Q1 2021 NanoString Technologies Inc Earnings Call
Good day, and thank you for standing by and welcome to the nano strength first quarter 2021 operating results.
This time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. Please.
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Thank you operator, good afternoon, everyone. Joining me on the call today is Brad Gray, our president and CEO and Tom Bailey our CFO.
And today, we released our financial results from the first quarter of 2021 share.
During this call we may make statements that are forward looking including statements about financial projections the impact of the COVID-19, and future business growth trends and related factors prospects for expanding and penetrating addressable markets, our strategic focus and objectives and the development status and as SaaS and plan.
And product launches.
Forward looking statements are subject to risks and uncertainties, including the risks and uncertainties that are described from time to time and our SEC filings a.
Our results may differ materially from those projected and we undertake no obligation to update these forward looking statements.
Later in the call Tom will be discussing our financial results and our guidance, we have prepared as a supplement to GAAP financial measures selected non-GAAP adjusted measures and calculation of which are described in detail in our press release.
Throughout the call all financial measures will be GAAP, unless otherwise noted.
And can also buy and reconciliations of GAAP to non-GAAP measures as well as the description limitations and rationale for each measure and this afternoon's press release.
To aid analysts and investors and building their models.
Under the financial information tab of our Investor Relations homepage that include a presentation of our non-GAAP or adjusted measures and.
Selected other financial data from the first quarter of 2021 as well as fiscal year 'twenty.
I'd like to remind everyone that we'll be participating and the UBS healthcare conference later this month.
And the attending the Jefferies Healthcare conference in early June and look forward to having the opportunity to speak with many of you there with that I'd like to turn the call over to Brad.
Thanks, Doug.
Afternoon, everyone and thank you for joining us today.
Before I provide a quarterly update I'd like to take this opportunity to welcome two new directors, who joined our board during the first quarter. Dr. Dan are all of sudden as vice President and Chief data Officer, and associates and our director of data science for the Moffitt Cancer Center Janet short sales.
As group Vice President of Autonomous Enterprise advanced analytics with machine learning and artificial intelligence at work.
These appointments underscore our commitment to capitalizing on that.
Informatics and big data opportunities presented by spatial biology, and I'm honored to have Dana and Janet join our board.
2021 is shaping up to be and exciting year for Nanosphere and spatial biology is in a period of tremendous growth revolutionizing research and field spanning from oncology to COVID-19 from neuroscience.
And Q1, we extended our lead and this dynamic market with genomics DSP instrument orders and setting a new record and exceeding the guided range of 40% to 50% year on year growth.
The launch of our genomics whole transcriptome Atlas is off to a great start and drove more than 60% of our record 94, New technology access program projects during the quarter.
Meanwhile, our income business sustained its durable growth with steady demand from new instruments, continuing more than a decade after the platform's introduction our.
Our encounter instrument revenues were particularly strong increasing 43% year on year.
While the genomics and encounter instrument sales are powering through the pandemic COVID-19 does continue to impact our entire utilization.
Reducing and counter consumable pull through per instrument relative to historical levels. We expect this pandemic related reductions and lab activity will continue to impact encountered consumables through the mid year with improvements during the second half of 2021.
I'd like to provide and update on the three strategic objectives that we focused on and 2021 before turning the call over to Tom to review the details of our operating results for the first quarter and our financial outlook for Q2.
Our first strategic objective for 2021 is to extend genomics DSP leadership and spatial biology.
During the first quarter, we capitalized on the opportunity to sell genomics instruments and other large installed base of Illumina sequencers with Ngls readout driving more than half of the genomic system sold.
Consumable revenue for the Ngls readout is also accelerating with mgs readout assets accounting for more than half of genomics consumables sold during Q1.
While it remains too early and the adoption cycle to predict how genomics consumable pull through will differ between systems that use encounter readout versus Ngls readout.
And these signs point to a strong utilization of genomic systems attached to and GFS.
We are working closely with Illumina to illustrate the power of genomics paired with Lgs, We recently announced a new collaboration with Illumina accelerator and their portfolio company dollar roll mix to bring spatial biology to the development of a new generation of pain therapeutics.
