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spk04: is accurate only as of the live broadcast February 23rd, 2023. With that, I'll turn the call over to Sujal.
spk05: Thanks, Alex. Good morning, and thank you to everyone for joining us today. On this call, we'll share our results for the fourth quarter and full year 2022 and provide an update on a range of recent activities. The progress I'll be sharing with you today is due to the extraordinary work of our growing teams in the Bay Area and Seattle. and now in San Diego, where we've opened an office in the University Town Center, one of the largest and most talent-rich biotechnology and pharmaceutical hubs in the country. The new office will initially have a focus on instrument engineering, reagent development, software engineering, and bioinformatics positions. Eventually, we anticipate some percentage of our commercial team being based there as well. This expansion of the Nautilus geographic footprint reflects our continued progress and focus on short-term development milestones and longer-term commercialization goals. Through these and other efforts, we remain ever motivated by our goal to revolutionize proteomics in the name of improving the lives and health of millions of people around the world. Our entire team is motivated by this goal, fully aligned and committed to doing what it takes to make this goal a reality. When I reflect on 2022, I see it as a year of accomplishment and of foundational progress, progress that will bear fruit as we move through 2023 and towards our plan to launch our proteome analysis platform, instruments and reagents in mid 2024. Here are a few examples. We made solid progress against our core scientific goals in 2022. Our major focus last year was on development activities, such as increasing the scale and robustness of our consumables, both reagents and flow cells. This progress goes hand in hand with advancing the quality and customer readiness of our offering. Critical to those advances were our efforts to strengthen the core of our R&D leadership team in 2022, with the addition of Sherry Wilcox as VP of Affinity Reagent Development and Ken Kuhn as VP of Reagent and Platform Development. Ken and Sherry have helped us build out a world-class development team, which will continue to pay dividends in 2023 as we move towards commercialization. 2022 also saw continued focus on advancing our commercial instrument. The process of taking an instrument from concept to build to commercial use involves a number of important phases that are closely orchestrated collaborations between diverse teams, I'm pleased with the progress I saw last year in this regard. Throughout the entire R&D organization, we continue to successfully transition to a manufacturing posture across all elements of the platform as we build towards commercial availability. That work continues and will accelerate in 2023. Early in 2022, we thought to augment our internal probe development efforts with external partnerships. When it became clear that some of those partnerships were underperforming compared to the volume and quality of probes we were seeing from our own internal effort, we made the decision to put our resources where they would yield results in the most capital-efficient manner. Our internal affinity reagent development pipeline continues to proceed well. Data we shared at conferences throughout last year demonstrated that our internal teams are able to generate probes that are extremely strong binders across a range of short epitope targets. These wide-ranging transitions and improvements coupled with advances in our on-platform workflow have allowed us to radically increase our experimental scale. Our internal target for 2022 was to be able to execute on experiments up to 75 cycles. We've not only demonstrated experiments of this scale, but we are now routinely performing experiments of this scale. The progress achieved throughout 2022 enabled us to present six posters at the HUPO World Congress in early December, covering all aspects of our platform, ranging from acidity region development to our single-molecule deposition approach. One of these posters demonstrated decoding of a model protein from an experiment of 24 multi-affinity probes across 70 cycles. This data demonstrated the full end-to-end integration of our experimental and computational workflows. These were exciting results that continue to expand confidence in our science, and we look forward to building on these results in 2023. Also in 2022, we nearly doubled our patent portfolio to over 40 pending patent families filed in the U.S. and abroad with a total of 11 granted U.S. patents thus far. In 2023 and going forward, our IP strategy will remain global in reach as we seek protection in the U.S., and in foreign markets where we expect to commercialize our platform. These and many other accomplishments in 2022 make me excited for our future. While we recognize that much work remains to be done, I'm firm in my belief that these and other foundational efforts will continue to pay off in 2023 and beyond. An important part of revolutionizing proteomics is inspiring others to join us on this journey. And it was with that goal in mind that we announced in Q4 what we're calling the Nautilus First Access Challenge, a contest designed to enable researchers from a broad spectrum of disciplines to uncover new biological insights and explore new areas of the proteome at massive scale. The response from researchers across the globe has been incredibly rewarding. It has unlocked the type of creativity we'd hoped to see when we offered them the chance to explore their samples unbounded by the inherent limitations of both traditional methods and of emerging affinity-based and peptide sequencing methods. We're very excited to review the proposals we've received. The deadline for submissions has passed, and we will announce the winners at the U.S. HUPO 2023 conference in early March. Stay tuned in the very near future for more on the first access challenge and how it has revealed pent-up demand for comprehensive proteomic coverage. Our existing collaborations with Genentech, Amgen, and MD Anderson also represent partners who are joining us on our journey to revolutionize proteomics. Recently, we announced a new partnership with the Translational Genomics Research Institute, TGen, to explore the utility of the Nautilus platform by studying specific protein targets in diffuse intrinsic pontine glioma. DIPG, a rare and often fatal childhood cancer. The goal of this partnership is to better understand the epigenetic mechanisms at work in DIPG by interrogating the proteoform landscape of specific proteins at the single molecule level. Proteoform is not possible to detect by peptide-based protein analysis methods. Work should kick off early this year, and the expectation is that the team will publish its findings when completed. I'm very excited about the work we'll be doing with TGen, and I'm especially excited by the broad set of use cases our collaborators are deploying our platform against. From childhood cancer to aging to neurodegenerative diseases, we are seeing interest from researchers across a wide spectrum of applications and use cases. Our team heard many such use case ideas when, as I mentioned earlier, we participated as a primary sponsor of the Human Proteome Organization's World Congress in early December. Aside from engaging conversations during our six-poster presentations, our booth was buzzing with researchers and PIs discussing how our platform could enable researchers to ask and investigate fundamentally different questions than ever before possible. It was exciting to hear proteomics researchers, many with deep, long-standing ties to mass spectrometry, enthusiastically see the potential of our platform to serve as a valuable complement to their traditional analysis methods. Conversations at HUPO and many others throughout the year, the strong submissions to our first access challenge, and the enthusiastic response of our research partners all served to strengthen my belief that Nautilus will bring to the market a highly differentiated platform with a wide competitive mode, a platform that delivers an unmatched value proposition to researchers seeking to unlock the extraordinary potential of the proteome. These researchers have expressed over and over again a desire for a single molecule solution, one that overcomes the inherent limitations of both traditional methods and of emerging affinity-based and peptide sequencing methods in terms of sensitivity, scale, and reproducibility. I'm excited to get our platform into the hands of researchers and assist them as they drive forward their innovative, impactful biological research. As we've previously discussed, my management team and I continue to proactively adapt to the gravity of the current financial and economic climate. We are tightly managing our resources to maximize our runway well into 2025 and balancing that with investments that will enable us to drive our scientific progress forward. For more on that, let me hand the call over to Anna for a look at our Q4 and full year 2022 financials. Anna.
spk18: Thanks, Sujal. Total operating expenses for the fourth quarter of 2022 were $16.3 million, which was $500,000 less than the fourth quarter of last year. This result is a testament to our diligent focus on controlling our spend. This past year, we continued investing in the business, growing our headcount, and making significant progress internally while decreasing our expenses overall. Research and development expenses in the fourth quarter of 2022 were $9.6 million compared to $9.9 million in the prior year. General and administrative expenses were $6.7 million in the fourth quarter of 2022 compared to $6.9 million in the prior year. Overall, net loss for the fourth quarter of 2022 was $13.4 million compared to $16.7 million in the fourth quarter of last year. Our bottom line was helped by our prudent cash investments and debt securities, resulting in net other income of $2.9 million versus $127,000 in the fourth quarter of last year. We continue to take full advantage of the opportunities created by having a strong cash balance, and generating earnings from our investments is another source of funding we are maximizing. For fiscal year 2022, operating expenses were $63.6 million compared to $50.5 million in 2021. That increase of 26% was driven by growth in personnel costs, along with an increase in expenses tied to our first full year of operating as a public company. Net loss for the full year was $57.9 million compared to $50.3 million in fiscal year 2021, an increase of 15% year over year. That net loss includes $5.7 million in net other income compared to $183,000 in fiscal year 2021. Finally, turning to our 2023 guidance, as we have consistently said, We expect to continue to grow our spend, but in a conservative, intentional manner. This year, we expect our overall operating expenses to grow by approximately 40% from 2022 levels. However, you can be sure that we will manage our growth in spending tightly to ensure we preserve our ability to invest in the commercial expansion leading up to our platform launch in mid-2024. Our timelines for product launch are unchanged. As we've said previously, we anticipate meaningful early access engagement and associated revenues to begin at the start of 2024. Revenue tied to the platform launch is expected to begin in mid-2024. We ended the year with approximately $314 million in cash, cash equivalents, and investments. which represents a trailing 12-month cash burn of approximately $48.5 million. While that cash burn will certainly increase going forward, we continue to anticipate our cash runway extending well into 2025. With that, I'll turn it back to Sujal.
