This morning. My name's Matt Stanton. I'm on the Life Science Tools and Diagnostics team here at Jefferies. Happy to have the team from Standard BioTools back with us at the conference here this year. Joining us from the company, we have CEO Michael Egholm. Michael, thanks for being here today. Before we jump into some Q&A, he has a few prepared remarks he's going to make, and then we'll kick it over to questions. So with that, over to you, Michael.
Thank you. Thank you, Matt, and thank you to Jefferies for hosting us here today. Thank you to all you guys for braving the snow this morning, which I'm sure was unexpected. Standard BioTools is setting out to set the new standard in the life science tools by empowering both researchers and investors here at the same time. We are focused on building high-quality products with margin in a sustainable and profitable way. I'm very pleased here to share the story of Standard BioTools and what we are building here. Before I do that, I will be making forward-looking statements, so I'm required to show you this. Now you have all read it. Let me jump right in. Here's our mission. We're built around three principles. We operate as owners, and we act like investors.
So we focus on getting return on investments, diversify, mitigate the downside, and generate returns for all stakeholders, including investors. We're based deeply in lean, so which results in efficiency, which again will help us grow profits. And we have a saying, a maxim within the company, "Without margin, there's no mission." So it doesn't really matter what you do if you cannot have a margin. Our solutions are all around enabling omics.
We are building a business, not any one technology or application per se. So we're not a science experiment. We're building a business with great technologies that will deliver great returns to shareholders. On the left side here, we have our three key strategies. And then on the right side, we have our sort of scorecard. Today, I'll go into a little more details here as we go along.
It's all about consolidating in the life science tool space. Over the last three years, we've done two transformative deals and are now at a place where we have a revenue that we have forecasted for this year to be between $170-$175 million. It's about building a product portfolio with solutions on high margin business. We're all about lean. So we all believe in lean as in the way that Toyota, Danaher practices.
We have developed our own business system, the Standard BioTools Business System, or SBS for short. We've pulled together a very strong team. Many of us have a tenure at Danaher, but coming from many other world-class organizations. When we completed the SomaLogic merger here in January of this year, we set out a very lofty goal of taking out $80 million of OpEx.
It's about a third of the combined OpEx of the two companies and said we're going to do that over two years. In just one short year, actually less than a year, we've operationalized all of those $80 million and will hit January 1 with an $80 million lower OpEx. What's really rewarding to see is that it's actually already flowing through the P&L. OpEx dramatically reduced by about 24%, and we see a 50% flow-through reduction in adjusted EBITDA.
Bit favorable timing in Q3, but still very nice to see that it's flowing through the P&L. We are building a business around what we call the value pyramid. Consumables on top. We do instruments and services as well. Clearly, margins are higher, particularly in the life science tool space for consumables. Instruments in between services, typically the lower margin. We are not shying away from instruments.
We like instruments that are not astronomically expensive and that will actually have a high pull-through. Likewise, we're not shying away from services. In fact, the majority of our business today is a service, but we don't mind it because it's an easy entry point for many customers as long as we can have a distributed solution on the other side to reach the full market potential. So if we look at the business today, we are at 53% gross margin.
A little more than half of our revenue is services. Field-based services are a quarter of that. Three-quarters asset-based services, mostly SomaScan. We intend to improve that pyramid both by improving mix organically, inorganically, obviously applying lean to improve gross margins and, of course, value-based saving to drive up the gross margin and improving the mix. And likewise, we are mostly in academia and pharma today.
We see other opportunities and other vectors for expanding in bioproduction and clinical as we go forward. The strategy is all around identifying highly valuable assets that have already had the R&D investments. In fact, the two acquisitions we have done to build Standard BioTools have hundreds of millions of dollars of R&D investment over the year and are now ready for prime time. We really focus on where we can find leverage operationally and commercially, and we're looking for discounted assets.
