Q3 2022 Nautilus Biotechnology Inc Earnings Call

November 1, 2022

Yeah.

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Ladies and gentlemen, thank you for standing by and walks to the Nautilus Q3 2022 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask the question during the special need to press Star one on your telephone.

I'd like to turn the call over to Charles Alex calling Investor Relations you may begin.

Thank you earlier today <unk> released financial results for the quarter ended September 32022, if you hadn't received this news release or if you'd like to be added to the Companys distribution list. Please send an email to investor relations at model stockpile join.

Joining me today for lot of US are Ctrip hotel co founder and CEO Parag Malik co founder and Chief scientist and Annemarie Chief Financial Officer.

Before we begin I'd like to remind you that electronic statements today. During this call that are forward looking within the meaning of the 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 titled forward looking statements in the press release model issued today.

Except as required by law model X disclaims any intention or obligation to update or revise any financial product pipeline projections or other forward looking statements, whether because of new information future events or otherwise.

Conference call contains time sensitive information and is accurate only as of the live broadcast November <unk> 2022.

With that I'll turn the call over to Stuart.

Thanks, Alex Good morning, and thank you to everyone for joining us today on this call we will share our results for the third quarter of 2022 and provide some insight on expected value of our platform our progress towards commercialization and a quick observation on the market landscape.

But first I want to thank our growing teams in the Bay area, and Seattle, where they're focused on short term development milestones and longer term commercialization goals. Their efforts continue to yield results that get us ever closer to our ultimate purpose of improving the lives and health of people around the world our entire team is.

Fully aligned towards and committed to realizing this important objective.

I am very excited about the emerging opportunity I see for proteomics and I'm pleased with the progress, we're making as a business we more than ever envision powerful research uses for our platform and continue to receive enthusiastic feedback from those researchers around the world with whom we are engaged.

They consistently tell us their desire to explore the protium more deeply and their frustration with what's available today.

They recognize the inherent limitations of both traditional analysis method and as emerging Sydney based and peptide sequencing methods.

They also understand how important single molecule intact protein analysis, and the resulting sensitivity and dynamic range that our platform is designed to deliver will be to their explorations of the protium.

We and they foresee a day when and ability to explore the entire proteome more thoroughly.

Fundamental advances in basic biological research, enabling researchers to make a substantial and long desired impact on the efficiency and cost effectiveness of therapeutic development. Similarly, we believe the next generation of diagnostics will be driven by our ability to measure a patient's proteome with the comprehensive.

That's accessible today in genomics by.

By designing technologies that measure how our proteins are functioning at any point in time for example in healthy versus disease States physicians, researchers and epidemiologists will be able to monitor populations for a wide range of conditions and open the gate to methods of precision medicine long dreamed up <unk>.

If we could spot a potential viral and bader traveling through our bodies and watch ourselves interact change and shifts during times of health and fitness.

Through proteomics tests that measure of patients current state against a previously measured baseline approaches to personalized and predictive medicine for cancer heart disease, Alzheimers disease, and other common illnesses could be made possible.

When Richard Proteomics data begins to drive deeper research insights, we will see a significant increase in patient well being and health and as I said earlier at the end of the day, that's why Nautilus exists in the first place.

Before I turn the call over to Parag for an update on our development progress I wanted to briefly share that in my view. We are in the very early stages of the journey to fully maximize the potential of the proteome to impact human health. It's the decades. It took for the <unk> market to mature any indication there.

Remains much value to be created in the market that will feature multiple complementary participants not unless we remain heads down methodically innovating. What we believe will be a game changing platform that will make a meaningful difference for our researchers and patients alike in the years and decades to come.

With that said I'll now turn the call over to Brad for an update on our development progress in Q3.

Chuck.

Thanks, <unk>, we continued to make progress against our core scientific and engineering goals in Q3, our major focus has been increasing experimental scale, while continuing to advance our quality and customer readiness of our consumables.

The significant effort being put in today to develop a strong suite of analytical methods and processes are critical to ensuring a good customer experience in the future.

The leadership of our new Vice President of reagents and platform development, Ken Kun and particular is substantially accelerated the development of <unk>.

Reagent consumables.

This push and regent scale and quality has been tremendously valuable in supporting our ability to routinely perform experiment involving many dozens of cycle holds in reagents.

Impairments at this scale enable us to demonstrate the instantiation of our prism methodology.

Concurrent with scaling our experimental capacity and consumable commercial readiness, we continue to make progress on advancing our commercial instrument with a particular focus on integrating the hardware and software components of the platform.

We are committed to making a system that is robust and easy to use from the perspective of both the instrument UI and the soccer Eli.

We expect to provide additional deeper detail on the instrument, it's componentry assembly and quality assurance initiatives as we report to you in future quarters.

