Quanterix Corporation (QTRX) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us for this session. My name is [ Mallika ], and I am an associate with the JPMorgan Healthcare Group. And it is my pleasure to introduce to you today Masoud Toloue, who is the CEO; and Mike Doyle, who is the CFO of Quanterix. Thank you so much for joining us here today. Before we kick off, just a quick reminder of the format of the session. We will have a presentation followed by Q&A. So please have your questions ready for the Q&A part of the session. I will now hand it over to Masoud. Thank you so much for joining us and sharing your story here.

Good afternoon. Thanks for coming to our presentation. We are excited to be here. Thank you, [ Mallika ] and JPMorgan for hosting us. So before we begin, I want to direct you to our safe harbor statement. This presentation contains forward-looking statements. Forward-looking statements in the presentation are based on Quanterix's expectations and assumptions as of the date of the presentation. Each of these forward-looking statements involves risks and uncertainties and are discussed in our SEC filings and on our website. So it's an exciting time, both in Quanterix and the field in general. Never before has there been such excitement towards identifying new biomarkers in the proteomics space, especially towards neurodegenerative research. If you're paying attention to the news, you're familiar with recent Alzheimer's drug approval that just happened on Friday and we're very excited about that. It was -- had been a difficult field, fraught with a lot of failures in the space. And our principle at Quanterix has been -- has always been that our view is for whenever there's something difficult to achieve, there's going to be people who are resilient and do a lot of work towards achieving it. And we serve those people. We have the honor at Quanterix to serve those people with breakthrough technology and allow them to enable biodiscovery. So our mission is simply explained in a single sentence. Our technology, the work we do is about elucidating biomarkers, transforming protein signatures to biomarkers to have an incredible impact on health care. And so in execution of that mission, we've -- the great people like Quanterix have grown a company that is at global scale. And last year, our revenues were over $100 million, and we're all around the world, around the globe. We have over 875 platforms placed around the world, and that's been growing. A number of accelerator projects or projects coming in through. Our first services laboratory has been increasing. And using our technology, we've been able to identify over 550 biomarkers using Simoa and publication rate at which things are published has never been growing at a faster rate. So if there are 3 things I'd like you to take away from today's presentation is #1, our technology is unmatched when it comes to sensitivity in detecting protein biomarkers. We're in the very early stage of a large proteomics revolution and we have highly underpenetrated in this market. And then 3, our strategy is beginning to converge together around an important time in neurodegenerative research. And our goal is to enable those future therapies and provide solutions to both researchers and patients. So first, let me tell you a little bit about the technology that we have at the company. So what powers Quanterix is technology called Simoa. Simoa stands for single molecule array technology. This is technology invented in 2007 by Dr. David Walt in his laboratory. And what differentiates this technology versus typical or other ways of detecting protein is that this is a digital measurement. So you use single molecules to reach a detection limit with Simoa and using traditional protein detection methods, you need millions of molecules to reach that detection limit. And so on the left-hand side, you're dealing with a bulk analog measurements and with Simoa, we're able to look at sensitivities that are up to 3 orders of magnitude of improvement versus typical assay or protein detection. And the reason why this is incredibly important has to do with the proteoform or the proteo-isoforms. And so if you think about in the human body, there's around 20,000 gene encoding proteins. And those transcribed into a couple of hundred thousand RNA transcripts, which then become a couple of 10,000 or so proteins, of which there's 1 million proteo-isoform. So think about phosphorylation, acetylation of these proteins. And these markers are incredibly dynamic. So whereas in the genome, you have a single genome and that genome is the same in one cell to the other cell, that's completely different in the protein and the protein world. Those proteins are at different expression levels and concentrations based on time, age, species, disease. And so it's incredibly dynamic and very much closer to clinical actionability. So Simoa sensitivity allows for digital detection of these isoforms. And because we have that sensitivity, we can look at less invasive and smaller sample types. We're looking at new biomarkers and new proteo-isoforms that haven't even been discovered yet. We're able to multiplex because we have that sensitivity advantage and we're really unraveling heterogeneity in tissue and fluid. So I think the technology is incredible. And then the importance is directing that technology to incredibly difficult biology problems. And so the great work that's done by the people at Quanterix is transforming the technology and making it available to researchers and clinicians. And that's been done through a product mix of about 80% instruments and reagents and 20% services. So our technology can be found in 3 different platforms. We have 2 benchtop platforms and a single platform that allows for sample in, answer out. So you take a blood tube -- blood sample, you put it into our platform, in our system using our reagents and you get answer out. So the entire workflow happens in that platform, in that instrument. And then for each of those instruments and platforms, we have an assay menu that's both catalog and we allow for homebrew assays to be developed on this platform. And then we have a services business. It's run by an incredible leader. His name is Mike Miller. He runs the clinical business. It's a CRO business. We take in samples and we perform services for clients and customers around the world. And I'll talk a little bit about some of the work we've been doing in that same laboratory for diagnostics, specifically our CLIA diagnostic laboratory. So our vision as a company is essentially twofold. Number one, very simply, we believe that there should be a Simoa platform in every single research laboratory. And the reason we have that view is that the depth of the sensitivity we offer allows researchers to identify proteins previously undiscoverable, isoforms that are very rare, isoforms that are in blood and the need -- elucidation and need to be identified and converted to biomarkers. So just like our view is