IsoPlexis Corporation

Thank you for standing by and welcome to ISOFLEX's first quarter 2022 earnings 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 call may be recorded. Should you require any further assistance, please press star 0. I would now like to hand the call over to Carrie Mendeville, Investor Relations.

Thank you. Earlier today, Isoplexis released financial results for the quarter and did March 31, 2022. 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 isoplexis.com. Joining me today from IsoPlexus is 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 IsoPlexus issue today. For a more complete list and description, please see the risk factors section of the company's quarterly report on Form 10-K, held on March 30, 2022, and in the company's other filings with the Securities and Exchange Commission. Except as required by law, ISO Plexus 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 It's accurate only as of the live broadcast May 11, 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 first quarter 2022 earnings call. On today's call, I will start by providing an update on our commercial progress and operational improvements designed to drive future growth. Then I will turn the call over to John for a closer look at our financial results and outlook for 2022. We started the year strong with revenue for the first quarter growing 52% to $4.9 million, coming in at the high end of the revenue range we preannounced in mid-April. Our team made significant progress supporting our customers who are providing critical immune data in the highest impact disease areas across blood and solid tumors, autoimmune and inflammation, and infectious disease. Our strategy is focused on 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 and instruments, as well as driving increased utilization within each customer account, focusing on a leaner, more highly integrated organizational structure to increase commercial and operational productivity, demonstrating discipline around cash conservation through strategic use of resources and operational and supply chain management excellence. Continuing expansion of our first product family, single-cell proteomic applications, through the superhuman cell library. Increasing the number of high-impact, clinically relevant publications, demonstrating differentiated utility of our single-cell proteomics technology in large end markets. And executing our innovative product roadmap to get our second and third product families to market, including our breakthrough duomic system, targeting uniquely clinically relevant multiomics, as well as CodePlex, our revolutionary solution for targeted proteomics. Starting with customer adoption, we sold 25 instruments in the first quarter, bringing our cumulative instruments sold to 234. Almost two-thirds of the instruments in our installed base are used for immune monitoring, and just over a third of these instruments are used for cell and gene therapy applications. Importantly, approximately one-fourth of the instruments placed this quarter were to repeat customers, demonstrating the value of our single-cell proteomic technology. This is evidence of our continued ability to execute on our land and expand strategy. Our pipeline remains strong across both our academic and biopharma customers. On the academic side, we've made strong progress with 73% of U.S. comprehensive cancer centers now using isoplexis technology. On the biopharma side, as mentioned previously, we have instruments placed in all top 15 pharma companies, and multiple of these pharma companies bought additional systems in Q1. As our user base expands and our customers continue generating fantastic data using our technology, a growing number of researchers will be exposed to the capabilities which will in turn increase adoption of our technology. We are continuing to demonstrate commercial and operational excellence, focusing on increasing productivity while conserving cash burn. After thoughtful analysis and scenario planning for the next few years, in mid-April, we announced a new strategic initiative to enable a leaner structure to integrate our commercial team more tightly with our customers, as well as our development teams with our operational teams. This integrated model serves to strengthen engagement with our customers while continuing to generate strong top-line revenue growth, deliver innovative solutions, and expand gross margins. We made changes to our FTE count, 20 percent less than the end of Q4 last year, which can represent our new FTE run rate. We focused on conservation of critical materials in our testing and R&D, and we eliminated consultants and software licenses. This has the benefit of conserving significant cash moving forward, which is critical at this moment in the history of the capital markets, and to enable us to meet our critical 2022 to 2024 upcoming goals with our current resources on hand. As we continue our Land and Expand strategy, we will now provide a streamlined single point of customer contact with regional support for the full suite of products on our wider test menu. This is intended to reduce the number of total support staff needed, while simultaneously strengthening relationships with our customers and increasing the productivity of our approximately 140-person commercial team. Local teams are more tightly integrated with the customer and each other aimed at producing scalable and productive growth. Additionally, as we move to launch our Duomix services, as well as our CodePlex targeted proteomics platform, we will further integrate operations, and development to ensure the timely launch of a quality set of scalable consumable products. As we continue to deliver a wider test menu of consumables to the market, our focus on integration is intended to streamline design for manufacturing, which we believe will result in gross margin improvement across all consumable product lines. We're already seeing the benefits and efficiencies of this redistribution of resources. We now have a more tightly integrated 200-person development and operational team that is energized and excited, fueled by our growing closeness with our customers. In line with this lean mentality, we are pleased to welcome Eric Stewart to the IsoPlexus team as our Chief Commercial Officer. Eric has the ability to leverage his experience with Danaher and other life sciences tools organizations to capitalize on our lean, more tightly integrated commercial force. His experience and alignment with our focus on productivity will be critical moving forward. We feel our current 140-person commercial team is well equipped to execute against the productivity goals we've laid out. Last, our operational management team has been successful at forecasting supply chain issues, building up inventory for critical components and providing a clear