Additionally, we continue to successfully transitioned to a manufacturing posture across all elements of the platform as we build towards full commercial availability in that regard I want to specifically, thank our SVP of operations Mary Godwin, who has built a team of experienced and effective professional who are leading the charge and ensuring that our systems and consumables.

Our manufactured at scale in the highest quality, most reliable and cost effective way possible.

I know I speak for Suzhou, when I think Mary and her team for their outstanding efforts.

In Q3, we continued to reach out to the broader proteomics community with the objective of sharing the scientific underpinnings of our platform.

In addition to serving as a clear demonstration of our cultural commitment to transparency and openness. The conversations frequently led to suggestions of exciting and creative applications of our platform and we had not previously ambitions.

One such recent conversation with well known proteomics Kols in both the U S and Europe began with a reflection that COVID-19 has spurred increased interest among the biomedical community on the immune system and the dynamics of immune responses.

That observation led to a suggestion that the nautilus platform might be particularly valuable in studying immune system activation and surveillance.

These and similar anecdote reinforce my belief that the novelist platform is going to spur tremendous creativity and innovation in the broader proteomics community.

With that I'll turn the call back to <unk>.

Thanks Brock.

We remain singularly focused on driving our scientific and development efforts forward in the most efficient most predictable ways possible.

As I mentioned last quarter, we are not currently focused on creating short term revenue opportunities.

By making the choice to focus on development at this time.

We believe we are positioning ourselves to ultimately make the maximum possible impact on the marketplace and on biological science.

We continue to expect to launch our <unk> analysis platform instrument consumables and software in the middle of 2024.

Nonetheless, we're focused on building a world class patent portfolio that aimed to protect technologies that we believe are fundamental to our platform and in many cases fundamental to advancing the field of proteomics.

For example, our patents and patent applications are directed to our platform assay and protein identification processes and methods are proprietary probes are protium scale protein arrays, including our proprietary chemistry and biochemistry for building those arrays are sample preparation methods key <unk>.

<unk> of our instruments and consumables.

And novel violence, Biotics and processes, we're applying podium level data to critical research questions.

Our IP strategy is global in reach as we seek protection in the U S and in foreign markets, where we expect to commercialize our platform.

Our current portfolio includes over 40 pending patent families filed in the U S and abroad.

And this reflects a near doubling over the past year.

As we lead the business My management team and I are acutely aware of the macroeconomic conditions in which we currently exist and remain committed to ensuring that we strike the right balance of extending our runway while investing in future innovation and commercialization capabilities. We are confident in our ability to do so.

And are actively executing on our plan that extends our cash well into 2025.

For more on that let me hand, the call over to Anna for a look at our Q3 financials.

Anna.

Thanks, Joe.

I will start my comments by sharing our financial results for the quarter.

Total operating expenses for the third quarter of 2022 were $15 8 million compared to $14 $6 million in the third quarter of last year overall that translates to a growth in spending of approximately 9% year over year.

Research and development expenses for the third quarter of 2022 were $9 6 million compared to $8 2 million in the third quarter of last year.

That increase of approximately 16% was primarily driven by growth in personnel costs supporting the continued development of our platform.

General and administrative expenses for the third quarter of 2022 were $6 2 million compared to $6 $3 million in the third quarter of last year.

A decrease of approximately 1% was a result of increasing our operating efficiency as we enter our second year as a public company.

Overall net loss for the third quarter of 2020 to $14 1 million compared to $14 5 million in the third quarter of last year.

To recap our total operating expenses for this quarter were only modestly higher compared to the same quarter last year as a result of our focus on expense management.

At the same time, we've grown our head count and related personnel costs by approximately 30% on a year over year basis.

Those head count additions.

All levels of the organization are fueling the next stages of development.

We previously communicated that we expected second half expenses to increase over first half levels. As a result of continued hiring and from scaling our development pipelines.

While we still expect spending levels to increase in Q4 and beyond our total operating expenses for 2022 will be below the levels. We previously anticipated and we are confident that these increases will be measured and additive to our progress towards commercialization.

It is our view that doing the hardware to maximize every dollar today makes us a better company in the long run and preserves our ability to invest in our commercial expansion to come.

We ended the quarter with approximately $324 million in cash cash equivalents and investments.

Which represents a trailing 12 month cash burn of approximately $50 million.

While that cash burn will certainly increase going forward, we continue to anticipate our cash runway extending well into 2025.

We believe this puts us in a strong position to focus on our scientific progress and to deliver the type of platform that we believe will enable our customers to achieve new levels of proteomics insight.

That I will turn it back to Sergio.

Thanks Anna.

At Nautilus, we are a team on emission.

Our mission to lead our proteomics revolution by providing ubiquitous access to the protium, we're committed to building a platform that sets a new gold standard for single molecule protein analysis and in doing so makes a meaningful difference in the health and lives of millions around the world.

