Q3 2022 Seer Inc Earnings Call
Good day, and thank you for standing by and welcome to the CEVA, Inc. Third quarter 2022 earnings Conference 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.
Ask a question during the session you will need to press star one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Carrie Mendivil Investor Relations may begin.
Thank you.
Earlier today <unk> released financial results for the quarter ended September 32022.
If you have not received this news release.
Or if he likes the attitude the Companys distribution list. Please send an email to investor at <unk> Dot buyout.
Joining me today from Dr. <unk>, <unk>, Chief Executive Officer, President and chair and David Horn, Chief Financial Officer.
Before we begin I would like to remind you that management will make statements. During this call that are forward looking statements within the meaning of federal securities laws.
These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated.
Additional information regarding these risks and uncertainties appears in the section entitled forward looking statements in the press release issued today for.
For a more complete list and description. Please see the risk factors section of the company's quarterly report on Form 10-Q for the quarter ended September 32022, and then its other filings with Securities and Exchange Commission.
Except as required by law <unk> disclaims any intention or obligation to update or revise any financial projections or forward looking statements, 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> 2002.
With that I'd like to turn the call over to Amit.
Thanks, Kerry and thanks, everyone for joining us this afternoon.
I'm encouraged by the growing enthusiasm for the poor geographic product suite across a variety of applications spanning discovery translational and clinical research.
During the third quarter, our team continued to make important progress against our strategic plan and we ended the quarter with $4 million in revenue and approximately $441 million of cash cash equivalents and investments on our balance sheets.
I have never been more bullish demand today about the future here.
Our technology will meaningfully enable researchers to undertake population scale studies that can uncover the complexity of the proteome, including the discovery of identification of previously unknown protein variance.
Identifying elucidating the biological role of these protein variance is the next frontier in the quest to understand human health and disease.
To that end.
Key leaders in proteomics are calling for the establishment of the human Proteome project similar to the human genome project, which was profoundly important in the transformation.
Acceleration of biological and medical research using genomics.
The ambitious goal of this proposed initiative is to map the entire human proteome by generating a definitive reference set of protein variance produced from the genome.
They needed discovery work simply cannot be done without the deep unbiased access to the podium at scale that fear uniquely enables today.
We believe that initiatives like the human Proteoform project are key and enabling the proteomics community to vastly increase the resolution of proteomics studies for this to become a reality, we will need the synergistic combination of two distinct technologies first.
Bias detector with peptide level resolution to identify and differentiate protein variance.
And second.
A platform to capture the vast array of protein variance at scale and in an unbiased way.
This will enable population scale studies, which will be required for identifying and cataloging the universe of protein variance.
The gold standard for unbiased detective for proteomics is mass spec and the only commercially available platform for deep unbiased sampling of proteins that scale is the fears per draft product suite.
We expect <unk> platform will be a major enabler of initiatives such as the human Proteoform project because of our ability to deeply interrogate the proteome in a scalable way, which provides an unmatched ability to discover and catalog novel content.
I'll start today by sharing some updates on our progress against our key objective to drive growth in 2022 and beyond and then I will turn the call over to David to provide more detail on our financial results. As a reminder, our five key objectives are first supporting customers to scale their user.
<unk> got a product suite for projects of increasing size and scope.
Second expanding our global customer network and installed base of instruments third.
Continuing to build our team commercial capabilities and geographic footprint.
Expanding our partnerships to make it even easier for customers to adopt our technology and fifth.
Driving our product roadmap to enable more applications.
Starting with how our customers are using the project graph.
We're excited to see our more established customers ramping their use of our technology with an increasing interest in larger studies ranging from 100 to thousands of samples.
As we've said previously the project graph removes the barriers that previously constrained deep unbiased proteomics studies in complex sample types to fewer than 50 samples.
Our technology is also highly extensible.
Our engagement with customers and prospective customers, we're seeing significant interest in utilizing the <unk> graph to explore a broad range of sample types diseases and organisms through studies of various scopes.
With our growing installed base, our centers of excellence or Coes coming alive and the addition of prospective customers to our sales pipeline. We have a line of sight to a growing number of larger studies.
