Quanterix Corporation (QTRX) Earnings Call Transcript & Summary

All right. Good afternoon, everybody. Welcome to the 43rd JPMorgan Healthcare Conference. It is my pleasure today to introduce Quanterix with us today for the presentation. With us today, we have Masoud Toloue from -- the CEO of Quanterix. The presentation today will be in the format of around 20 minutes of presentation, followed by a 20-minute Q&A. With this, I'll yield stage to Masoud.

Thank you very much, and thank you for having us. So today, I'm here today with Vandana Shriram, our CFO; Naren Bhat, Head of Corporate Development, [ NBD ]; and Joshua Young, Head of our IR, and also very excited to see Brian is also here today for the presentation. Thank you. So before we begin, I'm going to point to our disclosures page. Well, several disclosure pages on forward-looking statements and non-GAAP measures. The mission at Quanterix is to create the tools to enable discovery and better health. And we're doing this on a foundational platform called Simoa. The Simoa platform allows users, researchers, clinicians to look at with ultrasensitivity, biomarkers in blood. And using that core technology across our 1,000 instrument installed base, we're able to achieve 80% reoccurring revenues in the company with high margins. The technology has also been critical in both society, research and clinical impact with over 3,200 publications to date since the inception Simoa technology. Now let's start with the technology. The key aspect is being able to detect signal from noise. And using the Simoa platform, we can exquisitely separate that and get to a point where we're looking at single molecules needed to reach a detection limit in a digital fashion whereas all other traditional protein assays require millions of molecules needed to detect or reach that detection limit, and that's very much an analog signal. So we take this robust signal identifier. And what it means is that we're able to look for biomarkers that are unmeasurable by other technologies. We apply the technology, and we can find early-stage disease markers before symptoms appear. As with other technologies, you're in a femto to nanomolar level and you're looking at late-stage disease markers. Fundamentally, we've taken this technology and applied it through our assays, through our reagents and through our tests to catch disease before symptoms. And if we can do that, we're truly enabling health care as opposed to today's management of sick care or symptom-based care. The company over the last 2 years has delivered strong operational execution, building the base of the company. We've executed with 7 consecutive quarters of double-digit growth in a capital-constrained market. We've increased our recurring revenues from 65% to 80% with resilient customer demand for the platform and stickiness. We've expanded our gross margins by 18 points through our operational program, reduced our cash burn by nearly half, all the while, while continuing to invest in the core business in the core R&D engine and innovation. What's next for Quanterix? So over the last 2 years, we've built this incredible double-digit growing base. And today, I'm going to talk a little bit about our 3 core strategic growth vectors that we're looking to add on top of the space. I want to start with the first vector which is growing the menu. Our key imperative is to extend the #1 position that the company has in measuring neuro-based blood biomarkers. And we're doing that with our product development engine, which is already in motion. Over the last 2 years, we made significant investments into our operations and R&D program, and we're seeing the yield of those investments in 2024. In prior years, the company didn't launch many NPIs. In 2023, around 5 new assays. But in 2024, we launched 20 new and exciting assays, 12 markers were around neurology, 8 markers around immunology. The company is delivering the latest innovation to our customers. Just last year, we launched new biomarkers that were previously unattainable and not available in the market, including brain-derived tau, a brand-new marker that looks at tau from the brain and it eliminates peripheral sources of tau, adding to its relevance in looking at neurodegeneration and separating out signal from noise. We launched a groundbreaking 4-Plex assay called the N4PD assay, which is going to be important in neurodegeneration detection. And happy to say that we launched very exciting extracellular vesicle technology that allows our customers researchers and clinicians to begin looking at very interesting work as biomarkers move from tissue to blood and are encapsulated. And so we're very excited about these EV toolkits. These markers, in aggregate, extend and continue to give Quanterix a leadership position in neurology. As neuroinflammation pathways become more and more relevant for Alzheimer's disease, we're launching and developing inflammatory and pro-inflammatory response assays for our pharma customers to be able to measure and look at efficacy markers for therapies. In 2024, we launched 11 of these markers across three 4-Plex assays, ultimately extending Simoa utility to more laboratories. The second strategic growth vector in the company is about expanding into adjacencies, specifically around immunology and oncology. And when we do that, we expand beyond the $1 billion market share -- our serviceable addressable market share that we have today in neurology to $3 billion with immunology, up to $5 billion including oncology. And the thesis of the company has been Simoa in all labs, not just specialty neuro labs, and we're specifically focused in these areas of immunology and oncology. Now when we talk to our customers that perform work on the Simoa platform in immunology and oncology, they tell us they want three things. They tell us, we want ultrasensitivity, we want twice the plex that you offer today, and we want results fast, fast turnaround time. Very pleased to talk to you today about the launch of a new platform to address these customer needs, call Simoa 1, breaking past the detection limits set by the original Simoa platform. We're very excited to talk about this new platform launch by the end of this year. So using incredible breakthrough technology from the Walt Lab, we've been able to harness the ability of detecting ultrasensitive biomarkers in a new platform, and this is a breakthrough. This is not an incremental change. We're able to, by an order of magnitude, increase our sensitivity beyond our current Simoa platforms, extending our lead position in ultrasensitivity. We're increasing our plex by tenfold while maintaining ultrasensitivity across that plex. Our technology is going to include code match technology, which are optically encoded barcodes on proprietary emission beads that will allow us to grow