Fluidigm Corporation

Ladies and gentlemen, thank you for standing by. And welcome to the Fluidigm fourth quarter 2020 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference to our speaker today, Agnes Lee. Please go ahead, ma'am.

Thank you, Joelle. Good afternoon, everyone. Welcome to Fluidarm's fourth quarter 2020 earnings conference call. At the close of the market today, Fluidarm released its financial results for the quarter ended December 30, 2020. During this call, we will review our results and provide commentary on our financial and operational performance, market trends, strategic initiatives, and our response to the COVID-19 pandemic. Presenting for Fluidarm today will be Chris Linthwaite, our president and CEO, and Vikram Jog, our CFO. During the call and subsequent Q&A session, we will make forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results, and market trends and opportunities. Examples include statements about expected financial performance, including guidance related to revenues, product line performance, net loss, margins, operating expenses, and investment plans, as well as statements about COVID-19 testing opportunities, planned product releases, collaborations, partnerships, funding sources, market and revenue growth, expectations, trends in diagnostics and other clinical markets, and fluid on strategic plans to access and grow those markets. These statements are subject to substantial risks and uncertainties that may cause actual events or results to differ materially from current expectations. Information on these risks and uncertainties and other information affecting our business and operating results is contained in our annual report and Form 10-K for the year ended December 31, 2019, as well as our other filings with SEC. The forward-looking statements in this call are based on information currently available to us And Fluidigm disclaims any obligation to update these forward-looking statements except as may be required by law. During the call, we will present some financial information on the non-GAAP basis. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of the company's operating results as reported under U.S. GAAP. We encourage you to carefully consider our results under GAAP as well as our supplemental non-GAAP information and the reconciliation between these presentations. Reconciliations between GAAP and non-GAAP operating results are presented in a table accompanying our earnings release, which can be found in the investor section of our website. I will now turn the call over to Chris, our president and CEO.