We're seeing excellent progress with our store partners.
In both the size and scope of study is being performed three of our Coa partners are now working with large pharma and academic customers and significant studies.
In addition, these coes are demonstrating the power of the paragraph products suite with their own data. For example, <unk> has used the previous graph to deeply interrogate the proteomics content of biological samples beyond plasma such as euro <unk> struggled fluid and conditioned media.
The ladder enabled studies of the secret told.
Which are proteins that are differentially secreted by cells and tissues in health and disease.
The team will be hosting a webinar in the coming weeks to discuss the data with different buyer fluids, using a pretty broad product suite.
We're also seeing interest from pharma and biotech customers and running service projects with hundreds of samples across various applications.
These projects span a broad range of disease families, including neuro degenerative diseases oncology cardiovascular disease reproductive health and aging.
Notably beyond applications in human samples are technologies inherently species agnostic in that it also enables researchers to use the product with our product suite and studies with model organisms and applications in other end markets such as animal health.
We're encouraged by the breadth of projects among our customers and are excited to see multiple studies double run earlier this year moving closer to manuscript submission.
Customer driven proof points are essential in developing the market for any first of its current product.
We believe that as more third party data into the public domain over the coming months and years, the differentiated value proposition of the particular product suite to provide novel insights into the proteome and to enable the next generation of multi Omics studies will become more and more established.
While third party data moves toward publications, we continue to publish.
The opinion of our technology to demonstrate its unique capabilities to that end during the third quarter, we announced the publication of a groundbreaking study in advanced materials, demonstrating the power of engineered nano BIA interactions to enable deep access to the proteome.
This paper highlights how the combination of proteomics method, neither engineering and machine learning enables the capture of thousands of proteins.
The published results significantly expand the fields understanding of the nano BIA interactions.
And how the optimization of these interactions could enable the discovery of novel Biomarkers and biologic insights.
It is exciting to see the groundswell of enthusiasm emerging around proteomics over the past few months. We attended several conferences, where we continue to see a growing interest in the presentations from both <unk> and our customers.
This content is featured and available on our website.
Most recently our team attended the American Society of Human Genetics conference or <unk>.
In Los Angeles, where we presented three posters, highlighting our premier genomic capabilities.
Although this conference is traditionally more focus on genomics.
Bolden by the exceptional enthusiasm for potential customers, who attended our posters talks and visited our booth.
We're seeing an increasing interest from genomics researchers who want to access pretty of genomic content and are excited for what the project graph product suite enables.
Importantly, a growing number of publications and commentary are also highlighting the challenges of existing targeted proteomics approaches.
Researchers are excited about having unbiased access to the proteome, which enables them to discover novel protein variance and deepen the multi omics insights.
To that end, we presented a poster at the shg demonstrating the power of our <unk> analysis.
To enable user friendly data visualization and reproducible analysis, our proteomic and genomic data at scale, including the identification and exploration of Varian peptides.
We also demonstrated how to put aerograph enables disease classification and biomarker characterization in the poster looking at 200 sample Alzheimer's cohort performed in approximately four weeks and generating data for over 5000 proteins.
Finally in our study of non small cell lung cancer patients.
We showed that peptide level resolution can reveal biologically important differences in the expression of distinct variance of the same protein and the protein isoform level and this important difference in protein variant expression would have been masked. If this study was performed at the protein level.
Without peptide level resolution.
These presentations help demonstrate to researchers how to predict graft product suite can enable high resolution prettier genomics by providing unbiased peptide level data at scale in a timeframe not previously possible.
Now turning our attention to our commercial progress.
There continues to be a growing interest and excitement surrounding the paragraph product suite across a wide range of customer types of applications.
We're seeing strong interest across geographies and our pipeline of qualified leads is equally split between academic and commercial customers.
As we've said previously the sales cycle for our commercial prospect its shorter relative to our academic prospects.
The enthusiasm for the value proposition of our technology continues to grow which has been a strong tailwind in the market full of economic headwinds.
We continue to pay attention to the evolving macroeconomic environment, particularly related to the uncertainty with respect to its impact on biopharma spending constrained.
