Q2 2022 Somalogic Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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The.
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Yeah.
Good day and thank you for standing by welcome to <unk> Q2, 2022 earnings Conference call.
At this time all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your phone. Please.
Please be advised that today's conference is being recorded and I would now like to hand, the conference over to your speaker today, Mr. Richard <unk>.
Despite please.
Please go ahead.
Hi, Thank you.
Some of them are just released financial results for the quarter ended June 32022, 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 within the meaning.
Federal Securities laws, which are made pursuant to the safe Harbor provisions 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 it was relating to a market opportunity gross margin in future financial performance protein content in database growth customer base diagnostic pipeline expectations for hiring 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.
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 Securities and Exchange Commission today in the section entitled Risk factors in our most recent annual report on Form 10-K.
This conference call contains time sensitive information and is accurate only as of the live broadcast today.
August 15 2022.
<unk> disclaims any intention or obligation except as required by law.
Date, or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.
And with that I will turn the call over to <unk> Chief Executive Officer.
Thank you Marisa good afternoon, and welcome to our 2022 second quarter update call.
As always I want to express my sincere gratitude to all of you continue to invest and support us.
Similarly, we continue to make progress toward building, a differentiated scalable and durable proteomics enterprise.
Despite a challenging and ultimately disappointing quarter, our confidence in our technology and its trajectory.
And its unique ability to successfully unlock the power of the protium for our customers.
Society at large remains unchanged.
In the past quarter, we objectively grew and diversified our customer base.
We also continued our strategy of organically and Inorganically expanding the platforms for our protein measurement and identification technology and investment in new products to expand our market reach.
I would also like to call specific attention to the health of our balance sheet and cash position.
Especially in comparison to others in our sector.
This capital strength to provide similar <unk> significant optionality to evaluate and act on inorganic opportunities.
Diversified platforms and products increased scale.
To attract execution talent and grow revenue.
We have made a significant amount of progress over a very short period of time.
Turning are largely research and development organization into a commercial enterprise.
However, we still have work to do.
This remains a challenging period to navigate.
We continue to work diligently to build on the foundational elements, we put in place.
I'd like to turn now to our second quarter revenue of $14 1 million.
To provide additional color on the factors that have impacted revenue for the most recent quarter and thus far in 2022.
First.
Similar to other companies in the innovative life Sciences tool space. The macroeconomic backdrop has had an adverse effect on the supply chain.
In customer spending behavior.
Supply chain disruptions have affected sample delivery pushing revenue out into subsequent quarters.
I'll answer as following the launch and deployment of our site of service distributed Soma scan kits.
At the same time, the macroeconomic environment is for some customers, particularly.
Particularly a number of our largest to slower than normal contracting.
And thus has also impacted our revenue recognition.
Specifically, we saw several million dollars in contracts that were underway late in the second quarter only finalized after the quarter closed.
Second as we've discussed previously while we are in the process of evolving our technology to a more distributed model over 75% of our business currently relies on contracted in house service revenues derived from sample delivery from customers.
We have experienced and continue to experience a great deal of delayed sample deliveries and this in turn.
<unk> variability in month to month and quarter to quarter revenue recognition.
And third as we are still building commercial capabilities, especially in EMEA and APAC at present, we are a relatively small sales group.
The team currently consists of only 35 competent and highly dedicated individuals who are primarily working in the U S and 60% of them have joined the company in the last six months.
This has limited our ability to expand our global customer base and to generate increasing revenues from large customers who are already on our platform.
Yes.
Our revenue growth through 2022 for EMEA and APAC has fallen short of our expectations. Thus far this year.
So I think others are seeing as well across the industry.
Unlikely tie both in parts of macroeconomic headwinds.
Look our need to substantially grow our sales team in these regions.
These factors are still operative and headwinds still evident we are revising our full year guidance to be more conservative.
Shaun Blakeman, our Chief Financial Officer will give more details on our revised view during his portion of our prepared remarks.