Thank you, Agnes. Good afternoon. As I think about everything that's happened in the past year, it's clear that the ongoing global pandemic has affected every aspect of our business. driving the need for seamless execution, as well as opening new doors and accelerating greater opportunities. In fact, the pandemic has flipped the entire healthcare ecosystem on its head. By leveraging our core competencies, Blue Dime is fast emerging as one of the most unique and disruptive forces in life science technologies. We now span the spectrum from discovery to diagnostics, the latter of which is opening massive new markets for us to pursue. Diagnostics and healthcare decision-making are ripe for transformation. Our pioneering technologies will help to propel this paradigm shift as our franchises rapidly evolve into diagnostic and healthcare decision-making platforms of choice for laboratories around the world that are working to address the most pressing problems in infectious disease, immunology, and oncology. Regarding our fourth quarter, I am so proud of hire Fluidigm team for delivering financial results that were the highest in the company's history, relentlessly focusing on employee safety and addressing our customers' urgent COVID-related needs. Our team's actions reflect our shared values and an ethos we call stepping up, including a commitment and a passion to rapidly deploy our technology to combat the pandemic of today while accelerating our journey into new diagnostic categories and broader healthcare decision-making. We expect 2021 to be an incredibly exciting year in terms of new accounts to acquire, new markets to penetrate, new products, and capabilities to deliver new insights, and new partnerships to improve channel power, customer adoption, and overall utilization of our platforms. Before I turn the call over to Vikram to discuss our fourth quarter and fiscal 2020 results, let me first give you an overview of what we're calling Vision 2025, our updated strategic plan followed by a more in-depth look at our go-to-market strategy in both microfluidics and mass cytometry. The events of 2020 have validated our long-held perspective that the traditional diagnostics market is going through a seismic shift, where new entrants, like Fluidarm, who bring new testing strategies, new channels, high flexibility, lab efficiencies, and rapid scaling can capitalize on an enormous addressable market opportunity. Our board and management team have been working together to refine our long-term plan to align with this perspective. In a short time, we have built new assets that are foundational to diagnostics. We are confident that we have the right assets, the right team, the right vision, and the right strategy to access the tremendous opportunity before us. We have believed for some time and recently reaffirmed that COVID will have a profound and continued impact on healthcare, in ways not imagined at the beginning of the outbreak. The pandemic has made increasingly clear the necessity of new tools for combating infectious disease and a paradigm shift and disruption in the delivery of diagnostic test results. At Fluidigm, we are bringing to market an array of new technologies that are increasingly essential in these efforts. We have proven our ability to deliver high-throughput, flexible, low-cost testing solutions by leveraging our differentiated microfluidics technology. On a parallel path In mass cytometry, we are moving closer to healthcare from our research roots. We are uniquely positioned to provide healthcare insights through a proven technology that elucidates a deeper understanding of the immune response, disease pathology, and increasingly turns these insights into treatment strategies. We are focused on accelerating market adoption of both microfluidics and mass cytometry diagnostics and healthcare-oriented labs. We are incorporating the lessons we learned from COVID and applying them to a broader spectrum of diseases. We have many options for growth, and we will be selective in the areas we pursue with our resources. We expect the long-term growth rates of both of our franchises to exceed 20%, with a $12 to $15 billion immediately addressable market in molecular diagnostics, complementing our existing approximately $3 billion market opportunities. We have an exciting array of new products in our pipeline and we'll start to unveil them to the marketplace in 2021. This is a direct result of our conscious shift to higher growth, higher return on investment offerings. We are targeting next generation healthcare decision tools, including diagnostics and applied markets research. Throughout our portfolio, we believe there is an opportunity to increase our footprint across thousands of new labs, including general CLIA testing labs, flow cores, and clinical and anatomical pathology. We are now at the dawn of a revolution powered by digital health that will transform the healthcare ecosystem. We are committed to helping clinicians and emerging digital health providers deliver more informed healthcare decisions and better serve their patients by expanding access to broad testing and connecting clinicians more directly with their patients. Our investments are focused on transformative partnerships, technologies, and capabilities to achieve optimal patient outcomes as we navigate the current pandemic and apply the lessons we have learned to other applications in healthcare decision-making. Now I'd like to take a closer look at our microfluidics and mass cytometry business lines. Let me start with microfluidics and our game plan in solidifying our leadership position as the next generation diagnostics company. We will do this in four primary ways. First, we will advance our technological innovation to simplify our workflow, serve the decentralized market, and acquire new accounts. Second, we will expand into new channels, such as digital healthcare and telemedicine providers. Third, we will build upon the beachhead that we have established in labs to penetrate new markets. These labs already utilize our innovative diagnostic systems and are looking for a next generation testing menu for the post-COVID era. And therefore, fourth, we will introduce new capabilities and diagnostic content as we expand our menu to new therapeutic areas, which will drive a higher proportion of recurring revenue. Although the COVID pandemic caused significant disruption to our business, it also presented opportunities for us to prove the advantages of our unique technology to new accounts. Over the course of 2020, we were able to help revolutionize testing for the benefits of patients and first responders around the country and around the world. We believe COVID testing represents a five- to ten-year market opportunity, that high levels of testing are required in concert with vaccination, and that testing should