Constrained capex budget staffing shortages and limited customer access in certain markets such as China.
These factors have served to elongate the purchasing decision for potential customers.
Our team continues to execute despite the challenges.
And we remain focused on the task at hand to that and we're making great progress hiring top talent to support our growing commercial efforts <unk> continues to attract leaders from across genomics proteomics and other leading <unk> companies.
And I'm very proud of the team we have built and are continuing to build under Scott commercial leadership.
Now we also continued to make important progress with the Premier genomics consortium.
As a reminder, this is a multiyear collaboration that we established with discovery life Sciences, and <unk> in which discovery will offer deep unbiased proteomics capabilities to their existing and new genomic services customers.
We did go through ramp to an annual capacity of over 100000 samples.
Discovery Life Sciences has both the project graph outside instruments installed.
We will undertake a 500 sample protocol genomic study to generate marketing data for their upcoming launch.
Finally, we are driving towards the next set of innovation to further extend the capabilities of the <unk> product suite.
Last quarter, we released our <unk> genomic workflow or past two point, though which makes high resolution <unk> genomics and novel biological insights accessible with a click of a button.
Early feedback has been extremely positive and we are committed to delivering continued advances that make it easier for different customer groups to adapt deep unbiased Korea genomics at scale.
As we mentioned we're extremely encouraged by the interest and reception received.
For a presentation on this topic at the recent <unk> conference.
I fear our overarching objective is to allow our customers to see deeper into the proteome by innovating across workflows in our instrument.
Assay consumables and data analysis software.
We are relentlessly focused on delivering a great customer experience from sample loading to final report.
Our data and software teams are continuously expanding our data tools data management and data analysis with an iron enabling a broad range of labs to adopt the <unk> graph.
We're also paving the path into the future as we expect to see studies experiences thousands and even tens of thousands of samples by innovating how large datasets can be managed to enable population scale deep unbiased proteomics studies.
One current example of how we're innovating with our analysis approach is to use our CRD generated peptide reference libraries using.
Using these libraries, we're able to go up to 50% deeper into the protium that we could previously re analyzing prior studies and discovering more content.
Our goal is to incorporate these libraries as well as multiple tools for larger studies and datasets into our prodrug graph analysis suite releases in 2023.
I'm. So excited for what is ahead for sphere, our customers continue to amaze us with their use of the photograph and to imagine what's possible in the proteomics studies, a testament to the value and power of our technology.
Im encouraged by the enthusiasm, we're seeing across our current and prospective customer base and I am confident that we are well positioned to capitalize on the large opportunity ahead with that I will now turn the call over to David.
Thanks Hamid total revenue for the third quarter of 2022 was $4 million.
Representing an increase of 84% compared to $2 2 million in the third quarter of 2021. The increase in third quarter revenue was primarily due to increased sales of the <unk> product suite and its related products.
Product revenue for the third quarter of 2022 was $3 $9 million, including related party revenue of $1 3 million and consisted of sales of SB 100 instruments consumable kits and platform evaluations relate.
Related party revenue of $1 $3 million represents product sales to <unk>.
Since our SPR grant from the NIH was renewed in the third quarter, we expect a resumption of revenue contributions from grant and research related collaborations beginning in the fourth quarter.
Total gross profit was $1 9 million for the third quarter of 2022, representing a gross margin of 49% our gross margins improved sequentially as a result of higher consumable sales in the third quarter, particularly as our early customers begin to ramp.
We will continue to see variability in our overall gross margin on a quarter by quarter basis, as a proportion of instrument and consumable sales will fluctuate between any given quarter.
We continue to expect our long term gross margins to be between 70% and 75%.
Total operating expenses for the third quarter of 2022 or $27 million, including $9 1 million of stock based compensation compared to $19 6 million, including $6 8 million of stock based compensation in the third quarter of 2021.
Research and development expenses for the third quarter of 2022 were $11 6 million, an increase of 49% compared to $7 7 million.
In the third quarter of 2021, the increase in R&D expenses was primarily due to an increase in product development efforts related to the <unk> product suite, including $2 $7 million in employee compensation costs and other related expenses, including stock based compensation due to growth in research and development personnel and an increase in expenses.
