Hi, welcome to the Canaccord Genuity Growth Conference. I'm Kyle Mikson, I cover life science tools and diagnostics for Canaccord. Please welcome me to this fireside chat with Quanterix. Here with us today, Quanterix offers a highly sensitive platform based on digital ELISA for, I guess the target on neurology and oncology, and we'll talk a little more today. From the company, we have CEO Everett Cunningham. Thanks, Everett, for joining us today. Appreciate it.
Thanks for having me. Appreciate it.
All right, so starting with the performance in the second quarter. You guys announced your earnings, I think it was a few days ago, Monday. What were some key drivers of performance during the quarter and any, I guess revelations or changes that arose from the update?
Yeah, thanks for that question, and we had our earnings call on Monday morning, so it's kind of fresh. Let me talk about the things that we feel good about at Quanterix. We had our earnings call. We talked about what drove our top line and bottom line. First of all, we did our acquisition of Akoya. We announced it a year ago, a year under our belt, and the synergies that we acquired or that we drove from that acquisition, $85 million of revenue synergies over the last year. We completed that in Q2, along with our ERP integration. So just the discipline around our spending, hitting those synergy targets, I commend the entire company.
With regards to our top line, Mike Miller, who is in the audience, and I, our Chief Technology Officer and Product Officer, we did and just exhausted ourselves with scouring our different regions, talking to customers. What they tell us in terms of what we offer on the spatial side and our legacy Simoa side is just differentiating from a technology standpoint and validated by our customers and how they use our technologies from instruments, consumables, our clinical trials business. What we offer there has been very, very positive. Some green shoots that we have seen quarter-over-quarter are Accelerator clinical trials bookings were up quarter-over-quarter. We feel really, really good about that.
We have added some things on the commercial side to give us a little bit more scale and drive more net new business in terms of lead generation reps, and also added some investments on the marketing side. We are challenged in a couple places, right? The U.S. academic and government market. Listen, there are funding constraints. We are not just saying that due to our research, but talking directly to customers. That has been a headwind for us. Our commercial execution. We are very forthright and transparent around, we need more out of our commercial organization to start driving some sequential growth. We have done what I would say the right focus, the right transforming, and the right adding of resources on the commercial side so we can get that sequential growth.
Okay. All right, awesome. Maybe just on that note, the mix of the company's revenue, the combined company now with Akoya. Biopharma is pretty material. It could be near half or it could be definitely over a quarter of the business.
Maybe you talked about the A&G, the academic and government challenges, but how is the biopharma side a little bit pressured as well?
Yeah. Our biopharma side, what we are seeing is we are doing the same amount of clinical trials, biopharma deals. Those deals are just smaller deals. And the feedback we get from our customers are, again, they might be constrained a little bit from a funding standpoint, but this is mostly on us. And where I feel optimistic about our clinical trials business is if you go back a year ago, we did not have solely dedicated resources on the clinical trial side. We have added back a team that will be solely dedicated to clinical trials. And you talk about a quick transformation. Looking at Mike Miller ran that business two years ago, solely ran that clinical trials business. We have people that are currently at our company that have experience, have pharma relationships.
What we are doing is we are just deploying them the right way. Now they will be dedicated. It is about a team of about 7-10 people moving forward that they will drive our bigger deals with key pharma customers.
If the total dollars or dollars per project are lower, where do you think that the money is going, I guess? Is it to other competitors or just to other AI stuff or something? I do not know.
Yeah. Listen, everybody has spending choices. Again, in doing our research, what we feel is we have our opportunity to compete for those deals. Some of those deals are going to our competitors, and some of those deals we are just missing out and we are not there at the right time, having the right conversations with the right people. We have also done a good job. I give credit to our operations team on that side. We know which companies are doing neurological clinical trials. We got to be at the right time at the right place. With that dedicated team, I am confident we are going to start to see that pick up.
Yeah. I will say I think Quanterix did have a head start or a nice lead in neuro. What do you think it is from others and other vendors in this space that your competitors, again, that maybe makes their platform or portfolio a little bit more attractive or maybe makes a biopharma company open to testing it out, at least?
