Q4 2024 10x Genomics Inc Earnings Call
An archived webcast of this call will be available on the Investor tab of the company's website, ConnexGenomics.com, for at least 45 days following this call.
Good afternoon, everyone. During today's call I'll start with a brief overview of the product launches in both digital progress. We made in 2024 and one was a great set up to execute on our long term strategy.
I will highlight our key priorities and focus areas for 2021.
Adam will provide a more detailed look at our financial results business trends and the revenue guidance for the year.
Adam will also touch on the recent developments around the academic funding environment.
As previously announced we finished 2024 with total revenue of $611 million down 1% compared to the prior year.
On the background of increasingly challenging macro environment 2024 was a year of change for us.
First we launched a major new products across all three of our platforms while loop.
Extra effort from both our sales team and our customers to understand trial and transition over to the new portfolio. These launches have been met with a tremendous customer response.
Second within our single Silver Folio, we introduced a number of new products that deliver lower priced Brazil and per sample. We believe there is great potential to grow single cell revenue, while reducing prices to increase volumes over time.
Finally, we embarked on a major reorganization of our sales force to support the growing diversity of our products and customers and to allow us to scale into the future.
While all of these changes until some near term challenges, we are confident that they better position us to capture the tremendous long term opportunity we see ahead.
I'll start with a product innovations we introduced in 2024.
First on our chromium platform last year was the biggest year of chromium product launches in our history, we introduced a new Microfluidic architecture, Jim X and a slate of new products and capabilities. Once again, we raised the borrowing performance on data quality on robustness on scale we.
We rolled our powerful new capabilities to improve ease of use simple product and data analysis.
And we do this all with products at lower prices.
We also established a new standard for scale and cost customers can now run 1 million cell experiments with a single chip and in a single run.
They can also do so at a price point of one <unk> with our gem flex assay.
And with our own chip multiplexing products customers can now get down to $600 per sample at any scale.
We also launched chromium XO and instrument that provides a low cost entry point. So more researchers can access instrument powered workflows and performance advantages of chromium single cell analysis.
Our goal is to democratize single cell to drive it to ubiquity in routine use this past year, we took major steps in this direction, both in product capabilities and pricing.
The average price per chromium reaction decreased as we proceed through 2024.
This was expected as customers transition over to our lower priced <unk> products.
The drop was more pronounced in Q4, the first quarter and was jumbos floods and entre multiplexing beginning available to customers.
In conjunction with lower prices, we saw sequential increases in reaction sold throughout the year.
We expect it will take time for volume growth to offset the lower prices as a result in overall revenue growth. We're motivated by the early interest and adoption of our new assays.
Turning to <unk> 2024 was also a big year for our spatial platforms with product revenue growing 33% year over year as the portfolio continues to become a larger portion of our overall business as.
A significant contributor to the excitement for spatial last year was the new products, we launched notably visiting a Z and <unk> Brian <unk>.
Within our vision platform, we launched lithium HD, which brings special discovery to a new level by enabling whole transcriptome spatial analysis at single cell scale resolution.
Critically enabled by our scientists this instrument visit HG increases the resolution of the vision platform by over three orders of magnitude all while leveraging the same robust and easy to use workflow that the vision platform is known for.
Since its launch we've continued to see positive momentum from our customers in the fourth quarter customers continued the trend of order enthusiasm in larger volumes and new to visit customers are now overwhelmingly opting for visiting HD.
We also continued to execute on our robust <unk> R&D pipeline across our assays applications and software we started the year by launching our widely requested multimodal cell segment patient care, which leverages advances in assay chemistry, and sophisticated machine learning algorithms to significantly improve the determine.
Nathan will sell boundaries.
We also added new content extended simple compatibility and drove major advances in data analysis.
Finally, we launched <unk> prime five K, increasing plagued by an order of magnitude to 5000 genes.
Xinyuan Prime five features brand, new chemistry, and software to deliver an excellent <unk> sensitivity specificity and space or fidelity.
The enthusiasm from customers for these launches only adds to our excitement about this union platform and its long term potential to be the most significant technology evolution since the arrival of mgs.
We're encouraged by the robust utilization trends, we're seeing from researchers and by Reorders from customers purchasing additional <unk> systems as they experience firsthand the platform benefits.
In addition, there has been a growing number of publications and a core lesson of interest from residuals or planning cohort studies on Xinyu further fueling our conviction and opportunity ahead.
Both visiting HD and <unk> has been met with exceptional feedback in fact, one customer called the arrival of <unk> technologies, a watershed moment in Faisal trumps khatami's, revealing biological complexity as unprecedented resolution.
Sure our customers' excitement and believe in <unk> potential and scientific discovery translational work and ultimately clinical applications.
Alongside the product innovations we introduced in 2024, we also embarked on a major reorganization of our sales force in order to realize the full potential of our expanding product portfolio and evolving customer mix.
As mentioned on our Q3 call, we created greater specialization by establishing our capital equipment Biopharma and then emerging account teams all with the goal of improving focus and creating more defined roles with targeted incentives.
We've made meaningful progress with our new sales model since its introduction.
While we still have open roles to fill we're gaining traction with hiring and onboarding.
Our team is creating new opportunities at a faster pace.
And when bringing more consistent attention across customer accounts of all sizes in both biopharma and academia.
Overall, we believe we are on track for a new sales model to be in full force by mid year as expected.
As we kick off 2025, we're executing against several key priorities first finishing our commercial transformation and transitioning researchers to our new product portfolio. Our goal is to start taking advantage of the benefits of these foundational changes enable and deliver consistent execution quarter.
<unk> of the quarter.
Second we're working to drive more volume and greater use of single cell through lower prices, we firmly believe in the elasticity of demand of our products.
That's why we're working to democratize access to our tools delivering better products better workflows and better pricing. So more customers can do more single cell work more routinely.
