Alamar Biosciences, Inc. (ALMR) Earnings Call Transcript & Summary

Thank you very much for everyone for being here. It's my pleasure to have the Alamar team with us here today. Yuling Luo, the Chief Executive Officer; and Justin McAnear, the Chief Financial Officer. So, Yuling, Justin, welcome.

Thank you.

Thank you.

So, maybe just to start off, for an investor that might be new to the Alamar story, what's the best way to understand where the company is at today, and kind of how you fit into the broader ecosystem?

Alamar is establishing a gold standard in protein detection and analysis. We all know proteomics has a huge potential to improve our understanding of health and disease, leading to better treatment and healthier life. Despite all the great promise, this market remains to be largely untapped, mainly due to the limitation of the current technologies. The current proteomics solution is highly fragmented. On one end of solution, you have those high-plex discovery technologies like mass spec or affinity-based high-plex solutions. They're good for discovery, but they are not built for translation and diagnostics. So the analytical performance are limiting, either like sensitivity or specificity, or workflow are complicated. On the other hand, you have those clinical-grade single-plex immunodiagnostic assays that underlie the $20 billion diagnostic market, but their sensitivity are limited. They cannot multiplex. And that's how we are going to change the game with our precision proteomics platform that will make changes in 2 aspects. The first aspect is analytical performance. So, we built a precision proteomics platform that combines 5 critical pillars of performance. This includes, first, ultra-high sensitivity; second, high specificity; third, flexible, high multiplex capability; and fourth, broader dynamic range; and the last, seamless automation, push-button automation. There's no other solution in the market that has this unique combination of these 5 critical pillars. There is a trade-off. You either lack sensitivity or specificity or workflow simplicity. We are the only solution that combines all 5 in 1 solution and with exceptional analytical performance. And the second differentiation is that this is the only platform that was designed for translation and diagnostics, but having capability for high-plex discovery. So, it's the first platform that covers the entire customer journey from discovery to translation to future clinical diagnostics, connecting the multiplex protein measurement into a clinical outcome. So that really is the differentiation this platform has compared with all the solutions in the marketplace.

And you all are one of the fastest-growing proteomics companies or life science tools out there from a growth perspective. What is it about proteomics that you think is causing that inflection point? Why now? What's different relative to some of the other technologies that are out there? What is most important for investors to understand about why proteomics is seeing such incredible growth right now?

I think first is the science, right? So, there's more and more multiplex panels or signatures that's been discovered, leveraging those high multiplex discovery platforms, including ours. And those signatures have consistently showed that they can categorize disease more precisely and better than a single marker-based test. And second, a platform like ours finally have the capability to translate those signatures into future clinical diagnostics. And that's one of the major bottlenecks in the past where you have thousands or tens of thousands of signatures has been discovered and published, very few of them have been translated into the diagnostics. I think we're going to change that, right? And third part is that with our unique combination of ultra-high sensitivity for multiplex analysis, you open up a set of large market opportunity such as early detection of disease, disease risk prediction, minimal residual disease, where the disease signal is likely to be the weakest that requires this combination of ultra-high sensitivity for multiplex analysis. So, really, I think what our platform can do is that transition from a single marker-based test to multiplex-based signatures for chronic disease, very similar to genomics 20 years ago, where you see the transition from PCR-based single-plex tests to NGS-based multiplex tests where the market application have grown from $10 billion to $100 billion. I think we're going to see the transition in the proteomics as well, where single marker tests already underlie $20 billion, but it's a multiplex test that enabled by our platform. That's going to be the future for chronic disease and pretty much every chronic disease. And that's going to be the future for large market applications like early detection, minimal residual disease and disease risk prediction.

And in the past, I think you've talked about the total addressable market opportunity in proteomics more broadly, somewhere in the $50 billion range. How should investors think about how much of that is serviceable today versus more kind of near term, midterm or long term? And what do you need to be able to go tackle that broader TAM?