Looking forward, we plan to provide that genomics DSP technology access program branch with leased one startup from each alumina accelerator funding cycle.
The most important event and the first quarter with the launch of our whole transcriptome Atlas or <unk> for short.
Net of strength is historically known for providing customers with powerful disease focused panels and fields, such as oncology immunology and neurology.
And the human Wth, the first Gino wide assay that we've ever offered and serves the needs of any researcher studying human tissue samples.
Launch of the WTO and allows us to introduce the genomics DSP to numerous researchers and the basic discovery market, who have not traditionally engaged with our company.
But march advances in genome biology, and technology or <unk> conference was the perfect launch venue for WTS.
And it doesn't WTS abstract presented at <unk> and fields, such as immuno oncology Neurodegenerative disease and COVID-19 research.
We plan to build on the WTO and momentum during the second quarter by launching a mouse version of the whole transcriptome Atlas addressing a critical model organism that we believe accounts for about 30% of the market opportunities and discovery research.
We've been providing customers with the opportunity to test drive the WTO and through our tap service, which provides a strong positive leading indicators of demand.
We generated record tap orders and the first quarter with a number of projects or increasing about 75% over the prior year.
Our <unk> assay and accounted for more than 60% of all Q1 tap projects up from about 40% of tap projects during the fourth quarter.
In addition to opening new areas of research Wch captures significantly more revenue per sample and previous genomics panels.
Priced at about 17 $150 per sample wth generates about three times the revenue per sample that we record for most genomics panels, which readout using income.
We expect that <unk> will be a key growth catalysts in 2021 and beyond and expanding the overall addressable research market for genomics. So what we estimated it was about $3 billion per year.
Now I'd like to shift gears towards the translational research and markets, where it net of strength has always been strong and where we continue to extend our market leadership.
Protein assays for translational research are a popular and underappreciated application for channel mix accounting for about 30% of the Tam and and.
And have been featured and 90% of genomics peer reviewed publications to date.
Genomics is best in class for spatial protein analysis enabled by the highest flex and the largest antibody menu of any spatial biology platform.
Because of the simple workflow and fast turnaround time, we expect encounter readout to remain the preferred platform by translational research customers focused on protein analysis.
During Q1, approximately 45% of genomics instruments ordered.
We will be used with encounter readout and encounter readout assets drove about 40% of genomics consumable sales.
The importance of spatial biology, and translational research was prominently featured during the American Association of cancer Research or ACR conference last month.
Researchers presented eight genomic studies, including four studies by investigators from the genomics breast cancer and consortium and international network of researchers using genomics to develop a comprehensive Atlas and dataset of novel by our Biomarkers from breast cancer.
But for Christina Curtis from Stanford, David oral presentation, describing how her group use genomics to identify biomarkers that may someday helped to select patients likely to benefit from novel therapies.
Dr. Sandra swings group from Georgetown University genomics to Jim and straight that primary her two positive tumors have more immune cell infiltration and metastatic tumors, which may explain why metastatic disease somewhat harder to treat.
We reviewed publications continued to be an important indicator of genomics productivity and a driver of future demand.
A record number of genomics papers were published during Q1, increasing the body of peer reviewed genomics publications by about one third.
Two recent papers and the journal nature and demonstrate the unique capability of genomics and COVID-19 research.
Researchers from the broad Institute that Israel, and Wild Fornell use genomics in conjunction with single cell RNA sequencing to generate a spatial and resolve cell atlas to discover fundamentally new mechanisms for COVID-19 induced fatalities.
Overall, we're delighted with the expansion of the spatial biology market and with a leading position that genomics occupies.
Our second strategic objective is to advance the development of our spatial molecular imager and to seed the market for commercial the commercial launch planned for next year.
The spatial and molecular imager or semi per Schwartz.
And is designed to enable customers to perform high flex imaging of proteins and RNA down to the single cell and EBIT sub cellular resolutions using a single instrument that handles sample prep imaging data capture and quantification.
We showcased our new spatial molecular imager, and the Hebt Congress and customers and customer interest was robust.
