Q2 2024 Singular Genomics Systems Inc Earnings Call
Speaker Change: 0 0 0 0 0
Operator: Daniel Brennan, John Sourbeer, John Sourbeer, Matthew Sykes, Philip Taylor, John Sourbeer [inaudible] John Sourbeer, Greetings. Welcome to the Singular Genomics second quarter and business update. Time, all participants are in a listen-only mode.
Speaker Change: Daniel Brennan, John Sourbeer, Matthew Sykes
Speaker Change: Greetings. Welcome to the Singular Genomics second quarter and business update call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Philip Taylor.
Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone. Please note this conference is being broadcast. Now, I turn the conference over to your host, Philip Taylor.
Philip Taylor: Thank you, Operator. Presenting today are Singular Genomics founder, chair, and chief executive officer, Drew Spaventa, and the company's chief financial officer, Dalen Meeter. Earlier today, Singular Genomics released financial results for the three months ended June 30, 2024. A copy of the press release is available on the company's website. Before we begin, I'd like to inform you that comments and responses to your questions during today's call reflect management's views as of today, Tuesday, August 13, 2024, only and will include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information related to our financial and operating results, plans, and strategies.
Speaker Change: [inaudible]
Speaker Change: Thank you, operator. Presenting today are Singular Genomics founder, chair, and chief executive officer, Drew Spaventa, and the company's chief financial officer, Dalen Meeter.
Speaker Change: Earlier today, Singular Genomics released financial results for the three months ended June 30, 2024. A copy of the press release is available on the company's website.
Philip Taylor: Actual results may differ materially from those expressed or implied by these statements as a result of certain risks and uncertainties. These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission, including our most recent Form 10-Q and 10-K filings and the Form 8-K filed with today's press release. Our SEC filings can be found on our website or on the SEC's website. However, investors are cautioned not to place undue reliance on forward-looking statements.
Speaker Change: Before we begin, I'd like to inform you that comments and responses to your questions during today's call reflect management's views as of today, Tuesday, August 13, 2024 only.
Speaker Change: and we'll include forward-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information related to our financial and operating results, plans, and strategies.
Speaker Change: Actual results may differ materially from those expressed or implied by these statements as a result of certain risks and uncertainties.
Speaker Change: These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission, including our most recent Form 10-Q and 10-K filings and the Form 8-K filed with today's press release.
Speaker Change: Our SEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on forward-looking statements. We disclaim any obligation to update or revise these forward-looking statements.
Speaker Change: Please note that this conference call will be available for audio replay on our website at investor.singulargenomics.com in the presentation and events section.
Bruce Spaventa: We disclaim any obligation to update or revise these forward-looking statements. Please note that this conference call will be available for audio replay on our website at investor.singulargenomics.com in the presentation and event section. With that, I will now turn the call over to CEO Bruce Spaventa. Good afternoon, and welcome to Singular Genomics' second quarter 2024 earnings call. Q2 was a busy and productive quarter for our team. In Q2, we progressed the development of the G4x Spatial Sequencer, initiated our first Spatial Technology Access Services project, and added to our spatial pipeline of customers interested in services, collaborations, and G4x instruments.
Speaker Change: With that, I will now turn the call over to CEO Bruce Spaventa.
Bruce Spaventa: We will focus our call on the following areas. One, revisiting our strategy following the pivot to spatial sequencing earlier this year. 2, a summary of the second quarter results, and 3, an update on the development of the G4x spatial sequencer and our spatial services. We announced a strategy shift in February at AGBT when we unveiled the G4x spatial sequencer. The G4X is being developed to offer readouts of targeted transcripts, targeted proteins, and a fluorescent H&E stain, all in the same tissue section.
Bruce Spaventa: Good afternoon and welcome to Singular Genomics second quarter 2024 earnings call.
Bruce Spaventa: Q2 was a busy and productive quarter for our team. In Q2, we progressed development of the G4x Spatial Sequencer, initiated our first Spatial Technology Access Services projects.
Speaker Change: and add to our spatial pipeline of customers interested in services, collaborations, and G4X instruments.
Speaker Change: We will focus our call on the following areas.
Speaker Change: 1. Revisiting our strategy following the pivot to spatial sequencing earlier this year. 2. A summary of the second quarter results. And 3. An update on the development of the G4x Spatial Sequencer and our spatial services.
Speaker Change: We announced a strategy shift in
Speaker Change: The G4X is being developed to offer readouts of targeted transcripts, targeted proteins, and a fluorescent H&E stain, all in the same tissue section.
Bruce Spaventa: In addition, its novel capabilities will include DirectSeq, which is the sequencing of RNA in SIT2 and has the potential to open new areas of scientific discovery. This combination of readout modalities will offer significantly higher throughput than any spatial profiling technologies currently on the market. We continue to be encouraged by discussions with spatial experts and prospective customers. Spatial biology is quickly growing in many customer segments, and throughput is a significant limitation.
Speaker Change: In addition, its novel capabilities will include DirectSeq, which is the sequencing of RNA in SIT2 and has the potential to open new areas of scientific discovery.
Speaker Change: This combination of readout modalities will offer significantly higher throughput than any spatial profiling technologies currently on market.
Speaker Change: We continue to be encouraged by discussions with spatial experts and prospective customers.
Speaker Change: Spatial biology is quickly growing in many customer segments and throughput is a significant limitation. We believe that G4S will be uniquely suited to address these pain points and has the potential to accelerate growth in the spatial market.
Bruce Spaventa: We believe that G4X will be uniquely suited to address these pain points and has the potential to accelerate growth in the spatial market. The business setup is encouraging in that we plan to deliver cost savings to our customers while supporting a high-margin sustainable business. In addition to the exciting development work to get G4X to market, we are focused on supporting our existing G4 customers, most of which we believe will benefit from our move this space and are poised to become G4X customers.
Speaker Change: The business setup is encouraging in that we plan to deliver cost savings to our customers while supporting a high-margin sustainable business
Speaker Change: In addition to the exciting development work to get G4X to market, we are focused on supporting our existing G4 customers, most of which we believe will benefit from our move to Spatial and are poised to become G4X customers.
Bruce Spaventa: Supporting and continuing to improve their G4 sequencing experience is paramount to our offering a second product to an existing customer base. The G4 and G4X share the same platform, which will allow for a streamlined upgrade process for existing G4 customers.
