Ladies and gentlemen, thank you for standing by, and welcome to the Seer Second Quarter 2022 Earnings Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one one. I would now like to turn the call over to your host, Carrie Mendivil. You may begin.
Thank you. Earlier today, Seer released financial results for the quarter ended June 30, 2022. If you've not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investor@seer.bio. Joining me today from Seer is Omid Farokhzad, Chairman, Chief Executive Officer, and Founder, David Horn, Chief Financial Officer, and Omead Ostadan, President, will join for Q&A. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Forward-Looking Statements in the press release Seer issued today.
For a more complete list and description, please see the Risk Factors section of the company's quarterly report on Form 10-Q for the quarter ended June 30, 2022, and in other filings with the Securities and Exchange Commission. Except as required by law, Seer disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is only accurate as of the live broadcast August 9, 2022. With that, I'd like to turn the call over to Omid.
Thanks, Carrie Mendivil, and thanks everyone for joining us this afternoon. We continue to make strong progress across all areas of our business as we ramp our commercial footprint, expand our installed base of the Proteograph Product Suite, and work closely with customers and key thought leaders. As the body of data expands to show the power of unbiased plasma proteomics at scale, we're driving our research and development roadmap to further advance the capabilities of our technology. We ended the second quarter with $3.6 million in revenue and more than $456 million of cash on our balance sheet, continuing to drive momentum in our business while remaining well-positioned to execute on our multi-year strategic plan.
Now, more than 18 months since we started our phased commercialization, and six months following broad commercial release, we're seeing accumulation of evidence that our technology addresses significant unmet needs. Across a wide range of research applications, our customers are seeing promising early results that they believe are unlocking biological insights never seen before. We expected that our customers' work would span discovery, translational, and clinical research applications, and we are pleased to see an expanding number of customers undertaking projects in translational or clinical research relatively soon after acquiring the technology. To date, the majority of samples run by our customers are in clinical research and involve clinically relevant biomarkers. These projects span a wide range of complex diseases in studies across early cancer detection, biomarker discovery, aging and cell rejuvenation, and the impact of environment on human health, among other applications.
Now with that larger context, I would now like to share some updates on our execution against our five key objectives to drive growth in 2022 and beyond. As a reminder, these objectives are, first, supporting customers with an industry-leading experience while helping them to systematically scale their use of the Proteograph Product Suite for projects of increasing size and scope. Second, expanding our global customer network and installed base of instruments. Third, continuing to build out our team, commercial capabilities, and geographic footprint. Fourth, driving a product roadmap to enable more applications for our proprietary engineered nanoparticles. And fifth, expanding our partnership efforts to make it even easier for customers around the world and across markets to adopt our technology. Now to the updates. Let's start with how our customers are using the Proteograph and review some specific examples of the progress they're making.
In the first quarter of 2022, we saw 11 posters and presentations at scientific conferences. Since then, with the busy spring conference season, our customers, as well as Seer scientists, have presented 28 posters at nine additional industry events across the United States, Europe, and Asia. These events span the genomics and proteomics space and included conferences such as AACR, AGBT, ESHG, and ASMS. Importantly, about a third of these presentations were from our customers. Now, this is pretty remarkable when you consider that most of our customers have had the Proteograph in their labs for a relatively short period of time.
For example, at the American Society for Mass Spectrometry, or ASMS conference in early June, there were multiple presentations and poster featuring the Proteograph Product Suite, including several by our customers. At a high level, the most common themes were, first, the Proteograph Product Suite is enabling an entirely new approach to interrogating the proteome at a depth and scale not previously possible. Second, this capability is allowing researchers to see more of the proteome, especially low abundance proteins, than they had previously been able to see across similar cohorts. Third, this is enabling researchers to access peptide and amino acid-level protein variant information, which is necessary to perform high-resolution proteogenomics and only possible through large-scale, deep, and unbiased proteomics. To illustrate this, I'd like to share some specific highlights from customers' posters.
Starting with PrognomIQ, they found novel biological signatures for pancreatic cancer with multiple statistically significant differences in protein abundance among 92 cancer and 104 healthy subjects in a case-control multi-omic study. This result was very exciting because despite the moderate size of the sample cohort, they achieved a high predictive power driven by their biomarker signatures compared to other pancreatic cancer studies published to date. PrognomIQ observed that the strong detection of changes in biological signals and the breadth of the signals greatly enable identification of novel biological markers in clinical studies of practical size. This is in part due to the low technical noise relative to biological signal that the Proteograph enables across thousands of proteins in the proteome. You can hear more from PrognomIQ on this study also at the upcoming AACR Pancreatic Cancer Conference in mid-September.
