Q1 2021 Akoya Biosciences Inc Earnings Call

Ladies and gentlemen, and thank you for standing by and welcome to the cornea Biosciences first quarter 2021 and earnings conference call. At this time all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone please be advised.

Today's conference maybe recorded if you require any further assistance please press star zero and.

And I'd like to hand, the conference over to your Speaker today, David <unk> Investor Relations. Please go ahead.

Good afternoon, everyone. Thank.

Thank you all for participating in today's conference call.

On the call from our clients, we have Brian Mcgough, again, Chief Executive Officer, and Joe Driscoll Chief Financial Officer.

Here today are quiet released financial results for the first quarter ended March 31 2021.

A copy of the press release is available on the company's website.

Before we begin I'd like to remind you that management will make statements during this call.

Forward looking statements within the meaning of the federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act and 1995.

And he statements contained in this call that relate to expectations or predictions of future events results or performance are forward looking statements.

Actual results may differ materially from those expressed or implied and the forward looking statements due to a variety of factors for.

For a list and description of the risks and uncertainties associated with the quays business. Please.

Please refer to the risk factors section of our form S. One filed with the Securities and Exchange Commission on April 15th 2021.

We urge you to consider these factors and you should be aware that the statements should be considered estimates only and not a guarantee of future performance the.

The conference call contains time sensitive information and is accurate only as of the live broadcast today May 18 2021.

A quiet disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

And with that I will turn the call over to Brian.

Thank you David Good afternoon, everyone and thank you for joining <unk> first quarter earnings call, Joe and I will start with prepared remarks, and then we'll be happy to take some questions.

I'd like to start by saying that we're very excited and be speaking with you on our fourth quarter. Following a recent IPO on April 16th we listed on NASDAQ and raised $151 million and gross proceeds and on behalf of a call and I'd like to thank everyone, who is involved and the IPO.

We are now better positioned to execute on our mission of delivering a revolutionary class spatially derived biomarkers to empower life sciences, researchers to better understand disease and predict response to therapy.

Well, we had the chance to tell our story to many of you through our IPO process, we will integrate.

Within today's call and my remarks will review a review of acquired spatial biology platforms.

And we're pleased to be able to report that we had a strong first quarter with reported total revenue of $12 2 million coming in at the high end of our previously reported reported range of 12 to $12 2 million.

And as noted this performance was achieved prior to the benefit of the additional capital investment from our recent public offering and with our demonstrated momentum and the benefit of the additional capital. We are confident that we are on track to execute.

Our strategic plan for 2021.

Some additional first quarter highlights with more detail to follow shortly include we sold 37 instruments and the first quarter. This is higher than any quarterly total achieved in 2020.

We saw continued and meaningful acceleration of our peer reviewed publications and with the IPO funds and hand, we began aggressive expansion of our commercial and R&D teams to accelerate our strong momentum as the leader and spatial biology.

For background and reviews spatial biology refers to a rapidly evolving technologies and enables researchers and academia and biopharma to detect and map distribution of cell types and biomarkers across whole tissue samples at single cell resolution.

Coy offers solutions to perform this tissue analysis and specialty the typing to scientists across the full continuum from discovery through translational and clinical research and by way of comparison current genomics and proteomics and messages such as next Gen sequencing single cell analysis flow cytometry mass spectrometry and they do.

And do provide meaningful day of data, but requires the destruction of the tissue sample for analysis.

While these approaches are clearly valuable and broadly adopted they do not provide the funnel and fundamental information about tissue architecture.

Cellular interactions and localized measurements of key Biomarkers. This spatial context as central cornea has developed and deployed our codecs and synoptics platform to address the profound opportunities and scientific discoveries enabled by spatial biology.

We provide end to end solutions that enable researchers to quantitatively and interrogate a large number of biomarkers and cell types across and intact tissue section at single cell resolution.

The result is a detailed and computable map of the tissue sample that thoroughly captures the underlying tissue dynamics and the interactions between T cell types and biomarkers.

Our clients' platforms are designed to serve the unique needs of our customers and the discovery translational and clinical research markets, both codecs and fun optics offer seamless and integrated work flow solutions for our customers, including important benefits such as proprietary reagents to analyze a variety of tissue types are.

And I made a sample processing scalability comprehensive data analysis software solutions and dedicated field and application support.

And with these platforms, our customers are performing performing spatial phenotyping and developing a deeper understanding of complex diseases, such as cancer neurological and autoimmune disorders and many other therapeutic areas.

Our first platform codex is and ultra high plant parameter and cost effective platform, which is ideally suited for discovery research.

