Q3 2021 NanoString Technologies Inc Earnings Call

Good day, Thank you for standing by and welcome to the nano string third quarter 2021 operating results at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.

If anyone should require assistance during the conference. Please press star zero on your telephone.

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Doug Farrell, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you operator, joining me on the call today is Brad Gray, our president and CEO, Tom Bailey, our CFO earlier today, we released our financial results for the third quarter of 2021.

During this call we may make statements that are forward looking including statements about financial projections the impact of the COVID-19, pandemic future business growth trends and related factors prospects for expanding and penetrating our addressable markets, our strategic focus and objectives and the development status and anticipated success of <unk>.

Planned product launches.

Forward 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 in our SEC filings.

Our results may differ materially from those projected and we undertake no obligation to update any forward looking statements.

Later in the call Tom will be discussing our financial results in 2021 guidance and we are prepared as a supplement to GAAP financial measures selected non-GAAP adjusted measures. The calculation of which are described in detail in our press release.

Throughout this call all financial measures will be GAAP, unless otherwise noted you can find reconciliations of GAAP to non-GAAP measures as well as description limitations and rationale for using such measures infections press release.

Eight analysts and investors in building their models we have.

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 for the third quarter of 2021 as well as for each quarter of the full year 2020.

I'd like to remind everyone that we'll be participating in this people virtual health care Health care Conference next week, we look forward to having the opportunity to speak with many of you there and I would like to turn the call over to Brad.

Thanks, Doug Good afternoon, and thank you for joining us today spatial biology is having a banner year and name of shrink continues to extend its lead in this exciting market during the third quarter, we posted record genomics revenue as our whole transcriptome assay using next generation sequencing readout appealed to customers across both discovery.

And translational research earlier today, we unveiled our new cosmetics space all molecular imager publicly released a dataset manuscript that described the power of this platform to image the expression of almost 1000 genes and biobank samples stored as orderly fixed paraffin embedded tissue.

Meanwhile, our in kind of a franchise posted strong instrument placements, while consumable revenue continued to be impacted by residual effects of the pandemic.

Now review progress towards our 2021 strategic objectives before handing over the call to Tom Bailey to review our results and outlook.

Our first strategic objective for 2021 is to extend our lead in spatial biology through the broad adoption of genomics digital spatial profiling.

Three quarters through the year, our spatial biology businesses right on track with the genomics franchise performance.

Performance trending towards the top end of our guidance range for both instrument orders and overall genomics revenue.

During the third quarter genomics instrument orders grew 40% and now are are now on track for the full year genomics instrument order growth of about 50% compared to 2020.

Customer interest in using next generation sequencing and the readout for genomics experiments is a key growth catalyst and about 75% of genomics instruments ordered during the third quarter were purchased for use with MTS readout.

She always consumable pull through remains strong at an annualized rate of about $95000 per system.

Genomics whole transcriptome Atlas for Wpa assays, which were introduced during the first half of the year leverage Ngf's readout and are the first system wide products that we've ever offered.

In Q3, our assays for MTS readout accounted for about 75% of genomics consumable orders as revenue from our human whole transcriptome Atlas increased 70% sequentially from the second quarters.

Repeat orders were strong with about half of our WCS customers already placing follow on orders.

<unk> has a strong history of serving translational researchers who are focused on disease research and.

And our whole transcriptome assay is really no exception.

In fact about half of the translational researchers who originally have dropped the genomics to use with protein assays using encounter readout are now also using whole transcriptome Atlas assay is within GFS readout.

The Wpa assays are also getting traction in the large market for basic discovery research, helping us expand beyond the translational research market that has historically represented our core focus.

Mice are the most important model system for discovery research and researchers with interest as diverse as immunology neuroscience infectious disease and developmental biology have embraced our mouse whole transcriptome assay.

In the third quarter about 20% of our genomics instrument orders came from customers, who adopted DSP specifically for mouse whole transcriptome research.

We're also seeing strong leading indicators of demand from discovery researchers via our technology access program, which deliver results from a record number of projects completed in the third quarter. As we continued to work through a large backlog of projects that we're committed earlier in the year.

A full 90% of new projects or for Mgs based products and mouse whole transcriptome assay accounted for about 25% of new projects.

