to establish new relationships with sample aggregators to expand COVID-19 related opportunities and drive commercial execution as well as with digital health providers and new market entrants and areas such as retail as a channel for a differentiated COVID-19 testing platform.
We are also planning to enter into new collaborations to Creek.
And improved workflows on our next generation platform, which we believe will have an impact that transcends COVID-19.
The applications of our Microfluidics technology are not limited to infectious disease, we are already seeing emerging utilization of our technology and oncology Genotyping and clinical research arenas.
Going forward, we will continue pivoting from a highly academic focus to broader clinical and diagnostic applications and will continue strengthening our competitive positioning and diagnostics, where we see and a large addressable opportunity ripe for disintermediation.
We proved ourselves as disruptors by creating the first commercially kitted saliva based Covid test, which has been adopted by several universities, including the recently announced addition of George Mason University.
Our multi year product pipeline is robust, including several major new product releases in 2021, and we remain on track for our next generation biomarker platform release in the summer.
We have a clear go to market strategy focused on sample aggregators customer labs, and connecting providers and we will be partnering with digital platforms to eliminate the need for costly sales channels.
Leveling the playing field with larger peers. We will also continue innovating with a new instrument and sample to answer IFC.
And we are working toward embedding digital capabilities into our products and offerings to meet the future needs of the diagnostics industry.
The digital health care was a revolution is here to stay and we intend to play a leadership role in this transformation or.
Our recently appointed Chief Digital Officer will lead our efforts embedding digital into our product and solutions roadmap.
Overall, I'm incredibly proud of the way our team's agility and responsiveness has paved the way for accelerating growth and increased opportunity in 2021 and beyond this is what gives us confidence and our ability to achieve and expected organic growth rate of low to mid twenties through 2025, and our microfluidics business.
Now, let me turn to our other core franchise mass cytometry and why this technology is the most powerful platform for key clinical and health care decision, making.
Our game plan for mass cytometry growth comprises four key elements.
First we intend to propel our established beachhead and academia into clinical labs, with our health care with a health care decision, making tools.
Second we will continue to innovate our technology and improve the platform.
Third we will be embedding digital capabilities into our product suite for better informed healthcare decisions.
And fourth we will leverage the competitive advantage, we have over our competitors and regulated markets to move into health care decision, making.
First we've established an enviable beachhead and academic flow.
With over 325 active systems, which have attracted scores of new users.
Furthermore, we are becoming the gold standard for immune system studies with review committees requesting mass cytometry datasets in study designs.
As a result, we are seeing increased recurring revenue and publications and.
And the last year alone, we saw a 100% increase and our publication rate, which has now exceeded 1380 cumulative publications and reviews and baldy mass cytometry.
Mass cytometry is moving ever closer to serving and its central role and healthcare decision, making.
And we believe we are the market leader and generating cytometry based academic insights.
Used to address applied market health care questions.
We don't intend to undertake this revolution alone we've been building collaborations and partnerships to forge new ground for applications for mass cytometry.
<unk> example is the collaboration with PLT Tech, we announced today.
We are excited about this collaboration to introduce our mass cytometry platform registered for diagnostics and China.
As part of this collaboration.
We will be working with PLT tech to submit fluidized Helios suspension instrument for the Chinese diagnostics approval.
Under the agreement.
<unk> Tec will initially focus on panel development of blood panel for blood panel diagnostics, particularly those affecting children and ultimately develop prognostic applications to evaluate effectiveness of immunotherapy treatments and.
<unk> intends to purchase three systems as part of this agreement.
Taking a step back our mass cytometry business comprises two segments suspension and imaging.
With regards to suspension, we plan to significantly increase our existing footprint of over 325 active instrument instruments.
Moving from discovery research applications, as we advance into commercial labs and contract research organizations, which number over 1200.
Our customers turn to us to address their pain points, including number of markers analyzed simultaneously.
Resolution and single cell based analysis.
As a result, we are seeing an increasing number of publications and studies using mass cytometry technology to shed new light on diseases, we've been placing as many as 35% to 50 analyzers per year.
And driving utilization with new content and workflows that are named and significant studies and publications.
<unk> direct immune profiling assay <unk>.
