All right, good afternoon. Welcome back to the 45th Annual TD Cowen Healthcare Conference. I'm Kyle Boucher, an Associate on the Life Science and Diagnostic Tools team. I'm pleased to introduce Michael Egholm, President and CEO of Standard BioTools. He's going to walk through a couple of slides as an introduction to the company, and then we'll get to some Q&A. Michael.
Sounds good. Thanks, Kyle, and thanks for the introduction. Welcome to everybody in the audience and everybody on the webcast. A special thank you to TD Cowen for hosting us here today. Standard BioTools was founded with a bold vision of setting a new standard in the life science tools industry. We want to empower researchers to truly get their research done now with this plethora of new tools that are emerging, all while rewarding all our stakeholders. Standard BioTools started a little more than three years ago, a $300 million commitment, a thesis of consolidation, a tiny team, and a completely blank slate. Now here, a little more than three years later, that vision actually feels more like a dream.
We're now assembled a world-class team, a portfolio of highly differentiated products, $175 million in revenue in 2024, and now in possession of a clean balance sheet with almost $300 million on it. Could not have imagined all the work that we have done here just three years ago as we started on the journey. What I'll do here today is, very briefly, I have a total of 10 slides. It'll go fast. I'll talk about our strategy, what we've done so far, and then what's next for Standard BioTools. I'll end on what I believe is the most exciting news and exciting next thing in the life sciences, which is routine human plasma proteomics, measuring the proteins in thousands of samples, 10,000 at a time. The biology, you can see I'm just about to unlock that with Illumina. Exciting times.
I've been told this should make the slide go forward, which it did not. Can I get the next slide? I'm going to be making a bunch of forward-looking statements, so I'm required to show you this. On the next slide, thank you. We're describing our approach. We operate as owners and act like investors. We are relentlessly focused on efficiency with SBS Standard BioTools business system. I'm going to come back and talk about it, about growing profits. We have a mantra inside the company: without margin, there is no mission. It all doesn't matter if there are no margins. We have a set of highly differentiated solutions, many omics of different flavors, all really well positioned. What I want to stress, though, is we are not an omics de jour. We're not a hammer looking for a nail.
We had a set of solutions that help customers solve difficult questions today. What we're trying to build here is a company, not a technology turned into a company. Next slide, please. Apologize for my voice. I'm just coming over a cold and earnings last week. We're obviously talking too much. Our strategy is attracting, consolidating, and operating. We have attracted a team of world-class operators, very deep scientific expertise. Several of us hail from Danaher. It's not the only place where you can go and learn to be a good operator, but it's certainly one of the best places to go and learn. We consolidate companies. We've done two major transactions today: Fluidigm and SomaLogic, and a tiny one, Sengenics. Now had $175 million in revenue last year and a healthy cash balance.
I like to think of us as the Goldilocks of the life science industry. All the big guys have grown big by consolidation. Now the companies we are looking at, the emerging technologies, are all too small for them to pay interest. Conversely, all the other players in the industry at subscale we like to think as being just the right size to go and execute here. We operate using the Standard BioTools business system. It is rooted in lean. As I mentioned, several of us come from Danaher, where we learned a similar system that has resulted in $110 million in operationalized cost reductions. We are targeting adjusted EBITDA positive in 2026. I am sure on the 2025 and 2026 revenue, you guys are going to come back and ask a number of questions. Next slide, please. I am going to show a couple of different snapshots.
Our portfolio here is the mix. We like to think of it as the value pyramid, higher gross margins up top. We are a mixture of consumables, instruments, and services today. We, of course, as most in the industry here, like recurring high gross margin consumables the best, but you do need instruments to drive those sales. We also have a considerable service business that allowed the technologies to get adopted. Eventually, we want to climb up organically and inorganically up the value pyramid here and get a mid-60s gross margin. With time, we do want to expand the pie here as well, going from where we are today in pharma and academia into other attractive markets. Next slide, please. I'm a little disoriented because the time is not running, so I'll try to keep good track of the time here.