I will now address these foregoing factors and how we are mitigating them.
At a high level, our incredibly strong capital position with more than $600 million currently on the balance sheet will substantially facilitate our ability to weather the challenging and less predictable current macroeconomic environment.
Nonetheless to be abundantly cautious, we're significantly reducing planned expenses by as much as $75 million for the remainder of this year and through 2023.
With an eye towards maintaining a healthy balance sheet and optionality in an evolving market.
And Shawn will provide details for this as well in his comments.
It's important to note that as we do adjust expenditures, we will continue to invest and build out our life sciences' commercial team and appropriately supported to ensure we allocate resources to our largest opportunities.
Especially large biopharma enterprises, and particularly in EMEA and APAC.
But even greater urgency to execution. We are also organizing all life science commercial activities into one business unit and.
And promoting a seasoned and talented executive to run it and Adam Tesh.
Adam joined the company earlier this year after a successful 22 year career at Thermo Fisher and.
In established powerhouse in this sector.
Adam led all aspects of the molecular biology business there.
As portfolio included products sold into research.
Diagnostic and therapeutic markets.
He also led the protein and cell analysis business strategy and corporate development for the life Sciences group and global services and support of Thermo Fisher.
We'll now take those learnings to drive the same execution as general manager for our life Sciences business unit and some larger.
And in this role Adam reports directly to me.
To address the variability of our business related to macroeconomic factors, we are working to achieve greater business scale and diversity of customers and to have more product options available to them as well.
As you can see on slide 15, and our online investor deck, we have doubled new customers over the past year and added 20, new customers. In this most recent second quarter alone, which actually represents our largest quarter to quarter increase of customers over the past 12 months.
As the larger revenue opportunity for our life Sciences business requires we encourage large existing customers who come onto the platform to do increasing amounts of business with us.
Often moving from pilots or small studies to much larger ones are significant and ongoing new customer growth should pay real dividends over the next year and beyond.
In addition to customer growth. We are also working to make it easier for customers to secure and deliver samples to us.
Should help relieve some of the supply chain and contracting effects, we have recently experienced.
In regard to diversifying product, we have successfully transitioned <unk> scan from 5000 proteins to 7000, and our 10000 protein measurement identification product and successful development and is expected to launch commercially in 2023.
We have continued to develop new Soma signal high plex protein pattern recognition diagnostic tests with.
The significant academic clinical and early commercial traction.
And there are also significant use cases for these products and evaluation with our biopharma customers.
As well as known downstream clinical applications.
In consideration of our current service business orientation, and its impact on month to month and quarter to quarter variability. We are successfully putting the foundational elements in place to substantially grow our distributor business over time with a three part plan.
Increase the deployment of our existing array based Soma scan kits.
Launch NGF space distributed solutions with Illumina, Inc.
And create and launch chip based products with recently acquired Pella metrics.
The first part of the plan is to supply our existing array based kits to Biopharma and research customers, having recently re initiated this program.
Supply chain factors have negatively impacted our ability to acquire and build inventory of kits hardware and in turn our ability to distribute these products. However, we have found new vendors and are considering taking some components of manufacturing in house.
The second part of our plan is to get our App timber construct onto one of the world's largest provider platforms of distributed life Sciences solutions in the world with.
With Illumina.
Our close partnership with them and their commitment to create market and sell and Ngls application of Soma scan, which changed the commercial landscape for <unk> based arrays and proteomics in general when co branded products are launched in 2024.
Work between our two groups continues to go very well as mentioned in aluminum <unk> quarterly earnings call last week.
Third at the end of July we announced the strategic acquisition of Palo metrics.
Our San Diego based global leader in DNA Dando technology to develop a chip based next generation version of our service fee NSA.
This acquisition brings differentiated miniaturization technology.
Scientific and engineering expertise and Unparallel talent.
As well as the potential for enhanced future distributed and ease of use capabilities to our platform.
Ultimately our goal is to make proteomics accessible to all the <unk> technology.
