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spk00: Good morning, ladies and gentlemen, and welcome to the O-Link Proteomics Q2 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. I would now like to turn the conference over to your host. Ms. Stina Thorman, IR Manager, please go ahead.
spk02: Good morning, everyone. Thank you all for participating in today's conference call. Earlier today, O-Link released unaudited financial results for the second quarter ended June 30th, 2021. A couple of the press release and an updated corporate presentation are available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the U.S. federal securities laws, which are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to the variety of factors. For a list and description of the risks and insurgencies associated with OLE's business, please refer to the risk factors section of our final prospectus relating to our registration statement on Form S-1, file number 333-2. which was declared effective by the U.S. Securities and Exchange Commission on July 14, 2021, and in our other filings with the SEC. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. In the remarks or responses to questions, management may mention some non-GAAP financial measures. Reconciliations of adjusted gross profit and EBITDA and certain other non-GAAP financial measures to the most directly comparable GAAP measures are available in the recent earnings press release available on the company's website. This conference contains time-sensitive information and is accurate only as of the live broadcast today. August 11th, 2021. O-Link 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, except as required by law. And with that, I will turn the call over to Oscar.
spk03: Thank you, Stina, and good morning, everyone, and thank you for joining O-Link's second quarter earnings call. Before we get started today, I just want to inform you that John, unfortunately, is unable to join the call today. John has been admitted to a hospital with intestinal obstruction caused by an appendix removal he had some 35 years ago. I've spoken to him today, and he's doing well given the circumstances, and he expects to return in full force very soon, as soon as he receives treatment. With me today, I have Carl Raymond, our Chief Commercial Officer. Thank you for joining us, Carl. I will start with an overview of our operating results and strategic objectives, which include expanding our product offering and signature launch, and two, an update on our financial results and full year guidance. We will then open up the call for questions. Overall, I'm very excited with our performance in the second quarter of 2021, which marks our first full quarter as a public company. During the quarter, we delivered on all strategic aspects of our plan to expanded adoption of proteomics to help better understand real-time human biology. In our first full quarter as a public company, we delivered solid financial results and achieved several operating objectives, which we will discuss further today. We're pleased to report that we had a strong quarter with total reported revenue of 17.7 million, representing significant growth of 124% compared to the second quarter of 2020. On an organic constant currency basis, our revenues grew 129% compared with the second quarter of 2020. This performance resulted from the strategic execution across our entire business demonstrated by year-on-year growth in both kit and service segments of 191% and 131% respectively, which were driven by the Explore platform and our Explore kit launch. As a reminder, our products are offered both as kits and services through our Analysis Service Lab. And further, as you may recall, our kit offering was launched late in Q1 of 2021, So Q2 2021 represents the first full quarter of activity for Explore Kids. We are pleased to see continued momentum for the Explore platform, and they were building out their external installations somewhat ahead of our internal targets. The Explore pipeline looks very robust and supports the plan that we've set out for the near term. We are also encouraged by the fact that we see a good representation of both biopharma and academia in that pipeline. To date, we've generated kit revenues from 16 installations, including early access customers. From a regional perspective, we saw positive quarterly revenue growth and solid penetration of Explore in all regions. We continue to ramp up investments into our organization, and we're excited about the strong team that we are continuing to expand globally. We continue to monitor the development over the COVID pandemic, and in light of the recent increased uncertainty of how countries will respond to the Delta variant, we maintain our annual revenue guidance of 90 to 92 million for 2021. As we discussed during last quarter's call, O-Link is a leader in the emerging field of proteomics with our differentiated platform that provides clarity on mechanistic biology to address the overwhelming inefficiencies in healthcare and drug development. We are proud that researchers and clinicians are recognizing O-Link as a market leader, evidenced by our growing customer base and accelerating adoption of our technology. Furthermore, our customers' work has led to an accelerating number of publications referencing the O-Link platform. O-Link's deviation in the market starts with our disruptive and proprietary proximity extension assay technology, PEA, comprised of three product lines, Explore, Target, and Focused. Our newest product line, Explore, was launched worldwide as a service offering in June 2020 and rolled out as a kit offering in March of 2021. This offering has been met with excitement and strong adoption from our customers. We ended the quarter