We have a healthy M&A pipeline snapshot on the right between consumables, instruments, and reagents, criteria on the left. We're looking for innovative technologies, but we don't do science projects. A really, really simple question that we always ask ourselves is, can the technology that the company offers, does it solve a problem for which a customer is willing to pay for today and that we can make money on? It sounds so simple. Trust me, a very large fraction of the companies that we talk to get filled out just asking that one simple question. Next slide. Once we acquire a company, and that's what we did with Fluidigm, SomaLogic, and now in the process of doing with Sengenics, we take them through the SBS Flywheel. We set a clear strategy. We do the critical few. Conversely, a bunch of things we decide not to do.
A lot of the cost savings come from that. We do a lean transformation, both in operations, but really across the company. Once you've been one tour around, we continue going with continuous improvement, or as we call it in the lean language, kaizen. With this methodology, we have delivered an impressive scorecard. You can see the financial metrics here: 22% OpEx reduction, 33% improvement in EBITDA just in the last year. Equally impressive and actually more relevant to the customers are our improvement in on-time delivery, industry-leading 98% versus 78% two years ago. We are taking our complaint rate and cut by 50% two years in a row for fourfold reduction. As lean operators, we look a lot more about that because that is what predicts future profitability. Customers like it, cost us less to make. Next slide. Just recapping the journey here.
Fluidigm, we finished three years ago in April of 2022. We leaned it out. We brought it back to growth. A year ago, we brought on SomaLogic, almost through the complete integration process here, taking out an additional $90 million in OpEx. Very late last year, acquired a tiny little company called Sengenics, but highly complementary technology to SomaScan. For 2025 and 2026, we're excited what lies ahead for our additional M&A. Next slide, please. Back to our portfolio. 80% of our portfolio is in proteomics. It's an exciting place to be, very strongly predicted. A couple of reasons why it's exciting to be here. One is CAGR mid-teens predicted for years to come, despite whatever noise there is in the system now.
The reason why there's so much excitement about proteomics is that when you study the proteome, in particular the plasma proteome, you can predict the onset of disease, the response to drug, and eventually transform how we develop drugs today. That is in sharp contrast to the genome, which is interesting, has brought us pretty far, but it is a static picture, except in cancer. The proteome gives a dynamic picture of where we are today. You will need multiple samples. The real barrier to doing proteomics has been measuring enough proteins. We measure 10,000 proteins at once with a CV of just 5%. You cannot do this with antibody-based technologies. There is a block of a couple of thousand proteins that you simply run out of good antibodies. It is not a competitive statement, although it is, but it is also a technical fact.
You run out of good antibodies to work with. We can keep going. With that, on the next slide, we are at an inflection point where there are now, that's the middle bar here with the two curves, a flat line and a line that falls off, that now there are five different studies out there, a couple of them in print, showing that our technology stays flat with high precision and the leading competitor technologies fall off a cliff.
At the same time, we're seeing on the left, there's a list of references there where companies such as Novo Nordisk in Nature Medicine in December published a study on GLP-1 receptor agonist of semaglutide or Ozempic, where they showed not only how the drug works, but other mechanisms than the ones expected that it acts on, and maybe even more interesting, the possibility for smaller and faster clinical trial. Two of the pieces here. The third piece we have been missing, but we get now is with our partnership with Illumina, where today, if you want to use our SomaScan, you have to set it in for one of a few service labs around the world. Now, when Illumina in the first half of this year launched their distributed solution, you can leverage the amazing network and infrastructure of sequencing that Illumina controls.
Those three pieces together will finally unlock routine human plasma proteomics. Could not be more excited about that. On my last slide, I just want to, there we go. I just gone through, like as a hopefully like a little bit like a blizzard, but gone through what we set out to do, what we have done, merged two businesses, changing the product mix. We developed SBS and have leveraged it already. We're now ready for phase two of this here. Ready for takeoff. Four to six additional bolt-on acquisitions, shifting the product mix further up the value pyramid, and then deliver a profitable lean enterprise. We're well on the way, and we'll set EBITDA positive in 2026. If this is the first time you have heard the Standard BioTools story, I thank you for your attention and hope I piqued your interest.
Thanks to all of you here online and in the audience for your attention. I will look forward to the Q&A.
