Q3 2024 Seer Inc Earnings Call
The
The End.
The End
Good day and thank you for standing by.
Speaker Change: Welcome to the CR8 SIRRECORDER 2024 Irmings Conference Call.
At this time, all participants are in a list and only mode.
After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star, one one or your telephone. You will then hear an automated message advising your hand is right.
Speaker Change: So, withdraw your questions, please press star one one again.
Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to your first speaker today, Carrie Mendivil, Investor Relations. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Earlier today, SEER released financial results for the quarter ended September 30, 2024.
Speaker Change: If you've not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investor at seer.bio. Joining me today from SEER is Omid Farokhzad, Chief Executive Officer and Chair, and David Horn, Chief Financial Officer and President.
Speaker Change: Before we begin, I'd 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.
Speaker Change: Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release to your issue today.
Speaker Change: For a more complete list and description, please see the risk factors section of the company's quarterly report on Form 10-Q from the quarter ended September 30, 2024, and in its other filings with the Securities and Exchange Commission.
Speaker Change: Accept as required by law, fear 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.
Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast, November 6, 2024. With that, I'll turn the call over to Omid.
Omid Farokhzad: Thanks Carrie and thank you everyone for joining us this afternoon. I will begin our call today by providing updates on our business and I will then turn the call over to David to provide more detail on our financial results for the third quarter of 2024 and our outlook for the remainder of the year.
Omid Farokhzad: We continue to see growing enthusiasm for the Protograv product suite during the third quarter, despite the ongoing macro-environment pressures, especially for the adoption of new technology.
Omid Farokhzad: We ended the third quarter with $4 million in revenue and approximately $312 million in cash, cash equivalents, and investments.
Speaker Change: In particular, we were pleased to see multiple large orders from government agencies and continued strong interest in our stack.
Speaker Change: While the capital-purchasing environment remains challenging and a continuous headwind for us, we believe we're starting to see the flywheel effect and an increasing tailwind that comes with a growing number of plus-minus publications and preprints highlighting the value of the photograph.
Speaker Change: In the near term, we expect to see fluctuations in the relative strength of these two vectors. That said, I'm confident that directionally we're picking up momentum, as the data and evidence is strongly supportive of Proteograph's unique value proposition.
Speaker Change: At SEER, we're continuing to push the boundaries of what is possible to provide access to large-scale, deep, unbiased proteomics and help researchers generate meaningful insights into human health and disease.
Speaker Change: To that end, we're delighted that Thermo Fisher Scientific, the leading mass spectrometry provider, is partnering with SEER, a pioneer and leader in proteomics, to co-market and sell the Proteograph product suite alongside their Orbitrap astral mass spectrometers.
Speaker Change: Under this non-exclusive agreement starting in early 2025, Thermo Fisher's global sales force will have the ability to quote and sell the Protograph product suite, which includes an automation instrument,
Speaker Change: proprietary engineered nanoparticles and software analysis suite enhancing the accessibility of this innovative technology to life science researchers worldwide.
Speaker Change: We believe Silverfisher's Orbitrap Astral sets the gold standard for mass spectrometry.
Speaker Change: The robustness and performance of the FEAR platform and the sensitivity of the Orbiter of Astral make it possible for the first time to do population-scale, deep unbiased proteomics with unprecedented power to drive biological insights.
Speaker Change: Last year, we collaborated with Thermo Fisher to exclusively use their Orbitrap Astral in our SEER Technology Access Center in the U.S. And earlier this year, we extended the program to Europe.
Speaker Change: We have seen first hand the highly differentiated and exceptional data that our customers are getting by working with our stack, as well as the exceptional results from a growing number of customers who are using the Orbitrap Astral and the Protograph product suite in their own labs.
Speaker Change: This new collaboration makes it possible for customers to acquire the Protograph product suite in conjunction with the acquisition of the Orbitrap Astral.
Speaker Change: We will also conduct joint marketing initiatives, including conference promotions, seminars, and webinars, and collaborate on joint research studies, including population-scale studies, to showcase the combined power of the proteomics platforms.
Speaker Change: We're excited by the expanded geographic reach and distribution that this partnership with Thermo Fisher will provide.
Speaker Change: By aligning our technologies, we're providing researchers with a robust solution that enables comprehensive proteomic insights, ultimately driving breakthroughs in understanding human biology and disease.
Speaker Change: We continue to serve customers through the SEER Technology Access Center, or STAC, which allows a Proteograph user to run samples in their own lab and have SEER run the mass spec, or alternatively, provide end-to-end study services from sample to data.
Speaker Change: We continue to see strong demand for STAC and have a strong pipeline heading into the end of the year, despite continuing to navigate a challenging funding environment.
Speaker Change: SAC has been successful in enhancing access to the protograph and bringing the power of unbiased proteomics data to a growing number of researchers.
Speaker Change: We believe this increased access will catalyze the generation of third-party data and publications, further highlighting the transformative potential of our technology and facilitating broader adoption.
Speaker Change: Earlier this year we launched a second stack lab in Germany and we're excited to see increasing demand from prominent researchers in Europe that want to access the unique data that the protograph provides.
Speaker Change: We continue to see SAC as a strategic asset to invest in groundbreaking studies and run large sample cohorts for key collaborators, providing SAC services at lower price points.
Speaker Change: We expect these customers will present and publish their studies shortly further reinforcing the differentiated value proposition of the Port de Grace product suite and serve as key reference to drive continued adoption of our technology.
Speaker Change: In addition, we're seeing traction with our Strategic Instrument Placement Program, or SIPP, which continues to be an important catalyst for adoption, particularly for large pharma customers, many of which have purchased instruments through this program.