We want to do for proteomics, what was done for genomic sequencing.
Taking the equipment needed to do this work smaller and more modular.
And the process more economical and faster all while increasing the number of proteins measured overtime.
Finally, and while future, but enormous long term revenue opportunity, we continue to make progress in our diagnostics product and business development efforts.
In June we announced an agreement with Orca host the global leader in next generation precision oncology.
This deal includes both anchor who's running samples unsudden scan as well as a license to use our development platform.
Create new clinical cancer characterization tests the.
And potentially enable earlier treatment decisions and inform choices for alternative therapies.
In July we began an exciting partnership with me bought a bottle of health to enable the deployment of some signal tests in clinical practice.
Bartlett as an integrated network of World Class Health care providers in the United Arab Emirates, and a new agreement represents the first international health care system to be part of the Soma signaled proteomics for precision Medicine initiative large scale clinically fluke and partnership efforts aimed at effort aimed at equipping healthcare providers with a power proteomics technology.
<unk> to inform decisions at the point of care.
As part of this deployment clinicians at multiple new bottler owned provider groups, including the Cleveland Clinic Abu Dhabi.
I'll now order some signal test under a minimum volume agreement for patient care through their owned affiliate National reference Laboratory.
These tests will be deployed to support patient care across precision prevention.
The executive and VIP health and other wellness focused clinical.
This new partnership is just one great example of our growing successful effort to enable provider and patient access to Soma signal tests.
We've asked Todd Johnson to assume full control of our diagnostics business unit.
And he will now report directly to me as well.
It serves as the Chief Executive Officer of two digital health companies. He led from startup phase through commercialization as CEO .
At Health loop, a digital consumer health company, he deploy new digital tools into over 70 health systems, and hospitals and facilitated <unk> acquisition by get well network.
Prior he was founding CEO of <unk>, which was required by transcend services at that time, the nation's second largest publicly traded medical documentation company.
At some logic, we have successfully initiated our operating talent recruitment efforts and built an accomplished and experienced board and management team.
We have raised more than $850 million since 2022.
Our transition to public company status in 2021.
<unk>. We have also managed our finances, such that we have an extremely healthy balance sheet and cash balance to cover operating expenses ahead of achieving profitability.
An important point of differentiation during these challenging times.
The team at <unk> is growing and differentiating and our focus is strong we will continue to work hard in the coming quarters to expand the business and to outperform.
Now I'll turn it over to Sean.
Thanks Roy.
Revenue for the second quarter of 2022 was $14 1 million or 28, 5% decrease.
From $19 8 million in the same period of the prior year.
While we are of course disappointed in this quarter's outcome the core value and potential of our platform hasn't changed and we're still laying the necessary foundation for long term sustainable growth and profitability.
Our core customer base remains solid and new customer acquisition continues to be a strong point.
The challenges of the macro environment are not lost on us and we are acutely focused on what we can control to drive growth we remain optimistic.
Optimistic that this groundwork will yield future dividends as we built our global commercial enterprise.
Gross margin for the second quarter of 2022 was 50% compared to 59, 6% in the second quarter of the prior year.
While we did see stronger margins sequentially from Q1 2022 as expected volumes are significantly lower than anticipated, which is driving margins lower from the mid 50 percentage that we saw last year.
Q2, 2022 also had a modest negative mix impact from lower lower royalty revenue compared to Q2 2021.
Looking forward, we anticipate benefiting from more favorable mix and volumes and I expect margins to continue to improve in the second half of this year.
But I do want to point out that we expect samples from one of our private public partnerships at lower margins to modestly impact both Q3 and Q4.
So we anticipate aggregate margins in the second half to improve that low 50% range.
Total SG&A and R&D expense for the second quarter of 2022 with $54 4 million.
133% increase from $23 4 million in the second quarter of 2021.
R&D expenses for the second quarter of 2022 were $17 6 million.
Compared to $8 6 million in the second quarter of 2021.
