Nanostring (NSTG)

Doug Farrell IR
Brad Gray President & CEO
Tom Bailey CFO
Adam Wieschhaus Cowen
Dan Brennan UBS
Tom Peterson Baird
Call transcript
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Good day, ladies and gentlemen, and welcome to the NanoString 2019 Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to introduce your host for today's conference call, Mr. Farrell. Doug

sir. begin, may You

Doug Farrell

you, operator, everyone. good afternoon Thank

the On our Bailey, President with me results our XXXX. fiscal Brad Gray, today is for financial and our Earlier we the quarter today, of year call CFO. released second CEO; and Tom

During business number statements focus, growth, expanding related prospects forward-looking, will trends that product existing and and make financial the development success and offerings. anticipated and for addressable objectives, strategic statements and and about projections, we markets, penetrating future this are call, and of including collaborations, our recent our future factors, status of planned

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

differ on and projected may results the to these those from undertake we statement. materially call update obligation no today's Our

be we Utah, seeing the As there. next will and Genomics in many we week a participating forward to X.X you Conference in reminder, of UBS

turn to let that, Brad. call me With the over

Brad Gray

Thanks, Doug. to our for on joining updating you afternoon looking progress. you today. I’m us forward and Good thank

our in delivered we our as nCounter double-digit into quarter drive of straight and business. service QX, During revenue growth in sales base install expanding our consumable of base consistency product six

excited and for of This momentum and XXXX business genomics imminent continue we instruments. March for flow the to publications, shipment demand our very parallel, commercial late In Spatial in is of first combination build for the GeoMx following profile making core Digital order strong NanoString. strong the commercial our a Profiler, genomics launch consistency high DSP nCounter period with

objectives XXXX our to the on call turning today, progress before for call I of an over the will to towards our results details quarter. update strategic for the During Tom operating review the provide

double-digit our business to year-end This the March, that fueled in by pull-through of core in is for objectives XXXX installed our first consumer base. to be outlined business. growth we our continues strategic our growth expanding on sustain our As call nCounter leverages

million Our total consumables XX% consumer well revenue in growth for and sales $XX.X business. science our and The to drove both the life quarter CodeSet custom continued our perform channel driven by was growth in Panel second consumables.

to portfolio our growth, XXX account this led of continued majority by Panel. oncology families PanCancer for of and Our

Our with worldwide a CAR-T CAR-T off a Panel is to biopharma start well strong and XX also as as capabilities leading of with biotech academics manufacturing customers. customers mix including

of oncology In growth. outside important are contributions addition, our product to offerings making

accounted the of revenue. and increased approximately and year, neuroscience together about from prior respectively Revenue panels for our by third over immunology and panel XX% XX%

In addition, disease we panels raised our customers to profile human mouse create Alzheimer's NIH via collaboration MODEL-AD consortium the research. and among neurology with funded for

been research the to be has in recapitulate joint the that by Historically, accurately Alzheimer's limited models used development can mouse of lack for disease.

closely are of be part working five can this which As a panel we Laboratory novel Jackson with applied characterize disease. models for the to mouse mouse Alzheimer's develop collaboration, state-of-the-art to

metabolism, metabolic line outside of diabetes, continue pathways including In mechanisms metabolic NIH panel's QX, panels significant drive diseases to in that endocrinology customers with growth and self top stress. of address behind involve signaling to market in opportunities introduced panels new allow and study new the underlying field will We we the content to These alterations funding pathways hundreds large and dysfunction. oncology. researchers that attract invest

growth moderating was seen of by intense diagnostic as Prosigna's continued offset demand for where Europe competitors. grew revenue in in our promotional we've North America R&D Meanwhile, efforts consumable X%,

than QX year. about continue our our business, of the systems XX% and now the side nCounter prior by installed base XXX we instrument larger the to which reached On of systems, of expand approximately end it's

instrument anticipation mix the capacity for to future demand the application pay balance in systems and Throughout from our saw coming premium choosing throughput towards with first neuroscience. placements Oncology instrument higher shift immunology an high a of drove are of new DSP XX% as GeoMx half, for MAX about customers we projects.