We're happy to have you along on our journey and look forward to updating you every step along the way.

With that I'll turn the call back to the operator.

Operator.

Ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your Touchtone telephone, we will pause for a moment, while we compile the Q&A roster.

Our first question comes from Treehouse Savant with Morgan Stanley . Your line is open.

Hello. This is Hugo on the call for <unk>. Thank you for taking our questions.

Amidst the challenging macro could you elaborate on the action plan to ensure supply chain readiness targeting commercial launch in mid 'twenty four and then on the inflation that you're seeing rising costs of key inputs for your systems.

Yes.

Why don't I take these since it's a mix of financials and business here. Good morning. This is seasonal so the first part of your question really relates to supply chain and you know as.

As you're acutely aware.

Looking at companies throughout your coverage universe supply chain issues are just part of how you have to what you have to deal with an operating businesses today and for US those have implications both on the hardware side of things with respect to parts that go into our instrument and in addition to that it has.

A impact on our experimental throughput because of the lead times and supply constraints of various reagents and inputs into our experiments.

What I'd say is we've got a we've got a really mature team who has seen supply constraints and operated through various markets in the past and on the hardware side of things. We have we have supplies of the major long lead time parts, where we're having issues were managing supply issues day to day.

On the reagent side of things we're doing the same we're planning ahead, we're moving.

We're moving to get things ordered earlier and we're mitigating as we can.

On the inflation side of things.

Certainly we are seeing the impact of inflation across a wide range of <unk>.

Supplies that we use and.

What I would tell you on that front is there isn't any material impact that that is manageable, but it's certainly for US a watch list items, both in terms of things.

It seems that we procure but as well the impact that it has on our workforce and the changing dynamics of our workforce.

Got it.

Helpful. And then just a follow up separate follow up during the opening remarks, you mentioned, the platform's value and generating a population level proteonomic data.

How much sample volume will be required for Iran, and would this technology be suited for use with biobank samples.

I'll take I'll take that one.

This is pragmatic.

Two to answer your question.

We are anticipating.

On the low end of.

Hi, nanogram to low micro gram quantities of protein required.

In the platform and which makes it readily amenable to biobank samples.

Great. Thank you so much.

One moment for our next question.

Okay.

Our next question comes from Max Masucci with Cowen Your line is open.

Okay.

<unk>.

For taking the questions.

So just a bigger picture question.

Also our understanding that timing is still fluid, but just as we turn our sights to 2023, yeah are there any milestones or checkpoints that we should be keeping on our radar how should we be thinking about I guess the balance of product development update.

Eight persons.

Data readouts and whatnot throughout the year.

Okay.

Good morning, Max and maybe I'll. This is John I'll take this question here. So I think that when you think about 2023 so.

To kind of frame that year in context first we have previously indicated that we intend to fully launch our platform and.

And begin moving our business model largely to selling instruments selling consumables in selling software in the middle of 2024, and we're on track to launch the product in the middle of 2020 form and so with that 2023, plus those two quarters of 2020 for a total of six quarters, what you should be low.

Looking for as you kind of follow along on our journey. In 2023 is you should be looking for us to be.

Submitted for publication.

Papers that describe more of our decoding approach and the quantity of proteins that we're able to decode how we're able to decode protein leveraging the unique method that we use you should be looking for us to disclose more about our pricing.

Show offer instrumentation and as we start moving through that year, and we start getting getting deeper into the year really the launch of the early access program, which is our program that enables customers to as a service try out our platform before we are ready for that full commercial launch and.

If you look at 2023, there are a number of major.

Meetings and shows where we have opportunities to showcase our technology, and our science with papers and posters and and talks and so those are the sorts of milestones that I think you should look for in 2023, they're indicative that we are on track for that in middle of 2020 for launch.

That's great.

So usually you.

Participating in a panel.

Spatial and Proteomics conference recently, so I know, we're still really in early days here, but just started that.

At a high level it would be great to hear how you're thinking about the opportunity to complement the nautilus platform alongside spatial and vice versa Vice versa.

Yes, it's a great question Maxim and we think a lot about this when I talk to customers.

They described a range of biological insight that they would like to get from proteomics analysis platforms of the future first and foremost the question that they want to answer is what proteins are in my sample and in what quantity.

Quantities and they want to do that with exquisite sensitivity and dynamic range.

There are a huge number of protein molecules inside of the cell inside of blood serum and so if you want to have a comprehensive management measurement half to half sensitivity and a huge dynamic range and that is the hallmark of our platforms design.

After you've answered that first question customers have an increasing range of questions well, what splice forms where those proteins. How are those proteins modified because those modifications are important to understanding of the function of those proteins inside of the cell. After you understand the modifications customers want to understand.

