Q3 2021 Somalogic Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to pharma La <unk> third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question.

During the session you will need to press star one on your telephone if you require any further assistance. Please press star zero. Please be advised that today's conference is being recorded I would now like you had a conference over to our first speaker today Marissa bites Investor Relations. Please go ahead.

Thank you and thank you all for joining US. This morning, some of Arctic released financial results for the three months ended September 30th 2020 one a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make forward looking statements. During this call within the meaning of federal Securities laws.

Made pursuant to the Safe Harbor provision of the private Securities Litigation Reform Act of 1995.

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

All forward looking statements, including without limitation those relating to our market opportunity gross margin future financial performance protein content and database growth customer base diagnostic pipeline expectations for hiring and growth in our organization are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.

Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our Form 10-Q filed with the Securities and Exchange Commission today.

This conference call contains time sensitive information and is accurate only as of the live broadcast today November 15 2021.

<unk> 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.

I'll now turn the call over to worth my Chief Executive Officer.

Yeah.

Good morning, welcome to <unk> first quarterly update as a public company.

To review our results for the third quarter of 2021.

After more than two decades of hard work. We are indeed excited to now be public and to have this opportunity to speak with you today.

But our rapidly growing uniquely position proteomics business.

We had our first proteomics company at the Nexus of capabilities needed to realize it feels long anticipated potential.

Both the ability to measure a sufficient amount of the proteome at scale and then to simultaneously interpret and use that data to deliver impactful research and clinical applications.

This has provided us with a substantial first mover advantage and now positions us to capture a disproportionate share of.

The fast growing proteomics market.

We do use of this first mover advantage to develop the broadest and most flexible psychology.

The largest clinical proteomics database.

The deepest diagnostic pipeline.

And with our completed strategic merger with CMO Lifesciences too.

We don't have more than $650 million on our balance sheet.

We have already leveraged <unk> added resources to attract talent trends from our board of directors with World class industry Veterans and we will continue to leverage our balance sheet to invest in both organic and inorganic growth opportunities moving forward.

Okay.

As you might expect many have facilitated our recent success and has helped make our public transition possible.

We sincerely thank the investors that have supported us over the last few years.

As always our partners collaborators advisers are notably of course, our customers.

I also thank our leadership team and our employees for their patients' confidence hard work and mission orientation that they bring to their work each and every day.

Companies are nothing other than the people that constitute them on the things they agree to do together.

And do the efforts of our people some melodic hasn't objectively incredible opportunity to create the financial.

More importantly, human value as we move ahead.

For those newer to our story I'd like to provide you a brief overview of some water.

Founded in 2000, and some logic as a commercial stage proteomics company with a pioneering technology.

That provides more coverage of the protium that any other commercial enterprise.

I will have numerous several unique first mover advantages as I go through today due to our tenure.

Considering technology every <unk> company must have one capable of enablement.

In the case that the identification and quantification of proteins.

However in addition to this we also have a clinical proteomics database and.

What about for magic stuck in these three things comprise our integrated platform.

Which is creating a virtuous cycle of value creation.

Yeah.

Our basic enablement technology was discovered by our founder and his colleagues 30 years ago.

Over time, we have grown the number of proteins, we can identify and measure using proprietary modified <unk>.

Oligonucleotide sequences law against we synthesize and modify biochemically, which bond specific protein targets.

There are multiple benefits and advantages of using synthetic nucleic acid law against compared to other approaches.

Breadth depth and speed and cost just to name a few.

And the trajectory for this technology moving forward in time is significant.

Okay.

With this technology is the backbone we have created a scan.

An assay that uses our proprietary <unk> elaborates identify at present, approximately 7000 human proteins with high specificity.

High sensitivity and industry, leading reproducibility and a single sample.

Notably this was more than 4000 proteins with any other commercial owner process capable at this at this time.

And.

<unk>, we are working to commercialize measurement of approximately 10000 proteins over the next 12 to 18 months using this technique.

Putting more distance between ourselves and others and there is no theoretical limit to the number of proteins. We can measure on this platform over time.

As the vast majority of life Sciences use cases for proteomics or the better understand human biology to find new targets for medicines and vaccines more data simply means more insights and content really matters.

The <unk> assay is currently provided primarily as a service product, but we have proven in the past to deliver so Muscat gets decided service and these will be increasingly deployed over the next few years in a variety of formats likely include including arrays and G. S. P.

Possibly under approach other approaches currently in development.

Yeah.

The ability to accurately provide this amount of protein data to our biopharma in basic research customers means we are facilitating their work and waste previously unavailable and there's no other concurrently due to better understand biology.

Our contribution is facilitating the development of new medicines, and vaccines and our shared efforts with our customers and collaborators to relieve human suffering and to extend meaningful life.

We have built this integrated proteomics platform to be capable of robust high throughput proteomics analysis with broad protium coverage low limits of detection.

Short turnaround time and at low cost.

Furthermore, we've designed it with the goal of being a universal proteomics platform.

They cannot only be used across the life sciences industry, but also with the robustness reproducibility required for clinical applications.

Our growing clinical proteomics database currently contains approximately 1.5 billion protein measurements across approximately.

Approximately 450000 assay runs with over 675000 participant years of clinical follow up.

Approximately 80% of the samples and the database have been run on high plex of melodic assays measuring either 5000 or.

7000 proteins.

About 40% of all the samples offer fully annotated clinical patient data.

This unique asset is the largest in the world of its content and one that will grow over time as we add prospective clinical data with partners and fully access biobank opportunities.

We've used this database and our protium <unk> capabilities to create a new class of diagnostic tools called some are single tests.

Leveraging artificial intelligence machine learning and high Plex proteomics, some signal tests or protein expression pattern algorithm models.

That can contribute to diagnosing diseases in the present.

But also real time body morphology, as well something genetic tests and capable of.

As a former clinician I personally believe the most exciting thing about these tests that they also have unique ability to predict future biologic and medical risks to see these risks when traditional diagnostics may not.

Some internally validated examples of our tests include the prediction of near term cardiovascular disease or events.

The future development of cancer and complications arising from diabetes.

As well as real time disease detection with less cost and risk such as the diagnosis of nonalcoholic <unk> hepatitis or Nash.

Chest, rather than a liver biopsy.

We have over 100 of these first in class high Plex protein pattern recognition tests in our development pipeline.

<unk>, 20th which had been validated in a subset of those which had been used by clinicians are demonstration market over the past two years.

And are now being evaluated by our health system partners.

Our unique market vetted market proven platform capabilities position us extremely well to remain the leader at the forefront of the global commercial proteomics field.

So we're working across a broad spectrum of both enablement and applications used cases for research and clinical partners collaborators and customers.

The total addressable market for proteomics will approach $100 billion over the next several years.

Includes the current 50 billion dollar life Sciences tools component represented by both Biopharma translational and academic researchers.

In emerging diagnostics opportunity, which over the next few years several years should grow to more than $40 billion.

This is an opportunity with clear parallels to the early growth years of genomics, However, proteomics should impact human life with even greater significance over time.

Importantly, we believe there are several meaningful and discrete characteristics, which distinguish <unk> from other proteomics enterprises.

Number one.

We have a core proprietary technology on track to identify measure 10000 total proteins on a near term horizon.

Our core technology utilizes synthetic nucleic acid ligands with significant development potential.

Including a number of next generation proteomics product development opportunities using chip based and other approaches.

This technology is married with our clinical proteomics database and about dramatic stack that allows us to translate protein data to create our high value clinical applications. As I mentioned previously these three components could constitute a platform.

Not just protein identification and measurement technology.

Number two.

We are heavily market validated with real customers and real revenue.

Both of which are growing substantially in real time.

We've actually had more than 300 customers and collaborators on our platform over the past two decades at present. These include leading biopharma organizations, such as Novartis Amgen Glaxosmithkline and Novo Nordisk is all in a growing list of basic research investigators around the world.

We also have a growing number of contracted partnerships with leading clinical institutions and our proteomics for precision medicine initiatives that will accelerate the prospective validation.

<unk> and regulatory clearance for our high Plex protein powder recognition diagnostic tests.

Number three we are the knowledge leader for proteomics with our collaborators published approximately 400 publications on our platform many of them not just references to the use of our technology in the method section, but rather considered recent landmarks in human proteomics.

Number four.

Our platform is much more research tool.

We have successfully evolved into a full spectrum proteomics enterprise by leveraging our market leading platform to go beyond enablement.

And in the clinical applications and products.

There's obviously a great deal of value being created by the measurement of identification of proteins.

<unk>, a downstream diagnostic applications significantly expands our total addressable market potential.

Our bioinformatics group has been working with proteomics data for more than a decade.

Such that they were not just conceptualizing applications.

But we are actively putting them into the hands of our customers and collaborators in real time.

Finally, we have the best leaders in the field, including our newly expanded board and the recent addition of several key executives to our organization.

So combine these objectively differentiated capabilities support our assertion that we are well positioned.

To take a disproportionate share.

Of the rapidly growing proteomics market.

Importantly, as we don't have to use a large amount of our resources to make our technology work.

Where to get initial market traction, we can focus on real time business opportunities.

These include advancing our technology trajectory.

Spanning the 10000 proteins measured and beyond.

In developing and deploying a variety of site service deployed products.

We will also be able to continue to invest in our clinical proteomics database.