Seven at semi posters were presented at the meeting, including the first two presentations from our external collaborators at the Fred Hutch, and Dana Farber cancer centers.
While other imaging platforms. We're also previewed at HPT.
<unk> demonstrated industry, leading plex and sensitivity and we believe Epsilon and will be the best in class amongst the emerging imagers.
And Q1, we announced the technology access program for <unk> with.
With the objective of conducting a small number of high impact projects with key thought leaders and spatial biology that will help build awareness and seed the market.
Interest from collaborators has been high and we've already booked enough SMA tap projects to keep us busy for the balance of 2021.
Based on initial customer feedback and our market research, we believe that the multi cell resolution of genomics and single cell and sub salt resolutions of SMIC are highly complementary and provide a portfolio that covers the continuum of spatial research applications.
And we expect the launch of Soi will double the size of the spatial biology research market that we serve from $3 billion today to 6 billion and the future.
We remain on track from a commercial launch during the second half of 2020, two and I look forward to updating you on this program as it advances over the year ahead.
Our third strategic objective is to return our encounter business to pre COVID-19 growth levels.
And Q1, we generated year on year growth of 25% and our encounter business day.
And the encounter franchise had another impressive showing at the ACR conference. We're about 45 and counter based abstracts were presented.
And counter system remains a platform of choice and oncology research, even as we continued to expand our portfolio into new markets.
The exited the first quarter with an installed base of nearly 1000 and counter systems and increase of about 15% over the prior year.
Demand for new and counter systems as coming from a diverse set of resurgence.
During Q1 about 80% of new encounters were sold for both gene expression and about 20% were sold for spatial biology bundled with a <unk> system.
While roughly 60% of new customers were sold.
Sorry.
Nearly 60% of new encounters were sold into our core application of oncology research about 40% of systems sales were driven by immunology and other applications.
And counter consumable sales also reflected the diversification of our customer base as panels targeted towards host response.
And transplant and fibrosis contributed to growth.
Overall, we're pleased with trends and our business and our progress towards strategic objectives.
And I'd like to turn the call over to Tom to review the details of our operating results.
Thanks, Brad and thanks, all for joining us today.
For the first quarter of 2021 product and service revenue was $31 4 million representing.
Representing year over year growth of 28%.
<unk> genomics revenue was $9 7 million up 37% as compared to Q1 'twenty at above the high end of the Q1 guidance we provided in March seven.
$7 billion was derived from approximately 30 instruments shipped and $2 7 million was derived from consumable sales.
And counter Q1 instrument revenue was $4 8 billion representing year over year growth of 43%.
Q1 encountered consumable revenue was $13 3 million representing year over year growth of 21%.
As anticipated by our Q1 guidance provided in March COVID-19 continue to moderate lab activity and selective customers and geographies, yielding annualized and counter pull through of about $56000 and Q1.
As our full year guidance contemplated and we currently expect modestly lower lab activity and some geographies may persist through Q2, and therefore encounter pull through and the current quarter is expected to be about the same as we realized in Q1.
We continue to anticipate a recovery and the second half of the year and we are reiterating our guidance of 60000.
And to 65000 and annualized and counter pull through for the full year.
Service revenue was about $3 7 million for the quarter or 17% year over year growth driven primarily by increasing genomics DSP tap projects and increased service contract revenue driven by our growing instrument installed base.
Turning to margins and expenses I will provide results on a non-GAAP or adjusted basis, which removes the impact of stock based compensation depreciation and certain one time items.
Please refer to our press release as well as the exhibits we have posted to our Investor relations webpage for detailed information on our non-GAAP or adjusted measures are prepared.
Q1, adjusted gross margin on product and service revenue was 52% and reflected investments in manufacturing and tap service capacity to support our expected revenue growth and expansion into new product and service offerings to a lesser extent gross margin also reflected a Q1 customer mix that tilted more to distributed markets.
Our realized average selling selling prices are typically lower.
Adjusted R&D expense was $12 6 billion, a decrease of 15% year over year R&D.
