Q1 2022 Seer Inc Earnings Call
Good day and thank you for standing by welcome to the CEVA, Inc. First quarter 2022 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.
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I'd now like to hand, the conference over to your speaker today carry Amendable Investor Relations. Please go ahead.
Thank you.
Earlier today <unk> released financial results for the quarter ending March 31 2022.
If you have not received this news release or if you'd like to be added to the Companys distribution list. Please send an email to investors at <unk> Dot bio.
Joining me today from <unk> is Amit Birk, Dodd, Chairman, Chief Executive Officer and founder.
Zhang President and David Horn, Chief Financial Officer.
Before we begin I'd like to remind you that management will make statements. During this call that are forward looking statements within the meaning of federal securities laws.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.
Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in the press release issued today.
For a more complete list and description. Please see the risk factors section of the company's quarterly report on Form 10-Q for the quarter ending March 31, 2022, and its other filings with the Securities and Exchange Commission.
Except as required by law <unk> disclaims any intention or obligation to update or revise any financial projections or forward looking statements are there because of new information future events or otherwise.
This conference call contains time sensitive information and is accurate only as of the live broadcast May <unk> 2022.
With that I'd like to turn the call over to Tony.
Thanks, Kerry and thanks to everyone for joining us this afternoon.
We had a strong start to the year as we further ramp our commercial efforts expanded our installed base and made tangible progress across all areas of our strategic plan.
These efforts led us to close the first quarter with $3 $3 million in revenue and continued growth in our installed base.
I am, particularly excited by the growing body of customer data demonstrating in a concrete way the unique capabilities of the pornograph product suite to provide poured youll make insights added depth and scale that was previously not possible.
We've now seen presentations at conferences from the broad Institute.
Oregon Health and Science University Sanford Burnham previous medical Discovery Institute protein metrics and product <unk>.
To date there.
I'd be more than 40 public presentations on fears technology with four more coming up in June .
And we expect an increasing number of abstract data and presentations as more customers that already adopted technology, but scaled their use of the platform.
Given the growing demonstrations of customer you said a pretty graph.
Coupled with the forthcoming advances on our platform.
Never been more confident about our ability to become the definitive two leader in proteomics.
To reach this ambitious goal, we have a strong balance sheet.
Well capitalized with more than $470 million of cash, which we believe will support us as we execute on our multiyear strategic plan.
And enabled us to build a durable organization that will drive meaningful impact on the trajectory of science and medicine.
We're focused on five key objectives to drive growth in 2022.
To set us up for growth long term.
First.
Supporting customers with an industry, leading onboarding experience, while helping them to systematically scale their use at a particular product suite for projects of increasing size and scope.
Expanding our installed base of instruments.
Third continuing to build out our commercial capabilities geographic footprint and team.
<unk>.
Driving our product roadmap and exploring more applications for our proprietary engineered nanoparticles in 2022 and beyond.
And fifth.
Expanding our partnership efforts focusing on extending our global reach making it even easier for customers to access our technology and serving an increasing the diverse customer base.
Now, let me give an update on our progress across a few of these objectives.
Most importantly, let's start with how our customers are using the paragraph and review some specific examples of the progress they're making.
It has been incredible to get the product to our product suite into the hands of customers.
The customer experience with the <unk> product suite has been excellent across key metrics, including installation and validation training and ease of use reproducibility quantification sensitivity in.
In addition, we are automated assay customers have the ability to capture proteins across the vast dynamic range and different bio samples with peptide level resolution decipher in various portio Forbes.
I'm also excited by customers with data and interest in exploring the capabilities of our system to go beyond human plasma, including model organisms, such as mouth pig worldwide in other species.
Importantly, this flexibility to analyze across the PC type, whose biosamples have species specific protein structure demonstrates the inherent power of the <unk> product to be used with different applications without the need to develop a new specific pedal of nanoparticles.
In addition customers are excited by the Proto graph data on bio samples beyond plasma including CSS.
And secretive proteins and cell culture.
Finally same customers integrate the proto graph with other downstream proteomics technologies, such as tandem mass pack also called PMT.
Constraints, the versatility of the <unk> graph to work with a variety of mass spec protocols.
Now I'd like to move to.
Two examples of the Pornograph performance that customers are sharing and conferences.
A recent adopter of the Porto graph found that our product consistently and simultaneously.
She is an unprecedented depth of coverage and throughput compared with method that must trade up between depth of coverage or throughput.
Their hands.
RAF robustly identified more than twice as many cytokines with high throughput.