<unk> delivers a complete sample to answer solution for high dimensional immune profiling.
And it's become a standard method for assessing immune system response.
For example, just this week, we announced that the NIH expense it's.
Sponsored a study at Stanford Medical school focused on pediatric patients with MSC, using our <unk> direct immune profiling assay.
These studies and publications are a leading indicator that our technology will play a pivotal role and the health care evolution to come.
In addition to suspension, we view imaging is a highly attractive market that will extend well into the future.
That is why on the past two years, we focused our efforts on helping our customers better understand the immuno scientific subject of study and investigation with a huge impact on health care that requires insights and the single cells, both cells and tissue.
Currently high complexity imaging is dominated by immuno fluorescence and immunohistochemistry.
And to examine the cellular localization of proteins and visualized antigens and cells.
There is however, a great need by our researchers to be able to see even more plexi, not only and research settings, but increasingly increasingly and clinical work ups of tumor characterization and.
It is clear that the <unk> opportunity ahead of us as a mess. We currently have an installed base of more than 100 imaging systems and 17 countries, but we estimate that our serviceable market is at least an order of magnitude greater with more than 500 possible labs, who could benefit from deploying our instrumentation and.
And our consumables.
In fact fluid on them is uniquely positioned to serve both the discovery and applied markets with our proven technology and scientifically published studies.
And this year, we will be leveraging our partnerships to drive greater adoption, and Biopharma and crows and looking to expand even further and the imaging cores and pathology labs beyond 2021.
We are expanding our focus from image acquisition to encompass both pre and post imaging analytical solutions through new partnerships, such as and <unk> labs and Vizio farm.
We're using our therapeutic insights and Japan services lab.
To customize and access <unk> emerging new capabilities.
And exciting areas of advanced health care oriented biology.
One service one service project and particularly we wanted to highlight is our recent work with Georgetown Lombardi comprehensive cancer Center, which led to a publication to identify novel targets for pension and pancreatic cancer therapy as.
As well as an idea to form a new private company around these insights.
And finally as another proof of our leadership and enabling cutting edge research. We're pleased to see that our services labs have more than 40 projects completed or in progress, including several focused on COVID-19 related research.
In addition to expanding our system placement beachhead.
We will use data to enhance the value of our technology by embedding digital capabilities into our products and technologies, providing an enhanced customer experience.
And our Chief Digital officer will coordinate and drive our digital vision to impact data management and interpretation digital integration of instruments and delivery of information and.
And this will have applications across all of our products, our operations and our customer interactions.
And regulated markets fluid I'm holds a significant advantage over its recently emerging competitors, we have built a rigorous infrastructure encompassing stringent processes operations manufacturing and quality controls that enable us to meet regulatory guidelines.
Can take years for companies to build this infrastructure from scratch.
Lastly, I would like to mention some important news regarding our leadership as we announced in December our board welcomed Dr. On a soccer pitch as its newest director.
On a brings us over 30 years of regulatory and diagnostics experience.
In addition, our recently appointed our Chief Science Officer, Andrew Kong to lead and accelerate our diagnostics initiative.
And I expect to both Anna and Andrew will continue to share their expertise to enable the company to capture a sizable portion of the diagnostics market opportunities.
Going back to our vision 2025 plan.
We are well positioned and our mass cytometry suspension and imaging franchises for sustainable 20% plus growth as we expand into applied research markets.
Across the company, we are bringing to market a pipeline of innovative new products and capabilities, including content workflow and instruments that will be strengthened by our vital partnerships and.
Especially those and digital health care channel.
We will announce progress on this pipeline as the year progresses.
In summary, our four areas of focus on technology innovation expanding beachheads.
Partnerships and menu expansion.
In closing I am confident that the <unk>.
As the company evolves in 2021, regardless.
And regardless of quarter to quarter fluctuations and COVID-19 related uncertainty.
Our mission to improve life by driving meaningful insights and health and disease will stay the same.
<unk> will continue to revolutionize biology by enabling new insights into diseases and power better outcomes for patients we.
We're seeing more and more proof of this more publications more applied settings more clinical trials. The number of these proof points will accelerate result.