Speaker Change: Now moving to the exemplification of our technology.
Speaker Change: We continue to see a growing number of preprints and publications showcasing the value of the PortraGraph product suite.
Speaker Change: Notably, our conversations with potential customers are becoming increasingly productive as more researchers see the value and insights our data provides and we're seeing the scale of projects getting larger.
Speaker Change: We had a strong presence at the 23rd Human Proteome Organization, or HUPO, World Congress in Germany in late October, where our customers, collaborators, and seer scientists showcased a total of 12 posters and oral presentations.
Speaker Change: This research revealed new insights into Alzheimer's pathways, population-scale plasma analysis, and captured immune dynamics in xenotransplantation.
Speaker Change: One of our collaborators, Dr. Mike Snyder from Stanford University, presented data that highlighted the value of the Proteograft product suite for deep proteomic analysis in model organisms.
Speaker Change: In collaboration with SEER, Dr. Snyder and his team are conducting an aging study in an non-human primate model, specifically in pigtail macaques.
Speaker Change: In this study, 230 monkey plasma samples and 25 human plasma samples were analyzed using the proteograph XT coupled with the orbitrope astral.
Speaker Change: A total of 8,472 unique protein groups were identified across the 230 monkey plasma samples.
Speaker Change: As a comparison, the proteograph assay identified 11 times more protein groups in this cohort versus direct digestion workflow using the Orbitrap astral alone without the proteograph.
Speaker Change: Combined with the depth of proteomic coverage and the protein and peptide level resolution that this year platform provides, they're now able to investigate shared and species-specific human and macaque biology in a deep and unbiased manner.
Speaker Change: While they're early in their analysis, they're encouraged by the types of protein biomarkers
Speaker Change: differentially expressed in male versus female monkeys and across various age groups in the monkey cohort. For example, they have found many interesting biological differences in cytokines, hormones, and immune response related proteins.
Speaker Change: which can be difficult to detect due to the low abundance in plasma samples.
Speaker Change: This is yet another example of the power of the proteograph to enable unbiased deproteomics that revealed interesting insights and pathways for further study in non-human primate models.
Speaker Change: I remain incredibly bullish on the long-term value of our differentiated technology and its potential to transform our understanding of the proteome.
Speaker Change: Looking ahead, we will continue to execute against our core strategies of driving evidence and publications, continue to enhance access to the protograph, innovate with our products, and expand our applications. With that, I will now turn the call over to David.
David Horn: Thanks, Amid. Total revenue for the third quarter of 2024 was $4 million, representing a decrease of 3% compared to $4.2 million in the third quarter of 2023. It was primarily due to a decrease in related party revenue and grant revenue recognized in the quarter.
Speaker Change: Revenue recognized primarily consisted of sales of the Proteograph SP-100 instruments, consumable kits, and service revenue, of which $366,000 was attributed to related parties.
Speaker Change: of Related Party Revenue, and consisted of sales of SP-100 instruments and consumable kits.
Speaker Change: Product revenue grew year over year, primarily driven by an increase in instrument sales and consumable kit sales. Despite seeing continued pressure on CAPEX's budget and elongated sales cycles for the outright purchase of new instrumentation in the third quarter, we were encouraged by signs of a more constructive capital purchasing environment.
Speaker Change: Service revenue was $847,000 in the third quarter of 2024, including $186,000 of related party revenue, and primarily consisted of revenue related to stacked service projects.
Speaker Change: We continue to be encouraged by the customer interest in running projects through STAC and their ability to gain access to protographed data. We also continue to undertake projects for key strategic studies that will result in additional presentations and publications in the near term, but are conducted at a lower price point than our typical STAC service projects.
Speaker Change: This had the effect of lowering the amount of service revenue that was realized in the third quarter.
Speaker Change: Grant and Other Revenue was $90,000 for the third quarter of 2024 and consisted of lease and shipping revenue.
Speaker Change: Total gross profit was $1.9 million for the third quarter of 2024, representing a gross margin of 48%, compared to $2.2 million in the third quarter of 2023, representing a gross margin of 52%.
Speaker Change: Gross margins were driven by higher instrument sales and lack of grant revenue in the third quarter of 2024 relative to the third quarter of 2023.
Speaker Change: We continue to expect variability in our gross margin on a quarter-by-quarter basis, since the proportion of instrument, consumable, and service revenue will fluctuate in any given quarter.
Speaker Change: Research and development expenses for the third quarter of 2024 were $13 million, a decrease of 2% compared to $13.2 million in the third quarter of 2023. The decrease in R&D expenses was primarily due to a decrease in employee and stock-based compensation expenses.
Speaker Change: Selling general and administrative expenses for the third quarter of 2024 were 13.3 million dollars, a decrease of 10% compared to 14.8 million dollars in the third quarter of 2023. The decrease in SG&A expenses was primarily due to a decrease in employee and stock-based compensation expenses.
Speaker Change: Net loss for the third quarter of 2024 was $21.3 million compared to $21.1 million in the third quarter of 2023.
Speaker Change: We ended the quarter with approximately $312 million in cash, cash equivalents, and investments.
Speaker Change: During the third quarter, we invested $10 million in Prognomics Series D financing alongside other existing investors and a new large strategic investor.
Speaker Change: As of September 30th, we had approximately $14.7 million in authorization remaining under this share purchase program.
Speaker Change: Turning to our outlook for the year. We continue to expect revenue to be in the range of 13 to 15 million dollars for 2024. At this point I would like to turn the call back to Omid for closing comments.
Omid Farokhzad: Thank you, David. I'd like to thank our incredible team for their hard work this quarter as we continue navigating through a challenging macro environment for the adoption of new technology.
