Standard BioTools Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 7 speakers on the call.

Operator

Good day, and welcome to the Standard Bio Tools, Inc. First Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. Please note, today's event is being recorded. It is now my pleasure to introduce David Holmes of Investor Relations.

Speaker 1

Thank you, operator, and good afternoon, everyone. Welcome to Standard BioTools' Q1 2024 Earnings Conference Call. Leading the call today is Michael Egholm, President and Chief Executive Officer and Jeff Black, Chief Financial Officer. At the close of market today, Standard Bio Tools released its financial results for the quarter ended March 31, 2024. During the call, we will review our results and provide an update on our financial and operational performance, 2024 outlook, market trends and strategic initiatives.

Speaker 1

During this call, we will be making forward looking statements about events and circumstances that have not yet occurred, including plans, projections of our business,

Speaker 2

our

Speaker 1

outlook for 2024 and future financial results, market trends and opportunities and our expectations related to the combined operations with SomaLogic, including potential synergies and our business outlook for the combined company. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations. The forward looking statements on this call are based on information currently available to us, and we disclaim any obligation to update these statements except as may be required by law. During the call, we will also present some financial information on a non GAAP basis. We believe these non GAAP financial measures are useful in evaluating our core performance and as a baseline for assessing the future earnings potential of the company.

Speaker 1

We use these non GAAP measures in our own evaluation of continuing operating performance. We encourage you to carefully consider our results on a GAAP and non GAAP basis. The reconciliation between non GAAP measures and their GAAP equivalents are provided in the tables accompanying today's press release and as an appendix to today's presentation slides. Please note management will be referring to a slide presentation, including updated supplemental financial information within the webcast today. Following management's remarks, we will host a Q and A session.

Speaker 1

Today's slide presentation, along with a replay of the webcast are available on the Investors section of our website. I would now like to turn the call over to Michael Egholte, President and CEO of Standard BioTools. Michael?

Speaker 3

Thank you, David. We greatly appreciate everyone joining us on today's call after successful 1st year of operation at Standard BioTools and now on to our 1st full quarter with an integrated soma scan platform and soma logic team. Integrating technologies is hard, integrating culture is harder, but this has been one of the smoothest of the dozens I've been involved in over my operating team at Stand Up chew through the hard work of bringing diverse organizations and platforms together. It is a testament to both cultures and clear recognition that each believed in the statement that we are indeed better together. So thank you to everyone involved.

Speaker 3

Now on to the realization of that teamwork on the power of scale in life sciences. We are ahead of plan on operating synergy targets and now expect to achieve €50,000,000 of the €80,000,000 expected synergies we projected by the end of this year. Next year, we'll capture the remaining $30,000,000 of that initial synergy target. As an organization, we are laser focused on reducing cash burn and accelerating profitability, while maintaining long term growth prospects to focus investments in our commercial organization and our R and D pipeline. Importantly, in addition to the operational technological and financial leverage achieved in the combination, we are experiencing the early benefits of a more diversified revenue and customer mix.

Speaker 3

As our peers have discussed this quarter, it remains a challenging market for capital equipment sales in life sciences, perhaps one of the most challenging in the last decade. At Standard, while we are seeing similar headwinds, our consumable and service business, which now includes Somascan and its high quality service offering, are helping to smooth our growth, while we continue to expand our overall corporate gross margins and reduce cost and cash burn. Now let's dive in to our quarterly performance and some highlights from our product portfolio. In the Q1, on a pro form a combined basis, we have served revenue growth of roughly 2% year over year. This is 80% revenue growth on an as reported basis year over year with the impact of somatranscant revenue largely in line with our expectation considering the aforementioned ongoing macroeconomic challenges impacted the life science industry, which extended sales cycles, which again pushed some instrument purchases beyond Q1.

Speaker 3

Importantly, with the benefits of cost rationalization, we delivered a 26% reduction in non GAAP operating expenses and 45% adjusted EBITDA improvement on a pro form a combined basis. This is the power of the Standard BioTools model, actively pursuing M and A as an augmentation to organic growth, building scale in a highly fragmented space and using that to achieve operational leverage. Our expanded portfolio offers product across multiple distinct product categories, including instruments, consumables, field based service and now our soma scan service. To give you a sense of our sales mix this quarter, on a pro form a combined basis, instruments accounted for instrument support services 13% and instrument support services 13% and soma scan services 34%. Importantly, our combined recurring sources of consumable and instrument support services, revenue bolstered by our expansive service and kit offerings represented about 90% of total revenue, which served as a nice offset to softer capital equipment purchases.

