Quanterix Corporation (QTRX) Earnings Call Transcript & Summary

All right. We're going to go ahead and get started. Good afternoon. I'm Tycho Peterson from the Life Science team. It's my pleasure to introduce Quanterix. We'll do a breakout right after in the Yorkshire Room. And with that, let me turn it over to Kevin.

Thank you very much, Tycho. It's always a pleasure to be here. We've got some exciting news to discuss today, representing Quanterix. Before starting, please consult your regulatory filings before investing in our stock. Today, I'm going to discuss 2 things around the company: one is we have a pretty incredible story over the last 5 years on the research side, where we're executing, and it's pretty strong execution story. Today, we'll further build upon that because we will give some revenue indication of our Q4 performance. But I also wanted to talk about some aspiration around diagnostics and some of the ways we think we can disrupt moving forward, and some of the compelling logic that we're going to be using this year to further evolve that part of our story. We'll talk about our progress in '19 and lay out the goals, and we have a lot of growth catalysts for the execution side of our strategy for 2020. Starting with execution, I consider it to be a short to midterm story, low-risk research value creation. We didn't have any revenue really 5 years ago, and we're going to have $57 million this year -- or last year, 2019. We have a lot of validation, 650 third-party peer-reviewed publications now. We also are 23 of the top 25 pharmas, nearing 1,000 Phase I, II, III trials using the technology for getting drugs approved. We feel there's very low regulatory and reimbursement risk in this segment. Proven management team and incredible Board. The founder of Illumina founded Quanterix, David Walt, really an incredible person that's on my Board. Very strong scientists that's actually deploying the technology on many different fronts right now. We have a very strong economic profile, and we're very early stage in this story and into research. Solid balance sheet, raised $120 million this year. We have multiple growth catalysts going into 2020. We actually have a lot of investors that are trying to get pharma drugs approved for their pharma assets that they own and that's helped us actually from a business development. Many of our investors really give us great leads in our part of our business development. Powering Precision Health is an independent summit that we run each year. We just ran it in Barcelona, standing-room-only with all of our KOLs as well as investors attending. Strong IP and we have some next-generation roadmap to get to another 100x in sensitivity improvement, which will allow us differentiation to continue. But on the right-hand side, we think there's a strong possibility to significantly improve value creation as we evolve some of the learnings of this body of evidence into Precision Health. We believe that we have this disruptive sensitivity, not just in proteomics, but we can also do it in DNA and RNA. And we have now regained all of our rights back from bioMérieux, 100% of those rights are back. We know we can do blood-based low-cost testing with high strategic optionality. We are looking at a neuro toolkit, doing what typically has been done in cerebral spinal fluid, doing it in blood very productively with strong correlations. We're going to talk about that. Also, we think we have the possibility of moving productivity into liquid biopsies as well as single cell, and also rescuing drugs. We've been listening a lot to Biogen working on the aducanumab, Alzheimer's drug, having -- they're one of our large customers, having strong biomarker capability to get to disease cohorts sooner and earlier, long before symptoms can help get a drug approved. So in the short term, we think that in this diagnostic field, there's going to be a strong LDT opportunity, longer term, IBD and point of care. All of these diagnostic houses now have many of our units, Abbott, Quest, LabCorp, Siemens, Roche and the management team that we have is well positioned, we believe, for this segment. So starting off, we really are at the crossroads of technology and health care by digitizing the ELISA, a tried and proven technology and assay for many years in protein. And basically, what it's allowed us to do is instead of seeing disease very late-stage with a very invasive procedure, seeing it early stage, non-invasively through blood and urine as well as saliva. And so that technology, in general, the reason we want to focus on the protein initially is that we do see a lot of evidence that the protein is the one thing that changes with a lot of these identical twins studies. They start out with the exact same DNA, but as time goes on and they get subjected to environmental factors, their protein cascades shift. And that what makes protein so phenotypic and so valuable as a molecular asset to be diagnosing early detection. And so this slide just shows you on the y-axis, the level of invasiveness. And on the x-axis, the timing of when you detect the actual disease. And you can see that cancer and neuro, typically when you find out you have a disease, it's pretty late stage. Many times the symptoms do not appear until you're in Stage 3 or 4. Sometimes even posthumously for CTE and certain types of Alzheimer's. And now there's these publications that we have from third-party neurologists and oncologists that have been deploying the technology in cohorts facing the scrutiny of these publications and getting their work published. And we think this is in a very important area of focus. And you can see in the red box, the current detection levels that are the standard in the industry, don't allow you to see these diseases until late-stage when the concentration of these proteins are very high. What we've done is we've basically allowed the ability to go in and look at femtogram per ml levels, and by doing so we can then get to baseline levels of the proteins. And so any movement from baseline gives you a much earlier indication of the disease. And on the invasiveness side, typically, if you are going very invasive with a cerebral spinal fluid, spinal