Quanterix - Earnings Call - Q3 2020
November 5, 2020
Transcript
Speaker 0
Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the QuantaRx Corporation Q3 twenty twenty 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. As a reminder, this conference call may be recorded.
I would now like to turn the conference over to your speaker today, Mr. Amol Tobal, CFO, Concerix. Please go ahead, sir.
Speaker 1
Thanks, Annie. Good afternoon, everyone, and thanks for joining us today. With me on today's call is Kevin Buzowski, our chairman and CEO. Before we begin, I would like to remind you about few things. We had few problems with Business Wire today, and hence, the earnings release can be found on our website and also on Street Insider.
Today's call will be recorded and will be available on the Investor Resources section of our website. Today's call will contain forward looking statements that are based on management's beliefs and assumptions and on information available as of the date of this call. We may not actually achieve the plans, intentions, or expectations disclosed in our forward looking statements. Forward looking statements involve known and unknown risks, uncertainties, assumptions, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward looking statements. The risks and 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 Q3 earnings release and in the appendix of our presentation, which are available on our website, you will find additional disclosures regarding these non GAAP measures, including reconciliations of these measures to comparative GAAP measures. We believe that these non GAAP financial measures provide investors with relevant period to period comparisons of our operations.
These financial measures are not recognized under GAAP and should not be considered in isolation or as a substitute for a measure of financial performance prepared in accordance with GAAP. With that, I would turn the call over to Kevin.
Speaker 2
Thank you very much, Mal. I will start off with a on Slide three of the deck that's on our website. I'm going to review the strategic and financial progress the company's made starting first with some of the key advances in Q3. And then ultimately describing the vision and strategy which continues to evolve very comprehensively. Let me start with slide four where we're showing publications.
As you know, about three, four years ago we really started on a key focus of showing the world about how noninvasive early detection could lead to a real game change in healthcare. And we now are up to nearly one thousand third party peer reviewed publications. And there's been over three sixty eight biomarkers run. And on the right hand side you can see that Alzheimer's already has surpassed where we were last year in publications. There's some pretty key things that have gone on here.
SOMOA pTau-one hundred eighty one has been shown to be highly specific for Alzheimer's and allowing cohorts to be enriched and to eliminate frontal temporal dementia. As well, serum Nf L levels have been able to reveal sixteen years before dementia in familial patients Alzheimer's cascades, which that is a real early detection opportunity. And also serum Nf L has continued its evolution in MS disease progression. And even it's found its way into COVID. And some of the publications showing that if you lost taste and smell and neuro function, these scientists have been able to measure it with our Nf L.
And there's obviously a lot of excitement going on right now around abucanumab from Biogen as being another key market mover in this whole landscape of neuro products. The next slide, basically illustrates our continued revenue, Ascent. And as you know, we pivoted towards really putting a lot of focus on our accelerator to support overall customer activities given some of the issues that we know are out there with customer labs during this pandemic. And you can see that we've already surpassed significantly our full year revenue from last year with the third quarter results. And we've now run 128 Phase I, II, III drug trials inside of the Accelerator.
Also you can see our instrument placements continue to evolve, mostly again focused on neurology. But we're beginning to see expansion in oncology. And certainly at some point we'll start to see some in infectious disease as well because of their pivot into COVID and trying to support the world aggressive battle against COVID. And on a total revenue basis, you can see that we have surpassed last year's revenue as an entirety. But there's some one time very large wins that are incorporated into our third quarter revenue, which we'll detail out.
But even without that, we grew 22% in Q3 versus last year's Q3. So without significant tailwinds, we're pretty COVID tailwinds, we're pretty excited that we're offsetting most of the COVID headwinds with this performance. Some of the big wins in this past quarter given the advances and our focus on neuro and the CAC pivot. CAC stands for COVID Accelerator China pivot. And you can see that the Alzheimer drug trials momentum has really kicked up.
And we have a lot of customers that are running trials. And we launched this pTal-one 181, also a four plex that is being utilized in many Alzheimer trials, those have further advanced our position in this important evolving landscape. We also had the approval in Q3 of a Novartis drug, Kesimpta, MS drug approval. It was a secondary surrogate endpoint. And the normal TIFF study showing what Nf L levels do between ages seven to 70 has been completed in Switzerland.
Will be key to anything we do moving forward around getting the FDA to sanction Nf L as a disease progression marker. Hopefully for a single site IVD will be our pursuit primarily in 2021. In the COVID arena, we won 18,200,000.0 in Q3. We've won the initial grant of a couple million for feasibility in the end of Q2. And then we were rewarded to scale this antigen test up, which is showing incredible utility in blood, dry blood spots as well.
