Quanterix Q2 2024 Earnings Call Transcript

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August 8, 2024

Key Takeaways

  • Quanterix reported Q2 total revenue of $34.4 M, up 11% year-over-year, driven by a 35% increase in Accelerator Lab services and 7% growth in consumables.
  • Instrument revenue fell 29% to $2.5 M as customers remain muted on capital spending, a trend the company expects to persist through 2024.
  • The company updated its full-year 2024 guidance to $134 M–$138 M in revenue (11% midpoint growth), excluding AD diagnostics, reflecting a cautious outlook on instruments and consumables pull-through.
  • Quanterix expanded its Simoa menu with three new assays in Q2 (eight in H1), aiming for 20 assays by year-end, and plans a multi-marker Alzheimer's LDT launch later this year after promising clinical data.
  • Liquidity remained strong at $299.5 M with Q2 cash outflow of $5.1 M, though annual cash burn is now expected at the top end of the $25 M–$30 M range due to lower instrument and consumable revenue.
AI Generated. May Contain Errors.
Earnings Conference Call
Quanterix Q2 2024
00:00 / 00:00

There are 8 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the QuinteRx Q2 2024 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, Please be advised that today's conference is being recorded.

Operator

I would now like to hand the conference over to our first speaker today, Francis Prow, Head of Investor Relations.

Speaker 1

Thank you,

Speaker 2

and good afternoon. With me on today's call are Masood Toulou, Quanterix' President and CEO as well as Vandana Sriram, our Chief Financial Officer. Before we begin, I would like to remind you of a few things. This call will be recorded and a replay will be available on the Investors section of our Web site. Today's call will contain forward looking statements within the meaning of the U.

Speaker 2

S. Private Securities Litigation Reform Act. These forward looking statements are based on management's beliefs and assumptions and on information available as of the date of this call. We may not actually achieve the plans, intentions or expectations disclosed in our forward looking statements. Forward looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements.

Speaker 2

The risks and uncertainties that we face are described in the filings with the Securities and Exchange Commission. To supplement our financial statements presented on a GAAP basis, we have provided certain non GAAP financial measures. These non GAAP measures are used to evaluate our operating performance in a manner that allows for meaningful period to period comparison and analysis of trends in our business and our competitors. We believe that such measures are important in comparing current results with other periods' results and assessing our operating performance within our industry. Non GAAP financial information presented herein should be considered in conjunction with and not a substitute for the financial information presented in accordance with GAAP.

Speaker 2

Investors are encouraged to review the reconciliation of these non GAAP measures to their most directly comparable GAAP financial measures set forth in the appendix of the presentation posted to our website and in the earnings release issued today. Finally, any percentage changes we discuss will be on a year over year basis unless otherwise noted. Now, I'd like to turn the call over to Masood Talu.

Speaker 3

Thank you, Francis. Starting with our second quarter results, total revenue of $34,400,000 grew 11%. Despite a constrained capital funding environment and overall muted growth in the tool space, demand for Simoa sensitivity continues to expand by double digits. This quarter's results were driven by 35% growth from our Accelerator Lab, where customers can access our tech without the CapEx, 7% growth from our consumables business and very early signs of progress with partner enablement in diagnostics. 2nd quarter non GAAP gross margin of 52.3% was solid as we continue to invest in our assay development, which we expect will yield future growth.

Speaker 3

Our balance sheet remains strong with nearly 300,000,000 of liquidity. Cash utilization in the period was approximately $5,000,000 Wanda will touch on these results and our updated guidance in more detail. Recall, our 3 core growth objectives are 1, high growth in menu, specifically maintaining our leadership position in neurology and growing into immunology and oncology adjacencies 2, the ubiquity of Samoa in all labs, where we are allocating heavy resources and investment into pushing forward a new frontier for multiplexed, ultra sensitive protein detection that we expect will culminate in a new platform. And 3, a leadership position in diagnostic testing for Alzheimer's disease. Starting with Menyoo.