tap, you can get high-protein concentrations, but it's a very painful, it's a very invasive and even risky procedure. But as you try to lower the invasiveness to, let's say, blood, saliva or urine, the protein level, once again, is very low. So the combination of early detection, which is low protein levels, as well as noninvasive is really the goal of taking our sensitivity and deploying it to create a lot of value creation opportunities. So we start with the execution side of the business, which is research, which is today a $1 billion market. It's $4 billion when you consider all the molecular sides of it. We started out in neurology, where we have about 10% penetration right now. About $35 million of our revenue in 2019 is coming from neurology with the HD-X and the SR-X. We just launched in 2019, SP-X, which is going to allow us to start moving into oncology where Luminex and MSD and others participate, and we today have hardly any position, but we think we can disrupt by seeing the cytokines in the immune system at baseline levels. And then you can see when you move this body of evidence to the right, it's just a small sliver in the $40 billion aspirational side of diagnostics. And the area that we're most intrigued with is this neuro to start. And we're going to talk a little bit more about that in a moment, being able to see brain health in blood. So today, I did want to indicate that the level of publications that we had in 2019 was off the charts. We're almost getting a publication a day now from third-party neurologists and oncologists. And the second category here you can see the number of biomarkers that are being run in our technology continues to grow very nicely. And then you can see that there's been a really good uniform growth that's occurred here. It's a pretty formidable growth and what I do want to announce today that in Q4, we had another 46% growth, plus or minus 4%. And for the full year, we now believe we're going to have $56 million, almost $57 million of revenue, which represents another 50% plus growth year for us. And on the right, you can see not only is the revenue growing, but you're going to see in a moment, 400 basis points of gross margin improvement year-to-date. We launched these key products, HD-X and SP-X, and our growth in consumables showing that this technology is really getting deployed was greater than 75% for the full year. We also raised $120 million, fairly productively with very good stock price in 2019, giving us a very strong balance sheet. We acquired Uman, 1/3 of it. We actually paid using stock at the $30 level. And this is a very critical antibody pair that no one in the world could make that we've now protected our supply of and now offensively, Siemens and Techne are taking supply from us through a license and a supply agreement. The Nf-L is also a key future with all these publications for MS and many of the neurodegenerative diseases, including Alzheimer's. And this incredible cascade of publications is fueling our growth, and we are in a new facility with strength and team. And we did have a standing room only Powering Precision Health Summit in Barcelona a couple of months ago. So we're very much energized opposite this evolution of the business. I wanted to show this slide that starts to break down the various components of the business. The first box on the left is our Accelerator services. And it's just showing through 3 quarters, you can see that 3 quarters worth of revenue is equal to what we had in 2018. But the number of third-party and peer-reviewed trials -- I'm sorry, the drug trials that we're running in house up to 88 now, which is a key criteria for future differentiation and ability to create some companion diagnostic opportunities. You can see that our instruments have continued to grow. The installed base is -- just through 3 quarters is up to 370 instruments. But what's really intriguing is a growth catalyst of that middle box of instruments. For 3 years, we had very flat revenue on instruments. And then we started to invest in putting out smaller instruments and boxes to democratize the technology. And you can see how rapidly the revenue grew up for 2018, and even in 2019, just through 3 quarters, we already surpassed 2018. We had a very strong Q4. So we are now seeing an inflection point of instrument growth, which already, even with the flat instrument growth, we saw this very strong surge of consumable growth, which now is almost half of our business, which is very nice. It's the highest gross margin component, and you can see that it's been growing very steadily. Interestingly, the utilization, what we've done is we've calculated all the instrument value over the years and how much is installed, and we said, what percent of that instrument value of revenue that we collected, are we collecting each year in annuities? And 35% for the first 3 years is what we were collecting annually for the consumable pull through, but we've been expanding our kits. We've been moving from homebrew to kits, which provide the antibody pairs. And we've also increased to improve the performance of our instruments. And by doing so, we're now for the last 3 years, at 50% pull through. And even this year, we're at 60%. So we've continued to crop up that line, and that's what's allowed this significant revenue growth in the consumables. And on the right-hand side, you can see that good mix effect coupled in with just the fusion of fixed costs creates a very nice gross margin movement. 