And provides the capability to identify and more than 40, biomarkers and a tissue sample.

<unk> was originally developed and our lateral Doctor Gail you know and at Stanford University and was launched in 2019.

And the first quarter of 2021 we sold 20 codecs instruments compared to a total of 46 and all of 2020.

Installed base for codecs was 132 instruments as of March 31 of this year and while we saw a real impact from COVID-19 and 2020. We are extremely excited about the momentum we are seeing for codecs in 2021.

Our second platform phenomena is a high throughput spatial biology platform with the automation and robust robustness needed for translational and clinical applications. This workhorse platform enables researchers to visualize and analyze and quantify and phenotype cells and see to across the entire <unk>.

And at sub cellular resolution.

Our proprietary multispectral imaging technologies enables hole size hole slide scanning and 10 to 15 minutes, providing our customers and the translational and clinical research with the required and necessary automation and throughput and robustness.

The phone optics product line is currently comprised of three scanners, the mantra the vector and the Polaris with the Polaris being our signature platform and the most popular solution.

And the first quarter, we sold 17 synoptics instruments growing the installed base to 455 and optics instruments.

Across both codecs, and if and optics, our total instrument installed base grew 28% year over year, despite substantial impact from COVID-19.

Reagent revenue was $2 $5 million and the first quarter of 2021 and as discussed through IPO. This is an important area of investment for us for a clear and we anticipate strong growth here in 2020, one and beyond reagents are a key revenue contributors from our business and have a positive impact on our gross margins.

The quality and the value of our solutions as demonstrated by our broad customer base, our relationship with key thought leaders.

And and extensive and accelerating publication list.

As noted earlier the rate of publications utilize utilizing our technology continues to accelerate there were 109 peer reviewed publications and 2020. That's in your four four fold increase over 2019.

We have already seen over 60, new peer reviewed publications in the first quarter of 2021 that is also a nearly full force fourfold increase over the same period last year.

A key driver of these publications and our commercial success is the growing body of evidence that spatial biology solutions deliver significant value to our customers and are increasingly becoming a preferred mouphtaou modality for biomarker analysis.

One recent publication and highlight comes from the team at the Providence Cancer Institute and it was just recently published in the journal breast cancer research. They use our fanatics platform to measure tumor infiltrating lymphocytes, PDL, one expression and other immune variables to enable and I quote a comprehensive characterization.

And of activity of novel Immunotherapy agents close quote.

The paper highlighted both the required concordance with current clinical assays and importantly, the enhanced precision and predictive power enabled with and Opex and I'd invite you to look at that publication.

As with the team at Providence, we are grateful to have relationships with leading biopharma companies top research institutions and medical centers, such as Dana Farber Cancer Institute, Johns Hopkins University, UCSF and M D Anderson and many others.

These collaborations and partnerships helped demonstrate the utility of our solutions across a broad array of applications, including immuno oncology immunology and neuroscience and developmental biology.

Specifically, our partisan partnerships and the field of immuno oncology are delivering real advancements and translational and clinical research.

For example, acquire spatial biology platforms per feature it and several tox at this year's ACR meeting and here three highlights.

First in line with our March 2nd announcement of our partnership with Johns Hopkins, Dr. Suzanne as Tom highlighted best practices of their validation efforts on our platform as part of a session on future directions for immunotherapy diagnostics.

Dr. Laura estimate from UCSF and principal investigator on the I spy trials outlined her work to leverage the and optics platform to identify spatial biomarker signatures and Brett in breast cancer.

Third Dr. Gary Nolan and Stanford University acquire founder and codecs and dinner gave a plenary talk detailing his advanced work on codex to understand patient outcomes and colorectal cancer and cutaneous T cell lymphoma.

Consistent with the theme of partnering with thought leaders and acquire May two recent announcements further supported the goal of driving accelerated adoption of and innovation on the codex platform.

First we announced our imaging innovators network is termed I squared.

Which is a collaborative network of leading scientists specifically aimed at supporting open innovation and called Codex for rapid application expansion and I invite you to go to our website to read our most recent press release on the ice square and network.

Yesterday, we announced our co marketing agreement with Zeiss one of the world's leading microscopy vendors to further enhance the integration of our platforms for the benefit of our customers.

Following our successful IPO acquire remains focused on driving revenue growth by investing and the business with an immediate focus on expanding our commercial team and accelerating our research and the development and the first quarter. We added 21 people to the organization, bringing our head count up to 190.

We also recently and the added the newest member of our executive team Dr. Frederic Pla, who joined the call you and March as cheap as our Chief operating officer.