Speaker Change: Supporting and continuing to improve their G4 sequencing experience is paramount to our offering a second product into an existing customer base. The G4 and G4X share the same platform which will allow for a streamlined upgrade process for existing G4 customers.
Bruce Spaventa: Our strategy with existing GFOR customers is to continue to improve their experience and facilitate higher usage of the GFOR sequencer as we prepare them to convert to spatial sequencing when the GFORx becomes available. We are seeing improved reliability and usage across the existing installed base. System uptime has been averaging 95% during the quarter.
Speaker Change: Our strategy with existing G4 customers is to continue to improve their experience and facilitate higher usage with the G4 sequencer as we prepare them to convert to spatial sequencing when the G4x becomes available.
Speaker Change: We are seeing improved reliability and usage across the existing installed base.
Speaker Change: System uptime has been averaging 95% during the quarter. Average annualized consumable pull-through for the installed base was approximately $60,000 in Q2, which was roughly double Q1.
Bruce Spaventa: Average annualized consumable pull-through for the installed base was approximately $60,000 in Q2, which is roughly double Q1. In addition, we recently initiated the rollout of our V2 system upgrade package, which will include system performance and feature enhancements to further improve the reliability and usage of the system as we continue to prepare for conversion to spatial sequencing on the G4X. Now, let's move into the second quarter results. We shipped two G4 instruments during the quarter and generated $0.7 million in revenue. Of these shipments, one was to an academic core lab, and one was to a commercial lab.
Speaker Change: In addition, we recently initiated the rollout of our V2 system upgrade package, which will include system performance and feature enhancements to further improve the reliability and usage of the system as we continue to prepare for conversion to spatial sequencing on the G4X.
Speaker Change: Now, let's move into the second quarter results.
Speaker Change: We shipped two G4 instruments during the quarter and generated $0.7 million in revenue. Of these shipments, one was an academic core lab and one was to a commercial lab.
Bruce Spaventa: One of the most important focus areas for us is to maintain our emphasis on supporting existing customers. We continue to see improvements in system utilization and consumables pull through. Q2 was our highest quarterly total yet for consumable orders and shipments. Now, let's turn to an update on our development of G4X. In R&D, we are advancing work on instrument method development, expanding the compatible tissue types, and improving protocol performance for combined readout modalities.
Speaker Change: One of the most important focus areas for us is to maintain our emphasis on supporting existing customers. We continue to see improvements in system utilization and consumables pull-through. Q2 was our highest quarterly total yet for consumable orders and shipments.
Speaker Change: Now, let's turn to an update on our development of the G4X.
Speaker Change: In R&D, we are advancing work on instrument method development, expanding the compatible tissue types, and improving protocol performance for combined readout modalities.
Bruce Spaventa: Our internal focus is centered around developing the GFRUX platform and optimizing the spatial sequencing methods and protocols. Our planned initial G4X kit offering will be our V1 immuno-oncology panel with 300 genes, 12 proteins, and the ability to customize content. We are excited about the technology as we have continued to progress the development of capabilities and methods. In services, we continue to see growing interest in the funnel of service projects as part of the G4x Spatial Sequencing Technology Access Services Program that was launched in the second quarter.
Speaker Change: Our internal focus is centered around developing the GFRUX platform and optimizing the spatial sequencing methods and protocols.
Speaker Change: Our planned initial G4X kit offering will be our V1 immuno-oncology panel with 300 genes, 12 proteins, and the ability to customize content. We are excited about the technology as we have continued to progress the development of capabilities and methods.
Speaker Change: In services, we continue to see growing interest in the funnel of service projects as part of the G4X Spatial Sequencing Technology Access Services program that was launched in the second quarter.
Bruce Spaventa: Our strategy and services are twofold; to learn from running initial customer samples in order to accelerate product development and generate customers that will buy the instrument and consumables when available. Our initial focus in services is our V1 immuno-oncology panel. Project Submissions in our Service Funnel make it clear that a lower-target FLEX, higher-sample throughput offering is addressing an unmet need in the market. Several months ago, we opened a GFORX Spatial Research Grant Award Program, which was well-received by prospective customers and researchers from some of the top institutions across the world. We received over 50 applications from institutions interested in using GFORX in various applications, including cancer research, the study of autoimmune diseases, chronic disease research, cardiovascular and liver diseases, vaccine development, and neuroscience.
Speaker Change: Our strategy in services is twofold, to learn from running initial customer samples in order to accelerate product development and generate customers that will buy the instrument and consumables when available. Our initial focus in services is our V1 immuno-oncology panel.
Speaker Change: The project submissions in our service funnel make it clear that a lower-target FLEX higher-sample throughput offering is addressing an unmet need in the market.
Speaker Change: Several months ago, we opened a G4X spatial research grant award program, which was well-received by prospective customers and researchers from some of the top institutions across the world.
Speaker Change: We received over 50 applications from institutions interested in using the G4X in various applications, including cancer research, the study of autoimmune diseases, chronic disease research, cardiovascular and liver diseases, vaccine development, and neuroscience.
Bruce Spaventa: We look forward to sharing more information about the award recipients and our collaborations with these institutions to bring forward these exciting demonstrations of G4x applications later this year. Lastly, we are planning for our G4x Early Access Program, which we intend to deliver late this year. This will include a select number of customers with early access to G4x. The purpose of early access is to both learn and incorporate feedback for a broader commercial launch, as well as to generate demand. Now, I'll turn it over to Dalen to go through the details of our second quarter financial results. Thank you, Drew.
Speaker Change: We look forward to sharing more information about the award recipients and our collaborations with these institutions to bring forward these exciting demonstrations of G4X applications later this year.
Speaker Change: Lastly, we are planning for our G4X early access program, which we intend to deliver late this year. This will include a select number of customers with early access to the G4X. The purpose of early access is to both learn and incorporate feedback for broader commercial launch as well as to generate demand.
Speaker Change: Now, I'll turn it over to Dalen to go through the details of our second quarter financial results.
Dalen Meeter: Revenue for the second quarter of 2024 was approximately $0.7 million, predominantly made up of $0.4 million from revenue recognized on consumable sales and $0.3 million from revenue recognized on one capital purchase instrument placement during the quarter. Gross profit was negative $0.2 million in the second quarter of 2024, compared to negative $0.1 million in the second quarter of 2023. Our gross margin was negative due to discounts on G4 instrument sales, our use of the reagent rental and other non-capital purchase models, and higher costs associated with the support of system placements, partially offset by higher margins on increased consumable sales.