70% is where we think our long-term goal will be for gross margin. Geographies, you can see with the advent of some newer products, we're starting to grow now in Asia, which was key for us. We also have increased our position in academia, which we think is important because of publications. So we spend a lot of time really nurturing our academic KOLs. And then on the disease front, you can see our neurology continues to grow very rapidly, and we've just begun to move into oncology. And then on the right, you can see the growth for consumables has been 91% year-to-date and instruments have been 70% as well as services at 35%. So this next slide just shows you, against the strategic goals that we presented last year at this time, we just knocked it out of the park in every category, starting first with neurology, blew away the utilization number that we had indicated we'd go for. We launched the HD-X, which is a really showcase technology to replace the HD-1. We also launched the SR-X 1.1 into neurology. We launched the SP-X into oncology. We actually did sell 10 units, which we expected that was going to be very slow. And so we're very excited about getting out of the gates quickly in oncology. And then in the strategy front, we did acquire Uman and a Siemens license, and we did 50-plus drug trials. And then the financials, we've mentioned the growth that we've had there. And then the 100x sensitivity improvement, which we already can see a market for, based on many of our customers are deploying the high sensitivity in the cerebrospinal spinal fluid and they're finding post-translational modification proteins that are at a much lower subset level. They're now wanting to see them in blood. So we know when we can get to 100x, we're going to actually be moving science into a whole new realm and ushering in a whole new capability to stratify different types of Alzheimer's, Parkinson's, MS as well as now moving into oncology and liquid biopsies. So our company basically sells instruments. Two of those are bead based, which are the HD-X, the newest instrument, we just launched a quarter early. We charged $200,000 for it. We've got 258 HD-1, HD-Xs now installed. It's fully automated, and it's primarily focused on neuro. The little benchtop for neuro is called the SR-X at $75,000. We now have 118 of those installed. We just launched that a little over a year ago. And then the SP-X, we mentioned, we put 10 of those out, 13 is the total installed base now at $75,000 for primarily oncology. And you can see now we've got 180 different kits in the planar -- in the assay kit category, 100 of those are for plates, for planar and 80 are bead based, and that is a very good way to accelerate our revenue. And Nf-L was a homebrew at one time, 3 years ago, and now represents 33% of our revenue this year when you look at it across how it's impacted all categories of our revenue. It's a major opportunity for us going forward. And you can see this HD-X, it does have a 20% higher price, better gross margins, more reliable, pulls through 20% more consumables. We got good feedback to date, and we've actually sold 55 units. That was a lot more than we expected to do. 25 of those are actual sales of new units and 30 of those were trade ins, which we're extending the trade-in program. We know that the trade-in puts a little pressure on short-term margins as we trade in the HD-1s, but in the long term, it creates a lot of value for the company. So we're accelerating as best as we can. A little bit of short-term pressure on margins is important. It's not going to go negative, it's still going to keep growing our gross margins. It's just not going to grow quite as quickly as we've done while we do this trade in, but then it will expand and accelerate once we get more of the HD-Xs in. We actually hope by end of the year in 2020, to have 50% of our HD installed base be HD-Xs, which is a very fast transformation. So sensitivity enables smaller samples, it could be a blood prick that you then dilute up those samples. It can eliminate a lot of accuracy issues by diluting and eliminating matrix effects. You can see disease earlier, as we mentioned. But when you use multiplex, when you want to run 10 different analytes at the same time, you actually consume some sensitivity. So we're actually building a bank of additional sensitivity headroom that we use for any of these reasons when we are creating our differentiation strategy and competing against the various competitors that are out there. In future proofing, we know there's a lot of new proteins being discovered based on our -- using our technology in the cerebrospinal fluid that this is going to allow companies that buy our technology to be ready for that next molecule that could be low abundance. And so we are continuing to evolve our sensitivity. As you can see here, this is just a chart showing the various competitors and where they sit, and we really believe that for all those reasons on the left it's important for us to continue to make this investment. And this slide just shows that we already have found in our new investments, a 40x prototype, 40x improvement in the sensitivity, and we're ultimately going for 100x by the end of the year, in 2021. And we feel pretty good that we're making good progress against that. And we will be the leader in all of these categories once we achieve that. So how is this getting deployed today? It's primarily to help drugs get approved, lowering toxicity by lowering the dose of the drug when you apply it to a disease earlier stage, and then it's easier for a drug to work when it's earlier stage. That combination has given a 300% improvement. If you have a Phase I approval moving to Phase III and getting an approval, if you use biomarkers you can significantly enhance your ability to get a drug approved. And you can see even at CROs now, the Quests, the LabCorps, there's now 46 of our units there, and that's a big consumer of the consumables. And then even inside now, we've run 88 drug trials. Interestingly, there's $800 billion of neuro challenge in the United States alone right now. It's the cost of post-traumatic stress disorder, the opioid crisis, the big bolus of Alzheimer patients that we're going to have over the next 20 years. The NIH is now investing heavily into this whole area. One of our investors in one of the one-on-ones mentioned that it was oncology back in the 2010s, and they're now saying this next decade is really going to be focusing on neuro. So our timing is very good to be able to see brain health in blood. And the FDA has actually issued guidance now using biomarkers to get drugs approved and this is further adding excitement to the possibility of our technology. So these are the research and the biopharma companies and CROs that bought our product by the time of 2015. And by 2017, this is where we were and now I'm happy to report this is where we are in 