In October we unveiled the first spatial Oregon, Atlas, which includes whole transcriptome images of key functional tissue structure for five human organs, including the human brain kidney colon, pancreas, and lymph nodes as well as the mouse brain.

On slide the cancer genome Atlas and the human cell Atlas efforts, we expect our Oregon Atlas to become a reference database for spatial gene expression by Oregon, including both healthy and diseased tissue.

We have reduced the space from Oregon Atlas during the American.

Society of human genetics, or <unk> meeting last month and have been taking it on a roadshow ever since.

These data sets can be found on the spatial organ Atlas page of the genomics PSP section of our website and interest has already driven a meaningful bump in website traffic and lead generation as well as commitments from several external groups to extend the Atlas two additional organ types.

Overall genomics continues to drive rapid growth of our leading spatial biology franchise.

And we're excited by how quickly this opportunity is unfolding.

Our second strategic objective for 2021 is to expand our spatial biology franchise with high resolution offerings by advancing the development of our spatial molecular imager and seeding the market for the commercial launch is planned for next year.

Molecular imaging is shaping up to be an important new category and spatial biology.

Imaging platforms measure expression of a targeted number of Rnas are proteins at the single cell where sub sell resolution.

Our space on molecular <unk> provides the perfect complement to whole transcriptome analysis using genomics DSP.

<unk> held by numerous genomics customers who've already expressed interest in acquiring in SME and further collaborated corroborated by several recent customer surveys published by sell side analysts.

We are in an exciting period as we are beginning to reveal more details about our spatial molecular imaging.

Let me focus on three key developments outlined in our press release that we issued this morning.

First we've unveiled the brand name for our imager, which has caused mix <unk> chosen to provide a celestial complement smart genomics DSP brand.

Cognex brand is aspirational captures the imagination and in both our mission to mask the universe of biology.

Second we publicly released a high resolution data set generated using the cosmic <unk> highlighting the unique performance characteristics that set <unk> apart from competing imagers and allow researchers to see for themselves. The power of this new platform.

This forbids dataset includes RNA expression, not that single and sub cellular resolution within eight non small cell lung cancer specimens.

Two key attributes of this dataset contrast, with data released by others in the past.

First the cosmic <unk> dataset maps RNA from almost 1000 genes approximately twice the number of genes covered by competing platforms.

This was generated using formalin fixed paraffin embedded or FSP tissue samples the <unk>.

Compatibility of conflicts SME with challenging FSP samples sets it apart from competing imagers, allowing researchers to unlock value and archival samples as well as to apply the platform to clinical samples.

Cosmic <unk> data set can be accessed through <unk> website and analyzed by the research community.

<unk> dataset, consisting of over 800 single cells $260 million transcripts, and especially resolve sell tightened map of non small cell lung cancer tissue across 150 square millimeters.

The data can be explored through an interactive viewer and downloaded for analysis using an open source of third party informatics packages.

Early feedback from luminaries in the field, that's a peak at the data prior to release has been overwhelmingly positive.

And we look forward to discussing it with the broader research community in the months ahead.

Our third major revelation regarding cosmic <unk> is the release of a manuscript providing details of the chemistry the powers the platform and the performance that it achieved.

This manuscript, which can now be viewed in the online journal bio archive will serve as a reference for customers considering a cosmic SMA purchase.

It describes the performance of cosmic <unk> tissue, including resolution sensitivity and reproducibility as well as key applications of the platform such as identifying cell types and measuring cell cell interactions.

In addition to providing details on the RNA expression capabilities the best line pay.

Paper provides a teaser of cosmetics protein capabilities, showing 81, plex protein expression data and FSP further differentiating cognex from competing molecular imagers powered by genomic chemistry or residence or mass spec.

Together, the Kosmos semi and genomics BSP represent a compelling product suite that will span the continuum of applications and spatial biology.

The next major event. The highlight this portfolio will be our fourth annual spatial summit, which we will host on Monday February 28, and the advances in genome biotech that biology, and technology or <unk> meeting in Orlando, Florida.

This half day session, we will provide more details on <unk> and we will showcase early work from outside groups coming out of our <unk> technology access program.

This session will be opened to the investment community and you do not need to be registered for a GBT to attend.

Hope to see many of you there.