path for us to fulfill customer demand well into 2023 with our systems. Moving on to our single-cell proteomic applications and superhuman cell library, we've continued to demonstrate our ability to measure and monitor high-resolution immune response and health. We continue to leverage our unique ability to unleash the function of each cell to improve insights and decision-making for cancer immunology, infectious disease, and immune cell therapy researchers. Looking at our recent publication in Cell, We have now demonstrated that there are multiple functional immune cell types uniquely identifiable on our platform that are contributory to long COVID. Taking this with a slew of recent publications in cancer immunology, we begin to understand that functionality defining all of our immune cells will play a bigger role in developing better biomarkers across cancers and infectious disease. Turning to publications and data. An interesting evolution of our data sets is our new ability to include single-cell multiomics, which connects our unique functional proteomic readouts with the sequence and or gene expression of each cell for the first time. To illustrate this, last month at the American Association for Cancer Research, or AACR, we presented data generated on our duomic platform It demonstrates the ability to connect T-cell receptor or TCR diversity to the most functionally potent single cells. This enables a wide variety of applications for tumor infiltrating lymphocytes, personalized neoantigen TCRs, and cancer immunology in terms of understanding antigen specificity as well as T-cell potency. Importantly, the combination of the varying classes of the analytes that are being profiled and identified at the single-cell level provides a key new modality for tracking the most potent and powerful single-cell subsets of highly functional superhero cells. These cells are critical to driving longer-term response in cell and immune therapies via functional proteins. Additionally, our customers had multiple poster presentations at AACR from institutions including Brown University and UCLA that highlighted novel applications in chemotherapy-induced senescent fibroblasts, adoptive cell therapy, and next-generation CAR T therapies. We look forward to continuing to update on new data being generated, both proprietary and from our customers, as our innovative technology is being leveraged to unlock deeper insights. And lastly, turning to our product pipeline, we have three key areas of focus for product pipeline, single-cell proteomics, single-cell multiomics, and targeted bulk proteomics. Today, our revenue is almost all single-cell proteomics, but our differentiated product pipeline is getting closer to launch both the products in single-cell multi-omics as a service in targeted bulk proteomics. The midsize to large end markets for these two products are highly visible as well, with a few incumbents in recognized unmet need by researchers within the markets. Looking more closely at our pipeline, we are really excited about the progress with our Duomic platform. We recently reached a major milestone as we have completed the full workflow with the delivery of proven in situ DNA sequencing capability. We can now in situ sequence each bead in a highly parallelized manner on our proprietary DNA sequencer and leverage a large body of sequencing IP and products. With the ability to clearly sequence each bead in situ, within its own chamber, we now have the ability to generate unique cellular identifier for mRNA sequencing and our proprietary proteomic barcode from the same cell. This enables us to manufacture our highly parallelized duomic chamber system at a greater scale. We are the first and only company able to connect this critical functional proteomic biology with genetics. This is exciting for a wide range of biologists and sequencing researchers to view single-cell multi-omic as currently having critical gaps, but also view it as the next frontier. Importantly, Duomic has the proven capability to meet three of the largest unmet single-cell multi-omic needs, utilizing the combination of sequencing and proteomic architecture that only our chip has. These applications include immune expression in proteomics, tumor expression in proteomics, and T-cell receptor expression in proteomics. As a reminder, we are offering the Duomix platform via early access to the service in the second half of the year and are on track with full product launch in mid-2023. We are also very excited about our uniquely targeted proteomics platform, CodePlex, which addresses a large unmet need in clinical research for sample and answer out automated benchtop proteomics solutions. Walk-away workflows and proteomics are going to be what wins the market in the mid-term and long-term. The state-of-the-art today for most labs at the largest part of the market, then multiplex, requires 20 laborious workflow steps for trained technical lab members. In an era where it's difficult to recruit, train, and retain technical talent, coupled with the increasingly virtual environment, workflow automation on the bench is critical. Our CodePlex workflow combines multiple benches worth of instrumentation onto a single chip. We reduce over 20 steps into just one in an automated walkaway workflow with between 8 and 30 functional proteins per sample detected, which fills a core need in the market. We are seeing meaningful interest as clinical researchers have already published early studies in journals such as JCI Insight. CodePlex is an exciting next step for our industry and our company and will be a fully featured product and offer for early access in early 2023. We continue to build one of the largest bodies of IP in the proteomics and multi-omic space and now have over 165 foundational patents issued and filed across proteomic sequencing and system patents. Our investment in our IP enables us to be well positioned for the opportunity ahead. Overall, I am incredibly proud of our team for their work these past few months and excited about the opportunity we have ahead. We look forward to increasing our ability to service our growing list of customers with a more highly integrated commercial, operational, and development team. We are seeing early signs that our plan for continued cash conservation will be successful. We look forward to delivering to market our two highly anticipated novel suites of innovative products, which will provide deeper insights towards the development of more curative therapies in a large and highly visible end market. I am confident that by adapting to this next stage of the company's growth and our customers' needs, we will be able to further drive success for our customers who are leading the charge to solve the critical challenges of human health. I will now turn the call over to John for more detail on our financials.