spk05: Thanks, Anna. Anna's report clearly demonstrates our unwavering commitment to responsible financial stewardship of this business and using our resources prudently and to our advantage during these challenging times. We're excited about what lies ahead for Nautilus and the difference our platform can make in biological science. Our mission to positively impact the health and lives of people around the world remains our guiding light and the standard to which we hold ourselves. I'm grateful to our team, our investors, our strategic partners, and our research collaborators for joining us on this journey to revolutionize proteomics and empower the scientific community in ways never before thought possible. We made good progress in 2022 and look forward to building on those successes as we move through 2023 on our way to a commercial launch and beyond. With that, I'll turn the call back to the operator.
spk10: Operator? Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Max Masucci with Cowan & Company. Max, your line is open. Please go ahead.
spk06: Hi. Thanks for taking the questions. First one exited the year with over $300 million in cash, a low cash burn. So with the valuation re-rating in the public and private arena to a degree and with a few small M&A deals recently in the specialty tool space, Yeah, has your appetite for M&A changed at all recently? And if the answer is yes, you know, what types of assets could potentially advance your development in commercial timelines?
spk05: Good morning, Max. Let me take your question here. And so, you know, you're absolutely right that the M&A environment generally in the DX and tool space and the wider biotech space has picked up. You know, we fundamentally believe that the product that we are building has a value proposition that is spot on for the customer base and would have a very wide competitive mode relative to all of the existing traditional approaches and emerging approaches in proteomics. And so with that, while I would never say never, with that, we really don't see any near-term M&A, or even smaller strategic types of assets that we would go after. We're really focused on leveraging our balance sheet to go and complete the development of our platform to build our commercial organization and then launch. We're always open to synergistic technologies out there, but I don't really see anything on the horizon or anticipate that that'll be a use of cash.
spk06: Great. Makes sense. And then just in this market environment, we have increased scrutiny on near-term catalysts and milestones that can be used to track progress. So I guess bigger picture question, what would you consider the biggest advancement for the company during Q4 or maybe even in the second half of the year and What should we be keeping on our radar, you know, for catalysts and updates in the first half of 23?
spk05: Yeah, Max, this is Sujal. Let me take the first part of that, and I'm going to take that to Parag to just give you a little bit of detail on your question around the biggest highlight from the quarter. As you look at Nautilus's scientific conference schedule for 2022, one of the things that you would observe is that at each scientific conference, we had either a manuscript that we dropped on bioRxiv or a poster presentation or a talk that we gave. And as we went through the year, we slowly introduced to the scientific community more and more data about our platform and more and more sophisticated experiments. And as I mentioned in our prepared remarks, that culminated in a really interesting experiment in Q4 that I would consider the greatest highlight. And we demonstrated that on a poster at a talk at the World Hupo Congress in December. Why don't I pass it to Bob just to address just really briefly what that poster was about and talk to you a little bit about that.
spk06: That would be, oh, sorry, go ahead, go ahead.
spk02: Yeah, thanks, Max. So I'd like to just start out. 2022 was a tremendous year for our organization. We really built out the development side of our organization and brought the scientific community on our journey. with a series of milestones, as Suchil mentioned, presented at different conferences. And the largest milestone for me that we presented was really the scaling of our processes, demonstrating that we can comfortably run 70, 80 cycles and do that in a routine basis with dozens of multi-affinity probes that were developed by our in-house pipelines. And that really demonstrated the complete end-to-end sample prep all the way through instrument analysis, through data analysis aspects of our platform. And to accomplish this, we had to improve the scale of our reagents. We had to improve the quality of all of our consumables. We also had to improve our instrument to be able to support runs on that scale. And so over the coming year, we expect that scale to continue the improvement in quality of reagents and maturing towards our commercial launch. Sugil?
spk05: Thanks, Parag. Max, just to answer the last part of your question of what to expect in 2023, you know, Nautilus has had in 2022 and will continue to have in 2023 a strategy of bringing the scientific community and our potential partners, collaborators, and customers along on the journey as we complete the development of our platform. And so as we move through conferences on the scientific side through 2023, starting with the U.S. HUPO conference in early March, you should expect us to continue to have talks and continue to have poster presentations and manuscripts that continue to show our progress on the scientific front. And I think that that progress will indicate our progression towards that goal of a mid-2024 launch of our instruments and reagents and our systems.
spk06: Yeah, and of course, congrats on the poster, Ed Hoopoe, you know, and the 70 cycle run on the platform. We'd be curious to hear any feedback you received, you know, at the annual Congress. And I guess generally throughout 2022, as you rolled out new manuscripts and posters, how the feedback has sort of evolved amongst the scientific community?
spk02: Yeah, that's a great question. We've seen really just tremendous enthusiasm for the platforms. Um, it has been at Hoopoe, uh, we met with a very large number of, of key opinion leaders talked about their, their anticipated needs, their excitement about the platform, um, the sensitivity, the scale. And it's, uh, I think that was underscored as well in the first access challenge, um, that we saw just incredibly creative applications from around the world. And so I think what we're seeing overall is, and one of the other points I'll just mention about Hupo, at our seminar, really great questions, strong engagement, standing room only. In fact, lots of people sitting around the walls. And it was just fantastic to be able to share our journey with the scientific community and to have that kind of feedback.
spk06: Well, that's great. Thank you for taking the questions and looking forward to 2030. Thanks, Max.
spk08: Stand by for our next caller.
spk10: Our next question comes from Matt Sykes with Goldman Sachs. Matt, your line is open. Please go ahead.
spk15: Great. Thanks for taking my questions. Good morning, Sujil, Parag, and Anna. Maybe I just want to start on that last question and be a little bit more specific on some of that feedback. Sujil, you mentioned you spoke to a lot of mass spec users, and I'm just curious, as you spoke to them and gathered feedback, what are some of the things that they're excited about on Nautilus relative to what they're doing on mass spec? Is it throughput is it depth of analysis what types of specific feedback you're getting from them that can kind of give you comfort that there is a competitive advantage relative to the mass spec being worked that work done in proteomics that's going on today good morning math this is sujo uh the comments you heard earlier were from parag but why don't i start um here and then i'm going to pass it to prod to give you some more specific feedback from uh from what he heard in december
spk05: From a broad perspective, the way that we ensure that our product is going to hit the market correctly is by a constant and wide range of activities that engage with our potential customers. And that is one-on-one conversations, voice of the customer studies, it is pricing studies, it's engagement at scientific conferences, it's engagement with inbound activity, and it's as well really spending time and understanding what are the applications that scientists are interested in and how does our technology apply. The first access challenge, of course, underscores that as well because that was an opportunity for them to tell us how our platform would apply to their research. What we hear time and time again is that traditional methods, meaning generally mass spectrometry and then emerging affinity-based and peptide sequencing methods, really the challenge with those is a challenge in terms of sensitivity, scale, and reproducibility. And so to give you an example on the sensitivity front, being able to analyze intact protein molecules without having to digest them into peptides gives you a two log sensitivity advantage right off of the top and is critical for this next phase of proteomics that's coming over the course of the next 5 to 10 years. Gale is another one of those things that's incredibly important to these customers. Our platform is being designed with a chip that can immobilize up to 10 billion protein molecules. That leads to the ability to quantify across an extremely wide dynamic range. which is critical when you're in a wide range of applications. For example, in pharmaceutical development, where you are looking at a 96-well plate that has samples, which are cell lysates, those might be 100 to 1,000 cells, which is the typical sample size in each of those wells. You need a chip that's 10 billion protein molecules large in order to be able to analyze those with the greatest capacity. And there are no platforms that are within many orders of magnitude that are existing today or conceived. And so it's those aspects that researchers have really been captivated by. And in the conversations that I've had, customers readily are able to see how our specifications and what we're building would be impactful and differentiated for their biological research. Paul, why don't you add some specific commentary from December from the HIPAA event?
