Hi, this is Paul Knight at KeyBank, the life science analyst here. With us today we have Michael Egholm, the CEO of Standard BioTools. A lot going on in the last year or so with Standard BioTools, Michael, but I think a good place to start would be maybe a little background on where you were before Standard BioTools, and then we'll kind of go into discussion of the business.
No, yeah, sounds good. Hey, Paul, thanks for hosting us here. Happy to share a story. So I'm actually originally trained as a scientist. Along the way, I was at 454, did next-gen sequencing, eventually ended up at Danaher running a big business there. So last stop before this one here was a number of years at Danaher, where I really learned both running a P&L and, more importantly, learned lean business and, in fact, was foundational for leaving Danaher about 3 years ago and getting a team together and creating what's now Standard BioTools.
The most recent news, of course, being SomaLogic and the merger there, Michael. Can you talk us through what was compelling about this? What are the easy synergies you're thinking about with SomaLogic?
Yeah, so maybe just taking a step back. So the whole idea behind Standard BioTools was there were all these incredible tools out there and companies with incredible tools that can help advance science. However, most of the tool companies are struggling. And remember, we created this in the summer of 2021 where the market was at an all-time peak, so somewhat prophetic undertaking here, looking at where the various businesses are now. But we believe that the antidote to this inability of tool companies to scale was get on a platform, some multiple product, seasoned operators. Many of my team members come from Danaher. It's not the only place you can go learn, but it's a very, very good and very selective place. So we used that as a cheat as we put the team together. And then it needs, obviously, to be grounded in lean. It's foundational.
Then we needed access to capital. So with that, almost to the date here, in not a couple of weeks, it'll be two years since we closed the PIPE into what was Fluidigm and did the name change. And we're now well on the way there. I hear some background on my side. You don't hear it on your side, I hope.
I'll mute for a little while while you're chatting.
Okay. Yeah. Okay. No, yeah, this is better. So anyhow, we executed on Fluidigm. It was a big undertaking, fantastic technology, fantastic people there, and also great loyal customers. They really loved the technology but were frustrated with the company. So over the last couple of years, we got the technologies, products in shape, streamlined the organization, and so increased gross margin, lowered OpEx, and took a declining business back to growth. But we were still subscale. We ended last year at $106 million, which is a really hard place to be a standalone company, let alone a standalone public company. And from the very beginning, when we started Standard BioTools, we looked at the map of M&A opportunities, and SomaLogic was always there. We looked at everyone else. It's all in the S4 on all the companies we were talking to in parallel.
But SomaLogic was long my favorite for a couple of reasons. It's a highly differentiated technology. We're the only one that can do 10,000 proteins at the low CV out of plasma or serum. And it was a relatively simple integration that would be because it's all service revenue. That's also the Achilles heel of the business. It's all service revenue, but highly differentiated technology, strong clinical selling to pharma, like a barrier we'd never been able to jump over in Standard Bio. And then last but not least, there was also a very hefty balance sheet. So combined here, we ended up well over $500 million on pro forma basis on 12/31 here between the two companies.
It sort of gave us immediate scale, almost with $86 million in their revenue, almost an immediate doubling of revenue, but selling to the same end customers, but with much more selling from them into legacy SomaLogic into pharma and from our Standard BioTools side, much more to academics. And so we think there will be a lot of opportunities here for selling to each other's respective customers here as we combine sales forces.
Is there any technical instrument overlap, reagent assistance, etc., that could also represent cost savings and synergy?
Almost none. Theirs is entirely then not theirs. It's ours now. I keep recommending my team where we don't say ours. So the legacy SomaLogic is all service. We have 17 authorized sites out now, but it's basically a replica of our service labs in Boulder. And that was actually from the SomaLogic side. When they were looking at the merger, we brought in a very seasoned management team, a global sales force, and ability to design, make, and support instruments and reagents. And so actually highly complementary skill sets here. And I have this sort of report that the R&D team, so as complementary, they are already interacting and already seeing some novel insights here from bringing a fresh outside look.
Was their service and sales team bringing in a collection of devices and instrumentation, or was it all their own proprietary technology?
Yeah. So actually, in the Boulder labs, we're using varied robots and scanners, all published. Basically, sort of the main instrument is one Tecan robot and then an Agilent scanner. There are a number of other instruments that go into the workflow. But SomaScan, maybe just explaining a little bit, try not to be overly technical here, but think of SOMAmers as synthetic antibodies, and they act and behave exactly like antibodies, like monoclonal. So if you look at all the antibodies out there, our affinity, like the affinity for all these antibodies, the curves would overlap almost perfectly. I think our mean Kd is about 5 nmol/L, which is about where antibodies are, and they are equally specific. There are two to three big advantages. One is that they're DNA-based, so they're polyanions. It has two very significant effects.