And as a result to develop increasing numbers of clinical applications and in turn to pursue commercial partnerships and collaborations for these products.

On the life Sciences tool side, we can focus on the realization of business partnerships across a variety of applications.

Such as the deployment of our Optima reagents into other areas where antibodies are currently used.

Therefore, our balance sheet will be leveraged in a number of very visible ways in the near term.

Including internal development.

Partnerships and finally M&A activity.

So how are we doing in the present.

One of my father's favorite quotes and one that I think about a lot of the CEO follows.

The problem with potential as it it's usually just that.

My Dad was a football and basketball referee when I was growing up and saw a lot of promising high school athletes and the sports.

Some of whom moved to the next level that many who did not.

So are we living up to our potential or not.

I believe a host of recent developments would substantiate we are.

Shaun Blakeman, our Chief Financial Officer will discuss our financial progress in a few moments, but there are a number of notable qualitative milestones that we've achieved over the past few months.

In May we announced our proteomics for precision medicine initiatives definitive partnerships with Emory healthcare Intermountain healthcare common spirit health and the University of Colorado Health.

This initiative for health system partners, who we're working with our new diagnostic platform will facilitate market uptake in the advancement of our regulatory and payment strategy for clinical products.

In June we announced new life Sciences tools disease specific and custom proteomics panel products.

As well as new customer collaboration agreements with Novartis and soccer.

In July we announced a relationship in deployment of our <unk> assay capabilities to Beth Israel Deaconess Medical Center in Boston.

August we announced the collaboration with twist Biosciences to prove our database and other proteomics data for new therapeutic antibody targets.

And in September we added <unk> to our proteomics for precision medicine initiatives.

Finally, I started my comments today by suggesting a company's success is a reflection primarily or.

Most exclusively of its people.

Like to circle back to the importance at this point by mentioning a number of additions to our management team over the past year.

Jason Cleveland as our Chief Technology Officer, Jason has an incredible physics and engineering background, but also success as an entrepreneur.

Tracy Hurvey as executive Vice President for Life Sciences markets, who came to us from a very successful career and Ciara commercial sales.

David Mcgovern Senior Vice President of marketing, David came to us with a great background in Biopharma most recently at Pfizer.

Todd Johnson as executive Vice President of business development and strategy Todd.

Todd has been founder and CEO himself on the number of digital health companies and has extensive health care market experience.

<unk> as general counsel.

Most recently worked at and Tara and previously human longevity.

Shaun Blakeman, who you'll hear from momentarily as Chief Financial Officer, Shawn comes to US with extensive experience as a public company financial executive of Cantel medical and Medtronic.

And finally, just in this past month, we've added steep normal Steve Mermelstein as our SVP of M&A.

He previously held in adjuvant and adaptation as Chief business development and strategy officer. Following a number of important executive leadership roles at Thermo Fisher.

Before I hand, this over to Sean I want to mention in addition in addition to these qualitative.

Examples of progress the objected progress we're making on many fronts that are now translating into quantitative growth.

And that we believe will continue to do so moving forward.

Since the beginning of this fiscal year, we've grown ourselves and marketing group from 14 to 47.

Largely due to this investment in our commercial staff. We will have added 61 net new revenue producing customers year to date is.

As compared to this time last year and 34 of these were added in this last quarter quarter three.

This represents a total year over year increase of new customers of 179% in the third quarter year over year increase of 50%.

Finally, we greatly exceeded our topline revenue projections.

Private completion of our business combination and public transition, we projected $65 million in revenue this year.

A few months ago, we gave guidance that we would achieve north of $73 million.

You will hear from Sean are materially we are again revising our projections support.

I want to thank you all very much for your time and interest we'll look to expand further on these insights during an analyst Investor day that we are planning now.

We will provide additional details on soon.

So I'll turn it over now to Chief Financial Officer, Shaun Blakeman, Sean.

Thank you Roy.

To begin I'd like to summarize our highly successful recently completed merger, we see in life Sciences, two which closed on September one.

And our subsequent listing on the NASDAQ exchange under our new ticker symbol F. L. G C.

As Roy mentioned, we are very pleased that we successfully closed the transaction with total proceeds of approximately $630 million.

I'd like to start off by talking about why we're ahead of expectations and why we expect continued strength in our raising our guidance for the second time by highlighting some important metrics. This year that reflect the strength of our business.

First of all.

Our year to date revenue growth is over 110% compared to the first nine months of 2020 and.

And we're seeing that growth broadly across all channels.

Even more significantly we are driving growth disproportionately by the addition of new customers, creating a broader and more diversified base on which we are growing our sales pipeline.

In fact this year, we have added 34, new accounts in Q3, and 61 year to date alone, which is 170% more new accounts than we added year to date last year.

And the driver of this is our aggressive commercial team ramp.

We have more than tripled our commercial team from 14 employees to 47 year to date 2021.

And we're going to continue this aggressive investment in our commercial team.

We believe we will build on the strong sales trends we've executed on through 2021.

Now, let me turn to our financial results for the third quarter.

Revenue for the three months ended September 32021 was $20 million, a 40% increase from $14 2 million in the same period of the prior year.

As I already mentioned revenue growth was driven by the aggressive growth of our sales organization and the associated increase in our customer base.

Gross margin for the third quarter of 2021 was 56% compared to 65% in the third quarter of the prior year.

However, as noted in the press release, our third quarter 2020 included a onetime noncash adjustment to inventory.

It is worth noting that our gross margins have steadily improved over the past two years with customer diversification with our core service business had a solid mid 50% plus range.

Total operating expenses for the third quarter of 2021 were $36 2 million, a 138% increase from $15 2 million in the third quarter of 2020 are.

R&D expenses for the third quarter of 2021 were $15 6 million compared.

Compared to $6 9 million in the third quarter of 2020.

But includes a nonrecurring noncash $6 5 million stock compensation expense related to a secondary sale of stock and options, which is excluded in our adjusted EBITDA.

Sales general and administrative expenses for the third quarter of 2021 were $26 million compared to $8 3 million in the third quarter of 2020.

The primary drivers of these increases are head count additions as we continue to invest in our technology platforms, the commercial team and related functional support and public company readiness.

Following non-GAAP adjustments for a loss on extinguishment of debt and stock compensation charges related to a secondary selling above fair value. Our adjusted EBITDA for the third quarter of 2021 with a loss of $31 8 million.

This compares to an adjusted EBITDA loss of $5 2 million for the year ago period.

Please see our press release and 8-K on file with the SEC as of this morning for a reconciliation between GAAP net loss and non-GAAP adjusted EBITDA.

I would like to explain specifically the impact of earn out shares and warrants related to the stack merger on our Q3 results combined they account for $13 8 million or over 40% of our adjusted EBITDA loss for the quarter.

It is also important to note that going forward as the estimates and assumptions that lie behind these valuations change. These particular liabilities on our balance sheet considerably.

<unk> significantly, albeit as noncash items.

We ended the quarter with $676 million of cash cash equivalents and short term investments base.

Based on the ongoing strength in our business, we are initiating formal 2021 guidance of $77 million to $79 million in revenue representing growth of 38% to 41% over 2020 revenue of $15 9 million.

At this point I would like to turn the call back to Roy for closing comments.

Okay.

Thanks, Sean.

And thanks, so much for the time today to give you some background and updates on some logic.

We have already developed a successful increasing increasingly comprehensive set of proteomics products and solutions and Youll see us, but broadening and.

And deepening these capabilities over the coming months and years to better serve those who would benefit from them.

We have an objective opportunity and a real opportunity to work with all of you in the investment community as well as our partners collaborators and customers.

To relieve human suffering and meaningful life and opportunity, which I am personally grateful to have.

With that we'll open it up to questions.

Joining Sean and I for the question. It's a portion of the call is our president and Chief operating Officer Melanie Arris.

And our Chief Medical Officer, Dr. Steve Williams operator.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby while we compile.

<unk> roster.

Your first question comes from Dan Brennan with Cowen Your line is open.

Great. Thank you and thank Troy and John Congrats on the quarter.

The sales trajectory in 'twenty, one has been exceeding the forecast that you initially laid out.

When the stock filing this summer and then you raised the guidance subsequent to that and now you're raising it again.

And I know, Sean you spoke about the impact of the expanded commercial team, which is great and maybe just.

Taking a different angle.

Can you just give us a sense on the business trends.

And particularly by customer application.

What has been progressing better than you would've expected.

Given two guidance ranges today.

Sure Dan This is Roy.

So we really attribute the growth in 2021, and the two upward revisions of our.

Our projections and guidance too.

Two to two things.

One is really three things one the first is.

We've obviously alluded to and you alluded to as well just the simple growth of our commercial team.

There is a.

Fairly strong correlation or at least there has been over the last year.

When the addition of new field team staff and new business.

And that's generated a pipeline that's about <unk> larger than it was last year.

The second is.

Related primarily to some changes in business model that we made over the last year.

And we were we were hopeful that the changes that we've made to the business model would have a large impact, but obviously can predict exactly what that impact would be.

And basically those changes were primarily centered around.

We're moving a restriction from our customers to have to provide us data in rights to data. When we ran our samples in other words, allowing for a fee for service component and then announcing to the market that we would.

Be adding.

A variety of new products onto the largest discovery platform that we have.

Should these panels.

We put out and then the third thing.