Which sounded those proteins come from can you do single cell proteomics. After that the next question is spatial and so for US on this particular axes of biological insight. There's a long road map of innovation that continues to drive the customers' understanding of biology deeper and deeper and deeper and we think that create the huge.

<unk> long term opportunity for us.

Great.

On a similar.

No.

I guess I get asked.

The question.

A bit differently more about sort of how you view the complementary <unk>.

Sites that your platform could unlock alongside <unk>.

GFS space platforms, particularly given some of the recent announcements from <unk> and <unk>.

Ed.

If you start to look at those two opportunities.

Obviously, I think we're going in the direction.

Of correlated.

<unk> and genomic data.

Particularly in a longitudinal fashion, but.

As you think about the opportunity to sort of complement.

Some of the breakers youre seeing on the on the NGL side.

Yes.

Should we view that as.

Our growth opportunity that is still a bit further down the road or is there are there any sort of partnerships or collaborations that you'd be interested in.

Pursuing.

I guess, whether it's in.

And Jess or special.

I'll take that thanks, Max this is Craig.

What we've heard for for many years is that people are interested in in how biology works.

There are many levels of regulation that drive that from the genomic to the transcript helmick proteomics metabolomics and one of one of our key theses is to make it as easy as possible for our customers to be able to integrate all of that information to get the most complete view of the biology and so that's an area that where we're actively spending a lot.

Energy looking at how can we make that journey is easy for our customers.

I will just point out one particular.

Comment.

It's not entirely clear that the genome transcriptome and the proteome should correlate.

The time dynamics are very different the dynamic ranges are very different and so there is a tremendous amount of interesting biology and important biology between the layers and so we're really excited to be able to support those studies to find where is the key point in our seed and.

Whether it's at the at the transition from the transfer payment to the protium or in protein degradation or in protium movement from different parts of the cell.

Okay great.

I appreciate all the color I know, it's a bit of.

Abstract question so thanks.

One moment for our next question.

Our next question comes from Matt Flex with Goldman Sachs. Your line is open.

Hey, guys. This is Dave on for Matt.

So it sounds like you have been growing the team effectively making progress and being effective at doing that.

And a reasonable cost structure.

Could you tell us more about.

What youre seeing in the labor market for the areas you're hiring for.

Dave I'll take that one.

Yes.

Been able to make some really great hires and you can see that in some of.

The senior leadership additions, we brought on with Gwen and Sherri earlier in the year and Erik and Ken Warner recently, and as I said on the call we've grown our head count 30% year over year and that talent is really additive to what we've been able to do as a business and to your point.

We've done that while not increasing our cost very much in the way we've done that is by.

Bringing down the cost of our non personnel related spending so I'll just take a second and make sure that just to reiterate some of the points made earlier on inflation and what we've been able to do with our head count we've been bringing down our non personnel related spending by.

Repurposing head count, but also by bringing down the cost of our raw materials, increasing our production yield.

Developing cheaper experimental methods all of these things have created room for us to grow the team obviously to transform how our operating as a business without growing the overall cost.

As of.

Operating on a quarterly basis.

So.

Yes.

Yes, they're happy around other happy you asked about the labor market, specifically in what I would say the labor market is that we have seen just a little bit of loosening in terms of how tight the market is and we're seeing some opportunity with other companies mostly larger.

Companies, better reducing staff, but I would say even more importantly is that as we continue to advance our science and we continue to present at conferences. There's just more of an inflow of great high quality Super experienced talent that are coming our way and and basically telling us that they wanted to.

Work at non lift and they see the future potential of what we're doing and I'd say, that's the even bigger impact.

That's fantastic.

And in terms of.

Publications or events.

Could look forward to.

In particular, you could call out on the horizon.

Yes, so the two biggest.

Events and meetings for us that are coming up here that I would put in your radar is that in December is the world, who BOE, leading Cooper was the human proteome organization and at that meeting we will have a number of posters and a number of places where we will be showcasing our science in India.

Addition to that our collaborator from MD Anderson, who will be joining us at <unk> in December and then just six months. After that is in March is the U S version of <unk> and I think that's another great opportunity for us to continue to highlight the.

The improvements in our in our science the maturity of our platform and really talk about our path to the cutting the program. So those are the two that I put on your radar.

Fantastic Thanks, guys.

Next question.

Our next question comes from Brandon Couillard with Jefferies. Your line is open.

Hey, this is Matt on for Brandon Thanks for taking the question.

You noted the progress youre, making on advancing the commercial instrument and then transitioning over to manufacturing posture, but also some of the enthusiasm feedback youre getting from potential customers. So they will just be curious to thinking about how you're balancing the two of those as you look to kind of lock in the blueprint of the instrument to milk for forward to <unk>.

<unk>.

2024, both incorporating some of their thoughtful feedback while also advancing manufacturing posture. Thanks.

