Akoya BioSciences, Inc.

Q3 2021 Earnings Conference Call

11/8/2021

spk02: Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2021 Okoye Bayou Sciences Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to turn the conference over to your speaker for today, Priyam Shah. You may begin.
spk04: Good afternoon, everyone. Thank you for joining us today. I'm Priyam Shah, Head of Investor Relations at Akoya Biosciences. On the call today, we have Brian McKelligan, Chief Executive Officer, and Joe Driscoll, Chief Financial Officer. Earlier today, Akoya released financial results for the third quarter and it's September 30th, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will be making statements during this call that include forward-looking statements with the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements. due to a variety of factors. For a list and description of the risks and uncertainties associated with the COIS business, please refer to the risk factors section of our form S-1 filed with the Securities and Exchange Commission on April 15th, 2021. We urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. This conference call contains time sensitive information and is accurate only as of the live broadcast today, November 8th, 2021. ACOIA disclaims any intention or obligation except as required by law to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. And with that, I will turn the call over to Brian.
spk03: Thank you, Priyam, and good afternoon, everyone, and thank you for joining us. We are excited to announce today's strong third quarter results and highlight solid execution in meeting ACOIA's financial goals, hiring objectives, and R&D milestones. Looking back, it's remarkable to think that just three to four years ago, the concept of spatial biology was largely novel. Since then, accelerating interest by customers and investors has elevated spatial biology to now be considered a fundamental pillar and central to the future of life sciences research and emerging diagnostics. We at Akoya believe spatial phenotyping will inevitably become the standard for analyzing any tissue sample, and the reason is quite simple. Current technologies like next-generation sequencing, flow cytometry, single-cell analysis provide meaningful information, but they unfortunately require the destruction of the tissue sample, sacrificing all information on the structure of the tumor microenvironment and the cellular and protein interactions driving tumorigenesis. Measuring and monitoring these spatial interactions is central, for example, to understanding our body's immune response to disease. Akoya's platforms keep the tissue sample intact while measuring all cells and key biomarkers in their spatial context. A complete snapshot of the underlying biological dynamics of the tumor microenvironment is fully captured. So it is expected that over time, FFPE or fresh frozen tissue samples, particularly in cancer, will be preferentially analyzed on platforms that provide the spatial phenotyping information. Here at Akoya, as a company 100% dedicated to spatial biology, we are empowering our discovery research customers. with the tools to make profound new discoveries in understanding cancer biology. Our biopharmaceutical partners are leveraging our spatial phenotyping solutions, for example, to understand and predict how patients will respond to immunotherapies. Now turning to this quarter's results, we are pleased to report impressive third quarter financial results and a record quarter for ACOIA. with total revenue of $13.5 million, representing a 35% growth compared to the third quarter of 2020. We continue to see adoption of both codex and phenoptics, with strong instrument sales and consumable pull-through. Okoye is now the proven leader in this spatial biology revolution, with the largest install base of any spatial biology platform in the industry. As of September 30th, ACOIA had 651 instruments installed. As a key leading indicator, the rapid growth in high-impact publications continues to fuel our optimism. There were 110 peer-reviewed publications on our platforms in 2020, a nearly four-fold increase over 2019. Now, as of September 30th, 2021, there are already 192 publications on ACOIA's platforms this year, approaching a doubling of last year. It was still another quarter to go. Codex, as a growing percentage of these publications, is the market's most affordable spatial biology platform, providing unprecedented single and subcellular resolution across entire tissue samples. Priced at under $100,000, we continue to see high adoption of Codex within the academic market, especially at the individual investigator level. With Codex's ability to integrate with our customers' existing microscopes, we're just beginning to penetrate the fully addressable market of nearly 20,000 microscopes already in the field. On the phenoptic side, we continue to see the growing deployment of this platform's use in early to latter stage clinical trials. This is also driving expansion of the revenue pipeline within our advanced biopharma solutions division, or AVS as we call it, where we're performing fee-for-service work on clinical trial samples with key biopharma partners. With AVS, we have an increasing number of biopharma engagements similar to our announced AstraZeneca partnership, where we're analyzing samples and assessing patients' response to therapy across a number of clinical trials. In addition to being a valued revenue stream, these partnerships further cement our phenoptics platform as the leading spatial biology solution for translational research and clinical trials. Another valuable contributor to the growth of our clinical trial partnerships was the MITRE study published this