Sales general and administrative expenses for the second quarter of 2020 to $36 8 million compared to $14 8 million in the second quarter of 2021.
Adjusted EBITDA for the second quarter of 2022 was a loss of $46 4 million.
Compared to an adjusted EBITDA of $11 million loss in the second quarter of 2021.
Please see our press release on file with the SEC. This afternoon for a reconciliation between GAAP net loss and non-GAAP adjusted EBITDA.
We ended the quarter with $619 $1 million of cash cash equivalents and short term investments.
As already touched upon we understand the importance of protecting this cash balance that that is a true differentiator, allowing us to uniquely consider strategic options now.
Now more than ever we recognize the necessity of staying focused on building out our life sciences team and diversifying our product offerings and.
In addition, with the benefit of our past investments we have a first mover advantage in diagnostics with the broad portfolio of assets as we continue to evaluate that opportunity.
Based on the tests that we believe are the best returns.
Sure.
So I would like to reset expectations on our SG&A and R&D expense.
We have enacted plans to reduce our operating expense spend by $75 million from the last consensus through 2023 with $10 million already in progress this year.
In addition, we are also revising our 2022% revenue guidance to $80 million to $90 million.
While we are cautiously discounting expectations, given the challenging macro environment I want to point out that to reach the upper range of the guidance. We believe that we would need to benefit from our typical past Q4 customer seasonal behavior.
<unk> is likely to be muted.
There'll be extent, it's unpredictable.
I will close by saying that we believe Q2 will be our low point on commercial execution and while the macro environment may take time to improve we believe that our focus on the key priorities Roy highlighted earlier will deliver the strong growth expected of our platform technology.
At this point I would like to turn the call back to the operator for Q&A.
Thank you Sir.
As a reminder to ask a question you'll need to press star one one on your phone please.
Please standby as we compile the Q&A roster.
Good morning moment.
Okay.
Our first question will come from Dan Brennan of Cowen Your line is open.
Great. Thanks for the question guys.
Maybe just first question just high level, just kind of could you tease out a little bit.
The supply chain impact kind of on the quarter and kind of how much you guys are now forecasting that and kind of the back half of your guidance versus what you highlighted as the macro impact from customers.
Being more restrictive.
Spending.
And then I wanted to follow up on that kind of second part on the spending aspect between U S and the U S. But I'm just trying to tease out from a high level.
Do you think about those things.
Thanks, Dan.
Supply chain issues for us were.
Really two fold one is.
Disruptions in supply chain has continued to make it.
Less predictable that we're going to get samples on time from our customers.
Things as trivial as not having the right tubes to allocate aliquot samples into.
And then a host of other issues obviously impact.
Those samples coming to us.
On a predictable timeline.
As opposed to a more distributed business model with.
The second impact of the supply chain has had on us thus far this year.
It has significant impact on our ability to.
Create and.
Stockpiled inventory the hardware, we need to push out our existing array kits.
So these had been the two major impacts for US one related to the fact that we're primarily service business in the second.
Really had a disruptive impact on our ability to push our.
The kits out in our re initiated.
<unk> kits and program.
As far as macroeconomic impacts on spend.
Again, what we've seen is a slowing of finalizing contracts with our customers.
And our assumption is that this is just those customers taking a careful look at their own expenditures.
As compared to previous times.
We have not seen customers, leaving our platform that we have seen.
Slowing some existing customers contract processes.
Right.
So are they kind of equal or is one more.
One more significant than the other just because obviously the supply chain issue was in <unk> I think people very much expected here in Q beyond I'm, just trying to tease out the relative magnitude.
Yes, I don't know that we are prepared to talk about the relative magnitude of one versus the other there are really two different.
Two different types of impact right. So the first is again as the supply chain issue.
And it has an impact on.
The sample delivery being on time or being predictable and then and our ability to rollout.
Our existing array kits, that's obviously an.
An impact both to predictability of revenue and actually our ability to capture revenue in the second case around the.
Existing array kits program.
