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Nanostring (NSTG)

Participants
Doug Farrell IR
Brad Gray President & CEO
Tom Bailey CFO
Dan Brennan UBS
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the NanoString 2019 First Quarter Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Doug Farrell, Vice President of Investor Relations. Sir, please go ahead.

Doug Farrell

Thank you, Lauren.

me Tom Brad Bailey, with and our call and CEO; our the today Gray, is President On CFO. XXXX. Earlier results today, year for financial the first we quarter of released our fiscal this the addressable like factors, expanding call, and that I'd and prospects status forward-looking, about collaborations, for and statements markets, and anticipated focus, success projections, including you objectives, trends future remind that business are we make growth, our various and to strategic may development recent offerings. statements existing future our planned and financial penetrating during and related of product

Forward-looking uncertainties, to beyond and are statements in to are the described uncertainties subject filings. risks time many of risks including control, and our which time from SEC our

on no I'd we'll we May the call many may look Conference results everyone to UBS Our today you Healthcare forward obligation there. to forward-looking week statement. update the projected undertake publicly also any like at the that remind of differ materially be those of We to and XX. seeing from

like return to call to the Brad. I'd Now,

Brad Gray

Thanks, thank start. joining pleased I'm today. a that you off tell Doug. you and us to XXXX strong for is afternoon Good to

XX% first geographies and This core our the business in segments. across nCounter customer revenue. biopharma During and product in service included drove growth quarter, double-digit academic solid growth all both

our the call the year. of the begin a turning over setting addition, before driver customer I'll to In strategic to operating interest with for first of results in quarter. objectives Tom review spatial on profiler new our growth up this XXXX second our to build, an digital the for details continues for genomics the update half call

sustain XXXX in consumable pull revenue, base. our our our for objective through strong double-digit business. will expanding core into which be we call, nCounter by March is on first expected is leverage primarily growth This As to steadily growth driven strategic our outlined install to

as diagnostics. In prior the an life per all-time over $XX,XXX year. offset growing year-on-year. set $XX,XXX was from through in $XX.X of XX% of in an slower system, revenue record, Annualized Our half sciences increase the of to of was strength in the first revenue pull total in range products QX excess top XX% Panel quarter, million, growth consumable consumable guided our from

immuno-oncology the during (NYSE:IO) Set quarter. grew both PanCancer Code quarter. a with were Our panels sales which our record Profiling legacy our highlight, during the also Immune were and the Panel as We Panel achieved XXX our performance pleased Custom business,

Panel to accounts, continue which We XX% grew and and non-oncology year-on-year. penetrate neurology, revenue like immunology

track of the our achieved over XXXX. made we we improvements our panels launch to has our on force bandwidth Demand with year consistent full sales of be and sales envisioned, the to instrument The instrument healthy addressing metabolic the last and exactly to accelerating on pathways as of fibrosis. dividends. focus providing continue we managers year to new consumables, The for our regional what remain several over Systems including remains for additional nCounter revenue bifurcation expect and pay balance in our important funnel. with have addition, topics In the research year, such channel

oncology of customers studies, data the instrument the DSP high continued year replacements to the Oncology as During first with base nCounter. and including our MAX XX AACR strong accounted balance XX% result neurology. we presented install as where were of level approximately our activity applications demonstrates our throughput systems, XX% demand of our systems, XXX of the nCounter companies, was putting it sales in the QX, approximately part Systems from instrument in of nCounter of systems, recent GeoMx The immunology new from and impact to install biopharma approximately expanded a above The from bundles. base quarter going at ago. for over our majority meeting

During AACR, the manufacturing will in characterization, Panel, CAR-T find we of we and believe our had dialogue utility on development, which focused cellular customer substantial therapies.