Moving to Evotec, a Seer Center of Excellence and one of the global leaders in providing drug discovery solutions on a standalone basis or through holistic, fully integrated drug discovery solutions. They presented a poster revealing that on average, more than 5,000 proteins were detected using the single-shot data independent acquisition or DIA analysis across 105 patient samples with more than 3,000 proteins in individual samples. The poster also highlighted an unprecedented depth of detection for low abundance proteins such as cytokines, a class of protein known to be increasingly important in development of certain therapeutics that were previously not accessible in their unbiased workflows at scale. Finally, in a collaboration between Seer, Weill Cornell, and SpaceX, the Proteograph was used for deep proteome interrogation of the four civilian astronauts from the Inspiration four crew, looking at time points before and after spaceflight.
The poster showed 50 differentially abundant proteins, primarily indicative of oxidative stress and metabolic pathways. They're excited by these findings, which address the open-ended question of what happens to human physiology at the molecular level as a consequence of space travel. Importantly, the Proteograph provides information as to what protein variants may be affected, by how much, and how this correlates with other omic changes of interest. These posters highlight the unique value proposition of the Proteograph Product Suite to enable access to the vast depth of the proteome, which was previously very limited.
In a paper published in 2017 titled Revisiting Biomarker Discovery by Plasma Proteomics by Professor Matthias Mann, one of the leaders in proteomics, evidence was presented that the majority of the 117 FDA-approved protein biomarkers that were known at the time of their publications were biased towards the most abundant 300 plasma proteins. This is because historically, these were the proteins that could be readily interrogated at scale using shallow proteomic workflows without the complex immunodepletion and fractionation protocols. The authors propose that if the proteome could be interrogated to an arbitrary depth of 1,500 proteins efficiently and at scale, an additional 280 protein biomarkers could be discovered and validated. Here is why Seer is uniquely positioned to enable this.
The Proteograph enables efficient and rapid access to the plasma proteome with peptide and amino acid level resolution at depth and scale never before possible. The Proteograph provides a high level of reproducibility, enabling discovery power from tractable cohort sizes, making it possible to identify even small changes or more complex biomarker signature comprising groups of protein variants across populations. The combination of this depth and scale in PDA samples would have been made possible in genomics to allow at scale functionalization of genomic variants and the discovery of novel protein content. Customer data on deep plasma proteomics and the putative biomarkers they're seeing appears to support Professor Matthias Mann's hypothesis. Larger cohorts are likely to reveal even more novel biomarkers, finding statistically significant differences in proteins and protein variants.
We're in the very early days of this expansion in novel content discovery, and I expect to see a massive deepening of our understanding of the proteome and thus biology in the years ahead. As more third-party data enters the public domain over the coming months and years, we expect it will have a network effect in accelerating adoption. We also expect adoption will accelerate across multiple markets in parallel as we see growing interest in the Proteograph across a broad range of applications, including biomarker discovery, target identification, and drug development, and early disease detection. This interest spans a broad range of disease families, including neurodegenerative diseases, oncology, cardiovascular disease, and other complex diseases, reproductive health, aging, and veterinary medicine. It is clear there's a strong need for deep unbiased proteomics, and it's exciting to see the emergence of our customer data and the traction we are progressively gaining.
Now turning to our growing install base. We continue to see strong interest across geographies with our pipeline of qualified leads roughly equal between academic and commercial customers. As we have previously stated, the sales cycle for our commercial prospect is shorter relative to academic prospects, driven by how each segment received fundings for their projects. Over time, we do expect that the percentage of academic customers in our install base to increase as more and more grants are submitted and approved for projects leveraging the Proteograph Product Suite. Despite the ongoing risk of COVID and the uncertainty around supply chain, we were able to increase our install base across North America, Europe, and Asia in the second quarter, expanding global access to the Proteograph Product Suite.
As an example, Bertis, an innovative South Korean proteomics-based precision medicine company, which recently established a U.S. presence, has added the Proteograph Product Suite to complement and accelerate the discovery and translational mass spec-based clinical test development capabilities by scaling the scope and increasing the resolution of future studies. We are proud of the growing body of customer data and expect to see a number of them submit manuscripts before the year-end. Customer-driven proof points are essential in developing the market for any first-of-its-kind product. We believe that as more third-party data enters the public domain over the coming months and years, the differentiated value proposition of the Proteograph Product Suite to provide novel insight into the proteome and to enable the next generation of multi-omic studies will become more established.