Omid Farokhzad: Looking ahead, we believe these initiatives position us well for growth in 2025 and beyond. I look forward to keeping you updated on our progress. With that, we will now open it up to questions. Operator?
Speaker Change: Thank you.
Speaker Change: Thank you. At this time we will conduct our question-and-answer session.
Speaker Change: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Our first question comes from the line of Yoku Oku with Morgan Stanley. Your line is now open.
Speaker Change: Hi, this is Jason on for Yuco. Congratulations on the quarter and thank you for taking our questions.
Speaker Change: So maybe just starting off, given the midpoint of your 2024 guide of $14 million, it seems to imply a flat or slightly negative sequential step down from 3Q to 4Q, which seems to break with the 4Q seasonality trends for your company the past few years. So maybe can you talk a bit about your assumptions surrounding this? So is it mostly conservatism? And what are your assumptions surrounding the budget flash dynamic?
Speaker Change: Yeah, thanks, Jason. It's David. Yeah, in terms of the guidance, you know, given where we are in the quarter
Speaker Change: We do have a number of opportunities in our pipeline. And as we look at those, you know, it really just comes down to a timing issue.
Speaker Change: Some of those come, timing of those deals, you know, roll in our favor, you know, we'd expect to be at the high end of the range.
Speaker Change: And if some of them get pushed out, then it's obviously going to be a different outcome. So it's really just...
Speaker Change: Given where we are given the timing of some of those things and given
Speaker Change: We do continue to see pressure on budgets and so we're not really forecasting in a budget flush.
Speaker Change: for the fourth quarter. So we're, you know, again, you could read that as conservative, but it's just kind of where we're sitting right now.
Speaker Change: Hi, thanks for the color. And then maybe as a follow-up question, during 2Q you talked about significantly expanding your sales and marketing team to include addition of multiple new regional sales managers. So did that initiative drive the beat at all? If it hasn't, then presumably it might take some time to ramp up. So when can you expect benefits from this initiative to flow through to the P&L?
Speaker Change: Yes, yes, Jason, this is Omid. As we mentioned at the last earning call, we had significantly expanded the sales and marketing team. We have added multiple new regional business managers.
Speaker Change: We have added our new VP of Global Marketing, Zach Crother, to the team. Now, these new team members are ramping up. They're already making good progress. We feel very good about them.
Speaker Change: the opportunities that they're creating.
Speaker Change: Got it. And then maybe if I could just sneak one more in. So I think you've also previously commented on your sales channel kind of flipping from a 60-40 mix of a commercial and academic historically to now being 60-40 academic and commercial. So I was wondering like what's kind of driving this shift towards academic customers? Like how much would you attribute this shift?
Speaker Change: to benefits from the cadence of publications that you have seen to date versus like headwinds and capital constraints from larger biopharma customers who are maybe like announcing strategic shifts or pruning their portfolio. Thank you.
Speaker Change: the closed accounts, meaning customers that we actually close, that's different. So we're seeing more and more academic folks end up in our pipeline of customers.
Speaker Change: And as I mentioned, an increasing number of academics are coming on board in terms of opportunities.
Speaker Change: But if I look at our install base and if I look at the...
Speaker Change: You're making an interesting point that whether it's the increased evidence and publications that's driving the academics, I think that's part of it. The other part of it is that academics need time to get grants.
Speaker Change: That's different than the commercial budget framework. So the product has been out there, the evidence has been growing, and these academics are beginning to
Speaker Change: to secure the funding for the type of research needed to work with SEER. So I think that's also in part driving it. And then the comment you made about...
Speaker Change: the capital constraints in terms of the commercial customers, and that is correct. I mean, clearly the macro picture is making it difficult for CapEx purchases, especially for new technologies like Sear.
Speaker Change: That said, also the increased publications are helping us with those dialogues, and increasingly we're seeing the size of the studies that we're having conversations with, whether it's for commercial entities or academic entities.
Speaker Change: to be getting larger and larger. I mean, we're now in multiple conversations of studies that are 10,000 plus in study size. And I can tell you about a year ago, you know, we were having very, very few of those kind of conversations.
Speaker Change: So I think the data and the evidence is also driving larger and larger studies to become possible for us. David, do you want to add anything?
Speaker Change: Okay, perfect. I think you covered it. I think that was great.
Speaker Change: Thank you. One moment for our next question please.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Dan Brennan with TD Cohen. Your line is now open.
Speaker Change: Hi guys, this is a William on for Dan. First question I have is about kind of a competition question The proteomic space is gaining a lot of attention and there are other solutions that seek to overcome the same problems as proteograph
Speaker Change: I'm just wondering how we should think about the evolution of the affinity-based proteomics market as more solutions become available, and is growing overall awareness a tailwind?
Speaker Change: Yeah.
Speaker Change: William, thank you for the question.
Speaker Change: So, the proteomic market, by the way, I think is at its infancy and it's only going to grow.
Speaker Change: and the growth is going to be among the omics customer or the genomic customers that are going to begin to connect their genomic information
Speaker Change: functionally to proteomic information and get a ton more value in terms of that content.
Speaker Change: , , , , , , , , , , , , , ,
Speaker Change: The targeted approaches scaled first.
Speaker Change: And that's because the untargeted approaches, like the approach that CEA takes with the proteograph leveraging the mass spec, those approaches were not available. And so the customer ...
Speaker Change: years ago had only the optionality to use a targeted approach if they were going to do a study of any size.