appeal assay, the study LymphMark On in approval the significant versus in last Study, endpoint standard patients a a in was announced was diagnostic do of DLBCL as LymphMark side, North Prosigna but Celgene provide of is as lenalidomide month, its that clinical that medical the primary QX, of not care. survival for value support some standard Late of Phase Patient where III patients market evaluating enrollment of guidelines. accounts. DLBCL remains in Europe the origin, competitive of America cell based XXXX using away subtyping Performance strongest. can lymphoma results for for of That us progression ROBUST believe on to not testing there said, as decentralized classification free regulatory disease. the revenue we did being the solid this companion trial saw a achieve addition weaker share growth counter-detailing conducted unmet WHO per study need that subgroup And during of in care shifted in our indication. improved the diagnostic for a selection seeking LymphMark this from

the to path test companies who for pilot origin run approximately studies XX assay for a independently of LymphMark commercial the explore as subtyping cell stratification. and/or in continue with one have different patient partnership We a using of biopharma

spatial for success. the GeoMx our on objective profiler year for is Our digital to trajectory launch a strategic long-term second

we development projects expectations ago technology introduction Our provides access completed prototype which more of two years diverse for consistently instruments. efforts XX TAP, have Demand began with based of a on XX set TAP than now market than than more service our our for customers. GeoMx the or exceeded program, and more for has

to complete formats, for biomarkers, we These use invaluable anticipate input into and biology. insights us solution interactions, and real-time who preferred address efforts, design, allowing likely deliver researchers to techniques. spatial are hunting cancer for DSP, provided product a how to During are needs researchers gained have insights these for analytical consumable our the including development experimental and of integrated

throughput other former that sensor provides to content, and a this and GeoMx of larger mitt, intuitive GeoMx consumable a companies high partnerships software, powerful leading ecosystem. solution visualization validated In the addition suite with

Our during launch place at last generated new AACR Cancer Association is the on about interest Research leads X,XXX focused times booth leads full GeoMx AACR, year. of of for prior with total, took more We X driven commercial which as and month, than customer traffic. XX% customer many at that we customer the record generating In by Conference balance estimate nCounter. GeoMx American as dialogue the the was

for fixed enabled spanning include tissue protein selection, on unveiled At high-end DSP our menu panel pricing launches interest we modular expanding supporting and portfolio of design. protein $XXX,XXX, key immuno-oncology readout XX profiles used any This in more be the customers RNA XXX throughout GeoMx priced for The are will GeoMx. RNA panels pathology. tailor panels GeoMx kits GeoMx will scanners allows immuno-oncology. consumable targets neuroscience a their AACR, experimental validated our protein instrument than During all consumable widely which that over for contents at XX X consumable of launch, regions targets, of and platforms. of and with comparable to The morphology assays nCounter initial and to modular time. slide strategy initially research and format is

regions more affordable targeted panels more sample choose comprehensive markers For by or interest. per instance, price of adding more at up can content or a customers highly to entry buy

be our researchers for is price We twice revenue expect than nCounter per per sample, the sample average $XXX translational per spend customers to the about on which average about sample current panels.

for directly interface AACR, GeoMx a which to also map expression biomarkers, intuitive novel and provides an software, showcased of signatures, During spatial discovery context, translational opening era gene our we profiles to the research. new

were add software were platform visualize, our the tumor the the segmenting all versus toolkit and deep forth capabilities impressed to separate and compartments demonstrations high-resolution drew the molecular software biological by molecular leave GeoMx the creating early customers booth. Customers samples available images platform for the only phenotype, and Other themselves. of microenvironment. software that and post-launch launch, captivated steady launches profiles contrasts stream particular interested of fend tissue browse seeing with on by the Our back tissue the completeness analyze, Many in cell of between a solution were AACR at capabilities the profiling to interest for other which based and customers screen. to same on researchers, for the ability of often

us several designed Finally, announce around excellent partnerships and for venue capabilities to and build an ecosystem AACR GeoMx, automating its content, provided an to expanding its workflow.