R&D was lower in Q1, primarily due to timing of certain expenses expected to be made for research supplies and personnel as we ramp investment and our semi product development program, we expect.
R&D expense will increase through the balance of the year as SMA development accelerates.
Adjusted SG&A expense was $21 million, a decrease of 7% year over year.
Q1, SG&A expense change was primarily due to savings realized from pandemic related reductions and travel and trade show activities.
These savings were offset by investments made and our spatial biology related commercial initiatives, including investments to expand our service and customer support group and and certain digital marketing initiatives.
Adjusted EBITDA loss was $17 2 million and improvement of 27% as compared to the prior year.
So the balance sheet, we exited the quarter with approximately $410 million of cash cash equivalents and short term investments.
Transitioning to guidance, we are reiterating our full year 2021 financial outlook for revenue gross margin and expenses is provided on our March call.
Where genomics, we continue to expect the seasonal revenue pattern that is weighted to the second half of the year with roughly 40% of <unk> revenue to be reported and the first half of the year and about 60% and the second half.
As a reminder, we do not expect any material collaboration revenue to be recorded in future periods.
For Q2, we expect product and service revenue to be and the range of $31 million to $33 million representing year over year growth of 47% to 56%.
This range assumes $21 million to $22 million of and counter revenue and $10 million to $11 million of genomics revenue.
Genomics revenue guidance assumes about 40% to 50% instrument bookings growth year over year consistent with our annual guidance established in March.
Now I will turn the call back over to Brad for closing comments. Thanks.
Thanks, Tom 2021 is off from a tremendous start net of Turing is the market, leading product portfolio and the hottest field and life Science research spatial biology.
The launch of our genomics whole transcriptome Atlas has added to the substantial commercial momentum of our genomics franchise, while the unveiling of our special molecular imager is driving customer anticipation of its 2022 launch.
Our encounter platform is a mainstay of oncology research and continues to reach new customers.
Our strong balance sheet supports targeted growth investments to capture our substantial market opportunities and we are confident and our ability to fulfill our mission to map the universe of biology.
With that we'd like to open up the line for your questions.
As a reminder to ask a question you will need the quest star one on your telephone to withdraw your question press the pound or Husky, please standby with capacity Q&A roster.
Your first question comes from the line of Tycho Peterson from Jpmorgan. Your line is open.
Hey, guys good afternoon.
Couple of questions I guess on pull through overall <unk> pull through was a little bit late and I know that EPS is going to be accretive. So can you maybe just touch on there.
And there's two dynamics have pull through and the quarter kind of trending versus your own expectation and then.
Think about Upi and the funnel building there.
Do we think about overall pull through target.
Yes, Thanks Tycho.
I would say that Q1 genomics pull through was directly in line with management expectations.
And we said at the beginning of the year that Geo mix because of the whole transcriptome Atlas launch would be about 40% of revenue and the first half and 60% and the second with.
And with pull through increasing seasonally.
Yes.
And the Wpa launched again to have more of an impact and.
And Q1 and pull through was around $85000 per system per year, which was pretty much exactly what it was and the third quarter. So on a seasonal basis.
And what we'd normally expect Q1 to be relatively low.
And pull through that's right, where we want to see it.
Our guidance for the full year remains intact of <unk>.
Consumable pull through at the $85 to $95000 basis annualized so that implies Tycho that we work towards the bottom end of that range right. Now I think we should expect to see strengthening over the course of the year as the whole transcriptome Atlas becomes.
A major part of our consumable revenue.
We didn't say in the prepared remarks, but whole transcriptome Atlas contributed modestly to consumable revenue and the first quarter. We didn't begin shipping that product till March. So it was only a few hundred thousand dollars of our overall.
Consumable revenue and will make a much bigger contribution force.
And then Brad you alluded to customers with Mdx readout and net higher pull through as well.
Just kind of give us a rough sense of the magnitude and I know, you're not ready to fully quantify it but.
Yes.
I would just say.
We have a high five figures pull through that we're seeing so far and.
And counter readout genomics, and we're seeing NGL customers pull through.
And of the six figures its early days.
But that is a pattern that we had hypothesized that we would see and so far it looks like it's playing out.