I believe it's just the general interest in proteomics.

General market growth for the field. So it's really nothing more complex than that it's really related to those three things.

Got it okay.

So the company you alluded to some of the large pharma customers or some of the key customer contract you have.

Amgen and Novartis were disclosed in the filing has been notable customers can you just give us a sense of.

The contribution of some of your larger customers this quarter.

And then kind of as we look out how does that contribution change.

To get a sense of the contribution from Biopharma versus the academia and then diagnostic as you look out.

Sure.

Classically over the last.

Couple of years, our ratio of Biopharma customer revenue to basic investigator rocket demick investigator revenue.

It's been about 80 20.

And.

Over the last year I would say that that ratio has has been maintained.

Because we've added as we've mentioned a large number of new customers in both sectors in both Biopharma and in basic research.

I, obviously cant predict what will happen to that ratio over time, I do think that with the additional <unk>.

Products that we put into the market over the last year and with a growing of.

Field team that we could certainly see some disproportionate increases in that basic research component.

Just because of the the hand to hand combat that's required to bring those customers.

Onto the platform.

The.

Yeah.

We are assiduously focused on.

Bringing longer term higher volume contracts onto the platform.

We signed Novartis to a 10 year deal back at the end of 2019.

And over the last year, we've added three additional two to three year con.

Contracts with large biopharma organizations, as well and I think youll see us.

Bringing some more of those on to the platform as well over time.

Okay great.

In the stack firing Matt.

Management had laid out some sales forecast for 'twenty two 'twenty three guiding today, but I'm just wondering given the strength.

The business and year to date I think the sales forecast then we're implying somewhere in like a 34% 35% year over year growth in 'twenty two 'twenty three any any way to think about I would presume given the strength that you've seen year to date. It is not like a pull forward because like what kind of growth given everything you've discussed so that's the high way of asking any any way to think about.

The trajectory as we exit this year versus the sales forecast that you had originally laid out back in the filings.

Well I'll make a high level comment then I'll turn it over to Sean to talk about our philosophy around <unk>.

<unk> for 2022 and 2023.

At a high level.

<unk>.

Are very optimistic and very confident that the trajectory that we've seen this year will continue.

Over the next two years again, as we add to our field team.

And.

And bring customers onto the platform.

Some of which you have been waiting for us to make those business model changes, we made over the last year, Sean any additional comments about guidance for 2022 in two weeks.

Yeah, I mean, certainly we look forward to talking with you about our 2022 guidance sometime in the next few months and giving you more details behind that I would like to follow up and it does also relate to the customer diversification.

And that you had.

I think this remarkable that I'd like to point out is that.

The growth of our diversified pipeline with the new commercial team and expanding commercial.

<unk> team and how youre seeing that affect our numbers. So although you can see in our past right that you will we have the benefit of large customer contracts and we will continue to have those benefits in certain quarters. We're also feeling that in aggressively with our new diversified customer base at a fast clip.

And we expect that to continue so I think you will continue to see those quarters, where we benefit from two or three really good things happening, but we're going to be back filling in with our rapid expansion of our diversified customer base.

Yes, Brian this might be.

Carl I, just can say this might be a good opportunity for us.

All of the Harris, our president and CFO to comment a little bit more specifically on.

The concentration of the business has changed over the last year.

<unk>.

Sure Thanks, Laura Hi, Dan.

So over the last year with the addition of the 61 additional new customers, we're seeing those come in.

As.

First time wanting to try the platform. The good news is we're super excited to see that those initial.

Test runs with those customers are increasing so theyre, taking larger bites as they come in and then we're starting to see them come through as repeat customers. So we're very excited about the growth. We've also seen good diversification.

We had the large contract with Novartis that is.

Been fueling a lot of our revenue in the past, but this year, we're seeing that concentration with novartis.

Paul.

And our regular business from those new customers is actually taking up that space in between with.

Novartis and Amgen previously were.

The contribution from Novartis.

He is falling relative to the other customers actually the contribution on a year over year basis.

There is increasing so.

As melody.

Elucidated there.

The business is becoming much less concentrated as we move forward and bring all these new customers onto the platform, even though those large contracts that we've had.

The benefit of.

Over the last few years continue as well.

And if I could just get one more in if you don't mind I know you spent a fair amount of time on the diagnostics.

<unk> and the <unk> 40 billion Tam.

Any way to think about.

How meaningful diagnostics could be whether traditional diagnostics, our translational for use in clinical trials or however, you want to characterize it like how meaningful could this day as we look out.

Over the next say 12 to 24 months not I'm not quite COVID-19 contributing today, but given the Tam and how much time, you're spending there and the uniqueness of the platform. Just wondering if this is going to be a real revenue driver.

Kind of in the near to intermediate term.

In time, Dan This will be an incredible revenue driver and just to step back for a moment.

And talk about what these what this diagnostic purchase capable of doing.

One of the major problems in population health management is making accurate.

Predictions about groups of patients so imagine if you're running a large Medicare advantage plan.

And you've got 50000, diabetics imagine the ability to run the test on those individuals every other year and determine what their risk of long term complications could be and then take that 2000 that you identify and bear down on those.

To prevent those in to bend the cost curve considerably.

And then of course just in managing.

Individual patients to be able to tell someone whom you thought you were managing at the top of your license that theyre actually very high risk for cardiovascular events and to make a change in their drug regimen that prevents that event and so forth. So.

The medically over time these tests should be transformational and I was a clinician for 20 years and so I don't I don't say that.

Lightly.

Over the next two years, what we'll be doing is stepping through the.

The hoops you have to step through to get a new diagnostic platform into clinical practice. We've created this proteomics precision health initiative, we have six partners will be adding a few more these there'll be doing benefits proofing utility group trials inner mountain is already enrolling on those I'll ask Steve Williams in a minute to comment on where we are in these trials.

And then.

We're also collecting the data for regulatory filings.

And then another thing is that we have a huge number of these assets already we have 21st in class tests that already validated. These are unique assets. We've got as I mentioned more than 100, and our pipeline and so we're thinking really hard about how do we diversify taking those to market through a combination of us taking some of the market life.

Sensing some to other partners, who have already expressed an interest in these we are having those conversations as we as we.

Speaking in real time.

And then.

In addition, being the development partner for these as well Steve Williams can you talk a little bit about where we are on these benefits grew from utility group trials.

Yes, Thanks Roy.

Hi, Dan.

So I think that the way we like to think of these tests in the near term.

Is that they have a dual use in both markets. So if you think about our leading test which are most differentiated from the competition prediction of near term catastrophic cardiovascular events as one in Nash is another.

Nonalcoholic <unk> hepatitis and both of those have uses to accelerate the path of drug development and stratify patients.

Entry into clinical trials and monitoring their response and Thats, a very attractive format for clients, who get to 7000 protein measurements and they get validated tests that can be used during the exploratory or development phase to monitor response, so let's not forget that they actually have these dual use can we do.

Clients pharma clients, who are using these tests, but what <unk> asked me to speak about really was they use and this proteomics for precision health and then we have.

We're intending to start six clinical studies and the key objective of those studies is to show that clinicians can and will act. Upon this information this new kind of information and what we're providing them with it.

Is a prediction that finds people who have a one into chance of death heart attack stroke or <unk>.

Heart failure within about 18 months and it turns out that.

Slightly higher than typical risk population that people with diabetes, that's about 20% of the population.

20% one in five people has a 50 50 chance of one of these events.

And the Communist event type is that so.

That is a and it happens about 18 months after the sample.

The exciting thing about that is that it's not destiny that actually we can change it and there are new kinds of cardio protective drugs out there that are not very widely used but they could be used in these painful to reduce the event rate. So we believe this cost effective allocation of.

Existing drugs as a huge opportunity and those studies those six studies that were in the process of starting that's why I said into mountains already started the primary endpoint is can we achieve risk concordant prescribing. The people I just mentioned her in that high growth can we up the prescription.

From what's typically 15% can we get nearly 100% of those people on these new drugs.

The reason that they will come in today.

There's no way of accurately assessing their residual risk.

And you don't want to put someone on a drug with side effects and costs. When you don't actually know, it's not like blood pressure cholesterol way you can measure them and the drugs treat them. The new approaches like S. G. L. T twos NGL P ones, there isn't a measurable thing relating to the drug mechanism and that's what we provide so we're really excited about.

And within the next one to two years, what you'll see as we complete those studies days can we achieve risk concordant prescribing that leads to more cost effective application of existing trucks.

Alright. Your next question comes from Dan Arias.

Stifel. Your line is open.

Hey, good morning, guys. Thank you your ROI on the scope of analysis at the platform enables.

7000, Plex today going to 10000 next year I believe.

Where do you see the incremental demand coming from when you do that and do you have any loose timelines that we can think about for development and then commercialization of those capabilities.

Sure Dan.

So.

We.

We're very excited to.

Can move the content up from 7000 to.

10000 of course beyond and moving forward.

At 7000 were already measuring 4000 proteins no other commercial proteomics enterprise cannot scale and then at 10000 that debt.

That gap's kind of going to widen.

There appears to be an almost insatiable demand from our biopharma customers for more content.

And thats not shocking if you think about.

The fact that.

They used.

This information to drive better understanding of human biology developed to develop new medicines in new new vaccines in and define things like newer.

Jean protein Association's water called PQ, Tls, all of which can.

