Q2 2021 NanoString Technologies Inc Earnings Call
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Moving on.
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Good day, and thank you for standing by.
Welcome.
Welcome to the nano strength second quarter 2021 operating results at this time all participants are in a listen only mode.
After the speaker's presentation, there will be question and answer session to ask a question. During the session you will need to press star 1 on your telephone keypad.
Please be advised that today's conference is being recorded.
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Without further Ado I would like to welcome your first speaker for today Ms.
So Doug Farrell, Vice President of Investor Relations, Sir the floor is yours.
Thank you operator.
Thank you for everyone for joining us today on the call with me today is Brad Gray, our president and CEO.
Tom Bailey, our CFO earlier today, we released our financial results for the second quarter of 2021.
During this call we may make statements that are forward looking including statements on financial projections impacted for COVID-19, pandemic future business growth trends and related factors.
Thanks for expanding and penetrating our addressable markets for our strategic focus and objectives and the development status anticipated success of recent and planned product offerings for.
We're looking statements are subject to risks and uncertainties many of which are beyond our control, including the risks and uncertainties described from time to time on our SEC filings.
May differ materially from those projected we undertake no obligation to update these forward looking statements.
Later on the call Tom will be discussing our financial results for 2021 guidance for.
Repair has been supplemented GAAP financial measures selected non-GAAP adjusted measures for calculation of which are described in detail on our press release.
Throughout this call all financial measures will be GAAP, unless otherwise noted.
You can find reconciliations of GAAP non-GAAP.
Pinching limitations and rationale for using each such.
Such measure.
On the press release are also available under the Investor Relations page on our website.
I'd like to remind everyone will be in touch.
Dissipating and the UBS genomics to Winnow Conference next week as well as the Baird and Morgan Stanley Health Conference for healthcare conferences in September we look forward to having the opportunity to speak with many of you. There now I would like to turn the call over to Brad.
Thanks, Doug Good afternoon, and thank you for joining us today for our momentum of our spatial biology franchise continued to increase each quarter. We continue to extend our lead in translational research on the rapid adoption of Ngls readout for genomics is opening up a vast new margin basic discovery research.
A special molecule for imagery partnering interest from existing genomics customers as well as single cell genomics, researchers who are engaging with nano strength for the first time.
Meanwhile, on a encounter franchise is humming along continuing to generate strong instrument placements on great science more than a decade after its introduction.
Our first strategic objective for 2021 is to extend our lead on spatial biology through the broad adoption of the genomics digital spatial profiler and the second quarter, we generated a record number of quarters for genomics DSP instruments on delivered sequential growth on genomics consumable pull through per system.
If you on this instrument orders grew approximately 50% year on year at the top end of our guidance range of 40% to 50% growth for.
For recent launches of our human and mouse whole transcriptome atlas's for Wpa propelled annualized consumable pull through from $94000 per system. During the second quarter near the top of our previously provided guidance range of 80.595.
On the impact of <unk> on consumable pull through was pushing our genomics revenue expectations for 2021 towards the top half of our previously guided guidance range.
And importantly increases our estimates for the long term value of our genomics franchise.
Expanding the use of next generation sequencing to readout genomics experience is a key growth catalyst for our spatial business for <unk>.
Some launches of our first whole transcriptome products are driving the momentum.
These are the first system wide products that we've offered and they are appealing for researchers in both translational and discovery research during the second quarter, approximately 60% of new genomics instruments were sold to researchers containing the NGF as their primary readouts.
In addition, many researchers who initially use their genomic systems with encounter based readout have now begun to utilize assays with Ngls readout as well so.
So far this year of approximately 1 third of our installed base has order either on a whole transcriptome Atlas for our cancer Transcriptome Atlas assays.
Together these ngls readout assays accounted for approximately 2 thirds of total genomics consumable revenue in the second quarter.
We expect that the expanded research applications of our Ags enabled assays will drive broad adoption of genomics, while the higher revenue for suitable of these assays will continue to increase consumable pull through per system for the balance of the year.
During the second quarter, we expanded our NPS enabled genomics portfolio with the launch of the mouse whole transcriptome Atlas.
<unk> is the most important model system for basic discovery research and our market research suggests that may represent up to 30% of the spatial biology Tim.
In February we began operating the mouse for HCA through our technology access program for tab cel.