be maintained for national surveillance, as well as in industries such as travel. In other words, more vaccinations does not mean fewer tests. During the year, we saw strong demand for the market's first commercially available saliva-based COVID testing kits, leading to broad-based improvements across the business. Microflitics revenue grew 89% from COVID testing alone, and we sold 2.2 million COVID tests over the past six months. These results are truly a testament to our ability to rapidly scale, bring new tests to market, and acquire new customers. I strongly believe that the impact of COVID on healthcare will be profound and the ripples will continue to be felt for a long time to come. The pandemic has disrupted the diagnostics industry, creating new opportunities for digital health providers and demonstrating the need for high throughput, cost-effective, and flexible testing technology that can be rapidly adapted as new information arises, such as new viral sequences, new pathogens, and population stratification with differentiated treatment plans informed by companion and data sets. While these unprecedented times represent an inflection point for the broader industry, our business has also reached a key inflection point that will redefine our future, and we now have the capability to build a durable diagnostics business powered by microfluidics, subsidized by COVID testing demand, and non-dilutive funding. Our path to grow is clear. We must keep focusing on our strengths. We are an innovation leader for neat saliva diagnostics and collection. Our cost-effective solutions are best in class and are ready to be deployed on a mass scale. We can provide a highly dynamic range of lab throughput, and our technology is extremely flexible. This proprietary technology is what enables rapid iteration of panels, assays, and tests, consumables that drive recurring revenue to adapt to new viral strains and new diagnostic content, inform better treatment decisions, and support vaccine implementation. In fact, we have an extensive runway to continued growth as we further advance the transformation of our microfluidics franchise into a durable diagnostics platform. This strategy shift will launch longer-term revenue acceleration in the business, broaden our customer base, and increase recurring revenue. In this diagnostics revolution, we will not work alone. For example, in 2020, In addition to building a network of testing partners to increase access to saliva-based COVID testing to communities, we also secured new partnerships for building new capabilities, accessing new markets, penetrating new labs, and developing new products. This work will continue in 2021. Over the coming months, we intend to establish new relationships with sample aggregators to expand COVID-related opportunities and drive commercial execution. as well as with digital health providers and new market entrants in areas such as retail as a channel for our differentiated COVID testing platform. We are also planning to enter into new collaborations to create and improve workflows on our next generation platform, which we believe will have an impact that transcends COVID. The applications of our microfluidics technology are not limited to infectious disease. We are already seeing emerging utilization of our technology in oncology, genotyping, and clinical research arenas. Going forward, we will continue pivoting from a highly academic focus to broader clinical and diagnostic applications, and we'll continue strengthening our competitive positioning and diagnostics, where we see a large addressable opportunity ripe for disintermediation. We proved ourselves as disruptors by creating the first commercially kitted saliva-based COVID test, which has been adopted by several universities including the recently announced edition of George Mason University. Our multi-year product pipeline is robust, including several major new product releases in 2021, and we remain on track for our next-generation BioMark platform release in the summer. We have a clear go-to-market strategy focused on sample aggregators, customer labs, and connecting providers, and we will be partnering with digital platforms to eliminate the need for costly sales channels, leveling the playing field with larger peers. We will also continue innovating with a new instrument and sample to answer IFC. We are working toward embedding digital capabilities into our products and offerings to meet the future needs of the diagnostics industry. The digital healthcare revolution is here to stay, and we intend to play a leadership role in this transformation. Our recently appointed chief digital officer will lead our efforts embedding digital into our product and solutions roadmap. Overall, I'm incredibly proud of the way our team's agility and responsiveness has paved the way for accelerating growth and increased opportunity in 2021 and beyond. This is what gives us confidence in our ability to achieve an expected organic growth rate of low to mid-20s through 2025 in our microfluidics business. Now let me turn to our other core franchise, mass cytometry, and why this technology is the most powerful platform for key clinical and healthcare decision-making. Our game plan for mass cytometry growth comprises four key elements. First, we intend to propel our established beachhead in academia into clinical labs with a healthcare decision-making tools. Second, we will continue to innovate our technology and improve the platform. Third, we will be embedding digital capabilities into our product suite for better informed healthcare decisions. And fourth, we will leverage the competitive advantage we have over our competitors in regulated markets to move into healthcare decision making. First, we've established an enviable beachhead in academic flow with over 325 active systems, which have attracted scores of new users. Furthermore, we are becoming the gold standard for immune system studies with review committees requesting mass cytometry data sets in study designs. As a result, we are seeing increased recurring revenue and publications. In the last year alone, we saw a 100% increase in our publication rate, which has now exceeded 1,380 cumulative publications and reviews involving mass cytometry. Mass cytometry is moving ever closer to serving an essential role in healthcare decision-making, and we believe we're the market leader in generating cytometry-based academic insights used to address applied market healthcare questions. We don't intend to undertake this revolution alone. We've been building collaborations and partnerships to forge new ground for applications for mass cytometry. A prime example is the collaboration with PLT Tech we announced today. We are excited about this collaboration to introduce our mass cytometry platform registered for diagnostics in China. As