spk02: Thanks, Sujal. I think one of the key aspects as we look at this field in this space is that we find that even current mass spec users recognize the need for complementary tools so that they're really asking the right question using the right tool. and they recognize the key aspects of our platform, comprehensive analysis, sensitivity, dynamic range, reproducibility, runtime, and ease of use are really important factors when they're thinking about their study design. One of the aspects that we've done as well is really a series of deep interviews in 2022 with 40 or more key opinion leaders most of whom are mass spec users, and those design criteria for the platform, the ability to get to single molecule incredibly sensitively, the ability to look at proteoforms because you are not digesting the proteins and are able to look potentially at multiple modifications on the same protein molecule, those are capabilities that they're excited about unlocking novel biology.
spk15: Great. Thank you very much for that. And then, Anna, just on OPEX, you mentioned the 40% growth in 23. Two things. One, should we think about the R&D versus G&A splits as being kind of similar to what you did in 21 and 22 with sort of that 60-40ish split between R&D and G&A? And then, secondly, how should we think about the San Diego facility costs coming through, assuming that's a lease, just, you know, either as a percentage of or just maybe kind of characterize as those costs come through in 23? what that might represent of that growth in OPEX. Thank you.
spk16: Hi, Matt. I can definitely speak to that.
spk17: As you suggest, as you mentioned, the majority of our spending is still definitely going to R&D. In 2022, that was at approximately 60%. And given that we're still very much focused on development, I would expect that to continue for most of 2023. And then dollars would shift more towards SG&A as we get closer to that commercial launch. We are very excited about our San Diego facility. It's a fairly small facility, so I don't think it will contribute any meaningful expenses to those OpEx numbers. And I think overall our facilities, we've done a really fantastic job of taking on new facilities without a significant amount of cash outlay. or adding significant structural spend to our spending forecast.
spk08: Got it. Thank you very much. Appreciate it. Okay. Stand by while I promote the next caller.
spk10: Our next question comes from Brandon Coulard with Jefferies. Brandon, your line is open. Please go ahead.
spk11: Hey, thanks, folks. Good morning. Sujal, on the TGen partnership, I'm curious why they were the next logical collaboration partner. Why focus on such a rare disease like DIPG? And how many additional partners would you like to add in 23 on top of the current five?
spk05: Yeah, so let me take a couple of aspects of your question, and then I'll pass it to Parag to talk specifically about DIPG and why this was an interesting application. When you look at our existing set of collaboration, Genentech, Amgen, MD Anderson, and now TGEN, What we've tried to do is we've tried to focus on proteoform use cases that are within the capabilities of the platform today so that we can do analysis and deliver to the customer biological insight that they can't get from somewhere else. And the additional criteria is that we want all of these early collaborators to continue with us on this journey as we move towards platform launch and the great potential early access partners, data sites, and then ultimately customers. And so that's kind of the initial criteria for us. The other thing that's important to us is to have researchers who are focused on really important research, who are known well, and are willing to publish with us so that we can start building this body of evidence around our platform and start showing scientific community data coming off of our system. And so with TGen, it was able to hit all of those marks. Now, that being said, As we start to move deeper into 2023, our attention will switch a bit, not to these proteoform partnerships, but really switch to our early access program, which is a more formal program where the customer may take 24 or 48 samples, run them on our platform once we are capable of broad-scale proteomic analysis, and then we would return the data to them. We might have a small fee for that engagement. And really, those early access partnerships are about data generation and showing the scientific community what we can do. But equally, they are important for pipeline generation and starting to drive towards pre-orders of the instrumentation. Todd, do you want to chat about the particular application for TGen and why it's interesting in our portfolio of applications?
spk02: Absolutely. Thank you, Sujal. So I think DIPG is, despite being a relatively rare cancer, is a model for many other types of cancers. Additionally, the particular protein target that we're studying in that collaboration, our goal is to measure mutations and post-translational modifications, proteoforms, on individual histone molecules. And that ability will provide really critical new insights into how histone modification and proteome variation thereof, drive the biology of this disease, but also will provide a window into epigenetic modification in general. And that's a tremendous area of scientific interest. It's incredibly exciting. TGen is a fantastic partner to work with on these studies. So we're really excited to dive in with them.
spk11: A couple. Susil, any updated thoughts on chain? And as you look out over the next kind of 12, 18 months, any pain points you anticipate as we start moving towards commercial launch?
spk05: Yeah, Brandon, it's a great question. And we certainly are continuing to see supply chain pressures out there. And most of that pressure is with respect to lead times for various things. It could be simple things like tubes and pipette tips, and it can be more complex pieces of instrumentation as well. The third area for us is that there certainly are some slow parts of the supply chain with respect to some of the parts of our instrument as well. You know, what I would tell you there is, yes, there's some pressure, but we are managing it well. We have a team from the supply chain side that's led by our SVP of operations and supply chain. Mary Godwin has been doing this for four decades, and we've been doing a good job on our instrument side in making sure that we have parts pipelined for all of the instrument builds that we're planning, and we're planning our supply chain appropriately given the extensive lead times for a few components.
spk11: Gotcha. Last question, maybe better for Anna. The OPEX outlook applies to maybe another $30 million in incremental spend. Will that be mostly weighted to the back half? And I think you've been pretty cautious about building the commercial team up too soon. Will that begin to take shape in the back half? And I guess generally, where will that incremental $30 million be concentrated?
spk17: I can speak to the first part, and then, Sujal, maybe you want to tag on to that. But last year was a bit of an interesting year. We saw a dip in expenses as we consolidated our costs, and then we picked up in the second half. I would expect going forward that we would see more consistent growth over the course of the year, certainly with the highest spending being towards the end of the year. And that's really... still very much focused on development. We're still continuing to invest there. We're preparing for scale up quality manufacturing. So those are some of the areas where we'll continue to put both hires and dollars as we scale our experimental capacity. And then certainly towards the tail end of the year, we would begin hiring for the commercial launch that we expect in the first half.
spk07: and in the middle of 2024.
spk09: Yeah, so let me take the second half of your question here.
spk05: Brandon, let me take the second half of your question here, then you can dive in and ask more. So one of the things you asked was really when to expect the commercial build-out, and I think that I will add a little bit of nuance here. You know, there were some questions earlier about the macro environment and how we're reacting to it. And one of the things that we will do here ahead of our commercial launch in mid-2024 is build out a commercial team. But there are two things that you should realize there. Number one is that the team itself, we believe, would be a very efficient team, and it's not going to be a team that's going to be huge. And the primary reason there is that we have a instrument deal price, an initial deal price that's roughly a million dollars. And so the transactional load of being able to generate significant bookings from a particular sales rep out there is actually really good. And so that leads itself to sales efficiency and helps us with the cost structure of our commercial organization. The other thing to think about is that when, you know, When capital is readily available in the wider market, you would build your commercial team and start your top-of-formal activities earlier in the cycle. And when things are tight, like the environment is today, you'll build the commercial team much closer to the launch. And so, you know, I'm not going to commit to exactly what the timing is of that commercial team buildup, but what I will tell you is that we will compress that down pretty tight in front of that commercial launch. And while that might affect our revenue ramp rate right after the commercial launch, you know, it's our job as a management team to try to mitigate that. But we think that that's probably the most prudent thing to do because the last thing we want to do is overbuild the commercial organization and then have some sort of timing difficulty that leads to an additional pressure on our object.
spk08: Gotcha. Thank you.
spk10: Okay. Our last question comes from Tejas Sevant with Morgan Stanley. Hold, please, while I connect you.