Yeah. When I think of that biopharma piece, it's all within our control, right? Meaning, if I look at our competitors, maybe, and this is a little bit in hindsight, we've been through a lot of transformation over the last year. Bringing over Akoya.
Distractions.
it's a lot of resources. You say distractions. I'll say distractions, but a lot of transformational efforts, which is important, while our competitors that are in this space maybe had a little bit more, less distractions, let's just say. We're back. We're back. Like I said, we finished our synergies and the synergies actions back in Q2. We're now focused. Our theme is we're now investing to grow, and people now have their focus roles to go after and go after it. I'm really optimistic about our pharma clinical trials piece because as you know, in that business, it takes one or two deals to start to turn that around. Our bookings are up quarter-over-quarter. We get a couple of deals in the second half. We're confident that that business will start to generate growth.
Yeah, great. Just one more on this note. I guess I'm just asking, the low plex, high sensitivity approach that Quanterix has historically had, that's the path forward. Again, it's a good strategy.
Yep. Let me just touch on that. Like you said, low plex, ultra sensitivity. What we are hearing from our customers are, especially in the clinical trials, translational space, as it goes into diagnostics, the reproducibility of our instruments, the way that we develop assays, that reproducibility is critical in clinical trials, especially in the phase II and phase III. You need lot-to-lot, plate-to-plate, lab-to-lab consistency, and that is where we differentiate.
Oh, so that is a positive attribute o f the platform now. Okay. Yeah, in the past, that was more of an issue. All right. So in the second quarter update a couple of days ago, you talked about the pivot, or kind of like you are going down the diagnostics road a bit more and focusing a little less on the core research side, let's say. Just talk about the rationale for that, because it has been in the works for a while, and your background is very diagnostic-heavy, obviously. But what does that also look afford you longer term, and why does it make sense to do it now?
Yeah. Let me rephrase that a little bit. What I love about our company is the balance of our research tools business and diagnostics. When I think about our comments, and not just our comments, but our plan moving forward, we have three major priorities. Number one, we have to stabilize and start to grow our research tools business. I will just give you a little bit of color of what we have done there. If you go back a year ago when we were Akoya and Quanterix, you had people with deep expertise selling in spatial. You had people with deep expertise selling the Quanterix blood-based Simoa, low plex, high ultra-sensitive platforms. Then we came together, and the hypothesis was we can have one person sell the entire portfolio.
We can have one person sell spatial, one person sell Simoa, and one person even sell clinical trials. That assumption was wrong. We burdened our commercial organization with too much. If you look at our customer base, how we grow our business, our sales executive, they have to have deep expertise within that segment. What we have done is we have now segmented our organization. We have unburdened our commercial organization so they can go deep within their expertise. Moving forward, we are going to have one person sell spatial, a separate person sell Simoa, and a separate person sell Accelerator without expanding our commercial organization because we already have the people there. That is on the research tools side. We are focused.
We just announced on Monday a new Chief Commercial Officer, Jim Gute from Exact Sciences. Jim is w ell experienced in selling commercial tools, capital equipment service, and he comes in with amazing discipline in terms of driving pipelines, forecast accuracy. I know that because I have worked with Jim over the last six years at prior companies. That is on the research tools side. We have made changes, we have added leadership, we feel good about that, and we are really excited about our diagnostics opportunity. Just three months ago, we added a diagnostics leader, Geoff Albrecht, 28 years at Quest Diagnostics, well-versed in terms of blood-based biomarkers because he sold blood-based biomarkers at Quest Diagnostics.
Geoff , in short order, has taken our diagnostics opportunity, and set up an internal team focused on how are we going to scale from a commercial selling standpoint, how do we focus on reimbursement and taking our clinical utility studies and using that data to get widespread reimbursement, and also working on order to cash in the lab. Our diagnostics opportunity with LucentAD Complete is really positive and optimistic.