July in the Journal of Immunotherapy of Cancer. As a peer review publication, this has been an important tool to provide our biopharma partners the confidence that our Phenoptix platform has the analytical robustness and performance needed to be the central tool in their immuno-oncology clinical trial biomarker efforts. The pending CLIA certification of our ABS lab will also be an important driver of business growth going forward. On the organizational development side, As of September 30, 2021, we have approximately 305 employees worldwide, a significant increase from the 170 at the end of 2020. As part of our hiring this year, we have almost doubled the commercial headcount to about 150. A similar expansion has occurred within our R&D organization. With this, we are on track to deliver innovative products in 2022 that will further contribute to growth and catalyze Akoya's expanding commercial success. To support and guide us on this journey, we recently announced the appointment of Dr. Myla Lai-Goldman to our board of directors. Myla is a visionary and seasoned executive in the diagnostic industry. She brings over 30 years of leadership experience at innovative organizations, including 18 years at LabCorp, most recently serving as Chief Medical Officer and Chief Scientific Officer. We also announced the appointment of Dr. Pascal Bamford, formerly with Exact Sciences, Genomic Health, Epic Sciences, and Ventana, as Executive Vice President of R&D. Pascal has deep scientific and operational experience leading teams in developing and implementing successful, innovative digital pathology products. On the partnership front, I would invite you to review our recent webinar series, highlighting the groundbreaking translational and clinical research being done on our Phenoptix platform by many of our key partners. Speakers from UCSF, Early Child Research Institute, and Yale discussed the predictive power of spatially derived biomarkers in immunotherapy and its impact on clinical trials, testing, and the standard of care. Last week, we also announced the founding members of the first-of-its-kind Imaging Innovators Network, or the I2 network. With I2, Okoye is collaborating with pioneering scientists from world-class research organizations with ambitions to advance the field of spatial biology while exploring novel approaches to using the Codex platform for single-cell spatial phenotyping. These investigators come from leading institutions such as the Broad Institute, the Sanger Institute, Beth Israel, and the University of Chicago. These innovators are applying spatial biology to cutting-edge work in research areas ranging from high-resolution microscopy to oncology, neuroscience, immunology, infectious disease, and developmental biology. As an inherently open spatial phenotyping platform, we will continue to leverage partnerships with inventive thought leaders like these to drive open innovation in the spatial biology market. Now let me take a minute to step back and look towards the future. In the life sciences tools market, when the vectors of resolution, affordability, and speed intersect, then real value is catalyzed because larger exploratory studies become practical and routine. Applications, market opportunities, instrument sales, reagent pull-through then accelerate. We most certainly saw this in next-generation sequencing, and the same will be true in spatial biology. At Akoya, we have listened closely to our customers' needs and recognize what improvements we need to make to fully leverage the power of spatial phenotyping to follow this same catalytic path. Our platform improvements and new product introductions in 2022 will focus on driving workflow simplicity, scale, and speed. As a result, our discovery and early translational customers will reap the benefits of new ACOIA spatial phenotyping solutions that are nearly an order of magnitude faster in throughput than current on-market platforms, while also providing single-cell and subcellular resolution across whole tissue samples. For our clinical researchers and biopharmaceutical customers who are currently leveraging the unparalleled throughput and resolution of phenoptics, ACOIA is actively advancing our workflow and partnerships to establish spatial phenotyping as the standard for clinical trials and translational research in immuno-oncology, paving the way to change the standard of care. These workflow improvements will drive further value to our customers and establish ACOIA as the go-to spatial biology solution from discovery to translational and clinical research. To share more of our successes and vision, we are pleased to announce that we will be hosting ACOIA's inaugural spatial day on December 15th of this year. Key agenda items will focus on presentations from our customers using our platforms in discovery, translational research, and clinical trials. They will share their vision for spatial biology, its current applications, and future possibilities. And as noted, ACOIA will also provide a preview of our 2022 product roadmap, key areas of focus, including new powerful spatial phenotyping solutions. The lineup of speakers is promising to be very educational and I would encourage everyone to join and details will be posted soon. In summary, we are pleased with our third quarter performance, achieving great progress across a range of important metrics. In the six months since our IPO, we have continued to make strategic investments to build on and maintain our leadership position in the spatial biology market. We look forward to continuing to execute on our financial and strategic plans as we move forward through 2021 and beyond. And with that, I will now turn the call over to Joe to discuss our financial results. Joe?