Obviously, we want to protect the downside by buying smart, but of course, at the same time, creating a win-win. As we acquire assets, we apply the Standard BioTools flywheel where whenever we take over a new product line or a new company, we look at reviewing and leaning out every single process inside the company.
For example, in production, we focus on improving quality, reducing lead time, which again actually leads to lower cost and happier customers. When your quality is high, you can deliver when the customers want it. You'll get happier customers. You'll get more customers, which again allow you to expand, drive value back into the business, and we can then go on to the next asset. So we're executing this flywheel as we speak.
The team that's doing all this is on the chart here. We have a team of very seasoned operators from experience. Six of us are from Danaher, but others from Pfizer, from Roche, GSK, and Affymetrix and other organizations along the way.
What's unique to all is this breadth of operating experience and deep scientific acumen or enough scientific acumen here on the team to figure out which targets to pick and where to invest, and then the team there to execute. So in summary, we are executing on our vision. It's all about operational effectiveness, profitability. We're in the $170-$175 million guide for this year. We've done two major transactions. We're very active in M&A.
We have plenty of cash to bring us to profitability and to execute on our M&A strategy. And it's all about the discipline leveraging of SBS post-M&A. And it never stops. Even though we're almost three years into our first transaction, we're still leaning out and getting better and better every day. And we have put out there that in 2026, we are going to be at breakeven. So we're in a great path.
It's very early on this journey here, but a lot of upside here along the way. And with that, I thank you for your kind attention.
I guess maybe just to start off, you know, and kind of where you ended, you know, something I think that's maybe been a bit looked past coming out of 3Q is just the progress around the cost action and the pathway to profitability. You put up the stats, OpEx down 25%, EBITDA 50. Can you just talk about kind of the progress the team's made, the foundation that's laid for going forward, and how kind of sitting here today, you know, your comfort and visibility on the profitability by 2026 stands?
It's all about disciplined execution. We went in from day one, put out some very lofty targets that we then pulled forward by a full year. We've gone through, operationalized every aspect of the combined business, particularly SomaLogic that we just acquired here in January, taking out costs where we don't need it and still yet at the same time investing. We are also still maintaining significant investments in R&D and sales and marketing to drive future sales.
It is a bit of, obviously, a war here between revenue, gross margin, and OpEx on the other side to get to profitability. We've got the OpEx side about right size. There's probably more to take out there. And then it's really about jumpstarting the commercial engine. It is a relatively tough macroeconomic backdrop here with instrument sales.
We have a little bit of headwind from a few large accounts, but net net, we're actually seeing growth in the future although we're not guiding for 2025 and 2026.
Okay. And maybe sticking there with cost and some of the investments too alongside with that despite taking out the cost. I mean, you talked about in May at the strategic review, you know, Omics as a Service, SomaScan, right? There was a positive update there in 3Q. So I guess just talk about kind of where the focus is on investment, whether it be in R&D and some of those commercial initiatives you talked about and where you're most excited about putting R&D dollars to work within the portfolio today.
Yeah. So we have a mix. We have 55% services today. We really want to drive it towards consumable long term. So the growth vectors for all the businesses, Omics as a service where we leverage the SomaScan offering to include other technologies that we have. So we overcome the CapEx headwind. At the same time, we are pushing forward on our distributed sides. And then in the first half of next year, we'll have a distributed solution with our partner, Illumina, which will dramatically expand the market.
But so in the short term, leaning into Omics as a service to leverage that distributed sides and then the Illumina partnership. And then we discovered what we believe is a jewel inside the SomaLogic enterprise, which are all the individual reagents, 11,000 of them that make up the SomaScan assay.
We're now offering them as individual reagents and expect that to be a growth vector going out. We're making the investments we need to do there. Last but not least, we're really the best technology when it comes to high-plex. We are, of course, investing to keep that high-plex being by far the highest in the industry.