Which is the area that we think can eliminate a lot of the PPE and potentially even enable home care sampling. So we're really excited that the NIH has seen the potential in this test and has invested aggressively in scaling us up, which we also see the benefit of scaling up can also help us with a lot of the trials that we're running in our research side of our business, both in neuro and in COVID. Also, we've secured and already have begun major IRB Investigative Review Board studies with one of the largest payers in The United States for COVID, running five different IRBs at the current moment inside of our accelerator lab. In addition, the accelerators we've shown is growing and we've built our China position, recently naming a new general manager of our Asia Pacific business. The HD X performance continues to evolve and improve, which is a key to our strategy.
And we continue to get trade in revenue as well as new system sales. You may have seen the major announcement around Abbott where we have a nonexclusive license with them now, which pretty significant advance given that Abbott is one of the premier big three. Plus we were able to do it in a nonexclusive way with major upfront payment. I think there's a 10,000,000 upfront payment for this license. But longer term they will try to deploy and bring out instrument platforms to have Samoa inside.
And we also were very successful raising capital this quarter, 100,000,000. Once again, one of the largest up rounds that we've had. Plus we've continued to advance post that rounds with many of these major announcements. When you look inside of our revenue, when you remove some of the onetime effects, you can see here that we had very strong lab accelerator lab growth, which is what we had pointed out earlier. And this was for two reasons.
One is COVID, and they're using our labs. Two is we had a lot of HD X transitions where there was validation work going on in our customers and they were utilizing our accelerator lab, which we don't pull out the consumables, but a large portion of that revenue would be consumables utilized in the laboratory for the accelerator support of our customers' trials. And we did get back to instrument growth and consumable growth in Q3, which we find to be a real productive advance. You can also see that on a full year basis, we've continued to evolve. We certainly are over a lot of the Q2 challenge.
But on a full year basis, you can see our mix is now about 40% consumables, 40% services, and about 25% instruments. When you look at the actual geography customer disease demographics, you can see that our growth was actually strongest in Europe. But North America was close second in Q3. And this is actually the twelve month trailing revenue. And you can see that about 60% of our revenue is coming via pharma biotech.
And it continues to grow rapidly with all these trials, particularly in the neuro sector and also beginning in oncology. And you can see that from a disease specificity standpoint, we're still mostly neurology, but oncology is coming up very rapidly, particularly with a lot of the trial work going on in the accelerator. Now looking strategically, we've talked a lot about moving the life sciences in into a digital opportunity for measuring ELISA. Digital ELISA is a lot of what we've done. This chart depicts slide nine, how we've increased the sensitivity by 1,000 fold.
And we've recently announced four months ago another 100x and we've got a prototype that we're rolling out. That's really probably a year, year and a half away from being fully deployed. But this is a big advance allowing us to reach down underneath of what the traditional levels of sensitivity were to see new proteins of relevance. And then to reduce the invasiveness of the testing in the samples with the sensitivity to increase the TAM. And this is we think going to lead to a fairly significant revolution in proteomics with this deployment.
We are moving, as you can see from the right hand side of the slide, from high invasiveness liquid biopsies, cerebrospinal fluid taps, spinal taps, as well as even radiation from imaging down to really noninvasive early detection. And the protein once again, we believe captures many of the environmental triggers. And there's a lot more proteins than there are genes. And we think they're much more phenotypic, which makes them highly relevant. And so we're really advancing the field of proteomics with this sensitivity and creating a lot of translation, not only in these drug trials, but ultimately we believe for the clinic.
This slide is a slide we've used for really five years to depict on the x axis when you can detect the disease. And you can see the cancer and neurology are all the way over to the right. And they're typically very much the latest stage lethal diseases to be detected. And you can see how many publications we now have using biomarkers to get at an earlier detection. And depicted on the bottom you can see Samoa moves the concentration detection levels to levels that you can see these diseases much earlier.
Then on the Y axis, the invasiveness, once again by creating the sensitivity of Samoa, we can reach in and see answers in blood and saliva and urine that you couldn't see without really invasive procedures. And that combination is really what we believe is allowing us to shift cancer neurology, even COVID and infectious disease further to the left and earlier in lower invasive testing, we think in the end creates significant TAMs and opportunities to disrupt the way medicine's practiced. The initial deployment of this sensitivity and this capability is to help drug companies recruit better cohorts of patients that are more specific to the disease and the drug that they're actually trying to get approval. And to get cohorts when the disease is earlier stage when it's easier for a drug to be effective. And that also allows lower dosing which allows lower toxicity.
The combination of higher efficacy, lower toxicity leads to a 300% improvement in the areas that these biomarkers are deployed. And on the right you can see the number of CRO instruments now that have been placed, 55 of them running these phase one, two, three trials. Over 1,000 have been run across these CROs. And you can see that we mentioned earlier 128 have been running our own facilities. This is just a slide that shows how rapidly the adoption has occurred for the Samoa technology.