spk05: Thanks, Brian. Hello, everyone. As Brian mentioned earlier, total revenue for the third quarter of 2021 was $13.5 million as compared to $10 million in the third quarter of 2020, which represents 35% growth. This is the highest quarterly revenue in ACOIA's history. Product revenue was $10.9 million compared to $7.9 million in the prior year quarter. Services and other revenue totaled $2.6 million as compared to $2.1 million in the prior year quarter. Within product revenue, instrument revenue was $7.1 million compared to $5.4 million in the prior year quarter. Reagent revenue was $3.4 million versus $2.1 million in the prior year quarter, which represents over 60 percent growth. We had another strong quarter with 33 total instruments sold, which consists of 17 Phenoptix and 16 Codex. The total installed base is now 651 instruments as of September 30, 2021, with Codex at 161 units and the Phenoptix portfolio at 490 units. Q3 reagent revenue was right in line with our internal expectations. Normal seasonality typically results in lower reagent revenue in Q3 as compared to Q2. Q2 also benefited from customers coming back to their labs in a significant way, which resulted in higher than expected orders. We expect that Q4 will have higher reagent revenue than Q3, which is in line with what we have historically experienced. Our annualized pull-through on a year-to-date basis exceeds $30,000 per instrument for both codex, and the Polaris unit within the Phenoptix portfolio. Phenoptix pull-through is tracking in line with our expectations, while we have seen Codex pull-through exceed prior levels. We have a wide range of usage among customers, with our highest Codex users running annual pull-through in the $175,000 range, where the high-volume Polaris users are running around $200,000 on an annual basis. Gross profit was $8.5 million in the third quarter of 2021 compared to $6 million in the prior year quarter. This resulted in gross profit margin of 62.7 percent, an increase from the 60.6 percent in the prior year period. Total operating expenses were $19.2 million in the third quarter of 2021 as compared to $9.7 million in the prior year quarter. In line with our strategic plan, the increase was part of our plan to invest in the business following our IPO. We continue to hire aggressively in all areas of the business, including increasing our commercial and R&D spend to continue to drive market share growth. Looking forward, we project OpEx should be at least $20 million in the fourth quarter. Net loss for the third quarter of 2021 was $11.6 million compared to $4.3 million in the prior year quarter. due to the increased investment in operating expenses, as well as increased non-cash expenses, including stock-based compensation. Our year-to-date revenue is $38.8 million, a 31% increase over the first nine months of 2020. This puts us right on track to achieve our targets for fiscal 2021. We ended the quarter with $120 million of cash and cash equivalents as of September 30th. This gives us sufficient runway to make key investments in the business. Common shares outstanding are 37.2 million as of September 30th, and fully diluted shares, including the impact of outstanding options and warrants, totals 40.2 million. As highlighted earlier, we remain confident in our ability to deliver strong growth in 2021 and expect fourth quarter revenue to be at least 15 million. and full year guidance of at least 53.8 million. The third quarter results exceeded our guidance, and we are focused on delivering consistently strong results each quarter. Now I'll turn it back over to Brian.
spk03: Thank you, Joe. And in summary, we continue to see robust adoption of our Codex and Phenoptix platforms and are very pleased to report strong third quarter results. We are thankful for the hard work of our fellow dedicated Akoyans, as well as for the support for customers and shareholders. Akoya remains well positioned for growth, and we're excited about the opportunities that lie ahead. We hope to see many of you tune in for our Spatial Day on December 15th, 2021. And at this point, we will open up the call for questions. Operator?
spk02: Thank you. Ladies and gentlemen, as a reminder to ask the question, You will need to press star then one on your telephone. To withdraw your question, press the pound key. Again, that's star one to ask the question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Kyle Mikeson with Canaccord. Your line is open.
spk07: Thanks. Hi, guys. Thanks for taking the questions. Congrats on a nice quarter. I know this has been touched on in the past, but just given the announcement last week, I wanted to go over it again. So the I-squared network, just wanted to kind of get an update on the goals for that. I'm really wondering, I guess, two things. First would be, are you expecting maybe like a bolus of publications as a result of the collaboration? And then also, the second piece I wanted to kind of ask about was, could you leverage those insights to make updates to Codex or develop new products? It's sort of in line with, I guess, what you're sort of going to be talking about at the Spatial Day. Thanks. Thanks.
spk03: Yeah, that's spot on, Kyle. There's really two interrelated components of the I2 network. Number one is the awardees, and there will be a few more announced. And number two, it's also related to the microscope partnerships that we talked about prior to having really solidified direct integration, not just with the existing microscope, but potentially high-resolution microscopy. So you're absolutely correct in the goals that certainly publications, but most certainly an externalized pipeline of potential new products as part of this. So with Codex inherently being an in-situ reagent delivery device, we do have the ability with these partners to drive and invent new applications, and that's the goal. So absolutely an output of this is potentially new products and publications to come with that. And I would also remind that this is actually just a – albeit a minor, it is a market opportunity for us. These were not given away. These systems were acquired. So hopefully that answers your question, Kyle.