spk03: for Tejas. Thank you for taking the questions. I guess the first one for me would be for Sujo. Thank you for the color on the access challenge. But I was thinking, aside from the access challenge and your conference presentation and data releases, How else are you keeping customers engaged ahead of your mid-24 launch?
spk05: Yeah, so that's a really great question. So, I think that there are a lot of different ways that we are keeping the scientific community, meaning the researchers and our potential collaborators and customers engaged. First and foremost, we've had a large number of conversations, hundreds of conversations over the course of the company's six-year life with potential customers and partners. And the response has been incredible. We continue to engage with those customers, giving them regular updates. We engage with them on surveys and formal voice of the customer types of interviews. We meet with them at our various conferences and spend time keeping them up to date. So that's number one. Number two is that one of the things that's really been great here at Nautilus is that there is quite a bit of inbound activity from potential partners and customers because of the excitement around our platform and the capabilities that we've begun to show at scientific conferences. And so we have a steady stream of conversations with customers, getting them up to speed and doing presentations because of that inbound types of activity. One of the other things as well, that we did in 2022 is that we engaged with about 40 KOL, most of whom are mass spec users. And we did deep interviews with them, engaging them on where their pain points are, what they're looking for out of a proteomic solution that really tries to make a significant impact on their biological research. And through those engagements, we've had a continued meaningful dialogue So, you know, all of those things together, the first access challenge, the data releases, conferences, we have a very, very good interface with our potential customers and collaborators and partners.
spk03: Got it. That's helpful. And then, Sujo, I'm just wondering, if you look over the past year and all of the changes in the proteomics landscape, has your views on the competitive landscape changed at all over the past few months? And are you anticipating any dynamic changes ahead of your mid-2024 launch?
spk05: That's a great question. What I'm seeing over 2022 and the first couple of months here of 2023 continues to reinforce for me that we are building a highly differentiated product with a wide competitive mode. What I've seen from the traditional method competitors is that seen continued evolutionary improvements to their platforms, but nothing that really is fundamentally game changing. And from the emerging competitive landscape, you know, there are a few names that are performing quite well on the targeted side of proteomics, which is different and highly complementary to what we're doing. But on the discovery side where there are some companies looking to improve sample preparation, some that are focused on peptide sequencing methods, when we look at the capabilities of those platforms and how they've evolved, over the course of the last 12 to 14 months, if I include the first couple of months of 2023, I'm not seeing any major capability improvements or anything on the horizon that would close the gap with the capabilities of our platform that we're building.
spk03: Great. And one final one for me. I guess this is a little bit looking out into the longer term, but the clinical market is a huge opportunity for you guys. And with the clinical market today relying primarily on single biomarker assays, what do you think it'll take to drive that market to using a broader set of proteins in the clinic? And I know you guys highlighted sensitivity, scale, reproducibility, run times, and ease of use as key characteristics. But what do you think are some of the key features that this specific market would be looking for?
spk02: I think that's a great question. I think when we look at the clinical market, we've seen a similar trend in transition from single marker-based studies to panels occur in genomics. And it started with providing the research data across a wide spectrum of initially mutations in genomics so that people were able to take a more comprehensive look in a retrospective manner. from that comprehensive look, it just made sense to start using panels. There was a point that measuring those panels by orthogonal means was inefficient, and it was easier, it was faster to simply use the discovery platform as the clinical platform. And so we anticipate a similar transition will occur in proteomics. Initially, people will use the discovery platforms, look at a wide variety of markers, understand the synergies between them, understand the predictive power that comes from being able to look at many biochemical axes at the same time, as well as diving into proteoforms and really looking at that molecular heterogeneity as a marker. As those panels get larger and larger and it becomes challenging, to convert them into traditional assays, ELISA's, others, it'll spur a natural transition towards using our discovery platform as a clinical platform. And we are excited about that opportunity going forward. We're preparing for that opportunity going forward. And I think it's a really natural evolution of the field.
spk08: Great. Thank you guys for the time today.
spk10: Okay. Thank you everyone for your participation in this conference. This does conclude the program and you may now disconnect.
spk08: Hello, Eric, can you hear me? Yes.
spk20: Nice call. I just have a few things I wanted to just go over with you.
spk10: Absolutely. I probably know which ones you're going to say, but you go ahead.
spk20: Okay. The first one you're probably not going to guess, but it has to do with the chat. Well, two of them have to do with the chat. The first one in the chat is when Alex Khan sent you the script Once you had opened it up and had a quick look, you should respond. I know they want you to respond like within 20 seconds, but basically you should let him know or let the client know that you did receive it and that you were able to, you were able, you received it and you were able to look at it.
spk10: Very good point. Yep. I didn't do that.
spk20: Also, you're welcome for the Q and A. Also in the chat, Normally, they ask before the last person. They ask, do you want me to reprompt the Q&A instructions? I know they said before, but you just want to verify that they do not want you to reprompt. Because sometimes they change their mind.
spk10: You know, I texted them about 10 minutes ago. Did you see the text that I put in there?
spk20: Oh, yes.
spk10: But I don't know whether anyone was monitoring the chat.
spk20: you know to respond yeah well the thing is um that's why i normally do it um like two or three um questions before like before i would have done it yeah i would have done it when after max sykes uh not matt sykes went up i would have been tested on unless the plans had changed i'll close the call after pager's questions are addressed right is that what you think will that be okay or is that good? And then at the very end, while they're doing the closing remarks, I would put in, it's been a pleasure to work with you all. And just say that at the very, very end while they're wrapping up instead of putting it together. Because they may have just thought that the first part was just a formality.
spk10: Oh, I see. Yeah. No, you're right. Yeah, I expected... I think that I expected someone to respond and I was checking in to make sure that they wanted me to go straight to closing. But you're right. If I had reached out a little bit earlier, I think I was just expecting someone to be monitoring the chat, which it didn't look like anyone was.
spk20: Which is understandable because Alex Khan made it sound like he was going to do that because he was moving the participants around on the hand raise. So it was natural for you to think that. um usually i just ask is someone going to be monitoring and once i like with alex khan i don't say that's the problem it's just that yes the only i guess the only thing was that once the last participant has finished and say you know thank you for answering my questions just move them back into you know be moving from the speakers and this goes straight into the script just Don't even worry whether they're going to say anything or not. Just go straight into it. Because there's no way of knowing unless they actually say something. There's no way of knowing, and there's going to be that dead air that they don't like us to do.
spk03: Sure.
spk20: As for the thing I think you all thought I was going to talk about, yeah, never announce a participant until they have been promoted.
spk10: That is exactly it. I was clicking around, you know, there's those multiple things that you have to confirm and all of that. And I realized as soon as I started speaking, I thought, oh, my God, I'm introducing him before I've actually promoted him. So, yeah.
spk20: It was a good save, but yeah, it was just the fact that you started announcing him and I was like, okay, so it's taking too long. But yeah, you have to wait until after that. Thank you, say we'll wait for the next person.
spk10: Yeah, and that's when I said, you know, stand by while I connect you or something like that. I realized literally right in the middle of the time that I was speaking. But no, thanks. I appreciate the feedback, Chris.
spk20: Oh, no problem. The only other thing is This is one you might want to ask Chuck on. Starting at 8.55 with Matt Sykes, there was a distortion on the line. Initially, of course, I thought it was just Sykes' line. I didn't think anything of it, but I noticed both Sujal and these names again. Sujal and Karag. Yeah, they started having the same type of distortion. It was only on those three lines You may want to check, like I said, it started at 8.55 with Matt Sykes, but you might want to check with Chuck to see if you need to do a Zendex ticket for that. If it was just the participant, I wouldn't worry about it, but when it started happening to those, and I understand they are not undergoing the best weather.
spk10: So it's most likely, it was especially with- I noticed it with Anna's call. And I had actually put myself on mute and typed out something to put in the chat to recommend. Because I asked them initially, I said, I recommend that anyone who's not speaking, you know, put themselves on mute. And there was that guy, Chris Blessington, that was on the call the whole time, but he was not muted. And then at one point when Anna was speaking, there was four people that were all on live. And I noticed that her call was a little bit distorted and I had typed out a prompt to ask people to, to put themselves on mute. And then it actually, it righted itself. And so I erased it.