Speaker 3

We commercialized 3 new assays this quarter for a total of 8 in our first half of twenty four and are on track to complete 20 by end of year. In neurology, we're building on the successful launch of BD tau and plan to launch an N4PD assay in Q3, which combines BD tau with additional relevant markers in a neurology focused multiplex test. We also expect to launch several exciting cytokine panels in the back half of twenty twenty four, which we will discuss later this year. Zomoa has a clear leadership position in neurology and our menu continues to accelerate this lead powering exciting research, clinical trials and neurotherapies. Starting with neurology, in a recent June publication of Nature Medicine, researchers using Samoa were able to demonstrate that plasma, extracellular vesicle tau and TDP-forty three were effective biomarkers in both frontal temporal dementia and ALS suggesting new modalities for evaluating disease progression and clinical trial targeting.

Speaker 3

Next, in oncology, in the International Journal of Molecular Sciences, researchers using similar showed that NfL and GFAP were promising targets to evaluate brain metastases in patients with lung cancer. Patients with BRAIN metastases showed higher serum NfL and GFAP compared to those without, suggesting these biomarkers can effectively identify patients at high risk and potentially improve the efficiency of MRI screenings. Staying on NfL, there's a growing recognition by the FDA that this biomarker is important in drug development and clinical trials. In May, the Foundation for the National Institute of Health received acceptance from the FDA for its intent to qualify NFL as a biological indicator of frontal temporal degeneration. This builds upon the agency's 2023 accelerated approval of Biogen's drug, tofersen, for treatment of ALS, which relied in part upon extended review evaluating trends in reducing NfL levels.

Speaker 3

More recently in Q2, NfL was again used as an effective biomarker by Inexon Biosciences. Inexon announced positive top line results for their pivotal Phase 3 trial in Guillain Barre syndrome, a condition in which the body's immune system attacks the peripheral nervous system. Utilizing data generated by our accelerator lab, Enexon was able to demonstrate that their Phase 3 trial met his primary endpoint. In addition, Enexon established their therapy delivered improvements compared to placebo with other secondary pre specified endpoints, one of which demonstrated early reduction in the biomarker NfL between weeks 24 of therapy. Moving forward, we expect more clinical trials will incorporate monitoring NfL levels and we'll be ready to support our customers as the market leader for this biomarker.

Speaker 3

Simoa's leadership among key opinion leaders, researchers and pharma was evident at the Alzheimer's Association International Conference or AAIC last week. TOMOA has helped build the field of highly sensitive biomarker detection in neurology as evidenced by our technology cited in approximately 150 posters and platform presentations at the conference. Our platform is entrenched with academia and pharma and we continue to work with our customers to generate data for key publications and evidence for pivotal clinical trials. The highlight of our week at AAIC was important new data on our multi marker approach to Alzheimer's testing. Our presented data was derived from BioHermes and CANTATE trials, 2 independent and diverse cohorts and highlighted that combining amyloid beta-four thousand two hundred and forty, NfL and GFAP with p Tau217 and using an algorithm can improve the accuracy of diagnosis compared to a standalone p Tau217 test.

Speaker 3

We believe the future of Alzheimer's Diagnostics therapy selection with blood based biomarkers will follow a multi analyte roadmap. 30% of approximately 7,000,000 symptomatic Alzheimer's patients in the U. S. Today have pathologies other than Alzheimer's. We believe these patients will benefit from the diagnostic clarity that multi marker test can provide.

Speaker 3

We will launch a multi marker LDT later this year and we'll share further data on our test at CTAD this fall. Staying on diagnostics, I want to make a clear point on why Simoa is best in class for early detection of Alzheimer's disease. To date, the Simul platform has provided a numerical result for every single Lucent p Tau217 patient sample tested. Other competing platforms are not able to provide results for up to 30% of patients due to limits of those platforms sensitivity. To be clear, that means for every 1,000 patients visiting a neurologist to get blood testing, up to 300 may not get a numerical result if a platform other than Simoa is used.

Speaker 3

It is well understood that amyloid progresses over time. Someone with family history and early memory concerns should get blood based testing. Of the blood based tests available, we believe Simoa is best for measuring this early to late progression for the simple reason that there is a numerical value to measure each time someone is tested in the clinic. Our commercialization efforts for Alzheimer's Diagnostics are also progressing. Within the quarter, we engaged 4 new partners, representing both large hospital systems and reference labs with broad geographic reach.