Speaker Change: Today, that dynamic is changing. I had predicted, by the way, that in 2025, the first population scale, unbiased,
Speaker Change: deep unbiased proteomic study will go underway. I actually have increasing visibility for that statement to be correct.
Speaker Change: I mean the notion of doing tens of thousands of samples, deep unbiased proteomics on a mass spec, would seem like a pipe dream. Today that is completely a reality because of the ProteoGrav product suite and because the mass specs are getting better and better.
Speaker Change: So the customers are progressively recognizing this.
Speaker Change: And I think going forward, there's going to be room for targeted approaches to exist.
Speaker Change: and there's going to be a very important role for untargeted approaches.
Speaker Change: to add the content in proteomics that today has not been discovered yet. I think as content is discovered more and more,
Speaker Change: There's actually utility and a need for targeted approaches to interrogate those very specific proteins that have been discovered using unbiased approaches.
Speaker Change: So, both are going to coexist. I think it's a flywheel where more and more untargeted approaches is probably going to drive more and more demand for targeted approaches. I don't see the other side working, other than the fact that...
Speaker Change: Untargeted Approaches
Speaker Change: Those contents will drive
Speaker Change: Thank you, appreciate the answer. One more question I have is on the margins. Just wondering how we should think about margins exceeding the year and into 25. Previously we're targeting around 50% gross margins. Should next year see a dip in gross margins if instrument placements ramp?
Speaker Change: Yeah, William, thanks for that. I think for the back half of the year, I think we're still on track to kind of
Speaker Change: 48%, and I think we're trending for the nine months, I think we're around 49, 49.5.
Speaker Change: So, I think we're going to be in that 50% area. We're not giving any guidance right now on next year, and we'll kind of give you an update and more detail on that on our year-end call at the beginning of the year. But, again, we'll have more clarity around that and more color to provide you at that time.
Speaker Change: Thank you. Appreciate it.
Speaker Change: Thank you so much for your question.
Speaker Change: And as a reminder, everyone.
Speaker Change: to ask a question.
Speaker Change: please press star 1 1 on your telephone and your hand will be raised and wait for your name to be announced. To withdraw your question please press star 1 1 again.
Speaker Change: Our next question comes from the line of Rachel Zasanoff with...
Speaker Change: JPL
Speaker Change: Your line is now open.
Speaker Change: Hi, this is Jaden Rizmay on for Rachel Vanstal from J.P. Morgan. Thank you so much for taking my question. So first maybe just to start off
Speaker Change: How do you anticipate your recently announced collaboration with Dermo will impact Sears market reach, customer base, and ultimately the top line? And are there any specific customers where you expect to see the most growth as a result of this partnership? Thank you.
Speaker Change: Jayden, thank you for the question. This is Omid.
Speaker Change: So, first of all, let me give you context. I think the timing was just right.
Speaker Change: to do this kind of a partnership, and the reason is that the value proposition of the proteograph was getting more and more accepted and recognized by KOLs and by customers.
Speaker Change: And that made it easier for our partners to be able to sell our products versus requiring the very, very experts that reside within Sear to sell our products. So I think that's the timing part of it, and it was perfect. Now...
Speaker Change: We signed the agreement with our partners at Thermo Fisher Scientific. We still need to work through a lot of the implications for 2025.
Speaker Change: What you can expect from the revenue perspective on the top line, given this partnership, probably on our next call.
Speaker Change: Now, the opportunity for CEAR is that we may be able to shorten the protograph cell cycle by essentially piggybacking on existing astral instruments that will be placed.
Speaker Change: Now that said, keep in mind that the length of a typical capital equipment sell cycle is not short and so I expect that to still exist for the Astrol and consequently for the product that is going to be placed.
Speaker Change: whereas the astral with the proteograph can detect 6,000 or 7,000 or 8,000 proteins depending on the biological sample that may be different with different people.
Speaker Change: So, the value proposition in plasma is very significant, and I think those are the customer types.
Speaker Change: that are likely going to benefit from it.
Speaker Change: But the good news is that that is actually a very significant portion of the astral placement are exactly that customer profile.
Speaker Change: So I'm very optimistic about this and I have to say I'm very happy that we're doing this with Thermo, who's been a great partner to us over the course of the last three years and I'm thrilled by this partnership expansion.
Speaker Change: Yeah, that's perfect. Thank you. And then for my second question, I was wondering, what are you seeing from the stack program you launched in Germany? And how's the regression of that service been so far? And any expectations for the end of year and into 25? Thank you.
Speaker Change: Thank you. Bye.
Speaker Change: Yeah.
Speaker Change: Thanks a lot, Jayden. I appreciate this, David. So, yeah, we continue to see good traction, both in our U.S. stack as well as our EU stack. We've seen, you know, I think just in the ramp-up and the operationalizing of the EU stack.
Speaker Change: During the third quarter, we've seen good demand from those customers in Europe to be able to use.
Speaker Change: use our service over there. So we are very optimistic about that. And, you know, I think we'll continue to see the trend of, you know, continuing, you know, nice steady growth in terms of the service business.
Speaker Change: for the fourth quarter. And then we, you know, we certainly anticipate, you know, continuing that into 2025. Obviously, we can give you more thoughts on that on our year-end call. But, you know, we are, you know,
Speaker Change: Pleasantly surprised with the amount of interest we've had.
Speaker Change: We are continuing to
Speaker Change: at a lower cost for collaborators.
Speaker Change: such that we can, you know, get data and they publish studies and publish papers. So it's actually a strategic asset for us as well as we as we work to get data out there quickly into our hands of our customers that want to publish and do various studies. So overall, we're very pleased with it, and I think we'll continue to see
Speaker Change: All right.
Speaker Change: Thank you so much.