Yes, that's a good question I think that the balance for us is fairly simple I think that.

Customer feedback continues to inform her.

How we developed the science and the assay continues to help us prioritize areas of biological insights that are important to our customer and it helps us lot in terms of identifying where are the most interesting timely applications for our technology that are going to be the first killer applications when we.

Get out to market fully in 2024, I think thats from an instrument perspective.

Nautilus Youre very shortly we'll turn six years old I think officially in January and six years and at this point the instruments capabilities and requirements are very well settled and so the final instrument that we will be shipping in the middle of 2024 is moving through various.

Levels of development and qualification and certification and I think that that process doesn't really have a lot of customer input thats going in it's a pretty pretty well understood process and it's progressing nicely.

Super Thanks, and then another topic that's come up a lot is kind of the balance of <unk>.

Investment and development, but also expense management I'd be curious as you look out to 'twenty three and beyond are there any competitive forces that would make you actually want to accelerate investments in any areas, where you see potential opportunity. Thanks.

Yes, Matt.

I would be a fool to say Oh never because it's never it's never the case, but that being said I will tell you that.

I was the CEO of a public company in the last recession, the financial crisis, and we hunker down we really refined our operating expenses, we used it as an opportunity to transform our business that came out way way stronger and that is our posture here is.

We head into what undoubtedly is going to be a recession I don't know how deep nobody does but.

While I won't say there won't be any opportunity for sure for us to accelerate we're going into this very tight and not in a way where we are constricting our development, but we're being very smart and we're being really really hardcore about operating expenses and improving the yields of our reagents improved.

Their quality, we're really being hardcore with our costs and the benefits of that will be felt far beyond the recession and the end of the recession in our commercialization.

Great. Thank you.

And im not showing any further questions. At this time. This also does conclude today's conference you may now disconnect and have a wonderful day.

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Ladies and gentlemen, thank you for standing by and welcome to the Nautilus Q3 2022 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the specialty depressed star one on your telephone I would now like to turn the call over to Charles Alex calling Investor Relations you may begin.

Thank you earlier today <unk> released financial results for the quarter ended September 32022, if you haven't received this news release or if you'd like to be added to the Companys distribution list. Please send an email to investor relations at model bio.

Joining me today from <unk> are Ctrip hotel co founder and CEO Parag Malik co founder and Chief scientist and Adam <unk> Chief Financial Officer.

Before we begin I'd like to remind you that management will make statements today. During this call that are forward looking within the meaning of the federal securities laws.

Except as required by law model is disclaims any intention or obligation to update or revise any financial product pipeline projections or other forward looking statements, whether because of new information future events or otherwise.

This conference call contains time sensitive information and is accurate only as of the live broadcast November <unk> 2022.

With that I'll turn the call over to Stephen Hill.

Thanks, Alex Good morning, and thank you to everyone for joining us today on this call we will share our results for the third quarter of 2022 and provide some insight on the expected value of our platform our progress towards commercialization and a quick observation on the market landscape.

But first I want to thank our growing teams in the Bay area, and Seattle, where they're focused on short term development milestones and longer term commercialization goals.

Their efforts continue to yield results that get us ever closer to our ultimate purpose of improving the lives and health of people around the world. Our entire team is fully aligned towards and committed to realizing this important objective.

I'm very excited about the emerging opportunity I see for proteomics and Im pleased with the progress, we're making as a business we more than ever envision powerful research uses for our platform and continue to receive enthusiastic feedback from those researchers around the world with whom we've engaged they can.

<unk> tell us their desire to explore the protium more deeply and their frustration with what's available today.

They recognize the inherent limitations of both traditional analysis method and as emerging Sydney based and peptide sequencing methods.

We and they foresee a day when and ability to explore the entire proteome more thoroughly will yield fundamental advances in basic biological research, enabling researchers to make a substantial and long desired impact on the efficiency and cost effectiveness of therapeutic development.

Similarly, we believe the next generation of diagnostics will be driven by our ability to measure a patient's proteome with the comprehensiveness that's accessible today in genomics by.

By designing technologies that measure how our proteins are functioning at any point in time for example in healthy versus disease States physicians, researchers and epidemiologists, we will be able to monitor populations for a wide range of conditions and open the gate to methods of precision medicine long dreamed up Matt.

If we could spot a potential viral and data traveling through our bodies and watch ourselves interact change and shift during times of health and fitness.

To impact human health.

The decades, it took for the <unk> market to mature any indication there remains much value to be created in the market that will feature multiple complementary participants.

Not unless we remain heads down methodically innovating, what we believe will be a game changing platform that will make a meaningful difference for researchers and patients alike in the years and decades to come.

With that said I'll now turn the call over to Brad for an update on our development progress in Q3.

Correct.