Thanks, Michael. Great. All right. Michael, I wanted to start with sort of a high-level recap of 2024. 2024, another difficult year for the tools and markets, several macro factors weighing on budgets for capital equipment. That said, it was a big year for Lab. You completed the merger with SomaLogic back last January. I guess, can you take a moment to reflect, I guess, from a high level, how did 2024 play out versus your initial expectations? I guess what went right, what went wrong in your view?
Yeah. If I take a step back, I could not be more excited that we did the SomaLogic acquisition and merger.
Maybe starting from the high points and then maybe hit a couple of low points also along the way. Truly, the most exciting piece is that we did believe in the SomaScan platform. We believed it had a place in the proteomics landscape. Now with these three points I just showed, all the big data showing just technological superiority and really what looks like a defensible moat, all the scientific evidence and the application of proteomics, and now that Illumina no longer has a technical barrier, did not work a year ago when we re-merged with SomaLogic, all those pieces, that is, I feel lucky to be sitting excited. We are, of course, adding a ton of other work on how we talk about it, how we position ourselves to the outside world. That was definitely very much on top of my list.
Secondly, we set out an ambitious goal of taking out $80 million OpEx over two years. People called me a fair number of names when I said that we were going to do that. Not only were we able to do it, but we were able to do it in less than a year versus the two years we had planned. Definitely a high point. What we had not fully appreciated coming out of 2023 was the slowdown in pharma spend. I think we missed some signals because now talking to my peers, they were seeing it in 2023, but we were doing so good with the turnaround of what was fluid that we got blinded to a little bit. That was a big miss.
On the Soma side, we had a few accounts that just happened to have done very big studies in 2023. They acted as a really big year-over-year bad comp. We have not lost any of those customers, and I am sure they will come in the future and do additional studies. Even more exciting, below that, we see really big fast uptake in the SomaScan technology.
Got it. Okay. Maybe just one sort of longer-term question. When you announced the SomaLogic acquisition back in the fall of 2023, you set out a goal for $300 million in total revenue by 2026. At the time, it was a robust 20% annual growth rate beyond 2024 at the time. Since then, end market dynamics have been pretty challenged.
That being said, in your view, how do you think investors should think about the long-term sort of algorithm for Standard BioTools from here?
Yeah. No, great question. I am thinking back to when we announced that in October of 2023. It was a reasonable assumption given what we were looking at. I would say before I sort of just dissect it a little bit further, when we created Standard BioTools here, having a thesis of consolidation that you needed a platform and a team of seasoned operators, I believe way more in that thesis now than I even did four years ago. I left a fairly nice position at Danaher at the time to go pursue that. Absolutely no second thoughts on the need for what we are doing.
As I just said, we had our view on the future was skewed a bit from the very strong instruments growth we showed in 2023, and we were sort of blinded to the complete hold in CapEx. Actually, I think we fared better than several of our peers in it, but we were still down 27% on instrument last year. It's not as much fun as when you grow 46% as we did the year before on instruments. And then because we did not have really good forecasting on the SomaLogic side, we missed this $20 million headwind year over year from the big accounts. Other than that, it was actually an okay year. To be quite honest, as we were rolling into JPM, we felt really bullish about the year. We were happy, like all my peers, that 2024 was over.
We now had a series of additional challenges from mostly policy related that have sort of cast another net over the industry. Again, just back to my earlier point, if the thesis was correct before, now in this backdrop, I believe it is even more important that we consolidate, that companies such as ours exist.
Got it. All right. Maybe just diving into some of the details of the business, the Illumina-SomaLogic relationship is a pretty big area of focus for Standard BioTools, Illumina's protein prep product, NGS readout of SomaLogic SomaScan. I think you talked about this year, it is supposed to come out this year, and maybe the ramp being sort of a little slower in 2025, this being sort of a transition year.
How should we think about the ramp of that product and anything you're hearing from maybe early access customers and what they think?
I really genuinely believe I'm the covered genomicist who have now converted to whatever proteomicist. I don't know what I went by the end. I believe in the value of proteomics. I don't think there's any technology out there than plasma proteomics that will inform about a study of disease. It's not the only one, but it's by far the most important one. Us and Illumina coming together at this point in time where all the stars align is exciting. It is a pivot for the Illumina sales force. We are helping, doing the best we can to help on how you sell proteomics, which is not the same way as you sell genomics. It is a transition year for here.