Automation it workflow and importantly, this is happening at a 1% fall discovery right.
The ability to detect higher numbers of cytokines and other low abundant signaling molecule enables researchers to reproduce the belief and comprehensively molecular phenotypes such as the immune state of individuals'.
We expect this data to be presented at the upcoming <unk> conference in early June .
The American Association of Cancer Research also called the ACR Conference in April <unk> presented data from one of their ongoing oncology studies in.
In a cohort of 212 subjects utilizing the Purdue graph. The researchers were able to identify more than 5000 proteins and hundreds of glycol ciliary proteins in a single experiment.
The simultaneous detection of native and glad concentrated versions of the same peptides enables the analysis of differential expression of protein versions to detect association with disease progression.
This demonstrates the uniquely enabling resolution of the paragraph product suite and the types of studies at scale that it will open up across markets.
While product gnomic in OSA, a few have been the fastest to move to add scale studies, each with cohorts of 1000 or more samples, we're seeing the time to ramp very across customer sites.
Customers generally go through three steps as they ramp their studies each of which can vary in terms of duration.
First as they onboard the technology they increase their familiarity with the paragraph and train their staff.
Most of our limited with these customers have completed this step.
And our initial broad with these customers are beginning this process now.
Next.
Typically perform pilot studies to expand their hands on use of the technology and to fine tune their study design to answer specific biological questions.
And finally, they will take those learnings to ramp up the studies of unprecedented scale designed to unlock new biological insights.
While the <unk> gnomic are examples of early adopters, but also other customers who may be less familiar with that scale proteomics workflow and for those customers the velocity upscale up maybe more protracted.
We're building the support model to support customers of all types across this scale up curve.
Now, let me turn to our growing installed base.
There is a growing interest in the palpable excitement surrounding the particular product suite across a wide range of customer types of applications.
During the first quarter, we began our broad with these phase of commercialization and delivered the first of three systems to customers around the world. We now have customers up and running across North America, Europe , and Asia, including China, where we continue to work through Covid constraints.
While these constraints did not have a material impact on us in.
In first quarter of this year.
Restrictions continue in China, they do introduce some temporal uncertainty for our customers prospective customers and partners in this region and challenge our ability to access the country with our own personnel.
We continue to be encouraged by both the quality and quantity of prospects and a growing pipeline of roughly equal mix of academic and commercial sites.
We expect our pipeline to grow as we expand our hiring around the world and bring the Purdue graft product suite and its benefits to our customers. While interest is strong across customer types. We continue to expect our early adopters to be more heavily weighted towards commercial settings, given their ability to move more quickly.
And academic institutions.
As a first of its kind technology that is still in the early stages of commercialization. We continue to see third party data is an important component of the sales process.
While it takes time for this body of data to grow customers are inclined to undertake proof of principal studies, which I'll refer to as pop. These.
These pumps are typically smaller in size in the tens of sample size.
But provide a volume and depth of data that customers are really being in a position to access and analyze.
While highly pleased with the data prospective customers intend to interpret the data leverage the insights and imagine what is possible using the <unk> product suite.
The adoption curve grows and data from existing customers continued to increase we are presentations and publications, we expect pop studies to become less important in the sales process in the future.
As we continue to develop the market exemplify the power of the technology and to educate the customer base. We continue to be encouraged by our interactions with prospective customers in.
In addition, we're working to make it easier for them to adopt a particular product suite in the following ways.
We are providing one on one education, making it simple for them to integrate the technology into their specific workflows.
We're connecting them with experienced users performing similar applications, we continue to leverage our early collaborators in limited release customers as important reference site for this purpose and finally.
We're helping existing customers to produce data that serves as an independent third party validation of the technology.
Now moving on to our commercial progress.
As we ramp commercialization of the paragraph product suite, we continue to expand and strengthen our world class team.
Our team is the key to driving our business and we have made large strides in attracting top performing passionate people at sphere.
As of the end of 2021, we have expanded our team across key functions such as sales product marketing field application scientists field service engineers and support as well as building core processes and infrastructure to support a diverse and geographically.
Distributed customer base.
In a very competitive global talent market, we continue to prioritize recruiting the best talent and we expect to significantly grow this team by year end.
In mid March we welcome Scott Thomas as our Chief Commercial Officer, Scott has spent over two decades with increasing commercial responsibilities and life sciences industry, including 11 years at Illumina.
He has run commercial organizations in North America, Europe , and Japan building teams launching products and expanding geographies.
