IsoPlexis Corporation

Good day, and welcome to the ISOPLEX's fourth quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session, and instruction will be given at that time. If anyone should require assistance during the call, please press star then zero to reach an operator. As a reminder, this call may be recorded. I would now like to turn the call over to Carrie Mendeville, Investor Relations. You may begin.

Thank you. Earlier today, ISO Plexus released financial results for the quarter and year ended December 31st, 2021. If you have not received this news release, or if you'd like to be added to the company's distribution list, please send an email to investors at isoplexus.com. Joining me today from ISO Plexus are Sean McKay, Chief Executive Officer, and John Straley, Chief Financial Officer. Before we begin, I'd like to remind you that management will make statements during this call. that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled forward-looking statements in the press release isoplexis issued today. For a more complete list and description, please see the risk factors section of the company's quarterly report in Form 10-Q filed on November 12, 2021, and the company's other filings in the Securities and Exchange Commission. Isoplexis intends to file its annual report on Form 10-K for the year ended December 31, 2021, next week. Except as required by law, Isoplexis disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time sensitive information and is accurate only as of the live broadcast, March 2nd, 2022. With that, I'd like to turn the call over to Sean.

Thanks, Carrie. Good morning and thank you everyone for joining us. I'm pleased to welcome you to our fourth quarter and full year 2021 earnings call. On today's call, I will provide an update on our commercial execution and discuss our investments to drive future growth. Then I will turn the call over to John for a review of our financial results and outlook for 2022. 2021 was an exciting year for IsoPlexus. We have made significant progress across multiple fronts as we drove commercial adoption of our single-cell proteomics instruments and consumables and finished the year with $17.3 million in revenue, 66% year-over-year growth over 2020. At IsoPlexus, we have developed a proprietary technology platform based on the unique intersection of proteomics, single-cell biology, and functional multiomics as we work to enable a greater understanding of amoeba biology. There is a clear need for understanding functional proteomics that is not able to be captured in the genome and to analyze single cells for early signals of response to disease that cannot be detected at the bulk level. We look at single-cell indicators to understand the earliest sources of therapeutic response and disease activity to drive novel and advanced curative medicines for our customers. We are creating a unique position within the proteomics market. Today, we have launched our IsoLite and IsoSpark instruments and are seeing adoption across many different areas, including the high-growth segments of cell therapies, immunology, immuno-oncology, and inflammation research. As the pioneer of single-cell proteomics, we have recently unveiled our superhuman cell library, an industry-first mapping of the proteomically-driven cells that determine how the human body responds to complex disease. In addition, longer term, we are developing our single-cell multi-omic duomic platform, which will expand the multi-omics market with a uniquely clinically relevant solution, For the first time, researchers will be able to sequence the supercharged proteomic cells we uniquely detect, which will enable them to model and predict much deeper layers of clinical immune biology. Our strategy is focused around a set of key themes that will drive our growth and lay the foundation for long-term success. These areas include scaling customer adoption by expanding our installed base of instruments, as well as driving increased utilization within each customer account, significantly expanding our test menu through the expansion of our superhuman cell library, increasing the number of high-impact, clinically relevant publications, demonstrating differentiated utility of our technology in large end markets, executing on our innovative product roadmap, including the breakthrough genomics system, targeting uniquely clinically relevant multiomics, And finally, demonstrating operational excellence and supply chain management. We have demonstrated tangible progress in each of these strategic areas throughout 2021 and will continue to drive further progress throughout the course of this year. Starting with customer adoption, we sold 98 new instruments in 2021, bringing our total instruments in the field to 209. We experienced a strong fourth quarter of shipments with instrument demand driven by the differentiation of our proteomic single cell platform, particularly around the large areas of cancer immunology and cell and gene therapy. To drive lasting growth, we are continuing to execute on our land and expand strategy that we laid out on our last earnings call. First, we focus on landing key accounts across top pharma companies and comprehensive cancer centers. in which we have demonstrated meaningful progress throughout 2021. Starting with the top pharma, as of your end, we passed an important milestone with 100% of the top 15 pharma companies now using isoplexis for functional cell analysis. We have already begun expanding into these key accounts as several top pharma companies now have multiple isoplexis instruments. In fact, we have now placed our seventh system into one of the top five biopharma companies Demonstrating the value our instruments are bringing to these customers. This is the core of our customer adoption strategy. We are laser focused on getting a high degree of champions within these companies, which is a critical part of the first few months of utilization. Once these customers are generating data and establishing normal usage, our Salesforce starts promoting the value of our technology across different application areas. We are heavily investing in this expansion strategy, which allows us to create a robust pipeline within a wide number of large accounts. Ultimately, this strategy demonstrates the utility of our systems as we're able to leverage our customer success across multiple sites, as well as across numerous groups and applications. On the academic side, We are making great strides on our key account strategy as well, with 67% of U.S. comprehensive cancer centers now using isoplexis technology. We have now placed our fourth system at one of these major centers with additional orders coming in. This is a great proof point that although the first system can be the most challenging to place, we are able to gather momentum with subsequent systems. This brings confidence in our sales strategy and our performance for the coming year. This is just the beginning as we are laying the foundation to continue to proliferate our systems. We are well positioned to continue growing our install base to meet the increasing demand for our tools. Importantly, although our focus remains on placing instruments, our consumer business is also growing and we are pleased with the positive utilization trends we are seeing with customers so far. Moving on to our superhuman cell library. A big focus over the last year has been to move beyond T-cell profiling to characterizing the various proteomically-driven cell types that