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spk03: Good day, everyone, and welcome to the Phenomex First Quarter 2023 Earnings Call. Today's call is being recorded. I would now like to turn the conference over to Suzanne Hatcher, Senior Vice President, Investor Relations and Communications. Please go ahead.
spk02: Thank you, Operator. Good afternoon, everyone, and welcome to the Phenomex First Quarter 2023 Earnings Call reporting financial results for the quarter ended March 31, 2023. My name is Suzanne Hatcher, Senior Vice President of Communications and Investor Relations at Finomex. I'm joined today by Dr. Siddhartha Kadia, Chief Executive Officer, Mehul Joshi, Chief Financial Officer, and Dr. Rolando Brower, Chief Business Officer. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal security laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. For more information, please refer to the risks, uncertainties, and other factors discussed in our SEC filings. Except as required by law, Phenome X disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as a live broadcast
spk06: may 11 2023 as a reminder you can find today's press release and an investor presentation on the phenomex website under the investor relations section with that i would like to turn the call over to sadartha thanks suzanne and thank you everyone for joining us for our first earning call as phenomex at the end of first quarter we completed the acquisition of isoflexis forming the combined company called Phenomax. As Phenomax, we are positioned to be the leading provider of life sciences solutions that will have the greatest impact advancing the era of the phenome as the next revolution in biology and medicine unfolds. Our unique suite of products and services offer unprecedented resolution and speed. In fact, Phenomax serves the only single cell platform able to isolate manipulate and characterize live cells while enabling large-scale and multiplexed functional multi-omics. Our mission is to empower scientists to leverage the full potential of each cell and drive the next era of functional cell biology that will advance human health. We now have an installed base of 430 platforms with placements in all top 15 pharma companies by revenue and approximately 85% of United States comprehensive cancer centers. Our products have been cited in over 225 publications and are supported by a robust intellectual property portfolio of more than 600 patents. I will begin the call today by providing updates on the tremendous integration progress we have made in just seven weeks since the closing of the IsoPlexus acquisition and the tangible actions we are taking as we continue to execute on the five pillars of our strategic operating plan. I will then turn the call over to Mehul who will discuss our first quarter results and full year 2023 financial guidance. Starting with our first strategic pillar of building a world-class life sciences leadership team, we are continuing to bring on industry leaders with a proven track record in scaling life sciences tools companies. At the end of March, Dr. Yan Zhang joined Phenomax as Chief Commercial Officer. In this newly created position, Yann oversees our global commercial organization and helps drive strategic growth across our platform and services business. Yann brings over 25 years of operating and management experience in the life sciences tools industry. Most recently, she served as CEO at MissionBio, a life sciences company focused on high-throughput single-cell DNA and multi-omics analysis. Before MissionBio, Yan served in various commercial and business executive leadership roles at Thermo Fisher Scientific, Life Technologies, FEMetrics, NewGen Technologies, and Molecular Devices. With the addition of Jan, we have a strong operational team in place with Sean McKay, Chief Product Officer and former CEO of IsoPlexus, Eric Hobbs, Head of Global Operations and Business Integration and former Chief Executive Officer of Berkeley Lights, and Rolando Brower, who in his role as Chief Business Officer leads the research and development, and business development teams, and is a former executive from Thermo Fisher Scientific, Exact Sciences, and Danaher. Our goal of building out the leadership team with deep experience in life sciences tools space is now complete. I believe PhenomX collectively has the bench strength in life sciences tools as well as corporate function expertise in finance, human resources, legal and communications that is needed to become the platform for growth in the life sciences tool space. We look forward to building momentum in critical global markets with our technology and unlocking the new company's tremendous potential. Moving on to our second strategic pillar of prioritizing R&D return on investment through increased focus and rigor on development initiatives. When forming PhenomX, one of our main objectives was to create a balanced product portfolio with a range of price points to provide broader customer access across a larger portion of the cell biology market. To achieve this, we are focused on three key near-term development objectives. Number one, growing the core business in antibody discovery, cell line development, and single-cell and bulk proteomics within three market segments, discovery, bioprocessing, and translational and clinical research. Number two, completing the inducible producer cell line, IPCL, selector application for our latest system in development. This Beacon gene therapy system, which will be branded Beacon X, is expected to deliver unparalleled speed in cell line development within the AAV gene therapy space. And number three, unlocking a new market in single-cell functional multiomics for T-cells with the recent launch of the T-cell profiling workflow on Beacon and BeaconQuest for immuno-oncology and cell therapy serving both academic and industrial market segments.