Resulting in greater insights and more informed healthcare decisions.
<unk> has already began its journey as a leader and next generation diagnostics and with.
That I would like to now transition a victim vikram.
Sorry, Vikram for a detailed discussion of our fourth quarter and fiscal year operating results.
Thanks, Chris and good afternoon, everyone.
Before turning to the financial results I want to inform everyone that we have posted supplemental financial information. In addition to our investor presentation on our Investor website.
I will begin by providing revenue highlights and follow up with additional color on each of our franchises and regions.
And will then discuss our operating results and and with 2021 guidance.
We are very pleased with our strong performance and the fourth quarter and full year 2020 odd.
Our team remained resilient and resourceful opening up new opportunities and diagnostics and expanding utilization of our mass cytometry technology and infectious diseases using.
Using the same tools that are being used by our customers to gain insights and cancer and immunology.
Total revenue was $44 $6 million, and Q4, 2020 and increase of 38% compared to Q4 2019.
As Chris noted Q4, 2020 revenue broke last year's record and.
And sorry, and broke last quarter's record and is now the highest quarterly revenue ever achieved by fluid on.
During the fourth quarter product and service revenue of $45 million grew 26% compared to Q4 2019.
Microfluidics diagnostics revenue, comprising both consumables and instruments contributed over $9 million driving growth and our overall product and service revenue.
Changes in foreign exchange rates had and approximately two percentage point positive impact on both total and product and service revenue growth.
Microfluidics product and service revenue of $21 million increased 98% year over year, primarily driven by diagnostics revenue, both consumables and instruments.
We sold $1 million to $5 million COVID-19 tests and the quarter up from the 795000 tests that we reported and the third quarter.
OSB was below last quarter, but still within our range of 5% to $20 for test and similar to last quarter and majority of tests sold to universities.
At year, and approximately 30 instrument systems with generating patient results with <unk>.
And now have a base of instruments generating results and commercial labs to drive our near term diagnostics initiatives with partners.
Mass cytometry product and service revenue of $19 $5 million and the fourth quarter was 9% lower than the prior year quarter, mainly due to low instrument revenue offset by higher consumables revenue we.
We saw another quarter of sequential revenue growth for both instruments and consumables as customers placed instrument orders that had been delayed from earlier in the year.
We also benefited from year end seasonality in the fourth quarter.
Future customer ordering activity remains dependent on any impact from COVID-19 jurisdictions, and the pace at which we build on our sales funnel.
Looking at our fourth quarter revenue compared to the prior year period from a regional perspective, the Americas revenue grew 87% to $22 1 million, including $4 1 million of development Grant and license revenue.
<unk> and service revenue increased 57% to $18 million driven by higher Microfluidics diagnostics revenue.
The majority of our Microfluidics diagnostic sales this quarter was in the U S.
EMEA revenue increased by 24% to $14 $3 million. This increase was driven by Microfluidics and mass cytometry consumables offset by lower mass cytometry instrument revenues micro.
And Microfluidics revenue was driven by diagnostics instrument and consumable sales as well as research demands.
Asia Pacific revenue decreased 10% to $8 $2 million, driven by lower Microfluidics and mass cytometry instrument sales offset by mass cytometry consumables and service revenue.
To round up my commentary on the regions in the fourth quarter changes and foreign exchange rates had a six percentage point positive impact on EMEA revenue growth.
As I noted earlier, we reported development grant and license revenue of $4 1 million and Q4. This included $2 7 million of development revenue associated with an OEM supply and development agreement with the customer and.
And $1 4 million of revenue related to a research and develop and grafts.
Moving now to our operating performance, let me start by saying that 2020 was an extraordinary year for fluid on.
Despite all the challenges that were brought on by the pandemic GAAP operating loss for the full year 2020 of $51 million showed a modest improvement from the $51 $8 million of operating loss for the same period last year.
Non-GAAP operating loss showed a more significant improvement of nearly $4 million for the full year of 2020 and non-GAAP operating loss was $20 4 million.
Compared to $24 1 million for the full year 2019.
We drove this improvement by increasing product and service revenue on a full year basis and.
And accessing alternative revenue sources to fund investments for long term growth, including NRA and grant and license revenue of $15 $6 million. We will continue to look for similar sources of revenue and 2021.