Dalen Meeter: Thank you, Drew. Revenue for the second quarter of 2024 was approximately $0.7 million, predominantly made up of $0.4 million from revenue recognized on consumable sales and $0.3 million from revenue recognized on one capital purchase instrument placement during the quarter.
Dalen Meeter: Gross profit was negative 0.2 million dollars in the second quarter of 2024 compared to negative 0.1 million dollars in the second quarter of 2023.
Speaker Change: Our gross margin was negative due to discounts on G4 instrument sales, our use of the reagent rental and other non-capital purchase models, and higher costs associated with the support of system placements partially offset by higher margins on increased consumable sales.
Dalen Meeter: Operating expenses for the second quarter of 2024 totaled $22.6 million, compared to $27.5 million in the second quarter of 2023. These totals included non-cash stock-based compensation expense of $2.2 million in Q2 2024 and $2.8 million in Q2 2023. The year-over-year decrease was primarily driven by a non-cash expense in Q2 2023 related to a one-time adjustment in the carrying value of property, plant, and equipment and decreases in employee compensation costs due to reduced headcount.
Speaker Change: Operating expenses for the second quarter of 2024 totaled $22.6 million compared to $27.5 million in the second quarter of 2023.
Speaker Change: These totals included non-cash stock-based compensation expense of $2.2 million in Q2 2024 and $2.8 million in Q2 2023.
Speaker Change: The year-over-year decrease was primarily driven by a non-cash expense in Q2 2023 related to a one-time adjustment in the carrying value of property, plant, and equipment and decreases in employee compensation costs due to reduced headcount.
Dalen Meeter: Net loss in the second quarter of 2024 was $21.3 million, or $8.57 per share, compared to $25.6 million, or $10.58 per share, in the second quarter of 2023. The weighted average share count for the second quarter of 2024 used to calculate net loss per share was approximately $2.5 million. Ending cash, cash equivalents, and short-term investments, excluding restricted cash, totaled $133.2 million.
Speaker Change: Net loss in the second quarter of 2024 was $21.3 million, or $8.57, compared to $25.6 million, or $10.58 per share.
Speaker Change: in the second quarter of 2023. The weighted average share count for the second quarter of 2024 used to calculate net loss per share was approximately $2.5 million.
Speaker Change: And in cash, cash equivalents, and short-term investments, excluding restricted cash, totaled $133.2 million.
Dalen Meeter: Cash burn for the second quarter was approximately $17.5 million, which was sequentially lower than the previous quarter driven by the timing of cost savings measures implemented. Lastly, I wanted to take a moment to comment on the lease amendment that was announced last week. I'm pleased to note that we successfully amended a long-term lease obligation, right-sizing our facility's footprint to better align with our operational needs. This move not only optimizes our space utilization, but it also reduces our long-term lease obligations by approximately $50 million.
Speaker Change: Cash burn for the second quarter was approximately 17.5 million dollars which was sequentially lower than the previous quarter driven by the timing of cost savings measures implemented.
Dalen Meeter: This amendment will enhance our longer-term financial flexibility, allowing us to focus more resources on development and commercialization of the G4X. The amendment included a one-time upfront lease modification payment of $4.5 million, which was paid upon execution of the agreement.
Speaker Change: Lastly, I wanted to take a moment to comment on the lease amendment that was announced last week. I'm pleased to note that we successfully amended a long-term lease obligation right-sizing our facilities footprint to better align with our operational needs.
Speaker Change: This move not only optimizes our space utilization, but it also reduces our long-term lease obligations by approximately $50 million.
Speaker Change: This amendment will enhance our longer-term financial flexibility, allowing us to focus more resources on development and commercialization of the G4X.
Speaker Change: The amendment included a one-time, upfront lease modification payment of $4.5 million, which was paid upon execution of the agreement.
Dalen Meeter: As such, we expect our Q3 2024 cash burn to be higher than the second quarter. We do not expect the lease modification payment to have a material impact on our previous comments around cash runway extending to late 2026. Back to you, Drew.
Speaker Change: As such, we expect our Q3 2024 cash burn to be higher than the second quarter. We do not expect the lease modification payment to have a material impact on our previous comments around cash runway extending to late 2026.
Bruce Spaventa: Thank you, Dalen. I want to thank all our employees for their hard work and dedication over the last quarter. We are excited by the level of interest from early collaborators and prospective customers, as evidenced by the growth of inbound inquiries around our technology access services and research collaborations and growth in the sales fund. G4X's designed ability to read transcripts, proteins, and a fluorescent H&E stain at scale will provide a unique solution in an exciting, high-growth market.
Speaker Change: Back to you, Drew.
Drew Spaventa: Thank you, Dalen.
Drew Spaventa: I want to thank all our employees for their hard work and dedication over the last quarter.
Speaker Change: We are excited by the level of interest from early collaborators and prospective customers as evidenced by the growth of inbound inquiries around our technology access services and research collaborations and growth in the sales funnel.
Speaker Change: The G4X's designed ability to read transcripts, proteins, and a fluorescent H&E stain at scale will provide a unique solution in an exciting, high-growth market.
Bruce Spaventa: Where other spatial solutions in the market are pushing up on TargetPlex, we see an unmet need for lower TargetPlex and higher sample throughput. We look forward to updating you on our progress through the rest of the year. Now, let's open it up for questions. Operator.
Speaker Change: Where other spatial solutions in the market are pushing up on TargetPlex, we see an unmet need for lower TargetPlex and higher sample throughput. We look forward to updating you on our progress through the rest of the year. Now let's open it up for questions.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
Speaker Change: Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. This question is from Dan Brennan with T.D. Cowan.
Speaker Change: And the first question is from Dan Brennan with T.D. Cowan. Please proceed.
Dan Brennan: Please proceed. Great, thanks guys. Thanks for the congratulations on the quarter here and continued progress. Maybe could you start off with just, you know, timelines?
Dan Brennan: Great. Thanks, guys. Thanks. Congrats on the quarter here and continued progress.
Bruce Spaventa: I think you reiterated them just now, but just kind of walk through a little bit about early access and then about commercial launch. I think last quarter you guys were discussing this in and around Q2. Just can you guys confirm, are we still thinking of the same kind of timelines right now? Hey Dan.