affect human health. We have significantly expanded the number of cell types customers can analyze, which has expanded our test venue. Our system can now profile a wide variety of critical immune cells in the adaptive and innate areas, as well as structurally important cells to blood flow and tissue formation. We have categorized these cell types into our superhuman cell library, which we unveiled in January as the industry-first mapping of proteomically-driven cells. We are leveraging our growing expertise in single-cell proteomics to define what a superhero cell looks like and then developing a massive cell library based on our customers' findings across the cell types in the human body. This expansive platform allows our technology to be more broadly applicable across research for customers to continue to add on to the characterization of these uniquely predictive cells to advance human health. Turning to publications, there are now 100 publications demonstrating the necessity of our unique single-cell proteomic platform to drive the earliest signals of response in key high-growth markets such as cell therapy, cancer immunology, and infectious disease. There are a wide range of use cases for our unique single-cell proteomic analysis in superhuman cell biology that are exemplified through an increasing velocity of ultra-high-impact clinically relevant journals. We believe the growing collection of peer-reviewed publications highlighting the value of the IsoPlexus platform is a leading indicator of traction in TM markets. We have previously highlighted various nature medicine publications, that demonstrated our expanded cell therapy offerings and showed that our superhuman proteomic cells are indicating the earliest sources of long-term response. Today, I would like to highlight two recent publications that go beyond cell and gene therapy to underscore how we are advancing the pipeline into immune health and immune monitoring for cancer immunology, as well as COVID and other infectious diseases. Immune health and immune monitoring for cancer immunology represents a larger end market than cell and gene therapy for predictive response. Publications have shown our polyfunctional superhuman cell metric to be a key element in the ability for the immune system to orchestrate a long-term response in cancer patients. This indicator is valuable as we demonstrate the utility of our technology to customers. In the last six months, multiple studies have been published that indicate that changes in polyfunctional superhero cells predict cancer immunology therapeutic response against cancer in a durable fashion. Studies in Journal of Clinical Oncology, Journal for Immunotherapy of Cancer, and Blood Advances conducted at Memorial Sloan Kettering, MD Anderson, and more highlight the role of these predictive polyfunctional supercells. The second area I want to highlight is advancing the pipeline more deeply into immune health and immune monitoring. for COVID-19 and inflammatory disease. We recently announced a publication in Cell, where researchers used our single-cell functional proteomics technology to identify factors that may indicate patient inflammation after COVID-19 infection, also known as post-acute sequelae of COVID-19, PASC, or long COVID. In this study, our technology was used to profile the inflammatory immune response of COVID patients, which may be key to the development of preventative measures and treatments. These high-impact publications are a leading indicator of strength in larger markets like cancer immunology and also in new markets as we demonstrate a broader ability to access the superhuman cell library as it is applicable to infectious and autoimmune disease, transplant biology, and any areas where patients have a hyperactive autoimmune response. Turning to our product pipeline, we are making significant advancements in our four core product families, which include the single-cell secretome, intracellular signaling, our multi-omic duomic platform, as well as our bulk proteomic platform, CodePlex. Keep in mind, all of these four platforms run on our installed basis systems, meaning that the channels we built provide us the opportunity to deliver these new chip platforms to a high-growth existing end market. First, we are advancing our single-cell secretome test menu with the comprehensiveness of the superhuman cell library. Second, we've made advancements in our single-cell signaling platform, a single-cell alternative to the traditional bulk proteomic Western blot. We've added pipeline assets for immune signaling to complement tumor signaling, both of which represent a need for deeper proteomic pathway single-cell resolution. Third, our new single-cell multi-omic platform, Duomic, has demonstrated advancements at a rapid pace. The need for novel, high-utility single-cell multi-omic solutions began in earnest as the method was highlighted as Nature's Method of the Year recently in 2019. We are excited about expanding the single-cell multi-omics market with a uniquely clinically relevant solution. For the first time, customers can connect our unique functional proteomic data from single cells with the genetic drivers of these highly sought-after proteins for pharma and clinical research applications. In November, at the annual meeting of the Society for Immunotherapy of Cancer, or CITC, we demonstrated that Duomic now has the ability to capture concurrent T-cell gene expression and functional proteomic information simultaneously for the in-cell profiling in particular CAR-T profiling. Effectively, we demonstrated proof of concept in sequencing a variety of our proteomic supercells for the first time, which lays the groundwork for key discovery and development applications at the intersection of immunology and cancer. We are focused on three large end-market multi-omic applications, which include immune expression in proteomics, tumor expression in proteomics, and T-cell receptor expression in proteomics. As a reminder, we will be offering our Duomic platform via early access in the service in the second half of 2022 with a full product launch in mid-23. We are very excited for what's ahead with our pipeline and look forward to providing updates in the near future. Lastly, we are investing in our operational infrastructure to support our rapid growth. Over the second half of 2021, our operational team expanded our supplier relationship substantially reduced supply chain risk, and ensured our ability to meet increasing instrument demand in 2022. We continued to build raw material inventory in the fourth quarter of 2021 where necessary to mitigate lead times on critical and single supplier components, further ensuring our ability to execute upon our revenue plan in 2022. We are committed to operational excellence and will continue to iterate on our processes to support future growth. This has been a momentous year at IsoPlexus. I'm very proud of our growing team for all their work throughout the year as we transition to a public company. We are looking forward to continuing to provide our customers high utility, highly differentiated data that accelerates their work in critical areas of human health. We will focus on growing our install base for commercial excellence. And finally, we will also continue to provide updates on exciting advancements in our differentiated product roadmap all built upon our leadership in leveraging superhuman cell biology. I will now turn the call over to John for more detail on our financials.