with 16 external installations that we have generated revenues from since 2020, and the pipeline of additional labs continued to increase at several strategic sites, including Oxford University and the Helmholtz Center in Munich. In the second quarter of 2021, Explore represented more than 53% of total revenues as compared to 26% in the 420. We are pleased with Explore's production as a service offering and remain excited about the momentum in the kids' business. We recently announced the expansion of this product offering with the introduction of O-Link Explore 3072 in June. This is a significant milestone as it provides customers with access to our expanded library of approximately 3,000 carefully created and validated assays. With this expansion, we doubled the number of available protein biomarker targets covering all biological pathways and increasing the dynamic range while maintaining unparalleled sensitivity, specificity, and precision. By using O-Link Explore 3072, customers can experience a throughput of close to 10,000 samples per week per system. The system features our PEA HyPlex high multiplex immune assay technology combined with NGS readout on the Illumina NovaSeq and Illumina NexSeq platforms. We have started to take orders with deliveries expected to begin fourth quarter of 2021. This is an important step in our goal to rapidly expand our offering in the HyPlex space. We know our customers are very excited about the expansion of our protein by-order targets. We are proud to further democratize access to proteomics through access to reagent kits for customers' individual use and rapidly growing network of service providers, including O-Link contracted sites. Our ambition to expand to 4,500 protein biomarker targets in 2022 remains on track. Importantly, O-Link continues to invest in protein assay development by incorporating feedback from customer, what is most important and relevant to them. We've approached our protein assay library expansion strategy from a value-added perspective and continue to be focused on customer priorities as we expand our protein assay offering. During the quarter, DecoGenetics, an Amgen subsidiary and global leader in analyzing and understanding the human genome, became an early adopter of our Explore 1372 platform. We are excited to work closely with DecoGenetics' world-class scientists, led by Dr. Kari Stefansson, as they implement our new proteomics platform on a 10,000-sample multi-omic study. Kari and his team have a very impressive track record of discovering key genetic risk factors for dozens of common diseases, ranging from cardiovascular to cancer, which have influenced new means of diagnosis, treatment, and prevention for patients. Through our partnership, DecoGenetics is empowered with in-house resources to add high throughput, high quality proteomics to its population scale efforts of advancing modern healthcare. Additionally, the UK Biobank from a proteomics project agreed to expand the ongoing proteomics study of 53,000 participants to our new Explore 3072 platform. For background. The Biopharma Consortium and the UK Biobank is currently performing one of the world's largest studies of blood protein biomarkers conducted to date and aims to significantly enhance the field of proteomics, enabling better understanding of disease biology and supporting innovative drug development for more effective therapies. By expanding the study from Explore 1536 to the new platform, Explore 3072, the UK Biobank, and the consortium of 12 biopharmaceutical companies demonstrate their commitment to the Olin technology platform and support for continued investment in customer-oriented protein assays. We plan to book revenues from this contract extension in the first half of 2020, and we expect to run the 56,000 samples on the first 1536 proteins during Q3 and Q4 of 2021, as previously communicated and reflected in our guidance. As I mentioned earlier, at O-Link, we're committed to delivering the most relative protein assays to our customers, and I would like to take a moment to discuss the library coverage of biological pathways and processes that Explore 3072 enables. At O-Link, we provide a holistic, broad, and deep interrogation of the plasma protein. We use the freely available open source reactant database, which provides a transparent, intuitive, and visual overview of the molecular molecules, in our case, proteins, and their relationships organized into biological pathways and processes. Proteins participate in processes forming a network of biological interactions, which are grouping pathways including immune system, metabolism, signaling, and transcriptional regulation. The REACT-M is composed of 26 main pathways describing normal cellular function and one main pathway describing disease. In total, there are 2,536 pathways in the REACT-M database. Proteins can then be cross-linked and annotated to the different pathways based on open source databases and public literature. We can then use the reactant as a tool to measure our proteomic coverage and our focus for expansion of new protein biomarker targets. The takeaway here is with Explore 1372, we cover 100% of all major pathways with at least one protein, 94% of level one, 87% of level two to four, and finally, 81% of all level five pathways. Our coverage of four of the five level five pathways represent a vast proteomics landscape that we're playing in and will continue to expand. The REACT-M is an essential knowledge source for our community to better understand O-Link data and which pathways and mechanisms are involved in health and disease. Before turning to an update on our target and focus product, I want to provide an update on third-party validations of our products and services. During the quarter, we