The macroeconomic again has not really had an impact on our ability to capture revenue. Its just slower it just slowed revenue recognition as we mentioned.
There were several million dollars in business that was in contracting.
Quarter, they got pushed into next quarter because of this apparent slowing of contracting with our customers.
Got it.
Maybe a second one just on the commercial team.
You're obviously cutting SG&A and R&D to be more prudent.
Our plan was to double the number of commercial individuals I believe from like 60 to 120 by year end 'twenty, two where are you in that and how much is that being impacted by the more <unk>.
<unk> cost outlook.
While we certainly don't plan to.
Cut any investment in growth of our commercial team or supporting structure around it.
Are going to be full speed ahead on on that regardless of trimming spending in other areas. We we had a plan to be at about 125 total commercial team members at the end of this year.
And we're likely going to push that total number up moving into next year.
Our plan also requires that we go from our existing 35 sales field team to something around 70.
And we need to more than double.
Our current contingent in EMEA and APAC, we've got about 11 individuals.
Combined in EMEA and APAC.
And we'd like to hire at least 15 more combined in those two regions. So the total number of 125 is likely to be pushed up some moving into the first half of 2023.
We initially had great success in hiring but it has slowed.
For sure and most notably it has slowed.
U S.
Got it and then maybe final one would just be the original guidance issue costs are 29% to 35% growth. Obviously you have to do is impacting that today.
Could you just to how we should think about we don't know what 'twenty three will look like at this point in terms of both supply chain and macro but in terms of the confidence level in the 30% plus plus type growth rate.
As things normalize and.
Related to that any comment on the competitive landscape. Obviously, it's really early for what you're doing and there is.
Are there other kind of high plan.
Coaches out there as well that are that are in the marketplace a little bit ahead of you, but maybe just if you can comment on the confidence in that 30 plus percent type growth and do you think any of the impact on the on the kind of customers pausing here is related to anything from the competitive landscape factor. Thank you.
Sure.
Well, we certainly arent ready to comment on our projections for 2023 enlarge part.
As you noted without knowing what's going to happen with the macroeconomic or supply chain issues moving into next year.
Do believe.
Debt.
<unk>.
Our performance will improve over the coming year for sure and we'll be talking more about 2023 guidance.
On an appropriate timeline.
As far as.
Competitive issues, we have not.
Fine.
Competitive issues actually being that big of a factor here.
Our very close with our existing customers, we have been talking to them over the last two quarters and we really feel like this is more of an issue of.
Again.
Those factors I mentioned earlier around.
The impact of macros in supply chain on our business are primarily service orientation.
And then the size of our team.
<unk>.
If youre going to make comparisons.
It would be important to note that.
Our business model is primarily a service business model and there are others in the market could have their business model sort of a more evenly split between service and is distributed set of solutions.
And obviously you distributed set of solutions would be less sensitive to supply chain factors impacting delivery of samples.
To a service business orientation.
So again.
We havent seen significant competitive factors involved here don't believe that's part of this and I would also like to comment that we also don't believe this is a zero sum game.
Only a few percentage points.
Of the massive proteomics total addressable market has been captured by anyone.
So we don't believe this is a zero sum game and this is one company or companies taking away from others. We believe the opportunity is still very large for the sector.
Alright, alright, thanks, great I'll get back in the queue.
Yes.
Thank you.
One moment. Please next question.
Our next question will come from Brandon <unk> of Jefferies. Your line is open.
Hey, Thanks, good afternoon.
Maybe for Sean.
How do I square, the two key revenues being down year over year with the number of active customers growing over two X year over year.
Has there been any change in pricing and then I believe your top three customers were about 44% of the revenue base last year did you see a big drop in that cohort of kind of your top three large customers would be curious.
How much they contributed in the quarter and what that looks like on a year over year basis.
We haven't talked specifically about what each customers contributing to the to the bottom to the top line revenue Brandon, but there are a couple of important comments to make here one is that.
Yes.
I would say due to a combination of factors both the macroeconomic and frankly, the small size of our team and our focused thus far on new customer acquisition.