Thanks, Sean. Total revenue for the fourth quarter of 2021 was $5.5 million, up 63% from $3.4 million in the prior year period. These results were primarily driven by an increase in instruments sold. Total revenue for the full year of 2021 was $17.3 million, a 66% increase from $10.4 million in the prior year. Product revenue for the fourth quarter was $5.3 million, a 65% increase compared to $3.2 million in the prior year quarter. Product revenue for the full year of 2021 was $16.2 million, a 74% increase compared to $9.3 million in the full year of 2020. As a part of that product revenue, we made significant progress with consumables, generating $4.8 million in 2021 compared to $1.9 million in 2020. We are encouraged by the growth in our consumable revenue to date, and in the near term, we continue to focus on increasing our installed instrument base to create a strong foundation for long-term growth of our consumable sales. Our commercial team continued to drive adoption and sold 37 instruments in the fourth quarter, bringing total instruments sold to 98 in 2021. As of year end, we have now sold 209 instruments since initial commercial launch in late 2018. Service revenue for the fourth quarter was $246,000 compared to $201,000 for the prior year quarter, and service revenue for the full year of 2021 was $1.1 million in line with the prior year period. Gross profit for the fourth quarter of 2021 was $2.8 million compared to $1.8 million in the same period of 2020. Gross margin was 51% in the fourth quarter compared to 53% during the fourth quarter of 2020. Gross profit for 2021 was $8.8 million compared to $5.4 million in the prior year. Gross margin for 2021 was 51% compared to 52% in the prior year. As mentioned on our last earnings call, gross margin expansion is one of our key areas of focus as we continue to scale our business. Over the next five years, we expect gross margin to gradually improve and settle into the low to mid 70% range. Operating expenses for the fourth quarter of 2021 were $27.5 million compared to $11.2 million in the fourth quarter of 2020. The increase was primarily driven by headcount expansion across the organization and the additional costs of being a public company. R&D expense was $7.1 million, an increase of $4 million, and SG&A expense was 20.4 million, an increase of 12.3 million, primarily driven by increased personnel and related expenses, as well as marketing and promotional activities. Total operating expenses in 2021 were 85.1 million, compared to 32.7 million in 2020. R&D expense for 2021 was 21 million, compared to $11.2 million in the prior year, and SG&A expense for 2021 was $64.1 million compared to $21.5 million in 2020. Our net loss was $25.3 million for the fourth quarter of 2021 compared to $8 million in the fourth quarter of 2020. Our net loss was $81.6 million for the full year 2021 compared to $23.3 million in 2020. We ended the year with $127 million in cash on the balance sheet. As we move into 2022, we will continue to be thoughtful about investing our capital to maximize our ability to service our customers, rapidly expand our installed base, and continue to expand our clinically relevant product roadmap. Now, turning to our revenue outlook for the full year 2022, we expect revenue for the year to be between $26 million and $27 million. representing growth of 51 to 56%. At this point, I would like to turn the call back to Sean for closing comments.

Thanks, Sean. As we mentioned earlier, we are excited about the progress we made as we transitioned to being a public company in 2021 and accelerated our commercial adoption while also adding significantly to our product roadmap. We look forward to another exciting year in 2022 as we believe our unique single-cell proteomic solution will continue to make a deep impact on our fast-growing customer base in large clinically relevant end markets. With that, we will now open it up to questions.