for success. commercial Our second Digital to objective our strategic is GeoMx Spatial long-term position Profiler

efforts leading market ahead of terms of development track both for continue expectations GeoMx current demand indicators. our in to Our and

We’re continue see instruments. the with DSP the for pleased GeoMx strong we demand to

XX% the XX% increased cumulative and GeoMx orders and about Demand XX Our customer CRO. biopharma segments dozen cuts is GeoMx as orders a DSP for includes orders mix to in that new DSP total approximately we across captured academic quarter. roughly and during a second

placed GeoMx have about instruments. of by through new placed To-date while XX% have nCounter customers existing been by who XX% orders uphold users orders our been DSP new other of nCounter the

More future importantly, of continued demand that strengthen. we are indicators tracking GeoMx multiple to leading

the First, to process leads this around expand generated continued our funnel earlier launch DSP we our as year. instrument

sales the months. first unique of about qualified that more be which that accumulated half the are half leads we GeoMx During triaged than year, six cycle our for XXXX will GeoMx have customer of been now organization. anticipate sales We the about by

the lead of to benefit expect degeneration of would we activities these majority XXXX. in improve will So, the

leading to which Another our a or experiments Access that Technology run strong is indicator service DSP on provides DSP instruments. prototype demand our Program customers TAP, for is an opportunity

GeoMx resulted Our new percentage TAP as TAP service potential an from provides the orders customers by DSP our technology of interactions. instrument, ordering for increasing evidenced that before important a instrument evaluate to mechanism GeoMx the

more we revenue. completed resulting projects $X quarter, than more TAP than second in XX in TAP million the service During

million orders TAP than for biopharma projects We We companies have demand. of centers. shifts weekend including orders and service at more for keep medical that than XX several with carry proposed this staffing a growing our added projects projects we received to expanded new now by backlog XX pace than large academic more in $X recently more valued

Technology Access is of DSP. that Program of body utilities benefit the growth accelerates review of scientific secondary our the the demonstrates A in that literature peer GeoMx

been publications projects so we're been review completed path dozen have peer far, These collective tracking approximately submitted. contributed for XXX includes the unique now about customers. have and another Our seven experience that papers that have efforts XX

papers buy. of search with more wave the to and identify immuno-oncology, unique accurately body a you clinical to focuses trials DSP a awareness form continued than GeoMx to publications on create of patients represent need capabilities initial high-impact simply that critical The underscore immune advertising thousand and This of growing of active benefit to a therapy. biomarkers a significant ongoing in from few cannot

for University for study Two of metastatic recent in illustrate team particularly overall and Research GeoMx receiving the progression response, DSP journal the GeoMx that publications were for Cancer from immuno-oncology. patients melanoma. of published Clinical immunotherapy survival to Medical in impact a profiling and the that nicely biomarkers School use predictive and Rimm objective high In free a David spatial of his June, researchers Yale identify survival utilities

of use and using to Last for identify to the neurotoxicity, events of test Digital treated of with the selection. help prestigious Profiling patient be biomarkers in form study patients mechanism a cohort of to a unique journal Spatial week, unanticipated immunotherapy. Medicine that and highlighted published develop adverse a being to metastatic this able By Nature GeoMx the may melanoma understand clinicians

coming indicator using joint agreement in There have clinical of entered immune noting the is diagnostics GeoMx Mayo will from months. worth nine to over breast week, GeoMx-related the that a as interests Medicine the another appear tumor clinical this long-term architecture had third with DSP the last announced we We that paper community. DSP demand the for of development Earlier leading site samples. Nature who this just perform laboratories in was we investigate study across to

such for clinical While the developing is labs clinical of take world will renowned department developing path a GeoMx our time, test state-of-the-art which for Mayo with tests.