Yes. So, we are in the advanced proteomics segment, which includes ultra-high sensitivity plus multiplex applications. And within this market, in the research market today is about $3.7 billion and is estimated to reach around $11 billion. In this market, the fastest-growing segment is the mid- to high-plex discovery applications anchored by discovery, translation, clinical study and clinical trial and expansion to different disease areas. So, even the research market is a massive market opportunity over the next decade or so. Even bigger opportunity is the clinical diagnostic enabled by advanced proteomics technology like Alamar's. That market today is still small, roughly about $400 million, but expect to grow to $9 billion by 2035 and mainly driven by Alzheimer's disease but other applications. So, we are quite excited about this market. We believe we have a highly differentiated technology platform which can take a lead and capture a significant portion of that growth.

Right. And one of the key elements of your platform is NULISA. How should investors think about NULISA and how it translates into customer outcomes? What are the attributes? How did you design NULISA? Who is it most relevant for from an application standpoint?

I think the key differentiation is the combination of sensitivity and multiplex in a fully automated workflow, right? So, this combination of sensitivity and specificity is uniquely enabling for a lot of applications. And as I mentioned, multiplex signature-based approach is likely to be the future for chronic disease diagnostics. And this combination is uniquely enabling, and we are the only technology today that has this combination of ultra-high sensitivity for multiplex. And the automation is also critical for translation, for future diagnostics where the workflow is extremely important and the data quality is extremely important, and that's what we deliver.

And how do you think about -- you mentioned a little bit of the automation of the manufacturing and the know-how around that, the workflow, the IP. How should investors think about the competitive moat that you have relative to others in the proteomic space? And how does that translate into some of the future growth opportunities around diagnostics, for example?

Yes. I think the major moat is the chemistry that we have, right? We are the first one to take the approach of suppressing the background noise to improve signal-to-noise ratio. And we achieved over 10,000 -- around 10,000-fold improvement in signal-to-noise ratios to the point that we believe we have achieved best-in-class sensitivity and maintain that level of sensitivity for multiplex analysis. So, that really is the major moat of our technology. And it's protected by the combination of issued patents as well as years of trade secrets, right? It took us almost 6 years of development before we launched the product, which reminds me of my last company where we created this RNAscope technology. 20 years later, the patent has expired. But still nobody is able to replicate what we did with RNAscope technology remains to be the gold standard in the industry because it is also protected by a lot of trade secrets.

Okay. Great. Maybe shifting gears just a little bit on more of the commercial side. Can you help paint the picture for an investor on kind of what the commercial journey looks like for a given customer? How do they start out using your platform? How does that tend to change over time? And which customer segments are you finding have the most growth or the most kind of interest from all the different applications that are relevant here?

You want to answer this?

Sure. I'll take that one. So, first, I'd say there's no quite typical customer journey. But I can tell you, it would depend on the customer type, the budget, the kind of application that they're looking for. I could say that the sales cycle is about 6 to 9 months. Typically, they would start off with a TAP program where they submit samples to Alamar. Alamar runs the samples on the customer's behalf and then provides them high-quality data after that. And typically, the customer, once they get that data and they're able to go through it, that helps spur the instrument purchase. Customer would get the instrument, start using it, discover more broad applications for the instrument, expand into other panels, find other use cases internally and then that can lead to additional panel adoption and additional instrument adoption. As far as the -- we split out biopharma and academic and government, both are growing quite strong. I would say that on the biopharma side, we've seen that customers have been more apt to buy a second instrument sooner because their concern is typically the throughput that they can get today, like, time is a concern. On the academic side, in particular, core labs, they would tend to load the instrument up more because they can schedule experiments before branching in and buying a second one. But both segments have been quite strong.

Got it. So, I think looking at some of the available data out there, Alamar, the expectation is, I think, to add 100 placements during 2026. Like, how should investors think about the mix of new customers, additional instruments or placements into existing customers or expansion into different sites? How would you break that down?

Yes. So, I would say that when we look at the 100 instruments that we've talked about being our goal to place this year, most of those to date have been to new customers, and I would expect that most would go to new customers. But there still is a meaningful amount where customers on both academic and biopharma are buying an additional instrument. We also noted on our earnings call that we've seen some good traction from CROs this year as well. And we think that's important, and we think that's a good indicator that those CROs are investing in instruments because they can see the demand that could be coming their way in the future.

