Good afternoon, ladies and gentlemen, welcome to the Quanterix Corporation Q3 2019 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 that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. Now, I would like to turn the conference over to your host, Amol Chaubal, CFO. Sir, you may begin.
Thank you, Lance. Good afternoon, everyone, and thanks for joining us today. With me on today's call is Kevin Hrusovsky, our CEO, President, and Chairman. Before we begin, I would like to remind you about a few things. Today's call will be recorded and will be available on the investors 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 the 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 will discuss some financial measures that are not presented in accordance with U.S. generally accepted accounting principles or non-GAAP financial measures. In the press release and in the appendix of our presentation, 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 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 will turn the call over to Kevin.
Thank you very much, Amol. We're going to go through three top items here. First, like to talk about the Q3 highlights and then how we are stacking up versus our 2019 goals. Finally, like to discuss the incredible momentum we have in neurology and the upcoming PPH Summit that will further amplify our momentum. Let me start with the Q3 results. We're pretty excited to report that we had very strong growth, 41% on a GAAP basis. There was a one-time collaboration revenue last year from Abbott that does, in fact, when you remove that one-time revenue, our growth was 62%, which is a very formidable level of growth. Most importantly, when you look inside to see how we grew, it further bodes well for our future.
We also had, if you remove the one-time effect of the collaboration revenue, which was a very high gross margin, we once again have significantly ramped up our gross margin by over 500 basis points. We're really excited about the continued momentum on both revenue top line and our bottom line gross margin improvement. One key factor that I think came up a lot in our last quarter conference call was the HD-X and expectations in Q2 that we would probably have a fairly significant instrument miss. In Q2, you might remember we had a very strong Q2, and we further pointed out at that time that we have a lot of diversity of instruments, and we feel pretty confident that we're going to be able to continue driving instrument growth.
I think what you're going to find is that we had once again, I think each time we've launched products, we were ahead of schedule. We were actually able to launch the HD-X in Q3, and it was a significant momentum build, and you can see in a moment just how strongly our growth occurred in instruments. We also completed the acquisition and closed the Uman acquisition of NfL, by far the leading biomarker for neuro health that we can see around the world that can be viewed in the blood. We also raised more growth capital. I think we've raised nearly $120 million year- to- date. We're really excited about having a very strong balance sheet for growth optionality. We also had this continued involvement with all of our key thought leaders around the world and at ECTRIMS, which is a conference focused on multiple sclerosis.
We just dominated the meeting. There was 50 publications all coming from Quanterix usage of the Simoa technology and the NfL. This is clearly unparalleled level of growth of publications and validation. I think several of these were from the largest pharmas in the world on phase III trials, which again, we did project this forward about a year ago that we thought that we would be able to create these kinds of momentum for NfL, and that's occurring. I think most importantly and most exciting for me is this next item, which is that Tatiana Plavina , who's an 18-year veteran from Biogen, who did a lot of the game-changing NfL work and did a lot of the work even for the Siemens agreement that was put in place about a year and a half ago between Biogen and Siemens for serum NfL.
She decided a few weeks ago. We're really excited to have her on board. It's going to help us further accelerate our ability to try to go for analytical and clinical validation of NfL with the FDA. Finally, we completed just this week, actually, a major deal with NfL, with Siemens. First of the big three to team up with us to utilize our NfL coming from the Uman acquisition just literally two months earlier. We also announced the Techne supply agreement for our antibodies. You can see right out of the gate, we planned on this being primarily a defensive investment, but as we also pointed out, there would be opportunities for offense. Clearly, we're landing strongly on the offensive side. This next slide, I think, is a pretty important one. Goes into the growth breakdown.
When you look at Q3, you can see once again, across all three categories of our revenue, we had very strong momentum. When you look at year-to-date, I think the thing that is probably most compelling and represents a long-term major growth catalyst is that our instrument growth has been 70% year-to-date. We had about three years in a row where we were stagnant on instrument growth, and we launched a lot of new instrument platforms and form factors, and that is a significant move on instrument growth. Obviously, the consumables continue to keep growing. On the left-hand side, too, I just want to point out that the gross margin move, which again is somewhat unparalleled and unprecedented to be driving year-to-date almost 600 basis points of gross margin improvement. Next slide just goes back to the longer-term vision.
We said we would disrupt this industry with this technology. I think you probably have been watching publications coming out around tuberculosis and obviously on the NfL for neuronal health. Everywhere you look, you see publications coming out. A lot of the vision that we've had for five solid years now is to use digital biomarkers to see disease earlier in its disease cascade and then to see it non-invasively. That's a sea change in the way the healthcare system could be practiced. Because if you can see these diseases long before symptoms, it makes them much more treatable and someday, we think, preventable.
This slide is our vision, and we're primarily focused on neurology and oncology as our primary targets because those are the diseases that are most lethal and are discovered today very late stage via symptoms, and by the time you discover them, many times it's too late to do anything about it. This next slide just shows that the way in which we're capturing that slide that we just talked about is through what we call sensitivity. It's the ability to see in the blood and to see at a level of sensitivity that no one else in the world can see. By doing so, we're able to get onto proteins at baseline healthy levels. Any movement from baseline represents the disease cascade's trigger. We've been talking about this for several years.
This is a very disruptive capability, and the Powering Precision Health Summit was founded around that principle that sensitivity can transform the healthcare system. Our view here, with these pie charts, is to show you that we're starting in neurology and we're evolving into oncology with the launch of the SP-X. Ultimately, we've always said that we would go back into diagnostics. I know one year ago, we did get all the rights back from bioMérieux to enable us to unleash and unlock value in diagnostics. Up until then, we could not because it was an exclusive that bioMérieux had. We're pretty excited now that not only do we have this momentum in neurology now and moving into oncology, but we now have the rights to unleash and create value longer- term in what we consider to be the biggest market opportunity.