part of this collaboration, we will be working with PLT Tech to submit Fluidigm's Helios suspension instrument for the Chinese diagnostics approval. Under the agreement, PLT Tech will initially focus on panel development for blood panel diagnostics, particularly those affecting children, and ultimately develop prognostic applications to evaluate effectiveness of immunotherapy treatments. PLT intends to purchase three systems as part of this agreement. Taking a step back, our mass cytometry business comprises two segments, suspension and imaging. With regard to suspension, we plan to significantly increase our existing footprint of over 325 active instruments, moving from discovery to research applications as we advance into commercial labs and contract research organizations, which number over 1,200. Our customers turn to us to address their pain points, including number of markers analyzed simultaneously, resolution, and single-cell-based analysis. As a result, we are seeing an increasing number of publications and studies using mass cytometry technology to shed new light on diseases. We have been placing as many as 35 to 50 analyzers per year and driving utilization with new content and workflows that are named in significant studies and publications. Our MaxPAR direct immune profiling assay delivers a complete sample-to-answer solution for high-dimensional immune profiling. and has become a standard method for assessing immune system response. For example, just this week, we announced that the NIH has sponsored a study at Stanford Medical School focused on pediatric patients with MIS-C using our MaxPAR direct immune profiling assay. These studies and publications are a leading indicator that our technology will play a pivotal role in the healthcare revolution to come. In addition to suspension, we view imaging as a highly attractive market that will extend well into the future. That is why in the past two years, we focused our efforts on helping our customers better understand the immuno, a scientific subject of study and investigation with a huge impact on healthcare that requires insights into single cells, bulk cells, and tissue. Currently, high-complexity imaging is dominated by immunofluorescence and immunohistochemistry. to examine the cellular localization of proteins and visualize antigens in cells. There is, however, a great need by our researchers to be able to see even more plexity, not only in research settings, but increasingly in clinical workups of tumor characterization. It is clear that the plexity opportunity ahead of us is immense. We currently have an installed base of more than 100 imaging systems in 17 countries. but we estimate that our serviceable market is at least an order of magnitude greater, with more than 1,500 possible labs who could benefit from deploying our instrumentation and our consumables. In fact, Fluidigm is uniquely positioned to serve both the discovery and applied markets with our proven technology and scientifically published studies. And this year, we will be leveraging our partnerships to drive greater adoption in biopharma and CROs and looking to expand even further into imaging cores, and pathology labs beyond 2021. We are expanding our focus from image acquisition to encompass both pre- and post-imaging analytical solutions through new partnerships such as Indica Labs and Visiopharm. We're using our therapeutic insights and Japan Services Lab to customize and access emerging new capabilities in exciting areas of advanced healthcare-oriented biology. One service project in particular we want to highlight is our recent work with Georgetown Lombardi Comprehensive Cancer Center, which led to a publication to identify novel targets for pancreatic cancer therapy, as well as an idea to form a new private company around these insights. And finally, as another proof of our leadership in enabling cutting-edge research, we are pleased to see that our services labs have more than 40 projects completed or in progress including several focused on COVID-related research. In addition to expanding our system placement beachhead, we will use data to enhance the value of our technology by embedding digital capabilities into our products and technologies, providing an enhanced customer experience. Our chief digital officer will coordinate and drive our digital vision to impact data management and interpretation, digital integration of instruments, and delivery of information. This will have applications across all of our products, our operations, and our customer interactions. In regulated markets, Fluidigm holds a significant advantage over its recently emerging competitors. We have built a rigorous infrastructure encompassing stringent processes, operations, manufacturing, and quality controls that enable us to meet regulatory guidelines. It can take years for companies to build this infrastructure from scratch. Lastly, I would like to mention some important news regarding our leadership. As we announced in December, our board welcomed Dr. Anna Stankovich as its newest director. Anna brings us over 30 years of regulatory and diagnostics experience. In addition, I recently appointed our chief science officer, Andrew Kwong, to lead and accelerate our diagnostics initiative. I expect that both Anna and Andrew will continue to share their expertise to enable the company to capture a sizable portion of the diagnostics market opportunity. Going back to our Vision 2025 plan, We are well positioned in our mass cytometry suspension and imaging franchises for sustainable 20% plus growth as we expand into applied research markets. Across the company, we are bringing to market a pipeline of innovative new products and capabilities, including content, workflow, and instruments that will be strengthened by our vital partnerships, especially those in digital healthcare channels. We will announce progress on this pipeline as the year progresses. In summary, our four areas of focus are technology innovation, expanding beachheads, partnerships, and menu expansion. In closing, I'm confident that as the company evolves in 2021, regardless of quarter-to-quarter fluctuations and COVID-related uncertainty, our mission to improve life by driving meaningful insights in health and disease will stay the same. Fluidigm will continue to revolutionize biology by enabling new insights into diseases and power better outcomes for patients. We are seeing more and more proof of this. More publications, more applied settings, more clinical trials, the number of these proof points will accelerate, resulting in greater insights and more informed healthcare decisions. Fluidigm has already begun its journey as a leader in next-generation diagnostics. And with that, I'd like to now transition to Vikram for a detailed discussion of our fourth quarter and fiscal year operating results.