We really had no revenue about five years ago. And we have really accelerated rapidly with the adoption of these drug companies for this purpose. And we did mention earlier Novartis' new drug with a secondary surrogate endpoint that was presented at ECTRIMS using our Nf L neurofilament light assay. Roche also had an approval, utilized our technology as a secondary surrogate endpoint in MS as well. So these are good test cases further validating the utility of this technology.
Just for Nf L, you can see that when you have a brain trauma or neurodegeneration, what happens is the proteins Nf L, they actually break down from the neurons and the axons on the neurons dying. And those neurofilament light then goes into the CSF. And you can see on the right hand side that it actually crosses the blood brain barrier, but at a much lower concentration. And so we can see Nf L levels at two to four picograms per ml versus them being almost 100 times, 50 to 100 times more concentrated in CSF. So this enables the correlation.
There's many publications now showing that correlation which has allowed them a much less invasive way to look at brain health. And we're now actually looking at dry finger pricks, dry blood spots from finger pricks, which is even a less invasive sample. And so these are pathways for measuring the NFL. And you can see on the left hand side of this chart the traditional way of doing it, spinal tap, is $10,000 per procedure, very painful, very invasive. You can see that there's a lot of biomarkers that they would have liked to measured via the spinal tap.
But most people won't accept that for a drug trial. And so we've been able to move many of these markers into serum and plasma as evidenced on the right hand side with check marks. And most of these now, except for the ones in black, have already been shown in publications by these various researchers around the world as well as the pharma companies on the right have used cases seeing these biomarkers in blood. And almost 100% of the publications utilizing, particularly Nf L, are all done with the Simoa technology and also Uman now. We acquired them a year ago.
It's their antibody pair that is also utilized. 100 of those publications are showcasing both us in the antibody as well as in
Speaker 1
the instrument. Now this is
Speaker 2
a game changing slide. But two times the last eighteen months we've been publicized as having technologies that have been able to see Alzheimer's very early in the cascade. On the bottom left, there's a publication where Nf L showcased sixteen years before symptoms on familial patients that had genotype that they knew when they were going to get dementia based on their genes. And then they ran trials and this NFL was able to reveal it. There were several technologies deploying pTal two seventeen that were able to show as early as twenty years.
You can see there's a lot of publicity this year around the pTau series. In the middle, we had some publications come out, game changing one on pTau 181, which we've now launched. Actually shows a correlation in blood between the images of amyloid as well as the images of a tauopathy. So images of tau of the brain, images of the brain for amyloid have been correlated to pCal 181 in Alzheimer patients in blood. And that's what is shown on the bottom is the correlation between the CSF of 181 pCal and blood.
And on the right hand side, the advances that you've been hearing and reading about from Biogen is clearly advancing the drug and they have increasing the dosing of aducanumab reduces the level of the pTal-one 181 in the cerebral spinal fluid. And the reason for the arrow going over to the left is that correlation from the cerebrospinal fluid into blood, which we think longer term creates a lot of promise around a blood test that could be used as a screen to help move patients into drugs that get approved for Alzheimer's. And so it's not just using these technologies to get drugs approved, but then it's gonna be an opportunity to monitor their progress with the drug as well as someday maybe even being health screened. The Nf L, the number of trials continues to expand, particularly for MS, multiple sclerosis. But it is being utilized, as we mentioned already, in Alzheimer's as well as TBI, traumatic brain injury in MS, as well as ALS and frontotemporal dementia and Parkinson's.
Now we've also pivoted, as we mentioned, into COVID. And it really kind of started with the recognition of this cytokine technology we had to measure cytokines and see cytokine storm earlier, many of the researchers in the hot zones used our technology to reveal that and to predict it to help stratify patients that were going go serious versus be able to be stable. We then got a lot of interest from an outside peer group to build a serology assay, which we've done. But the number one area that we're really focused right now is on an antigen test, which we've mentioned that the NIH discovered this and helping us now fund this and further scale it. And then, you know, in the fourth category on the right, interestingly, Nf L as well is gonna potentially play a role for long term disease impairment that COVID could be creating for many that haven't even really had symptoms other than maybe loss of taste and smell.
So there's a lot of interest in all four of these categories of our biomarkers. And so someday we think there could be a comprehensive look at the disease, looking at these different biomarkers for each patient. And ultimately we see a lot of research opportunities because there's a lot of questions that haven't been answered on this virus. What level of antibodies when the vaccines come out are sufficient to prevent infection? How durable will those antibodies be?
What's the role of the innate immune system? How fatigued will the innate immune system be as a result of COVID? So many of the payer groups are very concerned about the long term implications. And we think our research is gonna reveal some pretty important tools for that research. This is just a slide showing how challenging it is today to measure whether someone has the virus, particularly before symptoms.