plex while maintaining high specificity across the assay. And finally, we're delivering simple and an efficient workflow with results in less than 3 hours with no PCR, no NGS and no 48-hour waiting periods for a result. We're super excited about this platform launch in 2025, and we're going to be talking more and providing more details as we get to our product launch. As we look into these adjacencies we start to think about oncology from the core premise of what's happening in tissue. Diseases like cancer begin in tissue. They move and migrate to blood, and they usually end up in organs like liver and lung that can take life. And so if we're going to develop diagnostic tests and therapy treatments, we need to measure the signals as they move along this pathway. And so protein-based tests have become increasingly important in testing and monitoring. And as we become more multi-omics based, these approaches with protein are going to be more and more required. We're super pleased to announce the acquisition of Akoya Biosciences that's going to uniquely position the combined company to accelerate the development of these new tests along those pathways. On close, Akoya is going to have access to our 1,000-instrument base of customers in neurology and they'll be able to offer their neurobiology applications to that base. On close, Quanterix is going to have the opportunity to go to Akoya's 1,300 installed base to offer new oncology and immuno-oncology solutions. We're combining the best-in-class in tissue and best-in-class ultrasensitive detection in blood to drive faster testing, better tools for monitoring and detection in oncology. And the exciting part is that Quanterix has already begun to develop these tests. A key piece to remember is that when you start to look at biomarkers in tissue, their spatial organization provide a lot of information to people developing therapies as well as diagnostics. And when those markers leak into blood, you want the most sensitive technology to be able to detect the first molecules that enter circulation. And in this combination with the markers that we have here, we're excited to say we're developing tissue, blood, complementary biomarker kits that we'll be making available this year. So in summary, the combination provides us an accelerated path to scale, profitability with a focus on great high-growth markets. On combination, our installed base doubles. We have pro forma revenue of $220 million. We expect strong double-digit growth in 2026. We expect the milestones that we've set out from an efficiency standpoint to be reasonable and achievable by the end of the first year and second year. We will be accelerating our cash flow positive rate in 2026, all with a strong runway to continue growth investments in the combined entity. So the third growth vector that I'm going to talk about today is diagnostics. Alzheimer's disease, unfortunately, has been a sad story with 55 million globally living with the disease, expected to double by 2050 with the demographics in our population, with a societal cost that's near $1 trillion in 2019. And so this is a difficult disease, and there are not many diseases out there with such an impact. Quanterix is playing a large role, enabling detection of this terrible disease by best-in-class early detection. We're able to monitor patients who potentially have the disease over a period of time and after they've received therapies and ultimately provide differential diagnosis opportunities for people who are looking and have memory concerns. So we're building the global infrastructure for Alzheimer's testing in the company in 2 parts. First, we're enabling our partners. We've demonstrated early success in lab enablement by providing our technology to the top prescribing hospital networks in the country and reference labs around the globe. We've announced 12 of these partnerships in 2024, and we're pleased to say that we're growing this network in 2025 with 10 partners already in the pipeline, validating our Alzheimer's disease tests for incorporation into their businesses. The second part of our growing the Alzheimer's testing infrastructure is around Lucent Diagnostics, our laboratory in Boston. At Lucent Diagnostics, we're offering the best multi-marker test. We have a differentiated reimbursement strategy and high-capacity infrastructure with approximately capacity to perform about 1 million tests a year out of our CLIA laboratory. Last year, we're pleased to announce the launch of LucentAD complete, a test for all patients, not late-stage patients. By offering a 5 biomarker multiplex test, we're able to really lower the intermediate zone of a single marker test from 30% down to 10%, threefold reduction, while maintaining high sensitivity, specificity and accuracy when compared to CSF and PET scan. And as I said in prior presentations, we're developing this 5-marker test to allow differential diagnosis, using our AD score or algorithm and the additional 80 relevant biomarkers we have in the test to begin to differentiate between Alzheimer's disease, frontal temporal dementia, Parkinson's and Lewy bodies. We're very excited about this tool and this test. It's available today in our LDT market, and we're very excited about its differentiated reimbursement strategy. We're taking this marker test -- this multi-marker test. We've already submitted a PLA code. We expect approval in the first half of 2025, and we expect pricing for this PLA code in the second half of 2025. We have an ADLT, advanced diagnostic lab test, reimbursement strategy for their platform where we're expecting reimbursement on that in 2026. The company continues to invest in this very attractive high return on investment business around Alzheimer's disease. Over the course of last year and this year, we have invested $20 million in our prospective studies, where we have 4 prospective ongoing studies, where they will complete enrollment in 2025. At which point, we'll be submitting our FDA package. We're investing in our testing capacity, now just under 1 million tests per year, available at our Boston laboratory. And we're making investments in our commercial team, around 16 people today focused on partner enablement as well as test send out to our own laboratory. So I'll conclude today with the strong position that we have entering 2025. We've named and we've talked about the strong operational execution that the company has performed and the great base that we've developed. And we talked today about 3 key growth verticals that we're layering on top of that well-performing base, growing the menu to extend our #1 position in neurology, expanding into adjacencies of immunology and oncology, and translating incredibly excited exciting markers in the research space to diagnostics. Thank you for your time, and let's take some questions.