This new offering is generating strong interest from researchers with diverse.
He's a biology, including immunology neuroscience infectious disease and developmental biology.
Our technology access program enables researchers to test drive genomics, while evaluating an instrument purchase and provides us with another strong indicator of customer enthusiasm for <unk> readout.
We generated more than 90, new task orders in the second quarter more than doubling the number of projects over the prior year with MTS readout, Ethan about 90% of the new projects.
While our whole transcriptome Atlas, it's broadening the basic discovery research, we continue to build on our track record of leadership among translational researchers focused on human disease <unk>.
<unk> has been serving the translational research community for more than a decade, and we have a strong brand and deep understanding of their unique requirements.
We understand that while robust and reliable results.
On fixed paraffin embedded for the FTE issue.
It's table stakes for any platform translational researchers demand much more.
They want automated solutions that can drive high sample volumes and provide consistent site the site performance needed for collaborating across networks.
Also want to handle on both RNA and protein on the same platform.
Genomics is these batesville biology platform all of these requirements, helping establish its market leading position and translational research.
To be clear while other companies are adapting their technologies to be S&P compatible net of trading platforms were developed using <unk> from the outset recent.
Recent product updates from other companies either shifted the competitive landscape more impacted our leadership and translational research.
Among other requirements translational researchers value the genomics provide protein assays are enabled by our portfolio of several hundred validated antibodies and best in class plants.
For the researchers focused on protein assays and kind of readout for <unk>.
For configuration and represents approximately 40% of genomic systems sold during Q2.
Half of these systems for about 20% of all GM on systems sold during the second quarter were packaged as genomics encountered bundles.
In most cases these bundles are going to translational researchers who are new in a spring customers further extending our lead.
Market.
Overall <unk> continues to provide a strong growth driver for 2021 and are set up for long term success transforming our company.
Our second strategic objective for 2021 and to advance the development of our space will be like for imager and to feed the market for the commercial launch is planned for next year.
Now, let's move on imaging is shaping up to be an important new market that we expect will be highly complementary for spatial profiling.
We're making great progress in developing our space for molecular imager for SME.
Hi.
Which remains on track to ship commercial instruments in the second half 2022.
<unk> is expected to be the best in class and distinctive from other imagers in several important ways.
First we expect that some either lead the class with both the highest flex on the highest sensitivity.
Second we expect <unk> to show superior performance and S&P tissue samples and third unlike competing platforms <unk> will launch with both RNA and protein.
We have developed the technology access program for <unk>, and we've been fielding interest from a diverse set of researchers.
Day about half of the <unk> tap projects come from existing genomics customers, while the other half came from single cell researchers just the beginning just beginning to embrace spatial biology.
The experiments, we're running spend many areas of biology, including oncology immunology and neurology.
Some researchers have an interest of a new base based on molecular imaging to create an atlas themselves within the tissue, while others are looking to characterize the interactions between individual cells.
Our top separate service is already oversubscribed for the year and we've been allocating our capacity for high impact science with key opinion leaders.
<unk> continue to reach out with interesting projects, creating a reservoir of demand that will keep us busy well into next year.
Our third strategic objective is to return our encounter business to the growth dynamics seen prior to the COVID-19 pandemic.
Our encounter franchise remains robust with our installed base, increasing about 14% over the prior year and customers publishing another 300 peer reviewed papers during the recent quarter.
We achieved a major milestone on our encounter business due to selling our 1000th system.
As of midyear 2021 instrument revenue almost exactly matches, what we generated during the same period in 2019.
This signifies a full recovery of instrument placements to pre pandemic levels and we expect this trend to continue for the second half of the year.
In Q2, we generated another sequential increase in consumable.
For about $57000 per system annualize that for.
Recovering most notable in North America.
We expect consumable pull through to continued recovering from head that may close during the second half.
Oncology researchers continue to embrace and counter <unk>.
We recently entered an exciting collaboration with the Parker Institute for cancer immunotherapy focused on the molecular characterization of cellular therapies.
The objective of this collaboration is defined the characteristics that will make the cell therapy effective providing a standardized approach to developing car T regimens that may improve patient outcomes across all cancer types.
Collaboration will leverage for cell therapy expertise of Parker's extensive network of World Class Research centers and Parker plans to make the findings publicly available the scientific community.