Finally, we made important progress with our partnership, namely the Proteogenomics Consortium, which, as a reminder, is a first-of-its-kind partnership that we established with Discovery Life Sciences and SCIEX. This is a multi-year collaboration with three phases for expansion, where Discovery will set up, expand, and offer deep, unbiased proteomic capabilities to their existing and new genomic services customers with a plan to ramp up to an annual capacity of over 100,000 samples. Discovery recently received the Proteograph and SCIEX ZenoTOF 7600 instruments at their facility in the Boston area, and is in the process of installation and validation, using 500 internal samples for a proteogenomics study. We expect that they will begin running initial customer projects as early as the fourth quarter of this year.
We believe the Proteogenomics Consortium will accelerate proteogenomics projects at the protein variant level with a type of scaled, streamlined expert operations to match nearly any customer's needs. As we expand our footprint globally with what is already a disruptive product, we're also pushing on the next set of innovations to further extend the capabilities of the Proteograph Product Suite. These innovations span a broad range of capabilities, including workflows, assays, and importantly, software and informatics. With our recent release of the next version of the Proteograph Analysis Suite, PAS 2.0, we're enabling a first-of-its-kind proteogenomics workflow that maps proteomic peptide-level data to genomic data to identify sample-specific variant peptides not captured in canonical reference databases. Customers can move easily off genomic endpoints and access meaningful data to enable peptide-level disease association, further functionalizing our understanding of genetic variation and moving closer to phenotype.
PAS 2.0 empowers high-resolution proteogenomics, something that is uniquely enabled by our technology and is not possible with targeted methods. We're continuing to expand our software feature, streamline data management across our workflows, and leverage the power of our proprietary engineered nanoparticles to lay a roadmap into the future. We're also expanding what can be done with the Proteograph with exemplification of proprietary engineered nanoparticle-based approach across sample types and model organisms, including cell culture and cell lysate, mouse and pig, as well as standardizing workflows across mass spec platform. This flexibility and accessibility will enable the Proteograph to elucidate novel insight for biomarker discovery and proteogenomics at scale across more customer groups. As we work to expand this flexibility, we expect to see an acceleration of the work of the scientific community to unlock immense biological insight.
As we work closely with our customers, focus on our goals, and drive execution against them, we are committed to providing a continuous stream of product enhancement and improvement to customers that will expand access to novel biological content and set a pace for innovation in proteomics. With that, I will now turn the call over to David.
Thanks, Omid. Total revenue for the second quarter of 2022 was $3.6 million, representing an increase of 171% compared to $1.3 million of revenue in the second quarter of 2021. The increase in second quarter revenue was primarily due to increased sales of the Proteograph Product Suite and its related products. Product-related revenue for the second quarter of 2022 was $3.5 million, including related party revenue of $1.1 million, and consisted of sales of SP100 instruments, consumable kits, and platform evaluations. Related party revenue of $1.1 million represents product sales to PrognomIQ. Total gross profit, inclusive of grant and other revenue, was $1.6 million for the second quarter of 2022, representing a gross margin of 44%.
As we have discussed, we expect gross margins to improve over time with increasing product volumes and continued cost reduction initiatives. We continue to target long-term gross margins between 70% and 75%. Total operating expenses for the second quarter of 2022 were $25 million, including $8.4 million of stock-based compensation, compared to $17.4 million, including $6.4 million of stock-based compensation in the second quarter of 2021. Research and development expenses for the second quarter of 2022 were $10.9 million, an increase of 57% compared to $6.9 million in the second quarter of 2021.
The increase in R&D expenses was primarily due to an increase in product development efforts related to the Proteograph Product Suite, including $2.6 million in employee compensation costs and other related expenses, including stock-based compensation, due to growth in research and development personnel and an increase in expenses related to the build-out of our facilities to support our R&D efforts. Selling, general, and administrative expenses for the second quarter of 2022 were $14.2 million, an increase of 35% compared to $10.5 million in the second quarter of 2021. The increase in SG&A expenses was primarily driven by a $1.4 million increase in employee compensation and other related expenses, and a $700 thousand increase in stock-based compensation. Other increases are attributable to an increase in professional services and consulting fees and our facility expansion.
Net loss for the second quarter was $22.8 million, compared to $16.6 million in the second quarter of 2021. We ended the quarter with approximately $456.1 million in cash equivalents, and investments and continue to be disciplined about our level of spend and the rate of return that we will earn on our deployed capital. With our extremely strong balance sheet, we believe we are well-capitalized to execute on our strategic plan for many years to come. Turning to our outlook for the year. We remain focused on building our business over the long term and achieving our strategic objectives each year. We're encouraged by the feedback we have received from our customers as well as the breadth and quality of our pipeline.