Third we plan to leverage our new single cell portfolio and the momentum we have in spatial to unlock exciting new growth opportunities, including in Biopharma translational studies in large scale single cell projects.
Let me share a bit more about each of these.
We believe we have the opportunity to deliver outsized growth in Biopharma today of this segment makes up around 15% to 20% of our total revenue and we intend to extend biopharma to be half of our business in the future.
In addition, there has been rapidly growing interest in using single cell and spatial for translational cohort studies and we believe it is still early days.
As we look forward, we expect both the number and scale of such studies to continue to increase as researchers work to transform how we understand diagnose and treat disease.
Another significant growth opportunity isn't enabling large scale single cell studies to map out Jim functions and construct AI models of biology.
The convergence of our technologies and AI has the potential to transform how research is done.
Speaker Change: Just last week for example, the Chan Zuckerberg initiative launched its unprecedented billions sell projects.
Speaker Change: We're extremely proud to partner with both CCI and ultimate genomics on this landmark initiative to fuel a rapid progress in AI model development and biology.
Speaker Change: Yeah.
Speaker Change: And finally as we move through 2025, we will continue our focus on managing costs. They can't disciplined approach to spending so we can maintain the strength of our balance sheet.
Speaker Change: When you take a step back it is clear just how vast and powerful opportunities for single cell and spatial truly off it seems not a week goes by what other new exciting revelation being made using our technologies.
Speaker Change: Let me highlight just a few that have inspired and motivated our team recently.
Speaker Change: As featured in nature last month, researchers relies on chromium vision and xinyu to demonstrate how different immune cells emerge in our deployed to fight infection in the small intestine.
Speaker Change: In a recent nature cancer paper focused on diagnostic markers and brain tumors. The author has demonstrated how spatial trust diplomas previously restricted to research now shows potential in routine diagnostics.
Speaker Change: And it's not just sentiment journal is taking note of the revolutionary potential of our technologies recently, a deadline to describe our goal of our work the virtual cell as the Holy Grail of science.
Speaker Change: The potential of our tools to accelerate the industrial biology, and advance human health has never been more clear.
Speaker Change: That's why we do what we do that's why we believe the opportunity in front of US is so large.
Adam: With that let me turn it over to Adam.
Adam: Thank you Serge I'll start by reviewing our financial results for the three months ended December 31, 2024, then I'll review our financial results for the full year 2024, and I'll finish by discussing our outlook for 2025.
Adam: All growth rates provided will be on a year over year basis, unless otherwise noted.
In line with our previously announced preliminary results total revenue for the quarter with $165 million.
Adam: An increase of 9% sequentially and a 10% decrease year over year.
Adam: Looking at our revenue breakout total consumables revenue was $133 $5 million down 5% chromium.
Adam: Chromium consumables revenue was $97 $7 million down, 17% driven by lower reaction prices and special consumables revenue was $35 8 million up 61%.
Adam: Moving on to instruments total instrument revenue decreased 37% to $24 4 million chromium instrument revenue was $10 $9 million down 2% and <unk>.
Adam: Spatial instrument revenue was down 51% to $13 $4 million driven by fewer xenial instruments sold.
Adam: Services revenue was $7 $1 million up 35%.
Adam: Looking at our revenue by geography, Americas decreased 16% to $87 2 million.
<unk> decreased 2% to $49 $8 million in revenue in APAC were down 5% to $28 million.
Adam: Turning to the rest of the income statement.
Adam: Gross profit for the fourth quarter was $111 million compared to $115 8 million for the prior year period.
Adam: Gross margin increased to 67% from 63% in the fourth quarter of 2023.
Adam: This was primarily driven by change in product mix predominantly fewer veniam instruments sold.
Adam: Total operating expenses for the fourth quarter decreased to $168 million compared to $171 million for the prior year period.
Adam: This decrease was primarily driven by a $19 $6 million in process research and development expense related to a technology acquisition in the prior year period.
Adam: Partially offset by an increase in outside legal expenses.
Adam: R&D expenses increased to $67 million compared to $65 3 million for the prior year period, primarily driven by higher laboratory materials and supplies.
Adam: SG&A expenses increased to $93 8 million compared.
Adam: Compared to $86 1 million for the prior year period, primarily driven by increased outside legal expenses.
Adam: Operating loss for the fourth quarter was $49 8 million compared to a loss of $55 $2 million in the fourth quarter last year.
Adam: Net loss for the period was $49 million flat to the fourth quarter of 2023.
Adam: Turning to our full year results.
Adam: Total revenue for the full year ended December 31, 2024 was $610 8 million, representing a 1% decrease over full year 2023.
Adam: Total consumables revenue for the year was $493 4 million up 3%.
Adam: Chromium consumables revenue was $372 $3 million down, 11% and spatial consumables revenue was $121 $1 million up 104%.
Adam: Total instrument revenue was $92 7 million down 25%.
Adam: Chromium bolster net revenue was $35 $2 million down, 26% and special instrument revenue was $15 $7 $5 million down 24%.
Adam: Services revenue was up 57% to $24 6 million.
Adam: Looking at our regional results for full year 2020 for America's revenue was $347 8 million down 7% EMEA grew 12% to $159 $8 million in revenue in APAC was $103 $3 million flat to prior year.
Turning to the rest of the income statement for full year 2024, gross profit was $414 $5 million compared to gross profit of $409 3 million for the prior year.
Adam: Most margin increased to 68% compared to 66% for 2023 this was primarily.
Merrily driven by change in product mix predominantly fewer veniam instruments sold.
Adam: Total operating expenses for 2024 decreased to $609 million compared to $674 6 million for the prior year the.
Adam: The decrease was primarily driven by a $61 million in process research and development expense related to a technology acquisition in the prior year period, and lower personnel expenses, partially offset by higher outside legal expenses.
Adam: R&D expenses decreased to $264 7 million compared to $273 million for the prior year, primarily driven by lower personnel related costs.