spk20: I see. Yeah. I didn't really notice it on her line. Like I said, I just noticed it. I mean, it may have been a little distortion, but because also you didn't do a sound check with her. You just asked for her, you know, just to say hi to her, there was no way to know whether there was anything wrong with her line or not. It was, because you did the check with everyone else and then she showed up.
spk10: Yeah, when she came on, she spoke enough of a sentence where I, good point, yeah. I mean, I felt like she had spoken enough to where I could hear that she actually sounded like the clearest one when she first came on the line.
spk20: But, Yeah, but as I said, just as a formality, because I didn't, like I said, I didn't notice it. And thankfully, Chris did keep his line quiet. So he didn't interrupt one or two other people. But yeah, it was just as soon as she came on. I thought I basically forgot the fact that, you know, since she didn't have a sound check, I forgot what she sounded like. So I was just, okay, so hers is a little bit off, but everyone can understand her. Everyone can hear her. She's going to sound good on the recording. No worries. But at the Sykes, I was like, uh-oh.
spk10: So should I ask Chuck to check the recording at 8 minutes and 55 seconds into the Q&A? No. Is that what you said?
spk20: You said 8.55, but... I said, yeah, about 8.55 is when Sykes came on to ask his question.
spk10: 8.55 into Q&A.
spk20: Well, 8.55 a.m. out, my time.
spk10: Oh, okay, thank you.
spk20: I couldn't... So basically about 10 minutes after the... Because he took about 10 minutes, so about 10 minutes after the recording ended, that's when I started hearing it.
spk10: Okay. Yeah. Okay, all right, good feedback. I'll reach out to Chuck about that as well.
spk20: If he does say put in a Zen ticket, if you want to, you can still chat me on Microsoft Teams. I'll try to help as much as possible. The only thing is, if you do put down 8.55 a.m., make sure it's Eastern time. Okay. Because I don't know what time it was for you.
spk10: Oh, it's 3.30 in the afternoon for me.
spk20: Okay, so it's heading to 3.30 now. That may have been about... $255,000 for you.
spk10: How about $255,000? Yeah. Okay.
spk20: Yeah, it's just 300. Matt Sykes put it out. And basically the owner and co-owner, that's interesting because they weren't even together, but both of them had problems. Yeah.
spk10: Oh, did it sound... I thought that both of them... Parag particularly sounded very clear to me. And the only person that I found difficult to hear was Brandon Coulard. He was... I found him very unclear.
spk08: But otherwise...
spk10: Otherwise, it sounded clear to me. Okay. All right.
spk20: We're going to have to go. So talk to Chuck, but it looks like someone else is trying to get in, so we need to end the call ASAP.
spk10: Oh, okay. All right. I'm ending it. Hang on just a sec.
spk20: All right. And once again, good call. Overall, good call.
spk10: Thank you. Appreciate that. And, you know, it's not letting me... End? Huh. It just... Oh. Okay.
spk18: First thing we need to do is... The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1-1. Thank you. music Thank you. Thank you. you Thank you.
spk10: Good day and thank you for standing by. Welcome to the Nautilus Biotechnology Q4 and full year 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. That is star 1 1. And then you'll hear an automated message advising you that your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. And it is now my pleasure to introduce your first speaker today, Alex Khan, Investor Relations of Nautilus Biotechnology. Please go ahead.
spk04: Thank you. Earlier today, Nautilus released financial results for the quarter and full year ended December 31st, 2022. If you haven't received this news release, or if you'd like to be added to the company's distribution list, please send an email to investorrelations at nautilus.bio. Joining me today from Nautilus are Suja Patel, co-founder and CEO, and Anna Mowry, Chief Financial Officer. Nautilus co-founder and Chief Scientist, Parag Malik, will be joining us for Q&A. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking within the meaning of the 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 titled forward-looking statements in the press release model as issued today. except as required by law. Nautilus disclaims any intention or obligation to update or revise any financial or product pipeline projections or other 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, February 23, 2023. With that, I'll turn the call over to Sujal.
spk05: Thanks, Alex. Good morning, and thank you to everyone for joining us today. On this call, we'll share our results for the fourth quarter and full year 2022 and provide an update on a range of recent activities. The progress I'll be sharing with you today is due to the extraordinary work of our growing teams in the Bay Area and Seattle and now in San Diego, where we've opened an office in the University Town Center, one of the largest and most talent-rich biotechnology and pharmaceutical hubs in the country. The new office will initially have a focus on instrument engineering, reagent development, software engineering, and bioinformatics positions. Eventually, we anticipate some percentage of our commercial team being based there as well. This expansion of the Nautilus geographic footprint reflects our continued progress and focus on short-term development milestones and longer-term commercialization goals. Through these and other efforts, we remain ever motivated by our goal to revolutionize proteomics in the name of improving the lives and health of millions of people around the world. Our entire team is motivated by this goal, fully aligned and committed to doing what it takes to make this goal a reality. When I reflect on 2022, I see it as a year of accomplishment and of foundational progress, progress that will bear fruit as we move through 2023 and towards our plan to launch our proteome analysis platform, instruments and reagents in mid 2024. Here are a few examples. We made solid progress against our core scientific goals in 2022. Our major focus last year was on development activities such as increasing the scale and robustness of our consumables, both reagents and flow cells. This progress goes hand in hand with advancing the quality and customer readiness of our offering. Critical to those advances were our efforts to strengthen the core of our R&D leadership team in 2022. with the addition of Sherry Wilcox as VP of Affinity Reagent Development and Ken Kuhn as VP of Reagent and Platform Development. Ken and Sherry have helped us build out a world-class development team, which will continue to pay dividends in 2023 as we move towards commercialization. 2022 also saw continued focus on advancing our commercial instrument. The process of taking an instrument from concept to build to commercial use involves a number of important phases that are closely orchestrated collaborations between diverse teams. I'm pleased with the progress I saw last year in this regard. Throughout the entire R&D organization, we continue to successfully transition to a manufacturing posture across all elements of the platform as we build towards commercial availability. That work continues and will accelerate in 2023. Early in 2022, we sought to augment our internal probe development efforts with external partnerships. When it became clear that some of those partnerships were underperforming compared to the volume and quality of probes we were seeing from our own internal effort, we made the decision to put our resources where they would yield results in the most capital-efficient manner. Our internal affinity reagent development pipeline continues to proceed well. Data we shared at conferences throughout last year demonstrated that our internal teams are able to generate probes that are extremely strong binders across a range of short epitope targets. These wide-ranging transitions and improvements coupled with advances in our on-platform workflow have allowed us to radically increase our experimental scale. Our internal target for 2022 was to be able to execute on experiments up to 75 cycles, We've not only demonstrated experiments of this scale, but we are now routinely performing experiments of this scale. The progress achieved throughout 2022 enabled us to present six posters at the HUPO World Congress in early December, covering all aspects of our platform, ranging from acidity region development to our single-molecule deposition approach. One of these posters demonstrated decoding of a model protein from an experiment of 24 multi-affinity probes across 70 cycles. This data demonstrated the full end-to-end integration of our experimental and computational workflows. These were exciting results that continue to expand confidence in our science, and we look forward to building on these results in 2023. Also in 2022, we nearly doubled our patent portfolio to over 40 pending patent families filed in the U.S. and abroad, with a total of 11 granted U.S. patents thus far. In 2023 and going forward, our IP strategy will remain global in reach as we seek protection in the U.S. and in foreign markets where we expect to commercialize our platform. These and many other accomplishments in 2022 make me excited for our future. While we recognize that much work remains to be done, I'm firm in my belief that these and other foundational efforts will continue to pay off in 2023 and beyond. An important part of revolutionizing proteomics is inspiring others to join us on this journey. And it was with that goal in mind that we announced in Q4 what we're calling the Nautilus First Access Challenge, a contest designed to enable researchers from a broad spectrum of disciplines to uncover new biological insights and explore new areas of the proteome at massive scale. The response from researchers across the globe has been incredibly rewarding. It has unlocked the type of creativity we'd hoped to see when we offered them the chance to explore their samples unbounded by the inherent