Speaker 3

More specifically, we announced 3 new partnerships in the U. S, including Mount Sinai, Banner Health and UCSF, which see approximately 5,000,000 patients annually. We also announced the partnership with KingMed, which has 49 labs set up in Mainland China, Hong Kong and Macau. These partnerships build upon our previously announced relationships and are early steps in building the infrastructure for Alzheimer's testing. Wanda will now discuss our financial performance in more detail.

Speaker 4

Thank you, Mathur. I will now go over our Q2 results and our updated guidance for 2024. As Madhu described, Q2 was another strong quarter of execution with double digit growth compared to the prior year. Total revenue for the Q2 of 2024 was $34,400,000 an increase of 11% compared to the prior year. Accelerator lab revenue was $10,100,000 an increase of 35% as demand remains robust for Simoa sensitivity.

Speaker 4

Consumable revenue was $17,400,000 an increase of 7% and instrument revenue was 2,500,000 dollars a decrease of 29%. In terms of revenue stratification, our customer mix in the period was approximately 50five-forty 5 between pharma and academia at 85% of our assay and accelerator sales were for neurology disease states. In addition, we recognized $700,000 of revenue in the quarter related to enabling our diagnostics partners to perform LDT testing by selling them instruments, consumables and licenses. Revenue from patient testing under our Lucent platform was immaterial for the quarter. Our revenue growth was led by North America and Europe, which grew 15% 25% respectively in the quarter.

Speaker 4

Our business in the Asia Pacific region was down 36% in the period as China remains a challenging end market despite its relatively small size in our portfolio. In addition, we did not have a repeat of a one time revenue adjustment from Q2 2023 in that region. For the quarter, our total installed base increase mirrored our performance in Q1. While not a surprise, the capital budget environment remains difficult and we continue to expect this overhang to persist through the balance of 2024. Shifting next to gross margin for Q2.

Speaker 4

GAAP gross profit and margin were $20,100,000 and 58.3 percent respectively, up $900,000 and down approximately 3 40 basis points compared to the prior year. 2nd quarter non GAAP gross profit was $18,000,000 and non GAAP gross margin was 52.3%, up $500,000 and down approximately 4 10 basis points respectively compared to the Q2 of 2023. As a reminder, we had several one time items positively impacting gross margin in the Q2 of 2023, which included approximately $1,000,000 of incremental revenue compared to Q2 2024 that flowed through at 100% gross margin, an impact of 140 basis points on margin. The remainder of the change in gross margin compared to the prior year is due to investments made in the operations and quality framework as part of our transformation. As a reminder, these investments took place in the second half of twenty twenty three.

Speaker 4

Moving down to P and L, 2nd quarter GAAP operating expenses were $33,200,000 an increase of $4,500,000 compared to the prior year. Non GAAP operating expenses were $31,100,000 an increase of $4,000,000 compared to Q2 2023. Within operating expenses, higher spending compared to the prior year was primarily due to continued investments in our R and D and commercial efforts. These investments are targeted towards our clearly defined near term growth pillars, which Madhu had highlighted to start the call. More specifically, we are allocating resources to our new platform, the build out of our Advantage Plus Assay menu and our sales, marketing and regulatory efforts in diagnostics.

Speaker 4

We are making these investments because we see clear signs of demand. Pivoting to the balance sheet, we ended the Q2 of 2024 with 299,500,000 dollars of cash, cash equivalents, marketable securities and restricted cash. Cash flow in the period was a net outflow of $5,100,000 Our liquidity remains strong and we continue to prioritize investment in organic growth. Moving on from the Q2, our updated full year 2024 revenue outlook is a range of $134,000,000 to $138,000,000 representing double digit growth of 11% at the midpoint. This revenue range excludes revenue from DUCENT AD Diagnostics testing, which we expect will be immaterial in 2024.

Speaker 4

The change in our guidance is driven by a challenging backdrop for instruments. We are assuming that Q3 and Q4 instrument revenue will be similar to the first half of twenty twenty four, whereas previously we had expected an uptick in the second half. We're also taking a cautious approach to forecasting consumables and are assuming that the weak capital environment will have a knock on effect on consumables pull through. These changes in our guidance are partially offset by anticipated strong execution in Accelerator, where demand for Simoa sensitivity remains robust. We expect that these updates, in addition to normal seasonality in our business, will result in Q3 being flat to slightly down compared to Q2 and then an uptick in sequential revenue in Q4.