Adam: SG&A expenses increased to $344 3 million compared to $343 3 million for the prior year, primarily driven by increased outside legal expenses, partially offset by lower personnel related costs.
Adam: Operating loss for 2024 was $194 6 million compared to a loss of $265 $3 million for 2023.
Adam: Net loss for 2024 was $182 $6 million compared to a net loss of $255 1 million for 2023.
Adam: We ended 2024 were $393 $4 million in cash and cash equivalents and marketable securities an increase of approximately $5 million from December 31 2023.
Adam: Turning to our outlook for 2025, we expect full year revenue to be in the range of $610 million to $630 million, representing zero percent to 3% growth over full year 2024.
Adam: At the midpoint this guidance implies double digit growth for both chromium reactions as well as our overall space oil revenue.
Adam: With this outlook, we are making the following assumptions first we are not anticipating improvements in the overall macro environment and generally expect it remains similar to what we experienced in the second half of last year.
That said it has been a very fluid situation over the past few weeks and days with heightened uncertainty surrounding NIH funding.
Adam: As we've shared previously we estimate total NIH funding exposure to be about 20% to 25% of our revenue.
Adam: Our guidance range contemplates previously anticipated weakness in the NIH funded research based on delays and reductions in new grant funding and how broader uncertainty around funding may impact customers' budgets and spending patterns. However, the current guidance range does not reflect the potential impact of the recently announced.
Adam: 15% cap on indirect costs should that be fully implemented.
Adam: Second our goal is to democratize single cell analysis, and we remain committed to driving increased access and usage of our products and customers labs.
Adam: We expect chromium consumables revenue to be modestly down this year as our lower priced products become a larger portion of our sales.
Adam: And finally, we continue to execute on the commercial changes that we made last year as previously discussed we anticipate some lingering impact from these changes during the first half of 2025 as we so open roles, particularly in our <unk>. We have conviction that these were the right structural changes to make and remain.
Adam: And on track to be fully complete by the middle of the year.
Adam: As Serge mentioned, we continue to focus on managing our spend we are taking a disciplined approach to our expenses and are driving efficiencies throughout the organization we.
Serge: We ended the year with $393 million in cash and cash equivalents when we feel confident about our strong balance sheet that we are well positioned for the long term at this point I'll turn it back to search.
Serge: Thanks, Adam.
Serge: Before we open it up for questions I wanted to things that 10 X gene I'm. So grateful for his tireless work unwavering dedication and obsession with customer success as we continue to push through boundaries and heart challenges together.
Serge: I have full confidence in the talented tenacity or our team as we execute on our 2025 priorities with urgency and excellent tenants.
Serge: Tenants with.
Serge: That's how we will advance our mission and create value for all stakeholders, both now and over the long term.
Serge: With that we will now open it up for questions.
Serge: Later.
Serge: Thank you we will now begin the question and answer session. If you have dialed in and would like to ask a question. Please press star one on your telephone keypad.
Serge: Ham and join the queue. If you would like to draw your question. Thank you.
Star one again.
Serge: And your first question comes from the line of Dan Brennan with TD Cowen. Please go ahead.
Dan Brennan: Great. Thanks for thanks for taking the questions guys.
Dan Brennan: Maybe the first one would be just on kind of single cell pricing.
Dan Brennan: Serge you talked about that I'm talking about the investment in price that youre, making and you still expect there to be some pressure on consumer mortgage can you just give us a sense of kind of where are we in the evolution. It looks like if we just took your consumables divided about my reactions price was down about 11% and 24.
Dan Brennan: So how do we think about what's baked in for 25 and kind of whats the gap today between your price and the competition and kind of how much now or does it need to get.
Dan Brennan: Hi, Dan Yes, thanks for the question so.
Dan Brennan: One thing to keep in mind is as we have multiple products with multiple configurations and different customers depending on applications depending on their experiments.
Dan Brennan: Looking at.
Dan Brennan: These experiments different.
Dan Brennan: Differently right. So for some price per ourselves in part for some price per sample is important for some price per experiment is important and we believe that we have really really compelling value propositions for all these customers across all lease applications now with all the launches we had last year. So.
Dan Brennan: And.
Dan Brennan: It's important to keep in mind that our primary imperative here.
Dan Brennan: Is to do is to grow the market. We see there is a lot more potential in single celled on what has been tapped into so far there is great potential to grow volumes.
Dan Brennan: And last year, we took major steps in enabling our unlocking sort of some of these Brian.
Dan Brennan: Barriers and enabling much are enabling new obligations in greater volumes.
Dan Brennan: So we believe that with our current product composition and line up we're in a good spot to drive more volume, which is what Adam was referring to earlier, that's our expectation for the year and I think the story for this year is going to be kind of a transition from into the new product lineup, and which will drive our asp's average price.
Dan Brennan: Reaction.
Dan Brennan: Lower just by virtue of the product mix kind of shifting into all these new products.
Speaker Change: Okay. Thank you and your next question comes from the line of Patrick Donnelly with Citi. Please go ahead.
Patrick Donnelly: Hey, guys. Thanks for taking the questions.
Patrick Donnelly: Serge maybe one I know the NIH you touched on them a little bit it sounds like maybe that got new Monday, 15% potential not really included in guidance can you just talk about what youre seeing from customers was there any reaction to that news understanding the NIH exposure, but just that second derivative to the academic market. How do you think about that.
Patrick Donnelly: And what's the right way to frame the mix there. Thank you so much.
Patrick Donnelly: Yeah, Let me just turn it over to Adam to clarify the specifics on an age.
Adam: Thanks, Patrick.
Adam: Try to provide some transparency around the assumptions we've made.
Adam: And the revenue guidance.
Adam: So as I mentioned earlier, we estimate total NIH funding is about $20 to 25% of our total revenue and so on.
Adam: The midpoint of our guidance range, what we've assumed here is a mid single digit decrease in NIH funded projects to our customers in 2025, and so that would equate to about seven or so million dollars impact to our revenue.