Thanks, Sean. Total revenue for the first quarter of 2022 was $4.9 million, up 52% from $3.2 million in the prior year period. Product revenue was $4.5 million, a 52% increase compared to $2.9 million in the prior year quarter. Our commercial team continued to drive adoption and sold 25 instruments in the first quarter, which brings the total number of instruments sold to 234 since our commercial launch. Service revenue for the first quarter was $457,000 compared to $307,000 for the prior year quarter. Gross profit for the first quarter of 2022 was $2.6 million compared to $1.7 million in the same period of 2021. Gross margin was 52% in the first quarter compared to 51% during the first quarter of 2021. Operating expenses for the first quarter of 2022 were $30.7 million compared to $15.1 million in the first quarter of 2021. The increase was primarily driven by headcount expansion as we built out the commercial team and advanced development of Duomic and CodePlex. This investment over the last three years is largely complete, and we are now preparing to bring these products to market. R&D expense was $7.1 million, an increase of $3.5 million over the prior year period. SG&A expense was $23.5 million, an increase of $12.1 million over the prior year period, and primarily driven by headcount expansion and the costs associated with being a public company. Following our reorganization plans announced in mid-April in a transitional period in Q2, we expect our operating expenses will be significantly lower going forward in the range of about $17 million per quarter, bringing our full year 2022 operating expenses to be in the range of $85 million to $90 million. These savings were achieved through four key areas. First, we reduced headcount by 20% from end of last year. Second, we eliminated outside consulting and professional fees as our team has matured and we are able to provide these services internally. Third, we eliminated a good deal of internal material consumption as we have reduced process redundancy to focus on our most important objectives. And finally, we cut back unneeded software licenses and related support services as we leverage our integrated team to interface with each other and the customer more directly. Our net loss was 28.7 million for the first quarter of 2022, compared to 15.6 million in the first quarter of 2021. We ended the quarter with $97.6 million in cash on the balance sheet. As we shared in mid-April, we amended our existing credit agreement, providing further access to $7.5 million of additional term loan financing. We believe that the amended credit agreement, coupled with our new strategic initiatives, will extend our cash runway into the second half of 2024. Now turning to our revenue outlook for the full year 2022. We continue to expect revenue for the year to be between $26 million and $27 million, representing growth of 51% to 56%. At this point, I'd like to turn the call back to Sean for closing comments.

Thanks, Sean. I am proud of our team for the significant commercial progress we made this quarter. Our recent organizational changes are bringing us closer to our customers and positioning us well for future growth with an efficient and thoughtful use of capital. I'm also excited about the advancements we're making with Duomic and CodePlex as we prepare for commercial launch, reflecting three years of significant investments. As John mentioned, we believe we have cash runway into the second half of 2024, which will allow us to grow and play a significant role with the ever-important end markets for the life sciences space. As a team, we are poised to take advantage of the significant opportunity ahead. We have more conviction than ever. that are unique single-cell proteomic, multiomic, and targeted proteomic solutions will be crucial to solving the most critical challenges of human health. With that, we will now open it up to questions.

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Vijay Kumar of Evercore ISI. Your question, please.

Hey, guys. Congrats on the print, and thanks for taking my question. I want to start off with a big picture P&L question, and perhaps, John, both of you can answer this. The stock right now is trading less than cash value. I mean, it's very rare for a tools company, you know, what we're seeing right now. Perhaps in pre-leveling biotech companies, you know, we've seen this. You know, for us, at least when I look at these things, the market space is assuming there is no cash value. All of the cash is going to get burned. So maybe just talk about You know, your confidence in driving that 50% revenue growth when you had a restructuring and headcount went down by 20%. Can you still sustain those kinds of growths while moderating OPEX spend? And I think you mentioned that the cash that you have along with the new facilities that gets you across. Was that mid of 23 or mid of 24? Maybe just up. talk about the cash burn, Greg, if you don't mind.