Potentially lead to the development of more effective.

Medications in therapeutics.

So.

There does appear to be an insatiable demand for content from those customers and the reason I say that is that.

At least three of our large biopharma customers have actually asked us in the last year, if we would right into their contracts that they continue to have access to.

So the higher content.

So.

As far as the timeline.

We are currently creating about 500 of these new are synthesizing ourselves about 500 of these new.

<unk>, we call our <unk> some of them are <unk> for proteins a quarter.

And we should be reaching that 10000, mark at least the capability to measure 10000 proteins during the fiscal year of 2022.

But likely it will be early in 2023 before we can commercialize that because.

Once you get to that level of content, you still have to product ties it.

And shift the collateral and so forth.

That new product, but so capability in 2022.

That will become part of our product portfolio, if all things go well and in the first two quarters of 2023.

Yeah, Okay. Thank you.

And then maybe on the diagnostics side of the menu that you have there is with a planned menu is pretty expensive. So I know you touched on some of the points during dan's questions, but can you just spend an additional minute.

Sort of how you handle those plans and how we should think about.

Where you carry the load when it comes to development activity versus where you might have the partners drive more of the process or do more of the work.

Sure.

Well I think Steve Williams, and others, who predate my arrival here were very smart and thinking about.

Which areas to focus on initially.

The thing about <unk>.

<unk> tests and the way that we make these of course is that we find protein expression patterns between and in our models its between 16 and 360 proteins.

A vast majority of the proteins, we would not put into those models. So this is where the machine learning becomes important.

Steve and his colleagues decided to focus initially on cardiovascular and metabolic disease.

I think that was very wide set of endemic conditions. It's also set of conditions for which there are therapies that can change the trajectory of those illnesses.

We.

As a follow on to that have.

Created in that metabolic area. These.

These diagnostic tests that predict call.

Complications in diabetes, and then sort of as a corollary to that from an organ system, we've moved into renal disease.

As well.

And so it's sort of rounding out that.

Cardiac and metabolic and renal there's certainly a disease access between the heart and the kidney.

And with diabetes.

And then we have decided to focus next on cancer.

We.

We believe that we are likely to have a set of tests.

Over the next year that can predict not <unk>.

Not early detection, so not like a cell free DNA tests, but are set up tests that we'll be able to tell.

Tell you what your actual biologic risk of developing cancer in the near future is and so you can imagine the impact on.

The way that we screen patients for cancer and the way that you could potentially coordinate those with with these early detection cell free DNA platforms, and so forth. So we believe that could be.

Transformational as well.

As far as other diseases.

I would say next in the pipeline.

Or.

We are looking at neurologic diseases, all commerce and related conditions.

And we're really letting moving forward from there the market inform us as to what.

Most interested in.

As far as determining the breakdown between what we decided to take fully to market.

What we decide to partner four or license to take to market.

Haven't made that discernment, yet and we're actively in discussions now both internally and with potential partner several potential partners.

To make this decision about what we'll take forward and what will license or provide others.

Access to to take forward and then of course.

Moving past even that is this opportunity to be the developer of these algorithms.

And for others on demand.

Using both our growing database <unk> the samples that those partners might bring to the table.

Okay very good thank you Ryan.

Your next question comes from Tycho Peterson with Jpmorgan. Your line is open.

Hey, good morning.

Well I want to go back to the precision Medicine initiative I appreciate the additional color Steven providers do you envision this being expanded at all beyond the six initial trials and how should we think about kind of data readout as I said I know you said over the next one to two years, but will there be kind of interim data.

How should we think about kind of milestones we can track from the outside.

Sure I'll make a couple of high level comments, Tycho and then I'll ask Steve to elaborate a bit.

So.

Yes, we have designed these trials.

In a way that it's not it's not going to take three or four years for them to be complete.

We will be getting data some data, we think within a year or so.

Talk about back to the market.

We also do plan to grow this.

We are in discussions with another number of leading medical institutions.

In North America.

To expand this list from six.

Two of them to a higher number we haven't decided what the top end is going to be it's going to it's going to be determined largely by.

The next set of these first six are primarily focused on cardiovascular disease and the number that we bring to the table will be primarily focused or are determined by.

Which disease process or which set of tests, we want to work with this next set of partners on.

But we will be adding additional partners to this precision.

Premiums for precision Medicine initiative.

Hum.

From a from a variety of standpoints I already mentioned.

The ability to.

Two these individuals' health systems and their physicians to the benefits group and utility proof work to sort of further validate beyond our demonstration market.

Which has already run.

More than 2500 cost itself.

But for these to be validated in the.

The utility proof determined by these partners to create Dorset dossier for regulatory filing and then.

Two other things one obviously some of these health systems could be our first real customers at scale and then lastly, we are discussing with all of these health system partners.

The potential to share data.

On a perspective basis to create more diagnostic models moving forward as you know clinical data is that just.

The gift that keeps on giving.

Steve would you like to discuss just briefly.

How soon do you think will begin to see some data come out we can talk about in these trials.

Thanks, Dara I think you said it well.

The studies themselves are only just beginning to recruit patients and typically we're looking at about six months duration for an individual in a study. So when you add up the recruitment time from the beginning of the first patient to the end of the last I would imagine in 18 months to two years is it reasonable timescale.

And I would.

Depending on noise decisions I think we would anticipate releasing some of that information to the market.

Well I mentioned some of the other indications will be going for I think the next one the first studies at all and people with diabetes.

Can we improve this drug allocation that we talked about earlier.

And next south of of studies.

To mimic that is going to be in people with preexisting cardiovascular disease, who have had an event in the past once again, it's an opportunity where risks can be high but not everyone has a high risk and there is a wide armamentarium of effective pharmacology is available.

Expanding out Tcs canines as well as the <unk> for people with diabetes says its a nice availability of enhanced cardio protection, but again as the same problem about who do you allocate that more expensive.

Pharmacology too so that'll be the next our next group of tests after the after the paper with diabetes.

Okay. That's helpful. And then following up on the content discussion just sticking on what's on deck for next year.

A couple of launches around kidney disease, you've got <unk>, you've got Covid recovery I think lung cancer susceptibility in Japan do any of these in your view has kind of a disproportionate potential to move the needle.

We go into next year, what's most interesting.

New launches.

[noise].

But I think they all have the potential to move the needle.

Again, because this type of diagnostic tests has never existed before.

The ability to tell a clinician or an individual that you have risk.

That you did not realize was present and then to act on that risk.

In any of these disease areas.

It's going to be impactful and something I can tell you as a solution.

I would have loved to have had.

Past.

So I don't know, which is going to be most impactful I certainly think if you think about cardiovascular metabolic disease and cancer. These are the two.

Mortality drivers and cost drivers around the world for human beings and so I believe that.

Both of these can be very impactful moving forward from the standpoint of value creation.

And then Steve just to add to that I would just say that the wildcard for me is COVID-19 recovery because you have a condition that has insulted kidneys heart lungs.

And we can measure the effects of all of those systems.

And so it's it's today it's unknown.

What extent, we can characterize the residual damage, but well know that shortly and I think of all the of all the things that could go from zero to 100 quickly it may be that that COVID-19 recovery as well as one is one such rather unpredictable application.

And then Roy.

At the Analyst day, you talked obviously about the evaluation of MTS I know you're speaking next 24 36 months to kind of asking before box strategy, but could you just maybe share some insight in terms of how you are kind of evaluating that process and how much you're thinking about internal development versus partnering with Oems.

Sure.

Well, we certainly know that.

I had a service solutions are going to be important moving forward and so we are evaluating.

A variety of approaches Tycho.

Believe that the market will best be served if we can deploy a variety of approaches. So as I mentioned earlier next generation arrays, Ngls and even some newer approaches that we that we actually have in development.

So on the NGL side as we've said previously we have been in discussions with potential partners.

For this to hopefully accelerate that.

That development and we continue to have those discussions and we'll hopefully elaborate on.

The results of those discussions very soon.

And then the other thing is I've mentioned before.

In previous.

Releases.

This concept of the things that we're interested in from an M&A standpoint.

We certainly are interested in next generation proteomics measurement platforms, especially those where we can use our <unk>.

Our reagents are our proprietary synthetic <unk>.

And Oh.

And so that's an area of focus for us for M&A and we're actively.

In discussions and looking there as we previously mentioned and hopefully be able to talk about that relatively soon as well so.

Hopefully more details on all of that.

In the near future Tycho.

Great and then one quick one for Sean before I hop off just on share count.

Whats the right share count, we should be using going forward.

Sure John.

Go ahead, so that would be approximately.

$182 million and we have any.

Yeah.

Okay perfect. Thanks.

Sure.

Thank you and that concludes our question and answer session of today's call I'll hand, the call back to Mike.

Yeah.

Great.

So we really appreciate everybody being with us today for us to share again some.

Information and recent progress at <unk>, we are.

Both excited and grateful for our recent cut recent accomplishments.

And also very excited for what the future holds for this company.

And its unique capabilities and unique position in the market.

We hope to see all of you or at least some of you relatively soon in person would be great.

Perhaps in San Francisco or elsewhere. So thanks very much.

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

[music].

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to pharma La <unk> third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer a question to ask a question during the session you will need to.

Our one on your telephone if you require any further assistance. Please press star zero. Please be advised that today's conference is being recorded I would now like you had a conference over to our first speaker today are visa barge Investor Relations. Please go ahead.