spk07: We are well-positioned to accomplish these objectives
spk06: with our newly combined power portfolio. Our OptoFluidics power portfolio includes Beacon System for antibody discovery cell line development, single cell functional multiomics for T cell profiling, and AAV cell line development workflows. If you recall, we provided details of our AAV and multi-omics T-cell profiling workflow in our November investor day. In April, Phenomex launched the single-cell functional multi-omics T-cell profiling workflow we believe will revolutionize immunotherapy research and development by comprehensively profiling single T-cells to correlate polyfunctionality with cytotoxicity and recover selected cells for downstream analysis, including transcriptomic and genomic analysis of the same cells. The application is a great example of how customers can use our optofluidics and proteomics products together for optimal workflow. By using the isoSPOT, to profile up to 30 cytokines per cell, then using the beacon to do more in-depth analysis on the cells producing similar cytokines, including multiomics and cell interaction and killing. We believe this produces the most complete solution for this type of research on the market today, which can help researchers and drug developers in areas such as characterization of cell therapy donor materials, CAR-T selection, identifying best killers, culture condition optimization, and primary cell safety assay, as well as potency assay, all of which is based on functional multi-omic analysis of the same cells.
spk07: In addition to Beacon system,
spk06: Beacon Select, a lower throughput beacon system with a price of less than $1 million, supports our objective of lowering the barrier of entry for customers to gain access to our technology. In February 2023, the Beacon Select for enabling cell line development application was launched, and the Beacon Select for enabling the antibody discovery application is set to launch next week on May 15th at PECS conference in Boston. This system is an ideal option for midsize biopharmas, CROs, and CDMOs, or those who already have a beacon system but need additional capacity Next, BeaconQuest, a lower-cost platform only available for academic researchers, is set to launch on May 15. BeaconQuest enables the main applications of Beacon system, including antibody discovery, cell line development, and single-cell functional multi-omic T-cell profiling. We believe this new product can provide significant value in high-growth academic research segments, particularly in immuno-oncology translational cancer centers and innovative cell and gene therapy development centers. With legacy isoplexus technologies already placed in approximately 85% of U.S. translational cancer centers, we intend to leverage these existing relationships and product synergies to grow a foothold in this very important market segment. And then finally, BeaconX, a new beacon system specifically for gene therapy manufacturing, will only be available with a licensing service agreement and is currently in customer beta testing. We are further developing IPCL application that includes a unique hydrogel feature that helps differentially protect nanopens to run destructive access, and in turn, quickly identify high-producing AAV cell lines amongst a pool of thousands of cells containing the capsids and genes of interest. This system is anticipated to significantly expand the number of diseases that can be treated using gene therapies. We continue to dedicate ample resources to this workflows development throughout 2023. We expect AAV manufacturing to drive 2024 growth in subscription service with increasing contribution in 2025. Under our proteomics portfolio, we offer the ISO Spark and ISO Light instrument platforms with applications to analyze single-cell immune secretome and bulk proteomics with the ISO code reagents chip. As part of our near-term proteomics product roadmap, we plan to launch Meteor in June, a next-generation chip available on the ISOPROC system that automates multiplex bulk proteomics in high sample throughput with meteor and isochore single cell analysis on the isopark system phenomax would enable a lab's entire portfolio in proteomics in one system and then in the first half of 2024 we plan to launch isochore nova a next generation high throughput chip available on the ISO Spark system. This new chip is expected to significantly increase the number of cells that can be analyzed from less than 1,000 to up to 10,000. In addition to the three key near-term objectives previously described, substantial resources are committed to our next-generation platform. In early 2025, we plan to launch Phoenix, a new benchtop optofluidic system that combines the footprint and low cost of the ISO-SPARC and ISO-Live instruments with the functionality of the beacon optofluidics and supporting a wide suite of applications. With this system, the application of our cell biology tools could be greatly expanded. One of the largest areas of focus is lowering the cogs of our optofluidic technology to significantly expand our serviceable addressable market. In the first four months of 2023, we have tested various components of this new benchtop design in an effort to de-risk our technical path towards cogs below $100,000, enabling a much more accessible price point for both academic and biopharma customer segments. Moving on to our third pillar, delivering consistent commercial execution. As a combined company, we now have a global commercial organization of approximately 130 customer-facing employees including our sales teams, field application specialists, field service engineers, and technical customer support roles. This vastly strengthens our ability to reach academic, biopharma, and CRO companies across all geographics. The commercial and technical teams are starting to cross-train on the combined opto-fluidic and proteomics product portfolio with an eye towards revenue recognition in the second half of 2023. As I mentioned earlier, Dr. Yan Zhang joined Phenomax as chief commercial officer in March. We also welcome Peter Sylvester as a new member of the board last month. Peter brings more than 25 years of experience in the life sciences tools industry, most recently serving as Senior Vice President and President of Life Sciences Solutions at Thermo Fisher Scientific. Peter's wealth of knowledge, especially his experience in global markets and commercial operations, will be invaluable to our efforts to strengthen our commercial strategy under Jan's leadership. Jan has hit the ground running and she is quickly instilling rigor and discipline in our commercial execution by focusing on market