As it relates to the -- your blood tests and platforms for Alzheimer's, fascinating you're looking at the heterogeneity of the disease, do you have any plans at looking at kind of the biology of the aging like inflammation, vascular issues, mitochondrials? That's one question. Second, do you see yourselves going into the consumer-facing Alzheimer's blood test competitive landscape? And if so, who do you see as the major competitors there?

Yes. So I'll take the first question, and then I'll get to your second question. So from a vascular standpoint and inflammation standpoint, we're involved in several active clinical trials that's looking at vasculature and inflammation as part of Alzheimer's disease. And the companies that are utilizing our services to run these trials are interested in the cause of disease as it relates to inflammation. And so we're active part of that. And if there were tests or small molecules that are developed, we expect our markers to follow that pathway. On the direct-to-consumer, today, this is a physician order test. We expect that to continue. There's obviously a large workup that has to be involved when someone suspects they have memory issues. There's a history. There's a genetic component to it. There is the question of, is it something else and is it not Alzheimer's? So physician, neurologists heavily involved in the process, and they tend to be physician-ordered tests. Volumes in general are low today. As therapy adoption improves, I could see it being something that's measured on a regular basis at your physical in the same way cholesterol is measured annually. And so I think in the early stages, it's probably less consumer-driven adoption. But in the future, I can imagine that this is something that everyone wants on an annual basis.

[indiscernible] space in [indiscernible]?

Absolutely. Yes. Absolutely, I can see us providing the tools to allow companies that have good extensive direct-to-customer networks to be able to fuel some of that growth, but we'll be very interested from a platform and a reagent perspective.

The presentation talked about the -- your strategy and how Akoya fits into that strategy. Can you elaborate a little bit more about why you think you can accelerate your growth with Akoya being part of Quanterix?

Yes. We're very excited about day 1 opportunities. I talked a little bit about the presentation that day 1, Quanterix has an extensive neurology base. Akoya participates in neurobiology, the science of neurobiology. In fact, the whole spatial market really began in this whole neuro field. And so the opportunity to go and talk to our 1,000 installed base and provide neurobiology tissue and spatial solutions is incredibly exciting. From a Quanterix perspective, we have exciting tests that go from tissue to blood, and that accelerates our entry into immuno-oncology and oncology. So the synergies and the growth opportunities are clear.

I'll continue asking. It's been a tough capital spending environment in the life science device industry, yet you have posted one of the highest growth rates in the industry. Can you talk about how you have been able to drive that growth?

Yes. I think we're one of the very few tools companies that had 7 consecutive quarters of double-digit growth. It's been a tough environment. When we saw significant CapEx constraint in the market, we pivoted to a model where we started offering our customer services. Our customers said, "We don't have the budget today for a platform, but we still have work that needs to be done." And so we began taking those samples from our pharma customers and offering services through our accelerator laboratory, and that's been very productive for the company. We have a near $40 million franchise, 36% growth in this accelerator business over the last year, and it continues to be a place that pharma companies turn when they want a clinical trial, they want to outsource R&D or work with us in developing a new assay for a new disease indication. So we expect in a capital-constrained environment to continue growing this accelerator franchise. About 70% of the orders that we get and the customers to come back to us have been reoccurring, and we were margin accretive to the whole business. So excellent execution, excellent program at Quanterix.

Yes, that is very exciting. You also issued preliminary results yesterday morning. Can you talk a little bit more about the current demand environment and what investors should expect Quanterix do in 2025?

Yes. I would say that, obviously, demand for Simoa sensitivity is robust, and we're entering 2025 with a position of strength. We talked today about a solid base business and our chapter -- and where we're turning where Quanterix is going next, 3 verticals, 3 areas of growth for the company. So we won't talk today about '25 guidance. However, in a normal course, we usually talk about what the outlook in 2025 will be on our Q4 call.

Can you also talk about some of your competitive advantages in Alzheimer's diagnostics market? How will you balance integrating Akoya with hitting your time lines and key milestones in this market?