Speaker Change: Maybe could you start off with just, you know, timelines? I think you reiterated them just now, but just kind of walk through a little bit about early access and then about commercial launch. I think last quarter you guys were discussing in and around Q2. Just can you guys confirm, are we still thinking of the same kind of timelines right now?
Bruce Spaventa: Thanks for the question. Yeah, I'll start off with timelines. We're just starting services now and in the midst of a few very exciting projects. We're on track to do our first early access later this year, probably at the end of Q4, and then we'll sequentially roll other early access sites in through the first part of Q1. And at this point, we are on track. We are planning to have a commercial launch towards the end of Q2 next year. Great
Speaker Change: Hey Dan, thanks for the questions.
Speaker Change: Yeah, I'll start off with timelines
Speaker Change: We're just starting services now and in the midst of a few very exciting projects.
Speaker Change: We're on track to do our first early access later this year probably end of Q4
Speaker Change: And then we'll sequentially roll other early access sites in through the first part of Q1. And at this point, we are on track. We are planning to have a commercial launch towards the end of Q2 next year.
Bruce Spaventa: And then could you just speak to, both, I guess, the pathway to the commercial specs, which you guys reiterated, and then as you have more customers kind of evaluating the product right now, just kind of walk through some of the experiences. I know you spoke about some of Dana-Farber and Harvard, I think, on the last call, but just kind of how high the interest level is, just a little more granularity on that front.
Speaker Change: Thank you.
Speaker Change: Great. And then could you just speak to...
Speaker Change: You know both I guess the you know pathway to the commercial specs which you guys reiterated and then as you had more Customers kind of evaluating the product right now Just kind of walk through some of the experiences. I know you spoke about some of the
Speaker Change: Dana Farber and Harvard, I think, on the last call, but just kind of, you know, how is the interest level? Just be a little more granularity on, you know, that front. And then the funnel, I think the last time we talked about maybe dozens of customers. I know it's not a firm kind of
Bruce Spaventa: And then the funnel, I think the last time we talked about maybe dozens of customers. I know it's not a firm kind of backlog, if you will, but just speak to kind of the interest level, if you can, as well. Absolutely.
Bruce Spaventa: So we feel like we've really hit on something here based on the response that we've gotten both from services companies and from people interested in buying a system or partnering to set up services of their own. I think that will be something unique for Spatial in G4X that is different from G4 in that a lot of the customers we're talking with, whether they're a large core lab or a CRO or a major oncology medical center, they are very direct.
Speaker Change: Backlog, if you will, but just speak to kind of the interest level if you can as well.
Speaker Change: Absolutely.
Speaker Change: You know, we feel like we've really hit on something here based on the response that we've gotten both from services And from people interested in buying a system or partnering to set up services of their own
Speaker Change: I think that will be something unique for Spatial in the G4X that was different from G4 in that a lot of the customers we're talking with, whether they're a large core lab or a CRO or a major oncology medical center.
Bruce Spaventa: And one of the biggest issues they have is throughput for Spatial and cost per sample. And that's exactly what we're addressing. The feedback that we get relates to very positive directional information on the scope of the product. And what I mean by that is we're targeting 300 genes, which is fewer transcripts than most of the other Spatial platforms, at least at this point, and about a dozen proteins. And what most people have said is that it's more than enough for the transcripts and the proteins, 300 genes, and a lot of times, it's less than 10 proteins people want to look at.
Speaker Change: They are very direct and one of the biggest issues they have is is throughput for spatial and cost per sample
Speaker Change: and that's exactly what we're addressing. The feedback that we get is...
Greetings.
Speaker Change: You know, relates to, you know, very positive directional information on the scope of the product.
Operator: Welcome to the Singular Genomic Second Quarter and Business Update Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.
Speaker Change: And what I mean by that is, you know, we're targeting 300 genes, which is, you know, less transcripts than most of the other spatial platforms, at least at this point.
Speaker Change: and about a dozen proteins, and what most people have said is...
Philip Taylor: I will now turn the conference over to your host, Philip Taylor.
Speaker Change: That's more than enough on the transcripts and the proteins, you know, 300 genes and a lot of times it's less than 10 proteins people want to look at, but if you can do that in combination, the same section, and you can do that at a lower sample cost point and more samples per run, that's exactly what they need.
Bruce Spaventa: But if you can do that in combination, in the same section, and you can do that at a lower sample cost point and more samples per run, that's exactly what they need. So we're really seeing that across the board in a number of different settings and applications. I think one other thing that is worth mentioning. If we segment the customer type into three buckets, in sequencing, we have about 30 instruments out right now, and the majority of those are in academic settings.
Philip Taylor: Thank you, operator, presenting today are Singular Genomics Founder, Chair, and Chief Executive Officer, Drew Spaventa, and the company's Chief Financial Officer, Dalen Meeter. Earlier today, Singular Genomics released financial results for the three months and a June 30th, 2024. A copy of the press release is available on the company's website.
Speaker Change: So we're really seeing that across the board in a number of different settings and applications. I think one other thing that is worth mentioning, if we segment the customer type into three buckets,
Philip Taylor: Before we begin, I'd like to inform you that comments and responses to your questions during today's call reflect management views as of today, Tuesday, August 13, 2024, only, and will include board-looking statements and opinion statements, including predictions, estimates, plans, expectations, and other information related to our financial and operating results, plans, and strategies. Actual results may differ materially from those expressed or implied by these statements as a result of certain risks and uncertainties.
Speaker Change: In sequencing, you know, we have about 30 instruments out right now. The majority of those are in academic settings.
Bruce Spaventa: There are two other segments that G4X applies to that were a little bit different when we started talking with prospective customers. And one is CROs, or Contract Research Organizations, that are providing services in a large part to pharma. And the other is going to be magical medical centers, places where there are high-throughput core labs that right now are doing pathology or looking at proteins and doing tumor microarrays. And that's another area where the cost and the throughput are prohibitive right now from scaling.
Speaker Change: There are two other segments that the G4X applies to that was a little bit different when we started talking with prospective customers and one is CROs or contract research organizations.
Speaker Change: that are providing services in a large part to pharma.
Speaker Change: And the other is going to be magical medical centers, places where there's high throughput core labs that right now are doing, you know, pathology or looking at proteins and doing tumor microarrays. And that's another area where the cost and the throughput is prohibitive right now from scaling and a lot of these places.