limitations of both traditional methods and of emerging affinity-based and peptide sequencing methods. We're very excited to review the proposals we've received. The deadline for submissions has passed, and we will announce the winners at the U.S. HUPO 2023 conference in early March. Stay tuned in the very near future for more on the first access challenge and how it has revealed pent-up demand for comprehensive proteomic coverage. Our existing collaborations with Genentech, Amgen, and MD Anderson also represent partners who are joining us on our journey to revolutionize proteomics. Recently, we announced a new partnership with the Translational Genomics Research Institute, TGen, to explore the utility of the Nautilus platform by studying specific protein targets in diffuse intrinsic pontine glioma, DIPG, a rare and often fatal childhood cancer. The goal of this partnership is to better understand the epigenetic mechanisms at work in DIPG by interrogating the proteoform landscape of specific proteins at the single molecule level. Proteoform is not possible to detect by peptide-based protein analysis methods. Work should kick off early this year, and the expectation is that the team will publish its findings when completed. I'm very excited about the work we'll be doing with TGen, and I'm especially excited by the broad set of use cases our collaborators are deploying our platform against. From childhood cancer to aging to neurodegenerative diseases, we are seeing interest from researchers across a wide spectrum of applications and use cases. Our team heard many such use case ideas when, as I mentioned earlier, we participated as a primary sponsor of the Human Proteome Organization's World Congress in early December. Aside from engaging conversations during our six poster presentations, our booth was buzzing with researchers and PIs discussing how our platform could enable researchers to ask and investigate fundamentally different questions than ever before possible. It was exciting to hear proteomics researchers, many with deep, long-standing ties to mass spectrometry, enthusiastically see the potential of our platform to serve as a valuable complement to their traditional analysis methods. Conversations at HUPO and many others throughout the year, the strong submissions to our first access challenge, and the enthusiastic response of our research partners all served to strengthen my belief that Nautilus will bring to the market a highly differentiated platform with a wide competitive mode, a platform that delivers an unmatched value proposition to researchers seeking to unlock the extraordinary potential of the proteome. These researchers have expressed over and over again a desire for a single molecule solution, one that overcomes the inherent limitations of both traditional methods and of emerging affinity-based and peptide sequencing methods in terms of sensitivity, scale, and reproducibility. I'm excited to get our platform into the hands of researchers and assist them as they drive forward their innovative, impactful biological research. As we've previously discussed, my management team and I continue to proactively adapt to the gravity of the current financial and economic climate. We are tightly managing our resources to maximize our runway well into 2025 and balancing that with investments that will enable us to drive our scientific progress forward. For more on that, let me hand the call over to Anna for a look at our Q4 and full year 2022 financials. Anna?
spk18: Thanks, Sujal. Total operating expenses for the fourth quarter of 2022 were $16.3 million, which was $500,000 less than the fourth quarter of last year. This result is a testament to our diligent focus on controlling our spend. This past year, we continued investing in the business, growing our headcount, and making significant progress internally while decreasing our expenses overall. Research and development expenses in the fourth quarter of 2022 were $9.6 million compared to $9.9 million in the prior year. General and administrative expenses were $6.7 million in the fourth quarter of 2022 compared to $6.9 million in the prior year. Overall, net loss for the fourth quarter of 2022 was $13.4 million compared to $16.7 million in the fourth quarter of last year. Our bottom line was helped by our prudent cash investments and debt securities, resulting in net other income of $2.9 million versus $127,000 in the fourth quarter of last year. We continue to take full advantage of the opportunities created by having a strong cash balance, and generating earnings from our investments is another source of funding we are maximizing. For fiscal year 2022, operating expenses were $63.6 million compared to $50.5 million in 2021. That increase of 26% was driven by growth in personnel costs, along with an increase in expenses tied to our first full year of operating as a public company. Net loss for the full year was $57.9 million compared to $50.3 million in fiscal year 2021, an increase of 15% year over year. That net loss includes $5.7 million in net other income compared to $183,000 in fiscal year 2021. Finally, turning to our 2023 guidance, as we have consistently said, We expect to continue to grow our spend, but in a conservative, intentional manner. This year, we expect our overall operating expenses to grow by approximately 40% from 2022 levels. However, you can be sure that we will manage our growth in spending tightly to ensure we preserve our ability to invest in the commercial expansion leading up to our platform launch in mid-2024. Our timelines for product launch are unchanged. As we've said previously, we anticipate meaningful early access engagement and associated revenues to begin at the start of 2024. Revenue tied to the platform launch is expected to begin in mid-2024. We ended the year with approximately $314 million in cash, cash equivalents, and investments. which represents a trailing 12-month cash burn of approximately $48.5 million. While that cash burn will certainly increase going forward, we continue to anticipate our cash runway extending well into 2025. With that, I'll turn it back to Sujal.
spk05: Thanks, Anna. Anna's report clearly demonstrates our unwavering commitment to responsible financial stewardship of this business and using our resources prudently and to our advantage during these challenging times. We're excited about what lies ahead for Nautilus and the difference our platform can make in biological science. Our mission to positively impact the health and lives of people around the world remains our guiding light and the standard to which we hold ourselves. I'm grateful to our team, our investors, our strategic partners, and our research collaborators for joining us on this journey to revolutionize proteomics and empower the scientific community in ways never before thought possible. We made good progress in 2022 and look forward to building on those successes as we move through 2023 on our way to a commercial launch and beyond. With that, I'll turn the call back to the operator.
spk08: Operator?
spk10: Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Max Masucci with Cowan & Company. Max, your line is open. Please go ahead.
spk06: Hi. Thanks for taking the questions. First one exited the year with, you know, over $300 million in cash, a low cash burn. So, you know, with the valuation re-rating in the public and private arena to a degree and, you know, with a few small M&A deals recently in the specialty tool space, Yeah, has your appetite for M&A changed at all recently? And if the answer is yes, you know, what types of assets could potentially advance your development in commercial timelines?
spk05: Good morning, Max. Let me take your question here. And so, you know, you're absolutely right that the M&A environment generally in the DXN tool space and the wider biotech space has picked up. You know, we fundamentally believe that the product that we are building has a value proposition that is spot on for the customer base, and we have a very wide competitive mode relative to all of the existing traditional approaches and emerging approaches in proteomics. And so with that, while I would never say never, with that, we really don't see any near-term M&A or even smaller strategic types of assets that we would go after. We're really focused on leveraging our balance sheet to go and complete the development of our platform to build our commercial organization and then launch. We're always open to synergistic technologies out there, but I don't really see anything on the horizon or anticipate that that'll be a use of cash.
spk06: Great. Makes sense. And then just in this market environment, we have increased scrutiny on near-term catalysts and milestones that can be used to track progress. So I guess bigger picture question, what would you consider the biggest advancement for the company during Q4 or maybe even in the second half of the year and
spk05: um what should we be keeping on our radar you know for catalysts and updates in the first half of uh of 23. yeah max this is sujo let me take the first part of that and i'm going to take that to uh prorog to just give you a little bit of detail on your question around the the biggest highlight from the quarter as you look at uh nautiluses scientific conference schedule for 2022, one of the things that you would observe is that at each scientific conference, we had either a manuscript that we dropped on bioRxiv or a poster presentation or a talk that we gave. And as we went through the year, we slowly introduced to the scientific community more and more data about our platform and more and more sophisticated experiments. And as I mentioned in our prepared remarks, that culminated in a really interesting experiment in Q4 that I would consider the greatest highlight. And we demonstrated that on a poster at a talk at U.S. – sorry, excuse me, at the World Hupo Congress in December. Why don't I pass it to Bron just to address just really briefly what that poster was about and talk to you a little bit about that.
spk06: That would be, oh, sorry, go ahead, go ahead.
