Akoya BioSciences, Inc.

Good day and thank you for standing by. Welcome to the ACOIA Biosciences first quarter 2024 earnings 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 a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker, Priyam Shah, Head of Investor Relations, please go ahead.

Thank you, operator, and thank you to everyone who's joining us today on this call. I'm Priyam Shah, Head of Investor Relations at Akoya Biosciences. On the call today, we have Brian McElligan, Chief Executive Officer, and Johnny Eck, Chief Financial Officer. Earlier today, Akoya released financial results for the first quarter ended March 31st, 2024. 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 make statements during this call that include forward-looking statements within 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 risks identified in our filings with the U.S. Securities and Exchange Commission, including in the risk factors section of our annual report on Form 10-K for the year, ended December 31st, 2023, filed on March 5th, 2024, and 10Q filed today, May 13, 2024. We urge you to consider these factors, and you should be aware that these statements are considered estimates only and are not a guarantee of future performance. We'll be referring to non-GAAP measures on this call, including non-GAAP adjusted gross profit, non-GAAP adjusted gross margin, non-GAAP operating expense, and non-GAAP loss from operations. ACOIA defines non-GAAP adjusted gross profit as gross profit margin adjusted for certain excesses and obsolete inventory charges. ACOIA defines non-GAAP adjusted gross margin as non-GAAP adjusted gross profit divided by total revenue. ACOIA defines non-GAAP operating expense as operating expense adjusted for impairment and restructuring charges. Lastly, ACOIA defines non-GAAP loss from operations as loss from operations adjusted for certain excess and obsolete inventory charges, impairment, and restructuring charges. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliation to the most directly comparable GAAP financial measures are provided in the table in the press release. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 13, 2024. 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. The audio portion of this call will be archived on the investor section of our website later today under the heading Events. And with that, I will now turn the call over to Brian.