Thank you and thank you all for joining us.

Morning, Some logic released financial results for the three months ended September 30th 2021, a copy of the press release is available on the company's website before we begin I'd like to remind you that management will make forward looking statements. During this call within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provisions of the private secured.

<unk> Litigation Reform Act of 1995.

Any statements contained in this call that relate to expectations or predictions of future events.

Or performance are forward looking statements.

All forward looking statements, including without limitation those relating to our market opportunity gross margin future financial performance protein content and database growth customer base diagnostic pipeline expectations for hiring and growth in our organization are based upon our current estimates and various assumptions.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements accordingly.

Accordingly, you should not place undue reliance on these statements.

For a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section of our Form 10-Q filed with the Securities and Exchange Commission today.

This conference call contains time sensitive information and is accurate only as of the live broadcast today November 15 2021.

Come on logic 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 I will now turn the call over to work My Chief Executive Officer.

Yeah.

Good morning, welcome to <unk> first quarterly update as a public company.

To review our results for the third quarter of 2021.

After more than two decades of hard work. We are indeed excited to now be public and have this opportunity to speak with you today.

But our rapidly growing uniquely positioned proteomics business.

We did our first proteomics company at the Nexus of capabilities needed to realize it feels long anticipated potential.

Both the ability to measure a sufficient amount of the proteomics scale and then to simultaneously interpret and use that data to deliver impactful research and clinical applications.

This has provided us with a substantial first mover advantage and now positions us to capture a disproportionate share of the fast growing proteomics market.

Due to this first mover advantage to develop the broadest and most flexible technology.

The largest clinical proteomics database.

And the deepest diagnostic pipeline.

With our completed strategic merger with CMO Lifesciences too.

I have more than $650 million on our balance sheet.

We've already leveraged <unk> added resources to attract talent and trends from our board of directors with World class industry Veterans and we will continue to leverage our balance sheet to invest in both organic and inorganic growth opportunities moving forward.

Yeah.

So as you might expect many have facilitated our recent success and has helped make our public transition possible.

We sincerely thank the investors that have supported us over the last few years. It was always our partners collaborators advisers are notably of course our customers.

I also thank our leadership team and our employees for their patients' confidence hard work and mission orientation that they bring to their work each and every day.

Yeah.

Companies are nothing other than the people that constitute them on the things they agree to do together.

And do the efforts of our people some melodic hasn't objectively incredible opportunity to create that's financial.

More importantly, human value as we move ahead.

For those newer to our story I'd like to provide you a brief overview of some logic.

Founded in 2000, and some logic as a commercial stage proteomics company with a pioneering technology.

That provides more coverage of the protium than any other commercial enterprise.

I will have numerous several unique first mover advantages as I go through today due to our tenure.

Considering technology every protium is company must have one capable of enablement.

Okay, So thats, the identification and quantification of proteins.

However in addition to this we also have a clinical proteomics database and.

And about informatics stack in these three things comprise our integrated platform.

Which is creating a virtuous cycle of value creation.

Our basic enablement technology was discovered by our founder and his colleagues 30 years ago.

Over time, we have grown the number of proteins, we can identify and measure using proprietary modified <unk>.

Oligonucleotide sequence la against we synthesize and modify biochemically, which is behind the specific protein targets.

There are multiple benefits and advantages of using synthetic nucleic acid law against compared to other approaches.

Breadth depth and speed and cost just to name a few.

And the trajectory for this technology moving forward in time is significant.

Okay.

With respect to <unk> as the backbone, we have created certain scan.

An assay that uses our proprietary <unk> elaborates or identify a president approximately 7000 human proteins with high specificity.

Sensitivity.

Industry, leading reproducibility and a single sample.

Notably this was more than 4000 proteins with any other commercial enterprises capable at this at this time.

And importantly, we are working to commercialize measurement of approximately 10000 proteins over the next 12 to 18 months using this technique.

Putting more distance between ourselves and others and there is no theoretical limit to the number of proteins. We can measure on this platform over time.

As the vast majority of life Sciences use cases for proteomics or the better understand human biology to find new targets for medicines and vaccines more data simply means more insights and content really matters.

The <unk> assay is currently provided primarily as a service product, but we have proven in the past to deliver service that gets us out of service and these will be increasingly deployed over the next few years in a variety of formats.

And including arrays and G. S P.

Possibly under approach other approaches currently in development.

Okay.

The ability to accurately provide this amount of protein data to our biopharma in basic research customers means we are facilitating their work and waste previously unavailable and there's no other concurrently due to better understand biology.

Our contribution is facilitating the development of new medicines, and vaccines and our shared efforts with our customers and collaborators to relieve human suffering and to extend meaningful life.

Okay.

We have built this integrated proteomics platform to be capable of robust high throughput proteomics analysis with broad protium coverage low limits of detection.

Short turnaround time and at low cost.

Furthermore, we've designed it with the goal of being a universal proteomics platform.

And not only be used across the life sciences industry, but also with the robustness reproducibility required for clinical applications.

Our growing clinical proteomics database currently contains approximately $1 5 billion protein measurements across approximately 450000 assay runs with over 675000 participant years of clinical follow up.

Approximately 80% of the samples and the database has been run on high Plex homological assays measuring either 5000 or 7000 proteins and about 40% of all the samples offer fully annotated clinical patient data.

This unique asset is the largest in the world of its content and one that will grow over time as we add prospective clinical data with partners and fully access bank opportunities.

We've used this database and our proteomics bio informatics capabilities to create a new class of diagnostic tools called Soma signal tests.

Leveraging artificial intelligence machine learning and high Plex proteomics somebody signalled tests or protein expression pattern algorithm models.

That can contribute to diagnosing diseases in the present.

But also real time body morphology, as well something genetic tests are incapable of.

As a former clinician I personally believe the most exciting thing about these tests that they also have unique ability to predict future biologic and medical risks and to see these risks when traditional diagnostics may not.

Some internally validated examples of our tests include the prediction of near term cardiovascular disease or events.

Future development of cancer and complications arising from diabetes.

As well as real time disease detection with less cost and risk such as a diagnosis of nonalcoholic <unk> hepatitis or Nash.

Chest, rather than a liver biopsy.

We have over 100 of these first in class high Plex, breaking pattern recognition tests in our development pipeline.

<unk>, 20th which had been validated in a subset of those which had been used by clinicians are demonstration market over the past two years.

And are now being evaluated by our health system partners.

Our unique market vetted market proven platform capabilities position us extremely well to remain the leader at the forefront of the global commercial proteomics field.

So we're working across a broad spectrum of both enablement and applications used cases for research and clinical partners collaborators and customers.

The total addressable market for proteomics will approach $100 billion over the next several years.

Includes a current 50 billion dollar life Sciences tools component represented by Biopharma translational and academic researchers.

In emerging diagnostics opportunity, which over the next few years several years should grow to more than $40 billion.

This is an opportunity with clear parallels to the early growth years that genomics, however, proteomics should impact human life with even greater significance over time.

Importantly, we believe there are several meaningful and discrete characteristics, which distinguishes <unk> from other proteomics enterprises.

Number one.

We have a core proprietary technology on track to identify measure 10000 total proteins on a near term horizon.

Our core technology utilizes synthetic nucleic acid log ins with significant development potential.

Including a number of next generation proteomics product development opportunities using chip based and other approaches.

This technology is married with our clinical proteomics database and about somatic stack that allows us to translate protein data to create our high value clinical applications. As I mentioned previously these three components could constitute a platform.

Not just protein identification and measurement technology.

Number two.

We are heavily market validated with real customers and real revenue.

Both of which are growing substantially in real time.

We've actually had more than 300 customers and collaborate on a platform over the past two decades at present. These include leading biopharma organizations such as Novartis.

Engine Glaxosmithkline and Novo Nordisk is all in a growing list of basic research investigators around the world.

We also have a growing number of contracted partnerships with leading clinical institutions and our proteomics for precision medicine initiatives that will accelerate the prospective validation.

Reimbursement and regulatory clearance for our high Plex protein pattern recognition diagnostic tests.

Number three.

The knowledge leader for proteomics with our collaborators published approximately 400 publications on our platform many of them not just references to the use of our technology in the method section, but rather considered recent landmarks in human proteomics.

Number four.

Our platform is much more research tool, we have successfully evolved into a full spectrum proteomics enterprise by leveraging our market leading platform.

Beyond enablement and.

And in the clinical applications and products.

It's obviously, a great deal of value being created by the measurement of identification of the proteins.

<unk>, a downstream diagnostic applications significantly expands our total addressable market potential.

Our bioinformatics group has been working with proteomics data for more than a decade.

Such that they were not just conceptualizing applications.

But we are actively putting them into the hands of our customers and collaborators in real time.

Finally, we have the best leaders in the field, including our newly expanded board and the recent addition of several key executives to our organization.

So combine these objectively differentiated capabilities support our assertion that we are well positioned to <unk>.

Take a disproportionate share.

Of the rapidly growing proteomics market.

Importantly, as we don't have to use a large amount of our resources to make our technology work.

Or to get initial market traction, we can focus on real time business opportunities.

These include advancing our technology trajectory.

Expanding the 10000 proteins measured and beyond.

In developing and deploying a variety of site service deployed products.