Launches never go like you want them. Usually, a few quarters. I certainly hope we're going to hit it right out of the chute, but we don't plan on it. To the exact timing of the launch, I'll let Illumina talk about it. What I did say in our earnings call last week is that we believe this is the next billion-dollar market opportunity. I truly believe there is a market not dissimilar to NGS once plasma proteomics become routine. The combination here is the first time that that's within reach. It's not the end. It will follow a technology development curve very much the same way as NGS did. We'll see just how plastic that market is.
Got it. Okay.
Staying on Illumina-SomaLogic, recently there was a large proteomics study announced using a competitor to SomaLogic, but at the same time, Illumina also announced a pilot proteomics program with the U.K. Biobank in biopharma collaborators to analyze 50,000 samples. I guess, do you think there will be more of these large proteomics projects going forward? I guess, how is SomaLogic positioned to maybe capitalize on these?
I'll sort of answer in last to first here. First off, the answer is we're exceptionally well positioned. You've seen the bag of data. There are five different studies out there. It's going to be one of the easiest sales in the world. What we do need to do is explain and show the value of detecting 10,000 proteins versus a few thousand. That's a legitimate question that we have to answer. As for biobanks, you won't get an argument for anyone.
When you go on these big fishing expeditions in the big data sets, more is better. It is really that simple. In some pharma use cases, you can argue whether it's one or the other. As a scientist, more is always more, measurement is always better, but always the question of if it can demand the extra value. As for the U.K. Biobank, biggest cohort out there, 600,000 total samples. It's an important study, a ton of important clinical data associated with it. Historically, SomaLogic did not engage with the scientific community broadly and more specifically ignored biobanks. They saw it as a low gross margin and not really of interest for its strategy. I'm not pointing fingers at my predecessors. That was probably a good strategy. As we came in, we did our strategic review. Remember, step one in SBS Flywheel is a clear strategy.
It became crystal clear to my team and I that we needed to engage with the biobanks. We have done that across. We will see who wins the next big projects as we come along. As for the U.K. Biobank, my competitor had already done a pilot that we had stayed away from. I believe at AGBT last week, I actually saw somebody that walked through the entire process. Even despite we've been completely absent from the conversation the last several years, it was very close. Even more exciting is that together with deCODE and Illumina and three pharma companies, we are doing 50,000 samples. It will be some of the same samples that our competitor is doing. I can't wait.
Right. Right.
Moving over to your M&A strategy, which is a key focal point of Standard BioTools, your strategy is to bring other underappreciated/mismanaged assets within life science tools to bring these great technologies under the Standard BioTools umbrella over time. In the deck that you just shared, you noted four to six deals in the next couple of years. Do you already have the pipeline that gives you the line of sight into four to six deals? I guess, how ready is Standard BioTools to do more now?
Yeah. The snapshot I showed is the actual pipeline and obviously much more behind it. We run a rigorous process as we mature the opportunities here. Yes and yes, it is all there. Yes, we are ready. We are just coming out of this massive transformation that we did on the SomaLogic side.
Some heavy lifting, I don't want to belittle that. Taking out $80 million in cost is not simple and a fair amount of work and, of course, heartache on where you cut and what you keep. I feel we're really well positioned with well functioning all the back office functions. We're now revamping our whole commercial arc. I'm leading it for the interim as we're transitioning here. I believe we are extremely well set up. M&A is a finicky game. You will only know about it when it happens. Typically, it takes a couple of times before you actually get there. No different with actually with either of the deals we have done. We did a little token acquisition. I haven't decided whether I'm counting that or not yet, but in the four to six interval.
What's really interesting about that technology was that others had invested massive amounts in it, but we found the perfect home because it's a perfect complement to the SomaScan technology. A little bit of luck, we can find a few more of these, but we're also looking for new vectors and entirely new products in that mix.
Got it. Digging in deeper to that, I guess, what are the criteria that need to be met in order for you to be interested in a potential M&A target?