Siemens' move to do a license with us on NfL represents kind of our first major agreement in this IVD landscape since we got the rights back from bioMérieux. We're pretty excited that we're now stratifying this, and this is a non-exclusive deal, again, showing the leverage capability of our technology, meaning that we still have the rights to license that NfL technology to other large diagnostic houses. Going back into the research piece of our business, I would like to illustrate that we are continuing to grow Asia and Europe faster than North America, where we've had our traditional largest installed base. We launched a lot of form factors that we felt would play right into that part of the world, smaller bench-top, lower price point.
You look at the customer growth, you're going to see that academia has been growing almost at 100% this year. This is product growth, and this is an important point because this is where our publications come from. A lot of companies don't realize how important publications are to fueling the growth of a business. A lot of our form factor designs were going right after academia to help with those publications. Because pharma, while they create a lot of value and a lot of profitability and a lot of growth for us and are our primary users, many of the academics are on their scientific advisory boards at those pharma customers and are guiding them into how to utilize these biomarkers for drug development. We see this as a very forward-looking way to grow the longer-term value creation of the company.
Academia growth has been pretty significant, and our overall revenue year-to-date from products is about 50/50 split between academia and pharma. When you look into disease categories, you can see that neurology is still a very significant piece of our value creation, and that's our focus. We know oncology has got a much bigger, longer-term opportunity with all the liquid biopsy excitement that there is with many of the companies in the landscape. We know that many of these companies are looking for blood-based markers. Even companies like Exact Sciences, who have built an incredible franchise based on measuring free DNA in stool, have talked a lot about the need to someday migrate to a blood-based system. We think that that's further validating a lot of our capability by having the most incredible capability to see sensitivity in blood.
This next slide is our strategic roadmap. We start with publications, and the Powering Precision Health Summit, which is coming up again in November in Barcelona, is a way we incite and create a lot of inspiration for these publications. You can see that they continue to ramp very positively, and the number of biomarkers being run in our systems continue to ramp as well. We do have a home brew approach where customers can design their own protein assay with our technology, and that actually creates a pipeline for future growth. The accelerators where we run services and actually create demand for our instruments and get paid for it's our highest gross margin business right now. It continues to grow very nicely. You can see now we've run 81 phase I, II, III trials in those facilities, and that's a significant ramp.
In the instrument category, you can see where our growth actually back in 2016 was negative and then 5% and then 48%, and then now you can see we've ramped that up very productively for future growth of consumables on the right-hand side. I think that there was questions in the last two quarters, and we tried to illustrate that when we saw this huge ramp-up of our consumables year to date in 2019 versus previous years, we knew we were going to be growing the 40%-50% level. This significant step-up was partly due to a major trial that was being run by Novartis, and we did explain that then, and we're trying to illustrate this with the shaded area here. Overall, when you look at that consumable growth, we've also been upgrading our instruments in the field.
We knew that 2019 was going to be a more productive utilization just because we've been improving these instruments coupled in with the one-time effect. You can see, there's a very steady growth and acceleration of growth in our consumables, which again, is a great testament to the technology actually being used. The next slide just illustrates, again, we've got three sources of revenue. We're on Slide 10. Instruments, we've got now three of them, HD-X, SR-X, and SP-X. Assay kits, we've got plates and the bead-based. Finally, the accelerator services are our three revenue sources. Again, we're really proud on the next slide that we were able to launch early the HD-X, which is an unparalleled ultra-sensitivity machine that's leveraging close to 10 years' worth of experience.
The productivity improvements coupled in with its flexibility and temperature control, we think set a whole new standard for delivering disruption in a technological form factor that is reliable. This is key. We began shipping in Q3. In this trade-in program, we're doing everything we can to accelerate that. The more HD-1s we can get out of the market and replace them with HD-Xs, we know HD-X is going to create a lot more consumption of the consumables. We're doing everything we can with a lot of prudent investments to try to get that installed base changeover. It could put some pressure on gross margins for a while, but we think that's a very intelligent investment to keep this engine going for transitioning our installed base.
We know the early access with several of our customers on the HD-X in Q1 and Q2 was very favorable, so we're really excited. The next slide is just a repeat that we've shown each time. What is it we're focusing our investment funds on to get better at? You can see we're continuing to focus on multiplexing, menu expansion, and the overall economics of our technology. Sensitivity will always be our focus.
The next Slide 13, shows all the strategic goals that we laid out for this year, starting with neurology, then oncology, and then strategically moving into diagnostics and the potential that we have longer term for diagnostics, and then our financial performance, as well as going for 100x improvement in sensitivity to go after the next generation of proteins that we already have been able to identify in the cerebro spinal fluid. Across all five of these categories, you can see we're in green. We've had another incredible year- to- date on hitting every one of these key goals for the year. Next slide just repeats the fact that a lot of the secret sauce of our technology and the way we've deployed it in research is to help drugs get approved.
By seeing disease earlier, you're able to then get a drug at under a lower dose and less toxicity to be effective, more so than if you catch the disease too late. This is leading to a 300% increase in probability of a drug being approved if it gets a phase I approval if they use biomarkers. You can see on the right-hand side, these CROs are all diving on this, and just one CRO alone has had over 650 clinical trials for drugs. The next slide shows you all the logos of the companies, really most of this has been over the last 24 months, that have now seized the technology and trying to utilize it to help both progress drug development and drug approvals, as well as better understand how biomarkers are affected by different drugs.
The FDA has actually issued guidance to support this, and they're now supporting biomarkers as being a better way to get drugs approved than to reverse symptoms. In the area of Alzheimer's, you probably watched the Biogen announcement where they lost a lot of value several months ago when they said that the aducanumab anti-beta amyloid drug was being pulled because data was not sufficient. When you looked at a broader set of data that included earlier disease and mild cognitive impairment, you start to see that they're now very bullish on that opportunity. We think it further validates, they're one of our largest customers, the importance of utilizing these technologies in the drug development processes.