One is that you can have thousands of these in solution at a time. You can't do that with antibodies. As soon as you get practically, I found over the years, I know there are others that are doing more, but beyond 40 or 50 antibodies in a cocktail, it's very hard to not get non-specific binding. And then they tend to bind because they've developed an optimized by sort of natural selection. They tend to bind to shapes rather than recognizing primary sequence. And then last but not least, maybe the most important thing, they're all immortal or what we call monoclonal. It's basically just a DNA sequence, so it's a modified DNA sequence. So all our 11,000 SOMAmers, they actually live in the cloud, and they're all monoclonal. There's no antibody collection out there of monoclonal or recombinant antibodies or human antibodies with that.
It's used in a technology called SomaScan. So it's a workflow, and we use something called kinetic proofreading. And that's what goes on the robot here to obtain the specificity. So it's a fairly simple workflow, but you do use instrumentation for it. And so the sort of the secret juice is the SOMAmer, how we pick these, and then it's how we actually run the assay.
I will also just pause for a second. We do have the format for people on the call, you can raise your hand, ask a question in that format. You can also email myself at paul.r.knight@key.com as well. Michael, we have released a model based on the acquisition and some of your guidance for what you're targeting in the year 2026. I thought it would be useful to talk about some of these line items and parts of the model. Starting with the revenue we have, we'll have over $100 million actual in 2023, targeting as much as or around $300 million in the year 2026. What's the component of this? Meaning, obviously, SomaLogic will be there, but you'll rationalize, I'm sure, some pieces, some not. But starting with genomics, you're a supplier to Olink.
What do you think happens with the genomics part of your business and the Olink vendor relation, OEM role you have there, and Olink obviously being acquired by Thermo? So is that business growing rapidly? Are you targeting it to be stable? What are your thoughts on genomics?
Yeah. So genomics was like $42 million last year. So a slight decline on a continued product basis. It was a 4% decline, which we were actually quite happy with because in 2022, on a contribution basis, we lost $24 million here. We're near break-even at $100,000. So stopping the bleed was quite a milestone here after 25 years into this microfluidic technology. We love the technology. We actually think it could be useful for a number of other things. So as much as we cut in marketing and selling and R&D here to get to profitability, we have preserved optionality so we can spin it up again and develop a new platform for others. Or if we can use it for the SomaLogic technology, we will do that.
Just explaining, though, that the reason why the business is in decline or one of the other ways maybe stress that one of the other ways we got it to profitability was to go from five different instruments and then go to a single instrument, the Biomark X9. And then there's a fairly similar instrument called the Signature Q100, which is the Olink instrument there. We've been basically the main applications that we historically have been replaced by NGS as prices kept coming down. And so we reacted to that and pivoted to OEM relationships and then niches where we're not competing with NGS. So we actually think it's going to come back to some growth here, probably towards the end of this year here. But I don't have a sort of a crystal ball quite yet on that.
But long term, we see the strategic customers where we want to go growing well, strong relationship with Olink. I think if you ask the Olink team is that we've been very good partners, and our expectation is we'll continue to be that for Thermo on the other side and look forward to have that conversation. We don't know of a replacement technology that Thermo has that could replace what we have. I'm sure they will try. That's how big companies act. But in any event, there'll be a large installed base out there of Q100s with drive revenue through the microfluidics device, which we're the only one that can make. We make this on a semiconductor-based manufacturing plant in Singapore.
This microfluidics chip, well, is that also the chip used when you're using an NGS as a detector?
No, it's not. So the microfluidics chip, so the basic format is 96 samples and 96 probes. We can basically do anything on that chip. There are two main applications for it. One is for real-time PCR, also called qPCR. With a 96-96 chip, we can do 9,216 individual qPCR reactions with tiny volumes of samples. Again, nobody can get there. And that's the application that's being replaced by NGS. Olink has two different readouts, either qPCRs or where you read out a finite number or basically do it en masse, or you can do bulk sequencing of all the signals here that you created, the DNA signals you created, and do that by NGS. So that's the two different versions. Interestingly, at SomaLogic or the legacy SomaLogic, we have a very strong relationship with Illumina where we just started early access.
And then early next year, Illumina is going to launch the full version of that, which we really think is sort of one of the backend growers here.
And then.
