Fluidigm Corporation

Good day and thank you for standing by. Welcome to the Fluidigm first quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 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 over to your speaker today, Peter DeMardo with Investor Relations. Thank you. Please go ahead.

Thank you, Mike. Good afternoon, everyone. Welcome to Fluidigm's first quarter 2021 earnings conference call. At the close of market today, Fluidigm released its financial results for the first quarter ended March 31, 2021. 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 Fluidigm today will be Chris Linthwaite, our President and CEO, and Vikram Yog, 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, EBITDA, margins, operating expenses, and investment plans, as well as statements about COVID-19 testing opportunities, planned product releases, collaborations and partnerships, funding sources, market and revenue growth expectations, trends and diagnostics, and other clinical markets, and fluidized strategic plans to access and grow those markets. These statements are subject to substantial risk 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 on Form 10-K for the year ended December 31, 2020, as well as our other filings with the FCC. 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 also present some financial information on a 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 relations section of our website. I will now turn the call over to Chris, our president and CEO. Chris?

Thank you, Peter, and good afternoon. In the first quarter, we delivered on our financial projections and made incremental progress on our Vision 2025 objectives. Amazingly, this last quarter marked the one-year anniversary of the global pandemic. While we are mindful of the terrible impact the pandemic has had on all of us, we are proud of our modest role in helping advance SARS-CoV-2 research, treatment, and diagnostic testing. Over the last year, we have redeployed the near-term financial benefits of more than $40 million of government investment, plus the proceeds from selling more than 4 million diagnostic tests worldwide. to build a foundation for longer-term growth in our core markets and our emerging diagnostics portfolio. Over the last 90 days, we, along with most industry participants, have seen a rapid deceleration in COVID testing demand and some improvement in our core business. As a result, we are revising our guide for FFY 2021, including a shift in our projected revenue mix to reflect the latest market conditions. Vikram will share more details during his portion of the business update. Today, I will provide a brief overview of new developments in key areas of the business, review some key strategic highlights from the quarter, and touch on our product innovation pipeline. On this last point, we are excited to do a much deeper dive into the mass cytometry franchise during our upcoming virtual investor event on May 24th, which will include a discussion of Vision 2025, including our strategy and innovation pipeline and markets and include presentations from select external experts who will discuss the role mass cytometry plays today and how it may shape the future of healthcare decision-making tomorrow. We also plan to host a later event focused on our microfluidics business. Before I turn the call over to Vikram to discuss our first quarter results, let me first take a moment to review our Vision 2025 and the relevant guideposts that reflect our progress. For Vision 2025, our three key focus areas are innovation, beachheads, and new partnerships. Our execution in these areas will underpin our growth across all product categories and drive growth in our recurring revenue streams. Over the last two decades, we have built a large portfolio of intellectual property, specialized know-how, infrastructure, and talent. In the last few years, we have added regulatory and quality system capabilities to to prepare for a transition of our technology into healthcare decision-making as we continue to bridge our leadership and research towards more applications that support human health. Unlike many other emerging technology companies that are just now entering the research markets, we are established pioneers where our competitors have aspirations for entering more regulated markets. We already have a clear understanding of unmet healthcare needs and a strong foundation for sustained success. Our Vision 2025 objectives reflect this steady pivot, and the COVID outbreak further accelerated this transformation. Let me start with mass cytometry, the business that has been powering our growth for years. In Q1, while we saw a decline in new system sales versus the prior quarter and year over year, our overall revenue performance met our expectations, with notable growth in European markets. Okay. Hi, everyone. Sorry I'm back. The gremlins disconnected me. So I think I got cut off with the last statement was really around notable growth in the European market. So I'm going to kind of reset and say, you know, in Q1, while we saw a decline in new system sales versus the prior quarter and year over year, our overall revenue performance met our expectations with notable growth in the European markets. In some markets, we faced headwinds from expiration of tax incentives and other COVID-related challenges. We anticipate these challenges are temporary and will be resolved over time. On a positive note, we saw good progress in new instrument lead generation, and we anticipate further growth in our pipeline on the heels of our upcoming user group meeting on May 25th. Also, we're pleased with the growth in our recurring revenue driven by several key consumables and services wins, including the completion of 14 fee-for-service projects highlighted by a large program for a leading pharmaceutical company. Beyond financial performance, over the last 90 days, we made considerable progress in our near-term objectives for Vision 2025. Let's start with innovation. Our mass cytometry franchise has long been a major source of innovation for Fluidigm and the cytometry market. And for the past few years, we have been working behind the scenes to build a next-generation system that will support multiple new product launches. For competitive reasons, we prefer not to share specifics on the product roadmap at this time. However, I will note that over these last few years, we have built a robust ecosystem of mass cytometry consumables, services, and analytical tools to serve our growing install base, including our award-winning MaxPAR immune profiling assay, which has been used significantly in COVID research. In a few weeks, we will reveal details of our next-generation system roadmap that will address many customer-requested improvements and competitive dynamics. Progress on this product roadmap, including feedback from early access users, has contributed to our improved revenue outlook for our core business in the second half of the year. Transitioning from innovation to beachheads, We have focused on system placements at leading cancer centers, contract research organizations, and biopharma accounts, which represent our beachheads for long-term growth. Two key metrics we track, mass cytometry usage in peer-reviewed publications and clinical trials penetration, demonstrate our progress in this area. We added 17 new clinical trials in Q1, and we are part of 144 total clinical trials, more than any of our competitors. Our technology has been featured in over 1,500 publications, with