high of at across RNA popular assays sensitivity. slide first is on combines enable set will the with RNA content unique or cell with workflow NanoString the a of kits, Our business Bio-Techne. ACD's ACD Bio-Techne and co-promote advanced visualization an entire targets RNA that GeoMx the scope and that our RNA front a diagnostics, assays with partnership

as demonstrated We guide on a have scope workflow morphology of GeoMx. to utilizes profiling interest already molecular of the of RNA selections regions feasibility reagents for that the deep kits

During a we the AACR, program. customers. the and paper NanoString announced both of And demonstrated ACD introduced we technology RNAscope access and availability workflow within results immediate that white our capabilities to

CFD, not that and will [indiscernible] very our la of vast the for This a a will on access focuses global drawing its for to library antibodies. leading GeoMx its own. in with approximately Abcam, IHC available expanding FFPE partnership leveraging far-reaching antibodies Abcam user channels. provider rapidly tissue, second from the with Our customers on content on antibodies a convenient protein GeoMx validated distribution provide with X,XXX of carte our easily could provide make partnership antibodies we oligo-conjugated

RX for provide positive. these and instrument, has anticipated systems updates automation and overwhelmingly through the with been Leica of GeoMx. than Customer straining situ to co-market DSP GeoMx and that which were an Bond customers X,XXX their to to provides proactively will Danaher that with tissue this Biosystems promote trust. GeoMx a partnership Bond now website protein of company, working autostainer to software adoption Biosystems reproducible market we're platform. match with encouraged their solution protocols by we've DSP already the a its in worldwide, for who automate and throughput RX and will appreciation reaction great representatives GeoMx, to processing sells addressed way partnerships more to they customers. we've expressed RX Leica protocols its Leica know the to and With GeoMx increase bond partnered a leaders through Bond hybridization, Customers available Finally, DSP making and results RNA immunohistochemistry needs Biosystems, with installed its awareness sales X automates on that customers which and instrument. autostainer the GeoMx

fact to bring scientific companies research of addition at based those that to XX the commercial primarily more interest GeoMx our a DSP field GeoMx launch date including M.D. was throughout and launch customers quarter, These year-end showcased at you from from reported at to continue AACR, studies Vanderbilt, orders Biosciences. DSP, first that HX In biopharma orders tell XX the X during and cancer cumulative pre-launch looking our on and team the XX. Pharmaceuticals preparing like to place total for Anderson customers publications. GeoMx the more we of activities strong orders QX, for scientific preordered we peer like focused centers than review presented number and more as of I'm the GeoMx Janssen Despite number to March than abstracts XX of XX to excited systems instruments. expanded from to we on than studies

previously of book our GeoMx we the consider made of in launches a year. QX, are industrial up in on been no are when launch, order X/X impressive such you biopharma more the of as were preorders XX field. QX customers is favorably flow, attractive We by all To that orders the that launch CROs. the we other are program we especially offered last to which into than and date, that With promotional compares companies site X/X providing and believe during had about priority product elements longer under are customers, heading academic that delighted trajectory

instrument MAX So far, new about through with these throughput system. of being vast pulled high have XX% the of preorders a our our nCounter majority

installing in third begin GeoMx commercial Systems We are our to quarter. beginning track on first the

GeoMx, to expect [indiscernible] The a the platform install our likely launch be we've orders of that are second commercializing to in in the parallel XXXX. to toward to which invest this is continued GeoMx year strategic over in the XX our balance half advance of fulfilled third XXXX. we to in commercial we received of booked XX hide-and-seek this we During to that year, preorders XXXX. objective, In

November, in for focused simultaneously this when platform update efforts next we on requirements, expression the increasing our profiled targets planned hide-and-seek input the a the applications. Conference coming AMP platform During of technical the the refining provide QX, reducing of and use the clinical major for technical is sample of utility expect profiling. number update on gene The to

Tom the the details over quarter like to first results. of to to turn our Now, call I'd review

