Here we go. Hi, welcome to the Canaccord Genuity Global Growth Conference. I'm Kyle Mikson. I cover Life Science Tools and Diagnostics for Canaccord. Pleased to present this fireside chat with Quanterix here with us today. Quanterix offers a highly sensitive digital ELISA technology called Simoa for protein measurement. With the company, we have Masoud Toloue, CEO, and Vandana Sriram, CFO. Thanks, guys, for joining us today.
Thanks, Kyle. Great to be here.
Of course. So, yeah, let's start with the performance in the second quarter, which you reported last week. Good quarter, changed guidance a little bit. Just walk through what happened in the quarter, and maybe just how to think about the rest of the year before we go into some more details.
You know, I would agree with that, Kyle. Great quarter. You know, in a capital-constrained environment, the company is growing double digit. When customers have difficulty, you know, placing an order for an instrument, they come to us through our Accelerator program, and so that's been growing strong double digits and, really, has enabled access to the technology, and access to Simoa sensitivity. So that's been positive. It's definitely carried some of our growth. The capital environment, obviously, for a lot of tools players, has been difficult, but, in a lot of ways, Quanterix has had resiliency and has been, being able to go through, you know, a difficult time in the market. We're investing, obviously, we talked about in the company, in a, in several categories in, in growth.
We expect the demand for the sensitivity to continue and, you know, we're excited about where we see the business in the next couple of quarters.
Okay, yeah, I think, so product revenue, which is like what's been-- which is driven by instruments, consumables, that was like, I wanna say flattish, basically, and then the service side, that's what kind of grew and everything. So maybe what were the dynamics during the quarter, the second quarter, where you saw, you know, a customer that, you know, wasn't able to, like, purchase instrument or maybe as many consumables, like, just like, you know, directly, and they, like, maybe sent samples to your guys' Accelerator lab? Did you see that dynamic happen, basically?
Yeah, absolutely. We have customers from academia, biotech, pharma, and CRO. And so, in the biotech pharma side, where, you know, there might be difficulty in purchasing a platform, they come to us for services or a clinical trial, and that's been a robust business. That's grown pretty well. We saw an uptick in consumables as well, not as robust as our Accelerator program, but also an uptick quarter-over-quarter or year-over-year. Instruments remained flat. I think we anticipated the back half of the year to pick up on instruments. We're probably not seeing that, but we do, with the backlog, see demand on our Accelerator program.
So is the Instrument kind of, you know, revenue guidance, I guess, for the end of the year, where you think, I mean, it's gonna be kinda flat quarter to quarter for almost the full year, like each... I think it's like $2.5 million in revenue, basically, for each quarter. Is that, you know, is that normal? Do you-- I mean, I guess, what do you think is, like, a worse outlook for instruments and CapEx, the first half of the year or the second half of the year? Just what are you kind of seeing in your business, I guess? Do you wanna-
Yeah, I'd say the $2.5 million is, you know, on the side of the worse outlook from our perspective.
Yeah.
You know, in our past, we've placed up to, you know, 20, 30 instruments within a quarter. We've done about 16 a quarter for the last couple of quarters. You know, as we look to our pipeline and as we look to the interest we're getting on Simoa sensitivity, we see the demand for sensitivity, and we see that because we see a strong pipeline, good level of interest in inquiries, and in the Accelerator lab. However, what we're also seeing is a lot longer to close any of the deals that are in pipeline, which is why, as we looked, you know, five weeks into the second half, we believed it was prudent to assume that the rest of the year is going to look pretty much like the first half.
So that same $2.5 million-ish a quarter level, that has a bit of a knock-on effect on consumables, and we adjusted for that as well. But we fully expect that, you know, demand for clinical trials for Simoa sensitivity, especially in neurology, is going to continue, and we see that in our interest in our Accelerator Lab.
You know, Kyle, to put all of this in context, you know, five quarters back-to-back double-digit growth in a tool space. I think is pretty decent performance, and we continue to see visibility for, you know, resiliency at Quanterix.
Yeah. Two years ago, you had the redevelopment program, think, like, it was announced restructuring, and the goal was to get to, I guess, double-digit growth by 2024, and you had, like, all these, all these, you know, multiple quarters of it, like, going forward. So and, and you've had headwinds that you didn't foresee back then, obviously. So, like, it's going better than expected, probably, and obviously, the margins, like, there's been lots of... You've, you've exceeded expectations, I think, from that program. But anyway, the, you've launched. Actually, on that note, you, you're aiming to launch, like, 20 new assays this year.
Yep.
You have, like, updated assays out there, kind of getting those out in the field. You have, I think, 10% of customers have adopted those. It was 5% in the first quarter. Is that rate. Maybe just, like, start on that point. Is that rate of adoption kind of, like, in line with what you would expect, or is that kind of slow, maybe due to some of the macro issues we're talking about?
Yeah, you know, so those are two separate things. Two three years ago, we began a redevelopment program where we remade all of the old existing assays, and that was good for the assays that we remade. We extended shelf life, improved on-shelf, improved availability, all positive things for customers and for Quanterix. And now we're introducing them to the market, and there's been, you know, excellent feedback on that. At the same time, that work and activity was, you know, work towards building a product development engine. In other words, what are the key pieces and core machinery for being able to launch new biomarkers when we learn about them in the field? And how can we do that at a fast rate? In the past, we hadn't been introducing a lot of NPIs.
Now, when we talk about 20 this year, it's really a reflection on that product development engine and being able to put new assays in the market at a fast rate. We've got great examples for that this year. We talked about, you know, brain-derived tau, super exciting marker. You know, we launched that. It's been getting a lot of excitement. We have cytokine markers, which we plan to launch, will be part of that 20 set. And so we made a bold statement that, hey, at Quanterix, we have an innovation engine that's fired up, and we're gonna be delivering a lot of that innovation right in 2024.
Okay, yeah, so just on that note, brain-derived... So some of these 20 new assays, it's single marker assays, or is it, like, multiple together, a mix, maybe?
Both. So we already have the B brain-derived tau as a single marker.
Mm-hmm.
And in Q3, we're gonna be launching it as a four-plex, where that can give a sense of, you know, something else happening. Just to give you a little bit of perspective on brain-derived tau, and I actually—I didn't know this prior to working with our close KOL customers, but tau is available not only in the brain, but you can find it in peripheral sources. Brain-derived tau is a measure of only the tau from the brain. So you can imagine, as a denominator, how important it could be when it's paired with, let's say, a phosphorylated tau marker or how important it would be in a multiplex setting. So I think what we're—what you see us doing is that we had the single marker tau. We talked about the multi-marker.
Now we're talking about the future innovation engine, additional markers that are gonna add more sensitivity and precision to what's out there today. So it's, you know, our commitment to our customers is we're gonna be number one in neuro. We're gonna continue that leadership space, and we're gonna continue to bring markers to market.
The cytokine marker, you know, assay, is that, is that for neuro also, or is that for like, you know, infectious disease or like, you know, oncology, maybe?
So I would say the birth of that cytokine market is, you know, you look at amyloid pathology, you look at tau pathology. There's also a large group of folks studying neuroinflammation. And is it the inflammation that's causing the disease or, you know, is this symptomatic, and is this an inflammation pathway? And so a lot of the cytokines we look at are neuroinflammation markers, which are important in the neurology field. But there's also this immunology field where people want to measure healthy patients. And you're like, why would you want to measure a healthy patient? Because we're trying to identify the early cytokine cascade in a healthy patient as the patient, you know, progresses, you know, in a disease.
So identifying the early markers without symptoms is important, and we think this is gonna be applicable in neurology. So, back half of the year, expect there'll be cytokine multiplexes, additional exciting neuro menu, and really a push into adjacencies.
Okay. How much of the kind of transition to, like, the new updated assay is the... this whole 5%-10%, et cetera, number is that impacting the guidance at all? Maybe like, you know, is that kind of-- is the uptake happening slower, maybe?
No, I would say that's a non-event. I wouldn't, or a non-issue. I think that's more a function of our customers using old assays-
Mm-hmm
... doing longitudinal studies, and then us saying: Hey, you need to switch over to the new assays because of these benefits. And, and because they're doing a longitudinal study, we're allowing them to complete that study and then get them onto the, onto a new assay. So, it would, I would say, not affecting guidance, not affecting ramp-up. Our sort of guidance view on the back half is more closely related to instrument placements and pull-through from instruments.
The new assays, though, are margin accretive, though, I thought, right?
Correct. Yeah. Yeah.
Okay.
So, that's a positive thing for the company. As we do those conversions, we expect to see margin expansion.
Okay, well, sorry, what were you going to say?
Yeah, just, really just a clarification. This transition to new assays is not a demand signal. I think there's been some confusion about whether it's an indicator of demand. It's not. So if you have a customer that's using NfL, it's whether they're using the last generation or not of NfL or the Advantage PLUS. They're still using NfL, and they're still using it in the same quantities that they need to. This is really more about just supporting our customers through a transition, does nothing to the demand or the revenue line.
Okay.
Now, you know, certainly as they change, there's a little bit of margin uplift, which we'd be looking for, but no change to how we look at consumables demand.
Yeah, there's, I mean, there's probably implications on the pace of, you know, consumable usage, I guess, as well as the merger that we're talking about, but... And, yeah, it doesn't sound like a huge cause for alarm, basically, but-
Right
... that sounds good. So and then how about just investment for growth in general, like the diagnostic side? I think like for the year, you're gonna burn like close to $30 million in cash, I think is what the guidance is. And there was a, there's a segment of that, you know, let's call it $20 million or so for diagnostics in general. How are all these investments that you kind of budgeted at the beginning of the year progressing at this point?
Yeah. So at the beginning of the year, we'd given the framework of $20 million of diagnostic spend over two years, so call it about $10-ish million in the 2024 timeframe-
Yeah
... and another $10-ish million of investment in the research-use business, primarily towards new assay development, as well as development of multiplexity on a platform. So we're largely on track with those investments. You know, the research use stuff is moving along very well. We'll give an update on the platform towards the later part of the year. On the diagnostic side, clearly, you know, with the approval of the drug coming in a little bit later, some of those investments have naturally pushed accordingly. But we continue to focus on building our partnerships, and we've built a new sales force that's going after that.... so investment's largely on track. You know, we adjust the pace and speed of each of the investments based on what's happening in the market.
Okay, and then how did the approval of Kisunla, I guess, donanemab, like, the spending plan, basically?
Yeah, so one, obviously, super important for patients getting the therapy approved. Now, we have two therapies on the market that are reimbursed, and FDA approved. And, you know, I think, we're paying very close attention to adoption rates of the therapy. And, you can see that a lot of the partnerships that we've made are practicing neurologist hospitals, where these prescriptions are happening. We're also looking at reference laboratories, and then eventually, the view that this ultimately becomes, you know, something that's prescribed or, you know, first line defense becomes your PCP, and then it's a different type of investment that we make down the line.
And you announced recently some partnerships with, with health systems that represent, like, millions of patients, I think, access to millions of patients. Yeah, just, like, maybe walk through that. Like, like, you know, refresh our memory, I guess, and, like, what kind of an impact did that really have? And like, if that could be, like, the start of a big, like, you know, partnership model for you going forward, possibly with diagnostics.
Yeah, we, you know, we talked about, I think between the partnerships we announced in Q1 and the partnerships we announced in this last quarter, we're you know, these are hospital networks that access over 10+ million, you know, patients. And we expect in the back half to announce additional partnerships, and there, the idea is they're purchasing our HD-X platform and our, you know, research assays and putting together a laboratory developed test to service patients in that hospital realm. And so, you know, that, that's a key part of our partnership strategy.
Yeah. I guess, you know, in the diagnostics world, in the—let's say in Alzheimer's and really p-Tau 217 for the time being, it's almost like there's a, like, a race to who has, like, the most attractive partnerships and whatnot. It just seemed like recently at least, it seems like some vendors don't have the most scalable, you know, hardware usage-
things like that, and the sensitivity obviously is not, is inferior to yours, I guess. Like, how do we, like, resolve all the, all this, like, noise almost? And why should we remain confident in the Quanterix kind of, like, model, and that you're, you know, not even that you have to win, it's like you're gonna have a piece of this pie, and it's a big pie.
Yeah. I think that's the first way to start the question, is that we think that, hey, enablement and identifying patients is gonna have to be through blood. Clearly, the PET centers and the CSF centers won't be, you know, at sufficient capacities to be measuring people, and plus, it's a very invasive type test. So I think clearly we've established that blood-based testing is the future for getting onto the therapies. We have, you know, many pharma partnerships where we're working very closely in making sure these blood diagnostics are in the market, to be able to get more people tested and see if they're, you know, applicable or if they can get access to the therapy. I think when you look at the Simoa platform, you...
It's like, remember, it's important to remember that it's a digital platform and with which has exquisite ability to separate signal from noise. And so what that means is the sensitivity is incredibly high, and every patient walking through the door is getting a result. And that's not the case with other platforms. So you have to imagine that, you know, when we go to a laboratory or we develop a partnership, you know, whether you're, you know, low levels of pathology or no pathology to late levels of pathology, every single one of those patients gets a numerical result. Now, let's say you don't have amyloid pathology, and you want to come in in six months because you have family history. We can measure that and measure that over a period of time, and that's the advantage of the Simoa platform.
We can, we can provide a result to all patients. So I think when you look at additional partnerships, this is a key factor for why folks want to measure p-Tau 217 on the platform. The second key thing, Kyle, is that you have the high sensitivity in the platform, but then you need a commitment that we're gonna provide the latest innovations to that lab that's offering the LDT. In other words, what's next? And as we've always said, 217 is just the start for Quanterix. We believe we have the best p-Tau 217 blood test on the market. The second step is, can we improve upon that test? And we've done that with five markers. We've been able to reduce the intermediate zone.
You know, we think it's a stronger test when you add four markers to p-Tau 217, and we're running a clinical prospective trial to see if we can do differential diagnosis with that five-marker test. So we're already working on the next version of the test, and, you know, now, you know, when we talk about BD-tau, we're talking about, you know, gen 3, gen 4 additions to this menu.
Okay. Yeah, a lot of questions on the multi-marker, basically, so that the other test can get Breakthrough Device Designation? What's the data? I mean, there's, like, CANTATE, there's the Bio-Hermes trials. I think that was a little more towards the 217 side of things, but maybe that helps with the multi-marker as well. Then how do you think about the FDA approval over time for multi-marker, just given you're kind of investing now in 217, and then a year ago, you were talking about 181, honestly, so it's interesting how it's changed. So basically, just the whole multi-marker push now and what happens next.
You know, I love what you just said. It's like a fast, evolving market, and hey, when new markers are identified, and they're better than other markers, those markers are not used, and new markers are used in the field.
Mm.
So for a customer, you wanna have the ability to have access to the best in the market. And so for us to say, "Hey, we're number one in neurology," a lot of this field was built on the backs of Simoa and key our KOLs using the technology and the platform to get this data, and they continue to do that, and that's what the beauty of those new markers are. When you look at the p-Tau and the multimarker setting, we're able to, you know, reduce this intermediate zone and just provide this additional value for those customers. And it's like: Hey, I want the next thing. I want the next generation.
Okay, but just, like, the FDA kind of pathway for it, though, like, a breakthrough? Could it get—will that get breakthrough? Is that possible with the multimarker test? I don't know how that—
I think we haven't commented on that, but I think that's a possibility. So we submitted our p-Tau 217 for a FDA breakthrough. We're using CANTATE and Bio-Hermes to support that, p-Tau 217 study. And, you know, as we show additional data and additional work of improvement on the p-Tau 217 test, we'll talk about, what we wanna do,
Okay
... with the FDA and sort of regulatory agencies. But to answer your earlier point, Bio-Hermes and the CANTATE prospective trial are powering both the 217 alone and as well as the multimarker.
Okay. Yeah, no, it's just, there's, like, a lot... The question had, like, a lot going on in there, and that's why I was just like-
Yeah, yeah, multi-part question.
Yeah.
Got the last part.
So, and I think on the call, on the conference call for earnings last week, you were, you kind of—I mean, it seemed like it was just this, like, the trend or the kind of a new strategy around multi-analyte, and the data was finally out at AAIC, I guess. I mean, could the company sort of transition from the single marker tests to the multimarker? And I think I was telling you this last week, how, like, it's a little, like, almost there's some irony because, you know, low-plex company, Quanterix, is now focused on so much, like, the multiplexing is, like, the future, I guess so.
Mm-hmm.
I mean, what does that really mean if you're going from the single kind of markers to multi? And just talk more about why that's such an unmet need, basically, or, like, the demand for it in the proteomics research world, as well as biopharma.
Yeah, you know, I think the way to look at it is if you look at our 217 test today, we view this as, hey, the highest sensitivity in the market. And so 217 versus some of the other tests in the market, I think it's a clear winner. When you add additional markers, we see the test gets better, and we've shown this at AAIC. We talked about launching an LDT based on some of this data before the end of the year. This is real. The markers that we're adding to our 217 is A-beta 40/42, GFAP, NfL, on top of 217. And when we do that, as I said, we can reduce, you know, the zone by threefold, which has significant, not only clinical utility, but economic utility.
And we think that, you know, in a combination with the algorithm that we have, this is a differentiated diagnostic test, and there's obvious value there. That's part one. Part two is... and we're understanding this in the second part of our clinical trial: Can we do differential diagnosis? We know that today 7 million people in the United States have memory concern. 30% of them don't have amyloid pathology, but could have some other dementia, such as FTD, frontotemporal dementia, or Lewy bodies. With a multimarker test, can we differentially diagnose patients that don't have the pathology but still have the memory concern and point them, you know, to other, other areas of disease? That, I think, is an additional differentiation, that we're pursuing from a multimarker standpoint. We've been in this business for some time.
Getting back to your multimarker question, you know, large part of diagnostics is single marker still today. So there are very few multimarker analytes that, you know, have become a diagnostic. I think Quanterix is probably in the sense of diagnostics, blazing this trail. From everything we've seen, four to five markers has been a sweet spot in the neuro field.
Okay, okay. And then I think with reimbursement as well, you know, there's, it's ongoing for the, on the 217 , I suppose. And I feel like a few hundred dollars maybe, like, rates would be possible for that. Now, if you add in multimarkers, you know, you're adding on... is each additional marker, maybe, like, tens of dollars of additional payment, or?
We'll have to wait and see what that reimbursement looks like. I think you've got the sort of bookend ranges of maybe, you know, a single marker. It's hopefully two, three digits, you know, and, we will find out as we get, these priced. We have the CPT codes this year, and towards the end of the year, we should get pricing for those codes. But I think where you're going to is, you know, there's this, you know, single marker component, but then on a multimarker, if you can show clinical utility, and if on a multimarker, you have fewer people, reflex the PET, and you can save that $5,000 or $6,000 per PET or per invasive CSF scan, that's a real value to the payer, that's a real value to the patient and the physician.
If you can go beyond that and do differential diagnosis, there's some additional value there. An algorithm score with four or five markers should be reimbursed at, you know, a level that's an order of magnitude better than the single marker.
Okay, so given the, you know, your test can basically identify Alzheimer's, you know, 15 years ahead of symptoms, basically, which is definitely pre-Medicare.
Mm-hmm.
You're talking like, you know, private and commercial payers would be important for you. So you go to those folks with, like, a dossier of all this data and well, you know, all this stuff that you need, right? But you've done a lot of... You're kind of, not pivoting, but you're, like, expanding and moving around quite a bit from marker to marker. How can you leverage, like, you know, the past work that you've done with, whether it's 181, NfL, 217, to, like, help that dossier for multimarker eventually, maybe soon, with private payers?
Yeah, absolutely. I think we, you know, we start with folks who have concern or folks who have symptoms and, and do the test, and that's, you know, a beginning key starting point, and that's a big part of the market. And eventually, as we start to look earlier, we expand into, you know, areas where early identification, and, you know, as the drug safety profile improves, the drugs become combinatorial, we see better data on drugs working on, you know, very early stages, then that's transformative. I mean, if, like, you have a family history, and you could do something about it when you're young, it's the same kind of view with sort of, you know, resection or, you know, in, in colonoscopy, where you can do something about it.
If you can do something and identify it early, I think that that's a path for Alzheimer's that's real. But we're starting with the symptomatic scenario, where you go into a physician's office, and you have symptoms, and you need a test.
So it is a kind of CDx strategy, is the diagnosis path for Quanterix. It's not quite like just straight up clinical testing, like Randox.
You know, I don't use the word CDx. I think if you look at the two therapy labels on the market, it's sort of the physician must diagnose amyloid pathology to get onto the therapy. And so this is a clinical decision-
Gotcha.
- where folks are using guidelines to make therapy decisions. And so we're working with the folks making the guidelines, the regulatory agencies, the FDA, the European agency. We have an effort going on in China to be able to show that, hey, this correlates highly to PET. This correlates highly to CSF. It should be used as a confirmatory diagnostic.
Yeah. Okay, final question, you know, 2025. So let's say this CapEx kind of... Right, you know, these constraints are resolved, or at least the comp is better, hopefully, or at least it's kind of favorable. And then, you know, no diagnostic revenue. Let's just, like, assume for now. Do you know, what are some, like, you know, milestones, catalysts look forward to for Quanterix? Could cash flow break even on the RUO business be something that you could actually achieve or obtain next year?
Maybe I'll take the first half of the question, Vandana.
Mm-hmm.
Maybe you can talk about our cash flow breakeven target. So first, you know, I want to point out, Quanterix has been growing at double digits, so whether there's a capital constraint or not, our focus on investment in the business hasn't changed, and our outlook, you know, towards the company hasn't changed. We expect, and we're investing for, you know, strong double-digit growth in the organization. We have an incredibly robust and resilient research business, and I want to make that point, that this research business on its own, first of all, is, you know, heavily indexed to an area in neurology, where we believe neurology is, you know, that it's a neuro decade in the next 10 years.
There's a lot of work that's happening in the neuro field, and of the areas that are being invested in, there's a high index of growth opportunity in neuro, and Quanterix is part of that. The second point I want to make is that we're advancing into adjacencies. While 70% of our business is in neuro, it's been a lot of what we've been focused on, but the ultimate goal for the company to scale would be get a form-fit system and box into as many labs as possible, and that adds, you know, you know, people doing development in immunology and oncology, and that's a real scale play. And so we're looking at ways to increase the plex, and we're investing in the space from an innovation standpoint. And then the third is, we're continuing to build this infrastructure on the diagnostic side.
And, you know, whether it's through the partnerships or it's through our own LDT, it's the regulatory approvals and continued innovation on the diagnostic, such that when there is an uptick in therapy adoption, Quanterix is going to be a, you know, a leader in providing this testing format. So very healthy research business that on a standalone is doing well in this market and will continue to grow with a big opportunity on the upside from a diagnostic scenario.
Okay, thank you.
And just real quick on the cash flow point. The guidance we've given prior is a revenue range of $170 million-$190 million on the REO business. That logically wants to be, you know, closer to the 2026 timeframe. The way we look at 2025 is we will continue to invest in all of these priorities that Masoud just said. So we would still want to keep prioritizing those investments, while at the same time trying to get the research business to be as productive as possible. And then diagnostics will be on top of that. That's likely to be an investment for some time.
Okay. Thanks, Vandana.