over 100 of them related to Hyperion, our imaging platform. We are adding more than one new publication a day as usage grows. Many of these publications highlight the potential for our unique technology platform to change healthcare decision-making. This morning, we issued a press release highlighting one such publication in the field of breast cancer research. A team of global researchers demonstrated the importance of both suspension and imaging-based mass cytometry in tumor analysis. Their work suggests the criticality of integrating these data sets into the national tissue biorepositories that industrial partners use for accelerating translational and preclinical testing of therapeutic agents and improving precision medicine goals. We see a future where mass cytometry data could be integrated into standard bioanalysis similar to IHC, next-generation sequencing, and other analytical platforms referenced by physicians. Our unique approach to panel development can help accelerate this journey, and we are working with numerous consortia in other disease areas. Closing out with partnerships, we added to our portfolio of content, software, and clinical service partners with an exciting announcement in China. As we announced, we signed an agreement with PLT Tech, and under that agreement, we sold one system in Q1, We anticipate two additional placements to support their initial regulatory filing activities for clinical oncology applications on the Helios platform. This is yet another important milestone in our journey towards playing a key role in healthcare decision-making. Finally, we wish to congratulate another partner, Immunoscape, a private Singapore-based company that announced a $14 million round of funding to expand their immunomics platform powered by our mass cytometry technology. They are expanding operations from Asia into the United States and are conducting a number of clinical trials funded by global biopharma clients. Value-adding service providers are a critical part of the ecosystem to accelerate the growth and adoption of our technology going forward. Switching now to our microfluidics business, similar to mass cytometry, innovation, beachheads, and partnerships are the key elements of our Vision 2025 strategy for this growth franchise. We will share more granularity in the investor event focused on this topic later this year. In Q1, we saw a modest decline in the number of COVID tests sold as compared to Q4 2020. However, we saw a sharp drop-off in customer demand in the back half of the quarter as the pace of vaccinations increased in the United States, which is our largest market for COVID testing. Based on near-term weak demand signals from our lab partners and general uncertainty in the complex testing landscape, we are reducing our FY 2021 COVID testing sales forecast by $18 to $20 million. During the quarter, despite the slowing COVID testing demand, we did experience growth in our core microfluidics business in applications outside of infectious disease. Shifting now to innovation in our microfluidics franchise, Regardless of the dynamics of the near-term COVID testing market, ultimately the pandemic has accelerated our innovation pipeline and enabled us to build numerous assets and capabilities that we were missing before the crisis. The pandemic accelerated our innovation activities and yielded non-dilutive funding grants from government to help build foundations for a durable diagnostics franchise. These investments will also benefit our non-diagnostics business. After more than a decade of incremental innovation in the PCR market, we are poised to release some transformative new products in the coming quarters. Funded in part through our August 2020 RADx award, we are developing a sample cartridge that integrates many of our workflow steps into a novel proprietary microfluidics chip. This cartridge will deliver multiplexing and large sample throughput, all in a cost-effective manner. We envision this new product as the cornerstone of our menu expansion and partnership strategy for numerous testing categories. Initially, we anticipate that the cartridge will be commercialized on our Biomark HD platform. In parallel, with support from DARPA, we are developing the next generation Biomark platform that I briefly introduced in our last earnings call. As a reminder, this sleek, updated platform will integrate our Juno and Biomark HD instruments into a single platform one-sixth the size of the two current instruments. This new platform is being developed with input from the diagnostics market and will leverage our newest sample-to-answer cartridge as well as other existing IFCs. We anticipate announcing an early access program for development partners in advance of broader commercial launch in late Q4. These products transcend COVID, and our progress increases our optimism for innovation-driven growth from this franchise in the years ahead. Beyond innovation, beachheads in the clinical market are crucial for providing an install base for further innovation in our testing menu. During the quarter, we secured a notable new account with an associated $1 million order. This lab will service the public education market and has been awarded a large testing contract. the details of which we anticipate sharing in due course. Finally, perhaps stating the obvious, partnerships are a critical element of our sustained success. We are a relatively small company and therefore are focusing on core technology innovation and planning to work with partners to drive menu customization, advance go-to-market commercialization, and augment our distribution capabilities. During Q1, we made progress with a new partner focused on transplant diagnostics, For reasons of confidentiality, we cannot share any details yet, but we are excited about the prospects of participating in this rapidly growing market with significant unmet needs. One partnership where we can speak more openly is our longstanding collaboration with Olink, a Swedish proteomics company. We congratulate them on a very successful IPO that will fund growth plans, including their journey into diagnostics. Our complementary technologies are uniquely suited for the unmet needs of the fast-growing proteomics market. During 2020, we collaborated on a major program that will further cement our business relationship in the years to come. We delivered on key milestones in Q1 of 2021, including a custom IFC and early access units on a new purpose-built system. Fluidigm will manufacture both the new platform and IFC consumable, while providing instrument service and support to O-Link's customers. In turn, O-Link will be responsible for menu expansion, customer application support, and sales and marketing. We will be shifting our BioMark HD sales relationship to the new platform, and we have a purchase order for delivery of production units in the second half of the year linked to this platform's commercial launch. We are excited that there are many opportunities to support O-Link's strategic plans in the years ahead. In summary, our Vision 2025 strategy transcends the COVID pandemic, and our combination of innovation, beachheads, and partnerships are providing the foundation for sustained growth and shareholder value creation across our business. We look forward to sharing deeper insights to this strategy and key milestones in our planned franchise-specific and focused events. I'll now turn the call over to Vikram for a detailed discussion of our first quarter financial results. Vikram?