A little bit tongue in cheek, sort of gave you my simplest question. Does the technology solve a problem somebody is willing to pay for and can we make money on it? It sounds so simple. It really is the first order.
An appropriate gross margin profile, I know what we can do with SBS and we can unlock. I also know we can't do miracles. Getting like the so it's not what it is, but it's what it can become. Secondly, for the bolt-ons, it's got to be a profile where we can use the leverage we have, the whole infrastructure, certainly commercially, back office. When things are good, we can also do R&D and manufacturing synergies and leverage. Even if there's not that, we can always come in and apply SBS and unlock further synergies to that. That's how we think about it.
Got it. Let's zoom back out a little bit again. I wanted to ask on your academic customer exposure, which you talked about during your earnings call last week, given the volatility around NIH and funding, the new administration.
I guess, what are your initial thoughts on how your academic customers have viewed recent volatility? And can you remind us what Standard BioTools exposure is to this customer class?
Yeah. It's definitely, as I said, walking into JP Morgan, we felt pretty good, including the very first day of JP Morgan. Just the news on export regulations, NIH cuts and grants and tariffs and all this sort of whole series of news. We took our time to digest it. We decided not to just flesh out something. We worked very methodically through it. We shared it last week in our earnings call, sort of walking through it on export regulations and tariffs. The upshot is we're not really affected. We'll maneuver around the tariffs.
The biggest headwind we see for the year is the cuts that may or may not come in the NIH. We only have limited exposure to NIH, less than $10 million in revenue. There will definitely be an impact on that. Our analysis tells us that there is going to be a broader impact on the Americas or U.S. academic spend. We are modeling at our midpoint a 15% decline year over year. That is versus what we actually thought was going to be a healthy growth. Quite a big cut we have baked in. Obviously, it will be hard to place instruments if the grants are not being reviewed or not moving forward. Even consumables, we think there are going to be some temporary headwind because many of these are project-based and you already have the core directors being careful with spend.
We haven't seen it yet, but all the discussions we have had echoes. I think you guys sent out a memo from AGBT and others as well. Everything I read resonates with what we have heard. We take a measured approach. Again, just back to it, our thesis remains. It's not fun. I wish we didn't have that. For a number of reasons, I wish it was not that way. If anything, the need for a company like ours only gets amplified in situations like this.
Got it.
Just one quick related. Why are you scaling up your NIH to the broader academia? What else are you seeing in academia? Who are those academic customers? Is it like DOD and NSF? Who else is in the other category?
Yeah. The way the ecosystem works for each university is very different amount of NIH money.
There's a net set of money missing from academia. We have already seen there's a bunch of graduate students and postdocs that haven't been hired. What we have seen is sort of hesitancy to commit to spending money, etc. I think it's definitely broader. I wish it was only constrained to NIH, but for all we are seeing, it's going to be broader than that. The NIH funding is a big part of U.S. academic funding. You cannot just remove that money. All the indirect spend, universities probably consider those general funds. Some universities are going to be just fine. They've used endowments, a lot of private funding. Others is going to be a complete disaster for. Yeah.
Okay. Got it.
All right. I guess with a minute left here, Michael, what do you think the most underappreciated and misunderstood part of the Standard BioTools story is? What are investors missing a t this point?
We are building a company of exciting technologies. We now have our crown jewel asset, the SomaScan asset, upcoming launch with Illumina. We have a team of seasoned operators that are taking out $110 million OpEx over the last couple of years and have the ability to do that. We have a clean balance sheet, almost $300 million, $295 million December 31st. Virtually note that we have a great setup to execute in this turbulent environment.
All right. I guess with that, anything else from you, Dan?
Maybe I'll sneak one last one. In pharma, such a big component in your business. Pharma, a lot of customers have been talking pharma spending sounding better.
Are you seeing that? I know you just reported last week, but what's kind of baked into the guide for 25 or 40?
We're seeing some good growth in pharma. We're seeing capital budgets coming back. When I sat on the earnings call yesterday, I'm not ready to take a victory lap or call it yet, but it's encouraging. We certainly hope it, and we certainly need it. Yeah.
Okay. Great. We'll migrate with that.
Michael, thank you.
Thank you.