Our third strategic objective is to return our encountered business. So the growth dynamics seen prior to the COVID-19 pandemic.

During the third quarter, our income performance was mixed with strong instrument sales offset by a slower than expected recovery in consumable sales.

Our strong encounter instrument sales demonstrate the continued demand for encountered a unique combination of simplicity power and robustness of.

Sales of encounter instruments during the quarter exceeded consensus estimates for instrument sales by 25% at roughly $6 million.

Year to date, our instrument revenue was similar to the first three quarters of 2019, indicating that we are returning to pre <unk> levels on the instruments side of our business we.

We continue to diversify our encounter into new areas beyond oncology.

That's about half of our encounter systems were sold for non oncology applications in the third quarter, including immunology and infectious disease.

Meanwhile, the pace, which our customers are publishing papers using encountered has never been higher.

Over the past 12 months, our customers have published more than 1000, new encountered papers, bringing the total publications enabled by our technologies to over 5000 papers to date.

Our encounter franchise remains healthy and our customer base vibrant that being said slower than expected encounter consumable sales during Q3, it looks straight the lingering impact of COVID-19 on one particular segment of our encounter customers that is biopharma companies focused on oncology.

<unk> biomarker studies in.

An estimated 70% of encountered users.

Pursue oncology research, while about 25% of encounters are owned by Biopharma companies and <unk>.

These customers typically analyzed samples have been collected during clinical trials.

COVID-19 pandemic began oncology clinical trial enrollment slowed the downstream consequence at this slowdown was lower volumes for biomarker discovery studies today.

Which translates into a slower sales of empower collagen panels.

Let me illustrate how this phenomenon impacted encountered consumables in the third quarter.

During the third quarter sales to academic researchers return to more than 90% of pre pandemic levels in North America, and two approximately 80% in both EMEA and APAC.

In contrast, consumable utilization by Biopharma companies remains deeply suppressed at about 60% of pre pandemic levels.

A specific encountered consumables that were most impacted were our immuno oncology panels that are used extensively in supporting clinical trials.

Pharma pull through has not improved thus far in Q4, and it's difficult to project when Biopharma when pharma biomarker studies will resume at full pace.

On this basis, we expect the encounter pull through will remain below pre pandemic averages in Q4 recovery further in 2022.

To summarize we continue to see healthy demand and spatial biology with solid momentum in translational research and increased penetration of the discovery market.

Our cosmetics SMIC is on track to begin shipping in the second half of 2022 and has demonstrated best in class on Eplex capability and unique compatibility with FMT samples.

Lastly, our encounter business continues to generate strong instrument sales offset by slower recovery than we had previously anticipated on the consumable side of the business now.

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 third quarter of 2021 product and service revenue was $36 $9 billion at the middle of our Q3 guidance range representing year over year growth of 23% Q3 genomics revenue was $13 million up 47% as compared to Q3 'twenty in at the high end of.

Guidance, we provided in August eight.

$8 5 million was from approximately 35 instruments ships and $4 5 million was from consumable sales annualized genomics consumables pull through was about $95000 per installed system in Q3.

<unk> delivered a solid quarter for instrument sales with $6 million posted in Q3, 11% year over year growth in the second highest Q3 total ever for and kind of instrument sales.

In contrast encounter consumables continued to be impacted by residual that residual effects of the COVID-19 pandemic.

Three encounter consumables revenue was lower than expected at $13 5 billion or year over year growth of 10% and counter utilization during the quarter impacted most materially and our pharmaceutical industry customers.

Annualized consumable pull through was about $53000 in Q3.

Service revenue was about $4 4 million for the quarter, representing 24% year over year growth and was driven by genomics DSP tap and increased service contract revenue from 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 onetime items.

Please refer to our press releases of the exhibits we have posted to our Investor relations webpage for detailed information on how our non-GAAP or adjusted measures are prepared.

Q3, adjusted gross margin was 56% consistent with our annual guidance range and about a 100 basis point improvement compared to Q3 of last year.

Movement was driven primarily by growth in <unk> DSP revenue and was partially offset by additional investments made in our manufacturing capacity and increased cost associated with providing our tap service.

Adjusted R&D expense was $16 6 million, an increase of 31% year over year.

R&D was higher compared to the prior year period, due primarily to increased personnel and product development costs related to our cosmic semi development program.