2019. So there's a nice explosion across the board of most pharmas trying to get drugs approved utilizing the technology. As we move to the right side and the aspirational side, we're really going to hone in on trying to get a neurology toolkit in blood. Looking at liquid biopsies as an opportunity and then point of care. And in the area of looking at neuro and blood, this Nf-L, you can see the number of publications has just accelerated and gone off the charts. There's 46 active trials right now utilizing Nf-L as an endpoint and it really is being applied for neuronal health across any neurodegenerative disease, Parkinson's, ALS, Alzheimer's as well as MS, even CTE is being considered. So these are a key opportunity. We think it should be like the cholesterol of the brain. Everyone should know at some point their Nf-L levels to know whether their neurons are dying at a pace faster than age would normally predict. And here is just a lot of examples of drug companies using it as an endpoint and further studying the role of Nf-L and how they can see disease much earlier in blood with Nf-L versus waiting on an MRI or a scan to see the impact of, say, an MS disease cascade on the body. We bought it online and this is just an example, that -- on the right-hand side, you can see that detecting Nf-L in blood, no one really could do with any of the antibodies that we try to source. You can see all the dots at the bottom, none of them could see it in blood. Many of them could see it in CSF, but not blood. And Uman was the only pair that could. And then on the left side, you can see the number of publications and 100% of those in blood are based on the Uman antibody pair. So getting this was a key defensive move. And now that we've gotten it, we found that there's a nice offensive opportunity there as well. We mentioned earlier, there's 15 drugs for MS, $22 billion. It takes 2.5 years with MRI to see brain atrophy from MS. And so it takes a long while for a doctor to know whether an MS patient is on a good drug. With Nf-L, they believe within months, they can see it in blood. And so this is key opportunity area for these 15 drugs and trying to make sure that the drug is bringing Nf-L levels down quicker so you know that you are on the right drug. And it could be the difference between dying standing up or dying in a wheelchair for an MS patient. So we think getting them on the right drug quicker is a great first volley way for us to evolve our Nf-L franchise into the diagnostic sector. We just ran a trial, 17 different sites around the world, 17 different labs, 70 different users and got the same exact results for the Nf-L test. That's the first step of what we call analytical validity of the technology. And on the right-hand side, we're just plotting from some researchers in Basel, age versus the Nf-L level in blood. And now they're running an 11,000 patient cohort of -- these are actually healthy population, seeing what their Nf-L level is. Once this is done, we're going to be working -- Tatiana joined us from Biogen, she's in the audience, 3 months ago. She was there 18 years running Nf-L and being the leader in Biogen. She is now leading up our clinical validity, trying to evolve this with the FDA. So we're hoping these 2 data points, once they're complete, the trial on the right being run by these neurologists in Europe, we'll be able to start to have a dialogue with the FDA soon this year by midyear, knowing maybe a course to further evolve our Nf-L in the clinic. This is an exciting chart, I think one of the most exciting in the presentation. On the left-hand side, Roche has a neuro toolkit, but it takes a very invasive spinal tap of cerebrospinal fluid to look at all of these different biomarkers for all those diseases in the arrow whether it be Alzheimer's, ALS, Parkinson's. On the right-hand side, you can see us building this out in blood. This is a key evolution and a key disruption to be able to see brain health correlated in blood versus that other procedure, we think, opens up a 10 to 100x market opportunity. And even in Alzheimer's, someday, we see blood test being screens and then monitoring whether you are benefiting from the drug. There's some researchers in a publication of CNN AD, Nf-L levels elevate 16 years before dementia. This was a key pivotal seminal publication that came out last year; CNN broadcasted it. And then we actually have, for measuring amyloid beta in blood, 98% under the curve compared to seeing it in imaging. So we're pretty excited that these can be pathways, one drug are approved to really monitor and manage patients in this cohort. We mentioned Powering Precision Health. You can see we bring all these speakers in from around the world. All these sponsors on the left-hand side. Thank you to JPMorgan, they're one of our key sponsors. And you can see a lot of pharmas and biotechs as well and diagnostic companies. In 2020, we're going to do it in Boston. We hope to have as many as 75 speakers over 2 days, focusing on neuro and onco, and all of the investors are invited to hear that. And this is our slide that just shows our key objectives for 2020. And it's just on the execution side, we're going to keep growing the installed base with these new instruments that we've launched, and then keep increasing the utilization across that installed base. And we think it's a pretty good opportunity for us to have a lot of value creation at fairly low-risk on the left execution side while then starting to do some research around these 3 key areas of opportunity in the diagnostic sector moving forward. And so in summary, execution is our focus for 2020 on the left, and then we're starting to build out our strategy for the aspirational opportunity in diagnostics. We think we have a market that is unprecedented for utilizing this sensitivity for detecting and validating through all the trials and the publications and the penetration throughout the markets, both in research and diagnostics is our goal. And we have a group of people that are very motivated within our company to continue to drive this. So we thank you very much and look forward to the breakout session, which is across the hall, Yorkshire Room. Thank you very much.