Yeah. Let us go to the LucentAD in a second. But first, just understand the sales force, kind of the ch ange in strategy. Makes sense that you wouldn't want to have one person with these three different jobs, basically. But essentially, when the companies combined, let's say the total entity had 150 sales reps or something like that, and then obviously there were synergies and maybe it ended up being 100. And each of those 100 people were doing the three, the clinical trials, the research, the diagnostics. Now it's split in three equal parts to do each one. So obviously the prior, I'm not sure why that was taken, that strategy, but the thought was it was a large team going across these areas. In this scenario, 33 people enough for each of these different segments. You understand?
Yes. No, I totally understand your question. Before we went and announced this, we've actually went out and looked at our deployment, state by state, country by country, and we're looking at do we have the right headcount, the right reach, to really drive our second half and 2027 and beyond. The answer is yes. Now what we're going to do is we're going to have people then say, take Boston as an example. We have four commercial salespeople within Boston. We ask those four people to cover from Boston all the way up to the Canadian border. Now we're going to take, and those four salespeople, thank goodness, two are legacy Akoya, two are Quanterix. We might have to add one person just due to the amount of business that's here in the New England area.
But those additions are onesie, twosie globally. Because of we kept the right amount of Akoya legacy, the right amount of Quanterix legacy, we're going to be deployed correctly in this new model.
Okay. You guys are guiding to a third quarter revenue number that I believe it's like kind of flat to the second quarter levels. You did decrease the guidance by quite a bit, but it still implies a pretty nice meaningful step up in the fourth, and that's driven by what exactly?
Yeah. These commercial, not just commercial, I know I am talking a lot about comme rcial, but we have added firepower in our assay development. We have added firepower in our manufacturing in terms of being intentional about bringing some spatial talent back in our organization. We feel good about that. We started all that at the end of Q1. These things take time, right? Especially commercially. It takes time to kind of build up. From a guide standpoint, that is why you see kind of flattish from Q2 to Q3, and then what we imply in Q4 in terms of the sequential improvement, these commercial things are going to start to take hold. Our Accelerator bookings, Q1 over Q2, hopefully some of these deals will pop.
Our new assays that we have launched in the first half of this year, on the spatial side, we think will give us some added juice, if you will, or momentum into Q4. You kind of put that together, that will justify kind of our sequential improvement.
Okay. On the diagnostics business, LucentAD Complete is the kind of the flagship test you are going out with. I guess that is an ultra marker test. You had roughly $10 million in diagnostic revenue last year, diagnostic enablement revenue with partners, and then this past quarter, it maybe was like nearly $2 million. Then for the year, maybe $10 million is a good way to think about it. What I wa nted to ask to start off was, currently the run rate of revenue you have now with the diagnostics, is that all LucentAD Complete? What is this program, as I sort of look at it, what learnings have you taken that will help you commercialize next year and so forth?
Yeah. We're excited about our entire diagnostics framework or moat, is what we say. Let me start with some of the milestones or levers that need to hit. We filed our 510(k) for LucentAD Complete in January. We've been having productive conversations with the FDA. We're looking for that to come to fruition in terms of FDA approval of LucentAD Complete sometime in Q4, maybe it might slip into Q1. It's hard to say. We can't control the FDA, but what we can say is our conversations have been very pro ductive, so that's good from that standpoint. We have three clinical utility studies that are out there with three reputable partners, and those clinical utility studies should read out in the second half.
I say that only because we're going to take that, the clinical utility studies data, that's the discussions we're going to have with payers. Because that's real life, looking at LucentAD compared to the single marker and how they work in real-life settings. So we're happy about those studies. Just recently, July 1st, Anthem Blue Cross and Blue Shield started covering blood-based biomarkers, which includes LucentAD Complete. So that to me is representative of the legitimacy of blood-based biomarkers and what they play into that journey of the treatment of Alzheimer's, right? We're really happy about that. We have a CMS price crosswalk of LucentAD Complete of $897. So we feel good about CMS and how they, again, validated our five-marker test.
Lastly, and this gives us variety, our flagship instrument, our HD-X machine, we are actually filing, and going to file a 510(k), and that will be submitted in 2027. So that gives us the opportunity to not just have a centralized strategy of people sending samples back to our lab, but it'll also give us a decentralized strategy of putting our machines, our IVD HD-X machine, in the lab so we can scale in that way. So we're excited about our diagnostics opportunity. In terms of, yeah, we have $10 million in the plan in 2026. We're pacing to hit that $10 million, I even think with a little bit of upside is kind of our trend.