Next slide just illustrates that there's a lot of abundant markers that you may not need our technology for, but by using our technology, you can increase the overall quality and lessen the false positives and false negatives. You can also, from a very small sample, get an answer, and then you can multiplex. Our overall goal is to move from the left side of this, which is our research-based, over to the right side, where we are actually running this for trials to get drugs approved. Ultimately, we think there's a clinical opportunity where the dollars are largest. That's where Tatiana is going to be helping us, as well as the different investments we're making around trying to get our biomarkers, starting with NfL, clinically validated.
The next slide just shows you how much excitement there is in the pharmaceutical industry for the NfL. There's 46 active clinical trials, and you can see that we're really honed in on three areas where NfL can play a role. It's primarily right now, multiple sclerosis, but ultimately it's going to also be in TBI. There's two active trials right now where NfL are co-primary endpoints for drugs for concussion, and then also Alzheimer's, we think ultimately is going to be an interesting opportunity for neuronal health and the impact of Alzheimer's on neurons in the brain. The next slide just shows that there were several phase III trials at ECTRIMS and the actual specifics of the drugs that were utilizing NfL.
The Slide 19 just is a repeat slide that shows you that 100% of the publications that are done in blood are based on the Uman antibody pair that we now own and have just licensed to both Siemens and Techne. In addition, no, I'm sorry, we licensed it to Siemens, and we are supplying it to Techne, and we did supply Siemens as well in Q3. On the right side, you can see that we actually, for several years, looked for antibody pairs that had the specificity of Uman, and we could not find it. We're really excited to leverage this around the world to help patients with mental conditions around the world with the technology. Already talked about the Siemens, which is the next slide in that route, that important announcement.
It is interesting to note that there's 1 million patients with MS just in the U.S., and there's a recommendation that someday that they will be testing twice a year for NfL to determine whether the drug is working. That's already just with MS, could be a pretty formidable market, and that's why the Siemens and others were teaming up with them with very attractive economics. Because of what we have as a proprietary antibody pair, that proprietary pair has allowed us very attractive economics in the way we're navigating and negotiating these agreements. Siemens is an incredible positive partner. We're really excited about that build-out. Next slide just shows someday we think that there'll be routine testing done for looking for Alzheimer's long before dementia.
You might have saw the game-changing seminal trial that showed that they could see NfL elevations 16 years before dementia in Alzheimer's patients. We're pretty excited how these types of early cohort biomarkers can play a role someday in not only screening, but then managing whether the drug is working. Now, if you really want to learn a lot about this next slide and my final slide is around the Powering Precision Health Summit. We are inviting investors. I already know of several key investors that have decided to make the trek over to Barcelona as well as some analysts. We had last year, I think, 18 speakers. This year we've got over 40 speakers. We got two different concurrent tracks, one on neurology and one on oncology. We expect almost three times the attendance that we had last year.
This is pretty formidable and pretty exciting that we now have an advisory board for PPH made up of industry experts that are guiding the agenda. You can see all the sponsors on the left that are making this free of charge for most of our attendees. This is the way in which we create a lot of momentum very rapidly for the opportunity to utilize our technologies. With that, I'd like to turn over to Amol for a little bit deeper dive into the financials. Amol?
Thanks, Kevin. I'm going to provide some additional financial details about our Q3 2019 performance. We'll be referring to slide 23. As Kevin noted, revenue in Q3 of 2019 was $14.9 million, compared to $10.6 million in Q3 2018, which represents 41% revenue growth. Excluding the impact of $1.3 million revenue recognized in Q3 2018 in connection with the termination of a licensing agreement, non-GAAP revenue growth for Q3 was 62%. Product revenue grew from $6 million- $10.7 million, an increase of 80%. This was driven by 82% growth in instruments and 79% growth in consumables. Service revenue grew from $3 million to $4.2 million, an increase of 39%. Year- to- date, total revenues are $40.8 million, a 53% increase. On a non-GAAP basis, year- to- date revenue growth was 61%. As stated previously, we are not providing revenue guidance.
Shipment of HD-X ahead of our Q4 expectations and stronger adoption momentum led to greater Q3 revenue than we anticipated. As stated in previous quarters, our goal is to deliver meaningful growth each quarter while continuing to build backlog for future quarters. Gross margin Q3 2019 was 47.1% and includes the unfavorable impact of $0.7 million relating to Uman acquisition-related purchase accounting adjustments, which are non-cash adjustments. We expect similar quarterly Uman acquisition-related purchase accounting adjustments going forward, subject to movement in acquired inventory. Prior year Q3 gross margin was 52.8% and was favorably impacted by the $1.3 million revenue recognized in connection with the termination of the license agreement. Our non-GAAP gross margin excludes the impact of non-cash acquisition-related purchase accounting adjustments and the license agreement termination and provides investors with relevant period-to-period comparison of operations. Non-GAAP gross margin in Q3 2019 was 51.8%, versus 46.2% in Q3 2018.
The 560 basis points increase over prior year was due to volume leverage and productivity gains in our consumables manufacturing. We believe we have a significant opportunity for gross margin expansion in the future beyond our Q3 2019 performance as we scale our overall business, reduce product cost, and continue to drive the mix to more consumables revenue. I'm excited to report that trade-ins for the HD-1 instrument are outpacing our expectations. While this may create a near-term unfavorable impact on gross margins, it is a very compelling investment to drive future consumables growth and excitement around our technology. Operating expenses totaled $17.3 million in Q3 2019, included $1 million in transaction costs and integration expenses associated with Uman acquisition. The balance sheet is in good shape as of September 30th, with approximately $113 million in unrestricted cash.
During Q3 2019, our cash balance increased by $41.3 million, driven by $64.5 million in net proceeds from our August follow-on offering, partially offset by $14.5 million use of cash to close the Uman acquisition. Plus, our P&L loss excluding $3.1 million of non-cash items such as stock options, depreciation, amortization, and working capital and others of $1.9 million, primarily driven by accounts receivable due to revenue growth. Weighted average shares outstanding for EPS totaled 26.6 million for Q3 2019 period. At the end of Q3 2019, shares outstanding were 28 million. Overall, we are pleased with our Q3 performance and are committed to delivering solid 2019 results in line with expectations. I'll now turn it back to Kevin.