Fred Most recently served as Chief operating officer at the Parker Institute for cancer Immunotherapy, and previously served as CEO of the genomic health prior to its acquisition and through its acquisition by exact Sciences and 2019.

He also has an impressive history at life technologies and G. Fritz.

And for its operational scientific and market expertise are valuable additions to our organization.

In summary, we are pleased with our first quarter performance, achieving great progress across a range of important metrics and we look forward to executing our financial and strategic plans as we move forward through 2020 one.

I'll now turn over the call to Joe Driscoll to discuss our financial results Joe.

Thanks, Brian and good afternoon, everyone.

Brian mentioned earlier total revenue for the first quarter of 2021 was $12 2 million compared to $11 million and the first quarter of 2020.

As a reminder, we have seasonal fluctuations in our business, where the first quarter is typically our lowest revenue quarter of the year, the second and third quarters being somewhat higher than Q1, and the fourth quarter being our strongest we expect 2021 to follow this quarterly pattern.

Product revenue was $10 million for the first quarter of 2021 compared to $8 9 million and the first quarter of 2020.

Services and other revenue totaled $2 2 million from the first quarter of 2021 as compared to $2 1 million in the prior year.

Within product revenue two important categories, our instrument revenue and reagent revenue.

Instrument revenue was $6 8 million and the first quarter of 2021 compared to $6 7 million and the prior year quarter.

Reagent revenue was $2 5 million and the first quarter of 2021 versus $2 1 million and the first quarter of 2021.

We saw meaningful orders near the end of the first quarter for both instruments and reagents, resulting in strong backlog heading into the second quarter.

We monitor instrument sold and the installed base as key performance indicators for our business, which Brian discussed earlier.

We had a strong quarter with 37 total instruments sold highlighted by 'twenty codex installations.

Over the last 12 months, our total installed base has grown 28% to 587 instruments as of March 31, 2021, which gives us a great base to drive growth and reagents and all other parts of the business.

We continue to expect a solid recovery and our business in 2021 after some COVID-19 related disruption and 2020.

Gross profit was seven 4 million and the first quarter of 2021 compared to $6 7 million and the first quarter of 2020.

This resulted in solid gross profit margin of approximately 61%.

And as reagents become a larger portion of the overall revenue mix and this will benefit gross margins in future periods.

Total operating expenses were $12 8 million and the first quarter of 2021 compared to $8 1 million and the first quarter of 2020.

As discussed during our IPO process.

The increase was part of our strategic plan to invest in the business as we aggressively hired during the quarter. In addition to increasing marketing spend.

Our plans are to invest the IPO proceeds heavily into the business, especially and expanding the worldwide commercial team as well as and research and development to accelerate progress and a number of active projects related to instruments reagents and software.

We expect the total operating expenses will be at least $15 million for Q2 of 2021.

Net loss for the first quarter of 2021 was $8 1 million compared to $2 1 million and the first quarter of 2020 due to increased investment and the operating expenses and certain noncash charges.

We ended the first quarter with $11 $7 million of cash.

In April the net proceeds of the IPO after deal related fees totaled approximately $138 million, which gives us significant resources to invest in the business.

Post the IPO as of April 30, total common shares outstanding are $37 1 million and fully diluted shares of $41 1 million.

Moving onto our outlook for 2021, we expect full year 2021 revenue to be at least $52 million.

As highlighted earlier, we remain confident and our ability to deliver strong growth in 2021 and are anticipating second quarter revenue growth of approximately 45% over the prior year second quarter.

The first quarter results represent a solid start to fiscal 2021, and we are focused on delivering consistently strong results each quarter.

Now I'll turn it back over to Brian. Thank.

Thank you Joe and summary, we continue to see robust adoption of our codecs and <unk> solutions and the discovery translational and clinical research markets. We're very pleased to report strong results and our first quarter as a public company. We're thankful for the hard work of our dedicated <unk> team and for.

And the support of our customers and shareholders.

Following the IPO of Coy is well positioned for growth and are excited about the opportunities ahead. At this point, we will open up the call for questions.

Operator.

Yeah.

Thank you as a reminder to ask a question and you'll need to press star one on your telephone to withdraw your question press the pound key please standby we compile the Q&A roster.

Our first question comes from Tim and I Savant with Morgan Stanley You May proceed with your question.

Hey, guys good evening.

Brian just wanted to get your take on sort of reagent trends, particularly in April and and then to me here.

And where I'm coming from with that question is that a couple of your peers saw some residual COVID-19 impact continuing and we expect that to continue through the second quarter. So just wanted to get your take on and sort of lab activity levels, where they stand today versus pre pandemic and what are the assumptions you're baking into your 'twenty one outlook.