In another exciting development, we recently entered a long term umbrella contract for supply the national Institutes of health.
Part of it's IMAX program.
The NIH NCI sponsored.
Clinical trials per year and under this agreement NIH researchers will now have expanded access were encountered platform to assess immune status in solid tumors for patients on clinical trials.
We continue to push encounter in the new areas beyond oncology.
Second quarter about half of our antenna systems were sold for applications outside oncology and consumable growth was especially strong in infectious disease and immunology.
During Q2, we launched a new stem cell characterization panel for the analysis and optimization of cell lines used in the development of novel Therapeutics.
Our new panel measured as a central component of the stem cell biology, and provides a standardized assays for evaluating factors that impact the liability from the development and manufacturing process.
We hope it will help researchers scale up that stem cell therapy workflow advancing this promising field.
To summarize, we're making great progress on our strategic objectives with encountered returning to growth genomics, reaching new customers through <unk> readout and <unk> generating excitement ahead of its 2022 months.
And now 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 second quarter of 2021 product and service revenue was $33.6 billion.
Representing year over year growth for 59%.
Due to genomics revenue was $11.2 million up 66% as compared to Q2 in 2000 and above the high end of guidance, we provided a day.
$7.4 million from approximately 30 instruments shipped for $3.8 million was from consumable sales.
Annualize June which consumables pull through was about $94000 per installed system in Q2.
For <unk> total revenue for Q2 was also above the high end of our May guidance Q2 instrument revenue was for $4 million representing year over year growth of 25%.
And kind of consumable revenue was $14.2 million representing year over year growth of 80%.
Annualized consumables pull through was about $57000 in Q2.
Service revenue was about $3.8 million for the quarter, representing 29% year over year growth and driven by new genomics GSV top projects and increased service contract revenue from our growing instrument installed base.
Turning to margins and expenses I'll provide results on a non-GAAP or adjusted basis, which removes the impact of stock based compensation depreciation and certain onetime items.
Please refer to our press releases on the exhibits posted to our Investor Relations webpage for detailed information on how our non-GAAP for adjusted measures are prepared.
Due to adjusted gross margin was 56%.
Consistent with our annual guidance range at about 400 basis point improvement compared to Q2 of last year, driven by both the growth and genomics DSP revenue net of recoveries and kind of consumable sales compared to the prior year period.
Adjusted R&D expense was $14.5 billion, an increase of 6% year over year.
R&D was higher compared to the prior year period, due primarily to increased personnel and <unk>.
On a development costs related to our SMA program.
We expect R&D expense will increase through the balance of the year as SMA development continues.
Adjusted SG&A expense was $21.7 million net increase of 27% year over year for.
Q2, SG&A expense increase was due primarily to investments made in our spatial biology related commercial initiatives, including investments to expand our sales force and our service and customer support groups.
Adjusted EBITDA loss was $17.3 million on improvement of 12% as compared to the prior year.
We exited the quarter with approximately $398 million for cash cash equivalents and short term investments.
Turning to guidance for Q3, we expect product and service revenue to be in the range of $36 million to $38 million representing year over year growth of 20, 26%.
The range assumes a <unk> $24 million to $25 million of encounter revenue from $12 million to $13 million of genomics credit.
Regarding our full year guidance, we are raising our full year guidance range for Jewish consumables pull through to <unk> 95.
For $100 per system per year.
Annualized pull through of approximately 100000 for $105000 for the second half from 2021 based on strong early consumable utilization and GFS enables items.
We are also affirming our previous guidance of 40% to 50% growth in instrument orders as compared to the prior year. As a result, we are updating our full year <unk> revenue guidance range of $48 million to $50 million, representing annual growth of 38% to 43%.
For encounter instrument demand has rebounded to pre pandemic levels globally, and our expectations for mid kind of instrument revenue remained unchanged.
We're narrowing our full year guidance for consumable pull group to 60000 to $63000 per system per year.
<unk> approximately 63000 for $66000 for the second half of 2021, and reflecting a rebound in consumables demand in North America, that's been partially offset by a modestly slower pace depends on it pandemic recovery in Europe and Asia.
As a result of these updates we are narrowing our full year and kind of revenue expectations to 95% to $97 million, representing annual growth of 24% to 27%.
The combined impact of these updates as an update to the full year product and service revenue guidance range of $143 million to $147 million, representing annual growth of 28% to 32% with the midpoint of our total revenue guidance remains unchanged we are on.