saw an expansion from the Scallop Consortium, a pre-confidential consortium consisting of academia and biopharma participants sharing genomic and proteomic data. Scallop is, to our knowledge, the world's largest proteogenomic database with the purpose of identifying novel and casual drug targets. This strategy combines data on genetic versus protein levels with data on genetics versus disease endpoints. with the goal of identifying proteins that are casual in disease distinguishing between cause and consequence. Despite being early days for this modern approach, it has already now proven to lower risk in drug development two to four times. The expansion includes a launch of a clinical arm using Olin-derived proteomics data with a goal to boost statistical power in comparison between active arm versus placebo standard of care. This will allow participants to access larger data sets to assess whether protein changes in Activon is specific for their indications or also seen in other trials or same or different disease indications. The final aim is to develop an indices standard for MPX, which stands for normalized protein expression, and is the unit in which holding data is presented to future proof protein profiling in clinical trials. Moving to our target and focus products. In June, we also introduced O-Link Signature Q100, an affordable benchtop system designed for readout of target and focus protein biomarker panels. The introduction of this system expands researchers' access to O-Link technology and high-quality proteomics data. We have seen significant interest in Signature thus far, based on the initial indication of interest or inquiries from potential customers. This positive response from customers is reassuring as we look to commercialize Signature later this year and into 2022. We remain committed to investing in and developing our product portfolio of more targeted solutions for protein biomarker research based on qPCR readouts. Until now, readouts of our target and focus panels have been exclusively carried out using the BioMark HD instrument from Fluidigm. Signature tube 100 offers a new dedicated solution for readout of target and focus panels that will enable researchers to run our kits more easily and conveniently in their own labs, using as little as one microliter of plasma or serum to measure up to 92 proteins simultaneously. This is one of many developments currently underway to serve a broader spectrum of needs within protein biomarker research, providing a broader offering of application-focused mid-tech solutions and more flexible customer offerings, which demonstrates our commitment to innovate and improve across all aspects of our growing portfolio to better serve the needs of our customers. We also remain on track with development of a new flexible product offering where customers can freely pick and choose up to 20 protein biomarker targets. This product will be a significant addition to our target portfolio that we believe our customers will very much appreciate, and we plan to begin selling this flexible product in 2022. Looking forward, O-Link remains focused on investing in the business to accelerate research and development, as well as to expand the commercial infrastructure to drive revenue growth. We are already showing the market great innovation with the expansion of a validated protein library of 3,000 assays, with holistic pathway coverage, and with further expansions to move to 4,500 in 2022. We also continue to add a meaningful number of hires, especially to our commercial and R&D teams. But we're growing all parts of our business and are investing slightly ahead of the growth curve we are expecting in the months, quarters, and years to come. We ended 2020 with 214 employees, And at the end of June, we had 317 employees, of whom 120 were in the commercial team. In addition, we recently closed our secondary offering by selling shareholders led by Summa Equity, a significant equity holder in July. And we were excited about the opportunity to speak with many of you on the road. And we wanted to announce that we're planning an investor day in New York on November 15, where we hope to have the chance to meet a number of you in person. but we will continue to monitor the COVID-19 developments. A safety date and more details will come soon. Before taking a closer look at our financials, I want to pause and conclude. In summary, we are pleased with our second quarter performance. We are confident that we have the framework in place to continue executing on our investment and strategic plans and drive meaningful growth for the years to come. Digging deeper into our financials, And total revenue for the second quarter of 2021 was 17.7 million, as compared to 7.9 million in the second quarter of 2020. Revenue growth was driven by the continued momentum in the expansion of our Explore platform, with Q2 2021 representing the first full quarter of sales activity for our Explore kit offering, which was launched late Q1 2021. Our Explore services revenues are driven by a broad spectrum of customers across the Americas, EMA, and the rest of the world. At the end of the quarter, we have 16 externally placed next door installations that we have generated revenues from in 2020 and in the first six months of 2021. 