Yeah. Yeah. Sorry. Let me just stop thinking. The other thing here, the other application is to actually do library prep. And this is why it gets a little confusing, but the same microfluidics or the same sort of architecture where we can design the chips differently, we can do library preparation for NGS, so independent of proteomics. And the newest OEM we have, Next Gen Diagnostics or NGD, is exactly that, library prep for pathogen detection to be followed by sequencing. So very excited about that second OEM relationship. We're obviously working on more. We believe it's a very, very effective way where we can't afford to develop the market, but going the OEM route will lead to profitability as soon as so. Getting that second OEM relationship over the hump was a good milestone.
It takes a few years before it shows up on the top and bottom line.
Okay. Excellent. The business, as you've kind of outlined it to be, I believe, even positive, in 2026 suggests that you can take the $565 million and year-end 2023 cash. You may have a lot of cash remaining in the year 2026. Do you still have a large acquisition list, Michael?
Yeah. So yes, and it feels very good in these times. Having that amount of cash feels very good. It gives us great optionality here as we go forward. Yeah. And we don't need anywhere near all the cash here to reach profitability. Hence why we put out the 2026 guidance. We are founded as a roll-up company and so very active still, M&A cultivation. But obviously, I cannot do another big deal here tomorrow. We've got to digest what we're doing now. As we've shared before, it's going really well. I'm really enthusiastic. It's sort of déjà vu all over again on the journey we were on two years ago when we came into Fluidigm. Great technology, great dedicated employees, and also very loyal customers and a lot of opportunity to fix.
So, sort of, the welcome we've gotten here and the embrace of what we're doing here has been really positive, even in sort of the backdrop of cost takeouts, which we have been very transparent with all our employees about. So, with all that said, I can't do a big one tomorrow. Although my appetite is still big, if plug-ins where we can get so companies that are not projects, so well-functioning but subscale companies with good gross margin profiles where you can get G&A leverage and commercial leverage immediately. Yeah, I would do those on an opportunistic basis. We are at a, I think we're near valley here on valuation. So obviously, I don't have a crystal ball here, so can't see it. So we're still very, very active.
Yeah. Yeah. Absolutely. I think part of this is probably psychology around the market and financing of biotech customers, right?
Yeah.
I know you mentioned somewhere around 20% could be organic growth. What are you thinking is a reasonable assumption over the next several years on organic growth possibilities?
Yeah. So we now have a proteomics portfolio here with three different products in it and exit of $150 million on all three proteomics technologies, the SomaScan, the CyTOF, flow cytometry, immune cell profiling, and then the Hyperion XTi imaging platform, all three highly differentiated. Nobody can do what we can do. Doesn't mean it's a good business, but it's a good place to be where you have highly differentiated technology. And again, for all three technologies, there's almost 20-year prior investment and many, many hundreds of millions of dollars have been spent over those years. So we have technologies that, as technologies are maturing, but not as products. And that's the piece we're putting on. All that means is that we believe we'll grow at least at the proteomics market's growth, so mid to high teens there in a sustainable way.
We believe while there's this sort of what we hope is temporary pullback from biotech investment, we still believe we're very early innings here on the whole life science revolution. And now the terms have been thrown around as post-genomics, and we're glad to be extremely well-positioned in that. I don't know of another company that has three highly differentiated proteomics technologies. And so that's going to carry the brunt of the growth. I think genomics is going to come back to growth and not sort of be sort of the pullback, the growth we had last year. So we did 22% in our proteomics business last year. SomaLogic did 21%. The one sort of caveat there is it's very project-based on the legacy SomaLogic side. So any one $10 million project moving from one year to another can have huge impacts.
You got to zoom out here on the multi-year stand. We believe we can sustain these growth rates there, and then genomics coming back in and contributing. That's how we get to the $300 million.
Your commercial capabilities seem to be part of the key to the lock on the commercial capabilities on Soma and the commercial capabilities on Standard BioTools. Is that correct? How do you get them to kind of overlap? Because one's academic, one's pharmaceutical-oriented. How's the magic of combining it? How do you get the magic?
Yeah. So first off, I'm actually not one of those and I know we've discussed this before here, but I'm not one that believes just put more in the back of anyone's salesperson. I don't think there's a ton of leverage here. These are all very, very technical sales. So it takes specialists. Where we get the commercial leverage from is from the infrastructure. You only need one country leader. We need one instance of salesforce.com. We are going to do the Standard Bio sales funds management process, the growth room, and all that leverage here. And then the same for FAS leadership, field application specialists. Again, so good leverage in the organization, good cross-training opportunities there, but we probably need dedicated salespeople.
