All right, so, good morning, everyone. This is Steven Mah in the Tools and Diagnostics team introducing our next company. It's my pleasure to welcome back Wenbin Jiang, CEO, and Patrik Jeanmonod, CFO of Cytek Biosciences. So let's keep it interactive. There's, you know, there's enough people here that, you know, we can just kinda yell out questions if you want. Otherwise, if you're more comfortable, just email me at steven.mah@cowen.com . So anyway, Wenbin, you know, just maybe just spend a few minutes on Cytek for those that, you know, aren't that familiar.
Sure, yeah. Now, Cytek is a cell analysis company, based upon the Full Spectrum Profiling technology we pioneered some years ago. Today, we carry a full portfolio of products, including instruments, reagents, and application services. Our technology, as well as our business, is based on the four business pillars, as shown here on this slide. Instruments is our primary revenue stream today, and about 75% of our revenue is on those capital expenditures. And then, the rest 25%, including our reagents and services, which are recurring. And so, Cytek today in the cytometry space, we are a leader, especially in the high end of the high-parameter cell analysis space. And our technology enables us to support many of the high-end research market applications in the core labs, pharmaceutical companies, CROs. And that's where we excel.
With our focus, going forward, is really to penetrate the technology more downwards, in addition to what we have pioneered with, and we would also like to make sure our products, our technology will be able to support all applications across the whole flow cytometry spaces.
Okay, great. Thanks for the intro. And then maybe, just talking a little bit, digging a little bit deeper into your, you know, your customer base. You know, can you just describe the mix of, you know, academic versus, you know, pharma, biotech, CRO, and a little bit more color on, you know, kinda some of the dynamics that we saw kind of in the, you know, capital equipment space, you know, which has impacted, you know, you guys and also some of your peers as well as a broader market in 2023. And, you know, maybe talk a little bit about, you know, how that kinda shaped the 2024 guide as well.
You know, when we first started, of course, 100% of our customer base are academic products, for the research application purposes. And gradually, as we continue with our development, and as our product become mature, and we start to penetrate more and more toward the commercial side of the business. And then today, 45% of our customer base are academic, 55% around there was for pharma, CRO, hospitals, and biotech type of business. And overall, in today's environment, that's what we see is academics kind of really relying upon the government funding. The kind of growth follows the trajectory of the funding available to those institutions. On the commercial side, really it's dependent on it's kind of really market share.
Clearly, due to the nature of our business, mostly in the capital expenditure, interest rate certainly affects how our customers buying and our tools. As we all know, 2023 was kind of challenged in that space. Overall, cell analysis was a down market. Under that situation, still we maintain the growth, and we continue to take market share due to the nature of our technology, due to the advanced performances and the data we can provide. When customers do decide to buy, and certainly Cytek is one of their top choices, that’s why we continue to take market share in our space.
Yep. So, who’s your major competitors here in the, you know, the high-parameter flow space?
I think basically, in our space, the primary providers are all those large conglomerates, like BD, Danaher, Thermo Fisher, Agilent. Like, they all have the kind of instrumentations. But with regard to the full spectrum and, including the FSP paired solution, including both analyzer and sorter together, as a paired solution, Cytek is the only one right now out there. So that's what continue to drive our business forward. This is what our customers would like to see. And so because when they actually do purchase, they would like to make sure any panel the experiments they have developed on the analyzer will be able to put it over to the sorters and all back and forth. Many times when customers used our technology, finding the kind of rare cells of interest, they would like to take those cells out.
I sort those cells, then they can move over to the next stage, to the downstream, and further analysis. This is where sorters are being used. We have both solutions out there for our customers.
Yeah, maybe let's get into the product mix. So yeah, you're talking about Aurora, sort of your flagship product there. Maybe talk a little bit about, you know, the cell sorter application, and then also talk about Northern Lights. And, you know, maybe I just to help everybody kinda level set, you know, kinda your price points, because, you know, my understanding, you're, you know, significantly cheaper than the competition with higher performance.
Looking at our product portfolio today, we have the full spectral flow cytometers, including Aurora, running from three lasers to five lasers, for the high end of the high-parameter cell analysis. We have Northern Lights covering from one laser to three lasers for the entry-level to mid-level type of applications. We have Aurora CS cell sorters, which match the performance panel of the Aurora analyzers, running from three lasers to five lasers. And we also have the imaging technology, ImageStream, and to pair with our full spectral analyzers and sorters, if a customer would like to get into the imaging space, our ImageStream is, in fact, a very fast single-cell microscope, can go above 5,000 per second kind of stream, cell by cell. And then we have the entry-level Guava products, primarily targeted for the QC type of industry applications.
nice thing about Guava is, it doesn't carry those sheaths. No tanks associated with that makes it very easy for the users in the industry setting. So this those are the whole portfolio of products we carry. And that enable us to support all kinds of needs across the whole space. You know, flow cytometry is a basic tool today in almost every life sciences labs. We have the tool we have the portfolio to support all kinds of applications.