We will also be able to continue to invest in our clinical proteomics database.

And as a result to develop increasing numbers of clinical applications and in turn to pursue commercial partnerships and collaborations for these products.

On the life Sciences tool side, we can focus on the realization of business partnerships across a variety of applications.

Such as the deployment of our Optima reagents into other areas where antibodies are currently used.

Therefore, our balance sheet will be leveraged in a number of very visible ways in the near term.

Including internal development.

Partnerships and finally M&A activity.

So how are we doing in the present.

One of my father's favorite quotes and one that I think about a lot of the CEO followers.

The problem with potential as it it's usually just that.

My Dad was a football and basketball referee when I was growing up and saw a lot of promising high school athletes and sports.

Some of them move to the next level that many who did not.

So are we living up to our potential or not.

I believe a host of recent developments would substantiate we are.

Shaun Blakeman, our Chief Financial Officer will discuss our financial progress in a few moments, but there are a number of notable qualitative milestones.

We have achieved over the past few months.

In May we announced our proteomics for precision medicine initiatives definitive partnerships with Emory healthcare Intermountain healthcare common spirit health and the University of Colorado Health.

This initiative for health system partners, who we're working with our new diagnostic platform will facilitate market uptake in the advancement of our regulatory and payment strategy for clinical products.

In June we announced new life Sciences tools disease specific and accustomed proteomics panel products as.

As well as new customer collaboration agreements with Novartis and <unk>.

In July we announced a relationship in deployment of our <unk> assay capabilities to Beth Israel Deaconess Medical Center in Boston.

In August we announced a collaboration with twist biosciences to prove our database and other proteomics data for new therapeutic antibody targets.

And in September we added you PMC to our proteomics for precision medicine initiatives.

Finally, I started my comments today by suggesting a company's success is a reflection primarily or almost exclusively of its people.

Like to circle back to the importance at this point that I mentioned, a number of additions to our management team over the past year.

Jason Cleveland as our Chief Technology Officer, Jason has an incredible physics and engineering background, but also success as an entrepreneur.

Tracy Kirby's Executive Vice President for Life Sciences markets, who came to us from a very successful career and CRM commercial yourselves.

David Mcgovern senior Vice President of marketing.

David came to us with a great background in Biopharma, most recently at Pfizer.

Todd Johnson as executive Vice President of business development and strategy Todd.

Todd has been founder and CEO himself on the number of digital health companies and has extensive health care market experience.

<unk> as general counsel.

And most recently worked at and Tara and previously human longevity.

Shaun Blakeman, who you'll hear from momentarily as Chief Financial Officer, Shawn comes to US with extensive experience as a public company financial executive of Cantel medical.

Tronic and finally, just in this past month, we have added steep normal Steve Mermelstein.

As our <unk>.

VP of M&A a role he previously held on Agila and adaptation as Chief business development and strategy officer. Following a number of important executive leadership roles at Thermo Fisher.

Before I hand, this over to Sean I want to mention in addition in addition to these qualitative.

Yeah.

Examples of progress the objected progress we're making on many fronts that are now translating into quantitative grows.

And that we believe will continue to do so moving Florida.

Since the beginning of this fiscal year, we've grown ourselves and marketing group from 14 to 47.

Largely due to this investment in our commercial staff. We will have added 61, net new revenue producing customers year to date as compared to this time last year and 34 of these were added in this last quarter quarter three.

This represents a total year over year increase of new customers of 179%.

In the third quarter year over year increase of 50%.

Finally, we greatly exceeded our topline revenue projections.

Private completion of our business combination and public transition with projected $65 million in revenue this year.

A few months ago, we gave guidance that we would achieve north of $73 million.

As you will hear from Shaun materially we were again revising our projections support.

I want to thank you all very much for your time and interest we'll look to expand further on these insights during an analyst Investor day that we are planning now.

Provide will provide additional details on soon.

So I'll turn it over now to Chief Financial Officer, Shaun Blakeman, Sean.

Thank you Roy.

To begin I'd like to summarize our highly successful recently completed merger with <unk> life Sciences to which closed on September one.

And our subsequent listing on the NASDAQ exchange under our new ticker symbol F. L. G C.

As Roy mentioned, we are very pleased that we successfully closed the transaction with total proceeds of approximately $630 million.

I'd like to start off by talking about why we're ahead of expectations and why we expect continued strength in our raising our guidance for the second time by highlighting some important metrics. This year that reflect the strength of our business.

First of all.

Our year to date revenue growth is over 110% compared to the first nine months of 2020, and we are seeing that growth broadly across all channels.

Even more significantly we are driving growth disproportionately by the addition of new customers, creating a broader and more diversified base on which we are growing our sales pipeline and.

In fact this year, we have added 34, new accounts in Q3, and 61 year to date alone, which is 170% more new accounts than we added year to date last year.

And the driver of this is our aggressive commercial team ramp.

We have more than tripled our commercial team from 14 employees to 47 year to date 2021.

And we're going to continue this aggressive investment in our commercial team, which we believe will build on the strong sales trends we've executed on through 2021.

Now, let me turn to our financial results for the third quarter.

Revenue for the three months ended September 32021 was $20 million, a 40% increase from $14 2 million in the same period of the prior year.

As I already mentioned revenue growth was driven by the aggressive growth of our sales organization and the associated increase in our customer base.

Gross margin for the third quarter of 2021 was 56% compared to 65% in the third quarter of the prior year.

However, as noted in the press release, our third quarter 2020 included a onetime noncash adjustment to inventory.

It is worth noting that our gross margins have steadily improved over the past two years with customer diversification with our core service business had a solid mid 50% plus range.

Total operating expenses for the third quarter of 2021 were $36 2 million a.

138% increase from $15 2 million in the third quarter of 2020.

R&D expenses for the third quarter of 2021 were $15 6 million.

Compared to $6 9 million in the third quarter of 2020.

But includes a nonrecurring noncash $6 5 million stock compensation expense related to a secondary sale of stock and options, which is excluded in our adjusted EBITDA.

Sales general and administrative expenses for the third quarter of 2021 were $26 million compared to $8 3 million in the third quarter of 2020.

The primary drivers of these increases are head count additions as we continue to invest in our technology platforms, the commercial team and related functional support and public company readiness.

Following non-GAAP adjustments for a loss on extinguishment of debt and stock compensation charges related to a secondary selling above fair value. Our adjusted EBITDA for the third quarter of 2021 with a loss of $31 $8 million.

This compares to an adjusted EBITDA loss of $5 2 million for the year ago period.

Please see our press release and 8-K on file with the SEC as of this morning for a reconciliation between GAAP net loss and non-GAAP adjusted EBITDA.

I would like to explain specifically the impact of earn out shares and warrants related to this back merger on our Q3 results combined they account for $13 8 million or over 40% of our adjusted EBITDA loss for the quarter.

It is also important to note that going forward as the estimates and assumptions that lie behind these valuations change. These particular liabilities in our balance sheet considerably.

Significantly, albeit a noncash items.

We ended the quarter with $676 million of cash cash equivalents and short term investments base.

Based on the ongoing strength in our business, we are initiating formal 2021 guidance of $77 million to $79 million in revenue representing growth of 38% to 41% over 2020 revenue a bit odd.

$9 million.

At this point I would like to turn the call back to Roy for closing comments.

Okay.

Thanks, Sean.

And thanks, so much for the time today to give you some background and updates on some logic.

We've already developed a successful increasing increasingly comprehensive set of proteomics products and solutions and Youll see us but broadening.

And deepening these capabilities over the coming months and years to better serve those who would benefit from them.

We have an objective opportunity and a real opportunity to work with all of you in the investment community as well as our partners collaborators and customers.

To relieve human suffering and extend meaningful life and opportunity of which I am personally grateful to have.

With that we'll open it up to questions.

Joining Sean and I for the question. It's a portion of the call is our president and Chief operating officer Melody Arris.

And our Chief Medical Officer, Dr. Steve Williams operator.

Okay.

As a reminder to ask a question you will need to press one on your telephone to withdraw your question press the pound or hash key please standby.

The Q&A roster.

Your first question comes from Dan Brennan with Cowen Your line is open.

Great. Thank you and thank Troy and John Congrats on the quarter.

The sales trajectory in 'twenty, one has been exceeding the forecast that you initially laid out.

When the stock filing this summer and then you raised the guidance subsequent to that and now you're raising it again.

And I know, Sean you spoke about the impact of the expanded commercial team, which is great and maybe just.

Taking a different angle can you just give us a sense on the business trends.

And particularly by customer application.

What has been progressing better than you would've expected.

Given two guidance ranges today.

Sure Dan This is Roy.

So we really attribute the growth in 2021.

To upward revisions of our.

But our projections and guidance too.

Two to two things.

One is really three things one the first is.

We've obviously alluded to and you alluded to as well just the simple growth of our commercial team.

There is a.

Fairly strong correlation or at least there has been over the last year.

When the addition of new field team staff and new business.

And that's generated a pipeline that's about <unk> larger than it was last year.

The second is.

Related primarily to some changes in business model that we've made over the last year.

And we were we were hopeful that the changes that we made to the business model would have a large impact, but obviously couldn't predict exactly what that impact would be.

And basically those changes were primarily centered around.

We're moving a restriction from our customers to have to provide us data in Reits to date and when we ran our samples in other words, allowing for a fee for service component and then announcing to the market that we would.