You can see that it's estimated in some publications that the false negative rate, meaning that you're told that you don't have the virus if you don't have symptoms, can be as high as eighty to ninety percent of the time when you actually have it, you're told that you don't because of sampling error of the virus onto the nasopharyngeal. So seeing it in blood could represent an opportunity and that's a lot of the focus that we've brought to this. And we're also looking to try to expand the window of being able to see the virus. There's new interest as well as checking therapies and seeing if the antigen level from our measurement come down as the therapy is applied in blood, which is potentially an endpoint opportunity for drug trials and therapy trials in the future. So we're excited about that opportunity as well.
Working with the FDA around moving to less invasive samples though is a challenge and it represents a lot of effort. We've got great relationships with the NIH as well as the FDA now. And we are very happy that we're trying to advance the ability to see this effectively in less invasive samples. And someday home care we think will be a great place to be testing and pulling out samples. But we may not actually do the test there, but we'll do the sampling from home and then get the answers from centralized labs.
So this payer group, ADVANCE, is pretty important for us because they're really looking for outcomes. And early detection can change the way they deploy healthcare. And it also can be a way to improve outcomes by getting to diseases earlier and lengthen life. And so across all of the different categories, starting with COVID, we are really excited about running these IRBs for the payer groups because it can represent a whole new way for the value chain to capitalize and leverage the opportunity that our biomarkers with low invasiveness early detection potentially home care could represent. And so where there's known biomarkers in therapy in places like MS, diabetes, COVID, we think that can be deployed now within these healthcare groups.
If there's a known biomarker but not a known therapy, there's a lot of members we think can get into drug trials to help get early detection of members with these disease cascades to help these drug trials. And then finally, where we are gonna monitor with a payer group their membership and the biomarkers over a long period of time. And as diseases come into that payer group, the membership group, we can look back and see what biomarkers could have revealed that. That could really be a great way for biomarker research to occur. There was a lot
Speaker 1
of
Speaker 2
news this past week with respect to Exact Sciences buying Thrive. And it's a chance to evolve I think Exact Sciences from a primarily genetic position to also looking at proteins. And we do think as we mentioned earlier, proteins are very important. And there are some specificity challenges with certain parts of cancer seq that added sensitivity can enhance. And we've been just looking at the proteins that they have in their algorithms and some of the level of detection that they have.
And we believe that there could be opportunities to utilize technologies like Simoa to further advance more sensitivity in these critical proteins that you can see here. And then for breast cancer, the ones in red on the right hand side are some of the most important proteins for these algorithms. And by having a lot more sensitivity, we think it could further power the improvement of these kinds of technologies. And so we really are excited about Exact Sciences moving to the protein. And many of the liquid biopsy companies are also looking to augment, like FreeNome, their protein positions with their DNA positions.
I wanted to just this is a visionary slide that tries to illustrate for our investor group just how TAMs get increased, the addressable market, using sensitivity. The greater the sensitivity, the earlier you see disease. That in itself, we already pointed out, creates the ability to use this technology for very exciting ways to see disease earlier. The less invasiveness going from cerebrospinal fluid to blood, let's say, you know, a dry blood spot or even saliva, that increases the TAM. The ability to multiplex takes away sensitivity.
So the more multiplexing you can do, the more disease specificity you can create. So the more sensitivity you have, the more you can create utility for these biomarkers. You also can dilute samples to eliminate matrix effects to allow the false positives and false negative rates to improve dramatically. So the ability to dilute can create a lot better specificity in the technology. And then finally, the ability to quantitate versus just say that a biomarker is there, instead of being qualitative, being quantitative.
And we think that in the area of research, particularly for serology, how much of those antibodies is actually there versus, for an individual patient, versus the amount of virus. And being able to quantitate those we think adds a lot of advantage. This slide just illustrates that there's been a lot of movement in the genomics landscape over the last twenty five years for very good reasons. The genomic revolution started with next generation sequencing, has led to a lot of really productive companies with many value added assays on the right hand side. We just wanted to showcase that in the protein world, Quanterix straddles the end of this pipeline for proteins.
And we're doing a lot of drug trials as we've pointed out, primarily in brain and in COVID areas currently. And as you see, those different proteins do find their way in IBD products like the Siemens, the Roche's, the Abbott's, protein products in the LDT labs, as well as health screens. And we've set up, we think, lot of good nonexclusive relationships with many of these companies on the right hand side to further advance the technology and create greater opportunities for it to advance. And we think that moving to the right, like what we see happening with driving frenome with the protein is a real important opportunity for this entire landscape. So we're very excited about a lot of the interest to further fuel proteomics even with upstream technologies and allow more to advance downstream.