To the buildup of our facilities to support our R&D efforts.
Selling general and administrative expenses for the third quarter of 2022 were $15 4 million.
An increase of 30% compared to $11 9 million in the third quarter of 2021 the increase.
In SG&A expenses was primarily driven by a $1 $2 million increase in employee compensation and other related expenses and a $1 $1 million increase in stock based compensation. Other increases are attributable to an increase in professional and consulting fees and our facility expansion.
Net loss for the third quarter was $24 million compared to $18 4 million in the third quarter of 2021.
We ended the quarter with approximately $441 million in cash cash equivalents and investments and continued to be disciplined about our level of spend and the rate of return that we will earn on our deployed capital with our extremely strong balance sheet and disciplined deployment of capital. We believe we are well funded to execute on our strategic plan for many years to come.
To our outlook for the year, we continue to expect revenue to be in the range of $14 million to $16 million for 2022.
<unk> said, we are paying close attention to the evolving macroeconomic environment, which we believe may impact the timing and the scope of customers purchasing decisions. Despite this.
The environment, we are enthusiastic about the interest in our technology and expect full year revenues to be in the upper half of our guidance range.
At this point I would like to turn the call back to Amit for closing comments.
Thanks, David.
Made great strides this quarter and we continue to work closely with our customers as they scale their studies.
It is exciting to see the protocol products, we are being adopted by customers around the world to conduct first of their kind studies that explore the proteome at a depth resolution and scale that was not possible previously.
As we move ahead, we are excited about our opportunity focused on our goals and committed to enabling our customer success I look forward to updating you on our progress with that we will now open it up for questions.
And thank you.
As a reminder to ask a question. Please press star one one on your telephone we please ask that you limit yourself to one question one follow up please standby, we compile the Q&A roster.
One moment for questions.
And our first question comes from Dan Brennan from Cowen. Your line is now open.
Great. Thank you for taking the questions.
I guess, the first one would be <unk>.
Talk about significant interest.
Would be customers or existing customers to explore a broad range of.
I guess trials or Youre getting research can you just discuss some more color on the funnel, what it looks like and kind of.
What you've assumed within the full year guidance, particularly in light of the elongated close rates that you discussed.
Okay.
Yes.
Yes. Thank you so much.
So.
We're seeing interest.
Across really three different groups.
Proteomics folks that are mass spec experts.
Genomics folks.
That are really kind of new to proteomics.
And are interested in adding proteomics to their research and then genomic folks who are already generating proteomic data.
But are looking for alternatives to current offerings and looking to see more from their studies.
So broadly speaking that is the bulk of our customers were dealing with and that split is from a pipeline perspective about 50 50.
Between our commercial industry customers.
And academic customers and are both lead and our pipeline.
I think as we're bringing customers from interest to a close.
While the pipeline is about equally split between those two.
Seeing that the close rates for the commercial customers higher but I think it's just the cycle of the the funding dynamic differences between an academic researchers in the commercials researcher driving that.
More rapid.
Sales cycle in the context of a commercial customer.
Said.
Given the broader macro picture.
We are seeing that.
Purchasing decisions.
For potential customer both in terms of academic and commercial customers.
Getting elongated.
And in the breadth of the studies that folks are taking notes.
It's everything from basic research to translational work looking at cohort studies with diseases Neurodegenerative aging cancer.
And also we're seeing studies now being done.
In this space of animal health, but we actually just did.
A reasonable size service project focused on the non human sample type.
Yes, Dan.
Yeah go ahead, Dave Thank you.
David Thanks for the question just in terms of the guidance look I think we're trying to two.
And factor that in what we're seeing just from an interest level and then just some of the macro headwinds and so.
Trying to balance those two.
<unk> and headwinds on some of these things.
Okay.
You talked to having line of sight on a growing number of larger studies and also publications, which we agree we've heard publications will certainly drive interest and maybe help the sales process are certainly should.
Anything notable we should be looking for in the next.
Now whether it be in year end or in the first half of 'twenty three that could actually.
Is there any one or two really large studies that could be notable selling points here, what youre, saying.
Anything on that front that would give us a sense of what to watch for.