Be adding.

A variety of new products onto the largest discovery platform that we have in regards to these panels.

We think we've put out and then the third thing.

I believe it's just the general interest in proteomics and the <unk>.

General market growth for the field. So it's really nothing more complex than that it's really related to those three things.

Got it okay.

So the company.

<unk> to come into large pharma customers or some of the key customer contract you have.

And gentlemen, Novartis were disclosed in the filing has been notable customers can you just give us a sense.

The contribution is coming to a larger customer this quarter.

And then kind of as we look out how does that contribution change just trying to get a sense of the contribution from Biopharma.

Say academia, and then diagnostics as we look out.

Sure.

Classically over the last.

Couple of years, our ratio of Biopharma customer revenue to basic investigator.

Academic investigator revenue you spent about 80 20.

And.

Over the last year I would say that that ratio has has been maintained.

Because we've added as we've mentioned a large number of new customers in both sectors in both Biopharma and in basic research.

I, obviously cant predict what will happen to that ratio over time, I do think that with the additional products that we put into the market over the last year and with a growing.

Field team that we could certainly see some disproportionate increases in that basic research components.

Just because of the hand to hand combat that's required to bring those customers onto the platform.

The.

Yeah.

We are assiduously focused on.

Bringing longer term higher volume contracts onto the platform.

We signed Novartis to a 10 year deal back at the end of 2019.

And over the last year, we've added three additional two to three year con.

Contracts with large biopharma organizations, as well and I think youll see us.

Bringing some more of those onto the platform as well over time.

Okay great.

In the stockpiling manner.

Management had laid out from a sales forecast for 'twenty two 'twenty three guiding today, but I'm just wondering given the strength.

The business year to date I think the sales forecast then we're implying somewhere in like a 34, 35% year over year growth in 'twenty two 'twenty three any any way to think about I would presume given the strength that you've seen year to date. It is not like a pull forward. This is like what kind of growth given that everything you've discussed so just the highway of asking any any way to think about.

The trajectory as we exit this year versus the sales forecast that you originally laid out back in the island.

Well I'll make a high level comment then I'll turn it over to Sean to talk about <unk>.

Lastly around.

Guidance for 2022 and 2023.

At a high level.

<unk>.

We are very optimistic and very confident that trajectory that we've seen this year will continue.

Over the next two years again, as we add to our field team.

And.

And bring customers onto the platform.

Some of which you have been waiting for us to make those business model changes, we made over the last year, Sean any additional comments about guidance for 2022 and two.

Yes, I mean, certainly we look forward to talking with you about our 2022 guidance sometime in the next few months and giving you more details behind that I would like to follow up and it does also relate to the customer diversification question that you had which is that what I think is remarkable that I'd like to point out is that the.

The growth of our diversified pipeline with the new commercial team and expanded commercial team and how youre seeing that affect our numbers. So although you can see in our past right that you will we have the benefit of large customer contracts and will continue to have those benefits in certain quarters, where alls.

So filling that in aggressively with our new diversified customer base at a fast clip and we expect that to continue. So I think you will continue to see those quarters, where we benefit from two or three really good things happening, but we're going to be back filling it with our rapid expansion of our diversified customer base.

Yes, this might be.

Carl I, just can say this might be a good opportunity for us.

Alrighty Harris, our president and CFO to comment a little bit more specifically on <unk>.

The concentration of the business has changed over the last year.

<unk>.

Sure Thanks, Brett Hi, Dan.

So over the last year with the addition of the 61 additional new customers, we're seeing those come in.

Yes.

First time wanting to try the platform. The good news is we're super excited to see that those initial.

Test runs with those customers are increasing so theyre, taking larger bites as they come in and then we're starting to see them come through as repeat customers so well.

Very excited about the growth we are also seeing good diversification.

We had the large contract with Novartis.

Been fueling a lot of our revenue in the past, but this year, we're seeing that concentration with novartis.

Hum.

And our regular business from those new customers is actually taking up that space in between with where Novartis and Amgen previously were.

The contribution from Novartis.

There is falling relative to the other customers actually the calculation on a year over year basis.

It is increasing so.

As melody.

Elucidated there.

The business is becoming much less concentrated as we move forward and bring all these new customers onto the platform, even though those large contracts that we've had the.

The benefit of.

Over the last few years continue as well.

And if I can just get one more in if you don't mind I know you spent a fair amount of time on the diagnostics.

<unk> and the 40 billion Tam.

Any way to think about.

How meaningful diagnostics could be whether traditional diagnostics, our translational for using clinical trials or however, you want to characterize it like how how meaningful could this day as we look out.

Over the next say 12 to 24 months, not I'm, not quite sure where to contributing today, but given the Tam and how much time, you're spending there and the uniqueness of the platform. Just wondering if this is going to be a real revenue driver.

Kind of in the near to intermediate term.

In time, Dan This will be an incredible revenue driver and just to step back for a moment.

And talk about what these what this diagnostic purchase capable of doing.

One of the major problems in population health management is making accurate.

Predictions about groups of patients so imagine if you're running a large Medicare advantage plan.

And you've got 50000, diabetics imagine the ability to run a test on those individuals every other year and determine what their risk of long term complications could be and then take that 2000 that you identify and bear down on those.

To prevent those in to bend the cost curve considerably.

And then of course, just in managing individual patients to be able to tell someone whom you thought you were managing at the top of your license that they are actually at very high risk for cardiovascular events and to make a change in their drug regimen that prevents that events and so forth. So.

Medically over time these tests should be transformational and I was a clinician for 20 years and so I don't I don't say that.

Lightly.

And over the next two years, what we'll be doing is stepping through.

The hoops that you have to step through to get a new diagnostic platform in their clinical practice. So we've created this proteomics precision health initiative.

<unk> partners will be adding a few more the they'll be doing benefits crucial utility group trials inner mountain is already enrolling on those I'll ask Steve Williams in a minute to comment on where we are in those trials.

And then.

We're also collecting the data for regulatory filings.

And then another thing is that we have a huge number of these assets already we have 21st in class tests that already validated. These are unique assets. We've got as I mentioned more than 100, and our pipeline and so we're thinking really hard about how do we diversify taking those to market through a combination of us taking some to market life.

Sensing some to other partners, who have already expressed an interest in these we are having those conversations as we as we.

Speaking in real time.

And then.

In addition, being the development partner for these as well Steve Williams can you talk a little bit about where we are on these benefits accrued from utility group trials.

Yes, Thanks Roy.

Hi, Dan.

So I think that the way we like to think of these tests in the near term.

Is that they have a dual use in those markets. So if you think about our leading tests, which are most differentiated from the competition prediction of near term catastrophic cardiovascular events as well and then Nash is another.

And nonalcoholic <unk> hepatitis and both of those have uses to accelerate the path of drug development and stratify patients.

Entry into clinical trials and monitoring their response and Thats, a very attractive formula for clients, who get the 7000 protein measurements and they get validated tests that can be used during the exploratory development phase to monitor response, so let's not forget that they actually have these dual use can we do.

Have clients pharma clients, who are using these tests, but what you asked me to speak about really was they use and this proteomics for precision health and then we have.

We are intending to start six clinical studies and the key objective of those studies is to show that clinicians can and will act. Upon this information this new kind of information and what we're providing them with is a prediction that finds people who have it.

Turning to chance of death heart attack stroke or heart failure within about 18 months and it turns out that.

Slightly higher than typical risk population that people with diabetes, that's about 20% of the population.

90% one in five people has a 50 50 chance of one of these events and the Communist event type is that so that is a and it happens about 18 months after the sample.

The exciting thing about that is that it is not destiny that actually we can change it and there are new kinds of cardio protective drugs out there that are not very widely used but they could be used in these people to reduce the event rate. So we believe this cost effective allocation of X.

This thing drugs is a huge opportunity and those studies those six studies that we are in the process of starting that's why I said into mountains already started the primary endpoint is can we achieve risks concordant prescribing. The people I just mentioned who ran that high group can weigh up the prescription rate.

From what is typically 15% can we get nearly 100% of those people on these new drugs.

The reason, they're not something today is because there's no way of accurately assessing their residual risk.

And you don't want to put someone on a drug with side effects and costs. When you don't actually know, it's not like blood pressure cholesterol, where you can measure them and the drugs treat them. The new approaches like S. G. L. T twos NGL P ones, there isn't a measurable thing relating to the drug mechanism and that's what we provide so we're really excited about.

And within the next one to two years, what you'll see as we complete those studies days can we achieve risk concordant prescribing that leads to more cost effective application of existing trucks.

Alright. Your next question comes from.

Can I ask with Stifel. Your line is open.

Hey, good morning, guys. Thank you your ROI on the scope of analysis at the platform enables.

7000, Plex today going to 10000 next year, I believe where do you see the incremental demand coming from when you do that and do you have any loose timelines that we can think about for development and then commercialization of those capabilities.

Sure Dan.

So.

We.

We're very excited.

Move the content up from 7000.

10000 of course beyond and moving forward.

At 7000 were already measuring 4000 proteins no other commercial proteomics enterprise cannot scale and then at 10000 that debt.

That gap's kind of going to widen.

There appears to be an almost insatiable demand from our biopharma customers for more content and thats not shocking if you think about.

The fact that.

They use.