Patrick Donnelly: And that assumption was based on a continuation of the general conservatism. Some of the spending patterns that you just asked about Patrick and delays that we first saw from our NIH funded customers in the second half of last year, and then certainly some of the announcements.
Adam: On the funds flow in January related to the NIH.
And then since that time, the situation's been pretty fluid and dynamic as you noted the indirect funding costs were capitalized Friday and temporarily suspended by a judge at a couple of days later, when we expect there's going to be additional challenges to these new rules from universities and from others and no one really knows with certainty what the final outcome of those various announced changes will be and so it has.
Adam: Such we have not incorporated these more recent events the indirect.
Adam: Conversation, which were changed by day by day in some cases by the hour we have not incorporated those into our guidance generally speaking.
Adam: Our customers use direct funds to purchase our products, including instruments and so while there's potential cap on indirect cost is not in our guidance. Let me give you some color about how we're broadly thinking about these latest developments without going into the real detail on direct versus indirect funds, we can reasonably bound the potential impact of an overall reduction in <unk>.
Adam: IH funding.
Adam: As you said expect the indirect path to save more than $4 billion annually, which would imply an 8% cut to the overall NIH budget. So based on our 2000% to 25% exposure, we estimate that this potential 8% reduction if fully implemented across both direct and indirect funds. The result in approximately a 10% to <unk>.
Adam: $15 million impact to our revenue again not accounted for in our 2025 guidance I would add to that.
Adam: Also part of your question apart from a quantitative impact we'd have to acknowledge the collective and heightened uncertainty around funding, it's going to have an additional impact on the confidence of our customers and this can further impact customer spending patterns the ability to make purchases and the timing of their purchases. So we're here to support our customers as they navigate this uncertain time, which unfortunately.
Adam: It's really distracts really important work, they're doing to push science in the world forward, we're watching closely to see how customers deal with its uniquely dynamic environment and we are here to partner with them, giving.
Adam: Given its critical role funding advanced research and discovery. The NIH has historically received bipartisan support and we hope and expect that will continue as conditions normalize.
Speaker Change: And your next question comes from the line of Dan Arias with Stifel. Please go ahead.
Adam: Okay.
Dan Arias: Hi, guys. Thanks for taking the question Serge can you just add some color to your comment on chromium volumes I mean, it looks like chromium reactions were basically flat this year down a point or two I believe.
Dan Arias: You're guiding to double digit growth in 2025, which is a pretty big step up, particularly given the environment right now to where is the confidence in going from zero to 10, plus and just where is it coming from is a discrete projects like 1 billion cells. Do you think you open up the market with some of these new products.
Dan Arias: I would just be helpful to sort of get your take on.
Dan Arias: How are you feeling about going to that level of acceleration. Thanks.
Dan: Yeah, Dan So one thing to maybe add too to keep in mind is that we actually had a sequential increase in reactions.
Dan: Going from Q3 into Q4, which we see as a kind of starting.
Dan: Pattern that we have worked on to establish and.
Dan: And we anticipate that that trend will continue into this until this year.
Dan: And yes, I mean, it's a function of the things that was talked about before but the new products the new price points, new configurations opening up more use cases opening up more routine use for some people opening up new people entering.
Dan: Single cell that werent necessarily doing or considering in before and for sure opening up of big large projects. So the CCI was a great example, there's many people who are looking to scale up their single cell research and.
Dan: And up until recently pricing was a big area. So we do we do anticipate that to continue and we see that the trend. We saw starting Q4 is a it is going to continue as well.
Speaker Change: Thank you and your next question comes from the line of any <unk> Leerink partners. Please go ahead.
Dan: Yeah.
Dan: I'm.
Speaker Change: Struggling with the fact that the indirect cuts are not included in your guide.
Dan: Simply saying that because.
Speaker Change: When you ask your customers and I'm sure your sales reps are getting this feedback.
Speaker Change: The instrumentation purchases are very risky in times when there is significant uncertainty on something that the researchers have really not experienced ever before.
Speaker Change: Indirect cuts where when they go in they are going to institutions that are sort of the leading institutions medical schools and universities that have significant indirect exposures, 60% to 80%, sometimes larger and they are expected to cut to 15%. So in situations like that the uncertainty is even.
Speaker Change: And Thats, where some of your innovative products are growing so I'm trying to.
Speaker Change: Understand.
Speaker Change: Knowing the fact pattern here knowing at least in the first week the level of <unk>.
Speaker Change: Conservatism that youre seeing and the fact that really the legal.
Speaker Change: Cases that you talked about they might be temporary and Congress act might require much longer given all that uncertainty I'm just trying to understand why this is in direct cuts are not baked into the guide.
Speaker Change: Well when you are.
Speaker Change: Is that you know our goal here is to provide the maximum transparency and control of how we're thinking about.
Speaker Change: Above the year.
Speaker Change: As a as Adam mentioned at the very very kind of volatile situation right now things.
Speaker Change: Things are changing by the day by the hour or so.
Speaker Change: We need to be careful in making assumptions about how it's all going to turn out youre right. The customers. As we said are definitely on the edge right now and Theres a lot of uncertainty.
Speaker Change: I do want to emphasize that.
Speaker Change: Our exposure when it comes to when it comes to instruments.
Speaker Change: Also somewhat.
Bounded right only a fraction a small fraction.
Speaker Change: All of the instruments.
Speaker Change: That we sell go into academic core labs.
Speaker Change: And within those the instruments are supposed to be financed through majority of through direct funds.
Speaker Change: While we recognize there's certainly exposure.
Speaker Change: The current environment is highly uncertain.
Speaker Change: The potential impact is also bonded and that's what's Adam articulated and that's how we're thinking about it.
Speaker Change: And your next question comes from the line of Doug Schenkel with Wolfe Research. Please go ahead.
Doug Schenkel: Hey, good afternoon, everybody. Thank you for taking my question.
Speaker Change: I'm going to.
