Quanterix Corporation (QTRX) Earnings Call Transcript & Summary

Good afternoon, everybody. Winding it down here. With me today is Masoud Toloue, CEO of Quanterix, and he's going to give a presentation on the company and the current trends.

Thanks for having us. Of course, excited to be here. So before we begin, I just want to point to the -- our safe harbor statement. We have, for any forward-looking statements or any GAAP to non-GAAP reconciliations, you can take a look at the statement we have here. You i can also find it on our website. So we're at a very exciting time in the history of the company, and I would say in the tools and diagnostics market in general. So number before -- are there a great number of discoveries happening in the protein signature space and the conversion of those signatures into biomarkers. And that really goes to the mission at Quanterix. We have an ultra-sensitive detection method for converting protein signatures into biomarkers, which are going to drive therapies and ultimately transform health care. And so in that mission and executing that mission, we're a global scale company, over -- just over $100 million of revenues, strong instrument placement base with just under 900 placements and a lot of publications growing quickly. I would say the 3 key messages I'd like folks to take away from the presentation. Number one, the technology is unmatched. It's a key competitive advantage for our market leadership. Two, it's a great market. I think we saw an excellent wave of genomics opportunities and now very large market in proteomics becoming unraveled, and we're very excited about that. And then finally, our role and our strategy to take the value and unlocking this proteomics research by moving it across a continuum from discovery research, pharma and testing all the way through to diagnostics. So first, a quick highlight overview on the technology. Technology is called Simoa, single molecule array technology. It was invented in David Walt's lab back in 2007. And the company IPO-ed in 2017. The main basis of the technology has to do with the ability to look at single molecule resolution to achieve a detection limit unlike traditional ELISA. So we view the traditional methods of detection, very analog-based, and then Simoa technology being very digital. It's sort of single molecule resolution and several orders of magnitude, better improvement in detecting these protein signatures versus traditional technology. And so the reason that's incredibly important, it has to do with the proteome. So the proteome is dynamic and closest to clinical actionability, while there are 20,000 gene encoding proteins. There are over 1 million proteome isoformes of those proteins. And a great example of that is Tau and -- phosphorylated Tau. It's been phosphorylated versions and the misfolded versions, which we find are very important in neurodegeneration. So I think maybe 5 years ago, people used to say, hey, why is sensitivity important? I was like, hey, that's like asking why is the 1,000x objective on a microscope important; and for us, the Simoa sensitivity really enables being able to look at a sample type that's less invasive. So smaller amounts of input. We're identifying new biomarkers and new isoforms. And with that greater sensitivity, we're able to multiplex. And so our vision on the research side is that just as you have that 1,000x objective, and you put it on and you're discovering new things that prior to that objective, the Simoa platform doing the same but with the protein space. And so our view is that to democratize Simoa, you're going to need one of these platforms in all laboratories. And the key differentiator for us is going to be that 3 orders of magnitude improvement in sensitivity. Now sensitivity will enable more discovery and unlock diagnostics. On the diagnostics side, on the screening side, you have to think about this as noninvasive screening. So a few examples of this are able to detect cytokine in infectious disease at a very early stage before symptoms. We're able to do the same thing in immunology and a big case that we talk about a lot are in neurology, us being able to detect these [indiscernible] early -- before symptoms, before conflict of impairment. And by doing it in blood, by doing it non-invasively without imaging or a spinal tap, we think that that's a key differential for not only driving therapy, adoption of those therapies, screening onto a drug, but ultimately, treatment of healthy individuals versus those at late stage. So we look at the continuum. You see that, obviously, it's a very large market, similar to genomics, the proteomics is incredibly large. And we sort of break it up into the 4 segments. We break into discovery, research, drug trial and then diagnostics. And you can see that we play a big role in the translation. But I think we play an even bigger role in taking things from discovery. There are a lot of players in the proteomics side in order to detect something at a very low concentration or something that's hard to measure, you can use the Quanterix Simoa platform. So we're moving things from discovery, the research, where it's still a protein signature and then translating that in a clinical trial or a test to a biomarker that's going to have some important readout whether it's a drug, or disease condition. And then even further moving back to a screen in a diagnostic [indiscernible] or a full-on diagnostic. And so I think, typically, what you see in the proteomics market is a handoff of the value creation. You discover the interesting protein marker and then you transfer worth $10, ELISA and top screening happens without ELISA. And then it's handed over to a track -- system of a large diagnostic player and has gone there. And so you see this value handoff, value transition and with Quanterix because these markers are -- have to be measured with a simple platform, we see a continuum of that value capture. So going and focusing kind of on the discovery and the research side, we're in a very unpenetrated -- underpenetrated in the large really expanding market. And we about 70% of our installed base are in neuro labs, and that's less than 10% of the therapeutic lending. So the reason why we've been so focused on the -- because we're moving things across that continuum and owning each of those categories. And one of the views is that, hey, we can do a lot in immunology and oncology for letting our customers develop a lot with the Simoa platform, these other potential areas. So going back to the vision in the research lab that, hey, there needs to be one in every lab to be able to discover these interesting proteins. And in our view, there's over 100,000 labs that benefits [indiscernible] Simoa platform. And there's a good opportunity to expand this TAM, not just in therapeutic areas, but improving sensitivity, further