Quanterix Corporation ($QTRX)

Good afternoon, everyone. I'm Evi Koslosky, Life Science Tools and Diagnostics analyst here at Goldman Sachs. I'm joined here by Everett Cunningham, the President and CEO of Quanterix. Thank you for joining us.

Thanks, Evi. Thanks for having us.

Yes. So I guess just to kick things off, you've had several months under your belt as CEO of Quanterix. Maybe walk us through how your background positions you well as you look to expand from kind of core research into clinical diagnostics and the high-level strategy of how you plan to execute this transition.

Yes. It's been almost 5 months since my new job here at Quanterix. I'm a lifer when it comes to health care. I've been in health care for 34 years. And my background in the pharma space, the research tools space, the precision oncology space lends it really well in terms of the timing and fit with Quanterix. If you look at Quanterix now, our research tools business, big robust business, really impressive installed base, how we pull through our consumables to generate growth. Our research tools business is a very solid business. And I talk about fit and timing, Quanterix to go to that next level being in that diagnostics business, our diagnostics opportunity, especially in the Alzheimer's side of the business, right now -- and I know we'll talk about it, but just from a timing standpoint of submitting our 510(k) for our blood-based biomarker test, making sure that our instruments are IBD ready, making sure that we get solid reimbursement. I've been through all of that in past companies, and how do we build that up to generate growth, it's exciting.

Yes, definitely. Let me jumping in, you mentioned it, you recently submitted the FDA 510(k) application. It's now under review. So what have your conversations been like with the agency? And I think you mentioned a time line of around 6 to 9 months of when you expect to hear back. So I guess, how are you thinking about that?

Yes. We submitted our 510(k) in January. We've had ongoing conversations with the FDA. While we can't predict what the FDA is going to do, we have all signs that we're going to get FDA approval in the second half of this year. And that time line is right on track. A good sign is the FDA continuing to ask us really solid questions and us following up on those questions. So we feel good about -- and that is a really big kind of sign for us to continue to execute our diagnostics plan is getting LucentAD Complete FDA approved in the second half. So all signs are headed in the right direction.

Great. And how should we think about the labeling requirements for multi-marker test versus some of the single analyte p-Tau 217 tests?

Yes. Like I said, our LucentAD complete test is a multi-marker, a 5-marker test. The blood-based biomarkers that are on market now are 1-marker, 2-marker test. How we look at that in terms of of how we're going to get designation is our test is differentiated. When you look at the 1-marker test that's out there now, that in-determinant zone is around 30%. So 30% of patients, you don't really get an answer. With the 5-marker test, that in-determinant zone goes from 30% all the way down to 10%. So we look at that as a couple of things. First of all, it just gives more answers. It gives more answers to the patient, which is critically important. But it also gives more answers to the health care provider. And then when you think of giving more answers, there's less than need for PET scan. So it also -- it decreases the amount of health care dollars that are being spent and the workflow just becomes easier. The last thing I'll say about the 5-marker test is CMS. So we got a really good price crosswalk of $897 for our 5-marker test compared to the CMS price crosswalk of the 1-marker test that's around $130. So it's not just clinicians saying that our test is differentiated, but it's also CMS with that robust price crosswalk.

Yes, definitely. And I wanted to touch on the pricing more. Maybe talk through what this means from a margin perspective, and how you compare it to the single analyte test, maybe on the margin side as well would be great. And I guess, how do you feel this helps you with early conversations with payers?

Yes. So a few things are going to help us with early conversations with payers that we're having right now. One is around our clinical utility studies. So we have three studies that are out there with three really credible partners, Mass General Brigham, Mount Sinai and the University of Florida. Those are clinically utility studies. They should read out in the second half of this year. So we're taking those studies because they're real-world studies in the neurology setting and the primary care setting. We're going to take those studies, and they will help us with the reimbursement discussions that we're going to have with payers. So we feel good about that. As far as margin, we're not going to talk about specific margin numbers right now. However, we're very confident that this will be and help our margin and be accretive to our margin goals for this year.