Hello. My name is Kevin Hrusovsky. I'm the CEO of Quanterix Corporation. I'm privileged to have Amol Chaubal, who is our CFO. And we just did a presentation across the hallway and have been meeting with investors pretty much around the clock for the last few days. So if you have any questions, we would love to field them. And we are webcasted, I'm told.

So I was just wondering, you talked about neurology and oncology being 2 great areas of opportunity for you guys. But penetration has remained very low at -- for neurology less than 10% and oncology less than 1%. So I was just wondering, what you think needs to happen for those penetration levels to sort of increase?

Yes. It's, I think, one of these situations were when you disrupt and you do something so differently than the way it's been done, you have to create a lot of education. And when we first started, there were a lot of people and even some of our current competitors that would say things like, "Well, okay, we believe Quanterix has sensitivity, but there's no reason for it. So like what's the point?" And so we've been spending a lot of time with this foundation called Powering Precision Health, bringing a lot of the top KOLs in neurology and in oncology and -- to stand up and present their work and describe exactly all the ways sensitivity can be deployed to really bring a whole new approach. And I think in neurology, there has been somewhat of a breakthrough in the number of publications in the last 12 months. And PPH was standing-room-only over in Barcelona, and the concept of being able to have great correlations in blood for what was being done in cerebrospinal fluid, or even more importantly, what people would have liked to have done in cerebrospinal fluid, but they couldn't get samples because nobody was willing to even enter a lot of a trials, they could now see it in blood. I actually think that we're on the cusp and the inflection point of that education that's going to lead to a lot of publications that lead then to a lot more purchasing of the technology and research. And NIH, I think, is going to further fuel this with their own education, and we're spending time educating them and making sure they understand what this tool can do. So I think that we have the pathway set. And when we first moved from only being a diagnostics company 5 years ago to saying, why don't we get a body of evidence in research first and then go aggressively into diagnostics. When we changed the order around, I think we needed to find a way for this sensitivity to actually work in research and getting drugs approved was a breakthrough that has really been validated by the FDA issuing guidance in the last 12 months around using biomarkers to get approval. The concept makes so much sense. So that's the good part. If you can get to a disease, when it's very early stage like a match burning in your body versus an inferno of a forest fire, if you can get to it very early, you can see how it would be easy for a drug to blow it out and probably blow it out at a lower dose, which makes it less toxic. So the combination of lower dosing, getting diseases -- moving the biomarker versus reversing the symptom, takes a little bit of time because that wasn't the traditional way for drug development to be done. So I think these CROs, you saw that there was a rapid uptake of the CROs. I think that's going to help us because they've got sales organizations that are kind of built for this to kind of educate a lot of the pharmas in ways that it's going to take us time. So I do believe that we're making the right investments and while that all sounds bad that our penetration is only 10%, there's a good side to that too. And that is that if we do figure this out, our execution side of the curve can create so much value, so quick, without any serious regulatory reimbursement risk, that will then further fuel our ability to get productively across into diagnostics. And we're hoping that companion diagnostics is a great way to bridge across without a lot of investor risk. So we'll see how the next year evolves. But we've had -- since going public, our growth rate has actually doubled because so many investors are actually sharing our story and trying to get their pharma stocks up in value. So I think that the things that are in place are actually good things that we aren't like 90% penetrated because then you'd be like, "Oh my gosh, where do we go from here?" So we actually have a market that's robust, and it keeps growing. And I think we're feeling pretty good about that. Yes?

To build on that a little bit, do you think the insurance companies, the Medicare, the payers of the diagnostic tests are ready to sort of adopt that new paradigm, early discovery and whatnot and sort of reimburse at a higher rate than would be necessary?

I think this is a very key point, and I noticed that one of my Board members and owners is in the room here, ARCH, and when I first started, and I ran Caliper, many of you know, for many years, that we did really well with that asset. When I first started at Quanterix, one of the LPs potentially of ARCH was Blue Cross, Blue Shield. And I remember Keith setting up a meeting and say, "Hey, talk." At the time they were invested heavily in Fiorinal. And they were trying to understand what Elizabeth was saying versus what I was saying. And I was like, we're going to take a few years here to get a lot of third-party peer-reviewed publications working with the scientists to validate what we've got. And they then try to set a meeting up and it never worked. She wouldn't talk to me. Full circle, 5 years later, we've had 5 PPH. We've had all of these scientists rallying, building publications, almost 650 of them now, 350 of them in neuro. I've been asked -- this past year, I've been asked to keynote on a lot of different forums. And next week -- we have a sales meeting next week. I'm flying back for that -- in the middle of the sales, and I'm flying back here being put on a stage where Blue Cross, Blue Shield is moderating, and I'm going to be on the stage with Thrive, which is the new protein liquid biopsy, just the 2 of us. And so we're going to -- apparently there are going to be a couple of thousand people in the audience. And to me, the fact that Blue Cross, Blue Shield, the same people that I talked to 5-year -- 4 years ago is moderating it, and you could see the progress, the real progress that we've made. I mean, we didn't really have any revenue then. I think that, that's going to be key to sending and pushing this thing along. Because if you can look at different drug therapies and know when it's going to work and when it's not going to work long before you've expensed all the therapy expense or maybe before even deployed it, I think while the pharma companies initially may not be too excited about that, payers and the FDA are. So I think that coming at this from the payer and from the regulatory bodies is a great way to bring this on. And I think neuro is kind of cool because there you've got drugs that couldn't get approved at all and it's easier for them to accept this concept of stratification because they've never had an Alzheimer drug approved. And so they're desperately trying to get something and if moving earlier and stratifying as a way to get the first shot on goal, I think we have a better chance of receptivity there. So I think we got a lot of good things lining up, and I think the players are going to be an important piece of this.