advancing ultrasensitive quantitative proteomics and increasing access from a footprint, price and work standpoint. So going back to the focus on the neuro market, we think this is an upcoming highly productive neuro decade. So blood biomarkers are ushering a new [indiscernible]. And at a very high level, you have to think that the how biomarkers are an incredibly great proxy for brain health. And if you have the best proxy for a noninvasive brain health, you're going to power a lot of therapy. So you can see kind of the early stage of this cascade, a lot of exciting news on Alzheimer's. But there's hope that big work happening with MS, ALS, Parkinson's, frontotemporal dementia Lewy body and downstream later half of the decade, mood disorders, pain, general cognition are some initial activity we've already begun in anticipation for yielding therapies in the future. So continuing down that cascade, we're translating these and signature becomes a biomarker once it's validated through a trial, and it's this conversion I couldn't file and is expanded. We highlighted several of the work that we're doing in various phases of therapy trials. These are all noninvasive bio measurements to power both pre- and post-market clinical trials. And you can see we're very busy, especially on the neuro side. And I think one thing that has recently been incredibly exciting is what's happening in Alzheimer's. So you see this continued drumbeat for hey, to scale a Alzheimer's test with 55 million people around the world who suffer from dementia or Alzheimer's, you're going to need a way to determine whether the patient is suitable or not for the therapy. And in our view, as a single marker test, that's going to be phosphorylated Tau. And so you see a lot of the change here in the pathological change and the need for early detection for therapy to be effective and Tau is one of the key markers for that pathology change. So in January, we're very excited to see, obviously, the fast track FDA approval for Leqembi. We think this is great for the field. And we were duly excited to see our [indiscernible] 181 biomarker on the Leqembi label as a biomarker endpoint. So a very exciting fashion. We saw that 10 milligrams per kilogram of Leqembi every 2 weeks reduced mean plasma pTau-181. That's our Simoa biomarker by 24% from baseline and 79 weeks. And that was a very significant -- highly significant decrease versus some of the other biomarkers. So immediately, the question is -- what does that mean? And what's going to happen in the Alzheimer's treatment workflow? And the way we view this is that blood biomarkers streamline the clinical workflow. And so someone will have memory concern and that memory consent was go to a physician, they will be referred for help every clinic for cognitive assessment and that's typically a manual test. And then our view is that you're going to need a blood biomarker prescreen to determine, hey, whether this is in the right pathology, ahead of a PET scan for a confirmatory cancer and finally, treatment in month. And we think that's the scenario today is that blood biomarker screen is great for the prescreen. Given the cost of imaging around $5,000 and the cost of prescreen we think economically that just makes a lot of sense. And then in the future, we're working to sort of change that paradigm. PET is not available around the world and access to PET, which is [indiscernible] just exists. So blood biomarkers, we view will replace PET, some of the effort we're doing or looking at 4, 5 marker panel to be able to do that in the future. So neurology, definitely our strength, definitely enables the clinical diagnostic market. We're taking our menu and providing access to market in a variety of these disease categories. Happy to announce at the beginning of the year, we launched our CLIA, NFL, LDT, just has brain health. NFL is a great general marker, a check engine light for the brain that's involved in stroke and last Parkinson's, Alzheimer's. Again, a great proxy for assessing brain health in clinical care. And finally, it's a great example of us taking things through a continuum. I'm working very closely with researchers on the discovery side to identify the important biomarker research and then the several drug trials and us taking it now fully through the continuum, of LDT, for laboratories, not just for clinical studies and testing, but in the future for screening and diagnostics. So we're going to continue building a blood biomarker LDT set to serve the broad market. We talked about the launch of our LDT, pTau-181 last year. I just mentioned the NFL LDT. We have taught for some more activity in 2023. And then on the regulatory side, we have a couple of trials underway, respected trials to validate these and get data for our breakthrough designation with the FDA. So in order to look in order to unlock all this value and be a company that's involved in the translation from research, taking it to discovery, managing [indiscernible] I want to be there moving to diagnostics. The organization and the company needs to be mature and have the ability to scale to meet that demand. And so we began a very large corporate transformation in August of last year. And the biggest part of that transformation was progress on our assay redevelopment road map. And so every quarter, we show the slide and we provide updates on what's happening in the road map, what the progress on redeveloping these assays and the great -- you can measure us on the gross margin productivity. And so very excited to say that progress has been according to plan. We expect 2 quarters into our transformation, profitable growth. And by the end of 2023, non-GAAP gross margins in the low 40s. And then from 2023 standpoint, we view that the core product and service revenues will increase. If you look at the midpoint of the guidance, about 9% on a year-over-year basis. And from a cash standpoint, we're going to be reducing our burn in '23 by 10% and moving in the right direction. And we gave also some guidance on when we expect to be cash flow breakeven. So great corporate transformation, on track, really changing the operations and be deliver to the great demand of similar products, but at the same time, changing the structure of the corporation and the organization to be able to deliver on a strong promise. So -- and here, Quanterix strong leader in proteomics, one of the very few at-scale global commercial companies. We are accelerating faster. We have the most sensitive protein measurement in blood. We're translating very effectively. In our HD-X platform, you put blood sample in and you get a result out. We have in-patient project that we're continuing to innovate and a great balance sheet to accelerate. So finally, I would say new team, and it's really the people at Quanterix that are making all this happen, and we're just getting started.