Sure Dan.
Look so just.
Paint the picture and then I'll kind of hone in with high resolution. So since we started.
<unk>.
Yeah.
There has been a 109.
Presentations at conferences.
And of that 190, <unk> 19 of them were from customers and this is going back to 2020.
Of course, we just started in 2020 that year had about.
Five presentations from a non from customers. So it really picked up in 'twenty one.
But what's interesting is if you look at 2022 alone.
66 presentations.
From theater and 12 from customers. This is at conferences.
But importantly, we need to see peer reviewed publications as tier has been publishing our first one with the nature of communication.
Then we did the pnas paper most recently the advanced materials paper, if I look at third party publication.
Visibility at least to a handful of manuscript from our customers.
And my expectation is we're going to be submitted tail end of this year and then heading into next year and I feel we should then begin to see.
This submission come out in the form of publication, probably the second half of 2023.
And the.
The scope of them are very I mean, just yesterday I was talking to.
Our proteomics Kols who had.
And instrument in his lab.
And.
He was just giving you an update on on a study that they had been where they were able to see upwards of 5000 proteins and his judgment.
And unbiased towards the oil mix with the ease of the workflow that offers for a high degree of.
Accuracy reproducibility to give you 5000 proteins is remarkable so that is the kind of things thats going to be getting published from a from an expert.
But in addition to that.
<unk> papers folks looking at different diseases, there's actually one.
Kols who is also.
Has used other platforms in the past.
Other proteomics platforms in the past or is that.
If you would add.
An expert user of the various FM for genomic technologies.
<unk> has also got some access to.
To the <unk> technology and my expectation is that data set is going to get published.
Anyway, So I think what's coming that should be really validating of exceptional quality of high impact papers.
We've seen some of it.
But these are really customer work customer data, we're still published at their own pace.
Great. If I can just sneak one more in any guideposts as we're heading into the fourth quarter, how to think about next year, obviously, you're not going to guide here, but I know consensus has revenue doubling so I'm just wondering given the comments on macro and elongated decision.
Decisions, but at the same time all of the momentum from the customer channel.
Wondering any any early thoughts about how we should think about next year.
Yes, Dan Thanks for the question.
Look as you know, we're not going to give guidance until our fourth quarter call next year look I think as we as we think about it and again some time will pass but certainly.
The macro environment is not lost on us.
Both with inflation and raising interest rates as well as some of the.
Layoffs and things people are seeing across the sector. So we're just being mindful.
Again, we always want to be.
And be thoughtful and conservative as we as we approach. It. So again I think we're just going to have to weigh everything.
Both again as we've said the positive tailwind from the customers relative to just the macro constraints of.
Budgets being tightened in Capex.
Decisions being elongated kind of how that all factors and so we'll update you in the first quarter, but that's generally what we're what we're weighing as.
As we look at it internally.
Okay, Alright, great guys. Thank you.
Thanks, David.
And one moment our next question.
And our next question comes from Derik de Bruin from Bank of America. Your line is now open.
Yes.
Hi, good.
Good afternoon so.
Dan just asked the question that was sort of the what I was getting from investors is just sort of the outlook for next year, but extending that a bit can you talk a little about sort of your opex plans I mean.
You have is you have a ton of cash on the balance sheet, but just how should we think about your spending patterns for next year and hiring and such.
Yeah, Derik thanks for the question.
Look we are.
Very prudent with our with our spend and our deployment of capital.
I think you can expect us to continue to be so.
<unk>.
We've also been real thoughtful about how we're going to spend that capital and so I don't think.
And the metric we tend to use as free cash flow and looking at.
Our free cash flow burn.
And look we're going to be very thoughtful about about keeping that in check.
And not not doing anything thats.
Imprudent, and we certainly feel like.
At our at our we do have a huge asset in our cash and we want to preserve that and deploy that as appropriately as we can over the course of next year. So that we're in good position to weather to weather. The storm, however, long it lasts and when it comes.
So again I think we're going to be really really mindful in terms of in terms of our spend.
Okay.
Yes.
Asking.
Asking prior question another way, it's like are there.
When you talk about major studies and things that were kicking off some of the.