2020 kit revenues relate to early access customers and primarily occurred in the fourth quarter. We've seen an average pull-through on these customers of some $600,000, with individual customer spend ranging from less than $100,000 to million-dollar orders. Analysis services revenue for the second quarter was $11.8 million, as compared to $5.1 million for the second quarter of 2020. The service growth continues to be largely driven by Explore across all regions. Kit revenue for the second quarter of 2021 was $5 million as compared to $1.7 million for the second quarter of 2020. Kit revenues were primarily driven by the Explore kit launch and more specifically the decode order. Explore kit revenues accounted for 39% of all Explore revenues in the quarter, a majority of that attributed to one order. Other revenues was $0.8 million for the second quarter of 2021 as compared to $1 million for the second quarter of 2020. Looking at revenue by geography, revenue in North America was $7.8 million as compared to $4.5 million for the second quarter of 2020. In MEA, revenue was $8.7 million as compared to $2.9 million in Q2 of 2020. And revenue in China and the rest of the world was $1.2 million as compared to $0.5 million in the second quarter of 2020. Cost of goods sold was $5.8 million in the second quarter, resulting in a gross profit of $11.9 million in the second quarter of 2021, as compared to cost of goods sold of $2.3 million in the second quarter of 2020, resulting in a gross profit of $5.6 million in the second quarter of 2020. Adjusted gross margin decreased to 70.6% versus 72.4% for the second quarter of last year. This decrease of 180 basis points was primarily due to a reduction in the service cost margin in the quarter as it continued to invest in capacity and a decrease in the kit margin as Q2 2020 was positively impacted by production variances. Our strategy to increase kit revenues as a percent of total revenues is expected to have a positive mixed impact over time. By segment, adjusted gross profit margin for analysis service was 64 percent for the second quarter as compared to 67 percent for the second quarter of 2020. Decrease in adjusted gross profit percentage compared to the second quarter of 2020 was primarily due to continued investment into the left capacity ahead of the anticipated growth and temporary reduced efficiency in the lab as we introduced the Explore service options. Adjusted gross profit margin for kits was 90% for the second quarter of 2020 as compared to 95% for the second quarter of 2020. The decrease in adjusted gross margin for kits was primarily due to a positive inventory variance in 2020, And the 2021 gross margin level represents an underlying margin level for our key business. Adjusted gross profit margin for other was 44% for the second quarter of 2021 as compared to 62% for the second quarter of 2020. The decrease in other gross margin compared to the second quarter of 2020 was due to a single order to a core lab. Total operating expenses for the second quarter of 2021 were $23.3 million as compared to $10.5 million for the second quarter of 2020. We continue to invest according to our strategic plan and what we communicated during the roadshow, adding a meaningful number of hires to our commercial and our lead teams in particular. But as mentioned previously, we are really growing all parts of the business and investing slightly ahead of the curve. Excluding non-recurring items related to our follow-on offering, the operating expenses for the second quarter were $21.9 million, including DNA. Excluding DNA, our operating expenses for the quarter were $18.1 million. We ended 2020 with 214 employees, and at the end of June, we had 317 employees, of whom 120 were in the commercial team. We see a lot of opportunity ahead for Olink, and we are investing accordingly. Our operating expenses are broken out as follows. Selling expenses for the second quarter were $7 million compared to $3 million for the second quarter of 2020. Administrative expenses for the second quarter of 2021 were $12.2 million as compared to $4 million for the second quarter of 2020. Administrative expenses in the second quarter of 2021 included approximately 1.4 million of expenses related to our follow-on offering and 2.7 million related to intangibles amortization stemming from the purchase price allocation following Summa's acquisition of O-Link in 2019. Further, administrative expenses have increased year over year as we've incurred additional expenses in the ordinary course of business of being a public company. Research and development expenses were $5 million for the second quarter of 2021 versus $3.5 million for the same period in the prior year. We continue to invest in our R&D efforts, and we are proceeding according to plan on all our major initiatives. Other operating income loss were $0.9 million in the second quarter of 2021 compared to a loss of $0.1 million in the second quarter of 2020. Net loss for the second quarter of 2021 was 10.6 million as compared to 2 million for the second quarter of 2020. Net loss per share for the second quarter of 2021 was 9 cents as compared to 28 cents for the second quarter of 2020. Adjusted EBITDA for the second quarter of 2021 was negative 6.3 million as compared to negative 1.3 million for the second quarter of 2020. We ended the second quarter with 158.1 million of cash and cash equivalent. And moving to our outlook for the rest of the year, due to the continued uncertainty around the COVID pandemic, we maintain our revenue guidance and we expect revenue for the full year 2021 to be in the range of 90 to 92 million, representing 66 to 70% growth over 2020. In summary, the second quarter of 2021 was another quarter of continued execution and growth. We are pleased with the growing traction and robust adoption across our entire portfolio of products and services. We look forward to providing future updates and investments we are making into our business and our strong operational and financial results. At this point, we will open up for questions. Operator?
spk00: If you would like to ask a question, please press star 1 on your telephone keypad. Your first question comes from the line of Matt Sykes with Goldman Sachs.