Speaker 3

While our somerscan business is still concentrated in a few handful of key pharma accounts, where revenue can be lumpy and is dependent on timing of projects and available budgets, these expanded revenue services further enhanced our diversification. And the more diversified we become, the better we can navigate capital sites like that we currently like the one we currently find ourselves operating in. Furthermore, these offerings cater to a broad customer base across academic research and biopharma, positioning us well for sustained growth in these large and attractive markets. We believe the key opportunity to leverage our combined technology platforms for future offerings, particularly expanding our existing lab service business into a multi modality offering, providing customers premium data with clinical solution support in a model we call multiomics as a service. This approach is a natural extension of what we are and provides a quicker path to technology adoption while avoiding some of the capital budget constraints currently facing the broader biopharma market.

Speaker 3

We are also exploring new models to selling SomaScan both with a lower plex, more cost effective model and a single somamir reagents. Of the most exciting is the early ang2 shares from a traction from our partnership with Illumina, which will broaden market access to the Illumina NGS partnership. We are off to a strong start and Illumina began its early access program with a small number of customers in the Q1. Early feedback has been overwhelmingly positive. As a reminder, this jointly developed product allows customers to run the highest plexiform scan assay, utilizing the installed base on NovaSeq as an NDS readout.

Speaker 3

As demonstrated by our successful authorized sites program, there is clear demand from our customers to be able to run the assay on a distributed basis or kits basis. The teams from both companies are working closely together and Illumina is on track for full commercial release in early 2025. Stata BioTools is a true enabler for scientists, allowing them to answer the most difficult questions they have. While we focus on building omics solutions, our job is to supply services, instruments and consumable for researchers to produce the omega answer that's relevant to their scientific question. This is how we fundamentally look at our business and business units.

Speaker 3

If you look at our business today through an omic lens, our performance was as follows. Polyomics accounted for roughly 80% of our total revenue this quarter, representing a 3% increase year over year. We continue to lead with the industry's most comprehensive and differentiated proteomics platform comprising highplex plasma proteomics, flow cytometry and spatial biology. Despite the modest year over year growth, we have a high conviction that these technology represent exciting near and long term growth opportunities due to their innovative applications and strong end market demand. Our genomic solution are currently in decline.

Speaker 3

And as discussed before, we manage our legacy Microfluidic solution for profitability, not growth. While down 6% year over year, the bright spot is strategic transition to use this technology as an OEM provider and strategic enabler to a core set of customers, including another leading polyomics company, which currently has approximately 200 of the OEM instruments in the field, which are again dependent on our microfluidics consumables. Finally, we have been laser focused on strategic capital allocation to drive long term value creation. We are committed to targeted investment in our existing technologies and platforms and to M and A, of which we have a full pipeline of potential partners. We also preserve shareholder value via share buybacks and opportunistically simplifying our capital structure.

Speaker 3

To that end, in mid March, we announced an agreement with our 2 largest shareholders, Viking Global and Kasten Capital to exchange all outstanding shares of their CSB convertible preferred stock for shares of common stock and eliminated all associated CSB preferred rights and privileges. Coupled with our share buyback, these actions represent major steps forward in streamlining and simplifying our capital structure, which we believe will ultimately make us more attractive to new long term investors and potential M and A partners. Standby tools today is a growing leader in the life science tool sector, which remains fragmented, under resourced and for most companies unprofitable. Today, I'm excited to address you as a unified company with a fortified balance sheet, diverse product mix and a scaled platform that integrates critical life science solutions under one roof and equally a part on a firm path to profitability in early 2026. Looking ahead, we are reaffirming our full year revenue guidance of $200,000,000 to $205,000,000 for 2024, and we are on track to achieve approximately €300,000,000 in revenue in 2026.