The other thing you mentioned -- that you mentioned throughout you see no devices for early detection. Do you view that as competitive longer-term for you guys on the oncology side?

So Tycho asked if I thought that Thrive and the competitors in liquid biopsy -- are they, in fact, going to be competitors longer term? And it was interesting because it was actually Tycho when I first started, that says hey...

Don't talk about that...

Start with life science tools, don't go too quickly into the diagnostics. And so we've now taken the steps of building out that body of evidence in research. And I think that what we have found -- I'm meeting with Freenome right after this meeting. All the liquid biopsy companies have been meeting with me. Most of them have been molecular. And you saw a very intriguing slide I showed on how DNA is the same when you're born in twins, end up evolving differently based on environmental factors. And epigenetics in my mind is actually being triggered by proteins or as these neo -- there's a lot of nucleotodes and things that -- nucleotosis that is driving those DNA and those different cascades. And so it's a protein that's essential to every aspect. If you can measure the lot of sensitivity, I think what you're going to find is that most of those liquid biopsy companies are going to be looking for all the omics at some point with algorithms and Freenome has been pretty advanced in that. Thrive is kind of starting with the protein, and they're now moving back into molecular, but most of the others are pretty much NGS and they're trying now to bring in protein. I actually heard a rumor that Illumina even talked about wanting a protein position in our company at this show, which I find really exciting because it's more phenotypic. And I do think that we can run DNA and RNA in our same device. We just wanted to stay focused on protein, but we can get exquisite sensitivity. I would even call it, PCR kind of capable -- digital PCR levels of sensitivity on DNA and RNA using our same device without PCR. So we have the ability to go to all of those omics. And so I think we are going to look seriously at how to fuel the liquid biopsy opportunity with our ability from an engineering perspective to get at these answers. And then data-wise, getting the right algorithms. And if we do, initially, we're going to supply them. So Freenome is a big customer already. We know that we've had inquiries, Isaac Ro is now the CFO down at Thrive, and they're asking us about using our technology. So I think initially we're going to supply into it. But we're going to study it. And if we can create our own algorithms and do something really productive here, we then could be direct competitors at some point. But for the moment, I think we want to feed it with our capability and try to be a little bit more agnostic across all those players.

Kevin, just unpacking that nucleic acid side. So you're using the technology in an amplification 3?

It is. So the creative thing that Dr. Walt did, David Walt, who's a founder of Illumina, he's our founder. This guy sits on my Board and he is like smart as all get out when it comes to science. So basically, what he did was he broke the sample, he digitized 500,000 little samples as the way we've taken the lysine and we've broken it up. But there's no reason why you can't use DNA or RNA on those same beads and to -- and what we do is we take these beads, there's 500,000 of them. Today, what we're doing is we're capturing the protein with antibodies and then we're putting a second antibody on it with it lights. And then we're isolating each one of those beads into a well that's the exact size of the beads. So 1 bead per well. And then we have camera technology that looks at that entire array. So we get this little 1 centimeter by 1 centimeter array that's got 250,000 wells in it. So we roll basically these beads across, they fall in. We can do the same thing with DNA and RNA, capture DNA and RNA. And then by isolating it, we can then use our camera technology. There's already publications on it. Our initial volley that we did into this industry was based on a diagnostic fully automated platform that was only built on the front end for sample prep for protein. So all of the early on publications from our technology was all protein because you couldn't really get into the system to run DNA. We launched a little over a year ago, SR-X, which is only a detector. So people can use whatever sample prep they want, and that's when the publication started on DNA and RNA. They're using the same detector, the same beads, it's just that they're doing it offline. So I think that this is a breakthrough and there's pubs already on it. And I think seeing digital PCR level without using PCR, eliminates the AT bias, gives all kind of advantages. We have a -- some microRNA work already for the liver enzymes, there's lot of publications. So we're already kind of starting. But I'm also saying there might be some other technologies in the molecular side that we might want to team up with as we start to build out the molecular side of our capability inside of the Simoa. So it's a pretty intriguing. We try to stay focused, so we don't get like a lot of these protein companies, they get all excited about DNA in the past and they diverted and they lost their focus. And so we're great at this focus. So for the moment, we're on proteins. And for the moment, we're not going after infectious disease. We're not going after a lot of other categories, which are very much reachable. We're staying in oncology, neurology, protein, but we're allowing through homebrew, which is the kit that people can do whatever they want with, let them start experimenting. Those publications will guide us and inform us where we move next with this. And I think the liquid biopsy companies are probably the most advanced in trying to get at the omics -- the molecular side of our Simoa.

