Q3 2023 SomaLogic Inc Earnings Call

Okay.

Good afternoon, and welcome to summer Logics third quarter 2023 earnings conference call. At this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes.

I would now like to call over to Noah corn with Gilmartin group Investor Relations for introductory comments.

Thank you today <unk> released financial results for the quarter ended September 32023.

Copy of the press release is available on the company's website before we begin I'd like to remind you that management will make forward looking statements. During this call within the meaning of federal Securities laws, which are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.

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

<unk> or performance are forward looking statements.

All forward looking statements, including without limitation those relating to our market opportunity gross margin and future financial performance.

Protein content and 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.

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

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

In addition, today's discussion will include references to non-GAAP financial measures, including adjusted EBITDA.

This non-GAAP measure is presented for supplemental informational purposes, only and should not be considered a substitute for financial information presented in accordance with GAAP.

See our press release on file with the SEC as of this afternoon for a reconciliation between GAAP net loss and non-GAAP adjusted EBITDA.

This call contains time sensitive information and is accurate as of the live broadcast today November eight 2023.

<unk> disclaims any intention or obligation, except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise and with that I will now turn the call over to Adam <unk> interim Chief Executive Officer.

Thanks, Noah good afternoon, and thank you for joining <unk> third quarter 2023 earnings conference call.

I am pleased to report another solid quarter marked by consistent progress on our commercial initiatives and increased operational rigor throughout the organization.

Despite a challenging macroeconomic environment, we achieved third quarter revenue of $22 million, reflecting 14% year over year growth when excluding nonrecurring licensing revenue that we received in the third quarter of last year.

Given our progress we are raising our full year 2023 revenue expectations to $82 million to $85 million from the prior range of $80 million to $84 million.

Before turning to our results in more detail I'd like to highlight our recent merger announcements.

In early October following a comprehensive review of strategic options, we announced our intention to combine in an all stock merger with standard bio tools, a leading provider of mass cytometry and Microfluidics technologies.

The merger establishes a leading platform of multi omics technologies to power research insights across a broad and growing market.

While expediting, some logics path to scale and cash flow breakeven.

It expands our commercial reach with cross selling opportunities and complementary offerings.

We believe the combined business will be positioned to meaningfully accelerate our path to profitability and we continue to expect the merger to close in the first quarter of 2024.

We expect our proxy to be on file shortly which will provide additional background and details regarding the transaction.

Now shifting to our third quarter results, starting with our core Soma scanned services offering.

Customer retention and acquisition remain the focus of our commercial efforts and we are finding new ways to validate the therapeutic pipelines of our customers.

For example, the recent rise in <unk>, one agonists have increased interest in the use of Soma scan to identify early indications of efficacy across clinical trial candidates.

In a recent paper published by diabetes care investigators were able to identify meaningful changes and cardiovascular risk.

Glucose tolerance liver fat body fat.

And cardiopulmonary fitness as a result of weight loss intervention by utilizing the Soma scan platform.

By attaining an early read on efficacy pharma investigators can allocate resources to the most promising therapeutic candidates before expensive and time consuming longitudinal studies are undertaken.

This represents just one of the many promises of the Soma scan platform.

In the third quarter, we continued to execute on our authorized site strategy. The primary goal of this strategy is to expand the ways in which customers can adopt and utilize soma scan.

We've been especially focused on expansion in Europe, and Asia Pacific is off as it is often more difficult for customers in those regions to send samples into our world class services lab in Boulder, Colorado.

As we establish more sites and generate higher sample volumes, we expect our authorized sites to offer more predictable and higher margin revenue.

While reducing sample delivery times for researchers globally.

In March we shared that we had established eight distinct authorized sites and we committed to doubling that base by year end as of today, we have 14 sites up and running and we remain on track to meet our commitment.

Turning to progress with Illumina.

In the third quarter, we also advanced our effort to grow our distributed business through our partnership with aluminum.

The partnership is focused on delivering a co exclusive co branded and GFS space to distributed solution.

Our work remains on track and we continue to expect early access for customers in Q1 of 'twenty 'twenty four.

This joint proteomics product will combine alumina is market, leading installed base and commercial force with the breadth and depth of the Soma scan assay.

To deliver differentiated insights to researchers across a wide range of customer segments while.

While attending the American Society of Human Genetics meeting in Washington D. C last week I had the opportunity to speak to a number of prospective customers, who are really excited about being able to leverage their illumina mgs instrumentation to gain deeper proteomics insights in their research the energy around this.

Is palpable and the level of interest from customers is high.

Finally, we are incredibly excited to announce the commercial launch of the 11 K Soma scan assay.

The new high Plex platform provides 11000 total protein measurements and is the largest proteomics offering available on the market.

We now have the ability to measure more than half of the human proteome in a single assay.