spk07: Yeah, that helps. Thanks, Brian. So I guess just moving on to kind of the financials here. So the fourth quarter guide is solid compared to what the street was expecting. I just wanted to ask what the environment kind of looks like, especially just given this forum, I think it would be a good time to just provide an update on you know, access, I guess, to customers and any instruments that you feel fell out of 3Q that could come back in fourth quarter or vice versa would be good to know.
spk03: Yeah, I'll let Joe comment in more detail on some of the specifics, but I think our general trends are similar to what you're hearing from some of our colleagues, which is there are intermittent pockets of access challenge in areas, particularly some areas in Europe and Asia Pacific. I think for us, maybe in part because we are more heavily instrument-dominated, we really haven't seen, you know, a meaningful impact on our pipeline or ability to procure orders. So at this point, you know, we would not change because of COVID, nor have we any of our guidance on the financials. Joe, I don't know if you want to add any additional color.
spk05: No, I think that's well said. You know, really every quarter this year, you see a deal or two kind of slip from one quarter to the next. And that's, I would consider that to be not unusual in any way. But for the most part, we're seeing business as usual in terms of customer ordering.
spk07: Okay. And then, Joe, actually, OpEx is expected to be $20 million in the fourth quarter. We didn't have you guys doing $20 million until late 2022, I guess, in the quarter. So, Is that $20 million like a new run rate, or is that going to grow substantially during some of the quarters of 2022, or how should we think about OpEx from here on out?
spk05: Yeah, so we've invested heavily this year, especially after the IPO. We've really grown various departments fairly aggressively, sales and marketing, research and development. We've made some investments in the clinical side of the equation. You know, obviously there's public company costs and infrastructure things that we're also doing. So I would say that the 20 million that we're projecting Q4 is a current run rate. And, you know, we are planning on hiring additional folks in 2022. So I think you would see that quarterly number go up from there. We'll provide additional guidance you know, in our Q4 analysis.
spk07: Okay, that's helpful. And then, Brian, just last one for you. When you think about, you know, I guess the current landscape and maybe even the future of spatial biology, not just, you know, spatial proteomics, do you think the growth of the market is really, you know, tied to NGS adoption, just given, you know, some of the radar capabilities that are out there, or do you think the opportunity for kind of standalone spatial profiling solutions is just as important?
spk03: I don't think the adoption of spatial is in any way tied to NGS. I do think on the discovery side where NGS is a readout for some of the spatial transcriptomics, there's potentially complementarity in the data. I still believe on the discovery side it is a rising tide, but I don't think there's any dependence on NGS at all. I think you're going to see a migration of the NGS customers who are recognizing the power of spatial to platforms like ours, especially as I alluded to in the commentary, especially as the scale and throughputs of our instruments expand and the number of application spaces expand, you'll see those customers, I think, migrate to platforms like ours. And then as you look at the translational and clinical market, I think it's even further divorced from anything having to do with NGS, particularly in the realm of immuno-oncology, where inherently the question is a spatial one about your body's ability to respond to these therapies. And those are overwhelmingly being addressed with protein-based biomarkers.
spk07: Got it. Makes sense. All right, well said. I'll leave it there. Thanks, guys, for the questions. Congrats again.
spk02: Thanks, Kyle.
spk07: Thank you.
spk02: Thank you. Our next question comes from the line of TJ Savant with Morgan Stanley. Your line is open.
spk06: Hi, this is Neil on for Tejas. Just had a couple questions on the ABS business. So last quarter you mentioned that CLIA certification for the Marlboro facility was coming in this quarter. What's the progress on that end? And, you know, if it did come through, what are your expectations on, you know, current backlog and how that's going to grow going forward?
spk03: Yeah, it's a great question. I appreciate you asking it, Neil. So the license process has been a lot slower than normal through the Massachusetts Department of Public Health. probably primarily as a result of the pandemic and the backlog. So we've got a date. We're hoping that happens this quarter, but we've been knocking on their door every week, just largely because of the backlog. It hasn't impacted our pipeline and our projects. We were sort of forward enough in our timeline, so it does not impact it. But to your question, it will further unlock larger, more important seminal studies post-CLIA as we think about For example, some of the potential enrollment studies that we have spoken about prior where CLIA certification is an important part of that.
spk06: Got it. And so on your existing partnership with AstraZeneca, could you tell us about the progress you're seeing there? And with continued investment on the BD side, how have conversations progressed on securing additional partnerships on the IO front?
