Q3 2021 Akoya Biosciences Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2021 call you buy fastest conference call.

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Good afternoon, everyone. Thank you for joining us today on premium Shah head of Investor Relations at acquired Life Sciences on the call today, we have Brian Mcelligott, Chief Executive Officer, and Joe Driscoll Chief Financial Officer.

Earlier today <unk> released financial results for the third quarter ended September 32021, a copy of the press release is available on the company's website.

But again I'd like to remind you that management will be making statements. During this call that include forward looking statements with the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act 1995, any statements contained in this call that relate to expectations or predictions of future events.

<unk> or performance are forward looking statements actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors for.

For a list and description of the risks and uncertainties associated with the claims business. Please refer to the risk factors section of our form S. One filed with the Securities and Exchange Commission on April 15, 2021, we urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. This conference.

Call contains time sensitive information that is accurate only as of the live broadcast today November eight 2021 acquire 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 for him and good afternoon, <unk> afternoon, everyone and thank you for joining us.

We are excited to announce today strong third quarter results and highlight solid execution and meeting our core years 2021 financial goals hiring objectives in R&D milestones.

Looking back it's remarkable to think that just three to four years ago. The concept of spatial biology was largely in all.

Since then accelerating any interest by customers and investors has elevated spatial biology can now be considered a fundamental pillar and central to the future of life Sciences research and emerging diagnostics.

We had a call you believe spatial phenotyping will inevitably become the standard for analyzing any tissue sample and.

And the reason is quite simple.

Current technologies like next generation sequencing.

Low cytometry single cell analysis provide meaningful information, but they unfortunately require the destruction of the tissue sample.

<unk> all information on the structure of the tumor microenvironment and the cellular and protein interactions driving tumorigenesis.

Measuring and monitoring these spatial interactions as central for example to understanding our bodies immune response to disease.

Our cordless platforms keep the tissue sample intact.

While measuring all cells and key biomarkers in their spatial context.

Complete snapshot of the underlying biological dynamics of the tumor microenvironment is fully captured.

So it is expected that over time.

Or fresh frozen tissue samples, particularly in cancer will.

We will be preferentially analyzed on platforms that provide the special Phenotyping information.

Here are the core as a company, 100% dedicated to spatial biology.

We are empowering our discovery research customers with the tools to make profound new discoveries and understanding cancer biology.

Our biopharmaceutical partners are leveraging our spatial Phenotyping solutions for example to understand and predict.

How patients will respond to immunotherapies.

Now turning to this quarter's results. We are pleased to report impressive third quarter financial results and a record quarter for our coil with total revenue of $13 $5 million.

Presenting a 35% growth compared to the third quarter of 2020.

We continue to see.

Adoption of both codex informatics with strong instrument sales and consumable pull through.

Our point is now these proven leader in this space will biology revolution with the largest installed base of any spatial biology platform in the industry.

As of September 30, <unk> had 651 instruments installed.

As a key leading indicator.

Rapid growth in high impact publications continues to fuel our optimism.

There were 110 peer reviewed publications on our platforms in 2020.

Nearly four fold increase over 2019.

As of September 32021, there are already a 192 publications on <unk> platforms. This year approaching a doubling of last year was still another quarter to go.

Codex as a growing percentage of these publications is the market's most affordable spatial biology platform.

Providing unprecedented single and sub cellular resolution across entire tissue samples.

Priced at under $100000, we continue to see high adoption of codex within the academic market, especially at the individual investigator level.

With codex is ability to integrate with our customer's existing microscopes.

We're just beginning to penetrate the fully addressable market of nearly 20000 microscopes already in the field.

On the Synoptics side, we continue to see the growing deployment of this platforms use and early to later stage clinical trials.

This is also driving expansion of the revenue pipeline within our advanced Biopharma solutions solutions Division.

Our EPS as we call it where we're performing fee for service work on clinical trial samples with key Biopharma partners.

With ABS, we have an increasing number of biopharma engagements similar try announced Astrazeneca partnership.

Were analyzing samples and assessing patients' response to therapy across a number of clinical trials.

In addition to being a valued revenue stream.

These partnerships further cement our <unk> platform as the leading spatial biology solution for translational research and clinical trials.

Another valuable contributor to the growth of our clinical trial partnerships was the Mitre study published this July and the journal of immunotherapy of cancer.

As a peer review publication this has been an important tool to.

Provide our Biopharma partners the confidence that our phenom fixed platform has the analytical robustness and performance needed to be the central tool.