Great. And maybe touch a little bit more on some of the clinical utility studies that you mentioned. I think completion in the second half, but maybe talk through what you're seeing there.

Yes. No, it's -- we're right on track. So we talk to those three partners that I talked about on a frequent basis. Those studies should read out in the second half. So we have a lot of things happening in the second half, right? We have our 510(k), we should get FDA approved. We have clinical utility studies reading out in the second half. We have our discussions with payers in the second half. We are also taking our HD-X instrument, which is our workhorse, right? The installed base is robust. We're getting that IBD ready. That should be in 2017. You're putting all that together. We talk about that as our diagnostic moat. And what differentiates us from many competitors in our space is the fact that our moat is ready now. You take all of that, and we're setting up, we're being intentional. I brought in a diagnostics leader from Quest Diagnostics, Geoff Albrecht, 30 years of experience at Quest [Audio gap] space. He's talked to payers in the space. He knows big [Audio gap] put all of that together, we will -- and our -- we will drive growth with our diagnostics now.

Yes. I mean a lot of catalysts kind of adding up for the second half. I mean, I guess from a sales team build-out perspective, how are you looking at that and then also managing expenses kind of?

Yes. I smile at that, Evie, because it's probably one of the most common questions that I get, right? And it's because people -- they look at my background, and I've built out diagnostics organizations and organizations like Quest Diagnostics and Exact Sciences. At Illumina, we built out a pretty robust diagnostics organization. Here's the similarity. The similarities are we know the call points that we need to go to grow this product. And what I like about our opportunity is it sits not only in the neurology call point, but it also sits in the primary care call point because half of Alzheimer's is diagnosed in the primary care setting. So we know that we have to be there, right? And we're going to be there through a multichannel approach. We're going to have obviously key account executives that will call on neurology and that pull through to primary care. We're going to have a multichannel marketing effort that we -- my team, we were talking about that this morning in terms of how do we cast a wider net with marketing and social media and working with advocacy groups to get the word out there. And then what I'm really excited about is we'll not only do it organically at Quanterix, but we're going to use smart third parties to do it. And we announced in the first quarter a really unique partnership with Tempus AI. They have great relationships at key health systems in the United States. Those health systems are integrated with EMRs, and we're targeting key health systems to integrate lucent [Audio gap]. We'll scale with third parties like companies like Tempus also. [Audio gap]

[Audio gap] This partnership. Are there any key metrics we should be looking at regarding that partnership specifically?

Growth is one. I think another key metric. And we're working really closely with Tempus is we're being strategic on those health systems that we target. Health systems that see a lot of Alzheimer's. Health systems that we have access to. Health systems, like I said, that have a solid EMR partnership. And those are the ones that we started to go to. We kicked this off at the end of Q1. And throughout the year, I'm sure we'll talk about the second half. But that's why we feel optimistic about the second half is because of smart things that we're doing to focus on growth.

Definitely. And you have some of this a little bit, but when you think about like the neurology specialists, which were probably the earlier adopters and then specific investments that are really required to get more into the primary care setting. I guess, how you balance the education of high-touch point PCP with kind of your current margin targets?

We're going to be smart about this. I mean the key opinion leaders with Alzheimer's, the Alzheimer's journey, dementia are the neurologists. And the good thing about neurologists is the -- what I would say, they're concentrated in big neurology centers that we are already embedded in today. So we'll continue to making sure that we have a diagnostics key account leader in these key neurology centers, and then we'll use it as like a hub and spoke from that, we'll make sure that we deploy appropriately. And I say that only because I've done this before, the primary care call point is so dispersed. It's so -- there's so many different ways you can go. We'll make sure that we know which primary care physicians are ready for blood-based biomarker adoption, and we'll make sure that we deploy accordingly. That's where Jeff will come in. The good thing about Jeff is his experience at Quest Diagnostics. They have experience in selling blood-based biomarkers. We know kind of where the fish are, and that's where we'll deploy accordingly.