Thank you, Prem, and good afternoon or evening to everyone. We appreciate you joining us today. During today's conference call, I will begin by giving a broad overview of our performance in the first quarter, review our business advancements, and highlight a few of our recent partnerships. Following that, Johnny will go deeper into our financials, key trends, and provide an outlook for the future of the business. While we made meaningful progress advancing both our operational and clinical objectives, our first quarter results fell short of expectations. We achieved $18.4 million in total revenue, driven primarily by strong sales of reagents and a growing lab services business. Reagent revenue totaled $7 million, a 23% increase from the prior year, bolstered by our industry-leading install base of 1,213 instruments as of the first quarter 2024. The annualized pull-through is now $53,000 on the PhenoCycler Fusion and $40,000 on the PhenoImager HT. With approximately two-thirds of our phenocyclers now paired with a fusion and with strong incentives in place for the remaining units to upgrade, we are strategically aligning our application breadth and workflow development efforts to capitalize on the phenocycler fusion system pull-through. The continued increase in pull-through can largely be attributed to our enhanced system capabilities realized with our phenocycler fusion and HT2.0 releases and our customers' desire for high-plex panels. Additionally, services revenue reached $6.2 million, a 5% growth from the prior year. We placed 30 instruments in the first quarter, contributing $4.9 million in instrument revenue. Despite the strength in reagents and services, the revenue shortfall was primarily driven by weakness in instrument placements in the quarter. Three main factors contributed to our revenue underperformance. systemic pressure on capital expenditures persisted throughout the quarter. The key drivers include elongation of sales cycles, increased scrutiny on and reassessments of incremental capital purchases, delays in labs expanding their capacity, NIH budget uncertainty, and inflationary pressures. We expect this downward pressure to ease as we progress through 2024. Second, as previously announced, We recently completed the launch of our new manufacturing center of excellence in Marlborough, Massachusetts. The primary focus of this facility is the manufacturing of our molecular barcoded antibody catalog and accompanying reagents. This facility is now fully operational and poised to meet the growing demands for our reagents, supporting our goal to drive increased margins and expand the available applications on our platforms. Our transition away from third party outsource suppliers to internally manufactured material temporarily impacted reagent fulfillment times and delayed instrument purchases. This was most acutely felt in reference-driven opportunities, core labs, and CROs. With these ramp-up activities now complete, we believe we have resolved our product availability challenges. We took this strategic step aiming to ensure reagent quality and availability for the foreseeable future, and are excited to provide an enhanced customer experience while also realizing cost reduction benefits throughout the year positively impacting our gross margin. Third, certain pharmaceutical partner lab services revenue recognition was deferred to the second half of 2024 due to a shift in clinical trial milestone timeline. We are well on track to complete these milestones this year, but the revenue recognition is now deferred to the second half of 2024. With this shift in clinical trial service revenue to the second half, resolution of our temporary reagent availability issues through our new manufacturing center of excellence, and growing optimism for improvement in the macro environment in the latter part of the year, we are confident that our foundational initiatives will lead us back to solid top-line growth and achievement of our profitability objectives. Our first quarter results also highlight several important initiatives that we have implemented aimed at enhancing our core financial fundamentals. Let me briefly walk through these. Turning to our margins and expense reductions in the quarter, we completed a $2 million inventory write-off from discontinued legacy instruments. These instruments were earlier versions of the PhenoImager HT that were part of the historical instrument portfolio we acquired with the phenoptics division from Perkin Elmer, now Revity, in 2018. For the first quarter of 2024, reported gross margin was 46%. When excluding this write-off, our non-GAAP adjusted gross margin was 57%. This compares to our GAAP and non-GAAP adjusted gross margin of 57% in the prior year period. Taking this step now will help simplify our inventory management and clean up our balance sheet going forward. To drive further cost controls and efficiency, we completed a facility consolidation into our new manufacturing center of excellence in Marlborough in addition to a 15% reduction in force in the first quarter. This resulted in an impairment charge and a restructuring expense totaling $4.4 million. Reported operating expenses were $30 million in the first quarter of 2024, while non-GAAP operating expenses were $25.6 million with these impairment and restructuring charges excluded. In the first quarter of 2023, our GAAP and non-GAAP operating expenses were $29.7 million. Excluding the 4.4 million impairment and restructuring charges, we had a 14% decrease in our operating expenses on a non-GAAP basis compared to the prior year period. In summary, by effectively addressing the primary drivers behind our revenue shortfall and simultaneously implementing targeted strategies to enhance operational efficiency and improve profitability, we believe we have the ability to return to solid top-line growth and are committed to meeting our goal of achieving operating cash flow break-even by the end of the year. I would now like to pivot to provide an update on our Advancing Companion Diagnostic Partnership with Acrobon Therapeutics and review two exciting, recently announced new partnerships with Shanghai KR PharmTech and Naracare. First, an update on Acrobon. On April 24th, at their virtual corporate R&D event, Akravan presented initial positive phase 2B clinical data for their therapeutic agent, ACR368, in patients positive for the ACR368 onco-signature assay in ovarian and endometrial cancer. This assay is run on Akoya's PhenoImager HT platform out of our CLIA lab in Marlborough, Massachusetts. More specifically, Initial prospective validation of Acrobon's ACR368 oncosignature assay demonstrated its ability to identify ovarian and endometrial patients sensitive to ACR368 monotherapy in the ongoing clinical trial with 50% confirmed objective response rate in oncosignature positive patients versus 0% in the oncosignature negative patients at a p-value of 0.0038. This statistically significant prospective validation of the patient selection approach via the ACR368 aqua signature assay demonstrates the ability to effectively identify cancer patients whose tumors are likely to respond to ACR368 monotherapy treatment. Building on this significant progress, including fast track designation for the ACR368 therapy for ovarian and endometrial indications, Along with breakthrough device designation for the ACR368 oncosignature assay in ovarian cancer, we and our dedicated companion diagnostic team are excited to continue advancing this exclusive partnership with Acrobon to bring a precision diagnostic to the market with the potential to address significant unmet treatment needs against a broad range of tumors in over 200,000 patients with limited treatment options diagnosed in the U.S. and Europe. Akoya also recently announced a partnership with Shanghai KR PharmTech and the pre-market approval from China's National Medical Products Administration, also known as NMPA, for the KR-HT5 instrument. Akoya co-developed KR-HT5 with KR PharmTech, utilizing the phenol imager HT as its foundation, and this platform will serve as the core technology to deliver next-generation pathology solutions. and multiplex biomarker workflows within hospital settings across China. The NMPA approval has a Class II designation, and KR PharmTech, along with Akoya, will be working with a network of key opinion leaders in China to establish clinical validation and secure Class III approval for specific assays. KR PharmTech is an experienced clinical partner that we believe has the scientific, strategic, and regulatory capabilities to usher Akoya's technology into entirely new and significant clinical markets. Finally, last Thursday, we announced our partnership with Naircare, a developer of laboratory tests for individualized survival protection of melanoma patients with offices in Germany and the United States. We have entered into an exclusive agreement to enable personalized therapy selection for early-stage melanoma patients. The aim is to leverage the PhenoImager HT, our CLIA lab, and Naircare's immunoprint test and its best-in-class clinical data to focus on increasing access to life-saving therapies for early stage melanoma patients. Melanoma is the leading cause of skin cancer related deaths, with over 235,000 new diagnoses used globally every year. Recent approvals of immune and targeted therapies have greatly expanded the available treatment options for adjuvant therapy, but primarily for late stage disease. The challenge is that a significant number of early stage melanoma patients remain at high risk of relapse and mortality without access to such therapies. As the majority of melanoma patients are diagnosed with early-stage disease, there is a critical unmet need to identify those at-risk patients to potentially enable earlier access to lifesaving therapeutic agents. NeuroCare's ImmunoPrint assay has demonstrated robust clinical performance in identifying early-stage melanoma patients at high risk of relapse through multiple independent, prospective, and retrospective clinical studies. The data demonstrates that the ImmunoPrint high-risk patient group is ideally suited to potentially benefit from therapeutic options that would usually only be administered in later stages. Akoya and Naircare will focus on developing partnerships with leading biopharmaceutical companies to enable patient stratification and therapy selection in early-stage melanoma patients, preferentially for those treatments already approved in late-stage melanoma. In closing, historically, Akoya has demonstrated consistent above-plan performance since our IPO in April 2021, and we are confident that we have addressed the underlying issues driving this quarter's performance. The market opportunity for spatial biology to emerge as the primary methodology for tissue analysis from discovery to clinical is unequivocal, and the momentum in the market awareness continues to grow exponentially. As evidenced by our industry-leading install base, we believe ACOIA has the systems, new operational efficiencies and capabilities, and scalability to meet the growing demand for spatial biology from discovery to the clinic. We also believe that ACOIA will drive considerable shareholder value with our newly enhanced and efficient manufacturing capabilities, best-in-class product portfolio, strong commercial team, and accelerating realization of the significant clinical opportunities in a substantial total addressable market. We thank you for your time and support. And with that, I will now turn the call over to Johnny to discuss our financial results. Johnny?