Speaker Change: Thank you follow up with just a couple of clarification questions on guidance.
Speaker Change: And I'm, sorry, if I'm, just being a little slower maybe need a little more coffee late in the afternoon, but theres just a couple of things I'm not clear on so the first is.
Speaker Change: I think you talked about reducing your guidance by $7 million.
Speaker Change: Due to something relating to the NIH, which occurred prior to the news about the indirect costs.
Speaker Change: So I wanted to just understand what the 7 million was then I believe you said your best estimate on the impact of.
Speaker Change: Indirect funding.
Funding being capped would be an additional $10 million to $15 million.
Speaker Change: I want to make sure I have that right.
Speaker Change: That kind of gets at one of the big elephant in the room, which is the NIH.
Speaker Change: Then what I don't think you've talked about with China and you Werent named in the same way alumina was name, but there are obviously lots of concerns about what's going on in terms of demand for genomic tools.
Speaker Change: In China, and I think it's broader than that and tool. So the first thing is can you clarify what's in and what's not in for the NIH, how youre treating China and then I think the other thing you haven't talked about is really pacing and again I'm sorry, if I missed that but given everything that's going on in the world I could either see where folks.
Speaker Change: We're trying to accelerate activity in it.
Speaker Change: Vance of uncertainty or they're actually slowing down and basically waiting for more clarity. What are you seeing and how are you treating that in guidance and accordingly, how should we model things by quarter.
Speaker Change: Yeah.
Speaker Change: Yeah, So why don't I start.
Speaker Change: Doug.
Speaker Change: Sure.
Speaker Change: Go back and forth a search on the China.
Speaker Change: Piece of this so.
Speaker Change: Thank you, let me clarify because I think you actually got it right so baked into the guide.
Speaker Change: <unk> is roughly a mid single digit decrease.
Speaker Change: NIH funded projects for our customers, so we knew things or they.
Speaker Change: They were shaky before the indirect news came out I guess it was last Friday.
Speaker Change: So that's what we've tried to incorporate into our guide that is roughly $7 million impact do we think about a mid single digit.
Speaker Change: Decrease in funding.
Speaker Change: For that 20% to 25% or so of our revenue and again, that's just based on sort of the conservatism that we've been seeing again things are more uncertain, obviously now.
Speaker Change: Given the indirect but thats really from a direct funding perspective, what we baked into the guide the 10% to $15 million that does not incorporate in the guide is really just weird to say look it's just a complete 8% cut to the total NIH budget and there are two distinct pools of money. There is a direct there isn't indirect that's the.
Speaker Change: The math that we were trying to walk people through again I think as Serge mentioned, we're just trying to be as transparent try to give people the right parameters to understand inbound.
Speaker Change: The risk and so again based on our 20% to 25% exposure if theres a full 8% reduction kind of just across the board as the way that it played out implemented across both the direct and indirect funding that resolved roughly 10% to $15 million impact to our revenue and that's the piece of it that we didn't.
Speaker Change: We didn't.
Speaker Change: Put into the guide, but let me just touch on pacing.
Real quick so from a pacing perspective, there's a couple of things to consider one is just yes, we're living in.
Speaker Change: Interesting times right now in particular.
Speaker Change: And so that's one reason that we would anticipate the year to be a bit more backend loaded the other though which we've been transparent about I guess going back all the way towards Q3 is that we're still working through and building up our commercial force and so hiring is going quite well.
Speaker Change: Still have some some gaps that we're feeling we're training up.
Speaker Change: The reps.
Speaker Change: We were able to hire and bring on board.
Speaker Change: Really in Q4 of last year, but even just as a result of getting that team up to full force and again consistent with the messaging we've been sending we would anticipate we're really.
Speaker Change: All systems go from a commercial perspective by the time, we get into the second half and so as such we're really thinking about as we thought about sort of quarterly pacing in sort of first half versus second half modeling it out.
Speaker Change: Much more consistent with what we saw in 2023 and I think both of these years predate EBIT I think even 2022.
Speaker Change: There's more business, it's transacting in the second half and we are in the first half. So I think if you use that kind of a general guideline looking back at 2023 pacing by quarter I think.
Speaker Change: That gives you a pretty good parameter of what we're thinking about and then maybe search you want to touch on the China questions. Yeah. So Doug I mean, there's a few things embedded in that China set of concerns with people first of all there are some of the news around the alumina and to what extent that would affect us and given that a lot of our products are used in conjunction with <unk>.
Speaker Change: Illumina sequencing now.
Speaker Change: The important thing to appreciate there is that our products are inherently compatible with.
Speaker Change: Just about any sequencing technology right and so it is fairly straightforward for our customers to switch over to another sequencer in fact, that's what's happening.
Speaker Change: In many cases over there.
Speaker Change: And so we don't anticipate.
Speaker Change: A major impact from decided that the alumina could be taken out of some of our customers' lives.
Speaker Change: Yeah.
Speaker Change: Also as far as sort of.
Speaker Change: Our agile technology it doesn't draw really the same levels of attention over there compared to some of these other products.
Speaker Change: Products like sequencing.
Speaker Change: All of those and also there isn't really a grade.
Speaker Change: <unk> in the country.
Speaker Change: Four four products as well so kind of putting all those factors together world, while theres a lot of different kinds of issues that are going on around China, we feel like generally where our risk is reasonably come to them and again, China is also a fairly minor part of our overall business at 9%.
Speaker Change: <unk>.
Thank you and your next question comes from the line of Tycho Peterson with Jefferies. Please go ahead.
Speaker Change: Hi, Thanks, a couple of clean up some guidance I guess search can you talk about what you're baking in for contributions from the product launches last year, just any color you can give on that.
Speaker Change: Baking in there and then.
Speaker Change: Chan Zuckerberg, what's what's in the guide for that and are there other similar projects Youre baking in legal I think goes down post the <unk> injunction. So maybe just talk a little bit about spending there and then one thing I wanted to understand on the NIH.