And then on the commercial side.
Two questions here, one you touched on the proteomics market I'm curious.
Efforts underway to kind of cap and to that market a little more and then.
On the sales force front youre hiring 100 reps.
Talk a little bit about how that simple.
Yeah on the.
Other proteomics front.
Don't think we're trying to reposition the company and any way at the proteomics company, but I do think the proteomics capabilities of genomics.
Our.
Huge differentiating factor and the spatial biology marketplace, our market research that we outlined at <unk>.
December Investor Day did highlight debt, 30% of the overall Tam is in protein 90% of our publications have been based on protein assay, so far and that is a place where genomics just absolutely excels and.
And it's particularly important and appealing for the highly contested translational research market.
In terms of sales force expansion things, we're off to a good start we have made higher throughout the first quarter.
Be continuing to make hires throughout the second quarter with the goal of having all of those new commercial hires onboard by midyear and terms of when I would expect to see their impact on our revenue line and normally it takes some months for commercial hires to come up to speed up to six months, depending on the position.
So that's really going to contribute to our growth and strength and the second half.
Okay.
Thanks, and let others hop in.
Your next question comes from the line of Dan Arias from Stifel. Your line is open.
Brad can you, maybe just comment a little bit more on selling and spending environment that youre seeing right now just the net of a mixed bag in terms of the commentary we've got so far on.
The state of the academic lab base when it comes to centralized versus decentralized labs.
And just the level of incremental spending increases that you saw and <unk> and might be expected at <unk>.
And then you can help us with there and just COVID-19 challenges and to the extent and the.
Good day.
Our in play here.
Sure Dan I'd say, it's a tale of two businesses Fernando strength.
The genomics and spatial biology business is robust and it's really powered through the COVID-19 pandemic.
I'll remind you that in 2020, we ended up achieving our original full year guidance that was issued pre COVID-19.
A large growth of our installed base and strong consumable pulls growth. So that business really was an impact in 2020, and I would say it remains an impacted and 2021 and the reason for that is we're in the midst of a spatial biology Revolution, where this has been named nature method and the year.
There is very high profile papers coming out and many institutions feel like they must acquire this capability to remain competitive.
And in contrast.
<unk> thousand and approximately 1000 instrument and encounter installed base is working across a wide area of research and some of it urgently needed and related to COVID-19, 19, and and high priority areas and some not and addition geographically the encounter.
As a global installed base and I would say during Q1 day.
Improved utilization of our <unk> installed base and North America was really partially offset by challenges experienced in some European countries, where lockdowns have reemerged at various points in the quarter. So overall I'd say net net the encounter and utilization is right where we.
We expect it to be which is about flat sequentially from Q4 to Q1 are poised to improve as the impact of vaccines takes hold and people getting back into the labs using their encounters and the second half.
Okay very helpful.
Maybe just sticking with special obviously hebt brought a few new platforms out of the Shadows. There I'm just curious whether you saw anything or you heard from customers anything that sort of.
Informed the product development and process for the semi or the or the genomic system I suppose but just when it comes to specs or performance or capabilities that you want to have setting your instrumentation apart.
Yes.
And there was a huge theme of spatial biology, and Hebt I'd say overall, it's very positive for the market debt. So many players are out there talking about this field and beginning to offer products and the field, we feel very caught most of those I should say most of those new.
<unk> that were previewed at <unk> were and what we would call. The imager category, so products that do single cell or even sub sell resolution.
And using and imaging modality and they would compete with our spatial molecular imaging.
The semi its position as the high plex offering 1000 plaques compared to.
Hundreds of <unk> for the other offerings and very high sensitivity relative to the other offerings. So we feel really great about the portion of the market that we're likely to occupy I didn't see anything it hebt that may be.
Any less confident that SMA is going to be a successful product.
Okay, maybe just one more and SMA and I'll get out of the way.
I think last call. You said you had 10 instruments that we're gearing up to receive samples and you just mentioned that you have plenty of work to keep it busy and.
And keep them busy what would be the aggregate and utilization level that you have across those 10 systems.