If you would like to ask a question, please press star then 1. If your question has been answered and you'd like to remove yourself from the queue, press the pound key. Our first question comes from Tejas Savant with Morgan Stanley. Your line is open.

Good morning, guys. Thanks for taking the questions. This is Edmond on for Tejas this morning. A few questions from me. First, on the guidance. The guidance range is relatively tight. I was wondering if you guys could provide some details on the puts and takes that could get us to the low end and the high end of the range. And where do you see the most room for driving upside in the guidance?

Hey, Edmond. It's Sean. Thanks for that question. Let's start here. Our range of 26 to 27 million is based on really continued expansion of our installed base at a rapid rate. And we're excited to grow at this at least 50% plus growth rate for the year and put up another strong year in the evolution of isoplexis as a meaningful player in the fast-moving single-cell and proteomic spaces. We do expect to continue the strong pace of instrument sales. in accordance with the guidance we put forth. So this would be at least 130 instruments placed this calendar year. This means we'd be at around 340 instruments by year end, an exciting position to be in given our expanding consumable pull through. We're excited also about the ISO SPARC in particular, continuing to be a key catalyst of our growth into academic centers and biotech beyond that pharma base, where of course we sold to 15 of the top 15 pharma While this product was launched in 2021, we expect the system to be over half of our instrument sales in 2022, as it was in Q4 of 2021. As far as the timing goes, our revenue ramp is expected to be similar to what we have done in the past, which is typically more heavily weighted toward the second half of the year. We also see consumable pull-through increasing throughout 2022, taking into account the large increase in placements which makes consumables a more significant portion of our revenue. As we discussed, our 100 publications are a strong leading indicator of purchases for high utility use cases in our large cancer immunology and cell therapy end market. And as we move into other key research areas, we expect pull-through to be at least 40,000 per unit on the basis of our single-cell proteomic leadership, with upside coming from expansion of our superhuman cell library, which we outlined on the call, as well as new applications like single-cell signaling. This progress on our business sets up for an attractive longer-term financial profile as we move towards the higher-margin razor blade model we seek, This recurring and predictable higher margin consumable revenue really demonstrates the purpose of why we are so focused on investing to expand the installed base now. As far as our sales force goes, as you mentioned, what are some of the catalysts? A key driver of our ability to deliver this year and exceed expectations is our maturing sales force, with a total commercial headcount of 190 as of the end of 2021. The vast majority of these sales forces have now been seasoned at the company, well-trained, and able to produce results that can have each major U.S. and international region creating more predictable revenue monthly, which is very important for us exceeding our goals this year. You also asked a little bit more about upside, and perhaps you're alluding to the pipeline issue. So we do have our duomic, you know, revolutionary first of its kind clinically relevant multiomics offering coming in the second half of this year as an early access service, which is very exciting. After our acquisition of a wide body of sequencing IP last year and our investment in development, we're now generating novel data in key end markets that is generating significant customer interest, as I mentioned on our call. While this is pretty exciting, We're not actually baking this into our revenue profile for the year consistent with what we discussed in the last couple quarters. We're really using this service launch this year in the half two for customer learning and to prime the market for a much broader launch in 2023. Therefore, again, as you alluded to, there is some limited upside in the services aspect of our business due to this revolutionary Duomic platform coming online as a service in half two of 2022. And we're excited to bring this to what we think so far is a very excited customer base. I'll stop there.

Great. Thank you. Thank you for all the color there. I'm not sure if I missed this on the call, but can you remind us what your current academic and pharma split is right now? And on that, have you seen any signs of spending conservatism, particularly on the pharma side with the recent chatter about cash for constraints?

And just, you mentioned one of the, I'll get to the split. Which end market did you say on the constraint side?

Biopharma, SMIDCAP biopharma.

You said SMIDCAP biopharma, okay. Yeah, so right now we're still maintaining at that sort of roughly two-thirds biopharma, biotech, one-third academic as we have consistently. From our perspective, The budgetary sort of outlay for what we expect this year hasn't been significantly constrained by, let's say, broader changes, as you mentioned, in conservatism potentially driven by the capital markets. I think a couple factors to think about. One, cancer immunology and cell and gene therapy for biopharma in particular continues to be of high import. for at least expanding their markets from an end market basis. And as you know, Biopharma in particular has had, you know, an influx of cash over the past, let's call it a couple of years to invest in expanding their pipelines. I think the second thing is we continue to see our differentiated publication profile in these two key end markets. as driving significant, let's call it, allocation of mind share and then allocation of budget for our technology. So while there may be some broader conservatism in the future, we don't see that really affecting instrument demand as it is today.

Great. And one last one from me, and I'll hop back in the line. I was wondering if you can comment on some of the recent trends you've been seeing in February from a COVID perspective on the lab operations side. And I appreciate the color that you guys provided on the actions that you've taken to reduce supply risk, but have there been any signs indicating that there will be improvements or deteriorations in the supply chain pressure side?