And their immuno oncology clinical trial biomarker efforts efforts.

The pending CLIA certification of our ABS lab will also be an important driver of business growth going forward.

On the organizational development side as of September 32021, we have approximately 305 employees worldwide worldwide a significant increase from the 170 at the end of 2020.

As part of our hiring this year, we have almost doubled the commercial head count to about 150.

A similar expansion has occurred within our R&D organization.

With this we are on track to deliver innovative products in 2022 that will further contribute to growth and catalyze acquires expanding commercial success.

To support and guide us on this journey.

We recently announced the appointment of Dr. <unk> Goldman to our board of directors.

Mylan is a visionary and seasoned executive in the diagnostic industry.

She brings over 30 years of leadership experience at innovative organization, including 18 years at Labcorp.

Recently, serving as Chief Medical Officer, and Chief Scientific Officer.

We also announced the appointment of Dr. Pascal Banford, formerly with exact Sciences genomic health Epic Sciences, and Ventana as executive Vice President of R&D.

Pascal has deep scientific and operational experience, leading teams in developing and implementing successful innovative digital pathology products.

On the partnership front I would invite you to review our recent webinar series, highlighting the groundbreaking translational and clinical research research being done on our synoptics platform by many of our key partners.

Speakers from UCSF related trials Research Institute and Yale.

Discuss the predictive power of spatially derived biomarkers and immuno therapy.

And its impact on clinical trials testing and the standard of care.

Last week, we also announced the founding members of the first of its kind imaging innovators network, where the ice squared network.

With ice square Korea is collaborating with pioneering scientists from World class research organizations with ambitions to advance the field of spatial biology.

Exploring novel approaches to using the codex platform for single cell spatial phenotyping.

These investigators come from leading institutions, such as the Broad Institute Sanger Institute Beth Israel, and you began the University of Chicago. These innovators are applying spatial biology to cutting edge work and research areas ranging from high resolution microscopy to oncology neuroscience.

Immunology infectious disease and developmental wild biology.

With codex as an inherently opened spatial phenotyping platform, we will continue to leverage partnerships with inventive thought leaders like these.

To drive open innovation and the spatial biology market.

Now, let me take a minute to step back.

And look towards the future.

In the life Sciences tools market.

The vectors of resolution.

Portability and speed intersect.

Then real value is capitalized because larger exploratory studies become practical and routine.

Applications market opportunities instrument sales reagent pull through then accelerate we most certainly saw this in next generation sequencing and the same will be true in spatial biology.

Out of Korea, we have listened closely to our customers' needs and recognize what improvements we need to make to fully leverage the power of a spatial phenotyping.

To follow the same catalytic path.

Our platform improvements and new product introductions in 2022 will focus on driving workflow simplicity scale and speed.

As a result, our discovery and early translational customers will reap the benefits of new acquire spatial Phenotyping solutions that are nearly an order of magnitude faster throughput than current our market platforms. While also providing single cell and sub cellular resolution.

Cross whole tissue samples.

For our clinical researchers and Biopharma suitable customers, who are currently leveraging the unparalleled throughput and resolution of fanatics.

<unk> is actively advancing our workflow and partnerships.

To establish the spatial phenotyping as these standard for clinical trials and translational research.

Immuno oncology paving the way to change the standard of care.

These workflow improvements will drive further value to our customers and establish a clear as the go to spatial biology solution from discovery to translational and clinical research.

To share more of our successes envisioned we are pleased to announce that we will be hosting a <unk> inaugural spatial day.

On December 15th of this year.

Key agenda items will focus on presentations from our customers using our platforms and discovery.

Translational research and clinical trials.

They will share their vision for spatial biology, it's current applications and future possibilities.

And as noted Alcoa will also provide a preview of our 2022 product roadmap.

Key areas of focus, including new powerful special Phenotyping solutions.

The lineup of speakers is promising to be very educational and I would encourage everyone to join in and details will be posted soon.

In summary, we are pleased with our third quarter performance achieving great progress.

Across a range of important metrics.

And the six months since our IPO.

We have continued to make strategic investments to build on and maintain our leadership position in the spatial biology market.

We look forward to continuing to execute on our financial and strategic plans as we move forward through 2021 and beyond.

And with that I will now turn the call over to Joe to discuss our financial results Joe.

Thanks, Brian and Hello, everyone.

As Brian mentioned earlier total revenue for the third quarter of 2021 was $13 5 million as compared to $10 million in the third quarter of 2020, which represents 35% growth.