Yes. That's great, that's great. I do want to touch on the competitive landscape. You have large cap players entering the p-Tau 217 space. Maybe walk us through the competitive advantage of the multi-marker test relative and then what you're actually seeing from the physicians in the market.

Yes. First of all, competition. I mean, we're asked the question all the time around competition and, Evie, in a really maybe unique way, I love competition. Twofold, number one, it defines how important and attractive this market is. I mean, if you think about Alzheimer's, right? Right now, the Alzheimer's journey is a journey of cognitive impairment, a lot of questions what do I do if I have Alzheimer's and almost people because they don't have tools waiting too late, right? And so the fact that the competition is here in this space, it talks about the need for many, many people to go and compete in this early detection, early biomarker space. So that's -- look, I welcome that. I also welcome it because it sharpens our tools. And when you have competition that's out there, we have to be that much better. And so I use that as a catalyst for our internal people to say, "Hey, we do have competition that are out there. How do we differentiate?" So here's how we differentiate. First of all, our diagnostics, we call it moat, right? Our diagnostics base is better than any company that's out there right now. We have the tools, the instruments. We have the kit, we have the blood-based biomarker. We have our internal lab right now that we can do order to cash and bring samples to our lab. We also have the opportunity because we have our HD-X instrument. We can have a distributed strategy, too. So we'll have to determine kind of how we go and where we go. So that's important to the differentiation. And then if I double-click on the 5 marker test, a lot of people say, well, the one marker is okay. It's okay for people. I beg to differ. I think that the 5 market test that looks at all the markers that are essential for diagnosing Alzheimer's is important. And I go back to what I said earlier, if I can then take that indeterminate zone that's now 30%. If I could take that down to 10%, that fold increase in giving more answers and making now the caregivers just knowing what to do with that. To me, we're going to impact the market.

Yes, definitely. You mentioned the distributed strategy with your instrument. Maybe talk through like what would be the considerations if you decided to go that route versus maybe using your internal lab.

Yes, we will go that route. First of all, we're going to utilize our own installed base and the relationships that we have on the research tool side of the business. In academia, in going after the right labs and making sure that they can then use our instrument to process their own samples. So to me, it's flexibility of having a centralized strategy with our own lab, it's amazing. It's in Billerica. It's up running samples now. So it's not a start-up lab, but it's an established lab and then having the flexibility of saying, "Hey, we'll put an instrument in your own lab, you run the samples." I think it's given us that flexibility.

Yes, absolutely. It's a good place to start to transition to the core research business. So I guess, pharma revenue in Q1 was impacted by fewer larger accelerated projects and weaker instrument placements. But can you talk through what you're seeing from a macro perspective? It feels like the market is maybe seeing slow and steady improvements. You've got some MFN deals, slightly better funding from academia, but maybe talk to some of the puts and takes.

Yes. Maybe I'll talk about it from a balance sheet standpoint first. Listen, end markets are tough. Not just tough for Quanterix, they're tough for...

It's broad base.

Yes, it's a broad base. And I still keep in touch with some of my alumina colleagues, and we talk about the end market that's impacting everyone. So we actually, in our plan this year, and we talked about it in our earnings call, we don't have anything built into end market improvement throughout the year. So that's from a balance sheet P&L standpoint. From a -- if I could just go pharma, for example, yes, our accelerated business was down, but not because of the number of deals. The number of deals that we've done are kind of compares the same. The number of deals that we're doing is the same in terms of quantity of deals. It's the size of the deal. So because of that and thank goodness, we've done a lot of research around that. I'm going to dedicate more focused capabilities on our accelerator business. I'm bringing in senior leadership that will focus solely on accelerator. They're going to use the entire company. I say that with a smile because I will start calling on pharma customers, and we need to compete for bigger deals in this space. That we think will bring upside to our Accelerator business in the second half. As far as academia and research, that business was down in 2025 by 25%. And in Q1, it was down by 16%. So we're still seeing headwinds in that space. but that won't preclude or are hinder us from going into that customer and still selling our instrumentations in our assays. It's -- we have the best in market. We need to -- it's on us to go out and execute.