Speaker 3

I'll now turn the call over to Jeff to discuss our financial results in more detail. Jeff?

Speaker 4

Thank you, Michael, and thank you all for joining our call today. As a reminder, our Q1 results on an as reported basis include the combined operations of Standard BioTools and SomaLogic since the close of the merger on January 5 this year. While the Q1 of 2023 as reported includes the financial results of the Standard BioSeal's legacy business only. So for comparative purposes, we think it's much more meaningful to look at the combined results of operations for both businesses. So my commentary today will focus on the pro form a combined results for both Standard Bio Tools and SomaLogic for both the Q1 of 2023 2024 and that includes the stub period between January 1, 2024 and the close of the merger on January 5.

Speaker 4

As a reminder, please refer to today's press release and the appendix to our investor deck for more information, including a reconciliation of GAAP to the non GAAP measures I'll be discussing here. So starting off with revenue. In the Q1, our pro form a combined revenue was just over $46,000,000 It grew about 2%, as Michael said, largely in line with expectations and again, all while continue to navigate the lingering headwinds from a challenging macroeconomic environment. The somaScan related business contributed about $24,000,000 in revenue for the quarter, grew over 20% and that's on healthy demand from somaScan customers, growth in our kits business to authorize sites and the initiation of the early access program with Illumina, which as Michael mentioned is on track for a full commercial launch in 2025. And again, not only do we see the Somoscan related business as a growth driver for us, it's also a valuable source of revenue diversification for the combined business, and we saw that reflected in our Q1 results.

Speaker 4

On the standard bio tools, instruments, consumables and instrument support services side of the business, revenues were 22,000,000 dollars down 12% over last year and that's due primarily to the lingering economic headwinds we mentioned, most notably impacting capital budgets in both biopharma, academic research as well as continuing pressure outside the U. S. With that said, we do see a robust and growing pipeline of opportunities. We expect to return to growth in the second half of twenty twenty four as macroeconomics are expected to improve and budgetary constraints begin to lift. Overall, consumables and services in both proteomics and genomics were impacted by our pre-twenty 23 declines in our legacy installed base.

Speaker 4

We do expect to see pull through begin to expand in late 2024 as our 2023 2024 installations continue to ramp up. Proteomics as a whole was up 3% year over year, while genomics was down 6% as we continue to manage this business through its planned transition. We've now rightsized our operating expenses in Genomics to a positive contribution margin and will continue to drive profitable growth in that segment. Moving on to our operating performance. On margins, our non GAAP gross margin on a pro form a combined basis expanded by 300 basis points from 53% to 56 that's driven by a combination of product mix and pricing.

Speaker 4

But it's also important to note here that this also includes over 3 50 basis points of offset due to the classification of certain operations, services and quality related operating expenses that we moved into COGS to align accounting policies between Center BioTools and SomaLogic as a result of the merger. So we expect this will have a similar impact for the full year gross margin in 2024. As we stated before, we continue to make significant strides in aggressively managing residual headwinds related to legacy service and warranty related costs, often on a customer specific basis. We expect this could continue to create pressure throughout 2024, but we continue to remain confident in our ability to drive our non GAAP gross margins into the mid-60s over time, especially as we move past these transitory headwinds, we grow sales and we drive cost improvements through continued deployment of SBS and lean principles across our combined operation. Moving to operating expenses.

Speaker 4

Very pleased to report that we're ahead of plan on our operating expense reduction initiatives. On a combined pro form a basis, non GAAP OpEx of just over $49,000,000 decreased by about $17,000,000 or 26 percent, and that just reflects early traction on expense reduction initiatives that began in the second half of last year. Keep in mind that our Q1 OpEx exclude about $1,700,000 of expenses related to the classification of OpEx in the COGS, as I mentioned. But even excluding this impact, our combined non GAAP operating expenses were down over $15,000,000 or 23 percent, and that's before we see any impact from the operational restructuring initiatives that we recently implemented. And as a reminder on overall cost out, we've previously announced our intention to remove $80,000,000 in non GAAP operating costs as compared to what we call our jumping off point of 250,000,000 dollars which was our annualized OpEx based upon the combined first half twenty twenty three run rate.