While we have managed to navigate the complexities of COVID, especially in China, and uncertain macroeconomic conditions globally, we remain cautious and vigilant as we aim to successfully navigate the coming months. With that said, we continue to expect revenue to be in the range of $14 million-$16 million in 2022. We realize the opportunity in front of us is significant, and we remain focused on thoughtfully deploying capital to develop the market for a first of its kind technology that is opening new avenues of investigation into biology across a range of applications. At this point, I would like to turn the call back to Omid for closing comments.
Thanks, David. We're at a pivotal time in proteomics. It is inspiring to support our customers as they generate data that is redefining what's possible in deep proteomics, enabling first of their kind studies and opening up a new gateway to the proteome. I have never been more excited about the opportunities that lie ahead of us. With that, we will now open it up to questions.
Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your touchtone telephone. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Derik De Bruin with Bank of America. Your line is open.
Hey, good afternoon. Thank you for taking my call. So a couple of questions. Hey, just wondering from your customers that have been doing experiments, what's sort of like the reorder time? Meaning when they do an experiment, and then they come back to do the next iteration of it, I'm just curious, what's the time lag? You know, how quick are the iterations in the experiment going on? Is there a data lag as people are doing more data analysis, is it taking more data analysis? Just give me a sense on what the turnaround time is between experiments.
Sure. Omid here. I think that depends on the customer type. Remember the number of customers are relatively small, so the point I'm gonna make.
Yeah
It may change over time. Typically a customer gets a Proteograph, runs a relatively small study, maybe in the tens of samples to understand the platform, the way it operates. That data set then prompts them to get the resources to run a larger sample. It may be to the tune of many tens of samples or hundreds of samples. Then those samples get run, and then the data analysis part of it that follows before they kind of build on. I would say a case in point would be if you look at the way Oregon Health, for example, played out. They were the first customer to receive the instrument.
They ran a relatively small, in the tens of sample size study, Derik, that they then presented at a conference. That formed the basis for them to secure the resources, which by the way is not just funding, it's also access to samples. Because the sites are, they don't necessarily have the number of samples that you can imagine ready to go. To secure the funding and the sample to then run about a 1,000-sample study, that study took approximately just a little bit north of a quarter to complete, another in the data analysis part of it. I would say that's probably a representative of a robust customer, if you can think about it. Now, there are customers that are even more aggressive than that if you would.
You know, a customer like PrognomIQ obviously knows their technology well. You know, they hit the ground running with large number of samples, and those study sizes have only grown, and my expectation is they'll continue to grow. The other point I would make, Derik, related to it is it's also a function of external data being presented. I think that's gonna facilitate it for these customers to be able to access resources and also the samples to run. Progressively, we're seeing customers present data. If you look at the most recent ASMS conference, 17 posters got presented. You know, 10 of them were from Seer, four from PrognomIQ, two from Evotec, one from Cornell. Of that 17, there were four talks, two from PrognomIQ, one from Seer, one from Evotec.
We're increasingly seeing customer presentations and customer data that's gonna then pave the road for larger and larger studies to get done, you know, at a sharper slope.
Got it. Just a couple of ones here. Is that $1.1 million run rate in PrognomIQ, is that a good sort of like number to use going forward the next couple of quarters, or are you expecting to see them scale higher?
Derik, it's David. That PrognomIQ is, and if you look over time, you know, what that related party revenue is, and you're right, that is all PrognomIQ. It's been fairly consistent. We do think, you know, certainly our anticipation that it will continue, but again, really depends on PrognomIQ and at, if at some point they, you know, they decide to pause and do another, you know, set up for another study or what. We do have some visibility that it will continue at least in the short term. Again, it's something where we hope over time, you know, that will continue to trend down a little bit just as an overall percentage of revenue as our non-PrognomIQ, you know, customer base grows.
That's, you know, again, they. It's been a strong, you know, pull-through from PrognomIQ, certainly.
David, one-
I would also caution you, Derik, that that's, they're not like a typical customer, if you will.
Yeah. Understood. What were the number of units sold in the quarter?
We're not gonna give the quarterly units, Derik, as you know. We will give you where we sit at the end of the year, as we gave you know, the end of last year. Again, we feel good with where we are to being on pace for that.
Got it. Thank you.
One moment for our next question. Our next question comes from Tejas Savant with Morgan Stanley. Your line is open. Hi, this is Neil
I'm sorry, can you, if you don't mind, just repeat your question one more time for me.
Sure. I just wanted to know about, you know, any early feedback on PAS 2.0 and how you anticipate it influencing sales cycles or potentially pulling forward purchasing decisions?