instrument As systems revenue first we quarter, excited in third upon our August GeoMx our began our as DSP and track in delight revenue shipping the entered begin recognizing GeoMx growth. to first embark to new the customers delivery phase we're the We're impact quarter. commercial later instrument on to a

orders. revenue of the to XXXX. bolus during of to get XX half we we Through expect second in year-end. start deliveries our to priority our as received push we to orders with into systems small systems of deliver DSP a QX, work QX recognize currently of of delivery site before between XX backlog the healthy will a of a Even instrument to most customers by carry with the second GeoMx GeoMx GeoMx previously expect XXXX, in systems the on of followed number This and half,

with Seq platform update & I'll our on close launch toward third prepared our remarks my strategic to XXXX. the Hyb advance an commercial in objective, is which

This and is high We tremendous make an program simple continue Hyb disease. of to steady Seq focused fast the advantage. competitive progress of & are confers & becoming area Hyb where the value infectious workflow to medical and application a need unmet on Seq on increasingly

potential partnerships diagnostic for first application for more in testing future. mid-plex the also opening a disease platform integrated commercial diagnostic the Infectious provides molecular general

November. technical major update AMP next expect of provide Pathology in the We or conference Molecular a to at Association

sequencing accuracy. We've and chemistry that planned turnaround our a highlights time accelerate update to increase

and pathogen seeing of addition, In susceptibility the forward We we identification look you testing studies to rapid Institute. with independent performed in to there. Broad collaboration many phenotypic plan highlight cultural antibiotic

review call like our second Tom details to to Now, the I would results. turn to of the quarter over

Tom Bailey

Brad. Thanks

and service product service grew and X.X XX.X XX% XX.X our of the of science service included Product guidance of sales, revenues was million instrument For the X revenues range. and sales year-over-year second quarter Prosigna sales, million million of which near million approximately high and life XXXX of million X.X of consumable end revenue.

$XX,XXX. a a growth increase was guided increase XX% our demand revenue Technology service and XX% continue nCounter within benefit our revenue by range Our and in GeoMx to approximately customer Considerable second from quarter in was Program. that panels Access driven in interest strong pull-through for

in during from Revenue recognition of resulted remaining partnership, recognized deferred collaborators impacted inclusion all from We million. the cash received Celgene. QX in of collaborations revenue the was Celgene revenue Collaboration quarter was from of X.X by million. X our accelerated which

Gross margin year. compared XX% in of prior at product in revenue XX% the line and service

are gross for sales, we installation strong to investments our positively Our and resources expand service was DSP. manufacturing impacted and offset making capacity margin GeoMx by by consumable our

of and the & program investments our R&D & Seq by XX% an nCounter increase was with increase was Lam million, period. funds in continued as DSP panels over by from GeoMx offset part expense Research. The in Hyb spending as an the prior driven XX year Hyb Seq received well

to lower last was XX.X due part million, activities. in related compliance expense expenses investment by X% commercial were related professional and impacted DSP SG&A The approximately activities quarter launch and prior which growth of offset in year. year's as Sarbanes-Oxley SG&A other was compared by in to fees, second an in GeoMx audit increase to

compensation R&D Both higher impacted were expenses by SG&A based QX. also during recorded expenses stock and

quarter, For stock-based prior X.X up second the compensation the from in year. million, X.X million was expense

amortization million of million $XX our equivalents borrowings and quarter XXX investments. the expenses under We were of short-term during an Depreciation incurred term with with over and cash, quarter additional includes cash This loan facility X.X ended CRG. million. amount the

for guidance outlook and year and full expenses expense. our reiterated updated loss an we higher gross provided release, and full press margin, stock-based revenue for due year compensation to being today's in with guidance, changes operating expected net to Turning we primarily GAAP

total For quarter, and approximately GeoMx the will $X growth revenue revenue. DSP we range in million our prior XX% to includes to third revenue million to the product as year which to XX This of million, expect XX period. the XX% of approximately service deliver compared be range

quarter, We third we in range the $XX expect million. $XX million $X approximately to the be revenue total million of of guided QX revenue to in collaboration so