Speaker 4

We broke out that target reduction as follows: $40,000,000 in G and A, dollars 20,000,000 R and D and $20,000,000 in sales and marketing. Also previously announced that we expect to achieve the full $80,000,000 in annualized cost synergies by fiscal 2026 and that we would have at least 50% or $40,000,000 of that operationalized in 2024 with the full P and L impact of those savings reflected in 2025. Based upon our recently announced reorganization and restructuring initiatives, we now expect to have operationalized $50,000,000 in annual operating expense savings for the full year in 2025 with $40,000,000 to $45,000,000 coming from SG and A and $5,000,000 to $10,000,000 from R and D and that's net of a number of planned focused reinvestments. And finally, to avoid any confusion on this, these OpEx savings are in addition to the reclassification of the $7,000,000 to $8,000,000 in annual OpEx into COGS that I mentioned before. So in total, we expect that approximately $20,000,000 to $25,000,000 of these savings will show up in the P and L in 2024 and the full P and L impact will be reflected in 2025.

Speaker 4

So based upon these efforts, we are very enthusiastic more than ever about the value we expect to generate under our now combined cost structure, leveraging the scale and reach of our portfolio and managing to a positive adjusted EBITDA target in 2026. But at the same time, we'll continue to maintain focused investments in commercial organization and our R and D pipeline to support sustained long term revenue growth. That brings me to cash flow and the balance sheet. We ended the Q1 with about $464,000,000 in cash equivalents, restricted cash and short term investments. As expected, cash burn was unusually high in the quarter due to several merger related and other non operating uses of cash.

Speaker 4

In the aggregate, during the Q1, we made about $70,000,000 in cash payments for settlement of year end operating accruals, merger related expenses, term debt retirement and share repurchases. Excluding the impact of these items, our adjusted operating cash burn was about 29,000,000 dollars and that represents about a $5,000,000 or 14% reduction over pro form a combined burn a year ago. And this is before the impact of any of the cost initiatives we recently announced. And we also think it's important to note that some of this quarter burn is a function of the timing of payments for merger transaction costs. Just as a reminder, when we announced the merger last October, we gave an expected 2023 year end cash outlook of around $500,000,000 We actually ended the year at 565,000,000 dollars with a big driver of this difference being payments that we expected to make in 2023 that were pushed into the Q1.

Speaker 4

So we expect our operating cash burn over the next few quarters will reduce significantly. While not at this level that we saw in the Q1, we do expect continued cash outlays for merger related costs, restructuring activities as well as additional share buybacks we've executed since the end of the Q1 before having recently terminated that program. We're well positioned to fund both these non operating cash needs and to support the combined business to cash flow breakeven, again, our target of 2026. And as we think about any future funding under for M and A, you can remain assured that we'll be thoughtful about additional strategic M and A when such opportunities arise, including the related use of cash. And one final update on our capital structure initiatives.

Speaker 4

As we previously announced in February, the Board approved a new share repurchase program of up to $50,000,000 With our enhanced balance sheet, this has enabled us to repurchase common shares to offset future dilution from possible future equity issuance rising from our convertible debt and other instruments in our cap structure. We actually saw this as really nothing more than responsible housekeeping, providing flexibility to preserve long term shareholder value, Including the $11,000,000 in share buybacks through our Q1, year to date, we purchased approximately 13,600,000 shares or about 3.5 percent of our common outstanding shares for a total of about $36,000,000 in cash at an average repurchase price of $2.68 per share. While we still have room available under the $50,000,000 plan that was authorized by the Board, we did terminate the existing buyback plan on May 2. So in summary, we're executing operating and financial objectives. We remain responsible stewards of our assets, and we remain committed to create long term value for our shareholders.

Speaker 4

And with that, I'll turn the call back to the operator for Q and A.

Operator

Yes. Thank you. We will now begin the question and answer session. And the first question comes from Matt Stanton with Jefferies.

Speaker 5

Hey, thanks. Maybe first one for you, Michael. I think you talked about the early findings from Illumina as overwhelmingly positive. Can you maybe just talk a little bit more about what the initial feedback has been and then some of the important proof points from here and how should we we should start to think about the commercial launch into 2025. Obviously, you don't flip a switch.