Also affirming our prior full year gross margin operating expense and adjusted EBITDA loss outlook amounts as provided on our March 1st call.
Additionally, as a reminder, we do not expect any material collaboration revenue to be reported in future periods and now I'll turn the call back over to Brad for closing comments.
Thanks, Tom as we entered the second half the year is shaping up just as we can envision.
Our new whole transcriptome assay for driving adoption and increase in consumable pull through.
On the long term value of our spatial business, our deep understanding of customer needs combined with unique throughput and multi on the capabilities of genomics are extending our leadership in translational research scientists across many fields of research are intrigued by our spatial imager on aligning up to perform their first experiments.
Meanwhile, on encountered franchise is still achieving important milestones within a decade after its introduction on.
On momentum is strong and we are confident that both our near term growth prospects as well as the old credit value of our spatial biology franchise.
That we now open the line for your questions.
Thank you Sir as a reminder to ask a question you will need to press star 1.
Again that is borrow on to ask a question.
Our first question comes from the line of Tycho Peterson from Jpmorgan you May ask your question.
Hi, good afternoon will flow through on for Paul.
1 question for Joe.
In terms of the current formula.
I'll jump on that 1 for Biopharma for genomics.
How do you see the mix.
Engine going for the whole transcriptome launch and how should we think about the balance of runway.
Academic versus Biopharma I guess the formats are much more fragmented market for the latter Mickey on.
We're ready to time, Inc.
I've got into transformation.
Help US Inc. Robert.
Thanks.
Thanks for the question Julien Youre right our installed base for genomics is about 2 thirds of academics and 1 third biopharma.
Initially when we launched our whole transcriptome assay, we imagined it would appeal more to the basic discovery researchers to define.
<unk> and academic research settings, and so we had projected debt over time the fraction of genomics is still into academic research with actually increase as I mentioned in my prepared remarks, we're seeing that the ags readout capability of genomics, including the whole transcriptome assay for <unk>.
Both for <unk>.
To discovery researchers and translational researchers so at this stage I think we should expect to continue to see on approximately 2 third 1 third split.
For new genomics instrument placements between academic and Biopharma customers.
Got it Thats helpful.
<unk>.
On.
The biopharma in conclusion on Easter.
Is there any corn on room count increase.
Our next growth, where we can also look at on a clinical trial.
And on the GM its throughput is already extremely high relative to all of our spatial biology platforms and is probably sufficient.
<unk> for use in a clinical trial the nominal growth of a genomic system is about 2 samples per bag and theres really very few clinical trials that would ever be enrolling patients at a faster pace than that or is it needed to screen patients for up for inclusion at any faster pace for that.
So we feel really good about the capability of the genomic system to serve the translational research market and include gain clinical trials.
Of course, most of our use of genomics and translational research today. Its a retrospective analysis of Ffbe samples that were collected in clinical trials.
We think that the throughput could hypothetically allow the prospective analysis at the enrollment of our clinical trial as well without any material changes to what our genomics offset demands.
Got it very helpful. And then lastly, I know you gave color on the task order for to you on that could you share the same for for SMA.
How many come from Matthew or working with them on the upcoming publications with AT&T at Huntington.
Yes, so in the past, we've said that our plan for.
For that SMIC.
For 2021 was to enroll 15 to 20 projects worth and we are fully subscribed at that level now.
We continue to collect excess demand as I mentioned in my prepared remarks, those those interesting projects for sort of on standby until we are able to expand our GAAP capacity and 2022.
We are previewing any particular forthcoming publications at this point in time, but look for incremental news flow on eskom highs in the fall and in the fourth quarter.
As some of these cap projects begin to make their way through completion and into appropriate public presentations.
Great. Thanks, so much Matt.
Thank you Julia.
Our next question comes from the line of Daniel areas from Stifel. You May ask your question.
Afternoon, guys. Thanks for the questions Brad on the consumable side and the raise on the genomics pull through average can you maybe just add some color to the elements in play there I mean, it sounds like Nextgen usage is up nicely for what are you seeing just in terms of ethane mix for your comp to your point before.
From the impact that's having maybe simple numbers relative to your initial expectations.
Any over any other sort of residual comments that you might have on utilization trends that are sort of driving that that debt rate for us.