Speaker Change: Turn off the light and enjoy this audio animation effects of instrumental music vj visuals! Processing particular trippy special effects, optical flares of music. So go on, this vj visuals music animation video!
Speaker Change: conversation starts Are we going to get there?
Speaker Change: Undeniably!
Speaker Change: Michael Chastain, Hassan Jahjit and Dominic Hoker hydrated after his assistance from Mr. Miller and Mr. Njema and maintained a consistent harassment status. David Horn, 1st Attorney in District and played with suspects in the Phoenix Court of Arrest on October 8 2013.
Speaker Change: Good day and thank you for standing by.
Speaker Change: Welcome to the Sear Inc. 3rd Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-one-one on your telephone.
Speaker Change: You will then hear an automated message advising your hand is raised.
Speaker Change: So, if you draw your question, please press star 11 again.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to your first speaker today.
Speaker Change: Carrie Mendivil, Investor Relations. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Earlier today, SEER released financial results for the quarter ended September 30, 2024.
Speaker Change: If you've not received this news release or if you'd like to be added to the company's distribution list, please send an email to investor at seer.bio. Joining me today from SEER is Omid Farokhzad, Chief Executive Officer and Chair, and David Horn, Chief Financial Officer and President.
Speaker Change: Before we begin, I'd 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.
Speaker Change: Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release to your issue today.
Speaker Change: For a more complete list and description, please see the Risk Factors section of the company's quarterly report on Form 10-Q from the quarter ended September 30, 2024, and in its other filings with the Securities and Exchange Commission.
Speaker Change: Except as required by law, fear 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.
Speaker Change: This conference call contains time-sensitive information and is accurate only as of the live broadcast, November 6, 2024. With that, I'll turn the call over to Omid.
Omid Farokhzad: Thanks, Carrie, and thank you, everyone, for joining us this afternoon. I will begin our call today by providing updates on our business, and I will then turn the call over to David to provide more detail on our financial results for the third quarter of 2024 and our outlook for the remainder of the year.
Omid Farokhzad: We continue to see growing enthusiasm for the Protograv product suite during the third quarter, despite the ongoing macro environment pressures, especially for the adoption of new technology.
Omid Farokhzad: We ended the third quarter with $4 million in revenue and approximately $312 million in cash, cash equivalents, and investments.
Omid Farokhzad: In particular, we were pleased to see multiple large orders from government agencies and continued strong interest in our stack.
Omid Farokhzad: While the capital-purchasing environment remains challenging and a continuous headwind for us, we believe we're starting to see the flywheel effect and an increasing tailwind that comes with a growing number of plus-minute publications and preprints highlighting the value of the portrait graph.
Omid Farokhzad: In the near term, we expect to see fluctuations in the relative strength of these two vectors. That said, I'm confident that directionally we're picking up momentum, as the data and evidence is strongly supportive of Proteograph's unique value proposition.
Omid Farokhzad: At SEER, we're continuing to push the boundaries of what is possible to provide access to large-scale, deep, unbiased proteomics and help researchers generate meaningful insights into human health and disease.
Omid Farokhzad: To that end, we're delighted that Thermo Fisher Scientific, the leading mass spectrometry provider, is partnering with Sear, a pioneer and leader in proteomics, to co-market and sell the Proteograph product suite alongside their Orbitrap astral mass spectrometers.
Omid Farokhzad: proprietary engineered nanoparticles and software analysis suite enhancing the accessibility of this innovative technology to life science researchers worldwide.
Omid Farokhzad: We believe ThermoFisher's Orbitrap Astral sets the gold standard for mass spectrometry.
Omid Farokhzad: The robustness and performance of the FEAR platform and the sensitivity of the Orbitrap Astral make it possible for the first time to do population-scale, deep unbiased proteomics with unprecedented power to drive biological insights.
Omid Farokhzad: Last year we collaborated with Thermo Fisher to exclusively use their Orbitrap Astral in our SEER Technology Access Center in the U.S. and earlier this year we expanded the program to Europe.
Omid Farokhzad: We have seen firsthand the highly differentiated and exceptional data that our customers are getting by working with our stack, as well as the exceptional results from a growing number of customers who are using the Orbitrap Astral and the Protograph product suite in their own labs.
Omid Farokhzad: We will also conduct joint marketing initiatives, including conference promotions, seminars, and webinars, and collaborate on joint research studies, including population scale studies, to showcase the combined power of the proteomics platforms.
Omid Farokhzad: We're excited by the expanded geographic reach and distribution that this partnership with Thermo Fisher will provide.
Omid Farokhzad: By aligning our technologies, we're providing researchers with a robust solution that enables comprehensive proteomic insights, ultimately driving breakthroughs in understanding human biology and disease.
Omid Farokhzad: We continue to serve customers through the SEER Technology Access Center or STAC, which allows a Proteograph user to run samples in their own lab and have SEER run the mass spec or alternatively provide end-to-end study services from sample to data.
Omid Farokhzad: We continue to see strong demand for STAC and have a strong pipeline heading into the end of the year, despite continuing to navigate a challenging funding environment.
Omid Farokhzad: SAC has been successful in enhancing access to the protograph and bringing the power of unbiased proteomics data to a growing number of researchers.
Omid Farokhzad: We believe this increased access will catalyze the generation of third-party data and publications, further highlighting the transformative potential of our technology and facilitating broader adoption.
Omid Farokhzad: Earlier this year we launched a second stack lab in Germany and we're excited to see increasing demand from prominent researchers in Europe that want to access the unique data that the Proteograph provides.