Speaker 5

So onboarding, ramping up, things to think about? And then in terms of contribution to Soma in 1Q, is there any way to quantify what the Illumina Early Access contributed, if you guys would be willing to share that?

Speaker 3

Yes. I'll let Jeff follow-up on the last part of the question. So the teams have been hard at work for quite a while at this. And so putting a version of the 7 ks in the hand for customers, the first leap and essentially able to reproduce what we've been doing internally and at a very like maintaining that very high hit rate on many proteins and a low CV, which is what differentiates us. The full launch will be in early, 2025 is what Illumina is communicating so far and will be based on the 11 ks assay.

Speaker 3

I'll say, I'm personally much more even more enthusiastic of this relationship than I was a few months when I stepped in as I've seen the early readout in the data and also seen the value in having a partner like Illumina with the market reads that they have, which of course far, far exceeds ours. And then to you had a question here on the timing, transitioning. We're still working through that. But net net, we believe this is going to be a long term growth driver. Maybe also just a reminder, there was a $30,000,000 payment upfront, which basically still sits on our balance sheet as unrecognized revenue.

Speaker 3

And so anything to add, Jeff?

Speaker 4

Yes. To your question, Matt, on alumina, we don't break out revenue specific to alumina separately, but I can tell you it's still early stages. It's a handful of customers. It's in the, call it, very low millions, very low single millions.

Speaker 5

Okay, great. That's helpful. And Michael, you talked about some of the updates coming out of strategic plan readout, some newer growth opportunities around multiomics as a service, low plex or single soma reagent models. Just talk about kind of timing around those, as we think about those new growth opportunities and any investments or cost associated with getting those off the ground here?

Speaker 3

Yes. So first off, no, thanks. Good very good question here. As we are reporting it now, any investments we are making like the cost savings we projected here so far, dollars 50,000,000 operationalized and we'll see it flow through here by the end of the year, is net of investments that we are making in those initiatives. So it's really important thing to note.

Speaker 3

And our strategic review confirmed and highlighted a number of tweaks to the strategy. Number 1 was that SomaScan is highly, highly invented and unlike any other technology we see out there is scalable in that as we expand content, we maintain our low CVs and do not increment complexity or cost. And that means that we're going to keep investing in that engine to expand that content and put a distance between us and further distance between us and the competition. Secondly, we saw a very, very high cost of demand for individual somamirs. And we've got to recognize that somamirs, they're not like antibodies, but they are just another affinity agent, just like an antibody with the same approximate affinity and specificity.

Speaker 3

And we have 11,000 monoclonal human affinity rare 11,000 affinity agents for human proteins. And we believe this represents a unique opportunity. We're going to start small and we're going to start operationalize it here by the middle of the year initially to our current customers and then offered out much more broadly. So we think there's a very strong pull internally, but also from current customers, but we even beginning to see a much broader opportunity with SomaMERS being a routine rate and used to as orthogonal validation to antibodies and or be another thing up researchers sleeve when they cannot make an antibody work. And then the 3rd piece that we recognized was around the value of the service we run.

Speaker 3

We run a very sophisticated service that work with very sophisticated customers and COOs. So we have the whole workflow from getting the cost for getting all the samples from COOs, running them quickly, getting bioinformatics analysis and clinical guidance back to our customers and we expect to lean into this and add some of the other products that we have, most obviously our flow cytometry solution, which we think will be highly synergistic. And last but not least, we are already, as I briefly alluded to in the script, beginning to look at how we can combine our microfluidic solution as a readout and maybe longer term expand on the workflow. So maybe longer answer than what you were asking for, but we're excited here after the strategic review.

Speaker 5

Appreciate that. That's really helpful. I guess just last one, sticking with you, Michael. In terms of capital allocations related to M and A, you talked about a pretty healthy pipeline. Just talk about appetite for deals, maybe potential size of deals and just the general bandwidth of the team given the Soma integration and a lot of other heavy lifting you guys are doing behind the scenes?

Speaker 5

Thank you.

Speaker 3

Yes. So integration and successful integration is job number 1, 2 and 3. Having said that, I did build out a very strong team here over the last 2 years. So there's definitely capacity in the team. And we can walk and chew gum at the same time.