Tom Bailey

Brad. Thanks,

approximately and million, million than cash product grew life XX%, For Prosigna nearly These XX% expansion other and year-over-year and million million $X.X Revenue which technology range. during to SG&A by to $XX.X $XX.X due consumable provided of full audit collaborations prior expense a consumable Gross quarter previously in instrument Research. related of higher spending investments the base, in the continued revenue. driven GeoMx primarily from in $X.X and million, over revenue the and product well recognized revenue XX% install million, Service XX% year in sales, was platform related million and activities. guidance sales, received $X.X service primarily and was demand in in the on the Lam as from on basis therefore increase as higher was our benefited above strength an Revenue was service driven The in hide-and-seek program The we booked of funds to by first last panels, of collaborators of content, to compared last professional from quarter our XX% a increase expenses XXXX, was which year, XXX over service spending strong the Service points we expense sales, SG&A growth an year. high-end expense margin and revenue and driven Product consistent our was of hide-and-seek growth $X.X instrument entirely due year. our that our access plus fees, prior sales. by was revenue $XX.X additional were of million. consumable GeoMx the in received subsequent for science continued was in increase and audited program. million guidance. XX% included SG&A $XX DSP compliance quarters expect increase from first by offset quarter growth was SG&A expenses Sarbanes-Oxley with year, were with R&D our $X.X slow

was $X.X which million short-term cash, and over first was compensation includes the and the quarter, quarter $X.X stock-based ended For million We expense cash of $XXX with investments, depreciation million. amortization the expense and net equivalents, XXXX our equity our X maintaining per financing. March received provided call Transitioning outlined guidance, financial on to are as press outlook, million in $XX.X and conference our of proceeds March we release. full year today's

in range expect half service million, For and in the product of $XX.X and of $XX.X we XX% service second total previous the revenue XX% the quarter, nCounter approximately first product we generate revenue our to with of to be expect related second. and the that consistent million year the to guidance in

expect the we For instruments of during GeoMx, begin to commercial the second installing half year.

So guidance include GeoMx not revenue. any our QX does

at XXXX recognizing revenue total third is begin to for our the unchanged $X guidance million. revenue expect We million GeoMx $X quarter GeoMx in and to

in expect second includes For of our Celgene for recognition our the remaining approximately of approximately $XX does which revenue of million The approximately from $X of quarter, Celgene. with accelerated we to full-year deferred change revenue $X revenue. the not record revenue collaboration million of the million collaboration guidance acceleration collaborations,

the activities remaining to product, and with As call, conclude for $XX.X X in to we of collaborations our expected this $XX.X be the on both collaboration recognize and is of representing we million service, the of year QX. as sum revenue March from Lam. revenue range to and balance deferred our million revenue Total noted expect Celgene

comments. over to Now, for I'll some back turn closing Brad the call

Brad Gray

the product already that, provides questions. expectations, oncology profiling line a with summary, a is nCounter is is lines continued panels With open growing XXXX of high sales year to these your Thank demonstrated start. line spatial compelling We solid DSP customer our by of has as that look strong to and The our off and you forward to explode for order momentum advances. GeoMx nice in and both market. you In flow core engagement. on updating driven to Tom. solution poised we'll with market

Operator

first Brennan UBS. from comes Our [Operator Instructions] Dan question with

Dan Brennan

So I maybe just the a first guess provide color. little Brad, on you can GeoMx, question,

this if which sure I You gave update, wasn't to we us kind get. an were backlog number, going of

that it from plus. going So on question to maybe call first XX front XX

Just going into commercial in the do how kind marketing launch? the or the what's about might how team as possibly that sales out the your the of translate team the Like, of activity in backlog think with you we backlog, seeking rest growth these for doing orders? you're and that aggressively preparing of are plus increase in XX And how midst year?