Philip Taylor: These risks and uncertainties are more fully described in our press release issued earlier today and in our filings with the Securities and Exchange Commission, including our most recent form 10Q and 10K filings in the form 8K filed with today's press release. RSEC filings can be found on our website or on the SEC's website. Investors are cautioned not to place undue reliance on board-looking statements. We described any obligation to update or revise these board-looking statements.
Bruce Spaventa: And a lot of these places say things like, we have 40,000 or 50,000 samples a year we want to run, and we run less than 10. And that's really a symptom of cost and throughput. So it's really encouraging. On the funnel side of things, both on the instrument side and the services side, we have over 50 at this point, and it's kind of pointless to really count more than 50.
Speaker Change: say things like we have 40,000 or 50,000 samples a year we want to run and we run less than 10 and that's really a symptom of cost and throughput. So it's really encouraging. On the funnel side of things...
Speaker Change: Both on the instrument side and the services, we have over 50 at this point, and it's kind of pointless to really count more than 50. What we're doing right now is trying to prioritize.
Bruce Spaventa: What we're doing right now is trying to prioritize what are the projects that don't require customization or what are the projects that we can do as a pilot now that have larger batches of work to come behind them. And we're just trying to prioritize based on those factors on the services side. And then on the commercial side, I think we still have some time to think about that.
Philip Taylor: Please note that this conference call will be available for audio replay on our website at investor. SingularGenomics.com in the presentation and event section.
Speaker Change: What are the projects that don't require customization or what are the projects that we can do as a pilot now that have
Speaker Change: larger batches of work to come behind them. And we're just trying to prioritize based on those factors on the services side and then on the commercial side, I think I still have some time to think about that.
Drew Spaventa: With that, I will now turn the call over to CEO, Bruce Paventa. Good afternoon and welcome to SingularGenomics, second quarter 2024 earnings call. Q2 was a busy and productive quarter for our team. In Q2, we progressed development of the G4X spatial sequencer, initiated our first spatial technology access services projects, and adds to our spatial pipeline of customers interested in services, collaborations, and G4X instruments. We will focus our call on the following areas.
Bruce Spaventa: We're still, again, not launching this until Q2, so very much, it's just to put our heads down and get the product developed in a place where it's robust and usable for external parties. And in the meantime, try to advance services projects that we think have a long tail of work or could create a customer that buys an instrument down the road. Maybe I'll sneak one final one in, just in terms of from here to the TAP and then the full commercial launch, like what are the biggest?
Speaker Change: Get the product developed in the place where it's robust and usable for for external parties and in the meantime Try to advance services projects that we think have a long tail of work or could create a customer that buys an instrument down the road
Speaker Change: Maybe I'll sneak one final one in. Just in terms of from here...
Speaker Change: to the tap and then the full commercial launch, like what are the biggest...
Bruce Spaventa: Kind of technical or product development or manufacturing issues that, I mean, I'm sure there's a lot on your plate, but just wondering the level of confidence in kind of hitting these timelines and what needs to happen between now and then. Thanks, guys. Thanks, Dan. Yeah, you know, a lot of it is optimizing the protocols to be as high quality as possible across all different tissue types. We're initially launching with six different tissue types, and, you know, tissue can be variable depending on how it was stored or how it was treated, and we're still understanding a lot about how our immuno-oncology panels of genes and proteins work across different tissue types that were stored in different conditions.
Drew Spaventa: One, revisiting our strategy following the pivot to spatial sequencing earlier this year. Two, a summary of the second quarter results, and three, an update on the development of the G4X spatial sequencer and our spatial services. We announced a strategy shift in February at AGBT when we unveiled the G4X spatial sequencer. The G4X is being developed to offer readouts of targeted transcripts, targeted proteins, and a fluorescent H&E stain all in the same tissue section.
Speaker Change: kind of technical or product development or manufacturing issues. I mean, I'm sure there's a lot on your plate, but just wondering the level of confidence in kind of hitting these timelines and what needs to happen between now and then. Thanks, guys.
Bruce Spaventa: So that's one part of it. The other part of it is really optimizing the workflow to try and simplify it where we can and make it as user-friendly as possible. The workflow right now is similar to what's done with other spatial instruments in that there are a couple days of pipetting, some overnight incubations, things like that before it's run on the sequencer, and we're trying to just understand each and every part of that to make sure that the requirements and the user instructions are clear, and the protocol is robust so that we have, you know, consistency in results.
Speaker Change: Yeah, a lot of it is optimizing the protocols to be as high quality as possible across all different tissue types.
Speaker Change: We're initially launching with six different tissue types.
Speaker Change: And, you know, tissue can be variable depending on how it was stored or how it was treated. And we're still understanding, you know, a lot about how our, you know, immuno-oncology panels of genes and proteins work across different tissue types that were stored in different conditions.
Drew Spaventa: In addition, its novel capabilities will include DirectSeq, which is the sequencing of RNA in situ and at the potential to open new areas of scientific discovery. This combination of readout modalities will offer significantly higher throughput than any spatial profiling technologies currently on market. We continue to be encouraged by discussions with spatial experts and prospective customers. Facial biology is quickly growing in many customer segments and throughput is a significant limitation. We believe that G4Fs will be uniquely suited to address these pain points and add the potential to accelerate growth in the spatial market.
Speaker Change: So that's one part of it. The other part of it is really optimizing the workflow.
Speaker Change: to try and simplify it where we can and make it as user-friendly as possible. The workflow right now is similar to what's done with other spatial instruments in that there's a couple days of pipetting, some overnight incubations.
Speaker Change: and David Slade.
Drew Spaventa: The business setup is encouraging in that we plan to deliver cost savings to our customers while supporting a high margin sustainable business. In addition to the exciting development work to get G4Fs to market, we are focused on supporting our existing G4 customers, most of which we believe will benefit from our move to spatial and are poised to become G4Fs customers. Supporting and continuing to improve their G4 sequencing experience is paramount to our offering a second product into an existing customer base.
Bruce Spaventa: And outside of that, there are all the activities related to, you know, transferring the product into manufacturing, thinking about scaling it up, and the informatics. I mean, there's a lot to it, but it's all, you know, right now the work's being done with, you know, the experience of going through the G4. So I'd say we've all been through this once a year ago, and I think we have eyes wide open, and we do plan to stay on schedule.
Speaker Change: and outside of that, there's all the activities related to, you know, transferring.
Speaker Change: You know, the product and the manufacturing, thinking about scaling it up, the informatics.