Okay. Yeah, there's a lot there to kind of walk through. I guess with the HD-X IVD, would the throughput ne ed to be maybe increased with that version of it, or is it just simply like a filing?
It's a filing. There's more of a stability standpoint. We have to get that up to about 98% from a machine standpoint. There's some software that we're adding to the HD-X machine, but all in all, Mike and I had a trip to Stuttgart and talked to our contract manufacturer. We're making the right strides with the HD-X machine.
Okay. In terms of the interactions with payers, I guess, because this will be prior to Medicare age, most likely, right? Because it's kind of like younger patients. So it's good to see the Anthem, but will they most likely honor the $900 rate that you have, do you think? I know it's final.
It is early on. It was just July 1st. Yes, we are assuming that they will honor the $897 price point. With early on, we have not really seen much volume yet. In terms of g aining approval. We will keep our eye on it, and we just look at that as a really good sign for blood-based biomarkers.
Are you eligible to be reimbursed today? I think there is other criteria that you do not, or FDA approval and stuff.
Yeah. Right now, before FDA approval, we are eligible for reimbursement.
All right. The volume should pick up and the revenue. I guess, in terms of now going towards the revenue cycle management and the billing and the governm ent affairs and all that.
That is what we are built on.
You're building it now? Okay.
What I like about Geoff Albrecht, and he has this experience at Quest Diagnostics, is what I would call the end-to-end build out of our diagnostics plan. If you start with, first of all, the lab. We have a lab right now that has been accepting samples of LucentAD Complete. We're used to that. We have lab capacity now that when that volume starts to pick up, we have capacity at the lab. You talk about our government affairs. We have to be front and center in Washington, D.C., to start impacting guidelines around how Alzheimer's is treated. Geoff is doing that. Recent hire around billing. We have two people now that we've hired to really focus on billing to make the easy button. We've been in diagnostics before with our past experience.
If you make blood-based biomarkers, especially for primary care, challenging, that's a deal stopper, right? What can we do from the billing side? We have two people working on that. Geoff is bringing in a seasoned pro that will handle our payer navigation. We have a large Rolodex of people that have been there and done that. Geoff's putting a team together that it's not just sales. We just hired a sales leader for diagnostics two weeks ago. It's end-to-end in terms of how we approach this market. We look at it this way. When I look at the competition, we have a year head start, and we need to continue to take advantage of that, so when these key milestones hit, we're ready to go.
Yeah. In terms of competition, it seems like there's either the larger companies that are maybe not as focused as on this one, like a niche kind of area. Then you have the smaller companies that there's no way they have the resources that you just talked about.
Because I was once one of those larger companies, right?
Yeah.
I won't speak to any name, but when I was part of that larger company, we focused on scale. We're a logistics company. Scale, right? Listen, good for them. When I think about the larger companies in this space, I like it because it raises the noise level of the importance of non-invasive blood-based biomarkers. Where we differentiate is around the effectiveness of a blood-based biomarker. We're a five-analyte, five-marker test. Every patient that takes our test gets a quantitative score. Versus the other competitors, only 70% get a quantitative score. The indeterminate zone of our competition is 30% or more. Because of the five-marker test, our indeterminate zone, we've lowered 10% or below. Especially in going into primary care, primary care physicians need answers, especially in Alzheimer's. We provide more answers.
So that's where we're going to differentiate ourselves to garner more share in the space.
Yeah. No, the performance is definitely very strong compared to the other tests out there. However, you're going at it alone, it seems like mostly. However, you have this Tempus partnership, probably have others in the fold. I would ask, why hasn't the Quest partnership happened yet? It's kind of a competitor, honestly. Maybe just on that note, what is Tempus? How does that help you and other partners that have neurology kind of endpoints?