Thanks, Chris. And good afternoon, everyone. Before turning to the financial results, I want to inform everyone that we have posted supplemental financial information in addition to our investor presentation on our investor website. I will begin by providing revenue highlights and follow up with additional color on each of our franchises and regions. I will then discuss our operating results and end with 2021 guidance. We are very pleased with our strong performance in the fourth quarter and full year 2020. Our team remained resilient and resourceful, opening up new opportunities in diagnostics and expanding utilization of our mass cytometry technology in infectious diseases, using the same tools that are being used by our customers to gain insights in cancer and immunology. Total revenue was $44.6 million in Q4 2020, an increase of 38% compared to Q4 2019. As Chris noted, Q4 2020 revenue broke last year's record and, sorry, broke last quarter's record and is now the highest quarterly revenue ever achieved by Fluidarm. During the fourth quarter, product and service revenue of $40.5 million grew 26% compared to Q4 2019. Microfluidics diagnostics revenue, comprising both consumables and instruments, contributed over $9 million, driving growth in our overall product and service revenue. Changes in foreign exchange rates had an approximately two percentage point positive impact on both total and product and service revenue growth. Microfluidics product and service revenue of $21 million increased 98% year over year, primarily driven by diagnostics revenues, both consumables and instruments. We sold 1.25 million COVID-19 tests in the quarter, up from the 795,000 tests that we reported in the third quarter. ASP was below last quarter, but still within our range of $5 to $20 per test. And similar to last quarter, a majority of tests sold were to universities. At year end, approximately 30 instrument systems were generating patient results. We now have a base of instruments generating results at commercial labs to drive our near-term diagnostics initiatives with partners. Mass cytometry product and service revenue of $19.5 million in the fourth quarter was 9% lower than the prior year quarter, mainly due to lower instrument revenue offset by higher consumables revenue. We saw another quarter of sequential revenue growth for both instruments and consumables as customers placed instrument orders that had been delayed from earlier in the year. We also benefited from year-end seasonality in the fourth quarter. Future customer ordering activity remains dependent on any impact from COVID restrictions and the pace at which we build our sales funnel. Looking at our fourth quarter revenue compared to the prior year period from a regional perspective, the Americas revenue grew 87% to $22.1 million, including 4.1 million of development grant and license revenue. Product and service revenue increased 57% to $18 million, driven by higher microfluidics diagnostics revenue. The majority of our microfluidics diagnostic sales this quarter was in the US. EMEA revenue increased by 24% to $14.3 million. This increase was driven by microfluidics and mass cytometry consumables, offset by lower mass cytometry instrument revenues. Microfluidics revenue was driven by diagnostics instrument and consumable sales, as well as research demand. Asia Pacific revenue decreased 10% to $8.2 million, driven by lower microfluidics and mass cytometry instrument sales, offset by mass cytometry consumables and service revenue. To round out my commentary on the regions, in the fourth quarter, changes in foreign exchange rates had a six percentage point positive impact on EMEA revenue growth. As I noted earlier, we reported development grant and license revenue of $4.1 million in Q4. This included 2.7 million of development revenue associated with an OEM supply and development agreement with a customer, and 1.4 million of revenue related to a research and development grant. Moving now to our operating performance. Let me start by saying that 2020 was an extraordinary year for Fluidigm. Despite all the challenges that were brought on by the pandemic, GAAP operating loss for the full year 2020 of $51 million showed a modest improvement from the $51.8 million of operating loss for the same period last year. Non-GAAP operating loss showed a more significant improvement of nearly $4 million. For the full year 2020, non-GAAP operating loss was $20.4 million compared to $24.1 million for the full year 2019. We drove this improvement by increasing product and service revenue on a full year basis and accessing alternative revenue sources to fund investments for long-term growth, including NRE and grant and license revenue of $15.6 million. We will continue to look for similar sources of revenue in 2021. The remainder of my comments and operations will focus on non-GAAP measures. Please note that the reconciliation tables between our GAAP and non-GAAP measures are provided at the end of our earnings press release that was issued earlier today. Non-GAAP product and service margin was 62.7% in the fourth quarter of 2020 compared to 64.9% in the year-ago period and 68.3% in the third quarter of 2020. Non-GAAP product and service margin on a year-over-year basis was lower primarily due to reserves for excess and obsolete inventory and lower pricing for mass cytometry instruments, partially offset by a favorable product mix. Sequentially, product and service margin was lower due to higher service costs, inventory reserves, and lower prices for mass cytometry instruments, partially offset by higher utilization of mass cytometry instrument manufacturing capacity. Non-GAAP operating expenses were $38.3 million in the fourth quarter of 2020, compared to $22.9 million in the year-ago period. When the pandemic hit in early 2020, we took immediate action to preserve our liquidity, including reductions in salaries and variable compensation. With sequential improvements in revenue in the second half of 2020 and increased confidence in our outlook, we restored employee salaries and short-term incentive compensation. The year-over-year increase in operating expenses is primarily driven by increased compensation costs, including variable compensation, higher facilities costs, and higher litigation expenses. Moving on now to cash flow and the balance sheet. Cash and cash equivalents, short-term investments, and restricted cash at the end of the fourth quarter of 2020 totaled $69.5 million, compared to $73.4 million at the end of the third quarter and $60.7 million at the end of 2019. Operating cash burn was $8.1 million during the quarter and $19.8 million for the full year, a $15.4 million improvement compared to 2019. Accounts receivable day sales outstanding increased to 54 days compared to 40 days at the end of the third quarter. Investing cash flow was a positive $3.6 million for the quarter and $7.6 million for the full year. excluding sales and maturities of investments. Investing cash flows included $14.3 million and $25.4 million of proceeds from our RADx grant during the quarter and full year respectively. Capital expenditures were $10.7 million in the quarter and $12.7 million for the full year compared to $2.5 million in 2019. The year-over-year increase in capital expenditures was primarily related to the expansion of the IFC manufacturing facility, which is being funded by the RADx grant. At year-end, the borrowing base under our asset-based revolving credit facility was $15 million, none of which was utilized. And finally, on to guidance. In 2021, we will be focused on executing on our Vision 2025 strategic plan, through innovation, beachhead expansion, partnerships, and increased menu. The COVID-19 pandemic is still ongoing, and although we expect it to dissipate as vaccinations proliferate around the globe, the timing and pace of the recovery remain uncertain. Reallocations of research budgets to COVID-related projects that started in 2020 are still in place as we enter 2021. Our expectations for this year are therefore tempered by these uncertainties. With this backdrop, for the full year 2021, total product and service revenue is projected to be approximately $140 million to $150 million, or approximately 14 to 22% higher year over year. Other revenue is projected to be approximately $4 to $5 million. Non-GAAP net loss is projected to be between $17 and $21 million. We expect non-GAAP product and service margin in 2021 to be close to or slightly above full-year 2020 levels. At the franchise level, mass cytometry revenue is expected to grow year over year at or below the low end of our total product and service revenue growth range. Growth is expected to be primarily driven by consumables and service revenue. Overall, microfluidics revenue is expected to grow at or above the higher end of that range, And year-over-year growth in microfluidics revenue is expected to be primarily driven by diagnostics testing revenue. Q1 product and service revenue is projected to be approximately $29 to $31 million, reflecting 20 to 29% growth year-over-year. Mass cytometry revenue is projected to be approximately 13% to 20% below the prior year quarter due to COVID-related delays in instrument orders in APAC and Canada. Microfluidics revenue is projected to be approximately 85% to 95% above the prior year quarter, primarily driven by diagnostics testing demands. Other revenue is projected to be approximately $1 to $2 million in the quarter. And with that, I will open up the line for questions.