Speaker Change: I mean, there's a lot to it, but it's all, you know, right now.
Speaker Change: The work is being done with the experience of going through the G4, so I'd say we've all been through this once a year ago and I think we're eyes wide open and we do plan to stay on schedule. So hopefully that answers your question.
Drew Spaventa: The G4NG4X share the same platform, which will allow for a streamlined upgrade process for existing G4 customers. Our strategy with existing G4 customers is to continue to improve their experience and facilitate higher uses with the G4 sequencer as we prepare them to convert to spatial sequencing when the G4X becomes available. We are seeing improved reliability and usage across the existing installed base. System uptime has been averaging 95% or in the quarter.
Bruce Spaventa: So hopefully, that answers your question. Great. Thanks, guys. Once again, if you have a question or a comment, please press star one.
Speaker Change: Great. Thanks, guys.
Matt Sykes: The next question comes from Matt Sykes with Goldman Sachs. Please proceed. Hey, good afternoon, Drew and Dalen.
Speaker Change: Once again if you have a question or comment please press star 1. The next question comes from Matt Sykes with Goldman Sachs. Please proceed.
Matt Sykes: Thanks for taking my questions. Maybe just first, the step down in reagent rental placements from the last quarter. I think you did five last quarter; it was one this quarter. Should we think about that more as a function of the shift in resources to G4X and less so about sort of the demand environment? Yeah, you know, our strategy right now is to maintain the existing network of customers and prepare them for a conversion. We're not actively trying to push and expand new systems for sequencing only.
Matt Sykes: Hey, good afternoon, Drew and Dale, and thanks for taking my questions. Maybe just first, to step down and...
Drew Spaventa: Average annualized consumable pull-through for the installed base was approximately 50,000 in Q2, which is roughly double Q1. In addition, we recently initiated the roll-out of our V2 system upgrade package, which will include system performance and feature enhancements to further improve the reliability and usage of the system as we continue to prepare for a conversion to spatial sequencing on the G4X.
Matt Sykes: reason rental placements from from the last quarter I think you did five last quarter was one this quarter should we think about that more as a function of the shift in resources to g4x and less so about sort of the demand environment
Bruce Spaventa: We're really focused on developing the GeForce platform, maintaining and, and, you know, frankly, selling instruments at a higher ASP than the sequencer itself. So it is part of the strategy, really, to maintain existing customers. And, you know, we aren't saying we won't put any sequencers out, but that's not our priority right now.
Speaker Change: Yeah, you know, our strategy right now is to maintain the existing network of customers and prepare them for a conversion. We're not actively trying to push and expand new systems for sequencing only. We're really focused on developing the GeForce platform, maintaining and, you know, frankly, selling instruments at a higher ASP than the sequencer itself.
Drew Spaventa: Now, let's move into the second quarter results. We shipped two G4 instruments during the quarter and generated .7 million in revenue. A V shipments, one was an academic core lab and one was to a commercial lab. One of the most important focus areas for us is to maintain our emphasis on supporting existing customers. We continue to see improvements in system utilization and consumables pull-through. Q2 was our highest quarterly total yet for consumable orders and shipments.
Speaker Change: So, it is part of the strategy, really, is maintain existing. And, you know, we aren't saying we won't put any sequencers out, but that's not our priority right now. Our priority is maintaining and getting spatial customers.
Bruce Spaventa: Our priority is maintaining and getting spatial customers, you know, in the queue to buy the more expensive combined system next year. Got it. And then of the G4s that you have installed now with those customers, do a majority of them have an interest in Spatial as well? Like, do you feel like that's a pretty good conversion rate you could get out of the existing install base?
Drew Spaventa: Now, let's turn to an update on our development of G4X. In R&D, we are advancing work on instrument method development, expanding the compatible tissue types, and improving protocol performance for combined readout modalities. Our internal focus is centered around developing the G4X platform and optimizing the spatial sequencing methods and protocols. Our planned initial G4X kit offering will be our V1 Immunal Oncology panel with 300 genes, 12 proteins, and the ability to customize content.
Speaker Change: in the queue to buy the more expensive combined system next year.
Bruce Spaventa: Or are there some that, you know, weren't going to be doing Spatial? Yeah, so about two-thirds of them have said directly that there's interest. And, you know, we assume that fewer than two-thirds will initially convert just to be conservative.
Speaker Change: Got it. And then of the of the G4s that you have installed now with those customers, do a majority of them have interest in Spatial as well? Like do you feel like that's a pretty good conversion rate you could get out of the existing install base or there's some that you know weren't going to be doing Spatial?
Bruce Spaventa: But, you know, we have line of sight to a good number of initial customers going to convert probably very early in the product being launched. So, the short answer is yes. We think the majority of the existing customers will convert into a spatial customer.
Speaker Change: Yeah, so about two-thirds of them have said directly there's interest and, you know, we assume that, you know, fewer than two-thirds will initially convert just to be conservative, but, you know, we have line of sight to, you know, a good number of initial customers.
Drew Spaventa: We are excited about the technology as we have continued to progress the development of capabilities and methods. In services, we continue to see growing interest in the final of service projects as part of the G4X spatial sequencing technology access services program that was launched in the second quarter. Our strategy and services is twofold to learn from initial customer samples in order to accelerate product development and generate customers that will buy the instrument and consumables when available.
Speaker Change: go converting probably very early in the product being launched. So the short answer is yes, we think the majority of the existing customers will convert into a spatial customer.
Bruce Spaventa: Got it. And just one more, the Spatial Sequencing Technology Access Services program, could you maybe talk about just sort of the cost you're incurring on that, and is it, I'm assuming it's within, Dalen, the forecast of sort of cash runway and everything like that? Hey, Matt. Excuse me, this is Dalen.
Speaker Change: Got it. And just one more, the Spatial Sequencing Technology Access Services, that program, could you maybe talk about just sort of the cost you're incurring on that and I'm assuming it's within, Dalen, the forecast of sort of cash runway and everything like that?
Drew Spaventa: Our initial focus in services is our V1 Immunal Oncology panel. The project submissions in our service funnel make it clear that a lower target plaques higher sample throughput offering is addressing an unmet need in the market. Several months ago, we opened a G4X atrial research grant award program, which was well received by prospective customers and researchers from some of the top institutions across the world. We received over 50 applications from institutions interested in using the G4X in various applications, including cancer research, the study of autoimmune diseases, chronic disease research, cardiovascular and liver diseases, vaccine development, and neuroscience.