that you have a microscope in every lab and you're looking at this whole microscopic world, we're looking at in the protein space, a world that's currently undetectable by current technology. And that's our view is why every one of these should be a platform in every lab. The second area is that our sensitivity enables new early detection and diagnostics. So you have to think about sort of a disease category. If you can identify a biomarker early in its pathway and you have proteins that are very low in concentration and you can detect those early, then you're truly performing health care as opposed to sick care. So imagine you have a protein biomarker, and it's early in the cascade of a disease. You identify it using Simoa technology, now you can actually do something about it and perform treatment. And so the sensitivity plays a role in 2 major forms. One, you're identifying the isoform, which is hard to detect using other methods; two, you are able to do it noninvasively in sample types that are much more readily accessible than CSF or doing a brain image or doing surgery. So the view there is that if you can do this in blood noninvasively, you can detect disease early. And a couple of examples of that, one in neurodegeneration when there's misfolding of proteins, tau protein goes into -- from the brain, crosses the brain-blood barrier, it goes into a blood, we're able to detect phosphorylated tau, which is important as entry criteria for Alzheimer's, for getting people onto clinical trials, and we think in the future diagnostics. The second area, we've been doing a lot of work on around cytokines. If you can catch cytokine early in its cascade, there's great implications for immunology and great implications for infectious disease. So a couple of examples of early detection. Looking at the proteomics market, we believe that similar to genomics, proteomics market is incredibly big and it's growing. As I said earlier, the proteoform and the proteo-isoforms are continuously changing based on disease, based on condition. And so we think this is a very rapidly growing area, of which Quanterix plays a unique role versus others in the proteomic side in each of these categories, from discovery through to research, testing in clinical trials and then ultimately into diagnostics. And so if you look at the early part of this cascade, you could see when you're doing discovery, you're looking for technology to screen thousands of proteins and identify a few or a handful of markers that are interesting in a screen. You're looking yes and no and high and low, you pick up 5. And then you enter this research phase where you're doing research and further evaluating those selection of 4 or 5 proteins of interest. Now if there is something interesting, you can convert a protein signature into a biomarker and then it's typically used in a drug trial or a clinical trial associated with a drug. And if there's a success or a key need to detect something early, that marker can become an LDT or a diagnostic. And as Quanterix where we play a role, we play a role in each of these categories. So on the left-hand side, you could see many companies in the discovery space, I'm doing key important discovery of these proteins and then the need to translate this. And so typically, in the protein space, you do discover, you identify some important proteins. But unfortunately, right after that, then those pairs are identified and a simple ELISA test is done and there's a lot of screening in the ELISA test. And then on the right-hand side, the great companies doing diagnostics work and have systems all around the world will take that pair where there was excellent screening and they'll put it into their track system and they'll make it available globally. Now where Quanterix differentiates itself from this typical mode of discovery, hand it over to an ELISA plate for screening to diagnostics is that we -- because of our technology, you have to do the discovery, you have to do the research, the clinical trial testing in our sample-to-answer platform. The technology we have is proprietary. You can only do it on our platform. You can't use our assays on other platforms, and we're able to take this through the continuum. And it's been a reason why we've been so focused in neurology. We're taking neurology from the discovery research, drug trials to the diagnostic space. Now 70% of our installed base are in neuro biomarker labs. And so if you kind of look, we believe we're very underpenetrated in expanding research market, which is less than 10% of the funding. Here is an example of NIH funding in the United States. So we view this as a great area to expand therapeutic areas. Our focus has been neurology because we're going on this continuum, and we think there is potential. And so going back to our view, our vision here that there should be one platform in every lab. We have, as I said, 875 platforms. There's, in our view, around 100,000 platforms where we think Simoa should exist. And our opportunities to unlock TAM are not just therapeutic area expansion, but they include increased sensitivity. We'd love to see higher sensitivity to be able to detect not just proteins, but in the future, metabolites and other very hard-to-detect molecules using higher ultra-sensitivity and then increased access. If we're going to get this platform in all laboratories and it's going to be ubiquitous like a microscope or some other detection platform, there's going to have to be innovation, both in footprints, price and workflow. So we have a lot of work to do. Now going back to neurology. As a company, we believe the next 10 years of neurology are going to be incredibly impactful. And I think what you're seeing in the last year and recently in the last week is that Alzheimer's has had significant breakthroughs. And so we're very excited about what's happening in the Alzheimer's space. There's a graveyard of these therapies that haven't been successful, and now we're seeing some success, and we look forward to the near term. As we're seeing new work happening in the Alzheimer's side, we're quickly developing biomarkers for the space. We're actively involved in building around Parkinson's, multiple sclerosis. We're looking at neurodegeneration and TBI, traumatic brain injury. We're also applying our biomarkers to research studies that are in their early phases. So while we're doing this work today, we believe in the midterm. And later in this decade, they're going to be incredible breakthroughs around mood disorder, frontotemporal dementia, neuro side effect testing, pain and general cognition. So we believe this is the neuro decade, and we're very excited. We think it's early innings. So now you go from research and the discovery side into the clinical market, and there's a big translation of these blood biomarker Simoa assays and this conversion of research-based protein signatures to biomarkers is expanding. I think it's the fastest pace that's happening today in research. And so a few examples