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Sungji Nam with BTIG. Your line is now open. Hi. Thanks for taking the questions.

Hi, Sungji. How are you? I'm doing just fine.

Sorry to cut you off. Go ahead.

Oh, no worries. Maybe just a clarification on COVID testing in the quarter. I think You guys exited last quarter with over 43 systems that were enabled for COVID testing, and you ended the year with 30. Could you kind of talk about the discrepancy there? Is it just recategorization? And then also, I'm curious, I think maybe you talked about, I could be wrong, of launching or submitting for EUA a combo assay for COVID testing with flu A, flu B, RSV. Just wondering if there's any changes in terms of that plan.

Thank you for the question.

Maybe I can take the first question.

Perfect. That's exactly what I was going to propose. You take the first. I'll take the second.

Yeah. So, Sanjeev, at the end of the third quarter, we had about eight to nine systems that were actually generating patient results. And so the higher number that you are correctly recollecting was the number of systems that were actually sold into diagnostics testing. But as we had, I believe, talked about the last time and then subsequently, there's a process between the time an instrument is placed at a testing lab until when it actually starts generating patient results. And the relevant metric is the number of instruments that are actually generating results. And that number has, in fact, grown from that 8 to 9 to 30 at the end of Q4.

And then I'll kind of tackle the second part if you want to ask any clarifying on either one of those points, Sungji. So with regards to the EUA on a combo assay, I think, as you well appreciate, the COVID environment is extremely dynamic. So we have actually spent a lot of time prioritizing expanding our menu of through things like the CEIVD submission, which we were successful in achieving just in the back half of the quarter or early part of the year in the first quarter. We've also been looking at expanding claims. So we actually shifted more towards asymptomatic, so working on screening claims and at-home collection, which are areas that are pretty important to our strategic roadmap. And no way whatsoever is it a reflection on the interest in a combo assay, but we really looked at what we thought the commercial attractiveness for the near term was going to be for that product and then deprioritized that for the near term on our roadmap. And we have other things in the works, which we'll come on to perhaps later as far as menu expansion in the near term, that we feel will have a much higher impact on the urgent needs of the market at this moment.

Okay, gotcha. That makes sense. And then just on the microfluidics business outside of COVID testing, would you be able to comment? It sounds like there's a lot of partnerships, potential new product launches coming up. Anything you guys can comment on at this point in terms of potential milestones that we can anticipate over the next 12 or 18 months?

I mean, the shortest answer is I think what was important for us was to present the Vision 2025 so you could see really where we're headed. And now as you see these announcements come out, which we do have many planned this year, you can drop them in as context. So I don't think there'll be a number in that time period you mentioned, including partnerships that are outside of diagnostics or outside of COVID-related partnerships for the microfluidics platform.

Okay, gotcha. And then lastly from me, congratulations on the PLT technology partnership. I was curious, are they largely replacing what they were using flow cytometry for some of these applications, or are these kind of new applications that they have been validating and developing more recently?

You're right. Your instinct, it's a combination of both. So some of it represents flow cytometry business that they think will be better suited on mass cytometry, in addition to some unique capabilities that our mass cytometer can provide that flow cytometry does not. It actually comes back to the theme we've been discussing around plexity and the power of getting that answer in a single experiment and our ability to build larger and larger panels. and run them all in a single experiment. So I well appreciate the challenges of fluorescence-based technology. I think it's struggling to scale to the needs of the future. And this is, I think, a great example of an organization that evaluated both and has moved towards mass cytometry.

Great.

Thank you. I'll get back in the queue.

Thank you.

Thanks. Thank you. Our next question comes from Dan Brennan with UBS. Your line is now open.

Great. Thanks for the questions, guys. So I guess first question, just digging into COVID a bit. So Q4 results were definitely light of what we expected. Chris, just comment a little bit about the traction that you saw, how it manifested versus what you expected. And then I'd be interested to get specifically what's baked in for 1Q and for 2021 for COVID.

Okay. Victor, I'll probably have you take the second part of the question, and I'll address the first. Dan, I can only say that we were extremely pleased with the performance in the fourth quarter, including the performance in COVID testing. In six months' time period, we went from essentially the first emergency use authorization in August for symptomatic claims alone with essentially no install base to delivering more than 2 million tests to the market. So, I recognize that, you know, others may have had aspirations even more aggressive, but we were, you know, we knew and we talked about it, I think, in our call color commentary as best we could that we were really new into this. And we were only at that point, I think, maybe 90, 120 days in, into that call period. And so, you know, we were still in the learning process of what it takes for labs to stand up, to validate. for them to acquire their own samples and their own business model variability. But I think our experiences in the fourth quarter have actually been quite instrumental and insightful in influencing and shaping our 21 priorities. So there's a number of things that we can do, we believe, to drive more success into this existing install base as well as expand our install base and consumable stream. And a couple of those is about getting more access to saliva-based approaches and specifically fluidime saliva-based approach in the marketplace. And that's why digital partnerships and partnerships in general are really important to that and to feed more business into our core partner labs. In addition, we're going to continue to make improvements on innovation. So we've talked about the next generation platform at IFC coming out later this year. And then the third is expanding our regulatory claims so we can market our technology across more use cases to address many of these emerging market segments across the economy. Vikram, I'll toss to you on the second part.

Yeah, sure. Hi, Dan. Our microfluidics business is going to grow between 85% and 95% from Q1 of 2021. to Q1 of 2021, and most if not all of that growth is due to COVID-related testing revenues. Just if your question relates to how it compares to Q4, I would say generally speaking, it's relatively in line with the Q4 revenues. And in terms of the 21 guidance for COVID? In terms of Q1, I thought your question was for Q1.

Right, yeah, yeah, no, it was both. It was one Q in 21.

Yeah, for 21, I think similarly, the microfluidics growth is going to be at or above the high end of the overall growth guidance. And all of that is going to be related to COVID testing revenue.