Omid Farokhzad: We continue to see SAC as a strategic asset to invest in groundbreaking studies and run large sample cohorts for key collaborators, providing SAC services at lower price points.
Omid Farokhzad: We expect these customers will present and publish their studies shortly, further reinforcing the differentiated value proposition of the Port de Grace product suite and serve as key reference to drive continued adoption of our technology.
Omid Farokhzad: Now moving to the exemplification of our technology.
Omid Farokhzad: We continue to see a growing number of preprints and publications showcasing the value of the Portugal product suite.
Omid Farokhzad: Notably, our conversations with potential customers are becoming increasingly productive as more researchers see the value and insights our data provides and we're seeing the scale of projects getting larger.
Omid Farokhzad: We had a strong presence at the 23rd Human Proteome Organization, or HUPO, World Congress in Germany in late October, where our customers, collaborators, and seer scientists showcased a total of 12 posters and oral presentations.
Omid Farokhzad: This research revealed new insights into Alzheimer's pathways, population-scale plasma analysis, and capturing new dynamics in renal transplantation.
Omid Farokhzad: In collaboration with SEER, Dr. Snyder and his team are conducting an aging study in a non-human primate model, specifically in pigtail macaques.
Omid Farokhzad: In this study, 230 monkey plasma samples and 25 human plasma samples were analyzed using the Proteograph XT coupled with the Orbitrap Astral.
Omid Farokhzad: A total of 8,472 unique protein groups were identified across the 230 monkey plasma samples.
Omid Farokhzad: As a comparison, the proteograph assay identified 11 times more protein groups in this cohort versus direct digestion workflow using the Orbitrap astral alone without the proteograph.
Omid Farokhzad: Combined with the depth of proteomic coverage and the protein and peptide level resolution that this year platform provides, they're now able to investigate shared and species-specific human and macaque biology in a deep and unbiased manner.
Omid Farokhzad: While they're early in their analysis, they're encouraged by the types of protein biomarkers
Omid Farokhzad: differentially expressed in male versus female monkeys and across various age groups
Omid Farokhzad: in the monkey cohort. For example, they have found many interesting biological differences in cytokines or hormones and immune response related proteins, which can be difficult to detect due to the low abundance in plasma samples.
Omid Farokhzad: This is yet another example of the power of the proteograph to enable unbiased deproteomics that revealed interesting insights and pathways for further study in non-human primate models.
Omid Farokhzad: I remain incredibly bullish on the long-term value of our differentiated technology and its potential to transform our understanding of the proteome.
Omid Farokhzad: Looking ahead, we will continue to execute against our core strategies of driving evidence and publications, continue to enhance access to the protograph, innovate with our products, and expand our applications. With that, I will now turn the call over to David.
David Horn: Thanks, Amid. Total revenue for the third quarter of 2024 was $4 million, representing a decrease of 3% compared to $4.2 million in the third quarter of 2023. It was primarily due to a decrease in related party revenue and grant revenue recognized in the quarter.
Omid Farokhzad: Product revenue for the third quarter of 2024 was $3.1 million, including 180...
Omid Farokhzad: $1,000 of related party revenue and consisted of sales of SP-100 instruments and consumable kits.
Omid Farokhzad: Product revenue grew year over year, primarily driven by an increase in instrument sales and consumable kit sales. Despite seeing continued pressure on CAPEX's budget and elongated sales cycles for the outright purchase of new instrumentation in the third quarter, we were encouraged by signs of a more constructive capital purchasing environment.
Omid Farokhzad: Service revenue was $847,000 in the third quarter of 2024, including $186,000 of related party revenue, and primarily consisted of revenue related to stacked service projects.
Omid Farokhzad: We continue to be encouraged by the customer interest in running projects through stack and their ability to gain access to protograph data We also continue to undertake projects for key strategic studies that will result in additional presentations and publications in the near term But are conducted at a lower price point than our typical stack service projects
Omid Farokhzad: This had the effect of lowering the amount of service revenue that was realized in the third quarter.
Omid Farokhzad: Grant and other revenue was $90,000 for the third quarter of 2024 and consisted of lease and shipping revenue.
Omid Farokhzad: Total gross profit was $1.9 million for the third quarter of 2024, representing a gross margin of 48%, compared to $2.2 million in the third quarter of 2023, representing a gross margin of 52%.
Omid Farokhzad: Gross margins were driven by higher instrument sales and lack of grant revenue in the third quarter of 2024 relative to the third quarter of 2023. We continue to expect variability in our gross margin on a quarter-by-quarter basis since the proportion of instrument, consumable, and service revenue will fluctuate in any given quarter.
Omid Farokhzad: Total operating expenses for the third quarter of 2024 were $26.3 million, including $6.1 million of stock-based compensation, a decrease of 6% compared to $28 million, including $7.9 million of stock-based compensation in the third quarter of 2023.
Omid Farokhzad: Research and development expenses for the third quarter of 2024 were $13 million, a decrease of 2% compared to $13.2 million in the third quarter of 2023. The decrease in R&D expenses was primarily due to a decrease in employee and stock-based compensation expenses.
Omid Farokhzad: Selling general and administrative expenses for the third quarter of 2024 were $13.3 million, a decrease of 10% compared to $14.8 million in the third quarter of 2023. The decrease in SG&A expenses was primarily due to a decrease in employee and stock-based compensation expenses.
Omid Farokhzad: Net loss for the third quarter of 2024 was $21.3 million,
Omid Farokhzad: We ended the quarter with approximately $312 million in cash, cash equivalents, and investments.
Omid Farokhzad: During the third quarter, we invested $10 million in Prognomics Series D financing alongside other existing investors and a new large strategic investor.