Yeah, hey, Vijay. So, this is Sean. I'll speak to, you know, how we feel about the progress moving forward and appreciate your context about the capital markets. Yes, we see it as well. I mean, so from a revenue perspective, you know, we're, as John said, we're reiterating the guidance. We feel strongly that the team we have in place is well positioned to, you know, to really exceed expectations this year, one, from an instrumentation perspective. I mean, we continue to show strength in our end markets as we did Q1 in the life sciences end markets in terms of demand, and that's really driven by, you know, It's interesting timing for us, but it's driven by a sort of inflection point in terms of what single-cell proteomics can mean to our end users. And what we're proving, and we're proving this in the publications, is whether it's the pretty large market of immune therapy response and immune health, or whether it's cell and gene therapy, leveraging our system, you get a very unique early readout into whether or not you can create an optimal, durable immune response And you can't get that via the sort of big incumbent out there, flow cytometry. And that's a big deal because we have, you know, we have 234 systems out there. You think about the big incumbents is 40,000 flow systems. We're offering value to our customers. It's now becoming ever so clear via high impact publication literature showing that our immune readouts connect to durable in vivo biology in a way that flow cytometry has not. And so what it means for us is, from a pipeline perspective, from a demand perspective, you know, we've never been more busy, right? Which I think that's really exciting. And that's kind of, you know, if you just think about that from a logic perspective, because right now, I mean, there's no stopping any sign of immune therapies being the future of all therapies, whether it's for COVID-19 with, you know, vaccines and other therapies, or it's cancer and the immunotherapies against cancer, or it's the cell therapies. And this is extending not just in cancer and infectious disease, but to autoimmune disease. And as we know, large pharma, academics, right, core end markets for us, and larger biotech, which covers approximately all of our installed base, these firms are still cranking along, generating a lot of cash, or generating on the grant funding which puts us in a good position. I think, you know, secondly, you asked about, so yes, I mean, do we see the prospects in our core single cell proteomics business? Yeah, we're very excited about it, right? And I mean, I think our customers are too, which is that's half the battle. And I think you're just going to continue to see that placement and that pull through continue to rise. I think the second thing is, you know, Right now, it's about execution in single-cell proteomics. And, you know, as I spoke about, we brought on this new chief commercial officer, experienced in the sort of Danner methodologies. You know, we came up with a strategy to keep the same customer-facing reps out there. We actually have more people selling consumables now, which I think is pretty exciting. And frankly, I mean, with the pipeline we have, with the awareness we have, and there's plenty of awareness metrics out there, you can look at our, you know, you can look at the awareness metrics in terms of something like a LinkedIn followers, which we have a lot more kind of, I guess, buzz around us and even some large companies, you know, it's about us converting that awareness into sort of executable orders. And the team we have with 50 plus commercial facing or customer facing folks out there under Eric, I just think is well equipped and poised to capitalize on the demand out there, right? I think the final thing is, like, as you mentioned, I'm going to pass it to John to go over some of the cash detail. You know, if you look at us having cash into 2024, you know, and again, we have to execute against that, but we have a lot of confidence that we're going to. What does that mean for us, right? So right now, in the sort of growth cycle of our company, we've grown quite a bit. We do, of course, expect to exceed these 50% CAGRs you were talking about. But I think that from a forward-looking perspective, You know, we have a couple of really interesting, exciting products coming on the market next year, which is the one we have Duomic, right? That's slated for services in the second half of this year. We now came out with a slew of data at recent conferences. Customers are excited because this is the first time ever you can take single-saw multiomics, nature's method of the year, which is really a precursor typically to large end markets, And you can connect genomics from single cells down to the functional proteome. We're connecting that biology for the very first time, right? And so we put out a lot of data on it recently that's exciting customers. And finally, we have this other product, CodePlex, where we're automating really laborious workflows in mid-multiplex proteomics. Pretty much the largest part of the end market for multiplex proteomics. And You know, we're offering something to, let's call it a pull-through market of about a billion dollars that the incumbents just don't have, right? They don't, they take 20 workflow steps, that's a lack of control, that's a lot of manual, for most of the customers, a lot of manual usage. We're automating all that on one chip, right? And we've proven that, started to publish in it, and that's a product that's going to be on the market. So if you think about it, it's about execution this year, which we feel confident in, and it's about having this three-legged stool of our products next year. But, you know, it's a I think there's great prospects as far as our end markets go. As far as market volatility, as you know, we're focused on business execution and we're focused on our excited customer base and really becoming a mainstay in our life sciences tools industry with these kind of very excited customer base. But Vijay, why don't I do this? I mean, unless you have questions for me on that, I'm going to pass it to John and he can speak with more detail around some of the cash projections and, you know, how we get into that mid-2024 period with resources on hand.

Thanks, Sean. And, yeah, Vijay, so just we did say we have now, you know, extended with the actions we've taken and the ongoing work we'll do not only on the revenue growth but on the cost control actions. We have extended our runway through the second half of or to the second half of 2024. I would also add in addition to what Sean described on the revenue side, you know, remember our model, you know, we have this continuing increasing mix of consumables to our revenue. So, the recurring consumable revenue as we continue to install and sell instruments. This first quarter, consumables represented 29% of our total revenue. we're still on a path to get to 50% or more consumable revenue, you know, mix by the end of 2023. So that's another mechanism here that helps drive and fuel our revenue growth. You know, just reiterate a couple things I said in the prepared remarks. You know, we took these actions after a lot of thought, made a lot of hard decisions, you know, and sort of I outlined four key areas. And if you think about those, you know, the headcount reductions happened, that happened in in early April, and so this will be a transitional quarter in Q2, but those are sort of hard cost savings by those actions. I mentioned the outside consulting and professional services. We've eliminated and curtailed and reduced a lot of those services. We'll continue to transition away from outside services as we continue to mature and build our internal capabilities. You know, that's a real savings beginning now in Q2, and we expect to continue to drive those savings going forward. Material consumption as well, just much tighter controls around that as we've, you know, done a comprehensive review of processes and working hard to eliminate redundancies, as well as, you know, part of this customer focus, a reprioritization of all of our activities, you know, really focused on meeting customer needs, and delivering Duomic and CodePlex, as Sean described. So we see all of those activities continuing. We gave our thinking about OpEx for this year, so the end of 2022, between $85 and $90 million. And then what we'll see in Q3 and Q4 is a much lower run rate in that range of $17 million based upon all of these actions we've taken. And I'll just finish, BJ, by saying, You know, all of these steps, you know, continued revenue growth, continued gross margin expansion generates more gross profit, you know, to fund our OPEX, and our OPEX is on a much lower basis now. So all of those actions, you know, we have a much clearer path towards profitability in the 2025 timeframe.