Yes. Thanks for the question, Dan I think it's been incredibly exciting and even surprising to us the broad interest in the whole transcriptome Atlas assay in the past you've heard us talk about the whole transcriptome Atlas as our gateway assay into just the discovery market for what you've heard in our prepared remarks is that the.
Entirety of our installed base.
Free to buy this assay that is beginning to adopt it.
That drives the overall dollar per sample up for our entire installed base and is translating into the second raise on our consumable pull through guidance that you heard today.
Because most customers are still in their call. It trial usage phase of the whole transcriptome Atlas assay I think it's too early to characterize exactly what their steady state run rate.
<unk> per system per year would be.
But clearly the overall dollar per assay average for our installed base going on.
And of course on a key driver on the long term value of our spatial biology franchise, which was what makes it so exciting.
Yes, okay.
We'll have quarters, you had said that you thought that if you fast forward into the end of this year whole transcriptome could come to make up more than half of what's done versus cancer transcript on do you still think that makes sense from an assumption.
Yes, I do think debt the Mcs readout assays, the cancer Transcriptome Atlas Anvil Transcriptome Atlas together accounted for 2 thirds of our consumable revenue on.
On genomics in the second quarter. So the whole transcriptome assay is probably already very close to half of the utilization of our total installed base and I think that will just grow over the I think that will strengthen over the balance for the year.
Okay. Okay, and then just maybe on the instrument side I mean, you guys have done a really nice job just sort of keeping the genomic business steady throughout the pandemic. So certainly kudos there for sure.
Im wondering when do you think we start to sort of see a step up on orders and installs.
Just in the coming quarters, obviously, the pull through is a telling sign on day 1 of them anyway, that's going up but it does feel like the enthusiasm around the spatial market just sort of being on the cusp of inflection.
Start to show up in the adoption rate, especially since it feels like the constraints on just getting into the lab for not as high so.
Totally appreciate the fact that things are not 100% out there I do get that but is it fair for us to model acceleration in the placement rate going forward from the for 30 years or so that you've been on for a while.
Yes.
So first let's separate orders and revenue recognition because those are really important different dynamics.
As you know for the first half of this year for both Q1 and Q2, our order rates.
Going on approximately 50% year on year.
So that is and that's the best indication of actual sort of real time demand from the market for genomics. So that's growing at a very strong rate.
Top end of our guidance range for the year.
We're maintaining our 40% to 50%.
Growth guidance for the full year on quarters. So.
Net and of course that will because when you look at the competitors for the back half of last year that will increase orders beyond the 30 or so placements that you've seen from us the past couple of quarters and given that we're on a 1 to 1 kind of book to Bill scenario now where each order is more or less fulfilled within instruments shipped.
You will begin to see instruments growing beyond 30 in the second half.
That being said part of your question seemed to imply that you were wondering if there was going to be an enormous step change or inflection with respect to instrument revenue I don't think thats. The natural dynamic of this market. We are marching orders up at 50% a year, that's a great clip.
I don't expect that suddenly the spike to a higher rate. If we can sustain that pace of instrument order growth for the balance of the year.
And sustain that that type of growth for the 40 to 50 range even into next year on the order of a great. We're going to build a tremendously valuable space for franchise without the need for it.
Anything that I would characterize as a particular inflection.
Yeah, no no I assume it wasn't thinking.
Big step up I was just I'm going back and I'm looking at the installs per quarter and Im saying, Okay, you guys actually place.
35 system in Q3 of last year, which again is a huge accomplishment given how difficult the operating environment was debt. So.
For those of US that are just trying to understand the.
The velocity of the trajectory of the spatial market is it fair to assume that if we pushed into the end of this year or the beginning of next year, you'll start to see that number creep up. It just says hey, there are more people out there that are looking to do space.
Experiments theyre ordering boxes, and you guys are putting more of them in lab and you did say a year ago.
Yes, certainly certainly that growth as is expected in the second half.
Just to work the math for you.
We're maintaining our 40% to 50% guidance range for orders, given where we earned a year that would imply a range of sort of 30 to 35 orders in the third quarter from 35 to 40 orders in the fourth quarter and that's just worked the math on on.
On growth on the 90 that we did for year 2020, and for 60 or so.
Year to date, so that gives you a sense of what's implicit in our guidance standard.