Got it. And maybe within your sales organization, can you help give us some flavor of how you expect that to look over time? I think today, you have somewhere around 25 reps. As your sales organization expands, how do you foresee the different segments that you might go into or preserving some of the productivity, which I think is really high amongst your reps today?

Yes. And so, when we look at last year, we ended at about roughly $3 million of revenue per commissioned sales rep. And when we were on -- when we were doing the IPO, we talked about our use of proceeds. One key use of that would be to continue to invest in building out the commercial organization, adding additional commissioned sales reps, also building out the support structure as well. I think we're a decent amount above $3 million revenue per head right now. And it's great to be efficient, but we don't want to be dogmatic about it. We want to make sure that we're finding the right balance between being efficient and prioritizing growth. And we are prioritizing growth, but doing it in a responsible way. So, we are going to be investing now and we have been going into next year in additional commissionable sales reps and continuing to build out that structure to continue to drive revenue overall.

Great. And in addition to the kind of core instrument placements and consumables that you see, how should investors think about maintenance or service? Is that a meaningful line item in the P&L? And how do you expect that to kind of look over time?

Yes. So, when our instrument ships, there is a 1-year warranty. And so most of our installed base is currently under that 1-year warranty. Customers can buy a maintenance and service contract after that, typically in 1-year increments, and then we recognize the revenue for that over the life of the contract. So, given that most of the instruments are under the 1-year warranty right now, that's not quite a meaningful portion of our services revenue line. I do think over time, though, as the installed base grows and the vast majority of customers buy that maintenance and service contract, that could become a meaningful amount in the future.

And recognizing that it's still early, how do you expect -- or what have you seen in terms of the utilization curve for some of your earlier customers? How do you expect that to trend after a year versus maybe 3 years?

Yes. So, first off, we've seen really strong demand for consumables. When we look at our Q2 results, consumables revenue almost tripled from Q2 of last year. So, we're quite pleased with that. Our instrument pull-through has been above $400,000 per instrument. And we've also put out the goal of maintaining that for this year, and we feel good about that. This can fluctuate quarter-to-quarter. If we were to place more -- as we continue to place more instruments, particularly if you increase each quarter, that can put downward pressure on the pull-through metric. Seasonality can also come into play towards the end of the year. And so because of those fluctuations and because it's early days, that's also why we've made that an annual metric where at the end of each year, we'll release the instrument installed base, and we'll also update the consumables pull-through.

And is that ramp or utilization curve, should that look different for an academic center doing research as opposed to a biopharma or a core lab?

Yes. So, at this point in time, because of the different dynamics that we've seen in academic and biopharma. Biopharma being more apt to buy that second, third, fourth, fifth or sixth instrument sooner, and we do have customers that have that many. That does put downward pressure on pull-through. But we also think it represents a great amount of potential for what future consumable revenue can be with those kind of instrument placements. On the academic side, we typically see them get to a higher pull-through number before they invest in buying a second or third instrument.

Got it. And I think your average pull-through is somewhere around $400,000 today. I imagine the capacity is much higher. What is kind of realistic steady state or mature pull-through for a productive customer?

Yes. So, we're north of $400,000 per instrument right now. And if you want to put that in context, a plate that's run through the instrument typically would hold 86 samples on it. One of those plates is between $9,000 to $10,000. If you ran 1 plate a week, 10 to 11 weeks out of the quarter for the full year, that would get you north of $400,000 per instrument. If you were to do -- if a customer were just to do 2 plates a week, obviously, that would get you to $800,000. If you were to load the instrument up, our instrument can run 3 plates in sequence, roughly 8 hours a plate. If you were to load the instrument up where you were doing that 4 or 5 days a week, that's where you can get to the $6 million plus theoretical pull-through ceiling. So, I think that there's a good amount of headroom from where we are today with the $400,000 and the kind of activity that, that represents to what we could get to in the future.