segmentation, accelerating regional expansion, driving market education through KOL engagement, and publications. In addition, working with Rolando Brower, our commercial team is already leveraging our expansive intellectual property portfolio of more than 600 patents for out-licensing and partnerships opportunities. We continue to focus our commercial efforts towards specific target customer segments within the industrial and academic markets. We expect to continue to penetrate the industrial biotech and pharmaceutical sales CRO segment. We will do this through broadening our Beacon product portfolio with Beacon Select in antibody discovery and cell line development business, as I just described, and driving adoption and standard setting for the potential assay in the cell therapy market using the ISOPAR instrument. With the Beacon Quest and single-cell functional multi-omic T-cell profiling workflow, we will focus on expanding our reach into immuno-oncology as well as the innovative cell and gene therapy development segments of the academic market. leveraging the current relationships from the isoflexus team as well as the product install base of proteomics portfolio where customers have expressed a strong unmet need in comprehensively characterizing patient samples and cell-based products, integrating functional analysis and transcripting as well as genomic analysis of the same cells, and then finally, exporting these cells of interest. For our regional expansion strategy, we will initially focus on Asia Pacific, including Japan, Taiwan, Singapore, and Korea. We have already begun this work by strengthening our leadership in the APAC region with the addition of Tomoya Aoyama as regional leader. Aoyama-san brings seasoned leadership with more than 25 years of experience in Asia in management roles as multinational public life sciences companies. In late April 2023, we established our legal entity in Japan and developed a go-to-market strategy and hired a strong team with robust tenure in life sciences industry. By Q3 2023, we expect to have a demonstration lab at Kyoto University. Turning to KOLs and publications, at the recent AACR conference, phenomics technologies were highlighted in 14 abstracts and 9 papers. Notably, one abstract featured combined data from our new multi-omic T-cell profiling workflow and isolite instrument by Dr. Anthony Zamora of the Medical College of Wisconsin. In short, using both our opto-fluidic and proteomic product lines, Dr. Zamora explored the underlying biological properties of CAR T cells and discussed how combining single cell poly functionality and their functional healing properties can potentially lead to the creation of more effective therapeutics. In addition, Several new studies using phenomics technologies have been published in key journals over the past month, including Nature Communications, Journal of Immunotherapy of Cancer, and Science Translational Medicine. This new customer data, in addition to the other publications using phenomics technologies, can be found on our website. We believe one of the largest commercial opportunities is the service agreements for AAV cell line development for gene therapy. We are actively building a robust funnel and engaging with various types of customers. While the progress in this area is dependent on our client's timeline, we have made significant progress subsequent to our initial work with Thermo Fisher Scientific. Right now, workflow testing is currently underway with other commercial clients in addition to seeking out academic collaborations. Finally, as part of our strategy, we will leverage our portfolio of more than 600 patents to develop a strong out-licensing program. In Q1, we licensed a portion of our non-core IP to a company outside of cell biology field. Turning to our fourth strategic pillar, of generating positive operating cash flow in the fourth quarter of 2024. At Phenomax, we are focused on building a profitable and sustainable business rather than pursuing growth at any cost. We continue to make progress against this goal with our updated market-driven product portfolio and pricing strategy, as well as discipline, expense, and cash management. When we announced our intent to acquire IsoPlexus in Q4 2022, we committed to delivering approximately $70 million in cost savings synergies. Our accelerated actions to reduce operating expenses are expected to yield cost synergies of approximately $72 million on a run rate basis by the end of Q2 2023. Our integration teams have worked diligently by reducing general and administrative costs, from eliminating duplicative expenses associated with maintaining the infrastructure needed by public companies, prioritizing high-value R&D initiatives, streamlining marketing resources and sales operations, and ensuring manufacturing, supply chain, logistics, and operations synergies. Exiting in Q4 2023, our realized cost synergy on a run rate basis are expected to be between $80 to $90 million ahead of our initially stated goals. Finally, I would like to give an update on our fifth strategic pillar of accelerating our path to profitable growth through mergers and acquisitions. As I discussed at the beginning of our call, we announced the closing of combination of Berkeley Lights and IsoPlexus to create PhenoMax. Seven weeks post-close, we have largely completed our integration and executed our cost synergy initiatives. And in the intermediate term, we are laser focused on commercial and product roadmap execution of the combined entity. In the long run, we remain committed to our objective of pursuing synergistic merger and acquisition options that either expand our total addressable market or provide leverage for our SG&A and research and development expense structure. When we think of synergistic mergers and acquisitions options that expand our total addressable market, these may include complementary technology tokens that expand PhenomX offerings, expansion of service offerings to existing and new customers, technology licensing opportunities, and opportunistic mergers and acquisitions with market dislocations. Overall, I am pleased by our progress during my four quarters of a tenure as CEO and as we work to transform PhenomX. With our attractive platform, we believe there are opportunities for consolidating other single-cell technologies into our portfolio with the vision of becoming a broad cell biology company. The next wave of biology and medicine is the era of phenome, and PhenomeX will power labs across that frontier. We have great opportunities ahead of us and a rigorous plan in place to create value for our customers and our shareholders. Now, I'd like to turn the call over to Mehul.