Why do I do this? I'll speak to the lab operations. pass to John more broadly about COVID impacts on our guide for the year. But just specifically about lab operations, we see that I think typical to what's happening around the United States, folks have been, one, more accustomed to dealing with variants. So, you know, whether it's wearing masks or getting vaccinated. and being able to continue operations as such. So I think that's sort of one key aspect to why we didn't see a significant blip in, let's call it the instrument driver, which again, as we spoke to as our In our guide, that's the significant driver this year. Secondarily, with lab operations, of course, coming into the beginning of the year, there was some caution, especially around the very early part of January. But this doesn't stop the projects that are supposed to be occurring with milestones for our customers throughout the first quarter. And as people have come back after the peak in the in the variant, we still see those projects continuing significantly with the same, let's call it expectations of our customers throughout the year, which from a lab perspective, drives the similar amount of usage to what we would have expected. John, why don't I just pass it to you on how COVID, you know, impacts our guide for the year as well.

Yeah. And so, you know, our revenue ramp for 2022 should look similar to what we've done in the past. So typically more heavily weighted to the second half of the year, Edmund. So roughly 40, it's about a 40%, 60% mix between the first and second half of the year for us. And so from our perspective, given everything Sean just described, we feel confident, you know, in the guidance we just gave that 26, 27 million for the full year. We are, you know, here we are March 2nd. So we've provided the guidance two months into the year and, you know, we're using all available information regarding the impact of COVID over the last several quarters and And, you know, we do think that most labs are back to their normal cycle at this point. Just lastly, and Sean said it, you know, at this point, you know, the COVID impacts have not changed the demand for our instruments from a budgetary perspective from our customers, and we continue to see strong end markets for our technology.

Great. Thank you guys very much. Thank you.

Our next question comes from Mac Masucci with Cohen and Company. Your line is open.

Hey, guys. Thanks for taking the questions. Maybe shifting over to the software side, just big picture here. You just speak to the automated analytic software, how much of a differentiator the software capabilities are or should be in the future, and then any feedback you've received from customers around ease of use, quality of insights, and whatnot.

Thanks, Max. Yeah, I think it's, so when you think about products and you think about end markets, there's, and you sort of, we harken back to what we just discussed as far as our end market being pretty heavily weighted to that biopharma, biotech. Part of that is driven by our ability to actually have a proteomic and single-cell system that's pretty easy to use, as you know. Our software is And our hardware proteomic automation plays a big part of that. And it's why, as far as you look around any single cell company, as far as a revenue mix, we are the most heavily weighted to the biopharma biotech area because of this, let's call it, mix of clinically relevant solutions. So that's kind of weighted towards more, you know, preclinical phase one, phase two, as we know in our TAM, and also this sort of ease of use of accessing the data from our single-cell proteomic systems. As far as the software goes, we think this is an important growth driver this year as well, because when people get access to our publications as a leading indicator of, let's say, directly what they can apply, for either their cell therapy programs or their cancer immunology programs today, the next thing we do as we're taking them through an initial sort of, let's call it a deeper dive into our technology after we've confirmed interest in our tech, is that they go through a software demonstration. And that software demonstration is basically to illustrate this is not downloading six open source pieces of software from online and trying to cobble together your own informatic understanding, which is actually pretty typical in our industry. This is taking a really big together push button software suite pushing a few buttons on the left side of the screen, and then kind of combining and comparing samples with, yes, we have a big data platform, but you can actually use specific buttons and just compare five samples or 10 samples or 20 samples and come to conclusions on differentiation of these kind of what makes a better cell product or what patient has a higher probability of being a responder in accordance with your biomarker research. So, you know, as you probably guessed, that Ease of use factor, very unique automation we have on our proteomic instrument, and the unique end-to-end nature to our single-cell software is a driver of why we're excited about our clinically relevant end markets.

Great. And for the single customer that's brought in, I think it was seven systems so far, I'm just curious. Yes. if that's a mix of IsoSpark and IsoLite and just, you know, how they're using all of those systems either independently, you know, or together in terms of, you know, the research projects they're pursuing?