So when you look at our TAM, we see it as a $1,000,000,000 TAM primarily focused at COVID $200,000,000 and neuro $350,000,000 This is on the research side of our business. And as we've been saying longer term, we wanna continue a 30 to 40% CAGR in that growth, in that landscape. We are deploying to the right now the COVID and neuro trying to find pathways for things like the Alzheimer's and MS and the neuro. And even in COVID, given the NIH's support of us for the antigen, we're looking at possible ways to help the world and the nation for the COVID opportunity. And there's about 1,200 proteins we showed early on that have evolved into about 200 proteins on the right hand side.
Longer term, we think that this protein revolution really hits, there could be as much as 90,000,000,000 based on some consulting research that we're having done right now. Ultimately maybe as many as 1,000 proteins could find their way if you could expand them into diagnostics. So in summary, going back to the telephone, going to the iPhone, we've seen a lot of advances in the computer systems on the top. And certainly we've watched the genomic revolution just bring a lot of value to investors. But more importantly, it's transforming the way patients can look at cancer and look at many of the ailments they have today.
And there's been a lot of advances occurring. And we think that the proteomics wave and that fan, has a real opportunity over the next ten years, and we're really excited to be, having an opportunity to advance that. So what I'd like to do now is turn it back over to Amal to talk through more specifically our finances. Amal?
Speaker 1
Thanks, Kevin. I'm gonna provide you some additional financial details about our q three twenty twenty performance. I'll be referring to Slide 49. As Kevin noted, our GAAP revenue in 2020 was $31,400,000 and included $11,200,000 revenue in connection with our non exclusive license agreement with Abbott and $1,900,000 revenue from our Vadex Phase one award. Excluding these non recurring items, our non GAAP Q3 twenty twenty revenue was $18,300,000 a 22 increase versus prior year Q3.
Instrument revenues increased 8% and consumables revenue increased 9% despite challenges in accessing customer sites for installations and customers facing interruptions in their operations due to COVID-nineteen. As previously discussed, we had proactively expanded our accelerator services capacity to support our customers sustain their research and clinical trials. This drove 56% increase in service revenue, which finished at $6,600,000 The RADx Phase II contract that we entered into at the end of Q3 did not affect our Q3 results. Year to date, total revenues are $60,200,000 excluding the Q3 non recurring items previously discussed. Non GAAP year to date total revenues are $47,100,000 a 15% increase.
As previously stated, we are not providing revenue guidance. We do expect to see Radex Phase two contract revenue of about $6,000,000 per quarter and associated cost of about $5,000,000 per quarter over Q4 twenty twenty and 2021, which we will continue to exclude from our non GAAP financials. Across Q3, we have seen demand progressively recover in U. S. And Europe.
However, a second wave of coronavirus may force renewed lockdowns, resulting in challenges such as limitations in accessing customer sites to complete installations and drop in consumables utilization due to interruptions in certain customer laboratories. On a non GAAP basis, Q3 gross margin was 51.5 percent versus a prior year Q3 gross margin of 51.8%. Q3 twenty twenty gross margin includes a 190 basis points negative impact from our successful HD-one trade in program. Our non GAAP gross margin excludes the impact of the nonrecurring Abbott license agreement and Radix Phase one award as well as non cash acquisition related purchase accounting adjustments relating to the 2019 acquisition of Oman, thus providing investors with a relevant period to period comparison of operations. We believe we have a significant opportunity for gross margin expansion in future as we evolve the mix towards high margin consumables and accelerator services businesses, scale our overall business and reduce product cost.
On a GAAP basis, our Q3 gross margin was 67.2% and was favorably impacted by the Abbott license agreement and RADEX grant versus prior year Q3 gross margin of 47.1%. Our GAAP operating expenses totaled $18,800,000 in Q3 twenty twenty and non GAAP operating expenses, which primarily exclude non recurring expenses associated with our RADEX grant revenue totaled 17,500,000.0 During Q3 twenty twenty, we raised $91,400,000 in net proceeds through our public offering and use of cash was restricted to $7,000,000 through proactive working capital measures. The balance sheet is in good shape as of September 30 with approximately $173,000,000 in unrestricted cash. Overall, we are very pleased with our Q3 twenty twenty performance and progress made on our strategic priorities. We remain focused on continuing our recovery to strong growth trajectory in the remainder of the year despite the continued challenges brought on by the coronavirus pandemic.
With that, I will now turn it back to Kevin.
Speaker 2
Thank you, Amal. And I would like to close Amal, on slide 50 to just illustrate that as we've been saying from the beginning, we have an incredible employee group, as well as a large ecosystem of thought leaders and many investors that have actually supported us in creating demand by working with many of the pharmas that they have stock positions with to help create opportunities to get drugs approved in the pipelines of many of our customers. This slide just illustrates that on the left hand side, as we've said, we are mostly a research business today. I'd say 95 plus percent of our revenues really are coming from this research side where there's no real regulatory or reimbursement risk. And we feel like it's a solid place to create value for investors with a great backstop.