That's great. A couple of things on the technology. I mean, you guys are talking about threefold increase in sensitivity going down the [indiscernible]. Usually, when you have -- there's [indiscernible] technology, right? Like so they easing up on throughput or sensitivity or comp, right? So talk about that, how the interaction of the pieces of the technology play out. Can you dial it down to where you don't need to have that deep, deep sensitivity, and you can actually increase the throughput or higher throughput assays or more multiplexing talk about the flexibility of that...

Yes, absolutely. I would say the throughput stays constant or [indiscernible] thought anywhere from 1 to 4 of molecules. If I look at some of the emission work we're doing on a future platform development, we're looking at some multiplexed capacities. From a cost standpoint, there's definitely a price premium for the similar technology versus ELISA. We have the digital readout that give us sensitivity. And then I think the third part of that reflect are the dynamic range. Do you need, in some cases, could look at something in CSF or another sample type where you don't need as much sensitivity, [indiscernible] answer is yes. We're able to measure that at an effective rate without sensitivity requirement. But I would say, Luke, the majority of the customers that come to us using the Simoa platform for the all tools that just aren't detectable in blood with other platforms.

Yes. I mean that's like especially the NFL, I remember what you guys started launching with that. So talk about the opportunity right now in the clinical trial, the number of clinical trials that you guys are on. I don't know numbers, he put that up there, but remember of CNS drugs that you're involved with, we can get some type of the upside here?

Yes. Yes. We don't -- we haven't disclosed sort of on a regular basis, the number of trials we're in. We haven't been involved -- we are definitely involved in most number of farm [indiscernible] that we have been previously. It's -- demand is really increasing. We're in a lot of early preclinical tests and trials that are going to be moving to Phase I. And it's all as I showed here that are going into Phase II and Phase III. I would say very broadly, it's a program in Alzheimer's anywhere we're likely involved in that program.

And if there's an approval on that side, you'll have the CDX or kind of the disease monitoring test, so that's money talking massive volumes here?

Yes.

Yes, what's the hurdle to adoption essentially?

Yes. I think a lot, as you've heard maybe from a few of the earlier presentations, is blood is going to be critical for the scale of any sort of Alzheimer's therapy. In terms of barrier to adoption, we need to get our platforms into more labs. We think that the LDT is a great first starts. We think that this is a good triage, more prescreen to a PET. So we want PET to be successful in the adoption of the therapies. And our view is data, clinical trials, information and getting this out into as many hands as possible.

Yes. And lastly, on the in combination with PET. Is it -- the data readout, is it that much more powerful and or is it you can totally displace PET with these biomarkers?

Our view I'm a little biased, Luke. Our view is that, yes, absolutely. I think in the future, I can't see a scenario where you wouldn't move a blood test and not [indiscernible]. I think today, it has full stamina. PET has comparisons with autopsy patients. And I think it has been the gold standard, but I think that will be displaced in the future with our technology.

Yes. Usually, when you're just placing something that's the gold standard, it's much harder sell into the clinical market than if you're additive? And actually, there's a company thrive, they did that with the imaging on the local biopsy of cancer screening, right? The test would have been great by itself, but they're like, well, we're not going to displace [indiscernible] fact, together, our data is that much better -- so wondering if that's part of your strategy as well?

It is. So right now, our view is you need PET. The confirmation test and validation test the floor you would get prescribed therapy. But in combination, the blood test is keeping from an economic standpoint, you have [indiscernible] those patients coming into a precognitive -- who are precognitivey impaired and half of them have amyloid, half of them don't have amyloid, you don't want to give everybody path. So I think it works hand in hand and in cooperation with the imaging today. And we think that screen is actually even a larger market than just some set of patients that would eventually get passed. So our view is screened today in the future with multi-analysis. And we can see in the future where it's -- we're able to get more people on therapy with terms of blood type.

Awesome. Thank you, I appreciate it.

Thank you.