We expect R&D expense will increase through the balance of the year as cosmic semi development continues.

Adjusted SG&A expense was $23 8 million, an increase of 43% year over year for.

Q3, 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 as well as costs related to licensing and implementation of new information technology solutions to support our commercial operations and finance functions.

<unk>.

Adjusted EBITDA loss was $19 $7 million and we exited the quarter with approximately $370 million cash cash equivalents and short term investments.

Turning to guidance three quarters through 2021, the full year outlooks for our genomics and counter franchises have trended in different directions. Our spatial biology franchise continues to be our major growth driver with genomic system orders and revenue trending towards the top end of our guidance range.

We now expect full year 2021 genomics revenue will be in the range of $49 million to $50 million driven by instrument order growth of approximately 50% for the full year at the upper end of our annual guidance range.

Our updated annual encounter a revenue guidance range of $91 million to $94 million is based on our continued expectation of instrument sales of approximately pre pandemic levels and an updated 2021 full year consumables pull through expectation of approximately $55000 per installed system are.

Our updated encountered pull through guidance range reflects the potential impact residual pandemic related issues on consumables utilization similar to what was observed in Q3.

At this time, we believe these residual issues to continue to impact in kind of consumables pull through into 2022.

We will offer further updates when we report fourth quarter results and provide our 2022 outlook in March for Q4, we expect product and service revenue to be in the range of $38 million to $42 million representing year over year growth of 6% to 18%.

This range includes $15 million to $16 million of genomics revenue driven by what we expect will be about 40, new genomics instrument orders in Q4, our guidance range also includes $23 million to $26 million of encounter revenue with annualized and tenor consumables pull through in Q4 expected to be approximately 55000 to 60.

Dollars per installed system.

Now I will turn the call back over to Brad for our closing comments.

Thanks, Tom and closing our spatial biology franchise is having a banner year as we continue to extend our lead in this dynamic market and fulfill our mission to map the universe of biology.

<unk> DSP instrument orders are growing 50% year on year, and we're successfully expanding beyond our core strength in translational research and into basic discovery.

As we reveal more details about our cosmetics based on molecular imager, it's market, leading plex and unique FSP sample compatibility are capturing the attention of the research community.

Together genomics in cosmic <unk>, the most compelling products suite and spatial biology, and promise to drive strong top line growth for years to come.

With that we'd like to open up the lines for your questions.

Thank you at this time, so I'll ask a question you will need to press star one on your telephone.

That is star one to ask a question to withdraw the question just press the pound key.

Your first question comes from the line of Tycho Peterson from JP Morgan. Your line is now open.

Okay.

Okay.

Sure.

Okay.

Meaningful revpar right now for Q guidance, but like so far into <unk>, what have you observed in cancer.

Any just taking that.

And just to confirm that the Empire weakness. Thank you.

Due to pandemic impact, meaning there is no incremental impact from the Mds.

Thank you.

Thank you. Thank you Julia for the question you were coming through a little garbled. So I'm just going to repeat back what I heard I think you asked about whether we have seen any recovery so far in Q4 for our encounter consumable.

Demand in clinical trial activities from Biopharma and.

And whether we're confident that this is a pandemic related impact rather than some of the competitive.

So first the clinical trial activity truly did slow down.

During the pandemic I know one research study that we saw talked about 1000 trials plus being slowed or paused enrollment during the pandemic and the downstream effects of that of course is fewer biopsy samples collected and fewer biomarker studies being run now and <unk>.

'twenty, one we have not seen that change to the actual number of biomarker studies that are being run in Q4, so far but we do expect clinical trial activity start picking up but remember biomarker work as kind of a downstream lagging.

Indicator of clinical trial activity.

There are people, who haven't followed the company too long been not appreciate the extent to which our biopharma customers are an important driver of consumable pull through there have been many quarters over time with that 25% of our customer base. Some encountered has accounted for about 40% of our pull through so.

It's not to say that our biopharma customers are not doing a lot of business still with us in fact theyre pull through on average during the third quarter was $70000 per system higher than our overall average, but given that in a typical pre pandemic quarter. They may have done 100 to 115000.

Average consumable pull through even that $70 per system annualized in the third quarter represents.