Funding has actually been good I mean, it was up 35% last year for spatial.
Speaker Change: I think you have $400 million of trailing 12 months funding available.
Speaker Change: When does that start to flow through obviously, there's a lot of noise here in the near term and I get it.
Speaker Change: All of that but the funding he actually went up quite a bit last year.
Speaker Change: Yeah. So tycho on the first part of the question as far as new products are concerned.
Speaker Change: Are concerned yes, I mean, there are definitely a big part of what we expect to happen. This year first of all we do expect that materially all of.
Speaker Change: Sort of the chromium business would turn over on to the Max.
Speaker Change: Most of the business will transform all went to the <unk> architecture across.
Speaker Change: Of course, the course of this year.
Speaker Change: We also are seeing good traction with the launches we did in Q4 around on ship multiplexing and with <unk> floods. So those are going to be a larger larger fraction of the horrible.
Speaker Change: Product mix and potential.
Speaker Change: So.
Speaker Change: They are and Thats part of whats going to be driving increased volumes through.
Speaker Change: For the year.
Speaker Change: The larger projects that we have talked about <unk> being one of them is also part of what we expect to be happening this year.
Speaker Change: So that's that is also contemplated within our expectations within our within our guide.
Speaker Change: As far as.
Speaker Change: On the funding from NIH Youre right.
Speaker Change: If you look if you click down a level below sort of the overall total funding trends.
Speaker Change: Trends for single cell and spatial or actually really promising I'm really.
Speaker Change: Really really healthy which is what part of the reason that gives us some amount of optimism about how things are going to be trending into this year and beyond we just have to temper it somewhat with the current situation and uncertainty around them.
Speaker Change: I think the last part they start talking to your question around sort of.
Speaker Change: Legal from an Opex perspective.
Speaker Change: Opex, we continue to manage our costs.
Speaker Change: In a disciplined way.
Speaker Change: And.
Speaker Change: We would anticipate our costs year on year.
Speaker Change: Roughly flat from an operating expense perspective, and that legal pieces part of it.
Speaker Change: Great. Thank you and your next question comes from the line of T. J Silvana Morgan Stanley. Please go ahead.
Hey, guys good evening.
Speaker Change: A couple of clean ups on the guide and then I have one on the on the.
Speaker Change: Legal side of things as well.
Speaker Change: Maybe Adam for you any color on gross margin cadence through the yard is a few moving pieces here. Obviously, you mentioned the pricing headwind in mix and so on.
Speaker Change: But also potentially you know some of these large single cloud projects come through does that sort of weigh a little bit on the gross margin line. So any color there would be great.
Speaker Change: And then on the on the IP litigation with the agenda.
Speaker Change: Sure.
You generally satisfied with the terms can you share whether they involve any ongoing royalty or license increase to you and given the patent overlap between that case and then the one with broker.
Speaker Change: Just any color on how you're seeing sort of that outcome positions you for.
Speaker Change: The other case thank you.
Speaker Change: So why don't I take the gross margin question and then ill defer to search on the second part of your question Tito Yeah, I think on gross margin the way we're thinking about the year in total is roughly in the same ZIP code as of where we ended.
Speaker Change: The 2020 for a couple of things that I would add and you touched on them.
Speaker Change: Better product mix from a for one can swing things right. So the more <unk>, we sell in against sort of embedded in that.
Speaker Change: And I say that margins will be fairly consistent year on year as an assumption around the <unk> to the extent that we're selling more <unk> instruments that will put some pressure on it we certainly have and I'm not talking about <unk>.
Speaker Change: Specific tariff commentary, but we've got cost pressures in the business really just basic inflationary supply cost that.
Speaker Change: We're working our best with our ops team here to to be mitigating through other efficiencies I think to your point on large projects and it's hard to forecast the timing of those but we're going to compete to win and so to the extent, we were going to do that across our business and so to the extent.
Speaker Change: With our portfolio.
Speaker Change: We've got flexibility to compete and to the extent that we're competing and winning some of those larger projects. During the course of the year, yet that could have a negative or a detrimental impact on gross margin.
Speaker Change: That's something that we're baking kind of into the plan as it stands but thats something that certainly we would.
Speaker Change: You have been talking about as the year progresses.
Speaker Change: Yeah.
Speaker Change: This is Jim settlements, so, yes, we're actually extremely happy with the outcome.
Speaker Change: Fundamentally the settlement validates the intellectual property investments we have planned.
Speaker Change: So fundamentally importance of Georgia charges warrant on this foundational investments around in situ.
Speaker Change: The team recognized the importance of this intellectual property early on and invested in developing.
Speaker Change: This does IP on the product and R&D all around it and I think this is a this is a really great moment in a huge testament to the to the whole team.
Speaker Change: And yes, we're very we're very happy with the outcome.
Speaker Change: And your next question comes from the line of vitro that installed with Jpmorgan. Please go ahead.
Speaker Change: Hi, This is Jason on for Rachel just digging into the placements how should we think about placements for Xenia enthusiasm next quarter and then in 'twenty five and then on chromium, what's the total pricing discount headwind do you expect for next year for chromium consumable.
Speaker Change: Yeah, Let me take <unk> first part of your actually I can take both parts of your question. So I think on the Xinyu.
Speaker Change: <unk> side I think what we've said from a guidance perspective is that we anticipate the entire social business to grow double digits. So we are anticipating growth.
Speaker Change: <unk> unit placements during.
Speaker Change: During the course of the year.
Speaker Change: And we would anticipate will sell more than 25 than we did in 2004.
Speaker Change: Got a great pipeline, we've got a dedicated <unk> capital equipment team now.
Speaker Change: They are starting to hit their stride that is.
Speaker Change: The team that probably still has the most hiring to do so we do anticipate as the year progresses is that team continues to develop and push the great opportunities that theyre developing through the pipeline and closing those that will have.