Yeah, so it is a good question. I think, right, if you look at specific customers like that, you might surmise that a lot of them, especially on the biopharma side, are pretty heavily on the IsoLite side of things. It's also a function of like if you purchase five of something across labs and you like them, you might want to just stick with that specific kind of type and throughput of product because you have success with it, right? So that's maybe a little more heavily weighted toward the isolate mix. But as far as the usage of it, you can look across, you know, our publication literature and say, hey, you know, in the last, and I alluded to this on our call, on the last six months, we've had a A number of pretty exciting and, you know, major clinical publications which take checkpoint inhibitor drugs that are obviously the main focus of a lot of the top pharma to combine drugs on top of that to get a longer-term durable response in their patients in various solid tumor indications. we've shown that our supercell polyfunctional predictors are key to sort of uncovering or, you know, deconvoluting the mechanism of what makes a good responder across a number of these PD-1, anti-PD-1 combination trials. And what that does is sort of demonstrate that for a major pharma that's very interested in that next wave of where they're going to get a more personalized response, their checkpoint drugs, again, the the largest oncology drugs in the world, we have a significant contribution to that. So it's not just one lab sort of running five systems and then saying, I need a sixth. It's more like there's so many avenues, even within one pharma, trying to attack this problem. And word is spreading that you need the isoplexis solution to uncover these supercells. And that sort of makes it a lot kind of i wouldn't call the word easy but a lot more straightforward to sort of say here's a customer reference within your own institution of thousands and thousands of people here's their demonstrated utility here's not only this published literature so showing that you need this from the major clinical trial centers but even within your own company you're generating real-time high-impact data so it it makes that sort of customer reference call that you need when you're in our stage, which is not in the early adopter stage, we're really in the early majority in some of these places. You need those customer references to just increase the volume of that sort of virtuous circle of customer expansion, if you know what I mean, Max.

Yeah, yeah, got it. Just final quick one, just would be curious if you know, conversations with the, you know, procurement folks have rebounded, you know, as the Omicron impact has faded and, you know, just the latest dynamics you're seeing. You know, you're still seeing any disruption in, you know, procurement facilities or if that's, you know, largely rebounded at this point.

So there was, from our perspective, it's rebounded because, you know, there was that, I think it's pretty broad based in our industry, but in December there was a bit of a, especially within academics, a short period where people wanted to pause on anything that was not specifically sort of COVID diagnostic related and had something to do with equipment. What we've seen is from a biopharma perspective, biotech, there's been no pauses on procurement. And if anything, the academics are back to utilizing the funding that they have, especially the growth in NIH funding, which is well-known this year, to sort of accomplish their organizational goals, which really involves success in their clinical trials and their clinical programs. That's the measure of every academic medical center across sort of indications because, of course, cancer is still a super high-need area of research that they all want to expand in.

Great. Thanks for taking the questions.

Our next question comes from Vijay Kumar with Evercore ISI. Your line is open.

Hey, guys. Thanks for taking my question. Sean, maybe back on the guidance question. Can you talk about the visibility you have here? Obviously, we've been hearing about supply chain impact. I think 3Q, you did have a push out of system placement. So talk about the supply chain situation and your visibility into this guidance.

Hey, Vijay, it's John. Let me just take that on the supply chain. You know, right as we did share on the last call, supply chain issues and logistic issues did present some increased pressures primarily on prices for materials as well as extended lead times for certain items. So in response to those pressures, you know, we built up our inventory. We did that throughout the second half largely of last year, including into the fourth quarter. And the goal there was to fulfill instrument demand in 2022 without disruption.

Vijay, sound good?

Hi, John. Sorry, can you hear me? Can you guys hear me? Maybe just the looks like. Yes, we can hear you.

Hi Sean, apologies, is this better?

Ladies and gentlemen, please stand by.

I'll try to do speaker just one more time.

You may begin.

Hey, everyone. Sorry about that. Dialing into a landline, I think that for some reason the Internet dropped off at our Brantford headquarters. Apologies for that. Does everyone hear me, Vijay?

BJ, your line is still open.

Hey, guys. Sean, John, can you hear me?

We can hear you now, yeah.

Fantastic. Apologies. I think I lost you guys there for a bit. John was talking about the visibility in supply chain.

Yeah, so just a couple things quickly. You know, on the supply chain end of things, as you mentioned last year, we did have – some impact on a pricing basis and a supply basis just to sort of, you mentioned the Q3 impact. What we did was really build up our inventory and prepare for 2022 so that we would have no impact on customer demand. You see a little bit of that in the sort of cash increase throughout the inventory increase throughout the second half of the year. And so now we're comfortable with really having what we need to sort of execute in 22 without disruption.

Gotcha. And then one related question, Sean, on this. What is, I guess, are there any gross margin impacts here? We're sharing about, you know, shipping costs going up. And what are your operating expense assumptions here for fiscal 22? A lot of inbounds I'm getting are on the liquidity position and your capital needs. Just given the cash, balance you have right now, is there a situation where you feel like you have enough cash on hand to drive the business or perhaps talk about the liquidity position in general and what kind of OPEX ramp are you assuming?

Yes. So what I'll do first is to the first question you had, because I can answer the OPEX question, what was the first question you had? So I was just dealing with some technical difficulties over here.

Sorry. Are there any gross margin impacts here on increasing freight costs, et cetera?