Not quite a full recovery to their pre pandemic levels. So.

That really was we believe the primary driver.

The pull through.

SMIC tap order book and some of the path from now until or commercial launch. So as we've said in past calls the demand for SMA costs et cetera mine now have projects has exceeded our capacity to manage those projects.

We have so far signed up between 10 and 20 projects, we expect in the year with more than 20 projects in motion and that really is the entire capacity that we have now some of those projects are beginning to yield results. We have a few posters being presented this week at the society of immediate.

There'll be a cancer meeting we.

We had some on the books for the Amp meeting them scheduled next week and of course, we will have a lot to show it to Hebt meeting in February so.

We're really excited to get more information out there.

In terms of what's left for us to do between now and the commercial shipments in the second half, it's really taking the chemistry that we've described now in the paper and wrapping a bullet proof instrument and automation system around that chemistry as well as the software tools that are required to process and <unk>.

As you alive and get insights from the tremendously large datasets. This this instrument can produce so really it's instrumentation and software we look forward to having a beta program, but when placed some instruments at customer sites in the first half of next year, and then getting shipping polka.

Herschel systems and the second half.

Alright, and kind of kind of Allah hopping.

February next question operator.

Yes. Our next question comes from the lineup then Brendan from Cowan.

Hey, guys. Thanks for the questions.

Send you home express starting there you raise the order out with a 50% orders were a bit stronger than we expected here. So I know you gave some color in the prepared remarks, maybe just a little color on who's ordering and.

And then B as we look at our model for 22, you know we've got 20 per cent increase in placements in genomics I'm just wondering with the strength of this order book any way to think through like how the early looking for 22 cause replacement opportunity and you know related to that like have you dated in terms of the placement like late that you could achieve I know.

Early on you guys wanted to delight customers you eliminate so maybe a multipart question you know who's ordering and kind of any early color on 22. Thank you.

Thanks for the question Dan.

G M X as you said the Germans order book has been strong we we hovered at about 30 instruments for order for a few quarter. Then we broke through in Q3 to 35, and we expect to deliver about 40 in the fourth quarter. This wave of new orders is really driven by the whole transcriptome Atlas.

And the M. G S readout capability, which together are driving 75% of new instrument placements.

The dimmick customers, who spend translational biology, and now discovery biology represent the largest group the vast majority of new instrument orders the mouse hole transcriptome Atlas motivated about 20% or 25% of new orders in the third quarter of that.

Is truly a pure discovery setup customers. So we're delighted with the growing demand for the instruments you know in terms of 2022 expectations.

This year, we will have grown 50% in terms of total instrument orders of course full dinner of the year with a much stronger base.

We're comfortable with where the three models are now at 20% there is potential upside to that but we would we would encourage you to kind of keep the models in place for now and of course, we'll we'll be providing guidance and the February timeframe and.

In terms of whether there's anything that's gaining our ability to fill orders via for right now with no I mean, we have the inventory.

To to ship instruments, we have had no supply chain challenges.

That being said we are with the ongoing pandemic precautions that are being taken at many customer sites. We are a little slow to bring some sites. So it does take a while for us to get those instruments installed and trained sometimes as much as a couple or three months to get through all of that work.

I'll still respecting the protocol that many of our customers have in place for having you know nanostring employs on site, but there's really nothing in terms of our own human capital or a supply chain, that's limiting our ability to fulfill genomics demand at this time.

Great. Thank you and then and then maybe the follow up kind of a two part of one related to the competitive landscape. Obviously, what took you guys are.

You know receiving some really strong growth. So I'm, just wondering kind of what you're seeing on the front line. There in terms of competition and then be you mentioned you know supply chain. That's gonna concern you guys are kind of towards the town and the reporting season, but was there any impact at all that you had on supply Tennessee is out there in the quarter, it's kind of taken your guidance. Thanks.

And then the second question first no issues from a supply chain perspective.

<unk> during the war and we do not foresee any limitations on our ability to fulfill demand based on the supply chain.

The competitive landscape I think we feel increasingly confident in our competitive position and spatial biology.

Within translational research.

We remain I think the leader and with genomics with it not only F. F. P compatibility, but it's automation its ability to process large numbers of samples and short periods of time the ability to focus the power of the system on regions of the tissue that translational researchers are focused on like.