It's not a perfect indicator, but I feel like.
If we had a sense for whether they were running at 40% or 80% it could be helpful.
And then indication there might be good.
Yes, I think when you look across our product development activities, which of course use the same instruments and our technology access program. We're running every at semi system, we have at very high utilization.
We're pushing the limits of this technology from a product development perspective, and we have many eager and key opinion leaders, who are going to work with us to demonstrate the power of the technology I don't really have a percentage number but I know it is very high.
Okay very good thanks, guys.
Your next question comes from the line of Dan Brennan from UBS. Your line is open.
Great. Thanks, Thanks for taking the question.
Just wondering on the lab.
And.
Openness, if you will.
Sequentially revenues are going to be up and Q2, and then obviously you've discussed it's more back half weighted year any.
Any factors to call out when you think about tracking labs and the data you're seeing in terms of the relative debt you saw and.
And Q1 versus Q4 and kind of what's implied.
And your guidance here for Q2.
Yes, I think that the guidance for Q2 is completely consistent with the commentary that we have provided which is really no expected improvement and lab access from Q1 to Q2.
So I think Tom was pretty explicit debt.
Encountered consumable pull through that we experienced which was $56000 per system on an annualized basis is what we're also assuming we'll see and the second quarter with improvements and the second half.
And just to reiterate I think what we saw and the first.
Quarter was some improvements in North America with labs, and continuing to increase their utilization, providing direct evidence of more people and the lab doing more work really offset by weakness in Europe, where.
Governments began to.
Discourage people from being in the lab, maybe as much as they were and the back half of the year as there were waves of outbreaks.
And this is all consistent with the guidance that we issued at the beginning of March our original annualized guidance had anticipated no strengthening and encountered consumable pull through the second half and really that's what we're seeing.
Got it and then in terms of the.
And the order growth you said it was above the 40%, 50% I think orders grew throughout the year last year or so.
Any color.
Was that is that surprising or is that just maybe had a little better and easier comps relative to the dog and the background is that is that just has had an easier comp on orders and <unk>. What are the order strength surprised you guys and the first quarter.
No I would say the order strength and the fourth first quarter was great, but not a surprise.
It came in slightly above.
The top end of our guided range. So we were pleased with it but not surprised by it.
And.
I do think the comps obviously do get harder as the year goes on.
Because we were in a pretty steep launch curve last year as well, so 40% to 50% order growth remains our got our guided.
Expectation.
Got it and then and then when you think about.
Some of the growth and tap that you mentioned and have it how do we think about that kind of filtering through obviously you have your guidance, but it was a nice sequential step up and tap.
Could that portend potential further strength above and beyond what youre guiding to what do you expect that kind of strength in terms of the number of top projects in <unk>.
Yes, I'd say and total number of projects our <unk> performance was right in line with our expectations if anything.
Exceeded expectations. It was the continued strength of the continued shift towards the whole transcriptome Atlas as the preferred.
Modality, there I mean, I think about only about 15% of the task orders that we got and the first quarter warfarin counter readout.
Increasingly people buy without having to do a tap your 85% of new taps, where for Ngls readout and I think in terms of how that plays through to instrument purchases generally speaking, we see sort of a nine month period from the time you order a path and then you run.
And you're maybe it takes a quarter to run your actual projects and get your results back.
Nine months from tap water to actual instrument orders. So a strong Q1 in terms of tap sets up a strong second half in terms of genomics instrument purchases.
Got it and then and then maybe final one just in terms of color on customers.
<unk>.
Obviously now youre going into discovery, so it's going to be more influenced by academia as opposed to translational customers and I'm wondering when you think about.
The mixed Crows pharma academia could you kind of give us an update on kind of what's happening across the various customers.
Yes, you are right, Dan academics are becoming an increasing fraction of the new genomics instrument purchases.
And as discovery becomes more of an exciting modality I'd say within our direct markets, where we have the best visibility into the customer types.
Academics outnumber pharma and CRO on about a two to one basis and the first quarter. So I think two thirds biopharma two thirds academic one third biopharma and CRO. So thats a continued enrichment of academics relative to.