Our growth in the Xenia instrument business year on year to your question on chromium consumables I guess, a couple of things I would say that the rebound in the math there.
Speaker Change: We called out double digit.
Speaker Change: The volume is what we're anticipating and thats whats baked into.
Speaker Change: On the guide.
Speaker Change: We also said, though as part of the the guidance section that.
Speaker Change: As I mentioned earlier that would be modestly down overall, and so I think youre going to infer from that that we'll probably have as we think about the new products that we've launched really from a price and creating accessibility from a customer perspective.
Speaker Change: <unk> sort of in the double digit sort of.
Speaker Change: <unk> framework on a year on year basis from from.
Speaker Change: From a reaction price standpoint.
Speaker Change: Churn comes from the line of Dan Leonard with UBS. Please go ahead.
Speaker Change: Thank you.
Speaker Change: I was hoping you could elaborate a bit more on your Biopharma comment I think you commented that's about 15% of your revenue could grow in a 50 over time can you perhaps share what was the growth rate for Biopharma in 2024, and just any more color around what the cadence would be to mix that part of your revenue.
Speaker Change: Thank you.
Speaker Change: Yes, so I mean overall you biopharm rod was for the year.
Speaker Change: It was fairly challenged especially if you go back earlier like the first part of last year.
Speaker Change: As we proceeded through especially after we made our changes on the commercial side outside of the new team.
Speaker Change: In Q3, we saw a really nice sequential.
Speaker Change: Improvement in Q4, and a lot of the signs that we're now seeing as far as the team is concerned having the people in place having sort of the new obligations opening up and conversations we're having with customers is all pointing in this <unk>.
Introduction of <unk>.
Speaker Change: Of those great potential to grow our business there.
Speaker Change: And.
Speaker Change: And so yes, so we do anticipate over historically, we've been around 15% to 20% and now we're making concerted investments and we're seeing great great opportunities to grow much faster than that.
Speaker Change: Toward that goal is about 50%.
Speaker Change: The next question comes from the line of <unk> <unk> Guggenheim Securities. Please go ahead.
Speaker Change: Hey, guys. Thank you for taking my question on the gross margin was a bit weaker than expected in the quarter was that just a function of pie instrument mix or is that also some inefficiency associated with the rollout of new consumable products that are dragging on margin.
Speaker Change: Yeah, Thanks to work.
Speaker Change: It was really as Indian mix.
Speaker Change: <unk>, we did mention.
Speaker Change: We saw we werent anticipating originally budget flush towards the end of the year just based on what we are.
Speaker Change: I've been seeing I think we mentioned earlier in the year publicly that we did end up seeing so when you think about where.
Speaker Change: We had guided.
Speaker Change: And where we landed.
Speaker Change: A good portion of that was budget plus a good portion of that was in Biopharma and then there were certainly some senior instruments that played into that and so when you think about gross margin trend. During the course of the year that was really the primary impact of that what.
Speaker Change: What you've described there in Q4.
Speaker Change: And your next question comes from the line of Kyle Mcphee with Canaccord Genuity. Please go ahead.
Kyle McPhee: Hey, guys. Thanks for the questions follow up on Biopharma with frequent forward can you talk about the biopharma spending assumptions and the 25 guidance given the bunch of Fox experience at the end of 'twenty four and secondly, just on the IV side Pizza have been validated all your claims asserted against a spinoff of competitors' products just given that litigation is there going to be even more.
Kyle McPhee: For competitive headwinds in single cell going forward. Thanks.
Speaker Change: So yes, maybe I'll address the first part of the question. The second part of the question first.
Kyle McPhee: Absolutely no decisions.
Kyle McPhee: Have a bearing in terms of overall production of our products and our technologies, which was really really strong about those and as far as competitive dynamics are concerned.
Kyle McPhee: We feel really great about the position of our products the value that they provide all the advantages in terms of data quality in terms of performance in terms of ease of use and value that they deliver to our customers and we feel really great where we are and that's and that's always going to be on neurostar, who are delivering great value for our customers.
Brian: And as far as Brian.
Brian: As far as Biopharma is concerned yes, I mean, we are sort of him as part of our of our guidance due temporal and consider the trajectory and.
Brian: The.
Brian: The impact the growth within Biopharma this year as well.
Speaker Change: Thank you and our next question comes from the line of looks very gutsy Barclays. Please go ahead.
Speaker Change: Great. Thanks, guys.
Speaker Change: Quick cleanup here.
Speaker Change: If I missed it but did you give a.
Speaker Change: Any sense or direction on the split between Vizio men Veniam consumables in the quarter and then unrelated.
Speaker Change: Can you kind of give us some timing there on the 1 billion cell project in China.
Speaker Change: Kind of how that plays out in and can they can get that done in two or three years or what's needed there from equipment perspective.
Speaker Change: Well so.
Speaker Change: The project itself is is getting going.
Speaker Change: Pretty quickly.
Speaker Change: As far as the timing to complete the obviously these are this is a very large scale sort of endeavor.
Speaker Change: It's not it shouldn't be kind of a three year.
Speaker Change: But it will take time for for it.
Speaker Change: Yeah to get done.
Mark Murphy: Your next question comes from the line of Mark Murphy with Baird. Please go ahead.
Mark Murphy: Hey, Thanks, I had two unrelated follow ups the first based on the.
Mark Murphy: The reaction on pricing commentary you've canceled wells at.
Mark Murphy: And <unk> tried to start it keeps more claims for that.
Mark Murphy: Reasonable assume that you will grow single saw revenue Andrew.
Mark Murphy: This quarter and your current plan that's part one and then Mark you can.
Speaker Change: I understand in any transition.
Speaker Change: With respect to all of that would be a challenge can you talk a little bit about how your customers in Europe in terms of what their behaviors like Australia may has been a very rapidly growing category for you over the last four or five years, and that's an area where indirect capped at 25%. So just be curious to hear about a difference of a similarity in the customer behavior. Thanks.