Yes. And touching on that market, too, because we've seen an NIH budget that's now been confirmed out slightly, but there's been talk of maybe the flow of funding isn't quite as robust as you would expect in that environment. So I guess what are you hearing conversation...

Hesitancy?

Yes.

Doesn't mean that research isn't important, but hesitancy to see a full release of kind of their spending. I think the important think, Evie, is that we're there when that spending does start to unleash. And we're working with our entire organization, our commercial organization to ensure that we're not going to look the market impact us from not being out there. We're going to be out there. So when it does, they have the best solutions, the best selling marketing, and we'll be there to capture it.

Yes. And kind of to that point, on the Simoa HD-X, you're upgrading your platform, and I think you plan to submit IBD status next year. I guess, talk through some of the upgrades and how you expect this upgraded version to help in terms of driving interest in placements.

Yes, reliability. When you get into the diagnostic setting, your machine has to 99% reliable. So it's going to be improving on the reliability of the machine, the software, the workflow. So when we do put it in the diagnostics clinical setting, it is seamless on how our clinicians work with us and health care providers work with us. And that's on track. We made that prioritization back in Q1 that we would focus on upgrading our HD-X. We're doing that because it has the largest installed base. We're working with one of our contract manufacturers, STRATEC. And we have a really good plan in place to be IBD ready at the beginning some time in '27.

Okay. And Simoa ONE is an early access. If you walk through the feedback of what you're hearing from customers so far or not, and how you're thinking about that launch, given the environment, maybe more capital constraints?

Yes, Simoa ONE. I mean, I think it's the example of our innovation, right? We're refreshing our HD-X machine, that's innovative because we're getting it ready for IBD. So own, like you said, is an early access. I'm actually seeing our early access partner next week down in Providence. And we're still getting insights from the early access program. We'll take those insights not only to improve on Simoa ONE, but also to improve on all of our instrumentation. So it's going well.

Great. And on Akoya, you already hit your $85 million annualized synergy target for the acquisition. So maybe talk through how you're balancing the strategic focus towards attacking new markets versus maybe some of your existing markets in neurology.

Yes. First, my hats off to our existing team. Vandana Sriram did a great job of discipline in hitting targets all across the organization. We hit our $85 million target in Q1. That really helped us from a balance sheet standpoint of, again, being cash flow breakeven in the second half. And so my compliments to the team. One thing that I've been impressed with in my first 5 months is just the discipline around prudent spending, investing doing the things that we say we're going to do, that $85 million synergy target is spot on. What I said during Q1 that I'm excited about is now making the pivot from being a synergy hitting target organization to an invest-to-grow organization being on the offense now. And having the synergy plan behind us and now focused on how do we generate that flat to low single-digit growth in our research tools business, in addition to now starting to have our Diagnostics business take off. We have the acquisition behind us and now we can focus on execution. That's the pivot that I've seen from Q1 to Q2, heading into the second half and beyond.

Great. And as you kind of gain more familiarity with the business, is there any way you feel you could drive additional synergies or maybe cross-selling opportunities within your core platform?

Yes. To me, I look at it as productivity, synergy words, sometimes is looked at as defensive productive and making the Akoya capability, the spatial capability, a part of Quanterix it's just going to bring us -- first of all, it's diversifying our business. So not only are we a neurology-focused company, but now oncology and immunology. So that's a good thing. Other synergies are come with our commercial organization. We now have one person going to a similar call point. So if I look at like pharma or academia, there's no need to have two separate people. It's usually the same call point that we can go to. So as time goes on, that productivity decision that we made will only gather momentum. So I'm happy about that. And then -- and I told our company this, right? I mean we had to do a lot to hit the $85 million in synergies, and now we're kind of in invested grow mode. Now we can look at surgical things that we can do, whether it's a growth opportunity or a synergy opportunity that will benefit our company and that's how we look at it.