spk12: Thank you, Siddhartha. Revenue in the first quarter was $18.5 million, which included $10.3 million of revenue from our OptoFluidics business from Berkeley Lights and $1 million of revenue contribution from our Proteomics business from Isoplexis in the eight business days following the close of the acquisition on March 21, 2023. Partnership, license, and other revenue was $7.2 million. Performer revenue in Q1 2023 for the combined companies was $20.2 million. By geography, North America accounted for 76% of total revenue in the first quarter 2023 followed by APAC at 17% and EMEA at 7%. Platform revenue was $6.1 million in the first quarter of 2023. This consisted of $5.6 million of revenue from our optofluidics business and $500,000 from our proteomics business. Our installed base grew by eight platforms during the first quarter of 2023. consisting of four opto-fluidic platforms from Berkeley Lights and four proteomic platforms from IsoPlexus. This brings the total installed base of Phenomax to 430 platforms. We continue to see demand for our products. However, macroeconomic factors are impacting the timing of instrument placements and further elongating sales cycles. Recovering revenue was $5.2 million in the first quarter of 2023. This includes $4.7 million of contribution from our optofluidics business and $500,000 of contribution from our proteomics business in Q1 2023. These results were driven by a few large customers working through their bulk purchases from second half of 2022 before our price increases. we remain focused on expanding the installed base to drive predictable recurring revenue. Partnership, license, and other revenue was $7.2 million in the first quarter, driven by out-licensing a portion of our non-core IP to a company outside of the cell biology field. With our large IP portfolio, we plan to be opportunistic to license our technology in non-core applications within the life sciences market. Gross profit for the first quarter of 2023 was $13.4 million compared to $13.8 million in the prior year. Gross margin for the first quarter of 2023 was 73%. Operating expenses in the first quarter of 2023 were $36.3 million inclusive of $4.4 million of stock-based compensation. This includes expenses related to the acquisition of isoplexis of $3.5 million and restructuring costs of $1.3 million. As disclosed in our 8K on May 5, 2023, we further reduced the headcount of Phenomax and have taken significant action to achieve our cost-energy targets. Net loss for the first quarter of 2023 was $23.4 million, compared to a loss of $21.4 million for the prior year period. All net loss numbers are inclusive of stock-based compensation and restructuring expenses. We are fully committed to rigorously manage our operating expenses and cash flow to achieve optimal cost efficiency. We ended the quarter with total cash $121.7 million, which includes cash and cash equivalents of $51.6 million and restricted cash of $70.1 million.
spk11: Now, I'd like to discuss our full-year 2023 revenue and operating expense guidance.
spk12: Considering macroeconomic headwinds, significant slowdown in decision-making cycles for large capital purchases, and our ongoing commercial integration efforts, we expect full-year 2023 revenue to be in the range of $75 to $85 million.
spk11: We expect our gross margin to be approximately 65%.
spk12: In addition, we plan to reduce our operating expenses from approximately $235 million in 2022 on a pro forma basis excluding transaction and restructuring expenses, to approximately $120 million in 2024. This will represent a reduction of almost 50% over two years. A substantial amount of synergy realization is already in place as of Q2 2023, and we expect our operating expenses to trend lower through this year. Our current forecasts indicate we would turn cash flow positive in Q4 2024. Please refer to the gap to non-gap reconciliation in the investor presentation found on our website under the investor relations section. Finally, as I reflect on my nine months at Phenomex, we have taken significant action to improve operating cash flow by increasing revenue and lowering operational costs. Our new commercial leadership, geographic expansion, and product roadmap are expected to drive revenue growth alongside the significant cost synergies that are lowering operating expenses as a result of the recent merger. We are also evaluating financing options to strengthen our balance sheet. As we execute against these initiatives over the next several quarters, Our 10Q as of March 31, 2023 outlines factors that raise substantial doubt about the company's ability to continue as a going concern within one year after the issuance of these financial statements.
spk11: With that, we will now open it up to questions. Operator?
spk03: Thank you. If you would like to ask a question on the phone lines today, you may press star 1 on your telephone keypad. To remove yourself from the queue, it is star 1 again. We'll take our first question from Tejas Savant with Morgan Stanley.