Thanks, Amol. We are sitting with a very interesting opportunity ahead of us. We've got an incredibly experienced leadership and management team, as well as a lot of employees that have been working with us for many, many years, many of them now coming from the pharma biotech industry. We redirected the business into research to eliminate the regulatory and reimbursement risk of diagnostics. That has enabled us to really, for the eighth straight quarter now that we've been public, we've been able to significantly grow our business, and that growth has accelerated as investors have actually started to help us with our growth by coming to PPH Summits and further referencing and linking us up with pharma biotechs that they own positions in and they would like for those companies to get their drugs approved.
We have created, we think, a very interesting opportunity where we're very early on in the penetration level, less than 10% for neurology alone, and we're really just beginning in a market that's 3x the size oncology. The first step in this, in our minds, was defining a market that was not fraught with a lot of risks. We think we've created a market opportunity for the next several years that's not fraught with those risks. We've been executing, we think, fairly flawlessly and even ahead of schedule on most of the key KPIs that we are focused on. The experienced group that is honed in on this is very motivated and passionate. It's some of the best employees that I've ever worked with in my career.
Many of them have been with us for many years in other companies, but I must say that there's a chemistry that's been created here that is truly igniting and going after something that we think could change the world, and that's the way health is practiced, particularly if we could put cancer and Alzheimer's, and MS and ALS in our rear view mirrors. With that, what we'd like to do is open it up for Q&A.
Ladies and gentlemen, if you have a question at this time, please press star then the number one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, press the pound key. Your first question comes from the line of Bill from Cowen. Your line is now open.
Hi, Kevin. This is Subbu Nambi on for Doug Schenkel. Kevin, now that UmanDiagnostics has been part of Quanterix for several months, how are you thinking about the opportunity for revenue synergies? Have you been able to cross-sell Simoa-based instruments to legacy Uman customers? Additionally, how has Uman revenue tracked relative to your expectation?
Yeah, great question. We didn't buy Uman for the short-term revenue opportunity. We merged with Uman based on what we considered to be a very long-term significant opportunity in diagnostics. Most importantly, we bought Uman because we were buying most of what antibody production they were making for our own kits for NfL, and we wanted to protect this incredible evolution of the NfL franchise within Quanterix. Today, over 33%, over a third of our revenue is linked in some way to NfL.
Making sure we protected that supply for the existing revenue growth was the primary reason for this move. We didn't anticipate there being much revenue beyond what we bought from them, but we have had some pretty productive developments that we were able to land in Q3 that did give us a little bit of revenue, beyond the revenue that comes with our Simoa kits. We don't actually granulize and show those revenue levels. Amol could actually maybe speak a little bit cleaner to this. I would say that we do think going forward, there will be opportunities to grow, the Uman revenue, beyond what we expected because of the cross-selling opportunity. Going forward, it's still a pretty small part of our company and a part of our business.
Again, primarily what this has done is created significant gross margin improvement by backward integrating into the supply of the NfL for the existing Simoa franchise. That's where a lot of the gain is, and I think we committed to a couple hundred basis points of improvement on an annual basis from that backward integration. But we are beginning to see revenue, as well, that's profitable. Amol, do you-
Yeah, just to add to that, right, Uman revenues by itself are very small. For Q3, Uman's revenues were $400,000. Again, as Kevin mentioned, a big chunk of it is things that we've created as part of business development activities for Uman's asset. Again, in large scheme of things, they are very small. In terms of gross margin expansion, as Kevin suggested, we will have gross margin expansion impact of integrating Uman. We've always said about 200 basis points. Please note that we had inventory when we acquired Uman, and it'll take us some time to bleed that inventory through Q3. You'll start to see that impact from Q4.
Got it. That is really helpful. If I could ask a second question, can you provide more detail on the Siemens NfL license and supply agreement? It does not appear that Siemens is using Quanterix system to develop NfL clinical assays. Is that right? If so, are there opportunities to-
Yeah.
Go ahead.
If so, are there opportunities to place your systems at Siemens down the road? More broadly, are there types of IVD deals we should expect you to pursue?
Yeah, those are three good questions. To start, Siemens does have a fairly formidable installed base of about 10,000 instruments. Siemens as well as Roche and Abbott have primarily in the area of ELISA and immunoassays, they've primarily been singleplex as opposed to multiplex. We clearly want to get as fast an IVD validation and clinical validation of NfL using our antibody pairs as possible. We think it bodes well for the world, but also bodes well for Quanterix shareholders because that investment can be very significant to break through with an IVD approval. Siemens having this large installed base, our goal here would be to hope that they could achieve some level of sensitivity on that existing installed base based on the way we've engineered the antibody pairs for both specificity and sensitivity.
Our goal here is to work with them to try to have them get validated and clinically relevant, an IVD kit for NfL onto that installed base. We also believe that the other diagnostic houses would be well-served to advance their own positions relative to NfL, and we would certainly be open to additional contracts because, again, this is non-exclusive, and we think that this is going to be a good thing for Quanterix as well as for the world. I would also point out that one of the key things about sensitivity is that we're on the bleeding edge of what's necessary. We're getting ready to run with collaborators in Europe, a 20,000 population study between ages seven and 70 on our Simoa technology, looking at NfL in blood. Having our sensitivity is necessary, we believe, to get good clinical discrimination for the seven-year-old.
Because what happens is, the younger you are, the less neurons that have died. We know that there's a curve that as you get older, your neuronal health gets worse. You do, with age, have neurons that die, and your NfL levels then get elevated. We've already seen this through some seminal game-changing publications from Jens Kuhle and David Leppert, who both will be presenting new data at Powering Precision Health Summit in Barcelona on November 19th. This is a very important part, and they're actually running this trial, this cohort trial of 20,000 to understand this elevation. We actually think, though, NfL is not specific to various diseases. Any type of way that your neurons die, it could be through concussions, it could be through Alzheimer's, it could be through MS, it could be through ALS, it could be through Parkinson's.