Brad Gray

quarter. imagine, not you we're take I've took of XXXX, place customers primarily get initiated still focus continued generate like in to during GeoMx being of their I was focused have team builds game of customer dialogue very course, once have, install additional the success could the commercial sorted to just first described. our focus install the long quarter, overall that And very the marketing new our confidence support. find as launch, our gained as customer program advantage primary in that on will best first incentives, process is momentum course, gives we to priority in really long-term orders. first to full of said, marketing our now the of growth. orders dialogues additional on can efforts, Obviously, for a context base orders So was expect install GeoMx XX maybe April the AACR. And to were preparing backlog out to play in week it to second customer plus we're at commercial during quarter. many site and full those funds invest team early That for just take a to for the we in access really say effort increased the overall of that not part which the us during instrument, launch we of but engaged happy and to remained we on and were the eager into XXXX the in the orders delighted things to continue We're half That first continue, the overall and a instrument support and capacity, mode.

Dan Brennan

X,XXX such about customers if that kind executing greater dealing look interest in given coming did Like, maybe having really with of through maybe exactly of the of than expectation, little the you or us a And own of have forget the bit are for how training that but process that facilitate you actually used, word can out large them can the will, at kind a the the expressing I process if leads? that I'm you many maybe walk leads, product? GeoMx? bolus your expressed customers compare in AACR And of you how bringing what's on those you will? you're just, for kind

Brad Gray

Yes.

leads of beginning year scale, calling a May. by To geocast marketing of of from already well achieved customers today as access we X,XXX of goal lead that that series, the sense we through the generation our give of sit a and some collected we've the of full qualified actually that our at accumulated have we have AACR tremendous early customers year through overall in through AACCR. beta AGBT, of we number of X/X So excess that leads in here is a series the you presentations gained, really, we and been webcast interactions, technology the the

been indicator. of had is overall customer running are ahead great for we think which So our engagement, expectations well a leading I what

are instruments, reps those that's inside will nCounter all a on challenge expanded focused capability follow-up years As and and luckily, to leads. with process on invested that historically in Obviously, on separate your and reps, managers, that sales people several the as for is they're leads. of implies, an all lead it us instrument sales reps, tremendous our and who the trained of take have priority inside leads been question of activity account resources field-based generation Those to We follow-up such upgraded. sales we a have for hot time. and our inside of subset in sales last a consumable on substantially who who number it's to follow-up those and specialists, are have being our GeoMx our sales technical are your from how regional also

I'd as Given after leads the does time months sales AACR until not processing say the time quarter. generated that great would momentum XXXX. stage that instrument year, in the for orders yield of enter the it some cycle, most are AACR half given of be set latter and this to six likely the we at the fourth But have we

Dan Brennan

obviously, in the antibodies. relationship? between the rich think a providing of library you interest it give announced. interesting Because that mean us would Then question door we you or might how is these the Danaher, have just of the terms and should themselves. maybe customers in really greater opens Techne on Danaher they're sound the final and those? just of little of to be about Techne Which of that partnerships the But Is color they like can product? in potentially maybe I a access kind both Abcam is relationship all of up the even it

Brad Gray

asking children. of expect you're to them and all favorite have fabulous me to They're Dan, my X impact. choose great I between a of all my

customer them each Because of You or really about engagement. through addressable contributes. know, into just going increased talking kind market translate and one how they

context. maybe instantaneous with of So Leica which over the the installed is the versatile customer of one autostainers in gives X,XXX research base us That and a RX Biosystems most really popular that's partnership systems, used to starting Bond partnership. access

on instant of go RNAscope approach. large all that a really to Abcam really I grown how begin to provide broad highly following partnership would there. not their spatial RNAscope install enthusiastic of base underestimated. have information. educate. base usage in to relevant electronic has relevant desire can little Bio-Techne's of a have business It's to they brings multiplex finally, under those are that say tremendous virtue And a leadership antibodies bit who number scale content, us it, using And well then vast consumable It's really a We've to very also placement. out for that access get by tremendous powerful of Bio-Techne customers. The So entree watched that validated a very a that demonstrated those kind library the customers, provides and and an Abcam a just to very partnership help sales shouldn't channel be but call customer are a It's IHC less relevant pull ability placed. installs provide once for us directly instrument for, an very through new there's

of each So them one is great.