Speaker 3

Secondly, as I'm sure you are all well aware, it is really upheaval here in the venture funded part of the market. And we're seeing ever more interesting assets being eager to work with us or eventually to be acquired for us. So we'll be highly disciplined and opportunistic. And we will for sure, just on the size, we won't do anything that's so big that it burns down on the very significant buffer we have between where we are now and profitability. And we'll keep working the bigger deals.

Speaker 3

As everyone know from the disclosures, we worked on the Sumo Logic deal, what was a year and a half plus. And so we'll keep doing that.

Speaker 5

Super. Thank you.

Operator

Thank you. And the next question comes from Dan Brennan with TD Cowen.

Speaker 2

Great. Thank you. Thanks for the question guys. Congrats on the quarter. Maybe just kind of high level just on the guide for the year.

Speaker 2

Obviously, Michael, you talked about some of the CapEx challenges. The Q1 was kind of a little bit better than you guys expected, but it does imply a nice steep ramp in the back half. So just any thoughts on like Q2, I think consensus sits at $48,000,000 Any thoughts about that's about right? And then as you think about like the growth that's implied in the back half of the year, I guess kind of what can say about other visibility or just some of the assumptions there?

Speaker 3

Yes. So we are confident in the long term, even the midterm growth here. So we are navigating as we talk to all of you about here over the last few months. So a number of transitory headwinds, one of them being this very, very tough CapEx market as I'm now seeing all our peer companies report as well. So what confidence do we have?

Speaker 3

We're seeing our sales funnels are getting larger. I have not seen any cancellations. I've only seen purchases being pushed out. And then we're getting over some of the headwinds we had. And then last but not least, at the AACR here last month, we launched sort of the next extension on our Hyperion XTi, new imaging modes, which are lightning fast.

Speaker 3

And we launched a long awaited slide loader, which can take 40 slides and customers could crank through those in 24 to 72 hours. So I would add here, we're the only proteomics platform that need a slight load out there. So very excited on the progress and excitement around that. And then last but not least, as we have talked about on the legacy Standard Bio side, our site of flow, there were a number of issues we're working through and we're really getting confident in the solution and see this our ability to chip away of what is a very big flow market that will with time or part of that market will transition to high parameter flow. And to that end, at the site of meeting, I think it's actually it was yesterday site of meeting in Edinburgh, there was work presented by one of our collaborators to show that not only do we have fast panel design up to 50 markers, we're hugely advantaged over any other technology on looking at intracellular markers such as cytokines.

Speaker 3

And that really, if you want to study that biology, which is really important, we are really the only solution. All that give us hope for the back end and for 2025 and 2026.

Speaker 2

Okay. Great. And then I know it was a question to you already on Somalogic, but really strong quarter up almost 20%, some of our diligence reflected that could be hitting a nice growth inflection here despite the challenging market. So is that kind of growth sustainable for the year? Do you think just any color kind of what you saw?

Speaker 2

I know you talked a lot about the Illumina partnership for 25, but kind of the driver today on SomaLogic and it's kind of just kind of growth sustainable for the year?

Speaker 3

As I noted in my script, we see really like strong validation for our assay out there. We are aware of a couple of bake offs that will be reported out soon with our major competitor, which is hugely favorable to us. So long term, we're really bullish on this. The big customers we have in pharma are all project based and subject to sample availability and budget availability. And we still while we have a view to move more to translational research, where funding typically is not as temperamental as in discovery.

Speaker 3

We're still mostly in discovery. So I don't really have a good answer for you there. So but we love the quarter we just had here on the legacy soma scan side.

Speaker 2

Great. And maybe one for Jeff, just in terms of the OpEx leverage, nice leverage in the quarter. Can you give us some thoughts on the pacing of the OpEx for the year and how do the synergies flow in kind of as we get towards the back half of the year?

Speaker 3

Yes. I'll hand that one over to Jeff.

Speaker 4

Yes, Dan, great to hear from you. So as I said, we've what I'll call operationalized 50,000,000 dollars in savings. And so we expect to see the full P and L impact of that $50,000,000 for the full year of 2025. That will start to layer in really the second half of the year. So we expect that we'll see, call it $20,000,000 to $25,000,000 of that actually hit the P and L in the second half of the year.