Mm-hmm. And give us a sense of the scale of number of instruments you have, and maybe the breakdown between the instruments out in the field.
Now, with regard to our organic instrumentation, full spectral-based, we have more than 2,000 today, right now in the field. That base accumulated since our first shipment in 2017 and by now. And then, starting from last year, with the acquisition of the Luminex Guava and the ImageStream, we have more than 200 instruments shipped last year for those products as well. And then, since we have taken over all the traditional Luminex instrumentation instrument services, today we have about 3,500 instruments in the field on active service contracts, which we provide the maintenance services. That's a key another recurring revenue stream for the company.
Okay, great. And, let's talk about the evolution of your consumables business. So, you know, when Cytek launched, yeah, you know, the consumables were pretty nascent. You know, maybe outline the steps you've taken to kind of improve your reagent footprint, and then maybe talk a little bit about the Cytek Orion and the traction that that new product is getting in the marketplace.
Yeah. And as you can see, with the increase of the instrument in the field, a natural direction for us is to support those instruments with the reagents, especially if we want to take full utilization of the full spectrum capability of the technology we have developed. The kind of standard off-the-shelf reagents, flow cytometry reagents on the market is not sufficient. That's a reason why we initially focused on developing those reagents not available on the market, just to fill the gaps. That enables us to use those reagents together with those off-the-shelf ones to expand the panel size. That's how we achieved the initial 40-color panel and which was the first in the industry based on the fluorescence-based technologies. And as we move forward, clearly, we would like to continue to capture the kind of recurring revenue opportunities on the reagent side.
So, we acquired Tonbo Biosciences. Tonbo was a company based on the conventional to support conventional flow cytometry, especially on the kind of mouse antibody side. And combining our Tonbo with Cytek, we now expanded our reagent pretty much covering the complete portfolio, from UV to the far-red type. So, reagent is already becoming more and more important part of our revenue streams. Although from the overall percentage-wise, it's still small, but we start from nothing, right? And so reagent is one of the highest growth business for Cytek. We continue to see this an opportunity for us going forward. But on the other hand, we realize flow cytometry reagents is very different from the reagent business in the genomic space, right? And there are thousands of SKUs, varieties out there. And typically, when customer place orders, they would like to see the reagents the next day.
That just means the logistics support for the reagents is very different from the logistics support we developed over the time for instrument business. This is where actually is the area we are continuing to develop, evolve, to enable us to capture the complete opportunities for us for growing our reagent business.
Yeah. I mean, let me just dig into that a little bit more. So, you know, when you kind of first started out, you know, people had to kind of use third-party reagents to use, you know, your instrumentation. So now as you're developing a broader reagent portfolio, you know, what have been some of the difficulties in terms of getting them away from their kind of their homebrew reagents to kind of your reagents?
No, this actually depending—it's dependent on customer usage behaviors. For the research type of customers, it's not about what reagents they use. It's about availability of the reagents, how easy it is for them to get hold of. Just like a printer, and user always would like to buy reagents from the printer supplier, right? Same thing. And our customers, if Cytek is able to provide those reagents, and our reagent certainly is optimized for the instruments we provide, and customer will be very much willing to buy this type of reagents from Cytek. So in the end, it's how fast we can grow our reagents is dependent on how ready we are on the logistics-type side to support their needs. So we don't really feel this is a challenge for us.
But on the other hand, other applications, for example, and like, the established applications and repeated applications for certain clinical trials, there, once the panel is already developed, probably the users don't really want to switch. Over there, for those types of usage, we have to work with them from day one. For the new applications, new clinical trials, that's a different set of usage behavior. So Orion actually is one of the products earlier, and I didn't mention about, which was, the automatic cocktail machine. That actually enables our pharma, biotech companies exactly to support the type of repeated application usage. It's automatic. And especially, when you start to work with large panels, and if you do this manually, it's very time-consuming and they also tend to make mistakes when the panel becomes large. Our cocktail instrument, it's a robot.
And once programmed, it does things automatically by themselves. It won't make any mistake. It not only supports our own instrument, actually, it supports any flow cytometers out there. It's a kind of nice piece of instrument working with the right reagents. And so that we feel not only it brings additional capability for our users, actually support the application of our users, it also helps to drive our reagent business into those applications.