The other two places where we're going to learn a lot from our SomaLogic colleagues is that they have a key strategic account approach because they are selling to these very large customers in pharma. We're going to add the mass cytometry products to that. Then last but not least, we have a Chief Medical Officer now, Dr. Steve Williams, and he has an organization of clinical experts that are working with pharma that just I think we haven't been able to afford before, but we can leverage. It's not lost on us that from the same tube of blood from which you derive plasma for doing SomaScan, we can also do immune cell profiling. There should be strong interest in doing both technologies. We see several synergies here as we go along.
And then vice versa for our legacy Standard BioTools team to have SomaScan in their back pocket or a few slides. Cross-selling is definitely a tool. And talking to the same people, they're all trying to answer the same sort of question. And then another thing maybe I should highlight, we've seen a lot of really good talent from the legacy SomaLogic side here. And so we are going through the organization and picking the best talent here.
My question from the outside is regarding the Hyperion XTi. That was a primary driver of growth in 2023. Is that momentum continuing for the Hyperion?
Yeah, we certainly hope so. Yes, deep funnel, very strong interest. We have an installed base of about 100 Hyperion users. And I've not talked to a single customer that does not want to update it to the XTi. It is a big investment of a list price of nearly $900,000. We are launching here next month, actually in a few weeks, we are launching a slide loader, the first of its kind of any spatial proteomics instrument. And so it can hold 40 slides. And so you can run those over 24 to up to 72 hours unsupervised. A huge step up in ease of use and improvement. We had not realized just how much better the XTi got. So we actually didn't have time to put a slide loader on originally, but it became basically the limiting factor.
The other thing we are enabling with that now is there's a new software package where we allow customers to rapidly scan because we see all 40 colors at once. We can scan at low resolution. So in 20 minutes or so, you can get a snapshot of the entire slide in 40 minutes sorry, in 20 minutes or so, in 40 colors. And then you can decide whether you want to do region of interest, which is what people have done historically, or go to a pixel-based analysis where we can scan an entire tumor at high resolution in a couple of hours. Again, unheard of throughput, lots of excitement there also from new customers. Every time we talk to pathologists on the capabilities here, genuine amazement here. But obviously, a long way to get this closer to the clinic.
But strong, still healthy growth from this platform here going forward.
Are you getting the read from customers that their financing window is opening up? Michael, I don't think another go ahead.
Yeah. I wish. I hope so. From where things looked at from the middle of last year to now, we've seen the slowdown. We're not losing any customers, but definitely capital purchases are definitely being pushed out. And what I keep telling my team is good opportunity for funnel building. And then what we just a little bit akin to what I just mentioned on the big SomaLogic contract was really and I know it is not how our systems work here, but keep telling investors to zoom out and sort of just look at the long-term trend. We're building, we're increasing our instrument base. We'll drive more regions through that, more service, and do it at higher gross margins and a lower OPEX. But no doubt that we still see sluggishness in the market here.
When do you think the GLP-1 cash creation will filter down to general R&D and equipment purchases?
No, it's definitely a lot of excitement now. And just we've disclosed one of our big customers is indeed Novo Nordisk. And so it's already a tailwind on that side. More broadly, how that affects the overall market, I don't have a crystal ball.
We can only hope, right?
Yeah, exactly. No, but we still think, and despite the sort of everybody is down on tools and biotech for now, we're still very early innings here. Other companies use the post-genomics era. And I'm incredibly excited to have three highly differentiated proteomics technologies in the post-genomics areas, all generating amazing data. And that's what sort of when you get a little bit of a hit any one time, that's what really picks us right back up again, how our instruments and services really do very meaningful work out there and a lot more good stuff to come. Very, very excited. Also, indeed, we obviously don't talk about that in public, but the R&D pipeline here across the portfolio.
And then lastly, with a couple of minutes left here, Michael, you know the Casdin and Viking converted the preferred to common, and it seems like a cleaner capital structure. Any positives you see on your side from that event?
Yes. So I said the preferred structure made a lot of sense as we went in and the $250 million pipe in Fluidigm. It served its purpose. Now we got feedback from investors that this may limit other investors that we want in the stock from going in. So we think it was a great simplification here. So very, very happy. And what I think investors should take away is an incredibly bullish sign at a time where everybody is down on tools for Casdin and Viking to give up on their downside protection and go all in here. So really appreciate their support here and their trust in me and my team.
Michael, exciting times. Looks like guidance suggests a tripling in revenue and much, much to come here over the next three years. Wish you luck, and we'll be following.
Okay. Thank you, Paul.
Okay. Enjoy your vacation too.
Yeah.
Bye-bye.