Speaker 4

In total, our updated guidance indicates full year double digit growth, while also acknowledging a macro environment that remains challenging. Throughout this period, we expect to continue to execute on our strategic priorities, setting us up well for strong growth in 2025 and beyond. We are maintaining our GAAP gross margin guidance of 57% to 61% and our non GAAP gross margin guidance of 51% to 55%. Finally, we now expect cash usage to be at the higher end of our previous cash burn assumption of $25,000,000 to $30,000,000 primarily due to the impact of lower revenue. We continue to believe that our research use only business will be cash flow breakeven at revenue levels between 170 $1,000,000 $190,000,000 I will now turn it back over to Masood for his final thoughts before opening the call for questions.

Speaker 3

I want to thank our team for their hard work and another great quarter. Your efforts are making a real difference in moving the shift from sick care to healthcare. It's an exciting time to be at Quanterix. If you're a super talented individual and want to participate in redefining protein detection boundaries and translating those to early detection of disease, I suggest you give us a call. Our business is growing double digits.

Speaker 3

Our investment in scale will see gross margins expand and the company has line of sight to positive cash flow. This on a standalone basis is an incredibly valuable asset in the growing field of protein tools. That said, there are now 2 new FDA approved and reimbursed therapies for Alzheimer's. As access to treatment is broadened, we will invest resources and work diligently to ensure access to testing is available. Let's take some questions.

Operator

Thank you. We will now conduct the question and answer session. Our first question today comes from Matthew Sykes with Goldman Sachs. Your line is open.

Speaker 5

Hello. Thank you for taking my question. This is Jake Allen on for Matt Sykes. So one thing I want to talk about is given capital equipment weakness over the past year, have you thought about any potential reagent rental or financing options for instruments in order to continue to drive pull through given the fact that instruments have remained soft?

Speaker 3

Hi, Jake. Yes, that's fortunately, it's a great option with the instrument and reagent platform that we have. We're seeing good pull through in our accelerator program. So it's a good offset for somebody who doesn't have CapEx today. They've been sending our samples to Accelerator.

Speaker 3

That said, there's probably a couple cases where we had regen rental programs where our customer had large consumable demand. So it's something that we absolutely have been able to offer.

Speaker 5

Great. And then for my follow-up, now that the FDA has approved Lilly's Kisumla, can you talk about your relationship with Lilly throughout their Sertuit AD LVT offering? And any feedback you've gotten from Lilly in regards to using blood based biomarkers to drive therapeutic uptick?

Speaker 3

Yes. So we're very excited about Sertuit AD and the work that both Lilly and Quanterix have done together over the collaboration period that's culminated in this test. So if you look at the test details that are presented at AIC, high sense, high spec, high accuracy test with low indeterminate zone. And yes, I mean, I think that both teams have a lot to be proud of. It was excellent work.

Speaker 3

In the sense of blood based testing, these are tests to evaluate patients that could be candidates for therapy. So it's a test that we're going to continue to support folks with and hopefully in the future expand access. Thank

Speaker 5

you for taking my questions.

Operator

Thank you. Our next question comes from Sung Ji Nam from Scotiabank. Your line is open.

Speaker 4

Hi, thanks for taking the questions.

Speaker 6

Just a couple on Alzheimer's disease testing. We'd love to hear the feedback you've gotten at AAIC on the multi marker approach to testing. And when you launch this assay, do you expect it to be utilized predominantly over the standalone

Speaker 3

Yes. Yes. I think that's the answer is yes. So we think the future for blood based testing is going to be a multi marker test. And at AAIC, Sung Ji, as you alluded, we showed for the first time that additional biomarkers, when we added additional biomarkers to our PTAU-two seventeen and use the 2 step algorithm, we can reduce the intermediate zone of a 2 cutoff test by 3 fold while we're able to keep the high accuracy of the test.

Speaker 3

So what that does is it helps provide more certainty for a greater number of symptomatic patients And we were very pleased with the results. So there's probably some room for single marker tests and this multi marker test absolutely is exciting. We've talked about launching this before the end of the year as a laboratory developed test.

Speaker 4

Great. And then just as

Speaker 6

a follow-up, it's great to see you guys expanding on your collaborations with the large healthcare system. Just kind of curious if the progress that you're making, how quickly could they ramp up? And also curious if they're more likely to do the testing internally or are they Thanks.