Omid Farokhzad: As previously announced, our Board of Directors authorized a $25 million share repurchase program in May of this year.
Omid Farokhzad: Under this program, we repurchased approximately 3.7 million shares of Sierra Class A common stock at an average cost of $1.78 per share.
Omid Farokhzad: During the third quarter as of September 30th. We had approximately 14.7 million dollars in authorization remaining under this share purchase program
Speaker Change: Turning to our outlook for the year, we continue to expect revenue to be in the range of $13 to $15 million for 2024. At this point, I would like to turn the call back to Omid for closing comments.
Omid Farokhzad: Thank you, David. I'd like to thank our incredible team for their hard work this quarter as we continue navigating through a challenging macro environment for the adoption of new technology.
Omid Farokhzad: Looking ahead, we believe these initiatives position us well for growth in 2025 and beyond. I look forward to keeping you updated on our progress. With that, we will now open it up to questions. Operator?
Speaker Change: Copyright © 2020, New Things LLC. All rights reserved.
Speaker Change: Thank you. At this time we will conduct our question-and-answer session.
Speaker Change: Thank you.
Omid Farokhzad: Thank you. Thank you very much. Thank you.
Omid Farokhzad: Thank you for watching. Bye.
Omid Farokhzad: Thank you.
Speaker Change: Our first question comes from the line of Yoku Oku with Morgan Stanley. Your line is now open.
Omid Farokhzad: Hi, this is Jason Ahn for Yuko. Congratulations on the quarter and thank you for taking our questions. So maybe just starting off, given the midpoint of your 2024 guide of $14 million, it seems to imply a flat or slightly negative sequential step down from 3Q to 4Q, which seems to break with the 4Q seasonality trends for your company the past few years. So maybe can you talk a bit about your assumptions surrounding this? Is it mostly conservatism? And what are your assumptions surrounding the budget flash dynamic?
Omid Farokhzad: In terms of the guidance, given where we are in the quarter,
Speaker Change: And as we look at those, you know, it really just comes down to a timing issue.
Omid Farokhzad: Some of those come, timing of those deals, you know, roll in our favor, you know, we'd expect to be at the high end of the range.
Omid Farokhzad: the
Omid Farokhzad: You know, our revenue base, you know, that could break either way, so we're really just trying to...
Omid Farokhzad: to be, you know, just to continue with that range that we have.
Omid Farokhzad: We do continue to see pressure on budgets, and so we're not really forecasting in a budget flush for the fourth quarter. So again, you could treat that as conservative, but it's just kind of where we're sitting right now.
Speaker Change: Go ahead, thanks for the color. And then maybe as a follow-up question, during 2Q you talked about significantly expanding your sales and marketing team to include the addition of multiple new regional sales managers. So did that initiative drive the beat at all? If it hasn't, then presumably it might take some time to ramp up. So when can you expect benefits from this initiative to flow through to the P&L?
Speaker Change: We have added multiple new regional business managers.
Speaker Change: We have added our new VP of Global Marketing.
Speaker Change: Zach Crosier to the team
Speaker Change: Now these new team members are ramping up.
Omid Farokhzad: They're already making good progress, we feel very good about them.
Omid Farokhzad: the opportunities that they're creating.
Speaker Change: Got it. And then maybe if I could just sneak one more in. So I think you've also previously commented on your sales channel kind of flipping from a 60-40 mix of commercial and academic historically to now being 60-40 academic and commercial. So I was just wondering what's kind of driving this shift towards academic customers? How much would you attribute this shift to benefits from the cadence of publications that you have seen to date versus headwinds and capital constraints from larger biopharma customers who are maybe like announcing strategic shifts
Speaker Change: Thank you.
Speaker Change: Let me take a crack at it and maybe I'll also have David comment on the back end of it if I leave anything out.
Speaker Change: The Closed Accounts, meaning customers that we actually close, that's different. So we're seeing more and more academic folks end up in our pipeline of customers.
Speaker Change: And as I mentioned, an increasing number of academics are coming on board in terms of opportunities.
Omid Farokhzad: But if I look at our install base and if I look at the...
Omid Farokhzad: that we're closing, it still tilted, Jason, toward the commercial, probably exactly the flip ratio, meaning about 60, 40 or so, tilted toward commercial. You're making an interesting point that
Omid Farokhzad: whether it's the increased evidence and publications that's driving the academics. I think that's part of it. The other part of it is that academics need time to get grants.
Omid Farokhzad: That's different than the commercial budget framework. So the product has been out there, the evidence has been growing, and these academics are beginning to
Omid Farokhzad: to secure the funding for the type of research needed to work with SEER. So I think that's also in part driving it. And then the comment you made about...
Speaker Change: The capital constraints in terms of the commercial customers, and that is correct. I mean clearly the macro picture is making it difficult for CapEx purchases, especially for new technologies like Sear.
Speaker Change: That said, also the increased publications are helping us with those dialogues, and increasingly we're seeing the size of the studies that we're having conversations with, whether it's for commercial entities or academic entities.
Omid Farokhzad: to be getting larger and larger. I mean, we're now in multiple conversations.
Omid Farokhzad: of studies that are 10,000 plus in study size. And I can tell you about a year ago, you know, we were having very, very few of those kinds of conversations.
Omid Farokhzad: So I think the data and the evidence is also driving larger and larger studies to become possible for us. David, do you want to add anything?
David Horn: Okay, perfect. I think you covered it, Omid. I think that was great.
Speaker Change: Thank you. One moment for our next question, please.
Speaker Change: Our next question comes from the line of Dan Brennan with TD Kohli. Your line is now open.