Yes, it's a great question Terry Johnson, and then I think what we're seeing is.

There were some a bit of a hangover some instances on the capital equipment side I recognize it wasn't your question and Q1 and a few instances, where COVID-19 had an impact but for us and our business as we're looking at the activity here in April and May we're continuing to see growth versus Q1. So we're really continuing to see a resurgence of our portfolio.

<unk> and terms of a reagent consumption is there still some sort of lingering COVID-19 impact you know, perhaps some but I think not to an extent, where it's going to meaningfully mute our performance in Q2, and I'll invite Joe maybe to add any color if you'd like.

Yeah Yeah.

Similar to what Brian said, you know, we're seeing good ordering levels across the board.

In Q2 and.

You can expect that number $3 million or more and in Q2 for our reagents versus the $2. Five we had in Q1. So we're feeling good about that.

Got it very helpful.

And then just in terms of the rapidly evolving competitive landscape here and in terms of instruments with single silo, and perhaps even sub cellular resolution.

Brian can you shed some light on what the product pipeline looks like for <unk> over the next sort of 12 to 18 months, particularly on the codec side of things.

Yes, I mean, I think we're going to probably withhold explicit details on the on the exacting product development launches that are forthcoming likely impacting 2022.

Our focus right now is really driving adoption of the existing products, but maybe a couple of additions stage us and number one is I think what we're seeing and the market and I think it is an endorsement of spatial biology is a real flood of new entrants some really powerful announcements by some of our colleagues are forthcoming future products and I think R. R.

Our mindset right now as a company with Kodak's, having been on the market just since 2019 and 2019 also being our first full year with synoptics is really focused on driving.

The performance of those existing products that said I think you can expect us to continue our advancements on two fronts, you'll you'll see forthcoming product announcements as we get through this year into next year, but also has highlighted and some of the opening comments, Josh we feel like partnerships are also a key part of.

And our of our product innovation driver and I made some specific mentioned to some stuff on the discovery side with Kodak's with our ice square.

Innovation network using our customers to help drive innovation, but also our partnership with Zeiss. So.

We will review more details on our product roadmap as it comes but I think what you can also see as I mentioned is a parallel branch off of leveraging our partners to help drive innovation.

Got it and then one final one on the Opex for Joe Joe.

You guys. It looks like you came in.

And I had a better we were in terms of the first quarter.

So should we think of a $15 million essentially.

And as a run rate to use on a go forward basis for Opex and then on a related note can you share any updates on your investments and the CRO service offering I mean, you're obviously seeing very strong traction there. So any plans to expand capacity or do you essentially view it as a hook to drive instrument purchases down the road.

So Josh you Opex and I can take the CRM portion.

Sure sure. So definitely for Q2, we believe opex will be.

$15 million.

And then we see and expanding actually beyond that you know for Q3 and Q4 say if he used.

$15 million and Q2, and then bump it up closer to 16 for Q3 and a little bit more for Q4.

Because where we are and the mode right now where we're in and aggressive investment mode and we're trying to hire people.

And all phases of the business so that that would be my recommendation on Opex and Brian do you want it and talk about the CFO or CIO lab services business is really a straw.

Strategic arm of our bid of our business working very closely with our key Biopharma partners on clinical trial work.

And we are investing in not just the laboratory resources, but dedicated business development and field.

To help drive that portion of the business. It's not focused on doing proof of concept studies to support capital purchases of our instruments and it really is a strategic driver as part of our aim to work with large pharma on clinical trials and become really integral and integrated to their clinical trial efforts.

Yeah.

Got it very helpful. Thanks for the time today guys. Thank you. Thank you.

Thank you and our next question comes from Steven Mah with Piper Sandler You May proceed with your question.

Oh, great. Thanks, guys and thanks for the questions.

Yes, Thank you Steven.

So first.

On the the head count expense expansion and I was wondering if you could provide some color on that and a sense for where the where the ads where it sounds like they were mainly and in sales and commercial so maybe just a little bit more color on that if he could and then also if any of the head count expansion was was global.

So I would say and all of the numbers that we quoted there were likely theyre evenly split between expanding our commercial team and our.

Research and development organization. So it is consistent with our priorities on the use of funds and the expansion of the commercial team is global.

Ross all geographies and that that will continue through the balance of the year.

Okay, Great and then digging in a little bit on the device co marketing agreement.

Can you give us a give us a sense on.

How that's structured.

Is it going to be.

Some are coil.

Our resources and then Zeiss resources combined for the co marketing of codecs, and and maybe give us a sense for their sales force.

Capacity and commercial scale that they can bring to bear yes, so at a high level.