Thanks neutral, we continued to make progress against our core scientific and engineering goals in Q3, our major focus has been increasing experimental scale, while continuing to advance our quality and customer readiness of our consumables.

The significant effort being put in today to develop a strong suite of analytical methods and processes are critical to ensuring a good customer experience in the future.

The leadership of our new Vice President of reagents and platform development, Ken Kun and particular is substantially accelerated the development.

Our reagent consumables.

This push in region scale and quality has been tremendously valuable in supporting our ability to routinely perform experiments involving many dozens of cycle Holden reagents.

Experiment that the scale enable us to demonstrate the instantiation of our prism methodology.

We are committed to making a system that is robust and easy to use from the perspective of both the instrument UI and the soccer Eli.

We expect to provide additional deeper detail on the instrument, it's componentry assembly and quality assurance initiatives as we report to you in future quarters.

Our manufactured at scale in the highest quality, most reliable and cost effective way possible.

I know I speak for Suzhou, when I think Mary and her team for their outstanding efforts.

In Q3, we continued to reach out to the broader proteomics community with the objective of sharing the scientific underpinning to our platform.

That observation led to a suggestion that the nautilus platform might be particularly valuable in studying immune system activation and surveillance.

These and similar anecdote reinforce my belief that the novelist platform is going to spur tremendous creativity and innovation in the broader proteomics community.

With that I'll turn the call back to neutral.

Thanks Brock.

We remain singularly focused on driving our scientific and development efforts forward in the most efficient most predictable ways possible.

As I mentioned last quarter, we are not currently focused on creating short term revenue opportunities.

By making the choice to focus on development at this time we.

We believe we are positioning ourselves to ultimately make the maximum possible impact on the marketplace and on biological Sciences we.

To expect to launch our <unk> analysis platform instrument consumables and software in the middle of 2024.

I would not a list we're focused on building a world class patent portfolio that aimed to protect technologies that we believe are fundamental to our platform and in many cases fundamental to advancing the field of proteomics.

<unk> of our instruments and consumables.

And novel Bioinformatics and processes, we're applying podium level data to critical research questions.

Our IP strategy is global in reach as we seek protection in the U S and in foreign markets, where we expect to commercialize our platform.

Our current portfolio includes over 40 pending patent families filed in the U S and abroad.

And this reflects a near doubling over the past year.

And are actively executing on our plan that extends our cash well into 2025.

For more on that let me hand, the call over to Anna for a look at our Q3 financials.

Anna.

Thanks, Joe.

I will start my comments by sharing our financial results for the quarter.

Total operating expenses for the third quarter of 2022 were $15 8 million compared to $14 6 million in the third quarter of last year overall that translates to a growth in spending of approximately 9% year over year.

Research and development expenses for the third quarter of 2022 were $9 6 million compared to $8 $2 million in the third quarter of last year.

That increase of approximately 16% was primarily driven by growth in personnel costs supporting the continued development of our platform.

General and administrative expenses for the third quarter of 2022 were $6 2 million compared to $6 3 million in the third quarter of last year.

That decrease of approximately 1% was a result of increasing our operating efficiency as we enter our second year as a public company.

Overall net loss for the third quarter of 2020 to $14 1 million compared to $14 5 million in the third quarter of last year.

To recap our total operating expenses for this quarter were only modestly higher compared to the same quarter last year as a result of our focus on expense management.

At the same time, we've grown our head count and related personnel costs by approximately 30% on a year over year basis.

Those head count additions at all levels of the organization are fueling the next stages of development.

We previously communicated that we expected second half expenses to increase over first half levels. As a result of continued hiring and from scaling our development pipelines.

It is our view that doing the hard work to maximize every dollar today makes us a better company in the long run and preserves our ability to invest in our commercial expansion.

We ended the quarter with approximately $324 million in cash cash equivalents and investments, which.

Which represents a trailing 12 month cash burn of approximately $50 million.

While that cash burn will certainly increase going forward, we continue to anticipate our cash runway extending well into 2025.

With that I will turn it back to Sergio.

Thanks Anna.

Nautilus, we are a team on a mission.

Our mission to lead our proteomics revolution by providing ubiquitous access to the Cardium. We're committed to building a platform that sets a new gold standard for single molecule protein analysis and in doing so makes a meaningful difference in the health and lives of millions around the world.

We're happy to have you along on our journey and look forward to updating you every step along the way.

With that I'll turn the call back to the operator.

Operator.

Ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your Touchtone telephone, we will pause for a moment, while we compile the Q&A roster.

Our first question comes from Treehouse Savant with Morgan Stanley . Your line is open.

Hello. This is Hugo on the call for <unk>. Thank you for taking our questions.

Yes, why don't we.

Why don't I take these since it's a mix of financials and business here. Good morning. This is seasonal so the first part of your question really relates to supply chain and.