All of those different neurodegenerative diseases, as well as the traumatic brain injury, can damage neurons and kill neurons that then elevate your NfL levels. The challenge is that NfL isn't specific to tell you which of those diseases or is it traumatic brain injury that's created the elevated NfL. We believe someday there'll be a panel where they'll have other markers that will be specific to the various diseases that would be run with NfL. Here's where the challenge comes in, is as you multiplex, you lose sensitivity. That's where we think someday our Simoa level of sensitivity is going to play a role to allow the complete panel and the algorithms for the complete panel.
We wouldn't say that that's what you should be buying our stock based on today, because that's what we would call diagnostic opportunities that we are starting to invest in very carefully. There's plenty of return in this research area because we're so embryonic in that growth mode for research. There's plenty of returns in our mind in research where we don't have the regulatory reimbursement risk. While getting the benefit of the research mode and looking at multiplexing in the research, it's going to set us up through the different opportunity and the different avenues for panels someday, for neurology and for neuro health. Yes, we do think that there's going to be an opportunity with the engineered antibodies that we have for Siemens to be successful for some level of use cases with the installed base.
To get the broad use cases that are ultimately going to be available with sensitivity and multiplexing, you will need our technology, we believe, to achieve that. That's why we want to continue collaborating with the diagnostic houses that we know have the interest in long-term sensitivity for panels. Hopefully that gave you some of the insights you were looking for.
Absolutely. Thank you so much.
Our pleasure.
Your next question comes from the line of Sung Ji from BTIG. Your line is now open.
Thank you. Thanks for taking my questions. Congratulations on the quarter. Firstly, it's nice to see that the trade-ins are outpacing your expectations. Just curious, what's driving that? You talked about you have some programs in place. Wasn't sure if you uncovered certain value propositions for the customers that you weren't aware of, if they were trading in at a faster rate. As you look out over the next two, three years, what percentage of your current HD-1 install base do you think would replace it with the next gen platform?
Yeah, great question, Sung Ji. Thanks for the congratulatory comment. We basically have always been very conservative. That's part of, we think, the value of our management team. We've always tried to create expectations that we know we're not going to surprise negatively. In this case, I think we knew that the HD-X had incredible game-changing capability, not just in significantly increasing the reliability, but also in temperature control and even enabling magnetic bead loading that ultimately will help us further enhance the sensitivity of the instrument. What we have found, I think, is that as we've started to articulate these benefits, we really have been getting a lot more interest. I think the fact that we ran this use case with several of our top users to test out the HD-X, it gave us data that further validated just how game-changing the HD-X was.
I think that as we start to teach the industry just how formidable of an improvement this represents, many customers at times don't use our technology all the time, and they were cautious using it in fear that they might have some kind of an issue that they couldn't manage and that would lead to losing samples. One of the things we're really honed in on with our user base with the HD-X is never letting it lose samples. That's really a key focus. It's not to say that they won't, but to date, we've had incredible results in not having these samples be lost. It creates a confidence then, and that word spreads quickly.
I think that with Powering Precision Health Summit coming next week and it being oversubscribed and with so many customers wanting to hear firsthand from all these users, and we've got so many users now that are going to be presenting, we think we're at a critical inflection point of opportunity where the HD-X, we think, will continue to cause a lot of interest and excitement. We think it's in everyone's interest for this investment. If there's a slight impact on gross margins by having the trade-ins, we actually think that this is a very smart investment for creating consumable pull-through later on, and plus great references for the way we sell is through a lot of reference selling. What percent will ultimately convert of the installed base to the HD-X?
I think it's all going to be something that we have to test for a while here before we'll make any kind of projections. We would love to see the more we can get the HD-1 out and the more the HD-X is in, it helps us in many different ways. We've been holding our customers' hands with a lot of technical support personnel because the HD-1 at times needed extra support. We think the HD-X is actually not going to require as much support. In one way, we're going to improve the overall intensity of the support that we have to provide. More importantly, if the instrument delivers the kind of usage cases, it's going to bring through more consumables. Everywhere you look, we think that it's a smart investment to get the trade-ins.
Hey, if half our installed base by the end of 2020 is converted over to the HD-X, I will tell you right now that we would be delighted. It would be one of the smartest things we could strive for. We're hopeful for those kinds of change-outs. Again, we don't want to set up expectations and have you feel like we're not getting the conversion that you would like. We think that at this point, we know it's happening at a much quicker pace than we anticipated, and that's what we really think is good for everyone involved.
Great. That's very helpful. It's also great to see such strong growth in the academic setting. Was curious, do you have a sense of whether you're replacing or displacing some of the conventional technologies that are being used? Do you think your technology platform is additive to kind of what the researchers are looking for?
Well, I think, Sung Ji, as the Powering Precision Health Summits further spread the word around the sensitivity and the way sensitivity can be translated into incredible benefits for the customer, we've already talked about less invasive early detection of disease, but the ability to get an answer from a very small sample. Could you someday have a sample as small as a blood finger prick that you could then dilute up and use in Simoa to get an answer from such a small sample? Those are the types of things that we know we've got use cases.
In fact, last year at PPH, there were a lot of presentations on using blood spots and poking out a small fraction off of a cardboard blood spot, which today every child that's born, which I now am a proud grandfather, so I know what this is like, but they have a heel prick, and they will create blood spots for every child born. Later on, if you could just simply punch out a little small circular hole into a vial and then put solution in it and dilute up that blood spot, all of a sudden you could transform the way you transfer and ship samples, right?
These are the kinds of things that people didn't really think about when they thought about sensitivity, but it is game changing because if you can start to get answers from dry blood spots, you change the whole logistics of the way samples can be moved around the world. You'll see at Powering Precision Health, there'll be presentations on a lot of scientists using dry blood spots. In addition, we find matrix effects that can get in the way, even for NfL. If you look carefully at the latest publications, you'll see that several of our key neurologists that are running these for MS patients routinely now in Europe, they're actually diluting threefold to eliminate matrix effects, and they're able to discriminate at the low end of the NfL levels better by this dilution.