Other than same store sales.
That combination has had an impact on active customers spending more on our platform.
We have not fully built out.
The competencies of the structures that we need.
To encourage our active customers to move.
And two.
Spending more with us on our platform and that's obviously an energy expanding.
<unk>.
Requirement those customers don't call you and tell you that they would like to spend more money you have to go out and get that so we.
We believe that that will be aggregated a great deal by just growing the team and putting those in same store sales competencies and structures in place.
We have seen obviously as I mentioned earlier are slowing and spend from our active customers I think that it's no secret to anyone that some very large biopharma companies.
I have announced significant disruptions to their own internal operations over this last year.
Summerlin employees off so that has had an impact.
On the slowing of spend but it's really those two things together the macroeconomics.
And the fact that we still need to fully build out those competencies, what we have not seen our active customers, leaving our platform and the enthusiasm of our existing customer relationships. There has not been attenuated.
And I would just add related to your question regarding asp's.
No way.
A result of ASP integrated in fact, our Asp's.
We improved throughout the year, so on a transactional basis.
Our margins by customer actually are getting stronger again, what youre seeing both in terms of the revenue and the margin as I mentioned are more of an impact in terms of just the volume of samples coming through in the quarter.
Got it and then Sean in terms of the guidance for the back half.
With implied.
Topline bounces back to little over $20 million a quarter in the second half.
What exactly in terms of the fab.
Factors that negatively impacted <unk> are you assuming to get data.
Second half whether it's.
Sample delivery variability normalizing or supply chain issues abating somewhat and then I think you had talked about on the Opex line about 70% growth for the year.
What is the revised outlook contemplate purchase opex growth this year.
Yes sure.
I would say actually to get to the lower end of our guidance, we're not actually assuming any significant improvement in the macro environment or something improving with.
Contracting time, it really is just based on a matter of our known pipeline and factoring in.
Right, the new behavior and timelines and.
And contracting that we're seeing and again as Roy and I have mentioned in the past right.
It is a variable business and we also know where we are with several large agreements and.
The magnitude of those comments.
To answer your question.
Get to the low end, we actually don't expect.
Q2 had some.
Yeah.
Aspects that led to the disappointing results.
But to get to the second half.
We're not assuming that any magic has to happen.
So to get to the upper end.
Happy to have some kind of modest improvement in what we're seeing in the macro environment with our customer uptake and specifically with our biopharma customers, specifically with their past Q4 behavior, which are leading muted in our guidance.
Okay. That's helpful and then.
Last one for me why on the palate metrics acquisition can you just talk about timing of commercial launch in magnitude of incremental investments might be needed to get that.
Product and commercial stage.
Sure.
I guess the first comment I would make is that we we believe that this acquisition was an extremely good deal.
Based on the price that we paid.
In exchange for the competencies technology and talent that we have acquired.
And the operational spend.
Over the next couple of years is actually done.
Relatively low in comparison to what might be anticipated.
As far as definitive statements about when we will begin to see revenue generated from this.
Acquisition. This is a development acquisition.
Felt like it will be two to three years before our products are created.
Our marketed and sold.
However, we expect to accrue.
Benefits from having this group.
People like Paul Rothemund, Who's a Macarthur fellow.
Under the tent with us.
And their work on all aspects of our technology platform. So we will accrue benefits on the way too.
Launched new products based on DNA nanotechnology and.
And chip based approaches.
That will that will be important for us even before those products are launched.
Thank you.
Thank you.
One moment please for our next question.
Okay.
And our next question will come from Dan Arias Stifel. Your line is open.
Good afternoon, guys. Thanks, Roy on the manufacturing options that youre, considering what kind of timelines with the moves to internalize some of that production, where those production processes beyond and can you just sort of talk to the risk around <unk>.
Doing something like that as you're trying to scale elsewhere within a choppy environment.
Sure Dan we Havent made a decision whether or not we actually need to bring.
Some of that manufacturing in house.