We're thrilled to welcome Scott and expect his leadership and breadth of commercial experience to help us accelerate long term commercial growth build a globally differentiated customer experience and nicely complement our talented executive team.
Let's now move on to.
To the scientific evidence confirming the breakthrough nature of our technology.
In mid March we announced the publication of a seminal paper in the proceedings of the National Academy of Sciences or PMA as.
That demonstrates our technology's ability to widen the aperture to the proteome and its vast molecular information.
This paper was published by an interdisciplinary team of scientists from fear.
Oregon Health Sciences University.
Massachusetts Institute of Technology.
And Harvard Medical School.
The paper examines and detailed the relationship between the unique physical chemical properties.
The panel of proprietary engineered nanoparticles.
The diverse pattern of protein sampling that is enabled by this panel.
This protein sampling is driven by a unique tunable and reproducible nano bio interface that is created between the given nanoparticle surface and a given biological sample.
The fear machine learning model describes in this paper can be used to enhance the molecular interactions that occur at the nano buyer interface and to design future nanoparticles to differentially interrogate specific protein families.
The technology platform simultaneously achieves an order of magnitude gain in media and depth of protein coverage.
Twice as much higher precision two five times protein identification and significant improvement in throughput when compared to a traditional deep workflow such as depletion of fractionation.
We're proud of the growing data and excited about what is to come this year at scientific conferences. We're looking forward to several presentations at the upcoming American Society of mass spectrometry conference in early June including multiple customer presentations.
We're at a pivotal time in proteomics field.
As the experience of our customers with the <unk> product suite expense, we look forward to more of the data and findings becoming public expanding the third party demonstration of the unique capabilities of the prodrug product suite and the insights that can be gained by interrogating the proteome deeply at scale.
And without limitations to prescribed targets.
These data will redefine deep toward Youll make methods enable first of its kind studies and open up a new gateway to the protocols that will be acceptable to labs of nearly any type around the world with that I will now turn it call to David.
For our financial update.
Thanks, Amit total revenue for the first quarter of 2022 was $3 $3 million compared to $62000 in the first quarter of 2021. The increase in first quarter revenue was primarily due to an increase in sales of products related to the prototype product suite.
Product related revenue for the first quarter of 2022 was $3 2 million.
Related party revenue of $1 1 million and consisted of sales of SP 100 instruments consumable kits and platform evaluations related party revenue of $1 $1 million represents product sales to pragmatic.
Total gross profit inclusive of grant and other revenue was $1 2 million for the first quarter of 2022, representing a gross margin of 38%.
As a reminder, in 2022, we expect gross margins will be dampened due to an anticipated larger percentage of instrument sales a significant reduction in service and grant revenue and our continued investment in scaling up our operations, resulting in higher overhead absorption. We continue to target long term gross margins between 70% and 75%.
Total operating expenses for the first quarter of 2022 were $25 million, including $8 1 million of stock based compensation.
Compared to $16 6 million.
Including $6 million of stock based compensation in the first quarter of 2021.
Research and development expenses for the first quarter of 2022 were $10 7 million, an increase of 73% compared to $6 2 million in the first quarter of 2021.
The increase in R&D expenses was primarily driven by an increase in product development efforts related to the prototype product suite, including $2 $6 million in employee compensation costs and other related expenses, including stock based compensation due to growth in research and development personnel and $1 $9 million related to the expansion of facilities.
Maintenance and depreciation of laboratory equipment.
Selling general and administrative expenses for the first quarter of 2022 were $14 $3 million, an increase of 39% compared to $10 3 million in the first quarter of 2021. The increase in SG&A expenses was primarily driven by a $2 $4 million increase in employee compensation and other related expenses, including stock based.
<unk>.
The increases are attributable to costs related to being a publicly traded company, including a $1 $5 million increase in professional and consulting fees related to accounting and audit services.
Net loss for the first quarter was $23 6 million compared to $16 $4 million from the first quarter of 2021.
We ended the year with approximately $472 million in cash cash equivalents and investments and continue to be thoughtful about our level of spend and the rate of return that we will earn on our deployed capital.
With our extremely strong balance sheet. We believe we are well capitalized to execute on our strategic plan for many years to come.
Turning to our outlook for 2022, we are confident in the market opportunity for the <unk> product suite and expect revenue to be in the range of $14 million to $16 million.
As we have previously discussed we expect revenue for 2022 to be more heavily weighted to the back half of the year as we continue to work through the natural sales cycle for disruptive technologies and ramp the productivity of our growing commercial team as a reminder, the key factors that are part of the sales cycle are continuing to build market awareness of the pretty graft product suite.