Following the seven case Soma scan offering our prior core technology. The 11 K Soma scan platform is expected to give researchers a considerable edge and the discovery of Biomarkers and drug targets for translational medicine proteins.

Proteins make up more than 90% of all known drug targets.

Having a broader view of the human proteome provided by this expanded platform gives.

It gives our customers more opportunities to make unique and novel biological discoveries.

The <unk> based platform retains the previous versions low coefficient of variation, which is the standard measure of reproducibility.

Versus the 10% to 20% in antibody based platforms. This improves accuracy with fewer smaller samples, which is often critical in population studies with limited sample volumes.

As early innovators in this space, we know that the discovery and development of disruptive therapeutics benefit substantially from a more complete view of the protium.

We look forward to driving adoption of this platform for the benefit of researchers across our customer base.

Now before I turn the call over to Elliott Laurie <unk>, our interim Chief Financial Officer, I'd like to reiterate that we are making strong progress towards our business objectives.

And we remain excited for our future as part of the combined company with standard bio tools, we look forward to the close of our merger and the realization of shareholder value that we can unlock together.

With that I'll turn the call over to Elliott <unk>, our interim Chief Financial Officer to review our financials.

Thank you Adam.

For the three months ended September 32023 was $22 million as compared to $41 7 million in the third quarter of 2022.

A 47% year over year decline on a GAAP basis.

Excluding $22 3 million in royalty revenue in the third quarter of 2022 from any D. Our revenue increased by 14% year on year.

Our underlying third quarter performance was driven by increasing adoption of the summit platform.

As well as an increase in revenue through our authorized site.

Product revenue associated with our authorized site strategy was up close to $2 5 million versus Q3 dollars 22.

<unk> 5 million or 17% sequentially from Q2 of this year.

Gross margin for the third quarter of 2023 was 47, 2% a decrease from 72% in the prior year period.

Excluding the <unk> royalty revenue in the third quarter of 2022.

<unk> margin increased by seven 4% year on year.

As we noted earlier in the year, we continue to expect full year 2023 gross margins in the mid 40% range and expect our margin profile to improve long term from our combined distributed solution and future royalty revenue.

Total operating expenses for the third quarter of 2023 were $38 5, Million% to 46% decrease from $70 7 million in the third quarter of 2022.

R&D expenses for the third quarter of 2023 were $10 5 million compared to $19 4 million in the third quarter of 2022.

Selling general and administrative expenses for the third quarter of 2023 were $23 9 million compared to $49 5 million in the third quarter of 2022.

Transaction expenses for the third quarter.

Right.

We're $4 $2 million compared to one.

And third quarter of 2020.

Transaction costs.

Sure.

Alright.

Perfect.

Okay.

So Q3 dollars 22 were related to the acquisition.

Out of that.

I would like to note the prior year's operating expenses.

The charges.

For stock based.

Okay.

Approximately.

Our third quarter results reflect substantial progress across ongoing expense reduction initiatives.

We remain on track to recognize approximately $170 million in full year operating expenses.

Adjusted EBITDA for the third quarter of 2023 was a loss of $20 1 million compared to an adjusted EBITDA loss of $30 2 million in the third quarter of 2022.

Accounting for the <unk> royalty in Q3 'twenty two the adjusted EBIT would have been a loss of $52 5 million.

We ended the third quarter with $454 million of cash cash equivalents and short term investments our cash burn in the quarter was $20 million, reflecting a significantly sequential decrease as we implement greater spending control.

We anticipate ending the year with approximately $430 million in cash equivalents and short term investments, implying a significantly lower cash burn rate than we had originally guided for the year.

Ending with our full year outlook as Adam mentioned, we are raising our 2023 revenue guidance to $82 million to $85 million.

At this point I'd like to turn the call back to Adam.

Yes.

Thanks Elliot.

In a moment I will turn the line over to our operator Shannon to open up the queue for questions.

Before I do I would like to ask that our audience focused our questions on our third quarter business results and progress.

Other than on the announced merger with standard bio tools as our proxy statement has not yet been filed Shannon were now ready for questions.

Thank you.

Reminder, to ask a question. Please press star one one you touched on telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Please standby one how the Q&A roster.

Our first question comes from the line of Cal Nixon with Canaccord Genuity. Your line is now open.

Our consortium loans upon local was up over a quarter ago.

This group of questions here.

So looking at the enhanced both the lager.

Coupled with new indications that we can do so too.

I voted for him.

While it's still early days, but I guess this is more of those customers get it.

Overall, if you look forward what are the expectations there.

Thank you Shannon I think as you just saw from the tax rate.

Elliot and I are unable to we weren't able to hear the question.

We're hearing a lot of background static.

Cal could you please repeat your question.

Hi, yes.

So.

So three four months of commerce.