That's helpful, Sean and John. Maybe if I could, one more. you know, gross margins, they were up sequentially. Was there any one-off items in Q1, either from a revenue perspective or any licensing fees that aided gross margins? How were you thinking about gross margins? And, Sean, a big picture for you, you know, I think you spoke about this, you know, customer adoption, there was enthusiasm, but what is the best way for the street dealer you know, appreciate that thesis team, that what you have is, this is something unique, and there is momentum building within your customer base.

John, you can answer the gross margin.

Yeah, so, PJ, nothing, no one time, either in the revenue or, you know, the cost of goods sold that impacted, you know, our margins. So, you know, you're right, sequential improvement, and, you know, I just mentioned, you know, our longer-term path to expand gross margins. We still feel confident about that. And, you know, we think we'll build on the margins going forward here quarter by quarter.

Yeah, that's right. And I think from a gross margin improvement perspective, I mean, we've been working on some things for a few years now. We'll have more to discuss. You know, we really do expect to achieve those target margins of, you know, 70 plus percent, especially on the consumable side. And, you know, more for us to show there in the near future, but definitely some investment there. in diversifying and sort of getting the, on the right side of getting reagents for our platform. You know, I think the big thing in terms of why do our products get excited about us? Why have we sort of continued to sort of, you know, push the placements forward? What's driving this now increased demand, you know, just in Q1? We had over a quarter of our instruments, you know, repeat customers. And a lot of these are big centers and things who are just – we see the velocity only increasing. You know, a lot of it's driven by two things, right? We have a very different platform than what's out there. And when you have – we unleash the full function of each cell, right? We call them these superhero cells. And instead of getting, you know, instead of looking what's on the surface of the cell, which is what flow does, this is like kind of, you know, we have this picture and it looks like it's what the what the cell looks like. It's like what a human looks like. We unleash what the cell does, what the functionality of the cell does. So that's all these really tough to get to proteins, right? These secreted proteins, these chemokines, growth factors, these phosphoproteins. And it's a whole new paradigm for what we're calling single-cell functional biology. And it's enough to say, wow, that's new biology. That's exciting. But the real driver is that we've proven how meaningful it is, right? So having that fully unleashed cell with all the function of that cell rather than what the cell looks like, you're now getting more and more early signs of predictive readouts in the immune system against cancer, against infectious disease. And that's Again, that's the game changer for anyone developing immune therapeutics, the game changer for anyone developing a cell therapy where they need to improve the process to get more longer-term potency. And when you have enough, you know, again, last year was our biggest year by far in terms of publication velocity, in terms of case studies and references, obviously, right, because we're just, we're really stepping up as a company. You start to reach a part at which it becomes standard parlance, you know, if you're in the immune therapy business, to start talking about the isoflexus system and, you know, polyfunctional strength and these types of things. And I think we're really reaching that point. And when it becomes that, then it's the question I, you know, I tend to ask the customers is, you know, how can you afford to not have our system in your workflow? How can you afford to not have our system in your trials? You know, from a research perspective, biomarker research, how, you know, because we're uncovering clear early mechanisms into the disease and the response that, you know, you just, it would be clouded without our system. So I think we're a really important time for the customer, but it comes down to two things. It's such a clear differentiation of technology versus anything else out there. And that's just, you know, kind of, you and I have discussed that it's very clear once it's been explained. You go from what the cell looks like to unleashing the full function of each cell, the work that it does. And then the meaning of that, in side-by-side studies, we keep putting out data that shows that our unique sort of metrics are really uncovering early, early insights, which drive high value for a really large market of customers. So, you know, I think as far as we're going to continue to communicate that to the street, we're going to continue to communicate that to our customers with our sales force. But then on top of that, Vijay, it's like, you know, we unlock those new kind of all that proteomic function per cell, and then we're adding gene expression to it with duomic, right? So, you know, that's a next-gen product for next year, second half of this year with the service, but it's really, we're doing something no one else has done, and there's a lot of meaningful value our customers can derive from that.

Thank you, guys. Thank you. Our next question comes from Puneet Sudha. of SVB securities. Your question, please.

Yeah, hi, Sean, John, thanks for the question. So first one, just wanted to clarify, the term loan, is it $7.5 million now, or is it 15? We recall it was 15, but just wanted to make sure we had that number right. And then also, in terms of the guide, I mean, can you just elaborate what's your expectation with the reduced commercial organization. What's your expectation total for instrumentation installed this year? And sort of how should we think about the mix of instruments versus consumables? I know you pointed out that consumable, there's a bigger push on consumables from some of the sales force. And then also just wondering, you know, how should we think about the, you know, sort of the duomic contribution this year, if you could, in the overall guide.