Okay. On Soma, you know, one of the things that's historically been a bit challenging is just the inherent lumpiness of that business tied to a handful of larger projects and customers. I think you've talked about this year, you know, I think a $15-$20 million headwind alone from those customers. But if we're going to set those aside, you know, the longer tail, let's call it top five, is actually growing pretty nice. I think it's kind of trending double digits year to date.
Can you just talk about, you know, the traction you're seeing on kind of that longer tail of customers, the durability and how that should and could, you know, help maybe smooth out, you know, that business if we look out a few more years here?
Yeah, we definitely want to broaden the base. Actually, I'm very happy when I get a $10 or $20 million order. It's good. It creates, obviously, a tough comp for the next year. These are incredible proof points for the technology that pharma companies want to spend $10 or $20 million with us and do these very large clinical trial sets or reviewer data. And the insights they get are incredibly valuable. So we like that.
So we want to go deeper in those pharma accounts, deeper cross-pharma accounts. And then this really encouraging sign that if we just look outside the top five, we are seeing the double-digit growth. And then, as I just mentioned, how we want to also broaden the base to push into our authorized sites, which are reagents, and now Illumina coming on here in the first half.
Okay. And for those on the longer tail, what's the biggest hurdle for them adopting, you know, Soma? Is it cost? Is it budget? Is it applications? Is it, you know, education, things you guys can do? What's kind of the biggest hurdle you guys hear and see for broader adoption on that longer tail?
Proteomics has been this dream of researchers for many years. With proteomics, you can predict pathogenesis that is progression of disease very powerfully, which you actually, in fact, like an order of magnitude or so more information content than you can with, for example, genomics. And this is really where we are aiming, educating everyone that proteomics is real and is here today and that we have a solution.
So education, absolutely number one. As with genomics, next-gen sequencing, I was part of that early journey. There are price inflection points along the way where it also spreads out, but it's come down now to a price point and a performance where companies are and now increasingly larger academic centers are doing trials of tens of thousands of people, which again will drive widespread adoption.
Okay. On the Illumina partnership, which you talked about, you know, exciting kicking off here in the first half of 2025, what's left or is there anything left to do kind of from between now and launch? I think you've kind of talked about the technical part largely behind you. And then you just remind folks, you know, that the deal was signed a few years ago, kind of what the economic structure of the deal was. There were some up-fronts or some royalties. And I know, you know, it'll take time for that to roll out, but just as people start to kind of think about the economic impact, you know, over the next few years, can you just remind us of the kind of how you and Illumina share in the economics of that deal?
Yes. So the way we think of our Illumina partnership is that this is really what's going to increase the market by an order of magnitude, if not more. They have 2,200 NovaSeqs out there, maybe across a thousand or so sites where this new workflow will fit into. And as I said, I believe there's this long-term trend where you complement, if not substitute, part of what's done with genomics today with proteomics. So that's the long-term driver. It was a partnership that was signed a few years back.
There was an upfront payment that still largely sits on our balance sheet of $30 million. And then the basic structure is we will sell them kits and get royalty as we go along. But it's really about a massive expansion of a market.
We do believe that synergistic with the business we have, the service business we have today, as you get more widespread adoption, we'll see more of our big customers actually maybe do even more work, and again, this widespread adoption will lead to demand for individual SOMAmers. Once you find hits, you will want to figure out what proteoforms of the proteins you just detected are, and so there's a whole ecosystem from that.
Fundamentally, the aptamers, as SOMAmers are made of, they're pieces of DNA. So it's a relatively straightforward thing for Illumina to read them on sequencers. It's part of their genius. There's a little bit of work to it. Over the last couple of quarters, the technical risk has been essentially retired, and it's all about Illumina getting ready for launch, and they will do all the sales and marketing and technical support.