Dalen Meeter: Yeah, that's right. The costs that we're incurring related to the Spatial Services Lab are baked into kind of the directional commentary around Cache Runway. Just to give you a sense, you know, we've got an internal lab that, you know, we've earmarked several G4X systems specifically for services. And we have, you know, a small number of lab personnel that kind of do double duty for internal work but then also work on the services projects that come in as well.
Drew Spaventa: We look forward to sharing more information about the award recipients and our collaborations with these institutions to bring forward these exciting demonstrations of G4X applications later this year. Lastly, we are planning for our G4X Early Access program, which we intend to deliver late this year. This will include a select number of customers with early access to the G4X, the purpose of early access to both learn and incorporate feedback for broader commercial launch as well as to generate demand.
Speaker Change: well
Dalen Meeter: Hey Matt, excuse me, this is Dalen. Yeah, that's right, the costs, you know, that were incurring related to the Spatial Services Lab are baked into kind of the directional commentary around Cache Runway. Just to give you a sense, you know, we've got
Dalen Meeter: But all of that, you know, internal cost is baked into what we've talked about previously in terms of Cache Burn. Got it. Thanks very much. Thanks, Matt. Okay, we have no further questions in queue. I'd like to turn the call back to management for any closing.
Dalen Meeter: an internal lab that, you know, we've earmarked, you know, several G4X systems.
Dalen Meeter: specifically for services and we have you know a small number of lab personnel that kind of do double duty internal work but then also work on the services projects that come in as well but all of that you know internal cost is baked into what we've talked about previously in terms of cash burn.
Speaker Change: Got it. Thanks very much.
Matt Sykes: Thanks, Matt.
Operator: No further closing remarks from me. Thank you, everyone, for listening. I look forward to updating you on future calls. Thank you. Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Okay, we have no further questions in queue. I'd like to turn the call back to management for any closing remarks.
Dalen Meeter: Now, I'll turn it over to Dalen to go through the details of our second quarter financial results. Thank you, Drew. Revenue for the second quarter of 2024 was approximately $0.7 million. Predominantly made up of $0.4 million from revenue recognized on consumable sales, and $0.3 million from revenue recognized on one capital purchase instrument placement during the quarter. Gross profit was negative $0.2 million in the second quarter of 2024 compared to negative $0.1 million in the second quarter of 2023.
Speaker Change: No further closing remarks from here. Thank you everyone for listening, look forward to updating you on future calls. Thank you.
Speaker Change: Thank you. This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.
Dalen Meeter: Our gross margin was negative due to discounts on G4 instrument sales, our use of the reagent rental, and other non-capital purchase models, and higher cost associated with the support of system placements, partially offset by higher margins on increased consumable sales. Operating expenses for the second quarter of 2024 told $22.6 million compared to $27.5 million in the second quarter of 2023. These totals included non-cash stock-based compensation expense of $2.2 million in Q2 2024 and $2.8 million in Q2 2023.
Dalen Meeter: The year-over-year decrease was primarily driven by a non-cash expense in Q2 2023 related to a one-time adjustment in the carrying value of property plant and equipment, and decreases in employee compensation costs due to reduced headcount. Net loss in the second quarter of 2024 was $21.3 million or $8.57 compared to $25.6 million or $10.58 per share in the second quarter of 2023. The weighted average share count for the second quarter of 2024 used to calculate net loss per share was approximately $2.5 million.
Dalen Meeter: Ending cash, cash equivalence, and short-term investments, excluding restricted cash, told $133.2 million. Cash burn for the second quarter was approximately $17.5 million, which was sequentially lower than the previous quarter driven by the timing of cost savings measures implemented.
Dalen Meeter: Lastly, I wanted to take a moment to comment on the lease amendment that was announced last week, and please note that we successfully amended a long-term lease obligation, right-sizing our facility's footprint to better align with our operational needs. News. This move not only optimizes our space utilization, but it also reduces our long-term lease obligations by approximately $50 million. This amendment will enhance our longer-term financial flexibility, allowing us to focus more resources on development and commercialization of the G4X.
Dalen Meeter: The amendment included a one-time, upfront lease modification payment of $4.5 million, which was paid upon execution of the agreement. As such, we expect our Q32024 cash burn to be higher than the second quarter. We do not expect the lease modification payment to have a materially impact on our previous comments or on cash runway extending to late 2026.
Drew Spaventa: Back to you, Drew. Thank you, Dalen. I want to thank all our employees for their hard work and dedication over the last quarter. We are excited by the level of interest from early collaborators and prospective customers, as evidenced by the growth of inbound increase around our technology access services and research collaborations and growth in the sales funnel. The G4X has designed ability to read transcripts, proteins, and a fluorescent H&E stain at scale will provide a unique solution in an exciting, high-growth market. Where other spatial solutions in the market are pushing up on targetplex, we see an unmet need for lower targetplex and higher sample throughput.
Drew Spaventa: We look forward to updating you on our progress to the rest of the year.
Operator: Now let's open up for questions, operator. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tool indicate your line is in the question Q. You may press star two if you'd like to remove your question from the Q. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Once again, please press star one if you have a question or comment.
Dan Brennan: And the first question is from Dan Brennan with TD Cowan. Please proceed. Great. Thanks, guys.
Drew Spaventa: Thanks for our congrats on the quarter here and continued progress. Maybe could you start off with just timelines? I think you reiterated them just now, but just kind of walked through a little bit about early access and then about commercial launch. I think last quarter you guys are discussing in and around Q2. Just can you guys confirm will we still think you're the same kind of timelines right now? Hey, Dan. Thanks for the questions.
Drew Spaventa: Yeah, I'll start off with timelines. We're just starting services now and in the midst of a few very exciting projects. We're on track to do our first early access later this year, probably end of Q4. And then we'll sequentially roll other early access sites in through the first part of Q1. And at this point we are on track.
Drew Spaventa: We're planning to have a commercial launch towards the end of Q2 next year. Great. And then could you just speak to both I guess the pathway to the commercial specs, which you guys reiterated. And then as you've had more customers kind of evaluating the product right now, just kind of walk through some of the experiences and you spoke about some of the data farmer and Harvard, I think on the last call, but just kind of how is the interest level?