Okay. And more positioned towards the translational research side. Do you see any low-hanging fruit to start to penetrate on the drug discovery side or maybe the clinical side within that?

Yes, both. I look at our accelerator business, our accelerator business. Right now, it's mostly on the Simoa neurology side of things. There are absolute connections that we can have on the Akoya side of things. So we'll look to stabilize and build up and bolster our Akoya spatial drug discovery opportunity on that side. The other things that. Akoya brings that I absolutely love, and we're being purposeful. I'm actually recruiting back Akoya talent to the company. We recently brought back Anthony Catalano, who is now our COO; and Akoya executive that we brought back, I'm looking to continuing to reach out to customers and bigger -- how can Quanterix partner in that translational side of the business. And then the question is, we saw this at AACR in San Diego, is how do we move from being a big partner in translational staying there, but how do we also move then into diagnostics and clinical. So that will be our focus, too.

Exciting. I have to ask an AI question. So I think when you think about tools business more broadly, we've heard several pharma companies are talking about changing their drug discovery and R&D workflows as they incorporate AI and predictive models. I guess what are you hearing from customers on that front?

Yes. I mean, AI is -- we were at our CEO dinner last night, and thanks again for hosting us. And AI was a big topic in terms of how AI is just revolutionizing the world, but specifically in health care. If I look at AI and what I'm hearing is with regards to Quanterix, and how we can partner with customers is around assay development. And how can AI not only increase assay development, but bring assays quicker to market. We will not shy away from AI and helping us with assay development. I can do it because of my Chief Commercial Officer kind of like Jean. I always think of AI in terms of how can we better target customers, how can we target patients? How can we be more precise at marketing. There's a lot of space that AI will play and help Quanterix speed to market.

Yes. Turning to the financial performance. You reaffirmed your top line guide in 1Q. But given the 1Q softness in instrumentation, a lot of those like kind of end market challenges that are broad-based, I guess, what specific catch-up could kind of help support growth in the second half. You talked about some of the catalysts and maybe from a financial perspective.

Yes. Let me -- so just to reaffirm what we talked about at our last earnings call was we have about $100 million in cash. No debt. We will hit cash breakeven in the second half. So we feel good about that plan. We're right on track, even with the softness in Q1. We say that Q2 would be about the same as Q1. And then we would then start to see a lift in the second half of the year. And we're standing by that because we made moves in Q1. A few of those moves are -- we enhanced our commercial organization. We saw that while our current installed base was okay, our net new customers fell behind a little bit. So we actually instituted lead generation representatives. All they do, Evie, is they go after new business. They look at leads, they legitimize those leads, and they work to bring those leads into where we can sell and close. So I love that piece of our business. We put more money into our spatial marketing. We -- for whatever reason, in Q4, Q3 of last year, we decreased marketing efforts on the Akoya side. We put monies and investments back into that. So we feel really good about that. You talked about our commercial organization and training. We need to make sure that we train them up on their capabilities, whether they're legacy Akoya. They need to trade up on Simoa and vice versa. So we've increased our training in that. So those investments will definitely accelerate our business, bringing in executives that really understand accelerator. We brought in a new head of Diagnostics, and we're putting in more investments in our Diagnostics business. All of those will help us, what I would say, change the trend in the second half.

Great. And you're targeting free cash flow breakeven by 4Q. What are the primary levers to drive this? Is most of it kind of on the top line recovery and then getting the operating leverage on that?

Yes. I mean, it's revenue cures a lot of woes, we always say. So that growth in the second half will definitely help us with cash flow breakeven. And then just doing what the organization has already done before I got there, the discipline that Quanterix has around hitting its targets and doing the right things is still there. So -- and we have that plan in place for the second half of the year. You combine our revenue lift with the continued discipline. We're confident we're going to hit revenue with cash flow breakeven.

Great. And margins, if you kind of expand into clinical diagnostics over time, what initiatives are in place to ensure you have sort of a self-sustaining tools business to make sure that you have the necessary capital sort of reinvest back into this clinical diagnostics opportunity.