Larger Scott Proteomics studies, I mean are those likely to kick in in 2023.
To be sort of like more meaningful contributors.
So the answer is.
It depends on how you define large.
Do I have visibility to 50000 sample study next year I don't do I have visibility to multi thousand.
Sample study next year I absolutely do.
But I think the key point to keep in mind is that.
Premise.
The underlying foundational premise for starting this company is consistently proving to be exactly correct, which is the field is directionally moving towards decides to bring the complexity of the protein after protein variant and the proteoform level.
We're beginning to see the scientific community talked about it in that way and see a uniquely offers that solution to them.
So.
We started up before seer, we're the largest unbiased study in plasma during the procurement was 48 samples now we've got customers that are talking about doing multi thousand sample studies.
Shortly after launch so this is remarkable and by the way I have every expectation that Eric.
We will absolutely see the multi tens of thousands of samples studies also come it's just not at least today I don't have visibility for that to be a 2023 event.
Okay.
Great. Thanks.
Thanks, Carrie and thank you.
And one moment for our next question.
And our next question comes from Tejas Savant from Morgan Stanley . Your line is now open.
Okay.
Hi, this is Neil on prepayments.
I wanted to build off that question on the elongation to purchasing cycles are these trends divergent as far as the different geographies that youre targeting and what is your current handle on the risk push us to the decisions that could swing placements between fed year end in early 'twenty three.
Yes, thanks Neil.
Yes, so in terms of the purchasing decisions.
I think the question was really around geography and are we seeing it's different in different places.
So certainly China remains China in terms of the Lockdowns and just lack of access to customers.
Depending on on how Thats rolling through.
So that continues to be a factor.
Access if you will.
In terms of Europe , I think that's certainly something we're certainly with the <unk>.
Inflation headwinds that theyre seeing there not to mention the.
The FX risk I mean, obviously.
We sell in dollars and our products become more expensive as they look to convert that into India into euro.
So again that just adds to the elongation of people thinking about it constrained cap capex budgets and the like.
And then in the U S. Again, I think as we've mentioned on previous calls again, it's really just the macro.
Not only inflation, but then capital budgets that people are.
Looking at Reassessing, we've seen approval levels get kicked up a level for people. So they need to go up a level to get approvals, where they wouldn't have had to in the past.
We've actually heard of a couple of customers, putting a freeze on all capex budget in our Capex spend for the rest of the year. So these anecdotes just kind of add up to people are just taking longer to think about things and I think it's globally with various factors.
Factoring in.
In terms of the global.
The global picture in terms of headwinds.
Got it and on that second part does the current guidance kind of contemplate that risk of any swings between quarter to quarter.
Yes, I mean again, we're trying to we left the guidance at 14% to 16 and as we said we do expect it in the upper half of that range, but as you know I mean look one given we're on a very small revenue base, one or two one or two deals can can swing it either way.
So again, we're just we're just trying to be prudent but as we sit here. Today. We are we are trying to factor in those various factors and in our remarks.
Okay I appreciate the color and one more from me. So as you progress towards those initial customer sample runs for the genomics consortium by year end any high level thoughts on.
How you see this partnership beginning to scale through 2023.
Yes, I'm not going to comment on 2023, yet with respect to the partnership I will say.
BLS and sacs have been fantastic partners I think we all have the same goal to get it up and running and scaling as quickly as we can and working closely with them again, we've got great interest.
In fact, we both had booth at <unk>.
And here in <unk>.
The team is.
Jointly talking to different people there were certain genomics customers you said.
Sounds great.
Would love to just get access to data how can I do that quickly.
For those customers, it's not probably not buying an instrument, but it's going going through one of our coes, including including the <unk> genomics consortium, so being able to kind of have them talk to dose at the same time. They are talking to us I think it was great and just kind of shows you.
The interest that people have in trying to access.
Access our data on a on a relative relatively quickly quick basis, and so we're really encouraged by that.
And look forward to working closely with both <unk> and <unk> next year to ramping the consortium further.
That's great I appreciate the color.
Thank you.
Yeah.
One moment for our final question.