If we can keep growing instrument placements.
On that kind of range.
We're going to be interest in place.
Yeah, absolutely okay. Thanks, Brett.
Our next question comes from the line of Catherine Shelty from Baird.
Your line is now open.
Hey, guys. Thanks for the questions I guess first can you just walk through what Youre seeing on the reopening side, where different regions in terms of activity levels versus pre COVID-19 levels and then what are you guys seeing when it comes to access to customer sites.
Yes, great Great question cash range so.
We alluded to in our prepared remarks, our best indicator for customer activities and the place where the COVID-19 pandemic impacted us the most is on.
Encounter consumable pull through.
And we've seen I'd say.
And on EBIT and demand recovers geographically.
In North America, our business is almost back to the pre pandemic utilization rate of encounters.
That we experienced in 2019 that being said EBITDA.
In APAC, we remain substantially below what our 2019 utilization rates for and we attribute that to slower recoveries from the pandemic and those regions that.
That may or may not be the same as what other companies are seeing but at least within our installed base, which is focused primarily on cancer research and to a lesser degree on immunology and neurology research that's what that's what we're seeing.
Importantly, maybe I'll just add none of that tend to net recovery seems to be impacting the play expense of.
Encounter instruments, which are back on the 2019 pace for the pace of genomics instrument orders, which are in line that haven't been on the top end of our guidance range. So far this year.
Yes got it.
You guys had talked about hiring about 100, new reps, how is that hiring process going on.
Where are you in terms on those hires on how should we think about a potential at that kind of impact.
Yes, we're about 3 quarters away through hiring those 100 reps we've.
We've made good strong progress, especially in North America, where of course.
Hiring as fast and simple.
Places, we still have higher any undergoing underway is more in Europe and Asia on where.
Ex longer to hire people.
We're pleased with the progress I think we'll begin to start to see the impact of those reps later this year. It usually takes 6 months for a rep to become effective on say Duane has been trained some people were hired agenda on the second quarter would be beginning to be effective in the fourth.
And then of course, we'll have a full year of their impact for 2022.
Okay got it and if I could sneak 1 more in I'm just curious if we could talk on the innovation roadmap for Geo mix from here.
I have 3 different encounter platforms are there different iterations of genomics you intend coming out for the next several years.
Yeah.
Now, we're focusing all of our genomics innovation on the sales front and the software front.
We believe that the combination of.
Price point for the plant in Brookwood debt debt. Our current genomics system has is.
<unk> really core labs across both the discovery and the translational market segments and what we wanted to do is continue to innovate on the consumables that will appeal to a larger number of customers. So obviously the whole transcriptome assay with the single most important consumables that we've introduced but we're also continuing.
To expand our protein library.
In fields beyond cancer, we're continuing to look at custom assay options for genomics that would allow us to address.
Biology that takes place outside of the human or the mouse model.
Those are some of the consumable innovations.
And then separately.
We're learning a lot from our customers on how they want to.
Store to process and to manipulate the data that's generated in spatial biology, and we're moving towards more sophisticated.
Software tools that will improve the customer experience and hopefully try to even higher utilization of the systems that are out there.
Today, we don't have.
For a specific plan with respect to instrument innovation, but certainly we will update you over time.
Is that from that develops.
Okay, great. Thank you.
Our next question comes from the line of Tejas.
For up Morgan Stanley You May ask your question now.
Hey, guys. Good evening. Thank you for the time this is edmund on for patients.
The total back on the.
The recovery trends and your counsel consumables I know last quarter, you guys had called out <unk> as a pocket of weakness I was wondering if you could provide some additional color on the recovery pace, specifically for the EU region and in terms of your guidance, what's baked into it for I guess total.
Total variance then.
Worsening COVID-19 impacts.
Yeah, So maybe I'll take the second part of that question first I think our guidance today on.
On an encounter consumables does bake in the current uncertainty with respect to the delta vary anywhere from watching on a real time as everyone else is.
That's part of the reason that we're no longer projecting that we'd be at the top end of our encounter previously provided guidance range because with this uncertainty I think we can only expect that the recovery will be.
On pace for a little bit slower than we might've originally a match, but I do not see it getting any worse than as embodied in our updated guidance range today with.
With respect to Europe, I'm, not really in a position to provide too much in the way of additional color.