You know, from our perspective, we really do have some faith in being able to expand our gross margins as we look forward. I think we wouldn't expect, like you alluded to, that sort of Q3 dip in the gross margins is largely due to supply chain. You know, it's still at this stage, our revenue mix is mostly impacted by selling instruments and as mentioned, you know, we expect customer utilization to continue to grow over time and revenue mix will get to more of a 50-50 instrument and consumable split by the end of 2023. There is going to be leverage as we scale operations to focus on consumables and as our rev mix becomes more heavily weighted towards consumables. A key driver of our margin improvement plans is indeed this consumable margin improvement process. So later this year, we're going to be coming out with more information on how we plan to make strides in this area. Our specific strategy has always been to improve our ability to source reagents and use high-quality reagents. So we will have more to describe there soon. Importantly, and, BJ, this is how we think of really the mid-term and the long-term, as our financial profile improves towards the higher consumable revenues higher margin razor blade model that we seek. And this is an easy sort of math function based on the 340 instruments we expect at the end of this year. This recurring and predictable higher margin consumable revenue will demonstrate the purpose of why we're so focused on investing to expand the installed base now. How about with the second question you asked, Vijay? I can pass to John on the OPEX assumptions. So, John, why don't you go forward?

thanks jordan vj just wanted to share you hear me i'm back on yep thank you so much okay so um so opex you know so for full year 2021 rx opex is approximately 85 million dollars and that's reflecting reflected our continued investment in the commercial team the future technology platforms in addition to the infrastructure um and expenses associated with being a publicly traded company so a couple of points about you know going forward one we are maintaining rather than increasing that spend that drove the commercial and operational success last year. So we had success in growing the business by expanding our commercial force, generated 66% revenue growth last year, and, of course, now with today's guidance, projecting 50-plus percent revenue growth this year. Two, we will be doing regular evaluations of the productivity around our three cost drivers. So that's the commercial, the operational, and development. to make sure that capital is most efficiently allocated. And last thing I would say, Vijay, we do seek to continue on our path to profitability within the next five years, which, of course, requires expanding our install base and driving that razor blade model that Sean just described.

And sorry, just to clarify that, John, when you said maintaining op expense, Is that as a percentage of revenues or from a growth perspective, or is that on a dollar basis, $85 million of profits spent?

Yeah, I think in terms of absolute dollars, DJ.

That's helpful, John. And maybe, Sean, one last one for you, a bigger picture question for you. Now, I think one of the questions I get is, you know, it's an interesting technology, isoplexis. But could this become a standard in the industry when you look at cell and gene therapies? I found your superhuman cell library initiative interesting. Maybe talk about what kind of traction are you getting from that initiative? Are biopharma customers now looking at your platform as perhaps becoming a standard? What needs to happen before we see broader adoption amongst your customer base?

So, yeah, just a topical question for us, EJ, as we sort of think through how we plan for the sort of three to five years. I think the question of standard is an interesting one. What makes standard? You know, this is, as we've gone through at times, looked at the places that have had, you know, 1,000 and 5,000 and 10,000 systems, and part of that is a two-pronged, gas set is the sort of validation you need the validation in the clinically relevant literature to be able to do what you're doing and you need high differentiation or else of course you know you become a commodity and so you have to sit on other um methodologies i think last year was really important for the validation part right you we you and i have personally talked about this this this proliferation of you know, Nature Medicine, after Nature Medicine, clinical publications, so Journal of Clinical Oncology just showed that if you care about measuring the immune system in response to, are my drugs that activate the immune system working, isoplexis is going to have a place to play relative to the flow cytometer solution you use today, right? Because isoplexis forms the functional proteomic aspects that's highly differentiated versus the surface immune cell profiling aspects of flow cytometry make. And what that means, right, if the promise sort of of our 100 publications is just a very leading indicator of us becoming a standard relative to flow, what this means is we have a much broader ramp ahead of us than behind us, right, because there's 40,000 flow systems. Every time, even in pharma where we have seven systems, when we go tour the, we do a walk of the pharma, You know, you see hundreds of flow cytometers around that pharma, right? And what that means is people care about immune profiling. We're offering a whole new aspect of analytical immune profiling they can't get anywhere else that's highly meaningful in the literature for, you know, predicting are your drugs going to work in a personalized fashion. And so we do believe that with the right awareness building, with this continued clinical validation in the literature, and with using this 190-person sales team, commercial team, to our advantage to evangelize our technology, we're on the cusp of being a standard. I think the second aspect is, so the first aspect is being a standard. The second aspect is technology differentiation. With the proteomic barcode, what we've done is created a large step function in what you're able to access from each cell proteomically, where you're only able to look at a few of these these highly relevant analytes from proteins that are the business end of the immune cell, what matters to sort of a patient mounting a response against cancer, for example, we've gone from doing three to sort of orders of magnitude above that, right, per cell. And what that means is we're uncovering this highly relevant clinical biology, but in a highly differentiated fashion that no other technology can touch. And so it creates a confidence in our sales team being able to sell what we do because it's high utility, high differentiation, and that's the basis of us becoming basically a standard. And the last part of being a standard is, well, you have to have the validation, you have to have the differentiation, you have to have the execution to back it up. And so, you know, our job over the next three to five years, as we've said, is we get this installed base into the, you know, we get this installed base into the 1,000 plus and then the 1,000s, And then we're really talking about a recurring revenue consumer-based business where our customers, they are our community, right? We don't have significant barriers to entry with high capital equipment costs. We solve for that if people have a differentiation need between the Isolate and the Isospark. Now it's about showing the utility of our platform as we have and just really expanding while, as John alluded to, recognizing that we are starting to see sales leverage, so sort of managing the cost basis of what we do to sell in every region in a sort of thoughtful fashion. Hope that helps, Vijay. So we're very excited about everything ahead of us, and we see significant upside in the next few years.