But there is absolutely, we've been calling it an aspirational opportunity to start to migrate into diagnostics. And COVID has enabled us a showcase opportunity to help the world with our incredibly inspired employee base, but also further demonstrate what this technology can do and help us advance into many of the different disease sectors that we know our technology can disrupt. So this slide just shows that we have a very formidable market opportunity, as we've outlined. And we think we're rivaling and creating a new category with our sensitivity in proteomics. And we have been penetrating this market that we can see being 1,000,000,000 today of TAM, but evolving very productively into very large TAM numbers, as you can see on this slide.
We also are better linking the DNA and RNA to the protein, trying to get a better map of where the protein links up with the DNA and RNA, particularly looking at these protein modifications that the disease triggers and environmental factors are creating. 19 of the top 20 pharma have now deployed our technology. There's been thousands of drug trials run, phase one, two, and three. Almost 1,000 peer reviewed pubs really validating this technology. And so when we look at the penetration opportunity, we think it's a significant razor razor blade opportunity.
We have a lot of consumables. We've invested significantly in our products and we'll continue to, advancing our sensitivity another 100x and continuing to evolve with off the shelf kits that allow our customers to get to a very large menu of proteins for measuring. We have an incredible board of directors that have been through this over the years. They're very instructional and very bought in and very much skin in the game, very much excited about this opportunity. And there's a real track record amongst the board and the management for commercializing disruptive technology.
So with that, we'd like to open it up for I know it's a busy day today, a lot of earnings releases given the election this week. We're gonna open it up and see if there's any questions.
Speaker 0
Thank you, sir. Ladies and gentlemen, if you have a question at this time, please press the star and then the number one key on your touch tone If your question has been answered or you wish to remove your cell from the queue, press the pound key. We have our first question from the line of Puneet from SVB Leerink. Your line is open. You may ask your question.
Speaker 3
Hi, Kevin. This is Scott on for Puneet. Thanks for taking my questions. Sure, Scott. So, Kevin, I'm just
Speaker 2
Hey, Scott. You're breaking up.
Speaker 3
Oh, there we go. I was on mute. I'm sure you saw the, Kevin, I'm sure you saw the initial positive stance from the FDA on aducanumab, from the recently released, briefing documents. I was wondering if you can comment on maybe how this might impact the pace of new trial starts in neurology more broadly, and if you believe it'll encourage the use of neurology assays such as Nf L and P Tau in these trials.
Speaker 2
Yep, great question, Scott. And obviously this has been a very challenged landscape for the past ten years trying to get an Alzheimer drug across the goal line. And when we entered four years ago, we brought the hope of objective markers versus the subjective markers, looking at such things as how long does someone with Alzheimer's, how long does it take them to traverse a maze at a hospital, being somewhat of a subjective measure. So more of a concrete objective marker of a biomarker in blood. So we had a vision around that possibility.
And then the FDA created guidance about three years ago under Scott Gottlieb, to actually have biomarker guidance to recruit patients precognitive impairment. And if you could show and validate that the biomarker was clinically relevant to the disease cascade, you could utilize that to actually help support your data. And I'm intrigued by this particular advance that it does look like pTal-one hundred eighty one in cerebrospinal fluid has played a nice correlative effect of increasing the dose reduces the level of pTal-one hundred eighty one in the cerebrospinal fluid as we commented on an earlier slide. And I think that the fact that there's some level of biomarker usage occurring, even if it's in CSF, creates an opportunity because of all the correlative work that's been done the last four years in blood for this to become a less invasive opportunity. So I think that we are looking at many pharma companies in general, looking at the amyloid thesis that was almost being shot down as not really being a relevant thesis.
I think that some of the enthusiasm that's going on with Biogen right now has created a little bit of a resurgence to some level of support for the amyloid thesis. I think there's still a lot of questions. I think there's, callopathy is another area of opportunity. But in general, we're seeing a more vibrant pharmaceutical base based on this news. And obviously this is creating downstream opportunities for trials.
And so we do think that this is a great moment. We don't know how sustainable it is. It'll be interesting to see how this progresses. Biogen is one of our top customers as is many of the companies in the neuro landscape. And many of the investors that own us, like I said, they own pharma companies that have neuro pipelines and have been making those introductions.
And that actually helped our growth. So I do think that this is a good moment for this opportunity. But we don't know how sustainable it is. And I think even downstream if a drug ever does get approved in Alzheimer's, which there hasn't been one yet, it could evolve like MS where there's today 16 different approved drugs. And then the question is, is the drug that you've selected for multiple sclerosis, is it working for you as an individual?
