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.