Continuing to educate potential customers on the breakthrough nature of our technology and its unique capabilities in helping customers access robust proof of principle datasets ahead of adoption.
We remain focused on building our business over the long term and achieving our strategic objectives each year.
At this point I'd like to turn the call back to me for closing comments.
Thanks, David.
Unlocking the power of the perennial will only be possible through deep unbiased profiling of the proteome at scale.
This has not been possible with <unk>.
<unk> methods and.
And as the path forward and driving novel biological insights to transform our understanding of human health and disease.
As we move forward in pursuit of our vision. This year, we will continue to drive execution against our core strategies.
We're paving the way for a portfolio of products that will open up a new gateway to the proteome.
I look forward to sharing updates of our progress over the course of this year with that we will now open it up to questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of <unk> <unk> from Morgan Stanley . Your line is now open.
Hey, this is neal on for pages.
So just wanted to start on commercial sales you purely previously mentioned net sales in SKU commercial given the shorter cycles versus academic customers is that still trending accordingly, and have you seen any lengthening of sales cycles from biopharma customers of all the noise around funding concerns.
Yes.
Yes. This is Amit sedans so.
So far yes, the sales are more heavily weighted towards commercial versus academic and as we had mentioned to you previously we expect that to continue for some period of time.
To a large extent because commercial entities typically go through.
A different set of funding cycles and are much more.
To make decisions on a short term basis, so yes, more heavily weighted towards commercial versus academic and I would expect that to continue at least through the balance of this year, if not leading into next year.
And we are not seeing anything that is outside of what we had expected in terms of the buying cycle with biopharma again keep in mind. The numbers are small we are still early and broad commercial release, but we're not seeing anything with respect specifically to biopharma.
That is out of outside of what we had expected coming into the year. So hopefully that answered your question.
Okay.
Thank you and as a follow up to that on the demand funnel is that still trending 50 50 between academic and Biopharma customers.
More or less yes, yes exactly.
Got it and then one more from me so on the product roadmap you previously mentioned initiatives, such as increasing throughput increasing content in reducing sample volume requirements. Any progress you can share on these <unk> or when we might expect to hear some updates on island.
Thanks, so much yeah, so I think.
I'll be able to this is Amit <unk> side I'll be able to give you more details.
On the next product I would say towards the second half of the year.
<unk>.
As I had highlighted before.
Customers' needs our customers ask for in the areas of increasing content.
While decreasing the required sample volume.
And then increasing throughput and by the way keep in mind that the throughput increases.
We will come at the level of a detector not so much at the level of the photograph.
And so those assets are in fact areas of R&D investment for Us and you can imagine that the subsequent product and then the products that follow it.
Reflect basically those those needs of the customers.
<unk> guided to have at least.
One new product.
Yeah.
Coming up and you can expect a new product in the second half of the year that product will address.
Some of the requirements of the customers and then in the subsequent products. Additionally.
Additionally for the customer they're going to be addressed.
Sure.
Yes.
Got it that's very helpful. Thank you.
Thank you. Our next question comes from the line of Derik de Bruin from Bank of America. Your line is now open.
Hi, This is <unk> on for Derik, so to start on cash where do you expect.
2022 from a cash balance perspective.
Sure. This is David Horn.
As you saw in the release we ended <unk>.
March 30 <unk>.
First was $472 million in cash.
And as you as you note.
We feel really good about where we are with respect to the cash position I would point to the metric we track is.
Free cash flow, which is operating cash flow plus capex and this quarter, we've earned about $20 million.
And so we feel pretty good about where we are we are going to be continue to be prudent with our with our outlays and always mindful of earning.
Attractive rate of return on any capital we are deploying so we feel good about where the where the balances and where we are for the rest of the year, but.
We're not giving guidance on where we're going to end cash balance, but I think you can.
Look at the first quarter and feel that we've got plenty of cash for many years to come.
Great. Thank you that makes sense on Opex can you talk a little bit more about what the pacing for this year. How can we think about the back half of the year. As you guys have been saying the revenues are expected to kind of increase there and also a little bit of color on in terms of instruments versus consumable mix.
Looking towards the rest of 2022 would be helpful too.
Yes, so in terms of the investment.
We are we have said, we reiterated our guidance of $14 million to $16 million. As we've also said we expect the majority of that revenue to be in the back half of the year.
So we will continue to.
Invest to obviously realize that additional revenue in the back half of the year. We are continuing to build the commercial organization. So I think we ended the.
The year end.
With the commercial organization of approximately 30 people and we will continue to.