No, I appreciate that. This is a market that we can't do by ourselves. We know that. I love the fact that our company is thinking that way. Our new CFO, Jason Faessler, who I've been working with, we're really thinking about how do we invest prudently to grow this market? We're going to do it in two ways. We will build out our internal team. We're going to be smart the way we do that. We cannot do the likes of the Quests, the Labcorp's, the Exact Sciences, and build out armies of 500 people. We can't do that. What we can do, though, is we can invest and really segment the market and say, if we have the number of reps that we can afford.
We've got to make sure that we go after neurologists, memory care centers, people that are really seeing a large volume of cognitively impaired patients. We're going to do partnerships like Tempus AI, which help us in the health system space. They're vertically integrated with EMR. Right now, we're working with Tempus to say, "Here are the select health systems that we're going to go after with their reps, and they're going to represent LucentAD Complete." It makes sense. What I also love that Geoff is doing, because Geoff has deep experience in doing this, is we're working with reference labs, too. Hopefully, we'll be able to announce some here in the near future of reference labs. They have representatives themselves.
They're selling their capabilities within a certain geography, and how do they partner with us, again, to help us scale?
I think an ARUP collaboration was announced in recent years. That's an example of a reference lab maybe.
That's a great example. ARUP is a reference lab. They're right now partnering with us with our single marker test. That's a good example. We're going to have partnerships with our five-marker test also. You mentioned Quest. Jim Davis, the CEO, we are good friends. We probably talk too much, but we talk on a biweekly basis. Listen, Jim is rooting for me and I am rooting for him, so we will continue to do so.
Yeah. From what I understand about the neurologist market, I think that there are over 10,000 neurologists in the country, but it is a more concentrated market. You do not need as many salespeople. You do not need a screening, like 1,000 people Salesforce going for PCPs. You need less maybe, right? Is that fair?
Yeah, it's very fair. I was at AAIC, and I was pleasantly surprised with a few conversations that Geoff Albrecht and I were having with neurologists. One of the things that's a little different that I haven't experienced with the neurologist primary care, the neurologists are embracing primary care physicians to use blood-based biomarkers. They're embracing it because it's going to increase their funnel of patients in the specialty side. It's not like they're competing. They want us to be very successful, not just with them, they love our five-marker test, but also in the primary care call point.
Yeah. I guess from what you kind of know about the therapeutic side of this, that lance, how that's driving a reason to even have these tests. Maybe just talk about the developments on that side.
Yeah, no, we're happy with the first generations of pharma therapeutics like Kisunla, Leqembi. We're excited with that. You see and you look at their volumes quarter over quarter, and it's very, very positive. What we also like, not like, but what we also need to understand is we need to understand, listen, this is an unmet disease state. You think of Alzheimer's, you think of the journey that Alzheimer's patients go through, but have gone through in the past. This is they get cognitively impaired, their loved ones are concerned, there's not many tools that are out there, and they usually go to a neurologist, and the neurologist says, "You have Alzheimer's," right?
Where we want to play is we want to play, there's 7 million people in the U.S. that have Alzheimer's, another 12 million that are cognitively impaired, and who knows the younger patients that are out there that are getting plaque buildup. We want to give those people answers so they can start early in their journey with whether it's therapeutics, whether it's diet, lifestyle changes, things like that. That's where we play, to just reshape the way that Alzheimer's disease today is navigated.
Yeah. All right, awesome. Now, with the last minute or two, just on the financials, this is all very exciting and promising, but you pushed back the cash flow breakeven target from the second half of this year to, I guess, I think sometime next year is the kind of the language. To be honest, what gives you confidence and why are you comfortable with that target at this point?
Yeah. When we think about the cash flow breakeven, why I'm confident is what we've done. You think about the $85 million of synergies that we delivered with the acquisition. That really spells out the discipline that we have as a company around managing our cash, expenses, that type of thing. So that's number one. The other thing, what gives me confidence is this is a revenue story. And we're doing the right thing. We started back in Q1. We're doing the right things to show sequential improvement on the top line. You combine those two, we're confident that we'll hit our cash flow breakeven next year.
All right. Perfect. Thanks, Everett.
Thanks.
It's great. Appreciate it.
Appreciate you having me.
Thanks.
Thank you.