This is the highest quarterly revenue in <unk> history.

Product revenue was $10 9 million compared to $7 9 million in the prior year quarter services and other revenue totaled $2 6 million as compared to $2 1 million in the prior year quarter.

Within product revenue instrument revenue was seven 1 million compared to $5 4 million in the prior year quarter.

Reagent revenue was $3 4 million versus $2 1 million in the prior year quarter, which represents over 60% growth.

Yeah.

We had another strong quarter with 33 total instruments sold which consists of 17 panopticon and 16 codex.

The total installed base is now 651 instruments as of September 32021, with Codex at 161 units and the <unk> portfolio at 490 units.

Q3 reagent revenue was right in line with our internal expectations.

Normal seasonality typically results in lower reagent revenue in Q3 as compared to Q2.

Q2 also benefited from customers coming back to their labs in a significant way, which resulted in higher than expected orders.

We expect that Q4 will have higher reagent revenue than Q3, which is in line with what we have historically experienced.

Our annualized pull through on a year to date basis exceeds $30000 per instrument for both codex and the Polaris unit within the <unk> portfolio.

So in Opex pull through is tracking in line with our expectations, while we have seen codex pulled through exceed prior levels.

We have a wide range of usage among customers with our highest codex users running annual pull through in the $175000 range, where the high volume Polaris users are running around $200000 on an annual basis.

Gross profit was $8 5 million in the third quarter 2021, compared to $6 million in the prior year quarter. This resulted in gross profit margin of 62, 7% an increase from the 66% in the prior year period.

Total operating expenses were $19 2 million in the third quarter of 2021 as compared to $9 7 million in the prior year quarter.

In line with our strategic plan. The increase was part of our plan to invest in the business following our IPO.

We continue to hire aggressively in all areas of the business, including increasing our commercial and R&D spend to continue to drive market share growth.

Looking forward, we project Opex should be at least $20 million in the fourth quarter.

Net loss for the third quarter of 2021 was $11 6 million compared to $4 3 million in the prior year quarter due to the increased investment in operating expenses as well as increased noncash expenses, including stock based compensation.

Our year to date revenue is $38 8 million, a 31% increase over the first nine months of 2020.

This puts us right on track to achieve our targets for fiscal 2021.

We ended the quarter with $120 million of cash and cash equivalents as of September 30th.

This gives us sufficient runway to make key investments in the business.

Common shares outstanding are $37 2 million as of September 30th and fully diluted shares, including the impact of outstanding options and warrants totaled $40 2 million.

As highlighted earlier, we remain confident in our ability to deliver strong growth in 2021, and expect fourth quarter revenue to be at least $15 million and full year guidance of at least $53 8 million.

The third quarter results exceeded our guidance and we are focused on delivering consistently strong results each quarter.

Now I'll turn it back over to Brian.

Thank you Joe and in summary, we continue to see robust adoption.

Codex informatics platforms and are very pleased to report strong third quarter results.

We are thankful for the hard work of our fellow dedicated of clients as well as for the support for customers and shareholders.

A cornea remains well positioned for growth and we're excited about the opportunities that lie ahead we.

We hope to see many of you tune in for our special day on December 15, 2021, and at this point, we will open up the call for questions operator.

Thank you.

Ladies and gentlemen, as a reminder to ask a question you would need to press Star then one on your telephone.

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Please standby, while we compile the Q&A Boston.

Our first question comes from the line of Count, Mike Sena with Canaccord.

Your line is open.

Thanks, Hi, guys. Thanks for taking my questions. Congrats on a nice quarter I know this has been touched on in the past just given the announcement last week I want to go over again, so the ice squared network.

Just wanted to kind of get an update on like the goals for that I am really wondering I guess two things.

First would be are you expecting that maybe like a bowl with some publications as a result of the collaboration.

And then also the second piece I wanted to kind of ask about was could you leverage those insights to make updates to codex or develop new products that sort of in line with I guess, what you're sort of going to be talking about the special day.

Thanks.

Yes, that's spot on.

Theres really two interrelated components of the ice squared network number one is the award ease and there'll be a few more announced and number two it's also related to the microscope partnerships, where we talked about prior to having really solidified direct integration not just with the existing microscope potentially high resolution microscopy. So.

Youre, absolutely correct and the goals that certainly publications, but most certainly in.

An externalized pipeline of potential new products as part of this so we would codex inherently being an in situ reason delivery device. We do have the ability with these partners to drive and invent new applications and that's the goal.