This information to drive better understanding of human biology developed to develop new medicines in new new vaccines and <unk>.

We define things like newer.

Jean protein Association's water called PQ T cells, all of which can.

Essentially lead to the development of more effective.

Medications in therapeutics.

<unk>.

There does appear to be an insatiable demand for content from those customers and the reason I say that is that.

At least three of our large biopharma customers have actually asked us in the last year, if we would right into their contracts that they continue to have access.

So the higher content.

So.

As far as the timeline.

We are currently creating about 500 of these new are synthesizing ourselves about 500 of these new.

After we call our <unk> some of them are <unk> for proteins a quarter.

And we should be reaching that 10000, mark at least the capability to measure 10000 proteins during the fiscal year of 2022.

But likely it will be early in 2023 before we can commercialize that because.

Once you get to that level of content, you still have to product ties it.

And shifts the collateral and so forth.

That new product, but so capability in 2022.

That will become part of our product portfolio, if all things go well and in the first two quarters of 2023.

Yeah, Okay. Thank you.

And then maybe on the diagnostics side of the menu that you have there is with a planned menu is pretty expensive. So I know you touched on some of the points during dan's questions, but can you just spend an additional minute.

Sort of how you handle those plans and how we should think about where you carry the load when it comes to development activity.

Where you might have the partners drive more of the process or do more of the work.

Sure.

Well I think Steve Williams, and others, who predate my arrival here were very smart and thinking about.

Which areas to focus on initially.

The thing about <unk>.

Proteomics tests and the way that we make these of course is that we try and protein expression patterns between and in our models its between 16 and 360 proteins.

Vast majority of the proteins, we would not put into those models. So this is where the machine learning becomes important.

Steve and his colleagues decided to focus initially on cardiovascular and metabolic disease.

That was I think it was very wide set of endemic conditions. It's also set of conditions for which there are therapies that can change the trajectory of those illnesses.

We.

As a follow on to that have.

Created.

Created in that metabolic area. These diagnostic tests to predict <unk>.

Complications in diabetes, and then sort of as a corollary to that from an organ system, we've moved into renal disease.

As well.

And so it's sort of rounding out that.

Cardiac and metabolic and renal theres, certainly a disease access between the heart and the kidney.

And with diabetes.

Then we have decided to focus next on cancer.

We.

We believe that we are likely to have a set of tests.

Over the next year that can predict not not early detection, so not like a cell free DNA tests, but are set up tests that we'll be able to.

Tell you what your actual biologic risk of developing cancer in the near future is and so you can imagine the impact on.

The way that we screen patients for cancer and the way that you could potentially coordinate those with with these early detection cell free DNA platforms, and so forth. So we believe that could be.

Transformational as well.

As far as other diseases.

I would say next in the pipeline.

Or.

We are looking at neurologic diseases, all commerce and related conditions.

And we're really letting moving forward from there the market inform us as to what its most interested in.

As far as determining the breakdown between what we decided to take fully to market and what we decide to partner four or license to take to market. We haven't made that discernment, yet and we're actively in discussions now both internally and with a potential partner several potential partner.

<unk>.

To make this decision about what we'll take forward and what will license or provide others access to to take forward and then of course.

Moving past even that is this opportunity to be the developer of these algorithms.

For others on demand.

Using both our growing database.

<unk> the samples that those partners might bring to the table.

Okay very good thank you right.

Your next question comes from Tycho Peterson with Jpmorgan. Your line is open.

Hey, good morning.

I want to go back to the precision Medicine initiative I appreciate the additional color Steven providing do you envision this being expanded at all beyond the six initial trials and how should we think about kind of data readout as I said I know you said over the next one to two years, but will there be kind of interim data.

How should we think about kind of milestones we contractually outside.

Sure I'll make a couple of high level comments, Tycho and then I'll ask Steve to elaborate a bit.

So.

Yes, we have designed these trials.

In a way that it's not it's not going to take three or four years for them to be complete.

We will be getting data some data, we think within a year or so.

Talk about back to the market.

We also do plan to grow this.

We are in discussions with another number of leading medical institutions.

In North America.

To expand this list from six.

Two to a higher number we haven't decided what the top end is going to be it's going to it's going to be determined largely by.

The next set of these first six are primarily focused on cardiovascular disease and the number that we bring to the table will be primarily focused are determined by.

Which disease process or which set of test we want to work with this next set of partners on.

But we will be adding additional partners to this precision.

Premiums for precision Medicine initiative.

Hum.

From a from a variety of standpoints I already mentioned.

The ability to.

Two for these individuals' health systems and their physicians to be benefits group and utility crew for it to take another sort of further validate beyond our demonstration market.

Which has already run.

More than 2500 test itself.

But for these to be validated.

The utility proof determined by these partners to create Dorset dossier for regulatory filing and then.

Two other things one obviously some of these health systems could be our first real customers at scale and then lastly, we are discussing with all of these health system partners the potential to share data on it.

On a perspective basis to create more diagnostic models moving forward as you know clinical data is the is the gift that keeps on giving Steve would you like to discuss just briefly.

How soon do you think will begin to see some data to come out we can talk about in these trials.

Thanks, Ron I think you said it well.

The studies themselves are only just beginning to recruit patients and typically we're looking at about six months duration for an individual in a study. So when you add up the recruitment time from the beginning of the first patient at the end of the last I would imagine in 18 months to two years is a reasonable time.

And I would I would.

Depending on noise decisions I think we would anticipate releasing some of that information to the market.

Roy mentioned some of the other indications will be going for I think the next one the first studies at all and people with diabetes can.

Can we improve this drunk allocation that I trust that we talked about earlier.

Nextel theft of studies.

To mimic that is going to be in people with preexisting cardiovascular disease who've had an event in the past once again, it's an opportunity where risks can be high but not everyone has a high risk and there's a wide armamentarium of effective pharmacology is available.

Expanding out Tcs canines as well as the S. L T. Susan G. P. J O P ones for people with diabetes says its a nice availability of enhanced cardio protection, but again as the same problem about who do you allocate that more expensive.

Pharmacology to so that'll be the next our next group of tests after the after the paper with diabetes.

Okay. That's helpful. And then following up on the content discussion just sticking on what's on deck for next year.

A couple of launches around kidney disease, you've got dementia, you've got Covid recovery I think lung cancer susceptibility in Japan do any of these in your view has kind of a disproportionate potential to move the needle you guys. As we think over the next year and what's most interesting an interesting new launches.

Okay.

Well I think they all have the potential to move the needle.

Again, because this type of diagnostic tests has never existed before.

The ability to tell a clinician or an individual that you have risk.

That you did not realize was present and then to act on that risk.

Many of these disease areas.

It's going to be impactful and something I can tell you as a solution.

I would have loved to have had.

Past.

So I don't know, which is going to be most impactful I certainly think if you think about cardiovascular metabolic disease and cancer. These are the two.

Mortality drivers and cost drivers around the world for human beings and so I believe that.

Both of these could be very impactful moving forward from the standpoint of value creation.

And then Roy Steve just to add to that I would just say that the wildcard for me is COVID-19 recovery, but because you have a condition that has insulted kidneys heart lungs.

And we can measure the effects of all of those systems.

And so it's it's today it's unknown.

What extent, we can characterize the residual damage, but well know that shortly and I think of all the of all the things that go from zero to 100 quickly it may be that that COVID-19 recovery as well as one is one such rather unpredictable application.

Okay.

And then Roy.

At the Analyst day, you talked obviously about the evaluation of MTS I know you're speaking next 24 36 months to kind of if you're able to pull a little box strategy can you just maybe share some insight in terms of how you are kind of evaluating that process and how much you are thinking about internal development versus partnering with Oems.

Sure.

Well, we certainly know that side of service solutions are going to be important moving forward and so we are evaluating.

A variety of approaches Tycho.

Believe that the market will best be served if we can deploy a variety of approaches. So as I mentioned earlier next generation arrays, and GFS and even some newer approaches that we that we actually have in development.

So on the NGL side as we've said previously we have been in discussions with potential partners.

For this to hopefully accelerate that.

That development and we continue to have those discussions and we'll hopefully elaborated on.

On the results of those discussions very soon.

And then the other thing is I've mentioned before.

In previous.

Releases.

This concept of the things that we're interested in from an M&A standpoint.

We certainly are interested in next generation proteomics measurement platforms, especially those where we can use our <unk>.

Our reagents are our proprietary synthetic <unk>.

And.

And so that's an area of focus for us for M&A and we're actively.

In discussions and looking there as we've previously mentioned and hopefully be able to talk about that relatively soon as well so.

More details on all of that.

In the near future Tycho.

Great and then one quick one for Sean before I hop off just on share count.

Pieces like whats the right share count, we should be using going forward.

Sure. Sean go ahead, so that would be approximately.

$182 million and Amy.

No.

Yeah.

Okay perfect. Thanks.

Sure.

Thank you and that concludes our question and answer session of today's call I'll hand, the call back to Mike.

Yeah.

Great.

So we really appreciate everybody being with us today for us to share again some.

Information and recent progress at <unk>, we are.

Both excited and grateful for our recent cut recent accomplishments.

And also very excited for what the future holds for this company and its unique capabilities and unique position in the market.

We hope to see all of you or at least some of your relatively soon and in person would be great.

Perhaps in San Francisco or elsewhere. So thanks very much.

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