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

Brad Gray

way we just through performing as half business XXXX, summary, In Tom. is the expected. had Thank

is consistently core our in nCounter generating team business. commercial well executing healthy and growth Our

and I'm to our for delighted NanoString strong leading for are track our proud revenue current recent on who part systems to solid commercial such results. DSP are team of this and DSP Both and progress be of with a quarter. we the indicators generated recognize GeoMx demand first GeoMx

for open questions. lines that, up your I'll With the


[Operator Our Doug with comes instructions] question first Cowen. Schenkel from

Adam Wieschhaus

questions. Wieschhaus This on is taking my Thanks Adam for for Doug.

XX You've believe the by in compared increase QX. increased you instruments a your which orders added XX was that in in slight GeoMx cumulative I QX, to

do So you've it order Or far? instruments this quarter number cadence? leads think a generated increase is go the you could so of XX higher right per on based

Brad Gray

really with we're flow. order pleased Thanks, Yes, the Adam.

we that our year. stage expect to the You instrument XX way range the the know work long half generation we really timeframe dozen at cycle order this being right in April of the around and about the in orders through longer equipment. XX second that be a -- the as really is in capital for its to sales activity Clearly, term through to maintain per being to the pace that lead launch it's started per

expect XXXX, to will right we're we're that but We now now. the delighted with number rate increase on right run in that

the XX up, about then are And XX ending delivering installing and XX just you second it it another if XX. ends in of about at kind half if forward systems, where between where actually and play adding we that’s

can where us will for XX with towards expectations currently one be where way as DSP a XXXX. instrument which we really for You XXXX screen way to entering revenue a instrument good it situation takes a a see backlog, are stands

look XXXX. we approximately to So, that cadence. good really run half the the of same for think to remain we're the accelerate in I rate on but to second a

Adam Wieschhaus

And program again enrolling there base the and a GeoMx placement increased backlog? and trying that the that helpful. noted just instrument program in that how quarter. the potential customers I’m driving and customer that’s understand, you've into in Okay awareness? overlap Is the feed that GeoMx lot are program this of between participate those that Thanks. could TAP to

Brad Gray

to Access is a that who you drive new interested are instrument the were functions our buy is been part one playing sort drive from people test Adam, the instrument for last In of quarter opportunity Yes, TAP that before us important the of customers had in about provide a DSP program. of who of Technology half program. for most Program GeoMx orders

indicator Importance illustrates a the path its as future leading instruments that orders. and our of for sort So of validity

think XX see we total important total XX% perhaps going was being overall but about that mechanism in about an TAP have the orders to come I now forward. program, orders

and So, to TAP we track will to you. continue report volumes


comes Dan UBS. Our from with next question Brennan

Dan Brennan

you've guess sure, clearly So QX, just been pacing year too. placements. back in you Brad, delight on two for you pretty right the GeoMx go make said want in half it's first slow one the obviously customers to is I the real of

doing and in big the in through you of much just Let install to only pretty two ramp walk a QX? so ability a have say, QX, in us bit QX kind us little about

Brad Gray

interest most the customers a XXXX as important sales in out who large is and taken and for risk delight the DSP for us Dan. the being you generate the iterate GeoMx The funnel point early for adaptor Sure, I'll of thing to and technology.

in urgent of part some we beginning late last small fiscal start a from will the GeoMx program either to intensely the focused As DSP delighting instrument or scientific had terms beta that the instrument or we on of we're have that placements very sites and in that year now who from prospective. of situations had quarter, meeting perspective in exposure are spend a through money customers, a to broadly with third

any And out kinks those installations. allow in that rounds will to of work first us

deliver We QX. we that team to sure through and have already as of the scaled up expectations but our high installation that possible. smoothly those balance make revenue support don't believe to be I risk, able to our as want

in the So, by and to to in million X X we QX between revenue approximate start quarter. X in of do million will doing fourth revenue million leading