Maybe I'll start just on the loan. Towards the end of the first quarter, we amended that facility, and then we had access to the final $15 million of the facility. We drew $7.5 million by the end of the first quarter. And so we have now $7.5 million remaining available that we would intend to draw this quarter.

And on the guidance side, you know, we spoke about it before, but we are reiterating the guidance, right? We're expecting to grow at that 50% plus growth rate. And really, we put up another strong quarter in the evolution of isoplexis, and we'll continue to do so throughout the year. You know, we had those 25 instruments placed in Q1 of 2022, with plans for, you know, 130 instruments placed this calendar year, which, you know, it means we'd be at around 340 instruments by year-end, which is an exciting position to be in, given our expanding pull-through. In particular, I think we're still very excited that IsoSpark is becoming a key catalyst of our growth, really, and as we expand into, you know, academic medical centers and continued biotech beyond our pharma base, where we, you know, and even within the pharma, we saw multiple instrument placements within our current pharma base in Q1. You know, just going back to what we said in our sales force, so just to reiterate, we did eliminate support staff, which we talked about. We right-sized the organization. We sort of move philosophically to this more customer-facing model, at the time, at the moment, we still have the same number of customer-facing folks, a little more than 50, right? We actually have more people selling consumables now because we essentially made it so each customer, instead of having multiple points of contacts, consumables, instruments, services, they have one point of contact, right? And so what that's done now is we think it's going to make us more connected to the customer in line with the appointment of our new chief commercial officer. We talked about, you know, those, those lean principles we've been sort of evolving towards and now we're very focused on, you know, I think we're well aligned in terms of philosophies and execution. Um, especially as we, you know, as we're increasing the consumable sales force, we're evolving to more of that razor blade model, especially into 2023. Um, As far as the timing goes, rev ramp is similar to what we've discussed in the past, which is, you know, weighted towards the second half of the year, but keeping us, keeping ourselves on that 40-60 revenue contribution, first half versus second half. And, you know, we're, right now, we just, we see the consumable pull through as achieving that, you know, 40K mark that we set out in our guidance for the year. And really driven off of, as I just discussed, some of those inflection points around sort of the publications and utility and the broadening of the end markets. Hope that helps.

Okay, got it. And then just on deal make, if I could, and then just one quick inventory question that At Duomic launch, can you be more precise in 2023 full launch when you expect that and sort of what do you need in order to, you know, when you think about the current customer base, do you have enough co-location of sequencers? What is needed to sort of overall drive awareness, publication expectations that you have for this year for Duomic? I mean, what are some of the things that are needed at this point from marketing and commercial front end? for the Duomic launch and if you could elaborate maybe in 2023, you know, when should we expect a full launch? And then just one for John. I mean, inventory stepped up meaningfully. Just want to make sure that we're clear around product obsolescence and, you know, expiration of reagents and things like that. So maybe if you could just clarify where you stand on that and anything that we need to be aware in terms of overall inventory buildup. Okay, thanks, guys.

Thanks, Puneet. As far as Duomit goes, you know, really, we're the second half of this year, we're still planning on launching this as a service, right? We put out data as a service to key opinion leaders. That's transitioning into launching it as a service. That'll just Every product we've launched, really, if you think about single-cell proteomics, we launched it as a service. We got a lot of great feedback. Also, we, you know, had the benefit of getting KOL publications out there and a lot of presentations in advance of that. So that process is still moving forward, right? You know, full bore, put out the data. We said we would as far as the year so far into AACR. I think the second thing is for next year, we're still on track for that mid-year launch. Like, what do we need for that? I mean, realistically, right now, we're still doing our work. We're still doing our work in terms of preparation for the product launch itself, but we're running these on the ISO Sparks every day, right? And, well, it's not every day, like, you know, every week. And the ISO Spark system is is what the product is going to run on in the field. And so all the practice that we're getting internally is preparing us for external product launch so that there's going to be no surprises on our end. From a KOL perspective, we've already, the concept is sort of of Duomic and the initial data itself has been well presented at various conferences, right? AGVT, CITSE, and AACR with just a lot of positive feedback at those conferences. So we're already generating a tremendous amount of leads in the build-up to the product launch. So we're just on track as far as technology access program, early access as a service, and then next year as a launch. We just feel excited that, you know, there's a tremendous amount of funding right now for single-cell sequencing and multi-omics. And single-cell multi-omics is still a very open field. Most companies are just looking at the gene expression plus in the proteome what the cell looks like, just with sort of... the surface markers on each cell, and we offer a whole new product. There's no one who can do the functional proteome from each single cell plus gene expression. We do that. It is very exciting to people who care about the connected biology of these cells that they've never been able to see. So, you know, I think we feel very excited about it, and now it's just we've got to be very, very focused on, you know, just execution of this process and finishing out what we've built for the last three or four years in Duomac.