As you're acutely aware.

Looking at companies right your coverage universe supply chain issues are just part of how you have to what you have to deal with an operating businesses today and for US those have implications both on the hardware side of things with respect to parts that go into our instrument and in addition to that it has.

The impact on our experimental throughput because of the lead times and supply constraints of various reagents and inputs into our experiments and.

On the reagent side of things we're doing the same we're planning ahead, we're moving where we're moving to get things ordered earlier and we're mitigating as we can.

On the inflation side of things.

Certainly we are seeing the impact of inflation across a wide range of.

Of supplies that we use and.

What I would tell you on that front is there isn't any material impact that that is manageable, but it's certainly for US a watch list items both in terms of.

Things that we procure but as well the impact that it has on our workforce and and the changing dynamics of our workforce.

Got it.

Helpful. And then just a follow up separate follow up during the opening remarks, you mentioned, the platform's value and generating a population level proteonomic data.

How much sample volume will be required per run and would this technology be suited for use with biobank samples.

I'll take I'll take that one.

This is <unk>.

Two to answer your question.

We are anticipating.

On the low end of <unk>.

Hi, nanogram to low micro gram quantities of protein required.

And in the platform.

And which makes it readily amenable to biobank samples.

Great. Thank you so much.

One moment for our next question.

Okay.

Our next question comes from Max Masucci with Cowen Your line is open.

Okay.

Good morning, Thanks for taking the questions.

So just a bigger picture question.

Versions.

<unk> readouts and whatnot throughout the year.

Yes.

Good morning, Max and maybe I'll. This is John I'll take this question here. So I think that when you think about 2023, so just to kind of frame that year in context first we have previously indicated that we intend to fully launch our platform and.

<unk>.

And begin moving our business model largely to selling instrument selling consumables in selling software in the middle of 2024, and we're on track to launch the product in the middle of 2020 form and so with that 2023, plus those two quarters of 2020 for a total of six quarters, what you should be looking.

For as you kind of follow along on our journey. In 2023 is you should be looking for us to be.

Submitted for publication.

Papers that describe more of Rd coding approach and the quantity of proteins that we're able to decode how we're able to decode protein leveraging the unique method that we use you should be looking for us to disclose more about our pricing.

If you look at 2023, there are a number of major.

Meetings and shows where we have opportunities to showcase our technology, and our science with papers and posters and.

And talks and so those are the sorts of milestones that I think you should look for in 2023 that are indicative that we are on track for that in the middle of 2020 for launch.

That's great.

So usually you.

Participating in a panel.

At our spatial and Proteomics conference recently, so I know, we're still really in early days here, but just sort of at a high level. It would be great to hear how you're thinking about the opportunity to complement the nautilus platform alongside spatial.

Vice versa vice versa.

Yes, it's a great question Maxim and we think a lot about this when I talk to customers. They described a range of.

Biological insight that they would like to get from proteomics analysis platforms of the future first and foremost the question that they want to answer is what proteins are in my sample and in what quantities.

Quantities and they want to do that with exquisite sensitivity and dynamic range.

There are a huge number of protein molecules inside of the cell inside of blood serum and so if you want to have a comprehensive management measurement you have to have sensitivity and a huge dynamic range and that is the hallmark of our platforms design.

Which sell did those proteins come from can you do single cell proteomics. After that the next question is spatial and so for US on this particular axes of biological insight. There's a long roadmap of innovation that continues to drive the customers' understanding of biology deeper and deeper and deeper and we think that creates a huge.

<unk> long term opportunity for us.

Great.

On a similar.

No.

I guess I get asked.

The question.

A bit differently more about sort of how you view the complementary.

Sites that your platform can unlock alongside <unk>.

<unk> based platforms, particularly given some of the recent announcements from Illumina.

Yes.

If you sort of look at those two opportunities.

Obviously, I think we're going in the direction.

Of correlated.

<unk> and genomic data.

Particularly in a longitudinal fashion, but.

As you think about the opportunity to sort of complement.

Some of the breakers youre seeing on the on the NGL side.

Yes.

Should we view that as.

And growth opportunity that is still a bit further down the road or is there are there any sort of partnerships or collaborations that you'd be interested in pursuing.

I guess, whether it's in.

And Jess or special.

I'll take that thanks, Max this is Craig.

Zinc.

What we've heard for for many years is that people are interested in.

How biology works.

And there are many levels of regulation that drive that from the genomics to the transcript helmick proteomics metabolomics and one of.

One of our key theses is to make it as easy as possible for our customers to be able to integrate all of that information to get the most complete view of the biology and so that's an area that where we're actively spending a lot of energy looking at how can we make that journey is easy for our customers.

I will just 0.1 particular.

Comment.

It's not entirely clear.

The genome transcriptome and the proteome should correlate.