The remainder of my comments on operations with a focus on non-GAAP measures. Please note that the reconciliation tables between our GAAP and non-GAAP measures are provided at the end of our earnings press release that was issued earlier today.
Non-GAAP product and service margin was 62, 7% and the fourth quarter of 2020 compared to 64, 9% in the year ago period, and 68, 3% and the third quarter of 2020 non.
Non-GAAP product and service margin on a year over year basis was lower primarily due to reserves for excess and obsolete inventory and lower pricing from mass cytometry instruments, partially offset by a favorable product mix.
<unk> product and service margin was lower due to higher service costs inventory reserves and lower prices from mass cytometry instruments, partially offset by higher utilization of message on the <unk> instrument manufacturing capacity.
Non-GAAP operating expenses were $38 $3 million and the fourth quarter of 2020 compared to $22 9 million and the year ago period.
When the pandemic hit in early 2020, we took immediate action to preserve our liquidity, including reductions in salaries and variable compensation.
With sequential improvements in revenue and the second half of 2020 and increased confidence and our outlook, we are still and employee salaries and short term incentive compensation.
The year over year increase and operating expenses is primarily driven by increased compensation cost, including variable compensation higher facilities costs and higher litigation expenses.
Moving on now to cash flow and the balance sheet cash and cash equivalents short term investments and restricted cash at the end of the fourth quarter of 2020 totaled $69 5 million compared to $73 4 million at the end of the third quarter and $60 7 million at the end.
2019.
Operating cash burn was $8 1 million during the quarter and $19 8 million for the full year 2000.
$15 $4 million improvement compared to 2019.
Accounts receivable day sales outstanding increased to 54 days compared to 40 days at the end of the third quarter.
Investing cash flow was a positive $3 6 million for the quarter and $7 $6 million for the full year, excluding sales and maturities of investments and invest.
Investing cash flows included $14 $3 million and $25 $4 million of proceeds from erratic grant during the quarter and full year respectively.
Capital expenditures were $10 7 million and the quarter and $12 $7 million for the full year compared to $2 5 million in 2019 net.
Year over year increase and capital expenditures was primarily related to the expansion of the IFC manufacturing facility, which is being funded by the <unk> Grant.
At year, and the borrowing base under our asset based revolving credit facility was $15 million, none of which was utilized.
And finally onto guidance.
And 2021, we will be focused on executing on our vision 2025 strategic plan through innovation beachhead expansion partnerships and increased menu.
The COVID-19 pandemic is still ongoing and although we expect it to dissipate as vaccinations proliferate around the globe.
Timing and pace of the recovery remains uncertain.
Allocations of research budgets to Covid related projects that started in 2020 are still in place as we enter 2021 and our expectations for this year and therefore tempered by these uncertainties.
With this backdrop for the full year 2021 zone.
On the product and service revenue is projected to be approximately $140 million to $150 million or approximately 14% to 22% higher year over year on.
Other revenue is projected to be approximately $4 million to $5 million.
Non-GAAP net loss is projected to be between 17 and $21 million.
We expect non-GAAP product and service margin in 2021 to be close to or slightly above full year 2020 levels.
And the franchise level mass cytometry revenue is expected to grow year over year at or below the low end of our total product and service revenue growth range, Georgia is expected to be primarily driven by consumables and service revenue.
Overall microfluidics revenue is expected to grow at or above the higher end of that range and year over year growth and Microfluidics revenue is expected to be primarily driven by diagnostics testing revenue.
Q1 product and service revenue is projected to be approximately $29 million to $31 million.
Reflecting 20% to 29% growth year over year mass cytometry revenue is projected to be approximately 13% to 20% below the prior year quarter due to COVID-19 related delays and instrument orders and APAC and Canada.
Microfluidics revenue is projected to be approximately 85% to 95% above the prior year quarter, primarily driven by diagnostics testing demand.
Other revenue is projected to be approximately $1 million to $2 million and the quarter.
And with that I will open up the line for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press. The pound key please standby will be compile the Q&A roster.
Our first question comes from sung <unk> Nam with <unk>. Your line is now open.