Biopharma.
Great. Okay, alright, thanks, Brian.
Your next question comes from the line of Thomas Petersen from Baird. Your line is open.
Hey, guys. Thanks for taking the questions.
Just curious if you could comment on sort of core research activity heading into April and May and sort of how.
And those purchasing activities had trended essentially if you could call it any pacing activities and any caught out the geographic commentary on academic and research side earlier, but any pacing commentary to call and a quarter and then sort of expectations and the back half around funding and environments given.
Expectations for a strong NIH global funding environments.
Yes, Tom and I don't know that I have a lot to add to what I've already said, but just to reiterate it I think.
We don't see a huge strengthening and.
And lab access as evidenced by our encounter pull through.
Between the first and second quarters.
The second by the second half, we expect fascinations to be widespread kind of the return to work across all sectors of the economy, including lab research will be will be well underway and I do expect substantial.
Strengthening of encounter a consumable utilization and the second half, but just as a reminder.
Spatial biology, and contrast to encounter utilization has powered right through the pandemic from the beginning and really I would say there is nothing about the COVID-19 pandemic that is impacting our genomics sales EBIT.
Either on the instrument.
On the consumable side at this point, it's really isolated for us to encounter utilization.
Got it and I appreciate that.
And then just quickly you guys have been hitting a lot recently on sort of potential developments on the software and bioinformatics side just.
Just curious if you have any updated thoughts here our timelines.
And as well as any particular customer feedback youre incorporating into development efforts here.
Yes, well informatics has been something we've always been focused on for spatial biology, and when we launched the genomics digital spatial profiler.
It came and comes with a very sophisticated data analysis suite. That's run on instrument at this stage and it is really delighted customers and allow them to very quickly visualize and manipulate and understand their data.
But we're not done there.
Wanted to continue to make collab.
Collaboration and sharing of data more and more possible that means developing and the future services that would take place and the cloud that would allow for storage of images and storage of the raw data share rig and collaborating across customers across sites. So look for us I don't have to.
Specific timelines, but look for us to continue to strengthen our offering in that and.
That aspect of spatial biology.
Probably more of a 2022 events and it is a 2021 of it for us, but its clearly an area of tremendous importance and investment.
Your next question comes from the line of Doug Schenkel from Cowen Your line is open.
Tom a couple of modeling questions and counter ASP was a bit lower than we expected in the quarter could you just speak to whether there was anything different relative to trend when it came to mix of types of encounters placed in the quarter, which might've impacted ASP.
And then and counter pull through would need to jump from I think about 55000 annualized and the first half.
The $65 to 70000 annualized and the second half.
To get into your guidance range for the year.
And I'm just wondering what youre seeing that gives you conviction that that is actually going to pickup from those levels.
Big burst, Doug I'll take the ASP question, and then I'll toss it back to Brad for the trend question on the ASP question and it was as I mentioned in the prepared remarks and.
Talking about gross margin a bit of a tilt to distributor mix and the first quarter and so it wasn't a difference really and the usual mix amongst sprints and Max flex. It was really a distributor mix that impacted the asps modestly and the first quarter as compared to others.
And Doug This is Brad I'll take the question on the consumable trends.
And I think a corollary to the question you asked is really to say how are we how confident are we debt.
Suppressed the relatively suppressed consumable pull through that we saw and encounter relative to pre COVID-19 rates is due to COVID-19, we looked carefully at the correlation of pull through on a regional basis to where COVID-19 outbreaks and COVID-19, Lockdowns are taking place and it's a pretty direct.
<unk> when we used when we hear about Lockdowns, we see reduced consumable pull through in that region and the and versus also true and.
So provided that the economy and the overall pandemic begins to release and the second half and vaccinations become widespread not just in North America, but and European countries and we're a little behind we should see a correlating strengthening and consumable pull through and the second half.
Back to levels that were call it consistent with our pre pandemic 2020 guidance.
So that's what I think that's what we're making our judgment.
Okay Super helpful.
And more along those lines.
And.
Couple of different points, but pulling them together you talked about.
Mix of genomics.