spk15: Hey, good afternoon, guys. This is Edmund on for Tejas Savant. Thanks for providing the update here today. I appreciate the color on your APAC expansion efforts and initiatives. Specifically looking at China, I guess during the quarter we've heard a bit from both ends the operating conditions in China with some companies reporting strong results and seeing benefits from government stimulus as well. Others have noted inventory stocking at distributors along with biopharma funding concerns. I was wondering if you can provide some more color on the operating conditions that you're seeing in China and what the expectations are for the rest of the year.
spk06: Yeah. Thank you, Tejas, and a really great question. We in China, as you recall, the traditional optofluidic platforms, which was a very successful business in China, is mostly oriented towards biopharma segment. And as you recall, until end of Q1, largely China was under lockdown and a lot of the activities in biopharma segment have been suppressed. In addition to that, biopharma segment in China is under a significant dislocation from, in geopolitical sense, from people trying to de-risk the dependence on China as it comes to larger pharma companies and people who are outsourcing to China in general. All of that has resulted into a particular challenge for our business because it does have a significant constraint. It's a $2 million device. Biopharma is under stress. Everybody is conserving capital. And as a result, our business has been specifically constrained. The second part of our business, which is the proteomics platform, had similar challenges, but it's, of course, a significantly lower cost point. And we believe that, you know, the business is going to recover as the year goes on. But I wanted to provide you with the full context of our overall mix and balance from our point of view. I think, you know, we have seen the commentary from many other life sciences tools companies having sort of a mixed bag of results. But, you know, we are selling something to a in outsourcing client base there, which does create a specific constraint for us.
spk15: Got it. Thank you for that color. And then I guess looking at your upcoming Quest launch, you guys will start focusing more on the academic end market. Can you highlight some of the strategies that you guys have in place and particularly how you plan on leveraging ISO's current academic footprint? And on the back of that, with all the platform updates provided today, do you have any updated views on the future of the Lightning platform?
spk06: Great, yeah. So let me start with the first question and then I'll get to the lightning question, okay? The first question is, how are we gonna use the Quest and the IsoPlexus original footprint? And I think it's a great question. Look, there are many, many reasons why we did this combination. One of them was that both companies had a microfluidic platform and IsoPlexus' success was larger in academic market segment especially in the immuno-oncology academic centers and cell and gene therapy academic centers. And Berkeley Light's traditionally was stronger in biopharma because of the two applications that we were most successful with were in the antibody discovery and cell line development, which are bioprocessing related activities. So given that the footprint is already there in a much larger installed base, when with existing relationship with academia, in fact, what we heard over and over again as we did our diligence, and as IsoPlexus was conducting their business, we heard from the clients of theirs that it would be nice to have an ability to do what IsoPlexus tool does, which is to be able to do the characterization of multiple analyte in the same sample. However, it will also be great to see if we can actually preserve those cells of interest, i.e., there are many clients who want to do both types of experiments, and that allows us to go to a very customer base to address that need, and we have decided to lower the barrier of cost and launch Beacon Quest to be able to do that. While we are also preparing the company, as you saw in the comments we made, for the next generation platform, which allows us to use the lower COGS footprint of the IsoPlexus platform and put all of our optofluidic strength into that platform. and allowing us to actually capture that marker more robustly going forward. So hopefully that answers your first question. With that, given that most of our efforts are focused on making that next-generation platform, technically we are not de-launching Lightning, but it is not something we are focusing on because we believe that our introducing Beacon Quest will solve the barrier or cost problem for customers vis-a-vis Lightning for sure and a lot more functionality we will be opening Beacon Quest up with all applications possible, including our most recently launched T-cell workflow. And there wouldn't be any need for Lightning per se, but if there are customers who prefer that platform for whatever reason, we'll continue to provide that, albeit we will not be investing further resources in developing that platform. We are putting all our commercial and actually most of the technical resources on developing Phoenix, which is our next-generation platform.
spk15: Got it. Thank you for that color. And one final one for me, maybe for Mehul. I'm not sure if I missed this, if you talked about 24 revenue on the call today, but I think at the time of the deal, you guys pointed to 24 combined revenue of $100 million. And at the midpoint of your guide, that implies about an 88% year-over-year growth for 24. Is that still the right way to think about it?
spk12: Well, I think we guided that we would be at $150 million in revenue on a run rate basis, exiting Q4 of 2024 as we break even from a cash flow point of view. And that was kind of the guidance we provided, you know, beyond or around 2024. Got it.
spk15: Thank you for the time today.
spk03: Thank you. As a reminder, everyone, please limit yourself to one question. If you have additional questions, please re-enter the queue. We'll take our next question from Julia Chin with JPMorgan Chase.
spk05: Hello, thank you for taking the question. This is on for Julia. I was just curious, in terms of customer feedback for Beacon Select, is there anything you can share with us? And then in terms of margins, what does the margin profile look like? And do you have a target profile for Beacon Select? And then I know it's still early, but maybe you could provide some color on the pull through expectations. Thank you.