We're pleased with.
The results that we anticipate will accrue over the next few quarters just from changing.
Some of our vendors for some of those hardware components.
Definitely have not made a decision whether or not to bring any of the manufacturing into house and obviously.
Because that is that will require capital and time and effort.
We will likely try to avoid a possible, but I think.
The message I was trying to transmit is that.
Simply changing out vendors has has already made an impact on this.
If we have to bring some aspects of manufacturing in the house we will.
But actually hoping not to have to do that.
Okay. Okay.
Okay, maybe just two quick follow ups.
On the new customers that you've taken on this year I'm just curious about the split roughly speaking between biopharma versus the academic and then just on the 10000 protein.
Get that Youre working on I know, it's still set for 2023 I'm just wondering whether there is there has.
Been a push off within 2023, whether we should think about the timeline just being farther down but still captured in the year.
Thanks.
As far as the split between Biopharma and research customers.
From this new contingent of customers that we've been fortunate enough to add over the last year and as I mentioned.
This last quarter was our.
Our largest new customer.
No.
Success story over the last 12 months.
We haven't we haven't talked about the split what I can say is that we have grown both Dubai.
New biopharma customers and research customers.
We have grown research as we've previously mentioned.
At a faster clip and biopharma, but thats not surprising.
We were certainly slanted more to big Biopharma.
Two years ago.
And that percentage is.
It is healthy for that percentage to shift a bit to incur.
Encourage more research customers come onto the platform. So we haven't talked about the split that we have we have grown in both contingents.
Good time to this.
Mentioned that remember that when these customers first come onto the platform whether their research or biopharma.
The first deal that we inked with them.
Usually in the tens of thousands of dollars.
Other than the one hundreds of thousands or millions of dollars. It really requires us to move them into the next step for the larger revenue opportunity in.
And characteristically where historically we've been very successful in doing that that's why we say that this huge new customer growth should bear significant dividends over time.
As far as the launch of the 10 Plex.
What we've talked about is that we plan to have all the reagents in hand by the end of this fiscal year to create the products.
Ron.
Our path to do that development has been successful so far.
And that we will launch the product sometime in 2023.
I would be surprised if we launched that in the first half of 2023, it's more likely to be in the second half just based on the usual needs to.
Hi is this.
Take the data from 7000 flex and recorded over 10000, the blanks for some of our customers. So.
In the latter half of the year.
But we'll talk more about that is as the project progresses.
Okay. Thank you very much.
Thank you.
And again, one moment for our next question.
Our next question will come from Kyle Mixon of Canaccord. Your line is open.
Hey, Thanks, Brian Sean could you talk about how much business has been delayed to future quarters, maybe quantify that in dollars or at least qualitatively and then related to that how much revenue from epic in Mesa sample processing was recognized during the second quarter.
Yes.
And as I mentioned tile there were several million dollars.
That we're delivering.
Played.
Yes.
At the end of the second quarter because of slowing of contracting of existing deals.
And I would characterize it in the high single digits of millions of dollars that were delayed and will be will be pushed forward and hopefully most of that will come into the fourth quarter.
There is a chance that some of that will be pushed even further and that remains to be seen.
As far as revenue from epic in May So just to remind.
You and others.
As we've talked about previously epic in May so were investments.
They are not top line revenue generating deals.
The.
The Mesa deal was it was it was an investment.
And a modest number of samples to run on our platform.
With an investment.
And a modest number of samples to run on our platform.
Two.
To be able to take our existing cardiovascular risk models.
And again just to remind you we published a seminal study in a major journal just recently on cardiovascular risk in science translational medicine that got a fair bit of the.
Attention to take those existing models and so to sort of harden them for multi ethnicities we.
But we plan to sell these tests all over the world.
And for them to be useful all over the world we need to make sure that we are making any dispensations for ethnicities that are required.
The epic set of samples with a larger set of samples.
It comes out of.
The U K in combination with <unk>.
And these samples are being run to create our suite of cancer predictive tests.