Sensitivity to allow dilution is also creating, we think, a game-changing opportunity. All of these pieces, we think, lead to the opportunity to really transform the HD-X technology into the next generation of opportunity.
Great. Thank you. Lastly from me, on your consumable revenue side, obviously you're continuing to see strong growth there. Just curious, do you think, I don't know if it's still early, but do you think that with the launch of the HD-X and also just continued strong growth in your consumable business, do you any thoughts in terms of how you're thinking about consumable pull-through for your platform? Is it still kind of, I think in the past you talked about a third of the instrument revenue on an annualized basis, could we see that kind of move up higher going forward?
Yeah, it's funny. We went back and we did an analysis after the last quarterly call around that specific metric, and we have been way outperforming that metric of a third of the revenue. There was some level of one-time effect of that large Novartis trial that we've now tried to make sure everyone completely understands, and we've said it in the past, but we want to kind of further reinforce it. Even without that, and when you remove that, we're outpacing that 33% rule of the investment.
40% is something that I think has become a whole new norm for us, and we believe that as we implement the HD-X, even though it's a higher priced instrument, we think that maintaining the pull-through of that 40% is going to be the type of goal that we're going to be striving for, even at a higher price point for the HD-X instrument. We're going to keep driving a lot of different programs to keep our consumable. Today, for instance, and yesterday, we have a thing called the Simoa Success, which is a key component of working with all of our users and user group meetings to talk about all the advances that we've made on these technologies. These advances will further allow utilization. Everywhere we look, we are seeing very positive momentum.
The one thing that we are going to keep an eye on in 2020 is as we trade in an HD-1 for an HD-X, there'll be maybe a three-month period there where we'll have to do that trade-in, and will that have any specific level of impact for any one customer? We know we're going to be able to continue driving the one-third despite even that kind of phenomenon. The question is, can we even keep going at the 40%? We are going to be mindful that the transition in trading will have a small effect as we are timing those transitions.
Great. Thank you so much.
Our pleasure.
Your next question comes from the line of Mark from Canaccord Genuity. Your line is now open.
Hi, this is Max Masucci for Mark.
Hey, Max.
Hey. Now that Uman is integrated, I guess, do you see other opportunities for M&A? If so, what types of deals? Can you talk about any particular areas of investment you plan to target with the recent financing?
Yeah, great question, Max. We're not in any way stating we're becoming an M&A kind of driver here. There's no question we've got a platform here that is going to disrupt healthcare. As we start to view the tentacles of opportunity that this kind of disruption can create, whether it be in research, where you might have other complementary product lines that go into the same landscape where you're selling into, and you could leverage your kind of sales channels. If you look at the technology in research and the fact that today we're honed in on proteins, and we know proteins are disrupting, but there's a complementary piece here, which is DNA and RNA. We're not really doing today a lot in DNA and RNA, but it's incredibly complementary to a complete understanding of the omics of the body.
We know that there are today a lot of DNA, RNA opportunities that are complementary to our protein. Now, for us, those represent opportunities for M&A leverage and synergy, but that's not currently our focus because we've got so much organic growth opportunity. What we're really looking towards is what can we do to accelerate the penetration of our current technology base. Things like Asia, we're honing in on advances and trying to accelerate our position in China and Asia because it's very small right now, but yet there's so much dementia issues going on across China right now, and we know that there's huge research projects to try to get neuro health understood in Asia, and we're not even tapped into that yet. We want to make sure that we start to tap into Asia.
We also have watched very carefully the evolution of our services business and some of the large deals that lead to companion diagnostics, which is the gateway for us to get into clinical diagnostics. By bringing Tatiana on from Biogen, we're really going to be honing in on what ways we can advance the overall strategic model of these deals that lead to companion diagnostic, which creates significant follow-through utilization of consumables. So to the extent we can cut across with FDA clinical validation, we think it creates a much more lucrative research market opportunity for rescuing drugs, even in the area of neuro. You just watch companies that have failed across the board in Alzheimer's disease, and now you see Biogen talking very bullishly around-
Aducanumab
aducanumab. That is creating, I think, the whole new resurgence of opportunity for earlier mild cognitive impairment cohorts, and even maybe before mild cognitive impairment. We want to look at the research, clinical trial sector, which we think is very robust, as well as Asia, as two strategic areas that we could advance our current platform. Secondarily, start to look at complementary technologies to what we have with our platform, such as DNA, RNA, such as other products that can be channeled into the same discovery opportunities and research development opportunities that we're currently in. Hopefully, that gives you a sense.
We're not focused on M&A, but we have, as you know, a very prestigious board of leaders that have been very successful with M&A over the years, and so we are trying to make sure that we are looking for ways to accelerate this opportunity that's starting to see a reach that's much broader than most people thought when we started to build into research.
Great. I think you took seven SP-X orders last quarter. I guess, how did SP-X orders look in Q3? Are most SP-X placements to customers that are new to Quanterix or existing customers that might already have an HD-1 or HD-X system? I guess, when you go into a customer to convert an HD-1, are your reps also pitching the SP-X?
Yeah. Originally, Max, we said that we would try to place 10 instruments in 2019 of SP-X because it's a brand-new product and a whole new market segment. Our view was that this platform is something that has got entrenched competition, primarily, I would say companies like Techne and MSD and Luminex currently play very productively in the oncology field. Penetrating a segment where you have entrenched competition is very different than when you're disrupting like we've been doing in neurology. Being that we're only less than 10% penetrate in neurology, this HD-X opportunity ended up being a pretty formidable opportunity for us that we could see our way clear to accelerating the launch of the HD-X. I do think our sales force continues to focus productively on the SP-X. We don't actually guide to these numbers or actually state granularly what we've done.