Question on the neurology side. Did you say 30% of the business is tied to Nf-L?

Yes. And you know, it's been intriguing. 3 years ago, Nf-L was a homebrew. Henrik Zetterberg, one of our KOLs, MD, Ph.D. neurologist from Sweden, started to run it and says, "Oh, my gosh, I can see Nf-L in blood." Where -- they didn't have a body of evidence in cerebrospinal fluid. It is -- couldn't see it in blood. He -- that was a seminal publication. He's on many of the advisory boards of Lilly and Biogen and -- most of those companies. Next thing you know, Nf-L is starting to be looked at by all the pharmas, based on that -- those seminal publications. And the -- some of the first publications were simply correlating Nf-L levels and cohorts of patients in the cerebrospinal fluid with the blood. And what it showed was about 150th the concentration is what you find in blood. Some of that's because there's 6 quarts of blood versus 3 pints of CSF in your body. So just the dilution effect of having more blood. Some of it is because some of those proteins don't cross the blood-brain barrier. But interestingly, it was correlated and different cohorts of severity. They were using patients with different levels of dementia. The more the dementia, the higher the Nf-L level and at CSF, the higher it was. So initially there was correlation and then they started looking at boxers, they started looking at athletes. We won the NFL head health challenge with the -- General Electric twice. We were on Good Morning America, talking about being able to measure concussions in blood. That's how a lot of people learned about us, but we're not really focused on concussions. We think getting drugs approved for neurodegeneration is a better way to get into this. But the reality is, is that 30% now of our technology and our sales are linked to Nf-L. So we calculated that, that's a couple of $100 dollar’s worth of value that could go away if we can't get the -- and we tried for 3 years to get other sources of antibodies to replicate the specificity that Uman, the company we acquired, was getting for their antibodies. And so many companies were making them; Roche, Siemens, but they couldn't get the same isotopes. And so that wasn't giving them the specifically -- specificity and clinical discrimination that the Uman pair was. So we then looked at Uman and found out 50% of our -- their revenue was us. So because of our sensitivity, we grew their -- we're like, we got to get this company before someone else does and then shut down our supply, we're in trouble. So we actually got it, and then we got in there and found out everybody was buying from them because nobody can replicate what they've got. Immediately, we did the deal with Siemens. So Siemens now is like -- this is a -- antibody companies. Siemens is like one of the best in the world. They're licensing now our Uman antibody for their installed base. Techne, our supplier of antibodies, is now buying our antibody. So it was a little strategic thing just to protect the Nf-L. But now we're seeing the offense and the ability for this thing to show neuronal health in blood. It's kind of like the cholesterol of heart. It's the way to know whether your brain is healthy or not. Are you killing neurons at a pace faster than age would predict? And these studies we're going to run are going to show us those curves and then I think everyone in the world someday should know their Nf-L level. You have a kid playing soccer, you want to know what their baselines are. You want to know if you're putting them in harm's way. This is going to be the future because it's noninvasive. You wouldn't do this if it in CSF, but now that we can see it in blood. One of our key workouts is can we become the exact sciences some day of the brain, with all of these neuro panels have seen in blood. I don't know but we're going to work it out, and we're going to try to create kind of good investment theses to see if we can move into this category, which no one even knew about a year ago.

And just to build on that, right? Like, I mean, as Kevin walked us through, we've not only fortified our position in Nf-L, but we've now created offensive dimensions to it. And the Nf-L case is worth noting because it almost went from 0 to what it is in a period of about 3 years. And what we've done through the last few years is create an ecosystem of KOLs and through our open source homebrew platform, it sort of creates a platform for us to harvest future generations of Nf-L like biomarkers that come through our homebrew and KOL network. And that's the kind of dimensionality it adds to our base business.

And just to that point, Henrik Zetterberg, the same guy that did Nf-L, he's on the Boards of Lilly, Biogen, he's a consultant of all time, feels that next Nf-L is pTau-181. He thinks it's the next Nf-L because looking at the tau and all different modifications in blood. So we're now building that out. So we think in the research part in the homebrew approach and our KOL outreach keeps that research business just fueling with future. So yes, it's 1/3 now, but we hope it's going to be 10%, with the advent of other Nf-L markers coming.