Sure. Let me maybe answer the first half of it, which is what the PAS is and the feedback that we're getting, and then its implication maybe on the commercial. I might ask for me to also you know provide an input on that. First of all, the PAS programs really enable for the user to access proteogenomic content. It gives them some workflow that lets them get peptide-level information and match it against genomic data to identify sample-specific variants of peptides. That's obviously a mechanism to identify variants of protein. Then these variants would not be present in canonical reference databases. These are really new content that the PAS enables for the customer to get. It's very easy to use.
This all gets presented in an interactive table plot. Visualization is very easy. It gives information in terms of where the peptide is in relation to its gene structure, the peptide domain, the functional regions. It really kind of makes it very easy for the customer to be able to connect genomic information and functionalizing it at the protein variant level information, at peptide amino acid level resolution at a scale that was previously not possible, and the customers find this really compelling. Amit, do you wanna maybe comment on implication on the commercial side from a customer perspective?
Sure. We don't really see PAS 2.0 directly impacting our revenue for the balance of this year, in particular, because it's currently included as a part of the overall Proteograph Product Suite offering. For this year, we don't expect it to have any material impact. Suffice it to say, as more of these software analysis tools come out, it makes the overall workflow simpler and more intuitive. Over the course of time, we would expect that is gonna have a positive impact in both adoption and the rate at which customers can not only execute experiments, but extract useful information out of them.
Thank you. One moment for our next question. Our next question comes from Dan Brennan with Cowen. Your line is open.
Hi, good afternoon. This is Kyle on for Dan. Thanks for taking my questions. I wanted to sort of jump into the sales funnel here. You know, in a slowing economy, have you noticed any delays or pushouts of any customer purchases to date? Maybe off of this, can you give us a sense for your confidence about getting to, you know, around 35 box placements this year? Thank you.
Let me start on the first part of it. I mean, in terms of pushbacks or delays on the parts of the customers, I think overall, I would say, obviously, you've seen our numbers for the first two quarters of the year. You know, we've managed to execute, I would say, really well. Now, that is in the face of just some real factors out there in terms of COVID, particularly in terms of the lockdown, and the impact that has had in China, as well as macroeconomic issues, that have played a role. Certainly, I would say ex-US more, but I think increasingly inside the US.
I wouldn't say we've seen any material pushback in terms of purchasing decisions, but suffice it to say, you know, these sales cycles are taking a lot of required focus on our part to make sure we execute on time. So far, we've managed to actually execute through those headwinds. I would say quite well. In terms of the boxes, you know, I'll turn that over to David, just so that he reiterates it. I think maybe perhaps reiterating what he was saying, that we're gonna provide our number retrospectively at the end of the year. We feel good about the overall plan that we laid out at the beginning of the year. David, do you wanna comment on this anymore?
No, I think that's right, Kyle. Again, I think we feel good about where we are. But again, we're not gonna provide any detail until probably the year-end call in February. Well, it will be the year-end call in February. Stay tuned.
Great. Thank you. Then just one more on sort of the publication side. Can you just remind us what, you know, the big key publications we should be looking out for? You know, are you viewing these sort of incremental validation of the platform or, you know, could they be meaningful drivers to adoption?
Got it. Kyle, Amit here. Look, we're seeing both an acceleration in the pace of presentations and publications, both in terms of a breadth of topics and also the number of presenting customers, right? If you look at the ASMS, for example, the number of posters, talks being presented by a number of different customers, quite different than a quarter ago or two quarters ago. I actually think that slope will continue to increase as we head into the second half of 2022. We have, you know, another robust conference season, number of presentation forthcoming at the American Society of Biochemistry and Molecular Biology, at the International Society of Mass Spectrometry, at the AGBT, at the HUPO. You'll see talks, presentation from both Seer and Seer customers.
Now, similarly, publications are gonna continue to increase as well. There, you know, I've mentioned before that there should be a Seer publication coming in 2022, so I expect that to be out in the H2 of the year. Similarly, we're now seeing at least a handful of customers with manuscripts that are now in preparation that are gonna be submitted, and I expect a number of those manuscripts to be submitted in the H2 of the year. While I consider what's happening today in terms of both the pace and the quality to already be quite high, and the insights that are gaining speed are quite robust.
I think that slope is just gonna continue to be sharp in the upward direction, and I don't expect any slowing of that.
Great. Thank you.
I'm not showing any further questions. I would like to turn the call back over to our host for any remarks.
Thanks, everyone. Appreciate, you taking the time today and look forward to being in touch.
Ladies and gentlemen, this does conclude today's.