Hi, Thanks for taking the question.
And my son, David Clair.
How are you on.
Maybe on just sorry to cut you off go ahead.
No worries.
Maybe just a clarification on COVID-19 testing and the quarter I think you guys exited last quarter with over 43 systems that were enabled for Covid testing.
And you ended the year with 30 could you kind of talk about that discrepancy there or is it just re categorization.
And then also.
I'm curious I think maybe you talked about and I could be wrong.
Of.
Launching we're submitting for EUA.
And our combo assay for Covid testing with flu a flu b RSV.
Just wondering if theres any changes in terms of that plan.
Thank you for the question, maybe I can take and take the first question.
Perfect. That's exactly I was going from low as you take the first and I'll take the second.
So some day.
In the at the end of the third quarter.
We had about 8% to nine systems that were actually generating patient results.
And so the higher number that you are correctly recollecting was the number of systems that were actually sold.
Into diagnostics testing, but as we had I believe talked about the last time and then subsequently there is a process between the time and instrument is placed at the testing lab until when it actually starts generating patient results and the relevant metric is the number of instruments that are actually generating results.
And that number has in fact grown from that eight to nine to 30 at the end of Q4.
And then I'll tackle the second part if you want to ask any clarifying on either one of those points on <unk>. So with regards to the UA on our combo assay I think you will appreciate the Covid environment is extremely dynamic. So we have actually spent a lot of time prioritizing expanding our menu.
Through things like the CE IBD submission, which we were successful on achieving just in the back half of the quarter early part of the year and the first quarter.
We've also been looking at expanding claims so we actually shifted more towards asymptomatic. So working on screening claims and at our home collection, which are areas that are pretty important to our strategic roadmap and no way whatsoever or is it a reflection on the interest and a combo assay, but we really looked at what we thought the commercial attractiveness for the <unk>.
Near term was going to be for that product and then de prioritize that for the near term on our roadmap and we have other things in the works, which we'll come on to perhaps later as far as menu expansion and the near term that we feel will have a much higher impact on the urgent needs and the market at this moment.
Okay got it that makes sense.
And then just on the Microfluidics business outside of Covid testing would you be able to comment it sounds like Theres a lot of because there are a lot of partnerships.
New product launches coming up and you think you guys can comment on at this point and.
In terms of potential milestones and we can anticipate over the next 12 or 18 months.
I mean, the short answer is I think what was important for US was to present a vision 2025. So you can see really where we're headed and now as you see these announcements come out which we do have many plan to this year you can drop them and as context. So I don't think there'll be a number and that time period, you mentioned, including partnerships.
That are outside of the Microsoft or outside of diagnostics and I'm sorry outside of.
Covid related partnerships for the Microfluidics platform.
Okay got you and then lastly from me.
Congratulations on the plc technology partnership with.
Was curious is are they largely replacing what they were using flow cytometry for for free.
And for some of these applications or are these.
And kind of new applications that they have been validating and developing more recently.
You are right your instinct, it's a combination of both.
Some of it represents flow cytometry business that they think will be better suited and on mass cytometry. And addition of some unique capabilities that our mass cytometer can provide that flow cytometry does not and it actually comes back to the theme we've been discussing around <unk> and the power of getting that answer in a single experiment and our ability to build larger.
<unk> and larger panels and run them all on a single and a single experiment. So as you well appreciate the challenges of fluorescence based technology I think is struggling to scale to the needs of the future and this is a great I think a great example of an organization that evaluated both on us.
Moves towards mass cytometry.
Great. Thank you I'll get back in the queue.
Thank you.
Thank you. Our next question comes from Dan Brennan with UBS. Your line is now open.
Great. Thanks for thanks for the questions guys. So I guess first question just digging into Covid a bit.
So Q4 results were definitely light on what we expected Chris just comment on sort of comment a little bit about the traction that you saw how it manifested versus what you expected and then on B and should it get specifically, what's baked in from <unk> and for 2021 for Covid.
Yes.
Okay, Victor I'll, probably have you take the second part of the question and I'll address the first.
And I can only say that we were extremely pleased with the performance and the fourth quarter and including the performance and Covid testing and six months time period, we went from essentially the first.