greater totality and it. is but that the trust, going that has I and a pan, very the of GeoMx a one have think to flash platform market-leading built to with that's an the And perception in a use that's amongst support parts. that think than customers impact coming to continued that a the having maybe that platforms is is for be X of collaboration ecosystem The going around I market also is important us. our of already sum this the all not is that's they intangible

Operator

with we from question a Catherine Baird. Instructions] have [Operator Schulte And

Unidentified Analyst

This the Tom some around Catherine. Appreciate color for actually orders. is on of

given of existing around your seen the an NanoString around mix changed getting team a about Just as far? the had guys customers kind Have customer preorders that that what's between thoughts sort of the then nCounter. strength and pacing wondering talked to out. And of so received, follow-up, new of you've what the install you've you

Brad Gray

for I'm GeoMx. for and their continued The who reversed are mix be sorry, XX% to about time customer XX% an XX% the customers new really I nCounter buying customers it, has with users nCounter and, first use existing

that is we exactly think I as expect. So would

Of course, the large. relationships, in people and by the were whom on we prelaunch had engaged people already us with who earliest period the DSP platform

that. begun changed explains comes are new So our we, to To in used has delighted see instrument we've that already nice them we to that coming are X/X really of the people since are the and We're we've installs over call. majority on existing provided last of benefit see answer to, whether that on to is customers, from and question the why that nCounter orders hope the with how who a guidance sales our past. The system had the last no. along instrument X weeks your our

install the instrument guidance year. XX that we Our of we during orders received have this remains will to that XX

last instrument we install in customers. throttling delightful As wave described we're the of to service that our ensure first are that call, pace to providing

to sure exact provide that how effectively. will We a any But these our train call. and as on get customers work we're we systems out commentary capacity, into more our and before we phase and install August install little in scale the our we pacing want make most to that we up kinks efficiently and

initially And so we want rollout. we to as take the time right to do that

of But stronger incremental our So an and just for course, any current helps guidance backlog revenue. indicate no XXXX current even change year beyond. in

Unidentified Analyst

color I about actual have little one combining about technology? timelines might when some maybe kits bit more, the already, it we on the appreciate the this thoughts you see then Techne potential out particularly a know we ACD. around coming talked do And partnerships, but any

Brad Gray

works. few team Yes, efforts off coordinated kick to I in the the the weeks think kits Obviously, that's the to just optimize May. began beginning ago of a at

real-time some prototype I is get those kit will experiments. feedback kind in into development and validated, our it be the that in of form primary and we'll access we efforts our doing technology into That in help as course. kits customers customer right think our immediately. is trained, the to their getting beginning already overall of going introduce focus embed what their our GeoMx has some Obviously, put us, can instruments do product due all development, of we'll in XXXX team those offerings installed, of first and program

consumable instrumentation really will of amount So the be revenue a of year. this vast revenue our with majority negligible

XXXX. to So I and everything, time want half revenue, really the that Look those I kits right. would would we GeoMx, our in like say to until imagine contribute take sometime second get not for this to

Operator

not closing for any I I'm this Farrell now back remarks. turn further the showing to like to And you. call Doug questions Thank any time. at would

Doug Farrell

joining I'd to us for everyone like thank afternoon. this

If call, the miss replay portion be will you next in any hours. the available few did a there of

callers, please dial is domestic day. a you. Thank that, for Call everybody For nice dial the callers, XXXXXXX. XXX-XXX-XXXX. same number International Conference wish XXX-XXX-XXXX. please ID With both, The

Operator

gentlemen, and wonderful and may conference. day. have Everyone you This for conclude in program participating does Ladies a disconnect. today's today's all thank you