And so Nf L is a great neuro marker to determine neurodegeneration. If it improves, if the level of Nf L comes down, that means the drug has got efficacy in the MS community. Same would be true in the Alzheimer community. We believe that there's evidence that neurodegeneration would slow down if a drug could be effective in the area of Alzheimer's. And so downstream, how do you get people into the drug more efficiently than imaging and or cerebral spinal fluid taps?
Hey, a blood draw could be a good first level screen. Secondarily, it could be a way to monitor disease progression and drug efficacy. So I do think that for companies like ours, it does help, create a lot of new interest and excitement for the possibilities.
Speaker 3
That's very helpful. And I wanna move my second question on the RADx program. It was really great to see you guys move on the phase two of development there. I was just wondering if you could describe what the next couple steps are in the process, if there's any timeline you can provide here. And just to kind of remind us where you expect the product to fit in the current testing paradigm for COVID-nineteen?
Thank you.
Speaker 2
Sure. Yeah, first of all, I would say that we feel very honored to have been discovered by the NIH. Our relationship there has continued to evolve to the most senior levels. And they've been incredibly productive as had the FDA where we haven't really had a lot of interactions with either of these two agencies until COVID really started to reveal the possibilities of our exquisite sensitivity playing a role to help. And so how we evolve at this point has been interesting.
It started out with a feasibility study. Our data looked very promising. And as a result of that they invested and are investing in scaling up our ability to make the kits for this antigen assay that ultimately could be deployed, we believe, in blood. We're initially trying to prove it out in nasopharyngeal. We got really good trials underway that are showcasing this technology sensitivity and capability for some of the traditional sample matrices.
But we ultimately think that the blood, and maybe someday even saliva, and I think the NIH is interested in saying can you also pool where you can run multiple samples? Because their interest is to scale up significantly. And I think one area of promise or at least of concern, and we hope that we can play a role, is in the asymptomatic. When children start going back to college, that's when the testing really started to move from those that had symptoms, when it's easier to detect when you have the symptoms, the virus, to those that don't have symptoms. And unfortunately it's much harder to see this virus when you don't have symptoms.
Either presymptomatic, meaning that someday you will have symptoms and you're just getting it early. Or some of those that get the virus never do it end up having symptoms. And so being able to improve false negative rates and improving even longer term after the virus has gone away, the false positive rate of some of today's testing is a key area of opportunity. Because you don't want people thinking that they don't have the virus when potentially they do. And if testing is creating some of that precision challenge, you want to get in there and correct that.
So we actually think that the timeline here is one of very aggressive nature from the NIH hoping to scale. But we're trying to stay very conservative and take all the right steps and make sure we don't get ahead of our skis on this to make sure we're taking all the right steps with the agencies to ensure we've got something that is really robust and is gonna really be able to help. And so again, we're working with the FDA as well as NIH on that scale up. And we will be launching research assays from the antigen and the serology over the next couple months that can be utilized by researchers to really begin to get a better understanding. And I actually think these drug trials and therapy trials, whether it be convalescent antibodies or whether it be remdesivir or different antivirals, being able to see whether the virus, the antigen comes down in blood will be a key opportunity we think to help create some endpoints that might be better than just how long is someone in the hospital, is this drug improving the amount of time they're in the hospital.
So there's a lot of those types of opportunities and the ability to quantitate as well as maybe to stratify who's got a more serious illness are all opportunities that we're trying to reach into. But it's too early for us to make any kind of conjecture around how this will translate. But it's an interesting development and I can assure you our team of people in our company is incredibly inspired working around the clock to try to advance this as fast as possible to try to help not just America, but around the world. We've got interest in these technologies.
Speaker 3
If I could just slip one more in, on HD X, the instrument upgrade cycle there. I know that's a big part of the story coming into the year. Can you just kind of bring us up to speed there? Should we expect the reacceleration of placements as academic customers kind of return to labs and and things begin to normalize? And do you still expect to convert about 50% of your, HD one customers?
Thank you.
Speaker 2
Absolutely. I'll, and and Amol, you might wanna follow this one up with just a description of the mix of trade ins versus new purchases. But to start off this answer, Scott, this HDX is something that we're putting a lot of emphasis on. It's fully automated. So you put in blood or saliva or whatever the sample matrix is and you get out the answer.
So it's fully automated. And we have a lot of our customer base saying, you know what, your automation of getting the same answer every time and the throughput that you can get on the HD X of about 1,000 samples per day fully utilized, I think it's probably better for planning purposes to look at 500 to seven fifty samples per day. That capability of having it fully automated and creating that throughput for a lower cost antigen type test that's got a lot of sensitivity and precision, we actually think that this could create more demand for the HDXs as we move forward, either in research or if we further evolve into diagnostics. We would try to utilize partners, third party, I'll call them more like LDT labs that have infrastructure. We're going to try to evolve our HDX deployment for at least the COVID landscape to either research customers or customers that have experience using this platform to give it just a higher level of performance and utility.