Expand that over the course of the year. So again continued investment in some critical areas.
Across the organization. So I think you will continue to see.
Spin.
<unk> to.
Increase along with revenue, although again, we are being very mindful of that and I think youll see us be prudent about that so really being thoughtful about how we increase that spend over the course of the year.
And then in terms of the instrument versus consumable I think was your second question.
We do as we've said we feel that over the course of the year it probably will end up being around.
Close to 50, 50, maybe a little bit more skewed towards instruments, but again I think the thing to keep in mind is that we.
Most of the limited release customers that will be placed.
At the end of last year won't really it takes people probably.
Kind of nine to nine ish months approximately to really start to ramp.
So we really wont see the benefits of the consumable pull through.
Towards the back until the back half of the year, but again hopefully that's helpful color for you.
Yeah, great. Thank you so much.
Thank you. Our next question comes from the line of Daniel Brennan from Cowen. Your line is now open.
Hi, Good afternoon. This is Kyle on for Dan. Thanks for taking my question. So I'll lump. These two together here and then hop back in the queue. So I just wanted to ask about your sort of go to market strategy with with heavy mass spec users can you sort of walk through your commercialization strategy in terms of who.
Who are you targeting first and.
What pushback, if any you're getting from your customers as you try to engage with them.
On that note on the publication side.
How should we think about the timing of some of these complications and are there any in particular that people are really looking for two to drive adoption. Thank you.
This is Amit let me, let me break that up into two questions really and I'll tackle the second part of it first and then the first part of the second.
So you may have seen that we recently published a paper in the proceedings International Academy of Sciences, and this actually followed the previous publication from senior in nature Communications.
You can expect.
Another paper towards the second half of the year. This would be an another top tier journal.
And by that I mean, Julian will be very high impact factor, which is the quality of jaundice typically measured.
There may be another paper that also comes on top of that the second half of the year, but if not kind of beginning of the next.
We have by the way put these papers.
In print and bio archive, so youre welcome to reasonable those papers are now in the peer reviewed.
On top of that.
We have now.
Had.
Over 40 different.
Envision a conference as posters abstracts and now most recently talks coming up as well.
Not just from <unk>, but also from Sears customers.
You can expect the slope of those.
Presentations to increase.
As the installed base and the number of customers increases. So for example, if I just look at what is happening just in the first.
Five months of the year relative to let's say the first five months of the year last year. There is a dramatic increase in the number of presentations thats happening from fear and the fear of customers and we're seeing progressively.
The tills being that these presentations are coming from the customers as they get experience with the instrument. So now let's go back to your.
The first part of your question, which is the go to market strategy.
How do we.
The solution to the mass spec users and by the way not just the mass spec users. If you look at our customer base. There are a number of customers that are genomic customers.
With with literally very little experience, if at all with MFS back who adopt the protium.
Product suite.
And then later either implement domestic demand.
The matter of fact onto the core facility.
What I wanted to do is I want to turn it to <unk> to give you kind of a deeper picture of what the commercial strategy look like.
And how that has played out over the course of the last.
12 plus months through.
Through the three phases of our commercialization strategy.
Thanks, Amit.
Just building on what let me first as I've said.
If you recall our strategy was and continues to be start with the collaboration face, which we commenced in late 2020 have that lead into a limited release phase, which span essentially the entirety of 2021 and that was very much focused on selecting what we call lighthouse customers among a set of key.
<unk> markets and flash applications, some of which are deeply embedded in I would say traditional proteomics, others of which are actually trending much more towards genomics and multi omics and we really wanted to spend a broad spectrum, where people were looking to and we're capable of doing large scale proteomics and or multi omics studies, where we believe the unique power of the <unk>.
<unk> can help to advance our understanding of biology in a far more accelerated way and then we're building on that bye bye starting into our broad commercial release, which commenced at the onset of this year.
So its systematically we're essentially trying to build on top one face on top of the other.
And so far I think we've been very pleased with both the progress of each of those phases.
And most importantly, the experience that the customers with the technology once it's in their hands and they are generating data in terms of pushback.
Quite frankly I'm not.
Qualified anything is it pushback, but as you would expect with any technology, there are areas, where customers would like to see some enhancements and improvements.
Most of which <unk> already covered at he was describing some of the technology improvements that you can expect coming into back into this year and obviously moving forward. So so far I would say in a nutshell is very pleased with with the acceptance of the technology across the three phases of our commercialization. So hopefully that answered your question.
Yes.
Definitely that's great. Thank you.
Okay.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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