spk06: Yeah, it's a great question. So Beacon Select, as you know, we just launched it not that long ago in Q1. And Beacon Select cell line development is in the hands of our commercial teams, and they are making a lot of engagement specifically for cell line development application. That is an industrial application, as you know. And the question the customers are asking is, is it a total tradeoff they have to do on total cost of ownership? And we are evaluating and further refining our price point. So what I could tell you is that the price point for the box itself is going to be lower as we've communicated already. And that will result into an erosion of the margin. I think that's what's reflected in our 2020 full year forecast. Even though our Q1 margins were substantially higher than that, we are accounting for that erosion in the margin going forward.
spk05: Got it. Thank you. And then, you know, now that you've completed the merger, are there any changes to a capital allocation?
spk06: Julia, you might have cut off for a second if you want to repeat your question.
spk05: Oh, sorry. Sure. I said now that you've completed the merger, have there been any changes to your capital allocation framework post-merger, and what are the main priorities going forward?
spk06: Absolutely. Look, I think we have, as you know, we have, for the size of our company, we have a very large transaction we completed. And as you see from this discussion from today, we have made absolutely a very, very strong progress on bringing the two companies together in all aspects of the integration. But most importantly, the team has had made significantly large and quick decisions on cost energy targets, which we had said 2023 of 35 million and 2024 of 70 million. In fact, we've completed all the work to reflect the 2023 Q2 numbers to reflect the 70 plus million dollars of synergies. And so we had done with that part of the heavy lift, if you will. However, our immediate focus is on now the combined product roadmap, which says a lot of exciting things we are working on. and commercial activity, as you can tell, these two companies coming together brings a larger commercial footprint together. However, each of the companies was focused on selling a very different segment. This excites our sales people because we have more things to sell as a combined team, but we still have work to do to train those salespeople into each other's portfolio. A lot of work is going on in that area, but it is not all complete, so our immediate near-term you know, capital allocation strategy will be to, you know, keep our head down and focus and execute on this transaction while, you know, making sure that we are being opportunistic as the market evolves over the next few quarters.
spk05: Thank you.
spk03: As a reminder, everyone, that is, please limit yourself to one question. If you have additional questions, you may re-enter the queue. We'll take our next question from Dan Arias with Stifel.
spk09: hey guys this is actually evan on for dan um actually i wanted to follow up first on i mean really just the last part of your prepared remarks um talking about the substantial doubt about your ability to be a going concern um just i mean based on what you guys have been saying uh you know becoming profitable uh by the end of next year uh i mean i'm looking at your balance sheet it looks like you took on a pretty decent amount of i guess the debt was probably from isoplexus and then you have about 70 million of restricted cash leaving like 50 of cash and cash equivalent sites so what's driving like what's the reason behind you having to put that statement in your tank you and and you know is that something that is just kind of driven by the SEC or is that something that we should be thinking about because just the idea that you guys would be profitable by the end of the year by the end of next year It's just surprising to hear you guys say that.
spk12: Yeah, hey, this is Mehul here. So I would say the going concern disclosure and the restricted cash classification that you mentioned are explained very comprehensively in our 10Q. But also we've laid out what management's plan is to enable the company to be a going concern. So I would urge you to read the footnotes and the disclosures in the queue, and then I'd love to follow up with you if you have further questions after that.
spk09: When do you guys plan on publishing that? Monday. Monday, okay. And I don't know, you guys mind if I ask one more question?
spk05: Go ahead.
spk09: All right, cool. So I just wanted to talk about, dig into the guide a little bit. So, I mean, you guys have guided to one queue, of zero partnership revenue obviously you guys sold some ip uh and got seven million bucks there um you guys have been guiding sort of you know to some partnership revenue for over the balance of the year um and and actually it's pretty surprising i mean you guys did a million dollars of revenue from isoplexis in basically like a week and a half um so i'm just trying to understand like when we think about this guy is 75 i think it was a 75 to 85 million Can you kind of parse that out between, you know, Legacy, Berkeley Lights, and then IsoPlexus? And then within the Berkeley Lights part, like, how are you guys thinking about partnership revenue? Just to get an understanding of, like, you know, here's the base business of Beacon slash our new products, how that should look for 23 versus kind of the other parts. Thank you.