Time dynamics are very different the dynamic ranges are very different and so there is a tremendous amount of interesting biology and important biology between the layers and so we're really excited to be able to support those studies to find where is the key point in our seed and.

Whether it's.

At the transition from the transcript on the protium or in protein degradation or in protium movement from different parts of the cell.

Okay great.

Appreciate all the color I know, it's a bit of.

Abstract question so thanks.

One moment for our next question.

Next question comes from Matt Flex with Goldman Sachs. Your line is open.

Hey, guys. This is Dave on for Matt So it sounds like you.

Been growing the team effectively making progress and being effective at doing that.

Hey.

Reasonable cost structure could you tell us more about.

What youre seeing in the labor market for the areas you're hiring for.

Dave I'll take that one.

Yes.

<unk> been able to make some really great hires and you can see that in some of.

The senior leadership additions, we brought on with Gwen and Sherri earlier in the year and Eric and Kenmore recently and as I said on the call we've grown our head count 30% year over year and that talent is really additive to what we've been able to do as a business and to your point.

We've done that while not increasing our cost very much in the way we've done that is by.

Repurposing head count, but also by bringing down the cost of our raw materials, increasing our production yield.

Developing cheaper experimental method all of these things have created room for us to grow the team obviously to transform how our operating as a business without growing the overall cost of.

Of.

Operating on a quarterly basis.

So.

Yes.

Yeah.

P J the other happy around your other half year, you asked about the labor market specifically in what I would say the labor market is that we have seen just a little bit of loosening in terms of how tight the market is and we're seeing some opportunity with other companies, mostly larger companies that are reducing.

Staff, but I would say even more importantly is that as we continue to advance our science and we continue to present at conferences. There's just more of an inflow of great high quality Super experienced talent that are coming our way and and basically telling us that they want to work at non lift and they see that.

The future potential of what we're doing and I think thats, the even bigger impact.

That's fantastic.

And in terms of.

Publications or events.

Could look forward to anything in particular, you could call out on the horizon.

Yes.

The two biggest.

Events and meetings for us that are coming up here that I would put on your radar is that in December is the world, who BOE meeting who both the human proteome organization.

And at that meeting, we will have a number of posters and a number of places where we will be showcasing our science and in addition to that our collaborator from MD Anderson, who will be joining us at <unk> in December and then just six months. After that is in March is the U S version of <unk>.

And I think that's another great opportunity for us to continue to highlight the.

The improvements in our in our science the maturity of our platform and really talk about our path to the cutting their program. So those are the two that I put on your radar.

Fantastic Thanks, guys.

One moment for our next question.

Next question comes from Brandon Couillard with Jefferies. Your line is open.

Hey, this is Matt on for Brandon Thanks for taking the question.

You noted the progress youre, making on advancing the commercial instrument and then transition over to manufacturing posture.

So some of the enthusiasm feedback youre getting from potential customers. So I'll just be curious to thinking about how you're balancing the two of those as you look to kind of lock in the blueprint of the instrument to milk for forward to commercialization.

2024.

Incorporating some of their thoughtful feedback while also advancing to the manufacturing posture.

Yes, that's a good question I think that the balance for us is fairly simple I think that.

Customer feedback continues to inform how we develop the science and the assay continues to help us prioritize areas of biological insight that are important to our customer and it helps us a lot in terms of identifying where are the most interesting timely.

Applications for our technology that are going to be the first killer applications. When we get out to market fully in 2024, I think that from an instrument perspective.

Nautilus here very shortly we'll turn six years old I think officially in January and six years and at this point the instruments capabilities and requirements are very well settled and so the final instrument that we will be shipping in the middle of 2024 is moving through various.

Levels of development and qualification and certification.

And I think that that process doesn't really have a lot of customer input thats going in it's a pretty pretty well understood process and it's progressing nicely.

Super Thanks, and then another topic that's come up a lot is kind of the balance.

Okay.

Yes, Matt.

I would be cool to say never because never it's never the case, but that being said I will tell you that.

I was the CEO of a public company in the last recession, the financial crisis, and we hunker down.

Really refined our operating expenses, we used it as an opportunity to transform our business that came out way way stronger and that is our posture here as we head into what undoubtedly is going to be a recession I don't know how deep nobody does but.

While I won't say that.

Won't be any opportunity for sure for us to accelerate we're going into this very tight and not in a way where we are constricting our development, but we're being very smart and we're being really really hardcore about operating expenses and improving the yields of our reagents improving their quality, we're really being hardcore with.

Our cost and the benefits of that will be felt far beyond the recession and the end of the recession in our commercialization.

Great. Thank you.

And im not showing any further questions. At this time. This also does conclude today's conference you may now disconnect and have a wonderful day.

Q3 2022 Nautilus Biotechnology Inc Earnings Call

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