Speaker 4

So in the P and L, you'll see somewhere around 40% to 50% of that $50,000,000 reflected in 24%. Great. Okay. All right. You'll primarily see it come out of SG and A.

Speaker 2

SG and A. Okay. All right. Well, great guys. Thank you very much.

Operator

Thank you. And the next question comes from Paul Knight with KeyBanc.

Speaker 6

Hi, congratulations on what must have been a lot of work to put this number set together.

Speaker 3

Thanks, Paul. Thanks, Paul. Thank you.

Speaker 6

The color you put out earlier on this Somascan scan early partnership on NGS, obviously, OLink has a readout on NGS that's getting a lot of traction as well. Are you going to be competitive with the OLink technology on the NGS readouts?

Speaker 3

Yes. So maybe just for background. SomaLogic in the past stepped away from the market for a 3 year period, which gave an opening to OLink, which they executed beautifully on. And therefore, I have many, many more sites up and running that we have. Our solution together with Illumina is highly competitive.

Speaker 3

And it really the advantage really lies in the soma scan assay, which I alluded to it before, but the underlying advantage is that our technology is scalable. We see many, many more proteins and we see them at a much, much lower CEV, which means that the discovery power of our assay is manyfold larger than that of Olinx. And without discussing cost, but this all in the same ballpark, we think we are highly advantaged in the long term. And I also alluded to bake offs to be published here over the next year.

Speaker 6

Okay. And then on the genomics side, you obviously supply some OEM partners in the marketplace. Do you see yourself really linked long term as supplying the microfluidic technology years out, Michael?

Speaker 3

Yes. We actually believe it's a highly differentiated solution. It's a very high performing solution for certain. There are certain samplesamplecomplexity points that it's a really good solution. One of them is we are an OEM partner to that other proteomics company there.

Speaker 3

And they like as best as we can estimate, they must have something approaching 200 units out in the field that are still reliant on our proprietary consumables, the integrated fluidic circuit. So what we have today, we actually feel really good about the business. We certainly expect to be as good partners to thermal once that acquisition closes And don't expect the change there. But if there should be 1, as I said, we already have 200 units out there that will consume the IFC. So feeling really good about that.

Speaker 3

And as we recently announced, we added a second OEM relationship, NextGen Diagnostics. We're very excited about the prospect there. It won't yield anything fast here, but in a few years, this will be a very nice growth and profit driver and rest assure, we are working on additional OEM relationships. As I said, nothing there happens fast, but once they are off and running, highly, highly accretive.

Speaker 6

Okay. And I guess, Jeff, my last question would be the $71,000,000 cash payments that includes you said $11,000,000 of the share buyback?

Speaker 4

Yes. So it's $11,000,000 share buyback, dollars 8,000,000 and we retired our Silicon Valley Bank debt and then $30,000,000 $34,000,000 of merger and there was an elevated amount of payments that we're paying off year end accruals, which is pretty typical in the Q1. So we think about our adjusted operating burn more in that $29,000,000 $30,000,000 range.

Speaker 6

Okay. And kind of flat similar in 2Q?

Speaker 4

Yes. I think that's right. I mean, like I said, in terms of kind of normalized adjusted operating burn, yes. We do expect we'll continue to have some merger related cash payments, but nothing to the level you saw in the Q1.

Speaker 6

Okay. Thank you.

Operator

Thank you. And this concludes our question and answer session.

Speaker 4

I would like to return

Operator

the conference to Mike Wigholme for any closing comments.

Speaker 3

Thank you, operator. I will close by once again thanking our team for their continued execution and dedication to our mission and to our investors for your continued support. I continue to be ever mindful of the work and challenges ahead, but remain more excited and confident in our ability to empower research to change patients' lives and in turn create value for all stakeholders. Stay tuned for future updates. We look forward to connecting with many of you at the upcoming Jefferies, Cowen and Scotiabank Conferences in June.

Speaker 3

And I'll now turn the call over to the operator to conclude the call.

Operator

Yes, thank you. The conference has now concluded.

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Earnings Conference Call
Standard BioTools Q1 2024
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