I think we did talk about the fact that there were seven orders right out of the gate, just to give everyone a sense that this is a very productive opportunity for us, one that we already know that for the year, we're feeling very comfortable that we're going to hit our expectations. In general, I would say that we still see this area as one of the bigger areas of opportunity. It's not just oncology, I would call it oncology and inflammation. Because if you look at inflammation, it really is the immune system and it's the cytokines, and many of the cancer drugs are immunotherapies, and that's really where we're honing in, and the SP-X is going to have an incredible opportunity.
One of the things that we also found is that in our accelerator services, we're getting a lot of new orders and a lot of momentum that we probably didn't expect for this planar SP-X technology. In a way, it's kind of a leading-edge way for us to validate and create demand. A lot of the growth that we're seeing in our accelerator is actually coming from us launching the SP-X as a product. We're pretty excited about that opportunity because we know that always precedes the placement of instruments. For 2020, we remain very bullish on augmenting our neurology sales with oncology/inflammation sales with the SP-X.
Great. Last one from me. Congratulations to Dr. Plavina on the new role. Can you just touch on why now is the right time to make the hire, your expectations for the role, and why you think you've made the right hire? Thanks.
Yeah. Max, you're asking very good questions. I've been very close with the Biogen team, including Al Sandrock, their Chief Medical Officer, who also just got promoted, is now running all of R&D. In fact, the last Powering Precision Health Summit that we had in the United States, he was on the panel. You might remember some of the comments he made that got picked up by Bloomberg around how he felt our technology could absolutely disrupt Alzheimer's longer- term. What we're seeing happen here is this stuff is accelerating quicker than most of us thought. For Tatiana to be willing to come to us, we thought that was, in itself, a big achievement.
I think what we have found since she's been here for just maybe a month, is she's so driven and so passionate by the culture that we have here and the ability to affect the world more so almost in a position where we affect all the pharmas and all the biotechs than in just one company. We have this incredible relationship with Biogen, and I think they're actually very happy to see that she's on our team productively helping further advance MS as well as Alzheimer's and all of these categories that now she can spread across to all of pharma. We think this is the time because of the onslaught and the kind of tsunami wave of MS publications for NfL and owning Uman and then getting our diagnostic rights back. There's three different events that have occurred there that's like the moon's lining up.
You get the rights back a year ago from bioMérieux. You then acquire Uman, that has this incredible specificity for the NfL antibody pair. Then you, on top of all that, have this tsunami wave of publications showing the clinical validity of this technology. When you add all that up, we felt like this was the moment to try to bring that capability on our team. Tatiana is just a delight to work with, and we're just so excited with the reach that she has. She'll be at Powering Precision Health as well as all of the pharma biotechs.
It's a great moment, we think, to go for clinical validation with the NfL, working with our customers, and there's a lot of data sets out there with customers that we could, we think, leverage and exploit as part of our campaign to get NfL to help the world with neuronal health. By the way, my long-term goal is everyone in the world should know what their NfL level is. If, in fact, you start to have some neurodegeneration or you're playing soccer, you've just seen all the new reports of women in soccer. You saw the reports last night on NBC around cheerleaders and the number of concussions and the amount of trauma that's being created just in every sport around. I would really want to know what my NfL level is of every child at some point.
Someday, we're going to work towards that vision that everyone ought to know their NfL levels, because if something's getting in the way of your neuronal health and you're above the curve of where you should be for your age, what's going on, and should you get yourself out of harm's way? We think that someday there's a very significant opportunity for health screens as well as drug interactions with NfL to advance the world in neural health.
Great. That's it for me. Congrats on a nice quarter.
Yeah. Thanks for the Powering Precision Health sponsorship, too. We really appreciate that. We should have said that to Cowen as well. Very much appreciate that.
Your next question comes from the line of Puneet from SVB Leerink. Your line is now open.
Yeah. Hi, Kevin. Thanks for the question. First one is on consumable. I think it was touched on briefly before, but I just wanted to get a sense from you in terms of the trials that are currently ongoing. What's the expectation for furthermore trials to come into that? It seems like the increase in consumable revenue was about a half a million USD. It was essentially flat from Q1- Q2, but then it increased again this quarter. Just want to get a sense from you as to sort of that contribution and what's your expectation of the timing of the current trials. When would those trials be completing and if there's any expectation for near-term trial additions into the consumable revenue?
Yeah. Clearly, trials are pretty important opportunity. It starts with phase I trials that are very small. You have phase II, ultimately their largest trials are phase III. We did have a very significant Novartis trial early in the year, which we've commented on. We've also continued to advance the reliability of our HD-1 that's out there. We have done a lot of things to improve its performance. Yeah, you're talking about a quarter-on-quarter growth. I think the way to keep looking at this is year-on-year growth. We've been running almost doubling on a year-on-year basis. A lot of that is because of, we think, the beginnings of a trial sequence of interest that is going to, we think, continue.
We're very bullish on trying to drive trials and feel like that's a big piece of our future opportunity. Now, we're not going to guide to that. We don't actually guide. I would say that we've always said that as a long-term growth horizon, even though the denominator is getting bigger, we had said going into 2015 and 2016, we felt that long-term growth of 40% was achievable. On average, we think that consumables should be outpacing the average growth. When we look at 40% total growth back in those years, we always assumed that we would see stronger consumable growth and we probably would see slower instrument growth. We would feel like the services would be on that 40%. If you look at this year, it's playing out this way. We're seeing the strongest growth in consumables.
The thing that has surprised us probably more than in many of the investors is just how significant of an instrument growth we've been able to create this year, which again, is a catalyst for future growth. People don't buy instruments to have them sit. They buy them to use them. We're very encouraged by the instrument growth. Your question is dead on. We will be very much focused on trials as being a key to our consumable growth ramp. It's not always going to be steady and even. You'll have surges because of trials. When we look at one of the key things we did last quarter is we looked at an averaging, a four-quarter averaging, and we could see the underlying growth was significantly improving when you do the averaging.
I think that's a good way to ensure you don't get tripped up on any kind of models that you might be building, Puneet.