We'll say, it's worth remembering that the areas that are weak.
Our relatively weak in terms of demand, which for us are in Europe, and Asia for the sustaining regions, where we work through distributors in many cases and so some of what we're likely to be CA in terms of a slower recovery of our business in those regions is confounded by the fact that distributors may be less.
More negatively impacted in their own business operations day in dentistry would be in a direct market.
I'll just add debt I think thats, probably the only color I can really add eliminating.
No that's super helpful.
And then just turning quickly to the F. For my Cat program. I know you guys had said previously that is.
It was mentioned from the development of the contact on the F&I and so on we find the visual and analytics pooled as well can you provide a brief update on how that development is progressing on these 2 fronts and the type of event.
Yes happy to.
On other things the tap allows us to do is see where the demand is from customers in terms of key parameters like the amount of area of tissue that they want to analyze the number of targets that they wanted to antelope analyzed and whether the question, they're asking it's really more about building sales.
It's just the math or whether it's something that is actually trying to probe how any individual cells are interacting and so those are all very different use cases, each of which would.
Informed.
A different part of the design choice of the instrument consumable on our software.
We have prototype software for present day, and visualizing space for molecular imaging data that we've been able to present some of the early tap customers with and get the real time feedback on how they would explore their data and.
And while I don't want to characterize it a particular insights I can say.
It's incredibly valuable.
Just the right time, and our product development effort to continue to.
Evolving requirements.
We look forward to being in a position at a time in the future to demonstrate those tools more broadly.
Got it. Thank you for that and then 1 final 1 for me step.
Stepping back looking at a higher level and given the recent emergence of participants in the spatial biology feel.
What are some of the key competitive advantages you guys being at nano stream I know you've previously highlighted thousand flex capability on best buy and you earlier alluded to a higher throughput on the Geo mix.
I think on the key factors that have been jumping out and separately.
Is there anything to note in terms of traction for some of these platforms that launched earlier this year from your side.
Spatial biology is truly the next revolution in the field of biological research and it's understandably, attracting a lot of innovators there.
As innovators from larger companies like us and there are many startups along the way.
Across both the molecular imaging and the profiling categories, demonstrating really leverages. Many of the same competitive advantages..1 is we've been in business serving researchers for over a decade and I think we have a deep and intimate understanding of what's required by the market, particularly amongst translate.
Researchers.
2 is debt.
We have for years built big robust highly automated instrument systems that debt.
You can place on lab and they just work over and over again day to day out.
That's a new skill that many smaller companies are building for the first time.
Free is.
Unlike some of the new entrants, we are actually participating in the market and engaging with hundreds of customers every day every week.
So I think that makes us smarter about what the customer base needs. Then of course on top of those there is a series of technical advantages for us out as an industry. We've always built every platform to be compatible with formalin fixed paraffin embedded tissues first and then later come back to adapt it to more.
To more call it esoteric sample types like fresh frozen. So I think we're always going to have an advantage on that simple type over our competitors. We've also embraced the idea of mobile mix. So we build all our spatial platforms to be capable of both RNA and protein at the same time.
Is it going to be another sustainable advantage.
And then finally, because we're pretty tuned in I believe for the translational market needs. We tend to build platforms that are high throughput and high plex and those tend to also by the way be those with the strongest recurring consumable revenue strength because plaques on throughput correlate with how much people spend on.
On consumables, so we feel really great about our competitive advantages and our positioning in the marketplace. Both on a technical and maybe on a more kind of corporate capability level.
Great.
Thank you from a covenant on incentive has been implemented.
Our last question comes from the line of Douglas Schenkel. Your line is now open.
Hey, guys. Thanks for fitting me in at the end here.
Sure.
Just I guess 2 or 3 cleanups.
First Hugh I think I remember you guys talking about.
On expectation heading into Q2 that there wasn't going to be any improvement in lab access I think the hope was that would be better than that but.
Yes, I think Thats, what was factored into guidance I just wanted to confirm based on what you talked about in your prepared remarks that it was probably a little bit better than you expected and kind of how you are treating that as we think ahead for the back half of the year.
Yes. Thanks for the question, Doug I believe that our access to labs, how are sales reps got into labs in the second quarter was about in line with our expectations. Most of our sales activity is actually still play for taking place over the phone it over zone.
Many of these research institutions.