Dan Brennan

just Brad And on GeoMx. then to related pipeline order

excitement quarter but obviously early tremendous this over orders Just longer now is about this experience walk XX you little us through cycle, the talked the like bit you've there another and gotten space.

customers How kind through about most that What Just process. like? they are for us them issue little is little convert of it you through much any give as go of get like walk are the from as about? us a getting or to over? you flavor order So from the for type you customers are feedback comment excited like you hearing an those what funding just of a them

Brad Gray

no as need throughout is we Yes, been to situations technology to and there think GeoMx have spatial are do Digital in even I period how can latent few customers where that in engage Profiling in this by broadly And they exposure what on, more technologies for gain maybe it. entire is that little we've Spatial last the to we've delighted learned profiling. customers enormous Spatial scientifically or years access with eager demand

infiltration industry Most coming rate We've cell our identifying the core tumor. of with grant anecdotally who success physical great second immune with cases of in from nCounter demand have community our and early of business our -date in the biomarkers immuno-oncology is really applications terms long-standing had through the quarter. relationships tremendous in used for

Howard all three this Hughes this this science of are the dollars whether to happy were being funding submitted research and researchers go first and their a of work. dull Medical funded aware really kind three for to need Howard That's application. grants consider a where with great Hughes Institute see We're leading-edge in agencies technology to

the this So, current see everything build future pipeline. indicators of demand excited continues we is and confident in this both about and terms and leading to our of

Dan Brennan

place kind from of talked function of educating of, orders doing more bit how maybe that that? a And to conversion many out and of how John, in demonstrations having go through the salespeople? us on XX% technicians many doing customers this? have little much case, if been you're things the you about one standpoint you like, kind team as have to What walk necessary do right of How the kind these qualified. GeoMx, just a And just Thanks. the leads like

Brad Gray


the orders February take been purchase though So, Generally evaluating for people Even for period have speaking, largely yet haven't decision of of all for see in meeting to potential months. meeting. lead the pride took the or GeoMx are who instrument currents of and of AACR around, activity March months, the at and we place cycles the the some so generation begun April that of AGBT took in impact

them in in have and That begin truly really actually them to will process include the impact our and funnel. our would the meaning, who that to determine is funding I qualified, sales sales they begin us we of XXXX. serious engage we and in we as not who are booth, customer kind just that people are browsing validate expect those that are leads

about the participation I purchase important reps and webinar visit and properly having our face-to-face a explain or interest existing or instrument in between When processes instrument sized force. I fuel order, past booth a the technology think using meeting, and like at so natural our the a instrument go think

the profiling. about in we worldwide we I a into possibility do spatial now, specialists of of the but go think nothing, bringing have which half of deep technical dozen intricacies

works. maybe purchase performing this with a of small are I types study think about an think show the sciences TAP hopefully then I sample instrument to the instrument thereafter. type doing people DSP order on about that And

have that cycle a execute on. in all place think I we the That’s to resources

Access should Program up time. I how that As Technology months is, about six take I mentioned, cycle understanding we're we're scaling capacity because important think and that it

So, we're Dan, and could and investments, closely if need make it, things the targeted will it we evaluate but an those incremental we needed. modeling obviously, channel, really demand DSP every in quarter justify to adjust as our single and

Dan Brennan

And just that range, for a kind little kind variability the just but then final our nCounter me, a quarter-to-quarter? any quarter normal just in the of is on within front obviously trends one kind of expectation, below on Thanks. kind pull-through your of or of kind of bit walkthrough