The micro environment and of course, our distinctive protein capability, which not many translational research was appreciate so despite the fact that there is increasing competition out there who have FFT compatible products, we really haven't seen any slowdown or competitive impact from that at this stage on the <unk>.

Major side I really think the <unk>.

Since today physician cosmic as the image to be I mean, I think we have market, leading one 1000 plex RNA capability. We've shown that will have 100 flex protein capability. We've shown that we are compatible with the most important tissue type, which is ffbe I feel really good about our positioning.

<unk> to some of the other players who will be bringing imagers to market around the same time.

Great Guy Thank you.

Your next question comes from the lineup then Henry S from Stifel and I'm, hoping.

[noise] afternoon, guys think spread just to go back to the question on encounter performance I understand the point on business not looking like it's going to competitive platform. So what about just work that staying inside nanostring, but it's going to.

You know genomics discovery work that just happened to have an ngf's back and does that is that something that could be in the mix.

I think your question really Dan is asking are we are we cannibalizing encounter consumable sales with Joe mix consumable sale. The Badger is that your question them more or less yeah.

No I don't think there's any reason to believe that's the case.

Because.

We can see that because we know what our genomics all through his within our Biopharma accounts and Biopharma accounts have been relatively slower adopters of the whole transcriptome Atlas assay compared to academic researchers.

And so we have not if that if we were seeing cannibalization, we'd be seeing that directly in terms of who was buying the whole transcript on outlets and that's simply not what we're seeing in fact if.

If you look at genomics consumable pull through within Biopharma customers right now it's less than we are seeing on the average academic accounts, which kind of corroborate. The fact that that biomarker research is a little slower than you would expect it to be and I think it just proves the hypothesis that we're seeing in cannibalization effect.

Okay.

And then maybe on the cosmic system and the data that you released today imagine you're hoping that that sort of steps up interest in the platform. I know commercialization is the second half of 2022 thing, but when when do you expect to start taking orders there.

As we sort of look ahead to getting the instrument in the market are there any production constraints that we should sort of take about when you get to the back half of the year not necessarily supply constraints more just manufacturing.

Sure. So we're following the genomics playbook and the launch of the cosmic and as you may recall, we had a really successful priority site program for genomic steps of Preorders ahead of the actual commercial shipments that is something that will begin to initiate and the first half of next year.

<unk> and the data that we released.

I expect will start to build the interest.

In that in that in that program, which will be unveiling probably around the HGT timeframe next year certainly by the time, we get to the second half of next year and we're shipping our first wave of instruments I do expect that there will be a very careful roll out of those instruments just as we did with.

<unk>, where.

We are of course going to be having the first instruments rolling off a new manufacturing line will be going through our first training procedures will be going through our first customer experiences with the instruments in their hands at scale. So we will have a control release of the actual system and and as a result.

To the extent you are updating your 2022 models.

I would not build much in the way of cosmic revenue into the second half of 2022.

The pace at which will actually be placing instruments and revenue recognizes then we'll be control and we'll have more to say about that in the February timeframe on the issue guidance.

Okay. Thank you.

Your next question comes from Atlanta Academy initial T from Bird lines open.

Hey, guys. Thanks for the questions I guess first mainly just sticking on cosmetics and a what additional development or optimization is there left to deal from a platform perspective, but for next year's Manche and at the spatial somebody that Hebt's should we expect to get pricing and Potter estimates there.

Yeah. So the work that we have left to do Katherine is really focused on the instrumentation.

And making it an overall bulletproof experience for customers that means taking it simple to use so that it works every time and that the data that comes out has the software and informatics back in to allow you to draw insights out of the data and you're generating.

So that's a good bit of engineering work and it's a good bit of software work for us still to do.

But none of it is high risk in the sense that we have to do anything inventive.

Good solid engineering work.

In terms of what to expect that the spatial summit in in the February timeframe at Hebt. Yeah, I think we'll be focused primarily on continuing to educate the research customer community about the capabilities of the system. So expect to see some of our early.

<unk> access program customers present, their data and their experience expect to learn a little bit more about the detailed specifications of the system.

No that will be focused on providing much in the way of economic.

Or financial guidance to Wall Street at that time in terms of pricing and pull through estimates, but if you really want to understand what the system can do and why we think it will be the market leader and what will undoubtedly be a competitive.