And Puneet, on your inventory question, yes, we did consciously increase the inventory balance, you know, as we've done over the last several quarters to further insulate ourselves from any potential supply chain issues. We do have adequate inventory now to satisfy, you know, the demand through 2022. We also expect to reduce our inventory levels over the next nine to 18 months obviously dependent upon supply chain constraints, but as, you know, we would see those ease. And your other question, we don't have any concerns at the moment about, you know, obsolescence and a couple of things. The majority of the inventory is related, still related to instrument components, so much less on the reagents, you know, with shelf life, but we are certainly mindful about, you know, the purchasing of the reagents and the shelf life and ordering with our demand and our production goals in mind.

All right.

Thanks, guys. Thank you. Our next question comes from Tejas Savant of Morgan Stanley. Your line is open.

Hey, Tejas.

Tejas, please make sure your line is muted.

Hey, apologies for that. Uh, Sean and John, this is Edmund, Edmund on for, uh, Tejas. Thanks for taking the questions. Um, Sean, I just wanted to touch upon that, uh, operational and commercial restructuring that you guys have undergone recently. I'm just wondering, now that you've had it in place for a couple of weeks, what have you been seeing? Specifically, a peer in the space has recently undergone a similar reorganization, and they saw negative impacts on the productivity of their sales reps as a result of the change. I'm just wondering if you've seen any near-term negative impacts or are expecting any negative near-term impacts on your sales reps?

Yeah, I think that one was a little bit different because I think they have multiple different types of boxes. And, you know, my understanding was they were actually dividing up at the point of contact with the customer where we're consolidating at the point of contact with the customer. But I could be wrong, right? So a little bit different, you know, as far as, well, I guess pretty different as far as just the way we're approaching the customer. I mean, what we're seeing so far is that, again, it's early days, but we had piloted this concept that it's actually optimal to be communicating with the customer when you're in this land and expand phase. So we're not, you know, with the ISO light and the ISO spark, we're not really in, hey, this is the first product, this, that, and the other thing, which I think, you know, a lot of what you're describing with the other org was meant towards hey, this is a launch of a new instrument product. For us, it's you guys already have as an institution four to five of these. So if you think about it, like our reps right now, the same ones that are talking to folks about consumables, they're asking about, well, is there anyone else you might know in terms of someone interested in instruments, right? And not only are we getting the leads at the top of the funnel, but they're actually communicating about the sort of impact at the instrument closing level. And so far, so good in terms of pipeline that we're seeing for instruments for Q2. I think we just feel more connected with the customer. I think there's some evidence that we are more connected, I think. And as far as the consumables go, we just see a continued path to sort of improve what we're doing on a per-customer basis. You know, inevitably, we just brought in Eric, our new CCO, and there's just a lot of focus on daily management, daily visual management, right? Which is just, you know, look at our instruments, look at what we're doing per instrument and sort of make sure that we're achieving the contacts, the quotes, et cetera. So there's just a lot of that going on right now. But to me, that's all positive around discipline. So far, no surprises. Everything's what we were sort of piloting in the Q1 phase and Now it's just about execution and control of the situation that we're in.

Got it. Thanks for the color there. And then, Sean, just wanted to pick your brain on broader industry consolidation. What we're seeing now is a lot of smaller tools companies selling to the same market with duplicated commercial efforts. What are your views on combining with a smaller company to sell into the same channels, even absent a takeout from a larger tool player?

Yeah, I mean, I think there's a few things. I think that part of, if you think about the relationship of the sales channel to having multiple products, I think to justify the sales channel, you need multiple products, right? And so I think that's what you're implying, which I think is accurate. I think from our perspective, if we look at ISO, You know, again, this is the core thesis going all along, and we really start to achieve that in 2023 from a three-legged stool product perspective. But the reason we built up the sales channel the way it is is we didn't put up 50 customer-facing folks for this year so much as we put it up for next year, right, when we have single-cell proteomics, Codeflex, which is a targeted bulk proteomics, which we think is going to be a very big product, and Duomics with a multi-omic system. And at that point, you really utilize the sales channel to sell all those three products, right, as instruments, consumables, and as a service. So, there becomes a justification for having those channels. I think more broadly, because, you know, this has been a theme that we've heard over and over again kind of recently on, you know, it's been written about redundant sales channels. I mean, I think more broadly, there's an expectation that some consolidation is going to occur to build out the sales channel that some of the larger players have. You have, you know, one or two sales folks per an account, but you have 30 or 40 products. So, I mean, that remains to be seen. I think our focus is, you know, really leveraging the sales channel that we're building now, train the people up in the single-cell proteomics product, and then leverage and extend them for when we have these other two products on the market next year. That's at least our focus for the moment.

Got it. Very helpful. And then one maybe for John. On your outlook, I was wondering if you could point to some of the potential drivers to upside not contemplated in the guidance.

So the one thing I'll point to is the Duomic. And Sean has talked about that a lot today in prior calls. We are releasing Duomic as a service is upside to us. And, you know, I would just say the overall pace and cadence of, you know, our instrument places and then the consumer will pull through.

Great. That's it from me. Thanks for the time today.

Thank you. Our next question comes from Max Masucci of Cohen. Your line is open.