Right. So, you know, how has Orion, you know, driven your business? Is it helping, you know, helping your BD efforts in terms of, you know, increasing number of inbounds, increased customer engagement? You know, how should we think about Orion sort of driving the kind of core instrument business?
You know, Orion being really instrument and to enable make it easy for our users, especially pharmaceutical companies. We are already in those pharmaceutical companies, by the way. And now, this cocktail machine along with our instrument really make the whole workflow more kind of smooth, right, easy for them. And then, along with our reagents, we provide them a complete cell analysis solutions, our clinical trial solutions out there, and make our users' life much easier.
Okay. Got it. All right. So you know, you mentioned that, you know, reagents are, you know, highest-growing part of your business. You know, what are you seeing, kinda like, the annual, you know, pull-through, you know, per instrument?
This is actually, you know, as earlier I mentioned, today, the challenge for Cytek on the reagent, pull-through, increased pull-through side is not really about the, the, business opportunity itself. We have a large portfolio of installed base. It's about how we fulfill their needs, meet their needs, deliver our reagents timely, and to support their applications. This is where we are going to invest and to build up. I think when that's ready, you will see far more advantages or opportunities for us, on the reagent side.
Okay. All right. Well, maybe let's just pivot into, you know, your clinical strategy. You know, can you give us a kind of a quick recap of, you know, kinda where you're standing, in your, you know, clinical instrument endeavors, both in, you know, Europe and in the US with Northern Lights?
Right. And as you can see, clinical is one of our four business pillars. We put a lot of emphasis and focuses on the clinical market. We started, in fact, in China for the clinical and with our Northern Lights CLC platform. And followed by China, we had our instrument IVDR clearance last year in Europe. So we feel and in China, in fact, we already made great progress with regard to the clinical applications. Among the top 25 hospitals in China, we are in 15 of them. And in Europe, right after our instrument got cleared last year, we already started to engage with all the top-notch leukemia labs over there. We feel great opportunities for us to grow our clinical business this year in Europe with our Northern Lights CLC as well as the reagents supporting our Northern Lights CLC platform.
In the US, right now, we have been working with multiple leukemia labs on MRD studies, and it's LDT-based. Now, we simultaneously, we are right now preparing to submit for 510(k) with our Northern Lights CLC. We do have a next-gen and Aurora CLC in the play. But for now, we feel immediate opportunity for us is this LDT applications in the US market.
Okay. Got it. And then, are you providing any timing on the Northern Lights 510(k) submission?
This is, we are in the preparation. We have all the data. We are right now just preparing all those documentation to submit, and then whatever the time takes for the 510(k), FDA to get us through this process.
Okay. No, that's fair enough. And, you know, you talk about your progress in China. You know, I think it was pretty strong, right? I mean, it's making up a pretty significant percentage of the APAC revenue. Is that right, Patrik?
Correct. Yeah. Yeah. Correct. The China piece is a key component of the APAC revenue. Absolutely.
Okay. Give us a sense of it. Is it, like, closer to, like, half or something, or more?
Well, it's slightly more than half. Yeah.
More than half. Okay. Got it. And then, you know, what's your expectations going forward? Is it gonna, is that at a steady run rate, or do you expect it to grow faster, or?
So the expectation is that regions like China and EMEA will grow faster than the US. Yes.
Okay. Got it. And I guess give us a sense of the kind of the regulatory landscape in, you know, ex-US, like in China. Is it is it more like an LDT process in the US, or, you know, or is it more of like a China FDA or EMEA FDA? You know, what's the pathway to get into the clinic ex-US?
On the clinical side, China, EMEA, we already have our instrument cleared. Going forward is just to add more application, panels, over there, to continue to submit for approval.
Okay. So it's, it's just mostly instrument approval?
Right. Instrument approval. TBNK and standard TBNK, two-laser, six-color, single-laser, six-color, are actually in the final stage of being cleared in China. Then, in Europe, single-laser, six-color already cleared by the IVDR, and two-laser, six-color is in the process. We feel will be done very quickly soon. But one of the focus for us in Europe is actually the leukemia MRD, which is based on our CLC-cleared instrumentation. That's mostly LDT-based.
Okay. All right. No, understood. All right. And so, maybe let's just pivot into the guide. You know, you're projecting for 2024 about 5%-10% growth. You know, it seems a little bit conservative given, you know, kinda some of the green shoots that we're seeing, some of the recovery in the capital markets. You know, maybe give us a sense of kinda the puts and takes on what kinda drove the guide.