Yes. I look at our -- right now, our footprint across Quanterix. And we look at this almost on a daily basis, like do we have the right mix? Do we have the right mix to grow our research tools business by low single digit, make sure that our diagnostics opportunity, we invest in the right way with that. And as I look at our mix, we're there, like we're there now. There isn't, hey, we have to go out and we have to all of a sudden ramp up more people in the research tools business. I spent a week in Beijing with our Asia Pacific team. And I asked the question to them like, do we have the right footprint to maintain our research tools business and to grow an amazing opportunity in diagnostics in China? And the answer is, yes. Now as we get FDA approval, we get more partnerships and all that kind of stuff, we will not shy away from adding especially on the diagnostics side, but our research tools business right now and the footprint that we have, the relationships that we have, the installed base that we have, the way in which we interact with our KOLs on that side, we're in good shape.

Great. And with some of these upgrades coming on with the Life Science -- within the Life Sciences space, like how do you think about a replacement cycle? Like do people then look to replace their instruments as you have upgraded versions coming out.

Yes. I mean, we'll do. We will give our customers a lot of insight and transparency in terms of what that upgrade is, how it helps in their own workflow. So they won't be surprised in terms of knocking on their door. And a lot of the customers we bring in, they give us input. So the transparency that we have around upgrades, and how we do that and get paid for the upgrades, it's already there.

Would you ever have a dynamic where a customer kind of knows that you're coming out with an upgrade, maybe they see the early access and then they actually wait to buy an instrument until they can get the newest version?

Yes. And we're working on those plans -- those specific plans now. One of the things we don't want -- and not just from a P&L standpoint, but from even technology innovation standpoint, we don't want people waiting. So that's where transparency comes in. But our planning right [Audio gap] we're also selling in the moment of what we have today. I like the [Audio gap] balance...

I want to make sure we have time to touch on this, but this morning, you announced the CFO transition. So maybe talk through Jason's background and sort of how you're excited about that.

Yes. I have to just first talk about Vandana. Day 1, when I got there in the middle of January. And anybody I've talked to the most of the company has been Vandana Sriram, and she's been so helpful to me in terms of getting to know the business, getting to just know the company, getting the rhythm of our numbers, what we need to do to set ourselves up for growth. So kudos and thank you to Vandana. We actually extended a robust search. We used a third party that cast a wide net for colleagues that are out there. Jason's background fits perfectly with Quanterix. He has experience in strategic planning on the finance side, a robust P&A experience a solid investor relations experience. He's a local guy or broker out of the street. So the transition from like relocating, it's going to be quick. He starts on June 22. And just excited about not only his experience, but his personality, his growth mentality. He's transformed an integrated companies into Bruker, which we need from where we are today. He will be a really good addition. We're excited to welcome on board.

Awesome. Very exciting. And I guess, you have a couple of minutes left. So maybe to wrap up, you've been with the company for just over 5 months, but what kind of excites you the most? And what do you think investors are most sort of underappreciating about the Quanterix story as we stand here today?

I'll tell you what excites me the most. It's the people. I have a few colleagues that are with me today and the enthusiasm and the sense of urgency of making an impact on disease states that need solid partnerships in [Audio gap] blood-based biomarkers, listen, everyone in some way [Audio gap] cancer and the passion that our team brings every day to their jobs gives me the confidence that we're going to make an impact in this space, so that's number one. Number two, maybe something that investors are underestimating and that is the balance that we have in the company. We have a solid research tools business with probably the most robust installed base. We have amazing technical and researchers that are developing new assays. We have a diagnostics opportunity that is second to none with a differentiated blood-based biomarker. KOLs that are out there, giving us input and relationships that we have on the payer side and also a compare versus last year. Our compare was at this time, this company was going through a major acquisition. So acquisition was kind of on the brain. Now with the acquisition behind us, we can focus on execution. That means upside growth for Quanterix, and we're excited.

Great. Awesome. That's a great place to end. Thank you so much.

Thank you, Evie. Appreciate it.