Brad Gray

Yes, take Tom I I if think let he will wants. add, that and

our I was anything you say was XX,XXX previous which for really per pull-through, that than if crosswalk if system and around lower component think in quarter. the at you it when has year, look been it

to period where now. want period in North Prosigna at seeing a I off look to prior million X.X it we're in be below in was Prosigna North dynamic think we America by intense prior you the expected to America.

saw. the calls continue a the And consumables pull-through middle non-oncology. vast at trends our panel both for what half rates range oncology remain business and and science the We our accounts to both in difference of across majority the think in healthy we lower life that custom, and of between

XX% run, our revenue we with grow continue recent has to the consumable quarters. which overall long So, installed to base, XX% in lockstep our will and think been in

Tom Bailey

has that add as issue it’s our I mentioned. to and just to timing quite The latter quarter Dan really that to I It growth you the pursuant do of with think else. much than anything is panels only were second quarterly There -- bit a wasn't is I would comment you the think timing well strong in first in and strong that quarter. as

feel part of solid the Prosigna really the of sort really that it's rest only So, of off, it about. is we


next comes Morgan. JP with Our from Peterson question Tycho

Unidentified Analyst

Lennie our This taking is for Tycho. on for Thanks questions.

line talk you you above seen Is an accepting GeoMx traction read early customers the in the can estimates? segment you give order First, And any which it book or about your evolution on with? have us utilization? with you've order initial can tracking started since most in

Brad Gray

second just is orders that new grew to order totality is. and academic CRO We about of book to XX about Sure, close the community. our quarter. biopharma from the continuing so dozen XXth from come quarter XX% a and in mix to XX% grow. install as the what have orders, That's researchers the to cumulative June in reiterate last pretty of orders nCounter was base are In

expected. utilization. to as It's that to So too early talk

which placed and yet before have haven't any at on But we utilization. We on after to $XX,XXX place mentioned similar annualized we model will $XX,XXX encourage time to the of some pull-through to the instruments as our would begin to people past, half nCounter, into take net what it persistent really a see we in bid we instruments those in commercial a rate. good is second a that


next Baird. [Operator instructions] with question from Our Catherine Schulte comes

Tom Peterson

is Tom This question. for for Thanks Catherine. Peterson the actually on

we here similar timelines collaboration, looking at? the to the angle two studies And kind Thanks. curious Mayo what to Just are Prosigna? on of these is kids on the offer

Brad Gray

exploration really the in is our a collaboration how long-term applied Mayo Digital technology clinic. be Profiling So, could Spatial of

is The day nature in that may biomarkers designed for we profile first identify one study become immune tests. tissues described expletory cancer profiling to their is breast and which that clinical

speculative really possibly market, when us that. for to imagine we're to think test come I but years still several that away it particular from So, could

of hybridization about that leaders is in absolute begin to to $X and great Their to in immunohistochemistry market, expression probably in think as adopter very size clinic large in early the the market. total to That world a and a laboratories. R&D specialized mean another is think a indication market And potential the clinical is we how when be use today, clinical which markets. is and as one billion take billion. willingness clinical lab situ being the I It's research of amongst said, of at through a market of characterize the is long-term size Mayo the the $X and least to in interest about we

but take terms the lifecycle it'll really we in platform some before in get with can long-term Now, our of can in of spatial GeoMx up think clinic, come time is help collaboration that faster. the and curve we exciting clinic to profiling Mayo general, only us the


on questions over Thank at turn the you. I’m back showing additional this time. I'd call host. like our to to

Doug Farrell

Excellent, Brad. us much you for joining very today. Thank

the If expect you replay did about call, portion hours. be to miss any we of in to X available

XXX-XXX-XXXX. For conference want XXX-XXX-XXXX. please to any is that. for the Domestic XXXXXXX. callers callers, dial callers dial same number that please International both ID access The

for very And joining you us that, thank today. with much


gentlemen, presentation. today's and concludes Ladies that

wonderful You may day. have now disconnect a and