And our final question comes from Julien Quinn from J P. Morgan Your line is now open.
Hi, David.
Emil for Julia. Thank you for taking my question. So my first question is about the gross margin I noticed this quarter you guys be a 5% increase in gross margin can you share a little bit about what are the contributors to the improvement.
In the growth and also moving forward Ryan what other incremental sources that is I've seen that can help improve the gross margin to that downturn, 70% goal other than.
Volume.
Got it thanks Amy.
So, yes, I mean, I think the big contributor this quarter was.
We did see.
Higher consumable sales, which is which is in.
In our view a positive.
In terms of people are ordering kits and using the system.
And so we feel like that is something that.
We will continue to contribute I will say just as a note of caution.
The mix is going to change quarter to quarter. So we will continue to see fluctuations again, a relatively small revenue base.
We will lead to some fluctuations in terms of the long term getting to the getting to the long term gross margins I think theres lots of areas, we see two to being able to drive that the first is <unk>.
Certainly improvement in the gross margins on our on our instrument we feel like there are ways. We can we can help improve that.
And that will certainly be a contributor and then we also see significant ways to improve.
Our overall gross margins on our on our kits not only.
The kids consume.
Not only.
Our nanoparticles, but all the reagents enzymes and buffers you need to run the experiment as well as plastic so as we continue to optimize that.
I think over time, not only from an assay perspective, but also.
In the kit and how we source those products in the kit will allow us to significantly improve the gross margins on the on the on the kits themselves and so the combination of that we feel and then and then you add in volume just the inherent benefits of increased volume that we'll be able to drive to those long term gross margins.
<unk>.
And again don't forget we only broadly commercial launch at the beginning of this year. So we're still early on the journey here in terms of that process improvement, but we are we are working on it and over the course of the next.
Couple of years, we'll continue to.
You see the gross margin to trend upward.
Thank you that's very helpful. My second question is about the revenue from the research customers.
I hope I remember correctly, you mentioned like starting Q4.
As the grants again improved.
Revenue from research customers or academic customers as Scott is going to start coming in so I'm just curious what's the scope of this part of revenue like how much is going to be spent.
How much is going to be on consumable and what's the run rate of that part of the revenue.
Yes, let me clarify that a little bit Amy.
So what we were talking about there as you may recall.
Had a.
Small business innovation research grant from the National Institute of Health.
And that was always characterized as grant revenue and what that is is that essentially grant revenue that allows us to conduct some research internally that then is reimbursed under this SPR grant from the NIH. So that grant actually expired at the end of May.
We applied to renew that grant to get dollars that had.
Fire and a lot of this was dragged out because of Covid.
So we applied in the third quarter and got approved.
So that that grant revenue in other words.
Revenue from getting reimbursed for our research under this grant will start to get reimbursed again in the fourth quarter. So.
It's simply a grant revenue.
Process that now is going to start again and as you can see historically.
Again that was in anywhere from tens of thousands to low hundreds of thousands of types of revenue in any given quarter.
And that is simply just a pass through reimbursement for research that we're doing under that grant.
Mhm, Okay. Thank you.
The clarification. My last question is about the clinical markets just curious Bob.
Are you guys.
Talking or have plans to work with liquid biopsy companies too.
Integrate the protium all mixed into the genomic analysis in there for the clinical studies just curious.
Yes. So of course the answer to that question is yes to all of it.
Number one we spun off our company other CF product gnomic set is squarely focused on multi omics.
Core too, which is deep unbiased proteomics, but in addition, looking at other omics as well.
Transcriptome Replicable litho mix.
And in addition to product mix.
We've had a number of dialogue with just about anyone that you can imagine in terms of the possibility of integrating.
This year photograph into their workflow and of course, we are.
Not disclosing the number of existing was the name of the existing customers in the liquid biopsy space.
Yes.
Adopted the platform.
Or are considering this so in general we've said that we will not disclose the name of our existing customers a certain set of customers who themselves have publicly announced are using the program.
Those customers, we discussed, but otherwise we don't but to answer your question.
Okay very unequivocally the answer is yes.
Okay. That's very helpful. Thank you so much.
And Keith.
And I am showing no further questions.
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