So absolutely and I'll put it this is potentially new products and publications to come with that and I would also remind that this is actually just a.

Albeit a minor it is a market opportunity for us because these were not giving away. These these systems were acquired so hopefully that answers your question Kyle.

Yes that helps.

Thanks, Brian.

I guess, just moving on to the financials here so.

The fourth quarter guide is solid compared to what.

Street was expecting.

Just wanted to ask what the environment looks like especially just given this form I think it would be a good time to just provide an update on.

Access to customers and any you know any instruments that you feel fell out of <unk> that could come back in the fourth quarter or vice versa.

No.

Yeah, I'll, let Joe comment in more detail on some of the specifics, but I think our general trends are similar to what you are hearing from some of our colleagues, which is there are internet and pockets of access challenge in areas, particularly some areas in Europe and Asia Pacific.

Think for US maybe in part because where we are more heavily instrument dominated we really haven't seen it.

Meaningful impact on our pipeline and our ability to procure orders. So at this point, we would not change because of Covid, nor have we any of our guidance on the financials. Joe I don't know if you want to add any additional color.

No I think Thats well said.

Really every quarter. This year, you see a deal or two kind of slipped from one quarter to the next.

I would consider that to be not not unusual in any way so but for the most part we're seeing business as usual.

Customer ordering.

Okay, and then Joe actually.

Opex expected to be $20 million in the fourth quarter. We didn't have you guys doing $20 million until late 'twenty two I guess in the quarter. So is that $20 million like a new run rate or is that going to grow substantially during some of the quarter's 22 or how should we think about opex from here on out.

Yes, so we've invested heavily this year, especially after the IPO, we've really grown various departments.

Fairly aggressively sales and marketing research and development.

<unk> made some investments in the clinical side of the equation, obviously, there's public company costs and infrastructure things that we're also doing so I would say that the $20 million.

Projected in Q4 as a as a current run rate and we are planning on hiring additional folks in 2022. So I think you would see that quarterly number go up from there.

We'll provide additional guidance.

In our Q4 analysis.

Okay. That's helpful and then Brian just last one for you when you think about.

I guess, the current landscape and maybe even the future space, while do not not just special proteomics.

The growth of the market is really tied to NDS adoption just given some of the radar capabilities that are out there or do you think the opportunity for kind of a standalone spatial profiling solutions is just as important.

I don't think the adoption of spatial is in any way tied to NCS I do think on the discovery side, where Ngls as a readout for some of the spatial transcript omics, there's potentially commentary and the data I still believe on the discovery side. It is a rising tide, but I don't think theres any dependence on N G S at all.

I think youre going to see a migration.

Of the <unk> customers, who are recognizing the power of spatial to.

Platforms like ours, especially as I alluded to in the commentary, especially as the scale and throughput of our instruments expands and the number of application spaces expand you'll see those customers I think migrate to to platforms like ours.

And then as you look at the the translational and clinical market I think that's even further divorced from from anything having to do with NCS.

Typically in the realm of immuno oncology, where inherently the question is a spatial one about your body's ability to respond to the therapy. These therapies and those are overwhelmingly being addressed with protein based biomarkers.

Got it makes sense, all right well I'll leave it there thanks guys for the questions. Congrats again, thanks, Scott. Thank you. Thank you.

Our next question comes from the line of Tejas Savant with Morgan Stanley. Your line is open.

Hi, This is Neil on for David just had a couple of questions on the Avs business.

So last quarter, you mentioned that CLIA certification for the Marlborough City facility was coming in this quarter.

What's the progress will matter and if it did come through what are your expectations on.

Current backlog and how that's going to grow going forward.

Yeah, that's a great question and I appreciate you asking it Neal so.

The license process has been a lot slower than normal through the Massachusetts Department of public health problem.

Probably primarily as a result of the pandemic in the backlog. So we've got a date, we are hoping that that happens this quarter, but we've been knocking on their door every week.

Just largely because of the backlog it hasnt impacted our pipeline on our projects, we were sort of forward enough in our timeline. So it does not impact it.

But to your question it will further unlock larger more important seminal studies.

Post clear as we think about for example, some of the potential enrollment studies that we have spoken about Pryor. We're CLIA certification is an important part of that.

Got it and so on your existing partnership with Astrazeneca could you tell us about the progress you're seeing there and with continued investment on the BD side, how conversations congrats on securing additional partnerships on the Io front, yes. So that's a great question. So we're not necessarily we're doing a whole lot of details about the specific projects with astrazeneca.