spk06: Yeah, it's a great question. Let me start by reminding you that when we did the transaction announcement and subsequent to that, we also had various different discussions with investors in which we've always maintained that we will provide the guidance at the end of Q2 or sometime in July or August timeframe. And what we were able to do was to do a much faster integration and we were able to put a range into our own internal forecast around both of those businesses. And we thought it's best for us to actually provide a guidance based on what we see right now so people can fully appreciate what the business opportunity is. But when we provided the guidance, we took a few things into consideration. One, the macroeconomic headwinds that we are experiencing and everybody in life sciences industries experiencing specifically with respect to biopharma. segment the second thing is the slowdown in decision making cycles for very large capital purchases we have been experiencing this now for last two or three quarters it's not that people aren't buying things they're committed what they committed in q3 they bought in q4 and what they committed in q4 they bought it in q1 and so we understand this lengthening of the large capital purchases continuing to happen and we took that into account as we looked at our forecast and the third thing is ongoing commercial integration effort that we are doing which of course is a significant strength in the mid to long term in the company but in the short term it is going to provide some disruption as we cross train people and change their geographic territories to focus on specific areas that they need to focus on going forward all of that gave us you know you know a range that puts and takes on the range and we're not going to go into details today about each of our portfolio to see sort of where we have strengths and where we have weaknesses, because in both cases we have both, we have provided a range that we can be comfortable providing to you today. As we move forward and have one full quarter of commercial execution in our belt, we'll be able to provide a lot more detail of the investor day we plan in August, as we had committed. We just thought that it is much better for us to have a forecast in front of you right now, and then we can provide more color on how you can model the business going forward. But this is the best we can do today, given we are still very early on integration.
spk09: All right. Super helpful. Thank you.
spk03: We'll take our next question from Steven Ma with TD Cowen.
spk14: Great. Thanks for taking the questions. So given the lower price point, is the Phoenix intended to replace ISO Spark and ISO Light? And then secondly, what gives you the confidence to get the Phoenix cogs down? Is that dependent on any new foundational technology being developed or do you have all the pieces together already and you just need to do the engineering?
spk06: Yeah, Steven, that is a fantastic question. Ever since I've been on here for four quarters, my number one goal has been to figure out a way to lower the cost of GoodSoul. for our technology, especially the capital part of our technology. So we have been searching for every single component that could be reduced in a cost structure. And I'm going to give you a little bit more detail so you can understand sort of what has been completed and what is the work that still remains to be done. If you recall, the Berkeley Light Beacon platform, and I'm going to, going forward, call it Phenom X Opto-Fluidic Platform. actually was developed eight to 10 years ago. The components that are used in that were sourced that many years ago. And as a result, as such, if you look and open the box, there's what I call a lot of empty space in that box. It was designed for a specific application and launched in that sort of eight to 10 year old supply chain, if you will. Since that time, the OptoFluidic R&D team has been extremely active in lowering the cost of goods sold for various reasons. Number one, Lightning was their first attempt at lowering the cost structure of various different components. And if you look at the footprint of Lightning, it is actually much lower footprint than it is for the Beacon platform. And with IsoPlexus transaction, we got access to a much more friendlier, if you will, a platform in terms of the box design, the software design, the user interface, and everything that goes with making a life sciences tool a benchtop device that is intuitive to use by customers. And we got a lot of strength from that. Yet, both technologies were actually microfluidics-based technologies, so the internal components and the guts are not identical but similar. For the last four months, so beginning actually beginning in December when we signed the deal till now, our teams have been intently figuring out and de-risking component by component what could go in that new device. I wouldn't say that everything is completed, but where we sit today gives us a significant confidence that the COGS reduction is not going to be a hurdle for us. It still remains to be seen on how many different pieces we put into that box, and provide how many different models of that box with what kind of features. And there is still work going on in making it more modularized compared to what we are at today. But the technical de-risk from a cost reduction perspective, I would say is 90% complete right now. So hopefully this gives you a bit of a color around why we are doing what we are doing. Again, I remind you of the fact that the box itself is the main cost and there are some components in the box that are driving a majority of our cost. We believe those components' cost could be reduced. We also acquired with IsoPlexus a significant manufacturing capacity, which allows us to manufacture these things within our own shop, and that allows us to lower the cost even further compared to the supply chain costs that go into making up the box.
spk14: Okay, great. Thanks. That's all for me.
spk03: We'll take our next question from Mark Massaro with BTIG.
spk04: Hey, guys. This is Vivian. I'm for Mark. Thanks for taking the question. So I think we just heard from a few companies about longer sales cycles and lower capital budgets in the strong gene therapy space. Could you just remind us maybe the mix between your customer base in terms of the smaller to midsize biopharma versus larger players? Thanks.
spk06: Vivian, that's a great question. Again, if you recall, both companies are relatively new in terms of legacy companies and the products. And as a result, most of the early transactions were done with either the large biopharma, which are the companies with the strongest need, desire to want to invest in the new technology, as well as have the cash available to do so. And the strongest academic centers which had the funding available to go after this innovative technology. Having said that, our next level of job just got harder because that smaller biopharma segment, the small to mid biopharma segment, got themselves under a cash-constrained world, which is what is reflected in our new forecast. We believe that that segment is going to continue to have challenge in large capital purchases And that is what we reflected in our forecast.