Again groundbreaking.
<unk> month's launch that will tell you what your risk of developing cancer in the future is not early detection and something a bit more compelling than that.
Obviously sit in front of early detection platforms.
Globally. So these are both investments.
Revenue is not being recognized from either one of these sample sets and we've been clear over the last couple of years that on occasion, we will be doing this we will be making investments in sample sets for product development.
And also to remind you that for most of these samples once theyre run that data goes into our database, which also has downstream product development.
Capabilities and benefits.
Okay sounds great. Thanks for that and maybe just a follow up.
Could you clarify if the high single digit millions that you just talked about being kind of pushed out is that included in the guidance or or is that not included and then maybe just like another follow up how material was the delay of the.
Potential point I guess of the kits rollout is that even though it. Thanks.
So we have accounted for those contracts being pushed.
And our second and our second half revised guidance.
And again as we have a better understanding of how those deals will be closed and again, we're quite confident that they will be because they are in contracting.
We'll talk more about that.
I'm sorry, the second part of your question again.
Okay.
Just the extent of this kind of slowdown it seems that the kit rollout yet.
I would say it's been it's been relatively significant.
Been significant in two ways.
The first is that obviously, it's a way for us to expand topline revenue.
There are some customers that would rather have distributed solutions and service solutions, we are fully aware of that.
The second impact is.
As.
The consequences of supply chain issues.
If.
If one of the difficulties that customer has and sending us samples as it related to their inability to do acquire the infrastructure or again things as mundane as the sample tubes, they need to send those that actually is.
It is important that obviously has an impact so it has impacted not only topline revenue, but also its impacted our sensitivity to supply chain issues.
That's why as I mentioned in the.
Transcript.
We are working diligently on a three pronged approach.
To turn what I would term right now the challenge for us.
Not having a.
A number of distributed solutions into what I believe over the next couple of years will be a differentiated strength for us when you consider lots of our own a rate case this summer.
<unk>.
Illumina is launch of our co branded products into the market, which will be again transformational I believe for the proteomics industry and <unk>.
Third our development of follow on chip based products with our acquisition of <unk>.
I would just add regarding the guidance again that it does not contemplate a market improvement in the macro environment. So although to <unk> point as we look at our pipeline and where we are in the known contracting process, which is how we are building this and adding on more conservative.
Assumptions based on what we've actually been seen as of late in the market that we're not.
Yes.
That number.
All of a sudden everything comes back in one quarter, we assume we're going to continue to see modest.
Each quarter going forward.
Okay that was great. Thanks, Scott just one last question for me given this run rate revenue kind of exiting 'twenty to over $20 million could the original guidance range. The 105 to 110 could that be a good way to think about revenue in 'twenty three.
So although a lot more about 2020 as the year progresses, and we continue to grow our commercial team.
And build our pipeline as a result of that so we will be talking.
Obviously, you're talking about 2023 as soon as as soon as that makes good sense.
Okay. Thanks I appreciate it.
Okay.
Thank you.
And this will end our Q&A session.
I would now like to turn the conference back to Mike for closing remarks.
So I want to thank you for joining our quarterly earnings call. This afternoon.
And thanks to Shawn for his comments on our operator <unk>.
<unk> assistance as well, we look forward to giving you additional updates about our business at several upcoming investor events, including participation in the Morgan Stanley Conference in New York in September .
We've made significant progress at some logic over a relatively short period of time.
<unk> already put in place incredibly important foundational elements to create a differentiated scalable enduro proteomics enterprise and.
And importantly, a number of compelling initiatives that will contribute to that eventuality are also now well underway.
We're both excited and confident about the future here.
As a result of our hard work and your support we will unlock the power of the human proteome to enable our customers to make increasingly important discoveries in lifestyle leave human suffering.
Together, we will relieve human suffering 16 meaningful life.
Thanks, so much.
This will conclude today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.
The conference will begin shortly to raise Johan during Q&A, you can dial star one one.
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