Speaker Change: So as far as our European business on the overdose.
Speaker Change: Uh huh.
Speaker Change: I think your question was around sort of the indirect and overhead kind of funds and how that plays out yeah. So I mean, that's a good point of comparison, our European business has actually been doing relatively.
Speaker Change: Relatively well over the course of the past year or plus.
Speaker Change: And that sort of indicates what happens when there is sort of a lower potential indirect right.
Speaker Change: Oh over there now of course, when we're looking at the U S would have to be cautious.
Speaker Change: Every time anytime you have a significant change of this magnitude that creates a lot of uncertainty.
Speaker Change: And.
Speaker Change: And that is a sort of less at an outlook of our customers, but yes, you can see that in a long run.
Speaker Change: This can kind of work out and.
Speaker Change: And research can continue.
They're really a robust rate.
Speaker Change: Thank you and our next question comes from the line of Matt <unk> with Goldman Sachs. Please go ahead.
Matt: Hi, Thanks for taking my question.
Matt: Just back to the commercial changes you made last year, just as we think about the first half of this year measuring your progress and success of those commercial changes I know you said the veniam wed likely be a little bit later, you made some comments about biopharma seeing sequential improvement at the end of last year, but how should we think about.
Matt: Were sort of the leading indicators of success of these changes would be is it in chromium capex as in consumables.
Matt: What are some of the metrics, we should be looking out for.
Matt: But also one thing to appreciate here is.
Matt: The the.
Matt: Changes that we implemented were meant to be holistic right. This was like a re architecture of our go to market.
Matt: Fundamentally why are we created new sub organizations with our commercial.
Matt: Function with the with a specified focus was specified target incentives and size and as such is going to affect all parts of our business. Brad was specifically wanted to make sure. We have a special dedicated team to focus on Z news, which is great. It's going to help <unk>, but also by version by virtue of taking the <unk> instruments out of the bag of other.
Matt: Our sales our sales executives that gives them an opportunity to focus more on the chromium products on their own vision products.
Matt: We should also help those product lines.
Matt: Also by virtue of separating out the focus of academia from Biopharma will help biopharma, but also help academia.
Matt: Academic towns and overall as.
Matt: We kind of zoom out where we are we do feel like we're in a good space and making good progress as we have outlined.
Matt: Good progress was hiring the progress with Onboarding opportunity management account coverage.
Matt: And as we look for the balance of the Euro we shouldnt be really in full force by the middle of this year.
Speaker Change: Thank you and your next question comes from the line of Mike RV scan with Bank of America. Please go ahead.
Speaker Change: Great. Thanks for taking the question I wanted to.
Speaker Change: Just follow up on a couple earlier points mixture arcata right I think Adam you talked about first half second half seasonality in 2025.
Speaker Change: Guys occasionally give quarterly guys just whenever there's something to keep in mind. So just.
Speaker Change: Yeah.
Speaker Change: Any additional clarity on <unk>, specifically or are you just going to keep it by by halves and then the other final question I'm sorry.
Speaker Change: There's maybe a better suited for you.
Speaker Change: Dan Leonard asked an earlier your comments about pharma biotech growing to 50% I just want to push on that a little bit more I mean, if you're at 15% to 20% revenue mix now.
Speaker Change: I realize that a longer term for a lot of technologies in genomics and tools. There as you know growing use cases in translational.
Speaker Change: Research as you sort of move out of that earlier pure academic pure research setting, but if I look at your portfolio of these technologies has been out there for a while this is not that new and yet despite being on the market for you now in some cases 510 years now you're still only at 50%, 20%. So I'm just wondering.
Speaker Change: How do you get to 50% Ryan I mean, I would've thought that if you're really going to get there you have been further along the ramp now.
Speaker Change: Is there something from a commercial organization or from a customer use case that you think is holding you back sort of keeping you out of pharma and biotech to a greater extent. Thanks, yeah, Yeah, Mike. So a couple of things. So first of all the products themselves actually had not reached the level of maturity and capability that's related to.
Speaker Change: Local pharma until I would say a couple of years ago, because it is really imperative.
Speaker Change: To have the ability to fix.
Speaker Change: Samples of work, we'll be able to work with fixed issues, especially with <unk>. As you think about kind of later stage clinical work with clinical trial work and that was not available.
Speaker Change: I'm until just a couple of years ago.
Speaker Change: Now we have it across our entire product line with our with the.
Speaker Change: The flex product availability on the single cell side with the.
Speaker Change:
Speaker Change: The Louisiana supporting <unk> being kind of <unk> from the very beginning so I think that is really really important context to keep in mind. So as you think about getting out of like the early stage discovery into later stages of product development, you do need to have fixation company compatibility, which wasn't really the case there before.
Speaker Change: The second is just young and thing things take somewhat longer to do to get tested and to get validated onto spread went up.
Speaker Change: Pharma and biotech and Oh, we have.
Speaker Change: We are seeing the emergence of new applications that we're sort of out there for since really 2016 that are now really getting wide adoption and lots of interest so specifically.
Speaker Change: Large scale crisper screens, something that's that's of great interest to Biopharma Hasnt MRSA is a really big obligation across our across many companies.
Speaker Change: And we see that this is just at the early days lots of obligations through the end of the full continuum of drug development and we have some getting into the sort of the specifics of our of all these different applications and.
Speaker Change: Yeah, I mean, the last the last bond is this has to be also.
Speaker Change: Enabled by the appropriately focused commercial team we have been very much focused on academia historically and we have created now.
Speaker Change: For the first time, a separate and distinct organization that's focused on driving those biopharma business is a different kind of a sales motion that's a different kind of.
Speaker Change: Expertise that's required to do so and we feel like we are putting the right pieces in place to drive it.
Speaker Change: Greater speed going forward.
Speaker Change: Thank you presenters and that is all the time we have for questions. This now concludes today's conference call. Thank you all for joining you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: