Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Quanterix Corporation Q3 2020 Earnings Call . At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at the time. If anyone should request assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference call may be recorded. I would now like to turn the conference over to your speaker today, Mr. Amol Dhavale, Chief Financial Officer of Quanterix. Please go ahead, sir.
Thanks, Annie. Good afternoon, everyone, and thanks for joining us today. With me on today's call is Kevin Hrusovsky, our Chairman and Chief Executive Officer. Before we begin, I would like to remind you about two things. We had few problems with Business Wire today, and hence the earnings release can be found on our website and also on StreetInsider. Today's call will be recorded and will be available on the investor resources section of our website. Today's call will contain forward-looking statements that are based on management's beliefs and assumptions and on information available as of the date of this call. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements.
Forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The risks and the uncertainties that we face are described in our most recent filings with the Securities and Exchange Commission. During today's conference call, we'll discuss some financial measures that are not presented in accordance with U.S. generally accepted accounting principles or non-GAAP financial measures. In the Q3 earnings release and in the appendix of our presentation, which are available on our website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to comparative GAAP measures. We believe that these non-GAAP financial measures provide investors with relevant period-to-period comparisons of our operations.
These financial measures are not recognized under GAAP and should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP. With that, I would turn the call over to Kevin Hrusovsky.
Thank you very much, Amol. I will start off on slide three of the deck that's on our website. I am going to review the strategic and financial progress the company's made, starting first with some of the key advances in Q3, and then ultimately describing the vision and strategy, which continues to evolve very comprehensively. Let me start with slide four, where we're showing publications. As you know, about three, four years ago, we really started on a key focus of showing the world about how non-invasive early detection could lead to a real game change in healthcare. We now are up to nearly 1,000 third-party peer-reviewed publications, and there's been over 368 biomarkers run. On the right-hand side, you can see that Alzheimer's already has surpassed where we were last year in publications. There's some pretty key things that have gone on here.
Simoa p-tau181 has been shown to be highly specific for Alzheimer's and allowing cohorts to be enriched and to eliminate frontal temporal dementia. Serum neurofilament light chain levels have been able to reveal 16 years before dementia in familial patients, Alzheimer cascades, which that is a real early detection opportunity. Serum NfLs continued its evolution in multiple sclerosis disease progression, and even it's found its way into COVID in some of the publications showing that if you lost taste and smell and neuro function, these scientists have been able to measure it with our NfL. There's obviously a lot of excitement going on right now around aducanumab from Biogen as being another key market mover in this whole landscape of neuro products. The next slide basically illustrates our continued revenue ascent.
As you know, we pivoted towards really putting a lot of focus on our accelerator to support overall customer activity, given some of the issues that we know are out there with customer labs during this pandemic. You can see that we've already surpassed significantly our full-year revenue from last year with the third quarter results, and we've now run 128 phase I through III drug trials inside of the accelerator. You can see our instrument placements continue to evolve, mostly again, focused on neurology, but we're beginning to see expansion in oncology and certainly at some point we'll start to see some in infectious disease as well because of our pivot into COVID and trying to support the world aggressive battle against COVID.
On a total revenue basis, you can see that we have surpassed last year's revenue as an entirety, but there are some one-time, very large wins that are incorporated into our third quarter revenue, which we'll detail out. Even without that, we grew 22% in Q3 versus last year's Q3. Without significant COVID tailwinds, we're pretty excited that we're offsetting most of the COVID headwinds with this performance. Some of the big wins in this past quarter, given the advances and our focus on neuro and the CAC pivot. CAC stands for COVID Accelerator China pivot. You can see that the Alzheimer's drug trials momentum has really kicked up, and we have a lot of customers that are running trials. We launched this p-tau181, also a 4-Plex that is being utilized in many Alzheimer trials. Those have further advanced our position in this important evolving landscape.
We also had the approval in Q3 of a Novartis drug, Kesimpta, MS drug approval. It was a secondary surrogate endpoint. The normative study showing what NfL levels do between age of seven to 70 has been completed in Switzerland, will be key to anything we do moving forward around getting the FDA to sanction NfL as a disease progression marker. Hopefully, for a single-site in vitro diagnostics, will be our pursuit primarily in 2021. In the COVID arena, we won $18.2 million in Q3. We'd won the initial grant of a couple million for feasibility in the end of Q2, and then we were rewarded to scale this antigen test up, which is showing incredible utility in blood, dried blood spots as well, which is the area that we think can eliminate a lot of the personal protective equipment and potentially even enable home care sampling.
We're really excited that the National Institutes of Health has seen the potential in this test and has invested aggressively in scaling us up, which we also see the benefit of scaling up can also help us with a lot of the trials that we're running in our research side of our business, both in neuro and in COVID. We've secured and already have begun major institutional review board, investigative review board, studies with one of the largest payers in the United States for COVID, running five different IRBs at the current moment inside of our Accelerator lab.
In addition, the Accelerators we've shown has grown, and we've built our China position, recently naming a new general manager of our Asia Pacific business. The HD-X performance continues to evolve and improve, which is a key to our strategy, and we continue to get trade-in revenue as well as new system sales.
You may have seen the major announcement around Abbott, where we have a non-exclusive license with them now, which pretty significant advance given that Abbott is one of the premier big three. We were able to do it in a non-exclusive way with major upfront payment. I think there's a $10 million upfront payment for this license. Longer term, they will try to deploy and bring out instrument platforms to have Simoa inside. We also were very successful raising capital this quarter, $100 million. Once again, one of the largest up rounds that we've had, plus we've continued to advance post that rounds with many of these major announcements. When you look inside of our revenue, when you remove some of the one-time effects, you can see here that we had very strong Accelerator lab growth, which is what we had pointed out earlier.
This was for two reasons. One is COVID, and they are using our labs. Two is we had a lot of HD-X transitions where there was validation work going on in our customers, and they were utilizing our Accelerator Lab, which we don't pull out the consumables, but a large portion of that revenue would be consumables utilized in the laboratory for the Accelerator support of our customers' trials. We did get back to instrument growth and consumable growth in Q3, which we find to be a real productive advance. You can also see that on a full year basis, we have continued to evolve. We certainly are over a lot of the Q2 challenge, but on a full year basis, you can see our mix is now about 40% consumables, 40% services, and about 25% instruments.
When you look at the actual geography customer disease demographics, you can see that our growth was actually strongest in Europe, but North America was close second in Q3. This is actually the 12-month trailing revenue. You can see that about 60% of our revenue is coming via pharma biotech, and it continues to grow rapidly with all these trials, particularly in the neuro sector and also beginning in oncology. You can see that from a disease specificity standpoint, we're still mostly neurology, but oncology is coming up very rapidly, particularly with a lot of the trial work going on in the Accelerator. Now, looking strategically, we've talked a lot about moving the life sciences and the medical landscape into a digital opportunity for measuring enzyme-linked immunosorbent assay.
Digital ELISA is a lot of what we've done, and this chart depicts, slide nine, how we've increased the sensitivity by 1,000-fold. We've recently announced four months ago, another 100x, and we've got a prototype that we're rolling out. That's really probably a year and a half away from being fully deployed, but this is a big advance, allowing us to reach down underneath of what the traditional levels of sensitivity were to see new proteins of relevance, and then to reduce the invasiveness of the testing and the samples with the sensitivity to increase the total addressable market. This is, we think, going to lead to a fairly significant revolution in proteomics with this deployment.
We are moving, as you can see from the right-hand side of the slide, from high invasiveness liquid biopsies, cerebral spinal fluid taps, spinal taps, as well as even radiation from imaging, down to really non-invasive early detection. The protein, once again, we believe, captures many of the environmental triggers. There's a lot more proteins than there are genes, and we think they're much more phenotypic, which makes them highly relevant. We're really advancing the field of proteomics with this sensitivity and creating a lot of translation, not only in these drug trials, but ultimately, we believe, for the clinic. This slide is a slide we've used for really five years to depict on the X-axis when you can detect a disease.
You can see that cancer and neurology are all the way over to the right, and they're typically very much the latest stage lethal diseases to be detected. You can see how many publications we now have using biomarkers to get at an earlier detection. Depicted on the bottom, you can see Simoa moves the concentration detection levels to levels that you can see these diseases much earlier. On the Y-axis, the invasiveness, once again, by creating the sensitivity of Simoa, we can reach in and see answers in blood and saliva and urine that you couldn't see without really invasive procedures.
That combination is really what we believe is allowing us to shift cancer and neurology, even COVID and infectious disease, further to the left and earlier in lower invasive testing, which we think in the end creates significant TAMs and opportunities to disrupt the way medicine's practiced. The initial deployment of this sensitivity and this capability is to help drug companies recruit better cohorts of patients that are more specific to the disease and the drug that they're actually trying to get approval, and to get cohorts when the disease is earlier stage, when it's easier for a drug to be effective. That also allows lower dosing, which allows lower toxicity. The combination of higher efficacy, lower toxicity, leads to a 300% improvement in the areas that these biomarkers are deployed.
On the right, you can see the number of CRO instruments now that have been placed, 55 of them running these phase I through III trials. Over 1,000 have been run across these CROs, you can see that we mentioned earlier, 128 have been run in our own facilities. This is just a slide that shows how rapidly the adoption has occurred for the Simoa technology. We really had no revenue about five years ago, we have really accelerated rapidly with the adoption of these drug companies for this purpose. We did mention earlier, Novartis' new drug with a secondary surrogate endpoint that was presented at European Committee for Treatment and Research in Multiple Sclerosis using our NfL, neurofilament light assay. Roche also had an approval, utilized our technology as a secondary surrogate endpoint in MS as well. These are good test cases further validating the utility of this technology.
Just for NfL, you can see that when you have a brain trauma or neurodegeneration, what happens is the proteins, NfL, they actually break down from the neurons and the axons on the neurons dying, and those neurofilament light then goes into the cerebrospinal fluid. You can see on the right-hand side that it actually crosses the blood-brain barrier, but at a much lower concentration. We can see NfL levels at two to four picograms per ML versus them being almost 50x-1 00x more concentrated in CSF. This enables the correlation. There's many publications now showing that correlation, which has allowed then a much less invasive way to look at brain health. We're now actually looking at dried blood spots from finger pricks, which is even a less invasive sample. These are pathways for measuring NfL.
You can see on the left-hand side of this chart, the traditional way of doing a spinal tap, which is $10,000 per procedure, very painful, very invasive. You can see that there's a lot of biomarkers that they would have liked to have measured via the spinal tap, but most people won't accept that for a drug trial. We've been able to move many of these markers into serum and plasma, as evidenced on the right-hand side with check marks. Most of these now, except for the ones in black, have already been shown in publications by these various researchers around the world, as well as the pharma companies on the right have use cases seeing these biomarkers in blood. Almost 100% of the publications utilizing, particularly NfL, are all done with the Simoa technology and also Uman now, we acquired them a year ago.
It's their antibody pair that is also utilized. 100% of those publications are showcasing both us in the antibody as well as in the instrument. Now, this is a game-changing slide, but 2x , in the last 18 months, we've been publicized as having technologies that have been able to see Alzheimer's very early in the cascade. On the bottom left, there's a publication where NfL showcased 16 years before symptoms on familial patients that had genotype that they knew when they were going to get dementia based on their genes, and then they ran trials, and this NfL was able to reveal it. There were several technologies deploying p-tau217 that were able to show as early as 20 years. You can see there was a lot of publicity this year around the p-tau series.
In the middle, we had some publications come out, game-changing one on p-tau181, which we've now launched, that actually shows a correlation in blood between the images of amyloid as well as the images of a tauopathy. Images of tau of the brain, images of the brain for amyloid, have been correlated to p-tau181 in Alzheimer patients in blood, and that's what is shown on the bottom is the correlation between the CSF of 181 p-tau and blood. On the right-hand side, the advances that you've been hearing and reading about from Biogen is clearly advancing the drug, and they have increasing the dosing of aducanumab reduces the level of the p-tau181 in the cerebral spinal fluid.
The reason for the arrow going over to the left is that correlation from the cerebral spinal fluid into blood, which we think longer term creates a lot of promise around a blood test that could be used as a screen to help move patients into drugs that get approved for Alzheimer's. It's not just using these technologies to get drugs approved, but then it's going to be an opportunity to monitor their progress with the drug as well as someday maybe even being health screens. The NfL, the number of trials continues to expand, particularly for MS, multiple sclerosis, but it is being utilized, as we've mentioned already, in Alzheimer's as well as TBI, traumatic brain injury, in MS, as well as ALS and frontal temporal dementia and Parkinson's.
We've also pivoted, as we mentioned, into COVID, and it really kind of started with the recognition of this cytokine technology. We have to measure cytokines and see cytokine storm earlier. Many of the researchers in the hot zones used our technology to reveal that and to predict it, to help stratify patients that were going to go serious versus be able to be stable. We then got a lot of interest from an outside payer group to build a serology assay, which we've done. The number one area that we're really focused right now is on an antigen test, which we've mentioned that the NIH discovered this and helped us and are helping us now fund this and further scale it.
In the category four on the right, interestingly, NfL as well is going to potentially play a role for long-term disease impairment that COVID could be creating for many that haven't even really had symptoms other than maybe loss of taste and smell. There's a lot of interest in all four of these categories of our biomarkers, someday we think there could be a comprehensive look at the disease, looking at these different biomarkers for each patient. Ultimately, we see a lot of research opportunities because there's a lot of questions that haven't been answered on this virus. What level of antibodies, when the vaccines come out, are sufficient to prevent infection? How durable will those antibodies be? What's the role of the innate immune system? How fatigued will the innate immune system be as a result of COVID?
Many of the payer groups are very concerned about the long-term implications, and we think our research is going to reveal some pretty important tools for that research. This is just a slide showing how challenging it is today to measure whether someone has the virus, particularly before symptoms. You can see that it's estimated in some publications that the false negative rate, meaning that you're told that you don't have the virus if you don't have symptoms, can be as high as 80%- 90% of the time when you actually have it, you're told that you don't because of sampling error of the virus onto the nasopharyngeal. Seeing it in blood could represent an opportunity, and that's a lot of the focus that we've brought to this. We're also looking to try to expand the window of being able to see the virus.
There's new interest as well as checking therapies and seeing if the antigen level from our measurement come down as the therapy is applied in blood, which is potentially an endpoint opportunity for drug trials and therapy trials in the future. We're excited about that opportunity as well. Working with the FDA around moving to less invasive samples, though, is a challenge, and it represents a lot of effort. We've got great relationships with the NIH as well as the FDA now, and we are very happy that we're trying to advance the ability to see this effectively in less invasive samples. Someday, home care, we think, will be a great place to be testing and pulling out samples. We may not actually do the test there, but we'll do the sampling from home and then get the answers from centralized labs.
This payer group advance is pretty important for us because they're really looking for outcomes, and early detection can change the way they deploy healthcare, and it also can be a way to improve outcomes by getting to diseases earlier and lengthen life. Across all of the different categories, starting with COVID, we are really excited about running these IRBs for the payer groups because it can represent a whole new way for the value chain to capitalize and leverage the opportunity that our biomarkers with low invasiveness, early detection, potentially home care, could represent. Where there's known biomarkers in therapy in places like MS, diabetes, COVID, we think that can be deployed now within these healthcare groups.
If there's a known biomarker but not a known therapy, there's a lot of members we think can get into drug trials to help get early detection of members with these disease cascades to help these drug trials. Then finally, where we are going to monitor with a payer group, their membership, and the biomarkers over a long period of time. As diseases come into that payer group, the membership group, we can look back and see what biomarkers could have revealed that. That could really be a great way for biomarker research to occur. There was a lot of news this past week with respect to Exact Sciences buying Thrive. It's a chance to evolve, I think, Exact Sciences from a primarily genetic position to also looking at proteins.
We do think, as we mentioned earlier, proteins are very important. There are some specificity challenges with certain parts of CancerSEEK that added sensitivity can enhance. We've been just looking at the proteins that they have in their algorithms and some of the level of detection that they have, and we believe that there could be opportunities to utilize technologies like Simoa to further advance more sensitivity in these critical proteins that you can see here. Then for breast cancer, the ones in red on the right-hand side are some of the most important proteins for these algorithms. By having a lot more sensitivity, we think it could further power the improvement of these kinds of technologies.
We really are excited about Exact Sciences moving to the protein, and many of the liquid biopsy companies are also looking to augment, like Freenome, their protein positions with their DNA positions. This is a visionary slide that tries to illustrate for our investor group just how TAM get increased, the addressable market, using sensitivity. The greater the sensitivity, the earlier you see disease. That in itself, we already had pointed out, creates the ability to use this technology for very exciting ways to see disease earlier. The less invasiveness, going from cerebrospinal fluid to blood, then to, let's say, a dry blood spot or even saliva, that increases the TAM. The ability to multiplex takes away sensitivity, so the more multiplexing you can do, the more disease specificity you can create.
The more sensitivity you have, the more you can create utility for these biomarkers. You also can dilute samples to eliminate matrix effects to allow the false positives and false negative rates to improve dramatically. The ability to dilute can create a lot better specificity in the technology. Finally, the ability to quantitate versus just say that a biomarker is there, instead of being qualitative, being quantitative. We think that in the area of research, particularly for serology, how much of those antibodies is actually there for an individual patient versus the amount of virus, and being able to quantitate those, we think adds a lot of advantage. This slide just illustrates that there's been a lot of movement in the genomics landscape over the last 25 years for very good reasons.
The genomic revolution started with sequencing, next-generation sequencing, and has led to a lot of really productive companies with many value-added assays on the right-hand side. We just wanted to showcase that in the protein world, Quanterix straddles the end of this pipeline for proteins, and we're doing a lot of drug trials, as we've pointed out, primarily in brain and in COVID areas currently. As you see, those different proteins do find their way into IVD products, like the Siemens, the Roche, the Abbott, the protein products in the laboratory developed test labs, as well as health screens. We've set up, we think, a lot of good non-exclusive relationships with many of these companies on the right-hand side to further advance the technology and create greater opportunities for it to advance.
We think that moving to the right, like what we see happening with Thrive and Freenome with the protein, is a real important opportunity for this entire landscape. We're very excited about a lot of the interest to further fuel proteomics, even with upstream technologies, and allow more to advance downstream. When you look at our TAM, we see it as a $1 billion TAM, primarily focused at COVID, $200 million, and neuro, $350 million. This is on the research side of our business. As we've been saying, longer term, we want to continue a 30%-40% CAGR in that growth, in that landscape. We are deploying to the right, now, the COVID and neuro, trying to find pathways for things like the Alzheimer's and MS in the neuro.
Even in COVID, given the NIH's support of us for the antigen, we're looking at possible ways to help the world and the nation for the COVID opportunity. There's about 1,200 proteins we showed early on that have evolved into about 200 proteins on the right-hand side. Longer term, we think that this protein revolution really hits, there could be as much as $90 billion, based on some consulting research that we're having done right now. Ultimately, maybe as many as 1,000 proteins could find their way if you could expand them into diagnostics. In summary, going back to the telephone, going to the iPhone, we've seen a lot of advances in the computer systems on the top, and certainly, we've watched the genomic revolution just bring a lot of value to investors.
More importantly, it's transforming the way patients can look at cancer and look at many of the ailments they have today, and there's been a lot of advances occurring. We think that the proteomics wave and that front has a real opportunity over the next 10 years, and we're really excited to be having an opportunity to advance that. What I'd like to do now is turn it back over to Amol to talk through more specifically our finances. Amol Dhavale?
Thanks, Kevin. I'm going to provide you some additional financial details about our Q3 2020 performance. I'll be referring to slide 49. As Kevin noted, our GAAP revenue in Q3 of 2020 was $31.4 million and included $11.2 million revenue in connection with our non-exclusive license agreement with Abbott and $1.9 million revenue from our Rapid Acceleration of Diagnostics phase I award. Excluding these non-recurring items, our non-GAAP Q3 2020 revenue was $18.3 million, a 22% increase versus prior year Q3. Instrument revenues increased 8% and consumables revenue increased 9%, despite challenges in accessing customer sites for installations and customers facing interruptions in their operations due to COVID-19. As previously discussed, we had proactively expanded our accelerator services capacity to support our customers sustain their research and clinical trials. This drove 56% increase in service revenue, which finished at $6.6 million.
The RADx phase II contract that we entered into at the end of Q3 did not affect our Q3 results. Year to date, total revenues are $60.2 million, excluding the Q3 non-recurring items previously discussed. Non-GAAP year to date, total revenues are $47.1 million, a 15% increase. As previously stated, we are not providing the revenue guidance. We do expect to see RADx phase II contract revenue of about $6 million per quarter and associated cost of about $5 million per quarter over Q4 2020 and first half of 2021, which we will continue to exclude from our non-GAAP financials. Across Q3, we have seen demand progressively recover in U.S. and Europe.
However, a second wave of coronavirus may force renewed lockdowns, resulting in challenges such as limitations in accessing customer sites to complete installations and drop in consumables utilization due to interruptions in certain customer laboratories. On a non-GAAP basis, Q3 gross margin was 51.5% versus a prior year Q3 gross margin of 51.8%. Q3 2020 gross margin includes a 190 basis points negative impact from our successful HD-1 trade-in program. Our non-GAAP gross margin excludes the impact of the non-recurring Abbott license agreement and RADx phase I award, as well as non-cash acquisition related purchase accounting adjustments relating to the 2019 acquisition of Uman, thus providing investors with a relevant period-to-period comparison of our operations.
We believe we have a significant opportunity for gross margin expansion in future as we evolve the mix towards high-margin consumables and accelerator services businesses, scale our overall business, and reduce product costs. On a GAAP basis, our Q3 gross margin was 67.2% and was favorably impacted by the Abbott license agreement and RADx grant versus prior year Q3 gross margin of 47.1%. Our GAAP operating expenses totaled $18.8 million in Q3 2020, and non-GAAP operating expenses, which primarily exclude non-recurring expenses associated with our RADx grant revenue, totaled $17.5 million. During Q3 2020, we raised $91.4 million in net proceeds through our public offering and use of cash was restricted to $7 million through proactive working capital measures. The balance sheet is in good shape as of September 30th, with approximately $173 million in unrestricted cash.
Overall, we are very pleased with our Q3 2020 performance and progress made on our strategic priorities. We remain focused on continuing our recovery to strong growth trajectory in the remainder of the year, despite the continued challenges brought on by the coronavirus pandemic. With that, I will now turn it back to Kevin Hrusovsky.
Thank you, Amol. I would like to close, Amol, on slide 50 to just illustrate that as we've been saying from the beginning, we have an incredible employee group, as well as a large ecosystem of thought leaders and many investors that have actually supported us in creating demand by working with many of the pharmas that they have stock positions with to help create opportunities to get drugs approved in the pipelines of many of our customers. This slide just illustrates it on the left-hand side. As we've said, we are mostly a research business today. I'd say 95+% of our revenues really are coming from this research side where there's no real regulatory or reimbursement risk, and we feel like it's a solid place to create value for investors with a great backstop.
There is absolutely, we've been calling it an aspirational opportunity to start to migrate into diagnostics, and COVID has enabled us a showcase opportunity to help the world with our incredibly inspired employee base, but also, further demonstrate what this technology can do and help us advance into many of the different disease sectors that we know our technology can disrupt. This slide just shows that we have a very formidable market opportunity, as we've outlined, and we think we're rivaling, and creating a new category with our sensitivity in proteomics. We have been penetrating this market and that we can see being $1 billion today of TAM, but evolving very productively into a very large TAM numbers, as you can see on this slide.
We also are better linking the deoxyribonucleic acid and ribonucleic acid to the protein, trying to get a better map of where the protein links up with the DNA and RNA, particularly looking at these protein modifications that the disease triggers and environmental factors are creating. 19 of the top 20 pharma have now deployed our technologies, and thousands of drug trials run phase I, phase II, and phase III, almost 1,000 peer-reviewed publications really validating this technology. When we look at the penetration opportunity, we think it's a significant razor/razor blade opportunity. We have a lot of consumables. We've invested significantly in our products and will continue to, advancing our sensitivity another 100x and continuing to evolve with off-the-shelf kits that allow our customers to get to a very large menu of proteins for measuring.
We have an incredible board of directors that have been through this over the years. They're very instructional and very bought in and very much skin in the game, very much excited about this opportunity. There's a real track record amongst the board and the management for commercializing disruptive technology. With that, we'd like to open it up for, I know it's a busy day today, a lot of earnings releases given the election this week. We're going to open it up and see if there's any questions.
Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press star and then the number one key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, press the pound key. We have our first question from the line of Puneet from SVB Leerink. Your line is open. You may ask your question.
Hi, Kevin. Amol, this is Scott McFarlane on for Puneet. Thanks for taking my question.
Sure, Scott.
Kevin.
Hey, Scott, you're breaking up.
There we go. Thought I was on mute. Kevin, I'm sure you saw the initial positive stance from the FDA on aducanumab from the recently released briefing documents. I was wondering if you can comment on maybe how this might impact the pace of new trial starts in neurology more broadly, and if you believe it'll encourage the use of neurology assays such as NfL and p-tau in these trials.
Yep. Great question, Scott. Obviously, this has been a very challenged landscape for the past 10 years, trying to get an Alzheimer drug across the goal line. When we entered four years ago, we brought the hope of objective markers versus the subjective markers, looking at such things as how long does someone with Alzheimer's, how long does it take them to traverse a maze at a hospital, being somewhat of a subjective measure to more of a concrete, objective marker of a biomarker in blood. We had a vision around that possibility, then the FDA created guidance about three years ago under Scott Gottlieb to actually have biomarker guidance to recruit patients pre-cognitive impairment. If you could show and validate that the biomarker was clinically relevant to the disease cascade, you could utilize that to actually help support your data.
I'm intrigued by this particular advance that it does look like p-tau181 in cerebrospinal fluid has played a nice correlative effect of increasing the dose, reduces the level of p-tau181 in the cerebrospinal fluid, as we commented on an earlier slide. I think that the fact that there is some level of biomarker usage occurring, even if it's in CSF, creates an opportunity because of all the correlative work that's been done in the last four years in blood for this to become a less invasive opportunity. I think that we are looking at many pharma companies in general, looking at the amyloid thesis that was almost being shot down as not really being a relevant thesis.
I think that some of the enthusiasm that's going on with Biogen right now has created a little bit of a resurgence to some level of support for the amyloid thesis. I think there's still a lot of questions. I think there's tauopathy is another area of opportunity. In general, we're seeing a more vibrant pharmaceutical base based on this news. Obviously, this is creating downstream of opportunities for trials. We do think that this is a great moment. We don't know how sustainable it is. It'll be interesting to see how this progresses. Biogen is one of our top customers, as is many of the companies in the neuro landscape. Many of the investors that own us, like I said, they own pharma companies that have neuro pipelines and have been making those introductions, and that actually helped our growth.
I do think that this is a good moment for this opportunity, but we don't know how sustainable it is, and I think even downstream, if a drug ever does get approved in Alzheimer's, which there hasn't been one yet, it could evolve like MS, where there's today 16 different approved drugs. Then the question is the drug that you selected for multiple sclerosis, is it working for you as an individual? NfL is a great neuro marker to determine neurodegeneration. If it improves, if the level of NfL comes down, that means the drug has got efficacy in the MS community. Same would be true in the Alzheimer community. We believe that there's evidence that neurodegeneration would slow down if a drug could be effective in the area of Alzheimer's.
Downstream, how do you get people into the drug more efficiently than imaging and/or cerebral spinal fluid taps? Hey, a blood draw could be a good first level screen. Secondarily, it could be a way to monitor disease progression and drug efficacy. I do think that for companies like ours, it does help create a lot of new interest and excitement for the possibilities.
That's very helpful. I want to move my second question on the RADx program. It was really great to see you guys move on to phase II of development there. I was just wondering if you could describe what the next couple steps are in the process, if there's any timeline you would provide here, and just to kind of remind us where you expect the product to fit in the current testing paradigm for COVID-19. Thank you.
Sure. Yeah. First of all, I would say that we feel very honored to have been discovered by the NIH, and our relationship there has continued to evolve to the most senior levels, and they've been incredibly productive, as had the FDA, where we haven't really had a lot of interactions with either of these two agencies until COVID really started to reveal the possibilities of our exquisite sensitivity playing a role to help. How we evolve at this point has been interesting. It started out with a feasibility study. Our data looked very promising, and as a result of that, they invested and are investing in scaling up our ability to make the kits for this antigen assay that ultimately could be deployed, we believe, in blood. We're initially trying to prove it out in nasopharyngeal.
We got really good trials underway that are showcasing this technology's sensitivity and capability for some of the traditional sample matrices. We ultimately think that the blood, and maybe someday even saliva, and I think the NIH is interested, saying, "Can you also pool where you can run multiple samples?" Their interest is to scale up significantly. I think one area of promise, or at least of concern, and we hope that we can play a role, is in the asymptomatics. When children started going back to college, that's when the testing really started to move from those that had symptoms, when it's easier to detect when you have the symptoms, the virus, to those that don't have symptoms.
Unfortunately, it's much harder to see this virus when you don't have symptoms, either pre-symptomatically, meaning that someday you will have symptoms and you're just getting it early, or some of those that get the virus never do end up having symptoms. Being able to improve false negative rates and improving, even longer term, after the virus has gone away, the false positive rate of some of today's testing is a key area of opportunity, because you don't want people thinking that they don't have the virus when potentially they do, and if testing is creating some of that precision challenge, you want to get in there and correct that.
We actually think that the timeline here is one of very aggressive nature from the NIH, hoping to scale, but we're trying to stay very conservative and take all the right steps and make sure we don't get our head ahead of our skis on this to make sure we're taking all the right steps with the agencies to ensure we've got something that is really robust and is going to really be able to help. Again, we're working with the FDA as well as NIH on that scale-up, and we will be launching research assays from the antigen and the serology over the next couple months that can be utilized by researchers to really begin to get a better understanding.
I actually think these drug trials and therapy trials, whether it be convalescent antibodies or whether it be remdesivir or different antivirals, being able to see whether the virus, the antigen, comes down in blood will be a key opportunity, we think, to help create some endpoints that might be better than just how long is someone in the hospital, is this drug improving the amount of time they're in the hospital? There's a lot of those types of opportunities, and the ability to quantitate as well as maybe to stratify who's got a more serious illness are all opportunities that we're trying to reach into, but it's too early for us to make any kind of conjecture around how this will translate.
It's an interesting development, and I can assure you our team of people in our company is incredibly inspired, working around the clock to try to advance this as fast as possible to try to help not just the U.S., but around the world, we've got interest in these technologies.
If I could just slip one more in on HD-X, the instrument upgrade cycle there, I know that was a big part of the story coming into the year. Could you just bring us up to speed there? Should we expect a re-acceleration of placements as academic customers return to labs and things begin to normalize? Do you still expect to convert about 50% of your HD-1 customers? Thank you.
Absolutely. Amol, you might want to follow this one up with just a description of the mix of trade-ins versus new purchases. To start off this answer, Scott, this HD-X is something that we're putting a lot of emphasis on. It's fully automated. You put in blood or saliva or whatever the sample matrix is, and you get out the answer. It's fully automated, and we have a lot of our customer base saying, "You know what? Your automation and getting the same answer every time, and the throughput that you can get on the HD-X of about 1,000 samples per day, if fully utilized," I think it's probably better for planning purposes to look at 500-750 samples per day.
That capability of having it fully automated and creating that throughput for a lower cost antigen-type test that's got a lot of sensitivity and precision, we actually think that this could create more demand for the HDXs as we move forward, either in research or if we further evolve into diagnostics. We would try to utilize partners, third party, I'll call them more like LDT labs that have infrastructure. We're going to try to evolve our HD-X deployment for at least the COVID landscape to either research customers or customers that have experience using this platform to give it just a higher level of performance and utility. I think in general, that's going to lead to new sales, either in research use only, and the neurology trials is just another area where we think there will be increased interest in buying HDXs.
Overall, it's just another area where we think there will be increased interest in buying HDXs. Overall, I think that the numbers that we cited going into the year are not going to be way off relative to trying to get to half of our installed base being HDXs of the HD series by year-end. Amol, anything you can add here?
No, I think you summarized it really well, and we will get exceedingly close to half of our install base with HD-X.
I was going to also comment around trade-ins too, Amol. That was a question that we were getting. I wondered if you could give a sense of the margin implications, because I know it's a good thing in the long term, but it'd be good to just discuss that.
Yeah, sure. Scott, as we've discussed sort of before, right, when we do trade-ins, we're basically offering an instrument at a discounted price, still above our cost structure. It's a great thing for the business, because it's going to drive a lot more utilization and a much more reliable platform, and going to expand our consumables revenue going forward, right? What happens because of that dynamic is, the gross margin, when we do this trade-in, gets sort of temporarily suppressed, which creates a drag on our gross margin. It's a great problem to have, because it creates a longer-term, better customer satisfaction and an expanded consumables utilization going forward. We continue to see a lot of interest from our customers on HD-X trade-in.
Because the way sort of grant processes and federal budget cycles work, we expect some of that trade-in volume to continue into Q4 as well as initial half of 2021. We can move to the next question.
If there's any other questions?
Thank you, sir. We do have another question from the line of Chris Masucci from Cowen. Your line is open. You may ask your question.
Hey, Kevin and Amol. Thanks for taking our questions. This is Chris on for Doug today. I apologize if you addressed this during your prepared remarks. I think we're juggling about eight earnings calls this afternoon. First, maybe just to follow up on the prior question, I think you were previously targeting 75 HD-X and SP-X and SR-X systems this year. Is that still the plan? Are there any bottlenecks in terms of being able to get an instrument shipped and installed in the current environment?
Yeah. I would say in general, Q2 was obviously a major headwind. We still have a lot of risk around what happens with this virus moving forward. Does it affect and shut down any labs? We're starting to see the potential of some closures in our European operation, which those can affect our ability to install. I do think that the overall numbers that we cited going into the year for HD-X still feel pretty productive, given some of the new opportunities that we're focused on. Amol, did you have other thoughts on this question?
Yeah, no, I think, Chris, you picked it up correctly, right? In our Q1 earnings call, we had stated 75 HD-X and 75 SR-X plus SPXs. At that point, we had reduced it from 90 before and also reduced the 50% to roughly 40% mix. We are still in line of sight with those numbers that we had shown during our Q1 earnings call. As I said, we'll get really close to 50% of our install base in HDX by year-end, provided we don't get disrupted by the second wave and associated lockdowns. If things continue to stay where they are today, we have a good line of sight to get to those numbers we shared during our Q1 earnings call.
Okay, great. Maybe just moving on to Abbott. What timelines have you committed to regarding development and commercialization of a product, and how much of that is in Abbott's hands versus yours? Well, I'll just leave it there and ask my follow-up after.
Yeah. I would say that we've not communicated any details. It's a very minor level of communication around this relationship, except to some of the financial terms. I would say that they're incredibly motivated by what Simoa can do. I would expect that this is going to lead to them deploying this technology into some new form factors sometime over the next several years. It's a longer-term opportunity, but for us, it was a big validation to be able to achieve this on a non-exclusive basis in a market that really has three premier large distributed IVD players. To give an opportunity for our technology to evolve inside of other channels to market. It's a $22 billion landscape across these large three or four diagnostic IVD houses. To establish this foothold is important. Again, we have a very strong relationship with the Abbott team.
We've been working on this for a couple of years, and they have a new CEO and a lot of excitement right now around this opportunity, which I think could bode well for us in the long term.
Thank you. There are no further questions on the line. I'm turning the call back to Mr. Dhavale. Sir.
Pass it back to Kevin to close our call.
Sure. Yep. Hey, thanks so much for everything that you guys have done with us, the investor group. We look forward to further evolving our discussions, our performance, and our story. We're very committed to driving growth in this landscape and feel very honored to have a chance to be working with all of you. Stay safe out there, and we'll talk soon. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.