Hi. Good morning. Apologies if you've addressed this during the prepared remarks. Sean, first one, two-parter. Number one, are there any menu items or applications that you plan to roll out for the commercially launched platform over the coming quarters that are worth calling out? New tests that could become available for customers to run in-house during 2022. And then second part, if you could just remind us which tests, which applications will be available to duomic users at the outset of the early access period. That would be great. Yep.

Sure, Max. So a couple of things, right? Like we're going to be in early access phase for the next iteration of the – we have the three buckets. Let's think about the three buckets, right? We have single-cell proteomics. We have single-cell multiomics. And we have CodePlex-targeted proteomics. So within single-cell proteomics, which is all of our current revenue platform, et cetera, we have a couple things. We've released more, let's call it more panels and things for other cell types, right? Natural killer cells in particular, really expanding applications within the superhuman cell library. We've put out more cell types, and now it's about customer education, but there's There's a lot more cell types, like let's say cancer-associated cell types, like cancer-associated fibroblasts and cancer-associated endothelial cells and things that are really influential in terms of how we fight cancer together using all the cells that are the sort of prototypical immunity and then structural immunity, right, those cancer-associated endothelial cells and fibroblasts and the like. So we're putting out more cell menu. Now it's about education of that cell menu. sort of drive increased usage and finally you know a lot of folks have been especially in the cell therapy world have been interested in what we can accomplish using our the phosphoprotein platform for um you know immune signaling right so immune signaling networks because we really we're we're the first technology that could that can capture at a multiplex level the proteins within single cells, right, simultaneously, not sort of, you know, whatever. But simultaneously, and that's the big deal, capturing it all at once at a high multiplex, getting the signaling networks of those single immune cells. And again, people use Western blot today, but imagine it's a single cell resolution, you know, what networks, the way that the cells are intricately connected within themselves, we've shown that there's really valuable information you can get from these small subsets of highly active cells. So, yeah, coming out with that adaptive immune single-cell signaling, right, for early access as well. So, I think some very cool things coming on just the single-cell proteomics realm. And for duomic, you know, there's going to be no surprises there. It's going to really match what we put out at AGBT. It's going to match what we put out at CITC. It's going to match what we put out at ACR, which is respectively tumor gene expression and functional proteome, which is like connecting the dots with the gene expression and the phosphoproteins of each cell for the tumor. At CITC, it was immune, just immune cell gene expression and the functional proteome. So connecting all the little gene expression levers you have at a super high multiplex level with the potency of each immune cell. And finally, I think a really exciting one that just came a few weeks ago was at AACR, doing the T-cell receptor profiling, TCR-seq, plus the functional proteome of each cell, right? And that's just at a very high level. You know, every immunologist out there wants to see a couple things. They want to see the specificity of the cell, which is the T cell receptor to the antigen itself, right? And again, we know the immune system therapies are sort of revolutionizing our industry. That's one half of the equation, though. The other equation is if you have a clone or you have the specificity of that cell, you want to know what that cell is doing. What is the potency? Proteomic potency at the functional level is really the only way to get to that, right, in terms of the direct methodology. We're combining the two. So understand in T cell receptor and proteome, you can get to the specificity, what the T cell is going to do against that tumor antigen-wise, and functionally how it's going to accomplish its goal. So that's like a really, really cool application that people are really excited about. So just those three, no surprises, just data we've already put out, and now it's about execution and delivering that data as a service.

Great. Final one for me, just following up on the ACR comment. It would be great to hear even at a high level whether the conference, ACR, was productive in terms of generating new sales leads and building the funnels.

Yeah, just really, really productive. I think you guys were there. You guys saw the buzz about sort of continued buzz about the next wave of single cell, which I think Everyone knows at this point there's two avenues, right? You've done a lot of single-cell sequencing. There's a lot of publication literature out there to sort of, you know, generate validation and better understanding of what that exactly means in a context of human health. You're either going into spatial, where you're validating the sort of location of the single-cell gene expression, or you're going into the proteome, which validates the function of that single-cell gene expression profile, because the two are very different, as we know. I think we talked about it while you were at IACR. There's just a tremendous amount of buzz in the end markets. The academics are getting funding, and the pharmas know they need this next sort of layer of precision medicine to sort of differentiate their next gen of immune therapies, of cell therapies, of gene therapies. And we have a really key mousetrap in terms of unlocking that part of the functional proteome that lets us all get to that next level of biology. So We had a just tremendous ACR, a lot of leads, and really, I think, productive use of our sales force there as well. I think you guys, I think I might recall you being in a picture in our booth with some of our sales reps doing some diligence on what we were doing. So, no, I think we're looking forward to more of those in-person conferences. I think they're great for our industry. I think there's a lot of tools companies right now that are just experiencing some real – tailwinds in terms of the end markets, and we just need to play this out a little bit with DCOM alluding more of this biology that sort of unlocks that next level of human health.

Got it. Appreciate you taking the questions.

Thanks, Max. Thank you. At this time, I'd like to turn the call over to Sean McKay for closing remarks. Sir?

Thanks, everyone. We look forward to being in touch, and yeah, we... We look forward to it. Take care.

This concludes today's conference call. Thank you for participating. You may now disconnect.