But I think in general, that's going to lead to new sales either in RUO. And the neurology trials is just another area where we think there'll be increased interest in buying HDXs. So overall, it's just another area where we think there'll be increased interest in buying HDXs. So overall, I think that the numbers that we cited going into the year are not gonna be way off relative to trying to get to half of our installed base being, you know, HDXs of the HD series by by year end. Amal, anything you can add here?
Speaker 1
No. I think you summarized this really well, and we will get exceedingly close to half of our installed base with HTX. And and
Speaker 2
And I was going to also comment, around trade ins to them all. That was a question that we were getting. I wondered if you could give a sense of, the margin implications because I know it's a good thing in the long term, but it'd be good to just discuss that.
Speaker 1
Yeah. Sure. And, Scott, I mean, as we've discussed sort of before, right, like, we we when we do trade ins, we're basically offering an instrument at a discounted price, still above our cost structure. And it's a great thing for the business because it's gonna drive a lot more utilization and a much more reliable platform and gonna expand our consumables revenue going forward. Right?
But what happens because of that dynamics is the gross margin when we do this trade in gets sort of temporarily suppressed, which creates a a drag on our gross margin. But it's a great problem to have because it creates a longer term better customer satisfaction and an expanded consumables utilization going forward. We continue to see a lot of interest from our customers on HDX trade in. And because the way sort of grant processes and federal budget cycles work, we expect some of that trade in volume to continue into q four as well as 2021. We can move to the
Speaker 2
if there's any other questions.
Speaker 0
Thank you, sir. We do have another question from the line of Chris from Cowen. Your line is open. You may ask your question.
Speaker 4
Hey, Kevin and Mal. Thanks for taking our questions. This is Chris on for Doug today. I apologize if you addressed this during your prepared remarks. We're I think we're juggling about eight earnings calls this afternoon.
But first, maybe just to follow -up on the prior question. I think you were previously targeting 75 HD X and SP RX SP X and SR X systems this year. Now is that still the plan? And are there any bottlenecks in terms of being able to get an instrument shipped and installed in the current environment?
Speaker 2
Yes. I would say, in general, Q2 was obviously a major headwind, and we still have a lot of risk around what happens with this virus moving forward. Does it affect and shut down any labs? And we're starting to see the potential of that some closures in our European operation in which those can affect our ability to install. But I do think that the overall numbers that we cited going into the year for HD X still feel pretty productive given some of the new opportunities that we're focused on.
Amal, did you have other thoughts on this question?
Speaker 1
Yes. No, I think, Chris, you picked it up correctly, right? Because in our q one earnings call, we we had stated, 75 HD Xs and 75 SRX plus SP Xs. And at that point, we had reduced it from 90 before and also reduced the 50% to roughly 40%, mix. And we we are still in line of sight with those numbers that we had shown during our q one earnings call.
And as I said, we'll get really close to 50% of our installed base in HD X by year end, provided, you know, we don't get disrupted by the second wave and associated lockdowns. If things continue to stay where they are today, we have a good line of sight to get to those numbers we shared during our Q1 earnings call.
Speaker 4
Okay, great. Maybe just moving on to Abbott. What time lines have you committed to regarding development and commercialization of a product? And how much of that is in Abbott's hands versus yours? Well, I'll just leave it there and ask my follow-up after.
Speaker 2
Yes. I would say that we've not communicated any details. It's a very minor level of communication around this relationship except to some of the financial terms. I would say that they're incredibly motivated by what Samoa can do. And I would expect that this is going to lead to them deploying this technology into some new form factors sometime over the next several years.
So it's a longer term opportunity. But for us, it was a big validation to be able to achieve this on a nonexclusive basis in a market that really has three premier large distributed IBD players. And to give an opportunity for our technology to evolve inside of other channels to market. It's a $22,000,000,000 landscape across these large three or four diagnostic IVD houses. So to establish this foothold is important.
And again, we have a very strong relationship with the Abbott team. We've been working on this for a couple years. And it's they have a a new CEO and a a lot of excitement right now around this opportunity, which I think could bode well for us in the long term.
Speaker 0
Thank you, sir. There are no further questions on the line. I'm turning the call back to mister Chubal. Sir?
Speaker 1
Pass it back to Kevin to close out the call.
Speaker 2
Sure. Yep. Hey. Thanks so much for everything that you guys have done with us, the investor group. We look forward to further evolving our discussions, our performance and our story.
We're very committed to driving growth in this landscape and feel very honored to have a chance to be working with all of you. Stay safe out there, and we'll talk soon. Thank you very much.
Speaker 0
Ladies and gentlemen, this concludes today's conference call. You may now disconnect.