spk02: Yeah, thanks, Max. So I'd like to just start out, 2022 was a tremendous year for our organization. We really built out the development side of our organization and brought the scientific community on our journey. with a series of milestones, as Suchil mentioned, presented at different conferences. And the largest milestone for me that we presented was really the scaling of our processes, demonstrating that we can comfortably run 70, 80 cycles and do that in a routine basis with dozens of multi-affinity probes that were developed by our in-house pipelines. And that really demonstrated the complete end-to-end sample prep all the way through instrument analysis, through data analysis aspects of our platform. And to accomplish this, we had to improve the scale of our reagents. We had to improve the quality of all of our consumables. We also had to improve our instrument to be able to support runs on that scale. And so over the coming year, we expect that scale to continue the improvement in quality of reagents and maturing towards our commercial launch. Sujal?
spk05: Thanks, Parag. Max, just to answer the last part of your question of what to expect in 2023, you know, Nautilus has had in 2022 and will continue to have in 2023 a strategy of bringing the scientific community and our potential partners, collaborators, and customers along on the journey as we complete the development of our platform. And so as we move through conferences on the scientific side through 2023, starting with the U.S. HUPO conference in early March, you should expect us to continue to have talks and continue to have poster presentations and manuscripts that continue to show our progress on the scientific front. And I think that that progress will indicate our progression towards that goal of a mid-2024 launch of our instruments and reagents and our systems.
spk06: Yeah, and of course, congrats on the poster, Ed Hoopoe, you know, and the 70 cycle run on the platform. We'd be curious to hear any feedback you received, you know, at the annual Congress, and I guess generally throughout 2022, as you rolled out new manuscripts and posters, how the feedback has sort of evolved amongst the scientific community?
spk02: Yeah, that's a great question. We've seen really just tremendous enthusiasm for the platforms. It has been, at Hoopoe, we met with a very large number of key opinion leaders, talked about their anticipated needs, their excitement about the platform, the sensitivity, the scale, and it's, I think that was underscored as well in the first access challenge that we saw just incredibly creative applications from around the world. And so I think what we're seeing overall is, and one of the other points I'll just mention about Hupo, at our seminar, really great questions, strong engagement, standing room only. In fact, lots of people sitting around the walls. And it was just fantastic to be able to share our journey with the scientific community and to have that kind of feedback.
spk06: Well, that's great. Thank you for taking the questions and looking forward to 2030. Thanks, Max.
spk08: Stand by for our next caller.
spk10: Our next question comes from Matt Sykes with Goldman Sachs. Matt, your line is open. Please go ahead.
spk15: Great. Thanks for taking my questions. Good morning, Sujil Parag and Anna. Maybe I just want to start on that last question and be a little bit more specific on some of that feedback. Sujil, you mentioned you spoke to a lot of mass spec users, and I'm just curious, as you spoke to them and gathered feedback, what are some of the things that they're excited about on Nautilus relative to what they're doing on mass spec? Is it throughput? Is it depth of analysis? What types of specific feedback are you getting from them that can kind of give you comfort that there is a competitive advantage relative to the mass spec being worked done in proteomics that's going on today?
spk05: Good morning, Matt. This is Sujal. The comments you heard earlier were from Parag, but why don't I start here, and then I'm going to pass it to Parag to give you some more specific feedback from what he heard in December. From a broad perspective, the way that we ensure that our product is going to hit the market correctly is by a constant and wide range of activities that engage with our potential customers. And that is one-on-one conversations, voice of the customer studies, it is pricing studies, it's engagement, it's scientific conferences, it's engagement with inbound activity, and it's as well really spending time and understanding what are the applications that scientists are interested in and how does our technology apply. The first access challenge, of course, underscores that as well because that was an opportunity for them to tell us how our platform would apply to their research What we hear time and time again is that traditional methods, meaning generally mass spectrometry and then emerging affinity-based and peptide sequencing methods, really the challenge with those is a challenge in terms of sensitivity, scale, and reproducibility. And so to give you an example on the sensitivity front, being able to analyze intact protein molecules without having to digest them into peptides gives you a two log sensitivity advantage right off of the top and is critical for this next phase of proteomics that's coming over the course of the next five to 10 years. Gale is another one of those things that's incredibly important to these customers. Our platform is being designed with a chip that can immobilize up to 10 billion protein molecules. That leads to the ability to quantify across an extremely wide dynamic range. which is critical when you're in a wide range of applications. For example, in pharmaceutical development where you are looking at a 96-well plate that has samples which are cell lysates, those might be 100 to 1,000 cells, which is the typical sample size in each of those wells. You need a chip that's 10 billion protein molecules large in order to be able to analyze those with the greatest gap And there are no platforms that are within many orders of magnitude that are existing today or conceived. And so it's those aspects that researchers have really been captivated by. And in the conversations that I've had, you know, customers readily are able to see how our specifications and what we're building would be impactful and differentiated for their biological research. Paul, why don't you add some specific commentary from December from the HIPAA event?
spk02: Thanks, Sujal. I think one of the key aspects as we look at this field in this space is that we find that even current MassPEC users recognize the need for complementary tools so that they're really asking the right question using the right tool. and they recognize the key aspects of our platform, comprehensive analysis, sensitivity, dynamic range, reproducibility, runtime and ease of use are really important factors when they're thinking about their study design. One of the aspects that we've done as well is really a series of deep interviews in 2022 with 40 or more key opinion leaders most of whom are mass spec users, and those design criteria for the platform, the ability to get to single molecule incredibly sensitively, the ability to look at proteoforms because you are not digesting the proteins and are able to look potentially at multiple modifications on the same protein molecule, those are capabilities that they're excited about unlocking novel biology.
spk15: Great. Thank you very much for that. And then, Anna, just on OPEX, you mentioned the 40% growth in 23. Two things. One, should we think about the R&D versus G&A splits as being kind of similar to what you did in 21 and 22 with sort of that 60-40-ish split between R&D and G&A? And then, secondly, how should we think about the San Diego facility costs coming through, assuming that's a lease, just, you know, either as a percentage of or just maybe kind of characterize as those costs come through in 23? what that might represent of that growth in OPEX. Thank you.
spk16: Hi, Matt. I can definitely speak to that.
spk17: As you suggest, as you mentioned, the majority of our spending is still definitely going to R&D. In 2022, that was at approximately 60%. And given that we're still very much focused on development, I would expect that to continue for most of 2023. And then dollars would shift more towards SG&A as we get closer to that commercial launch. We are very excited about our San Diego facility. It's a fairly small facility, so I don't think it will contribute any meaningful expenses to those OpEx numbers. And I think overall our facilities, we've done a really fantastic job of taking on new facilities without a significant amount of cash outlay. or adding significant structural spend to our spending forecast.
spk08: Got it. Thank you very much. Appreciate it. Okay. Stand by while I promote the next caller.
spk10: Our next question comes from Brandon Coulard with Jefferies. Brandon, your line is open. Please go ahead.
spk11: Hey, thanks, folks. Good morning. Sujal, on the TGen partnership, I'm curious why they were the next logical collaboration partner. Why focus on such a rare disease like DIPG, and how many additional partners would you like to add in 23 on top of the current five?
spk05: Yeah, so let me take a couple of aspects of your question, and then I'll pass it to Parag to talk specifically about DIPG and why this was an interesting application. When you look at our existing set of collaboration, Genentech, Amgen, MD Anderson, and now TGEN, What we've tried to do is we've tried to focus on proteoform use cases that are within the capabilities of the platform today so that we can do analysis and deliver to the customer biological insight that they can't get from somewhere else. And the additional criteria is that we want all of these early collaborators to continue with us on this journey as we move towards platform launch and the great potential early access partners, data sites, and then ultimately customers. And so that's kind of the initial criteria for us. The other thing that's important to us is to have researchers who are focused on really important research, who are known well, and are willing to publish with us so that we can start building this body of evidence around our platform and start showing scientific community data coming off of our system. And so with TGen, it was able to hit all of those marks. Now, that being said, As we start to move deeper into 2023, our attention will switch a bit, not to these proteoform partnerships, but really switch to our early access program, which is a more formal program where the customer may take 24 or 48 samples, run them on our platform once we are capable of broad-scale proteomic analysis, and then we would return the data to them. We might have a small fee for that engagement. And really, those early access partnerships are about data generation and showing the scientific community what we can do. But equally, they are important for pipeline generation and starting to drive towards pre-orders of the instrumentation. Todd, do you want to chat about the particular application for TGen and why it's interesting in our portfolio of applications?