Okay. Got it. Thanks for that. I wanted to get a sense from you from, in your conversations with pharma, what's the expectation for protein and peptides markers or significance of protein and peptide markers versus the genomic markers which are dominating the pharma conversations or pharma CDxs and other companion diagnostics and other products that are getting out into the market? I know you're seeing growth in neurology. I just wanted to get a sense from you, the applicability of protein peptide markers broadly, using Simoa platform. What's been the conversation there, and what's your expectation here of taking share away a little bit from genomics? Thank you.
Absolutely. I think, Puneet, that one of the roadblocks to utilizing proteins historically is the sensitivity. DNA became everyone's exciting focal point for investment funds because they were able, with PCR, they were able to increase the sensitivity of what they could see in the body. The way they did that was they amplified it. They amplified the PCR, they amplified the DNA and the RNA using PCR, which created some biases, some AT biases. In my last company that we did do a 10x kind of value creation was Caliper Life Sciences. We built the DNA libraries for most of Illumina. I think you're aware that our founder of this company also was the founder of Illumina, and he, like myself, have a tremendous interest in what the protein represents.
Because in a way, if you can get to the sensitivity of baseline understanding of the protein, in a way, it's much more phenotypic because the identical twin studies are what I like to look towards, and that is that they're born with the same DNA profiles, but yet one of them grows up to have a very different protein profile because of environmental factors and the way they live their lives. That is the key, we think, to why proteins are so much more phenotypic. By applying sensitivity to them, we can now get to the same level of sensitivity that you have with DNA, with protein. If you look at Roche, Siemens, and Abbott, most of their franchise, a big piece of it, has been based on ELISAs and proteins.
We know proteins are very phenotypic for seeing disease, but what we haven't been able to do is use proteins to see health. By having sensitivity, we can get down to the levels that show health. Then movement from health shows you very early-stage disease movement. We actually think that someday there's going to be some very profound liquid biopsy opportunities that are not just going to be based on genomics but also in molecular, but they're going to be based on protein. I think you're going to see a lot of companion diagnostic opportunities in protein. One of our great customers is Rules-Based Medicine at Myriad. They've run over 650 trials, phase I, II, III. Many of them are in autoimmune and immune type deficiencies, again, looking at cytokines.
I think that you're going to find the protein's going to be tremendously capable to help discriminate disease from health earlier, and it's going to become a good adjunct and complementary to DNA. Now you're asking, will it someday displace DNA? Will it someday replace molecular? I don't think I would ever see it totally replacing it, but I think it'll be very complementary. How far and what its reach is something that it's too early to tell. I can tell you, the level of adoption that we've been able to create with basically no revenue five years ago to what we are able to do right now with this consumable pull-through from pharma biotech, which is outpacing what you see in molecular.
I actually think that we're on a very strategically differentiated pace of growth and adoption that the protein is enabling with the sensitivity of the protein. I know you're a proteomics person yourself, a PhD, Puneet, so maybe I'll have you give a presentation on this because I think everything I've said here I know agrees with what your base belief system is. Anyway, if you want to comment, please do.
No, I appreciate all of your comments. Proteomics 2.0 is coming, so it'll be interesting to see how you participate there. I appreciate your insights there. The last one, if I could ask around Uman, and I think some of that is already covered, but just wanted to get a sense of the existing number of contracts that Uman had prior to acquisition. We saw one with Bio-Techne. We saw another one with Siemens here, and wanted to get a sense of if we should expect further contracts here in the near- term with Uman and potential other contracts that will be renewed. Thank you.
Very good question. I would say that by far, we were by far their largest customer. I think over 50% of their antibody output was coming to us to make our NfL kits. Our sensitivity, coupled with their specificity and sensitivity, created a real significant opportunity to clinically discriminate many of these biomarkers in neurology, but ultimately, we think in a lot of these other fields that we've been commenting on. I don't think that there was a lot of contractual work prior to us acquiring them. The Siemens was beginning. There was this major announcement by Biogen 18 months ago that Biogen was teaming up with Siemens to launch a serum NfL test.
If you recall, that was a game-changing announcement, and what was interesting was all of the data was based on Simoa that led to that deal, and at the time, we didn't have diagnostic rights. You might recall we had teamed up with bioMérieux, who doesn't really do neurology so much. We were somewhat caught in a relationship that didn't allow us to produce opposite these neurological opportunities. I think the Siemens opportunity, because of the install base, and I would look at Roche similarly, they've got, I think, a 70,000 install base. I would love to see some of these biomarkers that we can engineer, like NfL, on their instruments. Ultimately, when you get to panels, our Simoa technology, we think will become a big key component of what will be required.
Even though there wasn't a lot of deals that were in there, we felt that Techne was very important. We think that's a great company. We believe in them. We wanted to complete that deal right away, and that was again done after we owned them, and then Siemens. I would bet that there might be two or three more in the next year. We are very careful on how we set up those deals. We want to make sure we're capturing a lot of value. We're very pleased to say that we're capturing a lot of value in these deals, and we feel like that's an important piece to the equation because we'll be continuing to channel NfL via our Simoa in use cases that we know these other channels can't get to.
We want to keep pushing the edge of science to create those use cases, and that's key for us with Simoa. There's a great way for us to create value, we think, through some of these other deals, and we'll be very careful in the way we structure them.
All right. Thank you, Kevin.
Thank you, Puneet.
Showing no further questions at this time, I would like to turn the conference back to Kevin Hrusovsky for closing remarks.
Thank you very much. Hey, it's been an absolute pleasure to be working with Amol on all this. Amol, you've been with us now, how long?
Seven months.
Seven months. I got to say that across just about every aspect of our business, we've been scaling it and we've been culturally building out what we think can really disrupt. I do believe any of the investors that can attend Powering Precision Health, you'll be able to see a really clean opportunity to what we think the future holds. Thank you so much for all your support, and we'll be talking to you at the end of the Q4 period. Thanks a lot.
Ladies and gentlemen, this concludes this conference call. Thank you for your participation. You may all disconnect.