Okay. Maybe one on the instrument side, you know, that's something that's been challenging for both you and the broader industry, you know, tighter CapEx budgets, even kind of regionally. China has been tough. Can you just talk a little bit about what you saw in 3Q or year to date on the instrument side of your portfolio? And as we think about kind of 2025 and beyond, I mean, what kind of gets things back to a more normalized demand? Is it simply, you know, is it being past the election? Is it better biotech funding? You know, is it, you know, large pharma CapEx budgets, maybe some mix of all those?
We would just kind of love your thoughts on, you know, how, maybe not when, but how we kind of get back to more normalized instrument, you know, demand backdrop, what is going to be kind of the pillars of that?
Yeah. So as I just talked about here, our pyramid of consumables up top, we're really looking at driving that consumables growth. We see instruments as an okay business to drive that. So that's the long-term piece. In the midterm, we're leaning into our Omics as a Service. We believe we have a lot of expertise to offer our customers, and it lowers the barrier for entry in a CapEx constrained environment and will create future demand.
Our instruments year to date are down 28%, largely in line with most of our peers. We're obviously hoping for an eventual recovery fueled by government funding, biotech, VC funding, and then big pharma spend coming back online. What we are excited about is that the technologies we have will help pharma develop better drugs faster. And so we're sitting there ready to pounce.
Then I think you snuck in a question on China. We have about 5% of our business in China. Until a couple of quarters ago, we did fairly well in China. Now we got hit by the malady that everyone else has. The way we look at it is we have minimal exposure. If and when funding comeback, stimulus funding begins to flow in China, we see that as upside and sort of as a good potential thing. It's not disastrous for us and potentially a good thing.
Okay. That's helpful. On something you mentioned a few times on the Omics as a Service, can you just talk about kind of who that's targeting, how the adoption's been? And, you know, if we look out a couple of years, you know, any way to kind of quantify a blue sky scenario in terms of how meaningful of a revenue opportunity it could be as you kind of scale and roll out that service offering?
Yeah. So we're really leaning into having taken over a very large service business. As I just mentioned, the goal is not to develop a large service business, but we're leaning into it now here in the short term. We do believe it can deliver a very strong foundation for taking on new technologies, familiarize particular pharma and biotech with these technologies, lower the barrier to access, provide the clinical support, and then develop distributed solutions along the way. So we really see it as a sort of a short to midterm tactic to build for long term, getting the portfolio right.
Okay. Maybe just one quick on the guide. You know, I think you talked about there was some timing in 3Q and, you know, it can be a lumpy business, but the implied guide, you know, is kind of flat to maybe down a little bit quarter over quarter. Just talk about kind of what you guys are assuming from a sequential improvement, any budget flush in there at the end of the year, and anything else to call out as we think about the Q4 key revenue guidance here.
Yes. So we're focused on, again, still very early in our journey. We are focused on executing, driving our financial management, tight forecasting. We had a little bit of favorable timing in Q3. And so we stuck with our Q4 guide.
There are no assumptions or budget flushes in there, I wish. And so we're simply just focusing on the business. And the way we look at the business, not quarter to quarter, I know all investors are. I realize that's the situation all companies are in, but we really look at all these sort of as a 12-month trailing businesses and see what the long-term trends are.
And once we get over to these like year-over-year comps on the big accounts and then instrument sales come back, we're in a nice place and we'll forecast accordingly when we see it.
Okay. And maybe just the last 30 seconds we have, you know, we just love your updated thoughts on kind of the competitive environment, the Thermo Olink deal closed mid-year, you know, funding on the private side has dried up and been a bit tougher. You guys have the exciting Illumina partnership as we look out to 2025. You know, any kind of changes to speak out on the competitive front across proteomics?
So we believe we're exceptionally well positioned in the high-plex. In fact, we believe we're the only company that can scale meaningfully to high-plex. And then just on the broader M&A environment, we see a ton of opportunities out there, like valuable assets at deeply discounted rates. And we are busy every day going after those.
Okay. Perfect. With that, I think we'll stop and leave it there. Thank you.