Speaker 3

Yes. Just taking a quick look at some of the ones that we've listed this time around, I would say that all of them have the ability to have our platform and have the ability to perform testing themselves. That said, there will be some partners that if their order intake flow sort of exceeds capacity, they're always able to send things to us in Boston. So I think in this case, there's a lot of partners here that are performing themselves. But we have the option of tests sent out to our lab and I think that's what makes the Quanterix similar offering unique.

Speaker 6

Great. Thank you so much.

Operator

Thank you. Our next question comes from Dan Brennan with TD Cowen. Your line is open.

Speaker 7

Hi, all. This is Tom on for Dan. Just another housekeeping one on the multi market test. So given the improved performance, clearly you're launching for LDT later this year, but should we expect you to prioritize your FDA submission for that test? Or do we need to see more studies first?

Speaker 3

Yes, that's a good question. We've submitted a single marker test that we talked about. We received breakthrough designation for that single marker. As you know, and we've talked about it kind of in earlier calls, we've completed our clinical trials BioHermes 1 and CANTATE. So Phase 1 of those are complete.

Speaker 3

We're in Phase 2 and Phase 3 where we're collecting data both on the single marker and the multi marker. So I would say the effort and the work that we're putting in should provide data for both. And we're going to determine what might be most ideal for the IBD application that we have with the FDA.

Speaker 7

Thanks. And then just one follow-up on Simoa. So it was kind of announced intra quarter that 2 large players have signed up in partnerships with a different competitor, where sensitivity was inferior. So could you speak to the fact that other than sensitivity that large labs are going to be considering when choosing a platform partner and maybe how your strategy will kind of differ going forward, if at all? Thanks.

Speaker 3

Yes. So very clearly there, the top 3 clinical grade pretal-two seventeen immunoassays have been built on Simoa. And that's because it's the one platform that has the ability to quantify levels at the earliest stages of disease. So while there are PTAL27 tests out there that can achieve high accuracy, the important thing to remember is that the best clinical utility is when all patients can receive a result. Thank

Speaker 1

you very much.

Operator

Thank you. Our next question comes from Kyle Meikson from Canaccord Genuity. Your line is open.

Speaker 1

Hi, guys. This is Alex on line for Kyle. Just to start, I was curious, since the FDA approval of denitinumab in July, have you guys any uptick in interest in your diagnostics portfolio? And moreover, do you believe that we're getting closer to an inflection point in regards to AD drugs? Or could it realistically take a bit longer to get sufficient drugs in the market that could in turn kind of help scale up the diagnostics effort?

Speaker 1

Thanks.

Speaker 3

Yes. So the drug ramp for patients has probably been slower than most anticipated, but now that there are 2 FDA approved therapies, we expect that ramp to improve from where it has been. And as more and more people are looking to the therapy, then you're going to see, obviously, testing improve. And there, I think, whether it's been prior calls and prior discussions that it's blood based testing that's going to be the real key infrastructure for folks that have memory concerns and want the first line test. Clearly, there's just not the infrastructure for PET and invasive CSF based tests.

Speaker 3

So we think that the first approach is going to be blood and the tests are good enough that they can be confirmatory. So overall, I think that things should tick up more in 2025 and we're going to be building the infrastructure to be ready for that.

Speaker 1

Got it. Thank you. And just one more. I was wondering if you could just comment on the percentage or perhaps just a high level commentary on the number of customers that have been converted to the new assays and perhaps any feedback that you've gotten from these existing customers could also be helpful. Thanks.

Speaker 4

Yes. So we're still in the process of converting our customers to the new Advantage Plus assays and also releasing new assays that feed our menu. So both of those activities are going concurrently. That process is ongoing. As of Q1, we had converted slightly less than 5% of our customers to the new assays.

Speaker 4

As of Q2, that number is now closer to 10%. So good progress, but a little bit slow. And as we had anticipated, A lot of these assay conversions require customers to complete bridging studies to complete the number of the assets that they have on shelf getting through those first, etcetera. So not unexpected, but we do think that this is going to be a transition process that takes us through the remainder of the year at least.

Speaker 1

Got it. Thank you very much.

Operator

Thank you.

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