Yeah. We look at it as, first, we look at last year, how we did compared to the market. Obviously, if the industry was down and we were flat, we feel like we've beat the market. For 2024, we expect the market's growth to come back into a higher range, just because we believe our instruments and our strategy around the instrument, the addition of the new instruments like the cell sorter, like our expanded platforms now with new instruments will give us this growth opportunity. We feel there's still a lot of unknown out there, but we feel pretty good about where we sit as of today.
Okay. All right. Got it. And then, I guess more on the, you know, on some of the areas of growth, I mean, it's like, you know, what's giving you confidence that, you know, it is coming back? Is it what's a good benchmark? Is it, you know, is it funnel size, or is it level of customer engagement, or, you know, what are some of the things we can look for to see that, you know, you guys are executing on it?
Right. So we look at a number of factors here. Obviously, the funnel is one of them. But we look at also how we organize as an organization, how we our strategy towards entering the mid-market segment. So we're fairly present in the high-end market, but we feel like we're fairly underrepresented in the mid-market, which is the Northern Lights for us. And we are very new in that lower-level market, which is the Guava Muse environment. So we feel like with the combined sales teams, fully integrated now, as of end of last year, looking at our strategy, we feel like pretty good about where we can grow the business. And obviously, we like our customer base. We like the biotech customer base especially. We've created some great collaborations with mid and large pharmaceuticals.
We believe that we can continue to develop and strengthen that relationship, this year.
Yeah. Actually, on top of that, based on the momentum we have seen and the in-queue for our cell sorters, we see great growth opportunities for us, on this product. And that will add on to, the, up potential for us for the company, for 2024. Yeah.
Okay. Got it. And, you know, we haven't talked about Luminex very much, but, you know, I know one of the you know, one of the reasons you bought Luminex was to, you know, absorb some of their microfluidics technologies and potentially integrate them into Northern Lights. You know, can you give us an update on how, you know, that the integration's going and if there's any sort of timelines?
The integration by itself and with regard to businesses already completed. And now, Guava, there are two product lines within Guava. One is Guava easyCyte. The other one is Guava Muse. Both have been transferred into our manufacturing facility. And with this transfer, we see substantial improvement in the profitability of these two product lines. And so, that's a plus side. And actually, one of the most important part of this acquisition is actually the ImageStream and the imaging flow cytometry. And recently, I think a few months ago, we already seen the first US FDA-approved sickle cell disease treatment with CRISPR technology. In fact, that technology, the Luminex ImageStream has been used to validate the treatment and validate the effectiveness of the therapy.
So we feel we see great opportunities for this product line and going forward. Now, same thing is with regard to this capability itself, including not only the hardware side as well as the software, AI-based algorithm, machine learning. We are looking into integrating that capability into our Cytek's analysis systems and build upon our bioinformatics platform and for to provide the cloud-based data analysis with AI. And so, all of those actually is we see and the benefits are through this acquisition that can drive our revenue growth over the next few years.
Okay. Great. And then, speaking about M&A, you know, you guys have a pretty healthy balance sheet. I know you've been buying back stock. I think that shelf has expired. What's your plans in terms of more M&A and/or stock buybacks for 2024?
And I think, M&A has always been our priority over buyback. And we do see lots of opportunities over there. We have done lots of study and analysis, evaluation during the last 12 months. But we do, on the other hand, have very strict criteria with regard to which one to go after. One of them is with regard to the profitability. As Cytek would like to continue to maintain our profitable growth. So for any business we will go after eventually. And we should be able to turn this business profitable over the following 12 or 18 months. That just means and we need to find a synergy with those targets, whether from sales marketing perspective, from R&D perspective, or from an operation perspective.
So this is a very important aspect for us with regard to the eventual decision of going forward.
Yeah. All right. Great. Is there any questions from the audience? All right. Otherwise, let me just wrap up. What are gonna be the main catalysts investors should look for in the coming year here?
I think, as you can see, we focus on value creation, for our shareholders, over there. And as from Cytek perspective, yes, we look at efficiencies. We look at that means the cash utilization efficiency, operation efficiencies, operation excellence, and smart acquisitions. And in the end, I think for Cytek is, we continue to focus on profitable growth. That means we want to make sure while we maintain, meaningful, growth on the top line and net income basis, Cytek will continue to stay being profitable. This is, what we are going to focus on, for the 2024.
All right. Well, appreciate you guys, spending time with us.
Yeah.
Thanks so much.
Sure. Thank you.
Thank you.