Emergency use authorization and August.
For symptomatic claims alone with essentially no installed base to delivering more than 2 million tests to the market. So.
I recognize that and all others may have had aspirations, even more aggressive, but we were we knew and we talked about and I think and our call color and commentary as best we could that we were really new into this and we were only at that point I think maybe 90 to 120 days in and to that call period, and so we were still on the learning process and what it takes for labs to stand up to valid.
And <unk>.
And for them to acquire their own samples and their own business model variability, but I think our experiences and our fourth quarter has actually been quite instrumental and insightful and and influencing and shaping our 'twenty one priorities. So theres a number of things that we can do we believe too.
Drive more success into this and existing installed base as well as expand our installed base and consumable stream and a couple of those is about getting more access to saliva based approaches and specifically fluidized saliva based approach in the marketplace and that's why digital partnerships and partnerships and general are really important to that.
And to feed more business into our core partner Labs. In addition, we're going to continue to make improvements on innovation. So we've talked about the next generation platform and IFC coming out later this year and then the third is expanding our regulatory claims so it's easier on it.
It is so we can market our technology across more use cases to address on many of these emerging market segments across the economy.
Vikram I'll toss to you on the second part.
Yeah, sure Hi, Dan.
Our microfluidics business.
Is going to grow between 85% and 95%.
From Q1 of 2022, Q1, and 2021 and <unk>.
Most if not all of that growth is due to.
Covid related testing revenues.
If your question relates to how it compares to a Q4 I would say generally speaking it's a relatively in line with the Q4 revenue.
And in terms of the 'twenty one guidance Vikram for Covid in terms of Q1 I thought your question was for Q1 right. Yeah, Yeah, No noise, both and was it was one <unk> and 'twenty one.
Yes, the 'twenty one I think similarly, the microfluidics growth is going to be at or above the high end of the overall growth guidance and all of that is.
Going to be related to Covid testing revenue.
So basically whatever.
Okay.
Okay.
And make a placement.
Okay.
And then.
So again, you're breaking up.
And you had a 22% so just take 22% of your 'twenty, one 'twenty and Microfluidics on net.
And I took over and number I guess for for 'twenty one okay. So.
Maybe second question and so.
Chris you were obviously extremely bullish on the vision and 25, selling some pretty aggressive growth targets out there over the next five years and I guess the first question is from 2021 day.
Net income between <unk>.
And B from day got disconnected.
And unfortunately.
Maybe we should take the next question and the queue and let Dan come back on the next person on the queue.
Our next question comes from Stephen Mall with Piper Sandler Your line is now open.
Okay. Thanks, and thanks, guys. Thanks for taking the questions.
I'll, let you guys first a non COVID-19 question.
On this new digital.
And this new digital capabilities, you mentioned for imaging mass cytometry can you dig dig a little bit deeper and give us a little bit more color on.
And what that it's all about I know you mentioned data management.
And so it's something that's going to help customers.
Great and archive their their images or is that a remote pathology or analysis.
And a little bit more color players and then could you give us a sense on how you monetize that or are you going to offer it for free.
We're more on customer satisfaction purposes.
I'll take that one Steve good to hear your voice thanks for the question.
You've kind of landscape to a number of areas and Theres probably a few more in addition, so there's there's a lot of things that we can do to prepare for the health care and decision making on the future.
And some of those related to the pre analytical workflows and on the post analytical analysis. Other things are as you described kind of as <unk>.
All of US are moving now closer to pathology is adapting the technology for the needs of the pathologists, both clinical and anatomical pathology and the way they analyze data.
There's other things around connectivity of our platforms and storage of the data files and things you just identified also and even things such as remote monitoring and and.
And on uptime on the instrument platforms. So monetization for us could have will have or could have multiple facets to it. So there is additional software plug ins. There is some of the things we will do that will drive value, we'll see probably things we pushed through upgrade packages and the future.
And then there are of course, the final one which would be crowded debt the data accretion and algorithm development, which is an open area for further discussion. So at this time I won't speculate, but I think thats. The data generation is one of them and the insights is one of the most valuable things, but for the near term.
Majority of our revenue will be generated from utilization of the instrument platforms.