of these are, a few that we've highlighted. And so this is noninvasive biomarker measurements that are empowering both the pre- and the post clinical opportunities in the market. And so you can see, in some cases, we've worked with the pharma partners on their own biomarker, and we've taken that biomarker and enabled the ability to detect important signatures by running it on our Simoa platform. And then in other cases, you can see that we've -- these companies have used our on-shelf biomarkers for their work. So this highlights a few of our trials. And very excited to see on Friday, the Leqembi label highlights the plasma pTau-181 test on the Simoa platform. So incredibly exciting to see it listed as a biomarker endpoint along with PET. We believe this is a major direction in the field for blood biomarker expansion. And if you look closely at the label, it was great 10-milligram per kilogram of Leqembi every 2 weeks, reduced mean plasma p-tau by 24% from baseline in 79 weeks. And that's a very highly significant decrease. So the way we see this playing out is sort of twofold. One, today, if you are running an Alzheimer's clinical trial, and you're trying to identify a precognitive impaired cohort, you have to screen several hundreds of thousand patients and then to get to a size of about, let's say, 1,000 for a clinical trial. Now if you use PET, the cost of PET is around $5,000 per patient, and it's just the economics don't make any sense. So today, a lot of the biopharma companies use Simoa for early entrants or screen prior to the PET. So we screen in patients for the PET, they're tested by PET and they're included in the trial. We think that around the world, there's 55 million people who unfortunately have Alzheimer's and dementia, and that is going to require something similar where you don't need a screen before you run someone and do a PET. So we can see somebody coming in for a memory concern. They get a cognitive assessment done. They do the blood screen. They get PET performed. And if this is positive, then they're accepted into treatment and monitoring. In the future, we think that the one part that could drop out is the imaging, and we're thinking we're getting closer and closer to that point. So going to the end of that continuum that we described is the diagnostics and the LDT side. And with, as I said, 55 million people having dementia or Alzheimer's around the world. Unfortunately, with the aging in a population that's going to increase in the next several decades, that number is going to be 150 million people. And so where we see biomarkers powering therapies around triaging these patients, diagnosis, monitoring and screening and not just Alzheimer's disease, but as I said, traumatic brain injury, which is a popular discussion item in sports and also other tangential disease areas. So very happy in this vein on the diagnostics side, happy to announce the launch of our NfL CLIA laboratory developed test. Our CLIA LDT test is now available as a [ Monday ] in our Accelerator Laboratory. It's a new blood test for access to measuring brain health. This is an incredible indicator. We call it the check engine light for the brain because it's not a specific marker, but it's a general marker that gives you a sense of there's a problem and further work has to be done. This has been used in TBI, Alzheimer's, Parkinson's, ALS, MS. And today, it's being used in therapeutic trials with the potential to become a standard of care for brain health. So we're very excited about this. And I think this is at least one great example of where Quanterix is developing and doing the discovery for an important biomarker in the brain, taking it from discovery to research and then converting what was back then a signal to a biomarker that's used in drug trials and clinical trials. And then pleased to say in the last week, we've converted that to a CLIA LDT. So we're taking that value and moving it across the continuum. So we're not going to stop there. We have a lot of work to do. Last year, we launched the pTau-181 CLIA LDT. The pTau-181 that I referenced is the same biomarker that was used in the Leqembi study by Eisai. And right now, our LDTs, the main market for this is -- continues to be clinical research, prospective trials, clinical utility studies. We see in the future with the approval of a drug that's becoming more part of clinical care. So existing workflows needing better diagnostics to improve uptake for future therapies. We've done these LDTs. We've also -- we have 2 FDA breakthrough designations for our NfL and our pTau-181 marker. And our goal is to continue down this pipeline of expanding access to people doing both clinical research and for patients. So last year, we began down a very transformative path with a new strategy in the company. And that strategy is pinned to 2 key areas. Number one, the democratization of Simoa, as I said, Simoa in every research laboratory and then unlocking both the clinical and the diagnostic TAMs, especially in the neurology field. So we announced when we began that we were going down a 6-quarter path to transforming the company and making sure that our technology and our assays have the capabilities to go from discovery all the way to trials and diagnostics. And so on 6 quarters end, we're happy to say that the progress has been excellent. We expect to transform and the outcomes of this transformation to include a rapidly -- access to a rapidly emerging proteomics market, profitable growth as an organization. And ultimately, as I said before at the beginning of the presentation, tools that enable researchers to do incredible work. And so by developing a product development engine, we expect the rate at which we develop assays for our Simoa platform to increase significantly, and we expect innovation -- future innovations on the platforms that we currently have. So I'll leave you today with sort of where we started and where we were, where we are. We -- our IPO was about 5 years ago. And since then, today, we're the most sensitive protein detection platform in blood. We have incredibly strong IP protection. We're leading the path in the translation of these protein signatures to biomarkers, especially in the neurology field. And part of this is possible through our sample-to-answer platform, unlike other platforms, you can put the example in and get the results out. We're continuing to innovate. As I said, the company is global at global scale, global commercial scale. And we're adding additional accelerants to build momentum from where we are, and we hope that we can empower this field. So [ Mallika ], I'll end it here, and maybe one thing that I'll just add is that we have an excellent team, Mike Doyle and Samira Amini and Darrin is here. He's our Chief Commercial Officer back in Boston. Our Chief Operating Officer, Dan has done incredible work in the inside of the organization. Super excited. Mark, Brian, Erica, Alex excellent leadership team. And I'd say we're just getting started. Thank you.