So basically, we have a 22% amount. So 22% of your 21 micro fluidics number, that's the COVID number for 21.

Sorry, Dan, you're breaking up. I'm sorry.

Yeah, the 22%. So just take 22% of your 20 micro fluidics number, and that's the COVID number, I guess, for 21. Okay. So maybe second question is, so Chris, you were obviously extremely bullish on the Vision 25. sending some pretty aggressive growth targets out there over the next five years. I guess the first question is, in 2021, the mass . I think he probably got disconnected.

Yeah, that was unfortunate. Maybe we should take the next question in the queue and let Dan come back, our next person in the queue.

Our next question comes from Steven Maul with Piper Sandler. Your line is now open.

Okay, thanks. And thanks, guys. Thanks for taking the questions. I'll ask you guys first a non-COVID question. So on this new digital capabilities you mentioned for imaging mass cytometry, can you dig a little bit deeper and give us a little bit more color on what that means? I know you mentioned data management, but is that something that's going to help customers integrate and archive their images, or is it a remote pathology or analysis? Just a little bit more color, please. And then could you give us a sense on how you'll monetize that, or are you going to offer it for free for more customer satisfaction purposes?

I'll take that one. Steve, good to hear your voice. Thanks for the question. You kind of landscaped a number of areas, and there's probably a few more in addition. So there's a lot of things that we can do to prepare for the healthcare decision-making of the future, and some of those relate to the pre-analytical workflows and then the post-analytical analysis. Other things are, as you described, kind of as all of us are moving now closer to pathology is adapting the technology for the needs of the pathologists, both clinical and anatomical pathologists and the way they analyze data There's other things around connectivity of our platforms and storage of the data files, things you just identified also, and even things such as remote monitoring and uptime on the instrument platforms. So monetization for us will have or could have multiple facets to it. So there's additional software plug-ins. There is some of the things we will do that will drive value will be probably things we push through upgrade packages in the future. And then, of course, the final one, which would be the data creation and algorithm development, which is an open area for further discussion. So at this time, I won't speculate, but I think the data generation and the insights is one of the most valuable things. But for the near term, the vast majority of our revenue will be generated from utilization of the instrument platforms.

Okay, great. Thanks. And then... One question. I know you guys had talked before there was a COVID-19 related research tailwind, especially, you know, using some of your panels like MaxBar Immune. Have you seen utilization trends change given the vaccine news or has there been a drop off in COVID-19 related research?

I don't perceive that there's been a drop off in COVID related research. And, you know, kind of one example would be the Stanford announcement we just had yesterday. Although that's not strictly COVID, but it's the spin out or potentially one of the hypotheses is it's COVID related. I think the types of questions are going to evolve, and there's going to be a very durable need for immune analysis, for immune system or immune profiling and phenotyping for some of the reasons you just described. So what if exposure to various variants matter? What's the longitudinal impact on the population for different strains? What's the impact of the vaccine? Having supporting panels for things such as vaccine developers for the future. So we actually think there's probably a pretty rich corridor of need here. And I don't perceive, although I can't analytically qualitatively describe what COVID-specific research will be, but we perceive it will be quite strong. And we've seen it in the retrospective of our publications that are coming out and the shift towards more and more infectious disease-related publications.

Okay, got it. Thanks. And one last question. So on your COVID-19 ASPs, it still looks like it's a high mix of universities and Do you think that mix will evolve over time? And I know you guys are doing surge testing as well. Maybe just a little bit of color on the ASP mix and COVID-19.

I'll ask Vikram to jump in also, but I think we see a wide range on the commercial-oriented labs. The ASPs tend to be higher in the academic settings where they have a captive range. so meaning they have a student population they need to test. They generally are willing to put forward relatively large fixed-price contracts, and in return they tend to have ASPs that reflect that commitment to us in larger purchase orders. So we would imagine that over time, the more we increase commercial-scale business through the platform and volume through that, that the ASPs will probably increase over the measurement period, but it's always a balance of mix between the two. Vikram, any other commentary you want to add?

No, I think that's exactly right. It's all a balance of mix. We do have a base of instruments that have been placed at both universities and commercial labs, but the results so far, as you have correctly noted, have been skewed in favor of university testing and for which the prices remain on the low end of the fairly wide range of ASPs. And we do expect over time for that mix to be more balanced than it has been in Q3 and Q4.

I guess I'd just like to add is that, I mean, it's important, as we've talked about in the past, that we feel that we have very attractive margin profile across that spectrum. Clearly getting better ASPs is better, but even on the lower end, it's a very attractive gross margin for the company that gives us room to reinvest. And we're really looking at about establishing toeholds and beachheads. And finally, it's about also positioning ourselves against antigen testing and alternative testing approaches. And I think the industry hasn't necessarily benefited from the fact that there's a perception that PCR testing has to be very high. And in fact, you can get access to gold standard-based PCR testing on a fluidine platform at a very attractive price. Okay. Thank you.

Thank you. Our next question comes from Dan Brennan with UBS. Your line is now open.