The real objective there is really two prongs to that partnership number one.

As you know codecs integrates with existing microscopes and what this partnership allows us to do is really.

Be very close with their development teams on ensuring current and ongoing integration with with their microscope platform and platforms going forward.

That is the.

That is the technical side of that partnership in terms of the co marketing agreement, we're really just beginning to map out the detailed KOL marketing activities.

And exactly how we sort of leverage our respective marketing and field organizations, but they've got they really are one of the leaders in terms of their install base from microscopes that we integrate with and I can't at this time and speak to the exacting scale and the number of field reps that they have.

Okay, great. Thanks, so thanks for that color and my last question on the imaging innovator and its network.

Is this what you guys are doing for you are providing it for free but it is at this one.

Providing and its approximate software on a fee for service, except for giving it for free.

And I really appreciate you asking that question and give me a chance to give more clarity so.

The.

<unk> announcement of the imaging innovators network.

These are instruments that are purchase we're not we're not giving away codecs instruments and the what is powering that that our ability to build a network of users of codecs that are exploring novel applications, our ability to do that and that is the goal of of that network are Steven is too.

Allow people to innovate on codecs, because if you recall codecs really is and in situ reads and delivery device and allows our customers when we sort of unlocked the system as outlined in the press release and allows them to integrate codex with novel microscopy technologies attempt new assays. So this is really about expand.

And the field of applications.

Net codecs can attack.

And leveraging real thought leaders in the market to develop new capabilities on codecs and that's what it's really about proxima is as a whole separate offering and that is our cloud based compute.

Allergy that is enabling our customers to leverage the power of the cloud.

And to store share and analyze.

Their datasets, so hopefully that clarification was helpful.

Oh, yes. It was yeah I appreciate the questions and congrats on the quarter. Thank you, Steve and I appreciate it.

Thank you and as a reminder to ask a question you will need to press Star 100, and telephone. Our next question comes from Julia Qin with Jpmorgan. You May proceed with your question.

Hi, good afternoon, congrats on the quarter.

Maybe just to follow up on the ice square partnership could you give us an idea of the scale of this network like how many labs are involved.

And you mentioned this is really too.

<unk>.

Development of novel applications, what specific applications and should we be thinking about is it kind of.

Randy and to other disease areas.

And we think I think about it another way and also for you.

Our customers involved in this network are there any.

Preferential pricing on terms that we should be thinking about.

Yes, I think there.

There are some details within the within the agreement, but in terms of the scale. The scale right now we're talking sort of 10 to 20 sites and we have a lot of different areas that we're investigating with our partners. We're just on boarding.

Many of those now and they include novel microscopy approaches.

And I include novel assay methodology on methodologies on the Codexis from it really is about.

Expanding the application menu that's available on codecs and not just in terms of analyzed but other microscopy technology. So that that's really the focus is is leveraging the capabilities of our customers.

And their ability to innovate to help to help drive the advancement of the codex application space.

Got it that's very helpful and.

And then in terms of codecs obviously.

And strength.

And is above what we were modeling so could you just give some color on the drivers of distress and what's the price due to the upside and.

Those being mostly greenfield placements are added and seen any competitive wins against other discovery and spatial platforms.

Yes, I mean, theres always evaluation of competing technologies and it just comes down to the scientific preferences of our customers and I think what's what.

What's really growing our ability to continue to do well and codex is the recognition and continued.

Price realization of the use of the platform not just at conferences like the one I highlighted but also with growing publications.

And as the platform is in the market.

For a more meaningful periods of time people begin to recognize the power of the system and I think we're just beginning to feel that momentum and again, we sort of like everybody. We had this sort.

Sort of a wet blanket. It was that was last year, which was one of our first full years of Kodak. So we're just really coming out of that kind of regaining the momentum that we have.

Got it very helpful and last one from me in terms of the sales force expansion and.

21 additional people already how should we think about the cadence of additional hires throughout the year and what I like.

What's the timing for these new hires to reach full productivity.

We will continue to expand our sales team throughout this year and into next year and.

The number that we gave you.

In aggregate across the company of 21.

We will continue to aggressively hire at that rate or higher quarter over quarter.

Generally equally balanced likely between our commercial and R&D teams. So that that is our objective through this year and I think that the numbers. We gave you for for this last quarter I think our starting benchmark and Joe and feel free to add any additional color if you'd like.

No that's great. Thanks.

Thank you Julia.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Brian Mccallion width for any further remarks.

Just in closing I, just want to thank everybody for joining the call and we're looking forward to providing you. Our next update after after the second quarter. So thank you all so much.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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