Speaker Change: Hi guys, this is William on for Dan. First question I have is about kind of a competition question. The proteomics space is gaining a lot of attention and there are other solutions that seek to overcome the same problems as proteograph. Just wondering how we should think about the evolution of the affinity-based proteomics market as more solutions become available and is growing overall awareness a tailwind?
Speaker Change: Yeah.
Speaker Change: William, thank you for the question.
Speaker Change: So, the proteomic market, by the way, I think is at its infancy and it's only going to grow. And the growth is going to be among the omics customers or the genomic customers that are going to begin to connect their genomic information
Speaker Change: functionally to proteomic information and get a ton more value in terms of that content.
Speaker Change: that targeted approaches scaled first.
Speaker Change: And that's because the untargeted approaches, like the approach that CEA takes with the proteograph leveraging a mass spec, those approaches were not available. And so the customer ...
Speaker Change: years ago had only the optionality to use a targeted approach if they were going to do a study of any size.
Speaker Change: Today, that dynamic is changing. I had predicted, by the way, that in 2025, the first population scale unbiased
Speaker Change: Deep unbiased proteomic study will go underway. I actually have increasing visibility for that statement to be correct.
Speaker Change: I mean the notion of doing tens of thousands of samples, deep unbiased proteomics on a mass spec, would seem like a pipe dream. Today that is completely a reality because of the ProteoGrav product suite and because the mass specs are getting better and better.
Speaker Change: So the customers are progressively recognizing this.
Speaker Change: And I think going forward, there's going to be room for targeted approaches to exist.
Speaker Change: and there's going to be a very important role for untargeted approaches.
Speaker Change: to add the content in proteomics that today has not been discovered yet. I think as content is discovered more and more, there's actually utility and a need for targeted approaches to interrogate those very specific proteins that have been discovered using unbiased approaches.
Speaker Change: So, both are going to coexist. I think it's a flywheel where more and more untargeted approaches is probably going to drive more and more demand for targeted approaches. I don't see the other side working, other than the fact that...
Speaker Change: Untargeted Approaches
Speaker Change: were the first to become, at scale, available.
Speaker Change: Yeah, William, thanks for that. I think for the back half of the year, I think we're still on track to kind of...
Speaker Change: be in that area. We were 48%, and I think we're trending for the nine months. I think we're around 49, 49.5. So I think we're going to be in that 50% area. We're not giving any guidance right now on next year, and we'll kind of give you an update and more detail on that on our year-end call at the beginning of the year. But again, we'll have more clarity around that and more color to provide you at that time.
Speaker Change: Thank you. Appreciate it.
Speaker Change: Thank you so much for your question.
Speaker Change: As a reminder, everyone, to ask a question, please press star 1-1 on your telephone and your hand will be raised and wait for your name to be announced. To withdraw your question, please press star 1-1 again.
Speaker Change: JPL
Speaker Change: Your line is now open.
Speaker Change: Hi, this is Jaden Rizmay on for Rachel Vanstal from J.P. Morgan. Thank you so much for taking my question. So first maybe just to start off
Speaker Change: How do you anticipate your recently announced collaboration with Dermo will impact Sears' market reach, customer base, and ultimately the top line, and are there any specific customers where you expect to see the most growth as a result of this partnership? Thank you.
Speaker Change: Jayden, thank you for the question. This is Omid.
Speaker Change: So, first of all, let me give you context. I think the timing was just right to do this kind of a partnership, and the reason is that the value proposition of the proteograph was getting more and more accepted and recognized by KOLs and by customers.
Speaker Change: And that made it easier for our partners to be able to sell our products versus requiring the very, very experts that reside within Sear to sell our products. So I think that's the timing part of it, and it was perfect. Now...
Speaker Change: We signed the agreement with our partners at Thermo Fisher Scientific. We still need to work through a lot of the implications for 2025.
Speaker Change: what you can expect from a revenue perspective on the top line given this partnership, probably on our next call.
Speaker Change: Now that said, keep in mind that the length of a typical capital equipment sell cycle is not short and so I expect that to still exist for the Astrol and consequently for the product that is going to be placed.
Speaker Change: whereas the astral with the proteograph can detect 6,000 or 7,000 or 8,000 proteins depending on the biological sample that may be different with different people.
Speaker Change: So, the value proposition in plasma is very significant, and I think those are the customer types.
Speaker Change: that are likely going to benefit from it.
Speaker Change: But the good news is that that is actually a very significant portion of the astral placement are exactly that customer profile.
Speaker Change: So I'm very optimistic about this and I have to say I'm very happy that we're doing this with Thermo, who's been a great partner to us over the course of the last three years and I'm thrilled by this partnership expansion.
Speaker Change: Yeah, that's perfect. Thank you. And then for my second question, I was wondering, what are you seeing from the stack program you launched in Germany? And how's the regression of that service been so far? And any expectations for the end of year and into 25? Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: We use our service over there, so we are very optimistic about that, and I think we'll continue to see the trend of continuing nice, steady growth in terms of the service business.
Speaker Change: for the fourth quarter. And then we certainly anticipate continuing that into 2025. Obviously, we can give you more thoughts on that on our year-end call. But we are
Speaker Change: Pleasantly surprised with the amount of interest we've had.
Speaker Change: We are continuing to
Speaker Change: at a lower cost for collaborators.
Speaker Change: such that we can, you know, get data and they publish studies and publish papers. So it's actually a strategic asset for us as well as we work to get data out there quickly into the hands of our customers that want to publish and do various studies. So overall, we're very pleased with it. And I think we'll continue to see, you know, nice, steady growth out of it.
Speaker Change: All right.
Speaker Change: Thank you so much.