Okay, great. Thanks, and then.
One question I know you guys had talked before there was a COVID-19 related research tailwind, especially using some of your panels like Max bar.
Have you seen usually utility utilization trends change given the vaccine news or and it's been there been a drop off and COVID-19 related research.
I don't perceive that there's been a drop off and Covid related research and.
One example would be the Stanford announcement, we just had yesterday, although that's not strictly COVID-19, but it's.
Spin out or potentially.
One of the hypotheses and that's Covid related.
I think the types of questions are going to evolve and there is going to be a very durable need for immune analysis for immune system and immune profiling and phenotyping from some of the reasons. You just described so whatever exposure to various variance matter.
Whats the longitudinal impact on the population for different strains, what's the impact of the vaccine.
Supporting panels for things such as vaccine developers for the future. So we actually think there's probably a pretty rich corridor of need here and I don't perceive although I can't analytically analytically qualitate on a qualitative or quantitatively describe what COVID-19 specific research will be but we perceive it to be quite strong.
And we've seen it and the retrospective of our publications that are coming out on the shift towards more and more infectious disease related publications.
Okay got it thanks, and one last question so.
On your COVID-19 Asps.
It still looks like it's a high mix and universities.
Do you think that mix will evolve over time and I know you guys are doing search testing as well, maybe just a little bit of color on that.
On the ASP mix and COVID-19.
I'll ask I'll ask Vic from to jump in and also but I think we see a wide range on the commercial oriented labs asps tend to be higher and the academic settings, where they have a captive audience. So meaning they have a student population and you test. They generally are who are willing to put forward relatively large fixed.
Price contracts.
And in return and they tend to have asps.
And that reflects that commitment to us and larger purchase orders.
So we would imagine that over time, the more we increase commercial scale business through the platform and volume through that that the asps will probably increase over the measurement period, but.
It's always a balance of mix between the two.
Vikram any other commentary you want to add.
No I think thats exactly right. It's all a balance of mix. We do have a base of instruments that have been placed at both universities and commercial labs, but the results. So far as you have correctly noted have been skewed.
In favor of University testing and for which the prices remain on the low end of the fairly wide range of Asps and we do.
Do expect over time for that mix to be more balance than it has been and Q3 and Q4.
I guess I'd just like to add is that I mean, it's important as we've talked about in the past that we feel that we have very attractive margin profile across that spectrum, clearly getting better asps is better, but even on the lower and it's a very attractive.
Recurring gross margin.
For the company and it gives us room to reinvest and we're really looking at about establishing.
Toe holds and beachheads and finally, it's about also positioning ourselves against antigen testing and alternative testing approaches and.
There's the industry Hasnt necessarily benefited from the fact that there is a perception that PCR testing has to be very high and in fact, you can get access to gold standard based PCR testing on a fluid on platform and a very attractive price.
Okay. Thank you.
Thank you. Our next question comes from Dan Brennan with UBS. Your line is now open and guidance.
Hey, guys, sorry about that and it took off my Bluetooth and know what happened and so.
So I guess could you help me Chris and.
And because I mean the stock.
Moving because of inflated.
And Mr. Covid, I mean, the stock's off and the aftermarket say, 20% and your message sounds extremely constructive given that 2025 plan and.
The new product and the trajectory of business, which is well above what I think the street and forecasting so I guess I'm, just hoping to get a few things. So first of all could you just give the dollar COVID-19 number right now that's implied in 'twenty, one and I know you gave some card before I just wanted back and trying to make sure I understand what the base.
Number is for product and services ex Covid and providing our guidance for 'twenty one.
I'll have maybe vikram comment on that and just a second I just I don't want to go to the first part of the setup, Dan and welcome back by the way, which is I feel like part of the challenge here is because I think we're significantly undervalued by every metric on a shareholder.
General assessment appears and the performance I think what's been missing is our ability to communicate our longer term vision and I think putting a long term vision with putting stakes on the ground around recurring revenue streams around the growth performance of both portfolios and kind of shifting the narrative beyond.
Covid tests 123, or the quarter and question has been one of the things Thats been holding us back because if you step back and look at the body and the work, we're heading completely and the right direction of increasing shareholder value.