spk04: Okay. That's it for me. Thanks.
spk03: We'll take our next question from Gaurav Gopal Raju with Berenberg.
spk13: Hey, guys. How's it going? Thanks for taking my questions. First, you know, on the placements in the quarter, what was the mix of the, I think you said, Mehul, four OptoFluidics placements? You know, were they all CapEx? Were they all for the flagship Beacon? You know, maybe any subscriptions or maybe even Beacon Select placements? If there's any color on that, that would be great.
spk12: Yeah. How are you doing? There were, of the four, you know, Beacon placements, three were, you know, capital purchases, and then one was a reagent rental units.
spk13: Got it. Thanks. And then, you know, just kind of want to, you know, looking forward on the workflow side on the back of the new T-cell profiling one, you know, have you, and apologies if I missed this, but, you know, have you disclosed any further areas where you plan to develop, you know, future workflows and to complement the five areas that you have right now?
spk06: I think everything we've disclosed in this call is our current plans. I don't know what you imply by anything else. You can see our plate is full with all the different things that we are doing right now. on workflow specific like you know you just said the the T cell profiling workflow and development right so I guess maybe if I missed that earlier I was just wondering if you had a road map just on that specifically yeah let me invite Rolando Brower who is going to provide the the first the complete description of T cell profiling workflow and then where and how it's evolving and what type of customers it's a quite diverse type of customers who are interested in that workflow so
spk08: Yeah, so the T cell multiomics workflow on the beacon allows the profiling of thousands of T cells to be functionally profiled for their ability to secrete cytokines, kill antigen-presenting cells, and then retrieve selected cells for further analysis, including mRNA and DNA sequencing. One-sentence description of the workflow attracts very different type of customers. For example, in the context of cell therapy, our platform could be used to profile P-cells prior to CAR engineering and after engineering to functionally study what proteomics, transcriptomics, or genomics features can predict clinical success. But it's also a workflow that has a place in basic research, in translational research, And so the combination of the launch of this workflow together with our combination with IsoPlexus and Quest to penetrate the academic market that wasn't available to us to Berkeley Light before for the optofluidic platform makes the total package of how this new workflow can be utilized.
spk13: Awesome. Thanks for the time, guys. Appreciate it.
spk03: We'll take our final question from Matt LaRue with William Blair.
spk10: Hey, good afternoon. Just quickly on the guidance, I appreciate you're not going to break down sort of Opsifluidic's proteomics, but can you let us know, is there any other additional IP sales or licensing contemplated for the balance of the year or would the rest be just what you would think of as core revenue? And then I would follow up.
spk06: yeah maybe just to just to provide you with sort of the the approach that we took for guidance we are not going to provide details on sort of you know where the different things come from because we have some ups and some downs as i said yes we are contemplating further uh you know what i would call licensing arrangements uh not necessarily the kind that you saw in q1 but as you recall most of our business is now pure play life sciences tools business instruments and recurring revenues. But we do have previously completed work for clients in the services that we have performed. We are ongoing providing more and more work that is required and looking at making sure that there is gross margins available in performing those services going forward. So you might see some more partnerships, licensing, and other revenue as well. But we're not going to provide specific details. I think as we look at the balance, we feel very confident about the guidance that we're providing.
spk10: Okay. And then, Mehul, just in terms of the Q4-24 positive operating cash flow, you sort of gave us the revenue run rate and gave us the OpEx run rate. I think it would sort of imply, you know, gross margins improving from the levels you're suggesting in Q3. So, you know, what's contemplated in terms of the cadence of this year, given the step down, and then the components of the rest of sort of that operating cash flow, what's contemplated for gross margins?
spk12: Yeah, I don't think we're ready to guide on gross margins, you know, six quarters out yet. Obviously, as you know, it'll be driven by the product mix and the geography mix. that we're selling, but, you know, we have indicated, right, as we exit Q4, we'll be on a, you know, run rate to achieve $150 million in revenue and be, you know, cash flow break-even, right? I've kind of given you the optics piece. You have the revenue piece, and so I think you could model for gross margins.
spk06: Just to provide a little bit of more context around that comment as well, look, we are integrating the operations of these two companies and making sure that all the new operations footprint is able to provide that gross margin lift that we would need to have in the Q4 2024 timeframe. This is why we are not going to provide sort of detailed comment that's in our integration plan. that all of our plans imply that we will be able to get to that cash flow breakeven in the Q4 of 2024. And as you can tell from our operating expense reductions, that we brought that threshold at which we can become cash flow neutral or positive, I should say, to a much lower number than what we have had in our P&L before.
spk03: Okay, thank you. Thank you. This does conclude today's presentation. Thank you for your participation and you may now
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