So regarding the <unk> protein library I was just curious what new indications.

We are seeing researchers.

Huge library for I know, it's early days, so just kind of curious on the web.

Sure.

No.

Type of research.

Thanks.

Yes.

Okay.

From a revenue perspective.

So you talked about.

One of the things that with pricing.

Got it.

Okay.

Yes.

It's really market.

Different customers.

We've got incredible customer feedback.

But we also.

We wanted to ensure that we were looking out ahead into areas of scientific interest in sprint.

Gathering proteins with new menu update.

I hope that's audible.

Sure.

And I'll defer back to Shannon to you.

Got it thank you very much.

Definitely not.

And then my other question just would be.

I guess looking at the performance would you say that at this point.

The deposits I saw would you say some of this before.

This is driven more so therefore, the supervisory researcher.

Thanks.

Yeah, I would say most of the we're seeing fantastic growth in both customer segments.

But we're really starting to accelerate and penetrate more deeply.

<unk> Biopharma.

Those as I have discussed earlier can oftentimes sticky.

A longer road.

Okay.

And then with those customer basis.

And we're starting to see more and more growth different therapeutic areas and move itself.

The discovery aspect all the way.

As I highlighted on <unk> one.

In our comments, we're finding ourselves also in those clinical discussions as well.

Got it thank you very much.

Thank you.

Our next question is coming from the line of Dan Brennan with TV Cowen. Your line is now open.

Hey, good afternoon, guys, it's Kyle on for Dan. Thanks for taking the questions I had one on the kids business.

In regards to the authorized sites.

Sit here after 2014 sites.

Can be level with each of those sites and the plans to expand this in 'twenty four.

Yeah. So.

Some of those new sites that we've gotten up and running.

But yes.

And that's one of the things we've tried to do over the last several quarters.

Is.

Input collecting great Portland.

And we've done so thus far so activity level is great.

Absolutely.

Before.

Okay.

In 2016.

Got it thank you and how should we sort of think about the Q over Q.

Growth of the business it ticked up sequentially.

Guys beat the quarter by about $1 billion of half relative to the street and raised the midpoint of the guide.

Should we.

Gary the speed sorted over in Q4 history numbers look relatively fine where they are.

How should we think about that.

I apologize could you repeat the question.

Yes, we might be having said my technical difficulties here.

So so you beat the quarter by about $1 million of have raised the midpoint of the guide about $1 million five you're comfortable where the street is for the fourth quarter. So I guess, what are sort of the puts and takes.

<unk>.

Yes, I think part of the reason that we.

Increased guidance, we were expecting.

The fourth quarter to look.

More similar too.

The third quarter.

And so we're feeling good about that business certainly.

Sure.

Right now.

Okay.

But robust.

Great.

Got it thank you.

Thank you and as a reminder to ask a question at this time. Please press star one one you touched on telephone.

Our next question comes from the line of Daniel curious with Stifel. Your line is now open.

Hi, it's Paul on for Dan.

Apologies. If this has been a lot of trouble here, but I think the audience.

Just wondering in terms of.

Setting up these offer a place now that you're up to 14.

I mean, I guess, a little more frequent let me talk about are you starting to see any improvement in terms of faster pace of training.

I stayed up to speed in terms of normalized pull through is that kind of something that we are seen as more and more operators are getting out there or is it just.

More status quo.

Our new customers.

No I think.

Let me say this.

Yes.

I think we are seeing the benefits.

As we learn with each new on Brexit Brexit.

Site readiness.

Great.

Great Group.

Yes.

Arthur.

And our field.

Good evening.

Right.

We are ready for this when we show up.

Robots.

Robotics.

But there Rick.

Yes.

All right.

We continue to improve.

The site.

In Q1.

And as such some growth.

Ultimately working very.

Very high quality.

Correct.

Zero.

Sure.

Yeah.

Okay, Great and then just the.

One is in terms of.

The guidance raise is that something that.

Is there a specific geography that contributed.

So it's about where you're seeing more strength than you expected a quarter ago or is that.

Relatively broad based.

So it's fairly broad based to be honest with you it isn't any different.

<unk> in particular.

Well aware.

The second part.

China, but are closed.

Alright.

Counting.

So a lot less to foreclosure.

So what we're seeing is really more broad based growth as we expand our consent decree.

Dark, but only limited.

In Europe.

Correctly.

We're seeing really nice uptake in the.

Great. Thanks for taking my question.

Thank you.

I would now like to turn the call back over to Adam for closing remarks.

Great. Thanks, Shannon policies.

For the technical difficulty right into the Q&A opens up total system one of them.

I, just really want to thank you.

Your time and your efforts accordingly.

And we look forward to another strong quarter in closing the merger with coronavirus.

So Mike.

This concludes today's conference call. Thank you for participating you may now disconnect.

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