Hey, guys. Sorry about that. I took off my blue shoes. I don't know what happened. So I guess you helped me, Chris, and Vikram, because, I mean, the stock, you know, maybe because of inflated estimates for COVID, I mean, the stock's off in the aftermarket, say 20%, and your message sounds extremely constructive given the 2025 plan and the new product and the trajectory of business, which is well above what I think the street is forecasting. So I guess I'm just hoping to get a few things. So first off, just Could you just give the dollar COVID number right now that's implied in 21? I know you gave some call before. I just want to back in there. I just want to make sure I understand what the base number is for product and services, X COVID implied in your guidance for 21.

I'll have maybe Vikram comment on that in just a second. I kind of want to go with the first part of the setup, Dan, and welcome back, by the way, which is I feel like part of the challenge here is because I think we're significantly undervalued by every metric. a shareholder general assessment of peers and the performance. I think what's been missing is our ability to communicate a longer-term vision. And I think putting a long-term vision with putting stakes in the ground around recurring revenue streams, around the growth performance of both portfolios, and kind of shifting the narrative beyond COVID test one, two, three, or the quarter in question has been one of the things that's been holding us back. Because if you step back and look at the body of the work, we're heading completely in the right direction of increasing shareholder value. Maybe, you know, with that context, Vikram, would you like to comment on the COVID specific?

Yeah, sure. So there's a lot of uncertainty from quarter over quarter. So as I said, our expectations are tempered. So take that from that perspective. In 2020, we had roughly over $20 million round numbers, about $22 million of diagnostics testing revenue in microfluidics. And so that number, if you do the math, and I'll do it for you, in terms of the growth rate in microfluidics that we alluded to in our guidance, let's say all of that comes in from diagnostics. So that number would go from the $22 million numbers to roughly between, say, $32 million to $38 million in 2021. Got it.

Okay. And then maybe just on mass cytometry, so the guidance I know in 1Q reflects, I think, a decline. You guys commented on some delays in Canada and Asia. And I guess the full-year guide, you talked about, what, below the 14%, which would still be below 2019. So maybe just give us a bridge about, about what you're seeing and expecting in 2021. Obviously, you're citing some COVID uncertainties and the bullishness going forward beyond that. I know you've talked a lot about partnerships and new products and disruptive things. So can you just give us a sense of when, either A, when we're going to see some of this, B, how much conservatism maybe you're baking in for 21? Because while there's still uncertainty out there, presumably, you know, I guess from other peers, I think we're seeing some better outlooks in terms of traction and some recovery.

Yeah, thanks. I appreciate the follow-up on this, Dan, and I'll ask Vikram to join in, too. I think there's a lot of ways to address this. I mean, one of the things we're trying to do is create greater transparency, and this is kind of as feedback from shareholders and analysts like yourself over the past year. And part of that may be there's a departure between, you know, our outlook on COVID as being maybe a little bit more, in this case, that it's going to be more durable, the impact. And so our The mass cytometry, we get down to the granularity to the best of our ability at this point. Recurring revenue streams in terms of services and consumables should continue to grow and grow well off the 2019 levels. It's the analytical instrument placement cycle through the course of the year that has the greatest uncertainty for us. And I think the COVID turmoil hasn't really fundamentally changed that in this period. So as budgets are still being finalized and money is being reallocated to testing needs, et cetera, et cetera, but utilization continues to increase. So I think that's probably the biggest driver of uncertainty in the near-term period, but we don't see any reason why there's a fundamental challenge to our thesis over a multi-year period. And Vikram has offered, if anything else you'd like to add.

Sorry, I thought Dan had something to say. Oh, no, it's okay. You can go. Yeah, no, I just want to echo what Chris said. We are expecting strong growth in consumables and service. So we expect the trend that was created at the second half or Q4 of 2020 to continue into 21. We do have conservatism and you can see from the Q1 guide why on instruments, the quarter over quarter visibility due to local reactions from governments on various issues related to permits and so on and so forth, make that somewhat necessary for us to be cautious. So we're very optimistic on the consumables and service side in terms of growth in 2021. And are you planning to

Maybe host an investor day. It sounds like, Chris, from the language that you've got just a lot of things ready to go here. You've got competition on the spatial side, you know, continuing to ramp up as well. So I'm just wondering when you think we'll get some visibility on what the new product portfolio in particular is going to look like.

I think we completely agree with you, Dan, that Investor Day or in this current digital medium, maybe some series of events that can kind of lay out more granularity. I think we wanted to take this one step at a time, which is start with the Vision 2025, the overlay for how we see the year playing out and how the individual portfolios are lining up and then what we want to accomplish over the next five-year period. And as you said, there's a lot of value to them doing a click down to talking about each one of these. So we'll get back to you on the specifics, but it's certainly something that's top of mind right now.

Okay, thank you.

Thank you. I see no further questions at this time. I would like to turn it back over to Chris Lindwade for closing remarks.

Thank you. I just want to again thank everyone for joining our call here to wrap up the Q4 and full year 2020 year in review. And just to summarize, I'm really focusing on innovation, establishing and mobilizing these beachheads to expand into addressable markets. We're going to use partnerships quite aggressively throughout the year and look for us to talk about more expanded menu and offerings on both of our platforms. Thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.