Immature marketplace, then I think you'll get a chance to really see that there.

Okay, Great and then I think he added about 100 people can't commercial team nausea, and belief most definitely are focused on G. M X for now have you started to see the impact from that added head count.

Do you think that expanded team set you up for gentlemen, Scarlets and 22.

Yeah, So we have.

Hiring for our commercial expansion has gone well the overall team today is about a third larger than it was.

You know at the beginning of the year and we still have some positions silver fulfill I think we've sold about 85% of our open commercial positions at this time.

It takes time for new sales reps and.

Come up the curve and begin to contribute so I would not say that the third quarter reflects any impact any material impact from that salesforce expansion yet most of the hiring was done in the second quarter and people really found we're kind of finding their sea legs during the third quarter.

Hope that the fourth quarter will provide an opportunity for some of those new professionals.

And here in Nanostring to show Us what they can do and what they can deliver and I think we built some of that into the guidance that you heard.

Tom outlines.

Okay, great. Thank you.

Again as a reminder to ask a question. Please press star one.

Your next question comes from the lineup features savant from Oregon, Saudi Airlines open.

Hey, guys. Thanks, Thanks for taking the question. This is a non potatoes first on your wch the traction seems to be really strong for the human and both both human and thus the BTA, but.

Are you seeing customers Tenzin transitioning from an initial pilot study phase two larger scale experiments and given that there's been a couple of months.

With this product on the market are you better able to quantify what you expect to utilization rates would be at a steady state.

Thanks for the question Edmund so.

Most customers are getting their first experience for the whole transcriptome Atlas right now as we speak as I mentioned in my prepared remarks, I think about half of our Wpa customers have done their first experiment and now ordered their second batch of hold transcriptome Alice assays.

So we are beginning to see a repeat utilization, but it's still pretty early in the adoption cycle.

No we have at least one example of our.

A study planned substantial scale on W. G. A but I think there was a lot more of that still to calm I think there'll be more of that as time goes on.

In terms of utilization rates.

Reyes during our August call, our overall consumable guidance on the strength of the early demand for oil transcriptome Atlas assays are guidance right. Now is from 95 to $100000 per system per year Inconsumable utilization that is.

Up materially both from where it was this time last year and where it was in our initial guidance that we initiated with earlier. This year. So I would continue to use that number for now.

Think that's a good number to model.

Alright. Thank you and then in terms of the covenant, becoming trends that you see I know you've previously called that phone company N U in APEC regions, particularly since we rely on distributors can you talk about some of the times you see from the geographic perspective in terms of the sample collection and slower biomarker Biopharma, Utah.

Alization of encounters is there a geographic discrepancy that you'll see.

Yeah, our our biopharma customers really operate as global strike Swiss Biopharma companies have huge U S operations in U S Biopharma companies.

Big European operations. So, we don't really see geographic trends within our Biopharma customer segment, they tend to behave kind of as a global segment.

Academics, though do vary from region to region I'd say, the strongest performance of months or academic researchers and the strongest recovery has been here in North America.

But.

Both Europe and Asia have improved since our August call. They have we did see improvement in the academic markets X U S.

From cue to cue three but really with that biopharma.

Group, who has helped is kept us from fully realizing prepandemic recovery.

Got it got it in all your academic and might get in light of the robust academic funding environment are you expecting any sort of normal fourthquarter budget flush or seasonality of any sort.

But we do see seasonality every fourth quarter as.

As people tend to use.

Budget that they may have leftover before the OE year and deadlines, but we do not guide for a major budget flush in the fourth quarter. So, yes, I would say that our fourth quarter guidance assumes a typical pattern of seasonality in the fourth quarter, but nothing extraordinary.

Got it thank you very much.

There are no further questions at this time I would now like to turn the conference back over the dog funeral.

Excellent. Thank you very much for joining us today, if you didn't miss any portion of the call there will be a replay available in the next hour or two.

To access that please dial 800.

5367.

International callers. Please use 416621464 to the conference I D number for both is the same 2826727.

You again for your time and have a great day.

Goodbye today's conference call. Thank you for participating and have a wonderful day you may all disconnect.

[music].

[music].

Yeah.

[music].