spk03: Yes, so that's a great question. So we're not necessarily reviewing a whole lot of details about the specific projects with AstraZeneca nor others, but I would just say, directionally speaking, our project breadth and touch within all of these organizations continues to get broader as we become involved in more and more clinical studies, which is one of the reasons why Joe alluded to us really investing in expanding facilities and headcount, particularly within ABS, where we've added a meaningful number of headcounts. As a contributor to revenue growth going into 2022, it's becoming more and more meaningful. Not sure we'll call that out separately as a line item, but it really is an important contributor.
spk06: Got it. That's it for me. Thank you for taking my questions.
spk02: Thank you. Our next question comes from the line of Julia Quinn with J.P. Morgan. Your line is open.
spk01: Hi, good afternoon. It's very exciting to hear you guys talk more about the R&D roadmap for next year. So just wondering, like, between Codex and Phenoptix, I believe you had it above, which one do you think is a bigger opportunity in the near term? And specifically for Codex, you mentioned, you know, the order of magnitude, higher throughput. How important is throughput improvement compared to, say, some of the other aspects like menu expansion and resolution? And could you detail some customer feedback kind of leading up to your decision on the priority there. And then for Finoptics, what kind of workflow improvements should we be thinking about? And does that also include the launch of any potential curated panel content?
spk03: So great questions, Julia. Let me see if I can unpack it a little bit here. I would say at a macro level, a lot of the things that we're talking about to serve the discovery and early translational market are really centered around throughput, speed, and productivity. We already have the resolution, single and subcellular resolution. And so what we're focused on really is enabling larger scale studies to enable those biomarker studies to drive and feed into that longer term clinical strategy. So as we think about our investments, a lot of our near term R&D investments are around new software, new reagents, and new solutions. to enable that throughput expansion. And when we talk about, you know, perfecting the Phenoptix workflow, it is really about menu expansion, content expansion, solidifying protocols. You know, as we look at the clinical market, Julia, if you could maybe just pause, let me kind of step back a little bit. You know, longer term, it's incredibly important for Akoya. It represents about a $7 billion TAM, and I think our perspective, Julia, is that it's inevitable that spatial biology will have a huge impact on the diagnostic market. It's going to take a little bit of time, and so what we're balancing here as a company are making near-term investments to really drive top-line growth and discovery in the early translational markets, while investing in the longer-term clinical market and really be poised to capture what exists today as a huge opportunity. It's important for us to really maintain and, I'd say, enhance our first-mover advantage here And so our strategy on the longer-term clinical side is really about the diagnostic readiness of our platform. And that's why much of what we're investing in on the phenoptic side is hiring the people with the expertise and perfecting our platform's capabilities, and I'll get to that point of your question in a minute, but also forging these partnerships and establishing the regulatory readiness. So the advancements we're making on the phenoptic side include continued investment in our next-generation Proxima solution, content and assays that are ready-made, and really locking down and perfecting the clinical workflow. While at the same time our investments are not necessarily product on the phenoptic side, it's regulatory work like ISO, the CLIA that we just talked about with Neil, quality systems, and understanding market access. So all of that is behind catalyzing our partnerships with Biopharma and clinical trials. but also with some of these key opinion leaders so we understand pathology oncologist needs. So that's, I think, a quick summary. I wouldn't say we're necessarily choosing between Phenoptix and Codex, although what you'll see in terms of the new products that are rolling out, they really are catalytic on the discovery market.
spk01: Great. That's super helpful. And then a more near-term question on the 4Q guide. Could you cut and pack for us a little bit? What's the underlying assumption between the instrument side and the consumable side? And given that we've seen some volatility on the consumable pull-through, if you guys can just give more color on what you're assuming in terms of 4Q pull-through levels, that'd be great. Thanks.
spk03: Sure. Joe, you want to take that?
spk05: Sure. So our reagent revenue in Q4 should be in the high $3 million range. So we did $3.4 million in Q3. You know, early trends have been – order trends have been good in October. So we're projecting something in the high $3 million range. You'll see some uptick in some of the other categories, like that services and other category. You know, we're projecting that, you know, for example, the ABS business will be stronger in Q4 than it was in Q3. So you get a pickup there. And then the balance would be in instruments. So instruments is projected to be, you know, once again, the largest revenue contributor in Q4. Does that help?
spk01: That's great. Thank you.
spk05: Sure.
spk02: Thank you. I'm sure no further questions in the queue. I would now like to turn the call back over to Brian for closing remarks.
spk03: Well, thank you, Tawana. Again, we appreciate everybody's time, everyone's support, and congratulations. Looking forward to talking with all of you again individually as well as during our fourth quarter call. So thank you all for your time and we appreciate it and we'll talk to you all soon.
spk02: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now
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