Drew Spaventa: Just a little more granularity on that front. And then the funnel, I think the last time we talked about maybe dozens of customers. I know it's not a firm kind of backlog, if you will, but just speak to kind of the interest level if you can as well. Absolutely. So, you know, we feel like we've really hit on something here based on the response that we've gotten both from services and from people interested in buying a system or partnering to set up services of their own.
Drew Spaventa: I think that will be something unique for Spatial and the G4X that was different from G4 in that a lot of the customers were talking with whether they're a large core lab or a CRO or a major oncology medical center. They are very direct in one of the biggest issues they have is throughput for Spatial and cost per sample and that's exactly what we're addressing. The feedback that we get is, you know, relates to, you know, very positive directional information on the scope of the product.
Drew Spaventa: And what I mean by that is, you know, we're targeting 300 genes which is, you know, less transcripts than most of the other Spatial platforms leads at this point and about a dozen proteins. And what most people have said is that's more than enough on the transcripts than the proteins, you know, 300 genes and a lot of times it's less than 10 proteins people want to look at. But if you can do that in combination the same section and you can do that at a lower sample cost point and more samples for a run, that's exactly what they need.
Drew Spaventa: So we were really seeing that across the board in a number of different settings and applications. I think one other thing that's worth mentioning, if we segment the customer tight into three buckets in sequencing, you know, we have about 30 instruments out right now. The majority of those are in academic settings. There are two other segments that the G4X applies to that was a little bit different when we started talking with prospective customers.
Drew Spaventa: And one is CROs are contract research organizations that are providing services in a large part of Pharma. And the other is going to be Magical Medical Center's places where there's high throughput core labs that right now are doing, you know, pathology or looking at proteins and doing tumor microarrays. And that's another area where the cost and the throughput is prohibitive right now from scaling and a lot of these places say things like we, you know, we have 40 or 50,000 samples a year we want to run and we run less than 10 and that's really a symptom of cost and throughput.
Drew Spaventa: So it's really encouraging on the final side of things. Both on the instrument side and the services, we have over 50 at this point and it's kind of pointless to really count more than 50 what we're doing right now is trying to prioritize what are the projects that don't require customization or what are the projects that we can do as a pilot now that have larger batches of work to come behind them.
Drew Spaventa: And we're just trying to prioritize based on on those factors on the services side. And then on the commercial side I think we still some time to to think about that we're still again, you know, not launching this until Q2. So, you know, very much it's it's just, you know, put our head down and get the product developed in the place where it's robust and usable for external parties and in the meantime try to advance services projects that we think have a long tail of work or could create a customer that buys an instrument down the road.
Drew Spaventa: I think one final one and just in terms of from here to the tap and then the full commercial launch. What are the biggest? Kind of technical or product development or manufacturing issues that I mean I'm sure there's a lot on your plate, but just wondering the level of confidence in kind of hitting these timelines and what needs to happen between now and then thanks guys. Thanks Dan. Yeah, a lot of it is optimizing the protocols to be as high quality as possible across all different tissue types.
Drew Spaventa: We're initially launching with six different tissue types and tissue can be variable depending on how it was stored or how it was treated. And we're still understanding a lot about how immuno-oncology panels of genes and proteins work across different tissue types that were stored in different conditions. So that's one part of it. The other part of it is really optimizing the workflow to try and simplify it where we can and make it as user-friendly as possible.
Drew Spaventa: The workflow right now is similar to what's done with other spatial instruments in that there's a couple days of pipetting, some overnight incubations, things like that before it's run on the sequencer and we're trying to just understand each and every part of that to make sure that the requirements and the user instructions are clear and the protocols robust so that we have consistency and results. And outside of that there's all the activities related to transferring the product into manufacturing, thinking about scaling it up, the informatics.
Drew Spaventa: There's a lot to it but it's all right now the work's being done with the experience of going through the G4 so I'd say we've all been through this one a year ago and I think we're eyes wide open and we do plan to stay on schedule so hopefully that answers your question. Great. Thanks, guys.
Operator: Once again, if you have a question or a comment, please press star one.
Matthew Sykes: The next question comes from Matt Sykes with Goldman Sachs. Please proceed. Hey, good afternoon, Drew and Dale and thanks for taking my questions.
Drew Spaventa: Maybe just first the step down in ReAsian rental placements from the last quarter, I think the five last quarter was one this quarter. Should we think about that more as a function of the shift in resources to G4X and less so about sort of the demand environment? Yeah, our strategy right now is to maintain the existing network of customers and prepare them for a conversion. We're not actively trying to push and expand new systems for sequencing only.
Drew Spaventa: We're really focused on developing the G4X platform maintaining and frankly selling instruments at a higher ASP than the sequencer itself. So it is part of the strategy really has maintained existing and we aren't saying we won't put any sequencers out but that's not our priority right now. Our priority is maintaining and getting spatial customers in the queue to buy the more expensive combined system next year.
Drew Spaventa: Got it. And then of the G4X we have installed now with those customers, do a majority of them have interest in spatial as well? Do you feel like that's a pretty good conversion rate? You could get out of the existing install base or there's some that weren't going to be doing spatial. Yeah, so about two-thirds of them have said directly there's interest and we assume a fewer than two-thirds will initially convert just to be conservative, but we have line of sight to a good number of initial customers converting probably very early in the product being launched. So the short answer is yes, we think the majority of the existing customers will convert into a spatial customer.
Drew Spaventa: Got it.
Dalen Meeter: And just one more, the spatial sequencing technology access services, that program, could you maybe talk about just sort of the cost you're incurring on that and is it, I'm assuming it's within Dalen the forecast of sort of cash runway and everything like that? Hey Matt, excuse me, this is Dalen. Yeah, that's right, the costs that we're incurring related to the spatial services lab are baked into the directional commentary around cash runway.
Dalen Meeter: Just to give you a sense, we've got an internal lab that we've remarked several G4X systems specifically for services and we have a small number of lab personnel that kind of do double-duty internal work, but then also work on the services projects that come in as well. But all of that internal cost is baked into what we've talked about previously in terms of cashburn.
Matthew Sykes: Got it. Thanks very much. Thanks Matt.
Drew Spaventa: Okay, we have no further questions in queue. I'd like to turn the call back to management for any closing remarks. No further closing remarks from here. Thank you everyone for listening. Look forward to updating you on future calls. Thank you. This concludes today's conference and you may disconnect your lines at this time.
Operator: Thank you for your participation.