Although they are up and running and doing research really aren't eager to have outside.
<unk> walking the hallways newer sales reps meet their customers on coffee shops on campus.
Or or to work over the phone. So in that regard I think were right in line with what we expected.
Lab access you really meant more kind of the activity levels that are happening inside on the lab using our technology I'd say that was also more or less in line. During the second quarter I think our encounter consumable pull through was about where we expected it to be during Q2, our genomes.
Ex consumable pull through was better than we expected it to be during Q2.
So I would say that.
That says a lot access flat activity levels with in line or maybe slightly better than we had expected in Q2 with all of the caveat about the sort of geographically uneven improvements that I mentioned earlier.
Thank you for that Brad.
I apologize if I missed.
I missed this in your prepared remarks, but the 20 <unk>.
Net placements or so for encounter.
Was that was that sort of just 1 of those kind of timing dynamics in terms of why that number wasn't a little bit higher and not necessarily a reflection of something like there's a big drop off in attachment rates with genomics or something like that is that is that just kind of 1 of those normal.
Normal quarter reflects <unk>, we see from time to time.
But absolutely as Doug. This is Tom if you look back at that.
The first quarter and compared to the second quarter, we had a big installed base fleet from the first quarter. So you could see some some of the anomalies in sort of that installed base that happens seasonally seasonally relative to the revenue, which tends to be a bit more more smooth.
Brand counters. So another way of answering that is we did sell more units than we installed this quarter as compared to the per dealer.
So as to not impact from.
Revenue has been very very strong.
And we feel really good about it head on.
Into the second half of the year as we mentioned in our prepared.
Okay.
Good feelings on encounter.
Sorry to interrupt and thanks, thanks for that kind of on site.
My last 1 is really on its sort of a 2022 question. So I'll totally understand that you don't want to go there.
But based on what you're seeing.
I guess I'm, just wondering how youre feeling about it.
Kind of related to what I just asked about like how you are feeling about the ability to keep placing and counters not just over the next 2 quarters, but over the next several quarters.
That are really influenced by the continued interest in genomics.
In my model.
Actually half the pace of that counter placements moderating next year in part because.
My assumption is that theres going to be more and more of these genomics instruments going in front of.
Sequencer.
Yeah, those things don't have to be mutually exclusive right you could you could.
Place a lot of genomics instruments in front of sequences and you could keep influencing on creating demands on the core and counter side is it too early to say look your models way too conservative based on what we're seeing.
Or for now do you think that this is a fair way of thinking about on meeting genomics demand that's going to continue to be robust, but the mix of placements is going to increasingly skewed based on at the end for a sequencer.
Yes, great question Doug.
I'll start on Geo mix I think you are correct. The NGL mix placements will continue to skew towards Ngls readout.
That being said I do not believe that negatively impacts the encounter trajectory because encounter.
A lot of users well beyond genomics readout so.
Good day.
Actually if you look back even to last year about 20% from our genomics systems have been sold with encounter as bundles the net debt.
Percentage has been quite stable, so if SCO mix grows.
So too does if we went 8 of 20% so too does the <unk>.
Encounter pull through on to genomics.
That continues to be good.
On top of that we've worked hard to diversify encounter into areas like immunology, and neurology and I talked on the phone about steady sales.
That is sustained.
Encounter instrument placements.
On 2019 rates really through the first half of this year. So truly if you look pre pandemic.
On a write off 2020, and then look at 2021 post pandemic, we're placing instruments at almost exactly the same pace.
So I don't see a reason that that would moderate materially in 2022, I think it's conservative to model a little moderation, but really there is not a trend that I could point to that would make me expected or worried about it.
Okay.
Thanks, guys.
Thank you.
And that concludes the Q&A session I will now turn the call over back to Mr. Doug Farrell, Vice President of Investor Relations.
Please go ahead with your closing remarks.
Thanks, very much. Thank you everyone for joining us today, if you didnt Miss any portion of the call there will be a replay available next week.
We'd ask callers dial U S. Callers dial 1.800, 580, 580.367 International callers St. Jude for 16621 for export to the conference I'd is the same number for bolt. It has 3 for 1 for 1 on 7 so with that we will say goodbye and.
Thank you for your time.
Yeah.
Thank you again for participating this concluded on for.
Prince call you may now disconnect.
Sure.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Thank you.
So.
Okay.