spk02: Absolutely. Thank you, Sujal. So, I think DIPG is, despite being a relatively rare cancer, is a model for many other types of cancers. Additionally, the particular protein target that we're studying in that collaboration, our goal is to measure mutations and post-translational modifications, proteoforms, on individual histone molecules. And that ability will provide really critical new insights into how histone modification and proteome variation thereof, drive the biology of this disease, but also will provide a window into epigenetic modification in general. And that's a tremendous area of scientific interest. It's incredibly exciting. TGen is a fantastic partner to work with on these studies, so we're really excited to dive in with them.
spk11: A couple. Susil, any updated thoughts on chain? And as you look out over the next kind of 12, 18 months, any pain points you anticipate as you start moving towards commercial launch?
spk05: Yeah, Brandon, it's a great question. And we certainly are continuing to see supply chain pressures out there. And most of that pressure is with respect to lead times for various things. It could be simple things like tubes and pipette tips, and it can be more complex pieces of instrumentation as well. The third area for us is that there certainly are some slow parts of the supply chain with respect to some of the parts of our instrument as well. You know, what I would tell you there is, yes, there's some pressure, but we are managing it well. We have a team on the supply chain side that's led by our SVP of operations and supply chain. Mary Godwin has been doing this for four decades, and we've been doing a good job on our instrument side in making sure that we have parts pipelined for all of the instrument builds that we're planning, and we're planning our supply chain appropriately given the extensive lead times for a few components.
spk11: Last question, maybe better for Anna. The OPEX outlook applies to maybe another $30 million in incremental spend. Will that be mostly weighted to the back half? And I think you've been pretty cautious about building the commercial team up too soon. Will that begin to take shape in the back half? And I guess generally, where will that incremental $30 million be concentrated?
spk17: I can speak to the first part, and then, Sujal, maybe you want to tag on to that. But last year was a bit of an interesting year. We saw a dip in expenses as we consolidated our costs, and then we picked up in the second half. I would expect going forward that we would see more consistent growth over the course of the year, certainly with the highest spending being towards the end of the year. And that's really... still very much focused on development. We're still continuing to invest there. We're preparing for scale up quality manufacturing. So those are some of the areas where we'll continue to put both hires and dollars as we scale our experimental capacity. And then certainly towards the tail end of the year, we would begin hiring for the commercial launch that we expect in the first half.
spk07: and in the middle of 2024.
spk09: Yeah, so let me take the second half of your question here.
spk05: Brandon, let me take the second half of your question here, and you can dive in and ask more. So one of the things you asked was really when to expect the commercial build-out, and I think that I will add a little bit of nuance here. You know, there were some questions earlier about the macro environment and how we're reacting to it. And one of the things that we will do here ahead of our commercial launch in mid-2024 is build out a commercial team. But there are two things that you should realize there. Number one is that the team itself, we believe, will be a very efficient team, and it's not going to be a team that's going to be huge. And the primary reason there is that we have a instrument deal price an initial deal price that's roughly a million dollars and so the transactional load of being able to generate significant bookings from a particular sales rep out there is actually is actually really good and so that that leads itself to sales efficiency and helps us with the cost structure of our commercial organization the other thing to think about is that when you know When capital is readily available in the wider market, you would build your commercial team and start your top of formal activities earlier in the cycle. And when things are tight, like the environment is today, you'll build the commercial team much closer to the launch. And so, you know, I'm not going to commit to exactly what the timing is of that commercial team build-out, but what I will tell you is that we will compress that down pretty tight in front of that commercial launch. And while that might affect our revenue ramp rate right after the commercial launch, it's our job as a management team to try to mitigate that. But we think that that's probably the most prudent thing to do because the last thing we wanna do is overbuild the commercial organization and then have some sort of timing difficulty that leads to an additional pressure on our object.
spk08: Gotcha, that's really helpful, thank you.
spk10: Okay. Our last question comes from Tejas Sevant with Morgan Stanley. Hold, please, while I connect you.
spk03: for Tejas. Thank you for taking the questions. I guess the first one for me would be for Sujo. Thank you for the color on the Access Challenge. But I was thinking, aside from the Access Challenge and your conference presentation and data releases, How else are you keeping customers engaged ahead of your mid-24 launch?
spk05: Yeah, so that's a really great question. So, I think that there are a lot of different ways that we are keeping the scientific community, meaning the researchers and our potential collaborators and customers engaged. First and foremost, we've had a large number of conversations, hundreds of conversations over the course of the company's six-year life with potential customers and partners. And the response has been incredible. We continue to engage with those customers, giving them regular updates. We engage with them on surveys and formal voice of the customer types of interviews. We meet with them at our various conferences and spend time keeping them up to date. So that's number one. Number two is that one of the things that's really been great here at Nautilus is that there is quite a bit of inbound activity from potential partners and customers because of the excitement around our platform and the capabilities that we've begun to show at scientific conferences. And so we have a steady stream of conversations with customers, getting them up to speed and doing presentations because of that inbound types of activity. One of the other things as well, that we did in 2022 is that we engaged with about 40 KOL, most of whom are mass spec users. And we did deep interviews with them, engaging them on where their pain points are, what they're looking for out of a proteomic solution that really tries to make a significant impact on their biological research. And through those engagements, we've had a continued meaningful dialogue So, you know, all of those things together, the first access challenge, the data releases, conferences, we have a very, very good interface with our potential customers and collaborators and partners.
spk03: Got it. That's helpful. And then, Sujo, I'm just wondering, if you look over the past year and all of the changes in the proteomics landscape, has your views on the competitive landscape changed at all over the past few months? And are you anticipating any dynamic changes ahead of your mid-2024 launch?
spk05: That's a great question. What I'm seeing over 2022 and the first couple of months here of 2023 continues to reinforce for me that we are building a highly differentiated product with a wide competitive mode. What I've seen from the traditional method competitors is that seen continued evolutionary improvements to their platforms, but nothing that really is fundamentally game-changing. And from the emerging competitive landscape, you know, there are a few names that are performing quite well on the targeted side of proteomics, which is different and highly complementary to what we're doing. But on the discovery side where there are some companies looking to improve sample preparation, some that are focused on peptide sequencing methods, when we look at the capabilities of those platforms and how they've evolved, over the course of the last 12 to 14 months, if I include the first couple of months of 2023, I'm not seeing any major capability improvements or anything on the horizon that would close the gap with the capabilities of our platform that we're building.
spk03: Great. And one final one for me. I guess this is a little bit looking out into the longer term, but the clinical market is a huge opportunity for you guys. And with the clinical market today relying primarily on single biomarker assays, what do you think it'll take to drive that market to using a broader set of proteins in the clinic? And I know you guys highlighted sensitivity, scale, reproducibility, run times, and ease of use as key characteristics. But what do you think are some of the key features that this specific market would be looking for?
spk02: I think that's a great question. I think when we look at the clinical market, we've seen a similar trend in transition from single marker-based studies to panels occur in genomics. And it started with providing the research data across a wide spectrum of initially mutations in genomics so that people were able to take a more comprehensive look in a retrospective manner. from that comprehensive look it just made sense to start using panels there was a point that measuring those panels by orthogonal means was inefficient and it was it was easier it was faster it was to simply use the discovery platform as the clinical platform and so we anticipate a similar transition will occur in proteomics initially people will use the discovery platforms, look at a wide variety of markers, understand the synergies between them, understand the predictive power that comes from being able to look at many biochemical axes at the same time, as well as diving into proteoforms and really looking at that molecular heterogeneity as a marker. As those panels get larger and larger and it becomes challenging, to convert them into traditional assays, ELISA's, others, it'll spur a natural transition towards using our discovery platform as a clinical platform. And we are excited about that opportunity going forward. We're preparing for that opportunity going forward. And I think it's a really natural evolution of the field.
spk08: Great. Thank you guys for the time today. Okay.
spk10: Thank you everyone for your participation in this conference. This does conclude the program and you may now disconnect.
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