Being placed with <unk>.
Sequence serves on the backend versus and counters on the backend.
And we also talked about consistent with what we've heard across the group.
Activity is picking up a little bit more at the larger cores and major genome centers and maybe lagging a little bit at some other smaller.
<unk>.
And when I pull those things together I'm wondering if.
And the mix of genomics being placed in front of sequencing.
And is skewed in part by where Theres activity or if this is really a normal mix that we should expect moving forward do you have any thoughts on that Brad.
Packed it by lab activity levels or is that.
Norm that we should be expecting in terms of mix moving forward.
And I think it's the norms of what you should expect from mixed moving forward.
And our March call. We described that we expect at least 50% of genomic systems being shipped this year to go in front of Ngls and I'd say that that remains true and it could very well be higher.
Dennis <unk> have not observed this differentiation between cores and smaller labs and some other management teams have talked about on their calls I'm not saying, it's not there. It's just we haven't had direct experience with that so I would say everything we're seeing with respect to Ngls readout strength is fundamental to the capability.
Net debt and <unk> provides a tremendous installed base and and GFS systems, which outnumber and countered by a factor of between 15 and 20 to one and the excitement about the whole transcriptome Atlas and what that enables in terms of science that can be done on genomics and combination with the sequels.
Okay. Thank you again.
Your next question comes from the line of P. J <unk> from.
And from Stephane <unk> from Morgan Stanley Your line is open.
Hey, guys. This is Ed and then thanks for the time for the questions.
I guess my first question I'm going to circle back to SMA path outside of the strong demand that youre seeing for this new technology. What are some of the key learnings you guys are seeing because of this program so far and to what extent have these learnings impacted sort of the.
Evolution of the new platform and.
Is it still evolving very quickly or are you essentially locked down and.
Kind of Alpha prototype because you want to call it that.
Yes, I think maybe the one key learning that is most informative to our product development is the tremendous appetite from 1000 and plex assays that were seeing.
The place where the semi is most different from the.
And the competing Imagers that are being offered elsewhere and the excitement about what's possible at 1000 Plex is palpable.
And I think that has just made us more confidence that this idea of taking the plex leadership position within the market and serving the need not only of translational researchers who are more comfortable with targeted assets, but also discovery researchers who demand plex.
That's that's bearing out to be the right strategy for us.
Got it. Thanks, that's very helpful. And then given that the in situ imager will involve a capex purchase.
How important is it to.
I guess it would be.
First mover and this market how important is this first mover advantage.
And.
I don't think debt.
The exact order of product launch is critically important to the extent that we are out front.
Talking about the capabilities of our system and providing researchers the opportunity to experience those capabilities.
Wave of Imagers, that's coming to market as we're all coming to market and a relatively short window and I think one group getting.
Market a matter of months before others, it's not a huge shift and competitive dynamics.
Got it and then just one more on the SMA type program. I think you guys mentioned earlier that you have 10 instruments running R&D internally and also running and the top programs and it's already at pretty high utilization capacity are there any thoughts on extending that maybe something a little higher to accelerate from the top programs are taking more type programs and.
Sensually accelerating the timeline.
Yes, there are I think over time, we will expand our soi tap program at the beginning though where the semi alpha.
Alfred prototypes.
Really not nearly as capable as even the betas or the full launch instruments will be we.
Don't want to Overinvest and capacity on Alpha systems. So we're thoughtful about how many alpha as we dedicate to <unk> versus waiting to dedicate more capable beta is versus dedicating again and future more capable full commercial system. So we're really growing our capacity and a way that makes sense.
Strategy is for 2021 to really work with a highly select group of genomics researchers to demonstrate the capability of the system and.
And a way that allows us to educate the market and 2022 will move into a higher gear, we're really providing test drives directly to the people, who we want to sell instruments too.
And it's a little early right now for us to be doing that given that the full instrument launches until the second half of 2022. So we will scale up capacity as we get closer to that launch.
Okay. Thank you guys very much from the time.
Yes.
There are no further questions at this time I'd like to turn the call back over to Doug Farrell.
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Okay.
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