That's helpful, Sean. Thank you, guys.

Operator, are we still on?

Yes, our next question comes from Punit Sudha with SVB Lyrinc. Your line is open.

Yeah, hi, guys. Thanks for taking the question, but it looks like most of the questions have been covered, so with the technical difficulties ongoing, I'm going to wrap up my questions into one. First is really around ASP. What do you expect the trend to be for IsoLite, IsoSpark, and IsoSpark Duo, if you could elaborate on that? And then, Sean, I know you had a number of efforts ongoing to improve the technical product marketing and follow-ups and field application training improvements. So maybe if you could elaborate where those efforts stand there. And then last one for John. On gross margin, you highlighted low to mid 70%. So could you maybe elaborate, you know, is there any change in timeline for that? When should we expect that? And what's the sort of consumables versus instrument mix that you have expected those gross margin levels? Thanks, guys.

So let me start with product mix, related ASP on instruments, and then training. So, Puneet, as you, you know, as we've discussed, the ASP is really reflected by our changing product mix as ISO SPARC make up over half of our revenue. So, while we're not going to give a very direct ASP number, you know, we're in line with the guidance we're providing. And the mix that we see from ISO SPARC shifting to leadership position as far as units goes and then over half of our revenues with the overall instrument sales, it's in line with previous expectations on the evolution of ASP as we expand this installed base. And as we discussed, really the purpose of evolving the Spark and offering the customers Spark Lite and Spark Duo was to really give us more potential to have our razor blade recurring revenue and As we look at the razor blade side of the consumables, we do see sort of there's no significant differences between whether someone's right now buying an Isospark or an Isolite. Driving consumable pull-through today and consumable upside, as we know, the capacity of our instrument, if needed, is high above even our target sort of mid-$70,000 expectation for consumable pull-through in the midterm. So that's That's at least how we're talking about ASP. Training, of course. Training is a significant aspect of how we, one, kind of, let's say, built a really strong Q4 showing, but also how we've created expectations for this year. You know, when you, let's call it, when you digest so many new hires as we did when we did our crossover round with Perceptive, BlackRock, and iBridge early in 2023, One, you know that you need to have six to nine months to sort of ramp up. And with a technology like ours that has these key applications but in complex end markets, you may even need more than that. And so what we did was really invest in an internal training program. We term it our Kata training program, which is basically you train, you practice, you test, you train, you practice, you test. Then you practice in the field. You essentially pilot each person that comes on board What we've seen is significant success in being able to communicate the product and technology and the value proposition in a clear fashion. And then also we see the ability to view the sales aspect of what we do, which is the commercial need, you know, quoting, understanding the sales cycle, being able to balance sort of getting the instrument in within the sales cycle so that you can get the consumable pull through. That type of training we've really gone – the team up to speed on the isoplex and philosophy. So there's always a lot more training to do, especially as single cell signaling and duomic come online, right? Because that's just new and unique sort of single cell proteomic analytical tools that people need to be educated in. The core single cell secretome business, we made big strides on training folks, and there's really no stopping that as You know, even the most astute person in the literature, there's so many new publications on our tech that come out every sort of month and quarter. That training just needs to be a fountain that sort of never stops. So I appreciate those two questions. And, John, maybe I'll let you answer the third.

Yeah, thanks, Puneet. So I think your question, you know, the gross margin, the long-term, Expansion plan, any change in our timeline? The answer is no. We're still tracking the mid-70% range for gross margins in the next five years. And one of the key drivers of that, as you know, is the mix. I think that was your second part of the question between Instrument's and consumables. What we think is by the end of 2023, our revenue mix will be 50%, 50% instrument, 50% consumables. Obviously, we have some service revenue, but roughly a 50-50 split instrument consumables. And just for some context, you look at our year-end 21 and 2020 numbers, You know, the trend is heading that way toward a more favorable or positive mix from consumables. Our consumables were about 18% of our total sales in 2020 and increased about 28% of our total sales in 2020. So we do expect to see that trend continue and, again, not impacting that timeline we put forth.

Thank you. There are no further questions at this time. This does include the program and you may now disconnect. Everyone, have a great day.