And maybe with that context.
Vikram I'd like to comment on the Covid.
Covid specific.
Yes sure.
So there's a lot of uncertainty.
Quarter over quarter, so so as I said and that.
Our expectations are tempered so take that from that perspective in 2020, we had roughly over $20 million round numbers about $22 million of diagnostics testing revenue and Microfluidics and.
And so that number if you do the math and I was.
And do it for you.
In terms of the growth rate in Microfluidics debt, we alluded to and our guidance.
And let's say all of that comes in from from diagnostics. So that number would go from the $22 million number so roughly between say 30.
And 32 million to $38 million in 2021.
Got it Okay, and then and then maybe just on mass cytometry.
The guidance I know and.
It reflects I think.
A decline you had commented on from delays in Canada, and Asia, and I guess to.
Full year guide you talked about what below the 14%, which would still be below 2019. So maybe just give us a bridge about about what youre seeing and expecting in 2021, and obviously, you're saying from Covid uncertainty and.
And the bullishness going forward beyond that and <unk>.
Talked a lot about partnerships and new products and.
Disruptive things. So can you just give us a sense and win either way when we're going to see some of it is b how much conservatism, maybe you're baking in for 'twenty one.
On.
Because while there's still uncertainty out there and presumably.
I guess from other peers I think were seeing some better outlooks in terms of tracks and income recovery.
Yes. Thanks I appreciate the follow up on this day in and I'll ask Vic on to join and two I think there's a lot of ways to address this I mean, one of the things. We're trying to do is create greater transparency on this and kind of as feedback from shareholders and analysts like yourself.
Over the past year and part of that maybe Theres a departure between our outlook on COVID-19 as being maybe a little bit more and this case that it's going to be more durable the impact and so are the mass cytometry and we get down to the granularity to the best of our ability at this point recurring revenue streams and turns of services and consumables should be.
<unk> continued to grow and grow well off the 2019 levels. Its the analytical instrument placement cycle through the course of the year that has the greatest uncertainty for us and I think the COVID-19.
Turmoil hasn't really fundamentally changed that in this period. So as budgets are still being finalized and money is being reallocated or testing needs etcetera, etcetera, but utilization continues to increase so I think that's probably the biggest driver of uncertainty and the near term period, but we don't see any reason why there is a fundamental challenge to our thesis over a multiyear period.
And Vikram and offered.
And I also you'd like to add.
Sorry up and then had something to say.
Okay.
Yes no.
Just wanted to.
Echo what Chris said, we are expecting strong growth and consumables and service.
So we expect that trend that was created at the second half.
For Q4 of 2020 to continue into 'twenty, one we do have conservatism.
And you can see from the Q1 guide why.
On instruments quarter over quarter visibility due to.
And local reactions from governments.
On various issues related to permits and so on and so forth make that somewhat necessary for us to be cautious so, but we are very optimistic on the consumables and service sites in terms of growth and 2021.
And are you planning to maybe be hosting an investor day. It sounds like Chris from your language that you've got a lot of things ready to go here.
You've got competition on on the safer side continuing to ramp up as well. So I'm just wondering when you think we'll get some visibility on what the new product portfolio and particularly important.
And I think.
Yes.
I think we completely agree with you Dan that on Investor day or in this current digital medium and maybe some series of events that can kind of lay out more granularity and I think we wanted to take this one step at a time, which is start with the vision 2025.
<unk> for the how we see the year playing out and how the individual portfolios are lining up and then what we want to accomplish over the next five year period and.
And as you said I think theres a lot of value to them doing a click down to talking about each one of these so.
We will get back to you on the specifics, but it's certainly something that's top of mind right now.
Okay. Thank you.
Thank you.
Further questions at this time I would like to turn it back over to Chris <unk> for closing remarks.
Thank you I just want to again, thank everyone for joining our call here and to wrap up the Q4 and full year of 2000 22020.
Youre on review.
And just to summarize them and really focusing on innovation establish.
Establishing and mobilizing these beachheads to expand and new addressable markets, we're going to use partnerships quite aggressively throughout the year and look for us to talk about more expanded menu and offerings on both of our platforms.
Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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