spk04: Hi. Good morning, Oscar and Carl. Thanks for taking my questions. Just to start out on Explore, you mentioned the 16 new installations and you said it was a good mix of biopharma versus academic. I'm just wondering in terms of mix versus new versus existing, I know there's some early access in there too, but any new customers represent part of those 16 new installations?
spk03: Yeah, so I think, I mean, we see sort of a healthy mix of both, I mean, existing and new customers in the installations. But I would say sort of the majority is sort of, you know, from a dollar perspective is coming from existing customers. But there are definitely some new customers in there.
spk05: Yeah, I'll confirm that. Yeah, a mixture of both sort of new customer interest, which is exciting to see, as well as, as Oscar mentioned, you know, some good uptake from our existing customers and adoption of the platform.
spk04: Great. Thanks for that. And just on the competitive landscape in the low-plex targeted area, obviously a lot of your focus has been on Explore for good reason. I'm just wondering, in terms of the signature launch and the importance of that to – kind of building the growth momentum within LowPlex. How important is that? And are you seeing, you know, continued growth within the target and focus products?
spk03: So I can start by brief comment, and I can hand over to Carl. I think, I mean, we do see good traction on the Signature launch. And just sort of as a reference, I mean, in the guidance that we put out there, sort of the monetary contribution from Signature is relatively limited. But handing over to Carl so he can comment more on sort of the momentum that we see in sort of the signature part and target part of the business.
spk05: Yeah, thanks, Oscar. So, yeah, the uptake in interest has been tremendous so far. I think it sort of outstripped expectations a bit. And the signature instrument is absolutely going to be, I think, critical for our success in the mid and low-plex business. In fact, I guess sort of reflecting back on your prior question, also seeing sort of interest beyond the existing customer base into new customers as well. So we are seeing that entry point for the instrument and the accessibility of the technology that's being allowed by the launch of this instrument to open up the market. So we think that's going to be a very important story for us, as well as what Oscar mentioned earlier, in terms of development of future products and sort of a custom offering that will be available sometime in 2022, which then just sort of further addresses the needs our customers are expressing.
spk04: Great. Thanks very much. Appreciate the question.
spk00: And your next question comes from Sunji Nam with VTIG.
spk01: Hi. Thanks for taking my questions. Just a couple of questions from me. The coral initiative that you guys announced was curious, does that include both academic and biopharma customers as well, or do you anticipate that to happen? And then just kind of out of curiosity, would that partnership utilize Explore or the target platforms. Just kind of curious how they're thinking, how, I guess, the partners are thinking about that.
spk03: Yeah. Thanks, Chanji. Carl, do you want to take that question?
spk05: Yeah, yeah. I don't want to speak on behalf of the consortium or leadership, but to the best of my knowledge, it's open for any collaborators to participate, and we certainly encourage you to reach out to the consortium. And then, conversely, to the best of my knowledge as well, I don't think there's a limitation on which data they would particularly analyze. So, again, I sort of refer to the consortium, but, yeah, it's a tremendous amount of opportunity, I think, overall for the user community to contribute in that specific way as well with any sort of O-Link data.
spk01: Gotcha. Great. Thank you. On the UK biobank project, you mentioned the project for the 1500 being completed by the end of the year and then for the 3072 revenue recognition for the first half of next year. Just was wondering the, you know, what the contribution from the 3072 might look like. Would that be kind of comparable? to what you're looking to recognize for the first part of the project?
spk03: Yeah, thanks. That's a great question. So the extension of the UK Biobank, so we're running the first 1536 this year, and then the extension will be another 1536 to get to the 3072 sort of next year. Unfortunately, we are sort of under contract with the big, you know, the companies in the consortium, so we can't disclose the exact details. But the sort of overall contribution from the extension will be sort of smaller from a monetary perspective than the initial 1536. But then, of course, the sort of, you know, scientific contribution and also, you know, the sort of the contribution from a, you know, strategic and positioning perspective rolling, you know, it's great.
spk01: Gotcha. Great. Thank you so much. Thank you.
spk00: Again, if you would like to ask a question, please press star 1 on your telephone keypad. We have no further questions in queue.
spk03: Okay, thank you. So thank you, everyone, for joining us today and for your continued interest in O-Link. We look forward to keeping you updated on our progress, advancing proteomics, but also enhancing shareholder value. And we hope to see you in person at our plan investor day on November 15th. Thank you, and have a great day.
spk00: This does conclude today's call. Thank you for your participation. You may now disconnect your line.
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