Others, but I would just say Directionally speaking our project breadth and touch within all of these organizations to continue to get broader as we become involved in more and more clinical studies, which is one of the reason why Joe alluded to us really investing in expanding facilities and head count, particularly within ABS we've added.

A meaningful number of head count so as a contributor to revenue growth going into 2000, 22022, it's becoming more and more meaningful not sure we'll call that out separately as a line item, but it really is an important contributor.

Got it that's it for me. Thank you for taking my questions.

Thank you.

Our next question comes from the line of jewelry acquainted with J P. Morgan Your line is open.

Yeah.

Hi, good afternoon.

Very exciting to hear you guys talk more about that the R&D roadmap for next year.

I'm, just wondering like between Cogs and Opex I believe you had a about which one do you think is the bigger opportunity in the near term specifically recall that you mentioned.

We did hire group, but how is quite a bit.

Putting cookman comparator.

The other aspect like menu expansion on resolution and details on customer feedback.

Leading up to your your decision on the priority there and then of course in Opex you know what kind of workflow improvements are we thinking about and does that also include the launch of any Q&A panel content.

So <unk>.

Great questions Julien, let me see if I can unpack it a little bit here.

I would say at a macro level.

A lot of the things that we're talking about to serve the discovery and early translational market are really centered around throughput speed and productivity. We already have the resolution single and sub cellular resolution and so what we're focused on really is enabling larger scale studies.

To enable those biomarker studies to drive and feed into that longer term clinical strategy.

So as we think about our investments a lot of our near term R&D investments are around new software, new reagents and new solutions.

To enable that throughput expansion and when we talk about perfecting the synoptics workflow.

It is really about menu expansion content expansion.

Solidifying protocols you know as we look at the clinical market Julien Let me just pause, let me kind of step back a little bit longer term, it's incredibly important for acquire.

It represents about a $7 billion Tam and I think our perspective, Julia as debt that it's inevitable that spatial biology will have a huge impact on the diagnostic market, it's going to take a little bit of time and so what we're balancing here as a company are making near term investments to really drive top line growth in discovery and early translational Mark.

And that's while investing in the longer term clinical market and really be poised to capture what exist today as a huge opportunity. It's important for us to really maintain and I'd say enhance our first mover advantage here.

So our strategy on the longer term clinical side is really about the diagnostic readiness of our platform.

That's why much of what we're investing in on the synoptics side is hiring the people with the expertise and perfecting our platform's capabilities and I'll get to that point of your question in a minute, but also forging these partnerships and establishing the regulatory readiness. So what were the advancements we're making on the optics side.

<unk> continued investment in our next generation Proxima solution content and assays that are ready made and really locking down.

At perfecting the clinical the clinical workflow while at the same time, our investments are not necessarily product on the Opex side. This regulatory work like ISO.

Here that we just talked about with Neil quality systems and understanding market market access so all of that is behind.

Catalyzing, our partnerships with Biopharma and clinical trials, but also with some of these key opinion leaders. So we understand pathology oncologist needs.

So that's I think a quick summary.

I wouldn't say, we're necessarily choosing between.

Synoptics in codex, although what youll see in terms of the new products that are rolling out they really are catalytic on the discovery market.

Great. That's super helpful. And then a more near term question on the <unk> guide, particularly impacts were asked a lot about what's the underlying assumption that between the instruments and consumables side and given that we've seen some volatility on the consumable pull through if you guys can just give more color on what you're assuming in terms of poor Q wholesaler.

That'd be great. Thanks, sure Julie do you want to take that sure. So are we.

Reagent revenue in Q4 should be in the high 3 million range. So we did $3 4 million in Q3.

Early trends have been order trends have been good and in October so we're projecting something something in the high $3 million range.

You'll you'll see some uptick in some of the other categories like that services and other category, where we're projecting that for example, the ABS business will be stronger in Q4 than it was in Q3. So you get a pick up there and then the balance would be in instruments. So instruments is projected to be.

Once again the largest revenue contributor in Q4 does that does that help.

That's great. Thank you.

Okay. Thank you.

Are you.

I'm showing no further questions in the queue I would now like to turn the call back over to Brian for closing remarks.

Well. Thank you again, we appreciate everybody's time everyone's support and.

Looking forward to talking with all of you again individually as well as during our fourth quarter call. So thank you all for your time and we appreciate it and we'll talk to you all soon.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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