And the Powering Precision Health participating in that helped us build that for neurology. And as you saw this year, we branched out into an oncology chapter of Powering Precision Health, which we think will be pretty pivotal as we ramp our base into oncology.

Just to use the detail [indiscernible], how do you make sure that you own the next one, right? Because I mean, if it turned out the Nf-L, the specificity, was awesome that Uman have, how do you make sure that you guys either develop it or own it and then how do you protect it?

The really creative thing about what we have with the instrument that creates sensitivity with IP protection is it's allowing us to see what these antibodies represent in a way that no one else in the world can see. So we could see that Nf-L was so much more specific coming from Uman with our sensitivity than anyone else. So we had an advantage of doing that. And what's been remarkable is that it -- what we really have been doing with most of our assays is taking off-the-shelf antibodies that have been used for 30 years and have whatever they've been doing for the traditional Luminex and Techne and MSD technologies, we just take those same antibodies and the real secret sauce is the ability to break it and digitize it and create sensitivity through the instrument. So traditionally, almost on everything, we've got multiple supplies of the antibodies for almost every assay because it isn't the antibody that's bringing the greatness, it's the Simoa. We happen to find this one being one of these once a -- 1 in 100, where it -- we couldn't find anyone else to do it. And so in the future, we actually now have an antibody position for the first time. We had some learning. I brought in Dawn Mattoon, who ran all of R&D for cell signaling. She had a 100 Ph.Ds on her -- post hoc. She's amazing. She's deep into the science of antibodies. So now if we find something like what we did with Uman, we'll probably acquire it or find a way to make it. But we don't really want to be an antibody company if we don't need to be. We'd rather just take and use our differentiation of Simoa. But I do think we're unique because we use homebrew, as Amol was mentioning, we let all these researchers find whatever antibodies they can, create the best assay they publish. We then watch that. If we see something that's unique and great, we're going to go get a supply of those antibodies. And if we can't get a supply, we're going to figure out what we got to do to get it. So I think we're uniquely qualified to not let that get out of our hands.

Kevin, with such a high concentration with Nf-L, what's the risk that enthusiasm for that marker kind of tends -- goes away. I mean, is it really as good as you say? We all saw [indiscernible], they'd say there was a ton of futility in this marker because CNS space is [strictly], right? Like beta-amyloid, tau, is like this flavor of the month. This Nf-L, does it have staying power and growth?

Yes. So this is almost the opposite of the question that was asked earlier about only being 10% penetrated. Because your point is could this end up being too concentrated and become a problem for us. Earlier, why aren't we finding a way to get all these people that should be using the Nf-L aware of it? We actually do think it's the first problem. We see so much utility for this neuronal -- it's neuronal health that has been around for years and years and years in the CSF. The reason we're excited and know that it's got diversitility is because we've got the body of evidence in CSF. The thing that we're doing here is just simply allowing you to see it noninvasively in blood. So to me, it's got a lot of staying power, but we're not only linked to it. We're actually building multiplexes with tau, with amyloid betas, which we know are very important. We know there's a lot of drug companies focusing on those. So we're a research company. And so by being that, we know there's a lot of experimentation, and we think that the risk profile for investors of having a sit, where we sit makes it easier for us not to get too concentrated with any one marker. So I think what we're going to find is that Nf-L could be somewhat of a leader that they want to get to other markers, and we put it in a multiplex. They'll have to buy the other markers with the -- you know what I mean. So we're going to be moving more towards plexes to get more specificity but it's kind of like a marker that's not specific. You don't know what is causing your neuronal damage. All you know is that your neurons are dying faster than they should be. So if there is a need for the next level of science of what other markers become specific for Parkinson's versus ALS versus MS versus Alzheimer's, we got a lot of other markers that we can multiplex it with. And so I think that we're feeling pretty good that there's a lot of Nf-Ls behind it if, in fact, Nf-L does lose favor. But we don't have any evidence that it's going to lose favor. And by the way, in the -- Tatiana is in the audience and she is probably wanting to dive on this, but I've got a microphone so she can't. But after the meeting, you should -- you can spend some time with her. She just spent 18 years -- and she joined us from Biogen because of her total belief that this is -- and I know several like the Novartis Chief Medical Officer. He left to go to a centralized place to help Nf-L get to everyone because he sees it too. He's an MD neurologist, doesn't want to be locked up with just 1 drug because he sees Nf-L being a complete way to look at neuronal health noninvasively. So there's a lot of evidence of these people moving. I think there's a bigger thing, how do we get the FDA to sanction it quicker, and that's a lot of what Tatiana's key objective is for 2020. I'd like to thank everybody for your attention and learning more about Quanterix. If there is anything we can do to help, please let us know. Thank you very much.