Thank you, Masoud, and thank you so much for all of you being here today. We'll now transition into Q&A. So if anyone has any questions, please raise your hand, and we'll hand over you a mic. Well, maybe to kick off one question that we have on our minds is Quanterix did go through a bit of a transformation last year. Would it be possible to talk a little more about why the transformation happened? And how we can measure progress going forward?

Yes, absolutely. So at the end of the second quarter, we took a look at the value proposition Quanterix has. And it sort of relates back to being in the discovery research space and then the demand from our customers for more clinical trials for more testing in these high-throughput fashion and more opportunities towards diagnostics. And we said that in order to achieve that value and enable this market that we're going to begin an assay redevelopment program for our technology and our platform. And so that assay redevelopment program is not just related to our assays, but it also includes work that we're doing in our operations and scaling to be able to meet that future demand. So we did that big pivot in the second quarter. We announced that it would take 6 quarters to achieve and 2 quarters in, we're happy to say that the progress and our expectations are on track.

And maybe switching to macro a little bit. Given that China has opened up now, and we are seeing a little bit of a COVID uptick there. So how does that influence your business? Maybe it would be good to hear about that as well.

Yes. Yes. Thanks, [ Mallika ]. Yes, I think one of the important factors is that, hey, there's research and this work is not just happening in one continent, it's happening around the world, and China is a very big opportunity for us. One of the things that we did there is we opened a nonexclusive partnership with a partner to really take this technology from research to IVD. And so with COVID and our view that there should be in China for China strategy, we began this partnership with [ UltraDx ]. We announced it at our last earnings call. And the view there is enable LDTs and enable future diagnostics in country. So it's a growing area for us, and we're going to be paying a lot of attention to it.

Thank you. And given the Alzheimer's drug news that we got last week, what are some of your key takeaways in the Alzheimer's market and therapies and testing?

Yes. I think the -- one, our view is that there needed to be a first drug approved in the market. And then we hope reimbursed eventually in the market. And when you have that first leader, I think what happens is that there's a lot more funding, a lot more hope and a lot more work and resources that are poured in into a field once you have that blazing that -- something that's blazed the field. And so I view a lot more work could become [ in internal ] therapies. It could be tau therapies, not just amyloid that enter. And so the whole research category in neurology, I think, was a big uplift after that announcement. And that's just everything preclinical. And then on the clinical side, our view is that this is great. We think the blood biomarkers are going to have to enable this therapy. I talked about the 55 million people who have dementia and the disease, and they're going to need screening. And we think that the blood biomarker is going to be critical to make that happen. So very excited about the opportunity in the next 10 years.

Yes. We're very excited to see how this pans out as well. So maybe one thing to pivot a little bit is, you have a very healthy balance sheet. How do you plan to deploy it? Are there any upcoming plans for M&A?