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spk04: Good day, and thank you for standing by. Welcome to the OLINX Proteomics Q2 2023 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Medina, VP of Investor Relations and Capital Markets. Please go ahead.
spk11: Thanks, DeeDee, and good morning, everyone. Thank you all for participating in today's conference call. On the call from O-Link, we have John Hymer, Chief Executive Officer, Carl Raymond, President, and Oscar Yeom, Chief Financial Officer. Earlier today, O-Link released financial results for the second quarter ended June 30th, 2023. A copy 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 a variety of factors. For a list and description of the risks and uncertainties associated with OLINC's business, please refer to the risk factors section on 2420F, Commission File Number 001-40277, filed with the U.S. Securities and Exchange Commission on March 27, 2023, 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. Also, in our remarks or responses to questions, management may mention some non-IFRS financial measures. Reconciliations of adjusted gross profit and EBITDA, constant currency revenue growth, and certain other non-IFRS financial measures to the most directly comparable IFRS measures are available in the recent earnings press release available on the company's website. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 9th, 2023. Oling 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'll turn the call over to John.
spk06: John? Thank you, Jan, and good morning, everyone, and thank you for joining Oling's second quarter 2023 earnings call. I'll begin with highlights of the quarter and recent progress, including our launch of Explore HT and other innovation at Olink. Then I'll turn the call over to Carl to provide more details on our commercial results, Explore HT and Outlook. Following that, Oskar will discuss our financials. Olink saw continued success and business momentum in the second quarter. From high-plex to low-plex, our reach within customer labs around the world continued to expand, driven by strong externalization with both Explore and Signature. We navigated through a challenging external operating environment, which, in combination with our new product launch, pushed our revenue seasonality to be more back-half-weighted, as indicated earlier in the year. Overall, we continued to make expected and solid progress on all major strategic objectives. As we entered the second half of the year, Ohlins' commitment to transformative innovation entered a new chapter with the launch of Explore HT. Explore 1536 and Explore 3072 were both incredible innovations that helped launch the next generation proteomics market, while also laying the foundation for O-Link's leadership. In July, we launched Explore HT to usher in a new era of proteomics, increasing our ambition while doing so and improving upon every major design feature of 3072. We increased the breadth and depth of the library to 5,300 plus validated protein assays, the majority of which belong to O-Link, yielding an 80% increase in unique assays. HT also has sevenfold higher data throughput and a fourfold sample throughput that is scalable from tens to millions of samples. A sixfold reduction in components with a tenfold reduction in boxes and 90% reduction in plastics. significantly reduced cost per data point, including lower sequencing and labor costs, and a simplified workflow, all while maintaining our industry-leading data quality. The power and capability of Explore HT seemed almost unthinkable just a handful of years ago, and we are very proud to offer a product with this level of performance to empower new discoveries in healthcare. Carl will discuss Explore HT and its launch in greater detail. Though I will say that it's been eagerly anticipated by customers, and we believe the initial launch period is going remarkably well. We expected Explore HT will help further cement our market-leading position by demonstrating our commitment to high-quality products and innovation. In software and our data ecosystem, we also made strong progress with Olink Insights significantly expanded its normal ranges resource with data from two large cohorts. This includes data from more than 52,000 UK biobank samples and a subset of data from the China Kadori Biobank, one of the world's largest prospective cohort studies with more than half a million participants. Proteins in health individuals is a critical biological problem. The question, what does normal look like, is a fundamental one that remains largely unanswered, and answers are needed across a myriad of disease states to learn what is not normal. When one considers variables in human populations such as ethnicity, age, and sex, then the diversity of the data pool, the quality of the data measurement, and the competence of the data analysis become critical. Allink Insight enables all of these, and in the process of driving multiple new use cases across customer R&D. As a completely unique data set, we believe O-Link Insights normal ranges resource represents the most extensive collection of proteomics data of its kind. And this is only the beginning. As O-Link Insights users base and data pool both expand over time, its value will increase dramatically for customers within the O-Link ecosystem. and can be further enhanced through advanced data techniques like machine learning and algorithmic approaches. Our mindshare within the scientific community continued to grow during the second quarter as well. Late last year, we reached the milestone of a thousand peer-reviewed publications citing the use of PEA technology, a feat more than five years in the making. Today, less than a year from that impressive achievement, we've exceeded 1,300. and expect to see the rate of strong scientific productivity to continue. Olink and PEA have a growing presence at major medical meetings as well, including the European Society of Human Genetics Conference and the Alzheimer's Association's International Conference in June and July, respectively. We believe Olink's culture of ceaseless innovation has yielded the industry's broadest and most well-positioned product portfolio today, across high- to low-plex, and with end-to-end workflow solutions. The engine of O-Link's success is stronger than ever, and we look to the future with even greater optimism. I'll now turn the call over to Carl to provide more details on our commercial efforts in the second quarter, the Explore HT launch, and what we're seeing in the market. Carl?
spk07: Thank you, John. Revenue of $29.4 million during Q2 was comprised of $10.5 million in kits revenue, $15.5 million in analysis services revenue, and $3.4 million in other. Total revenue on a reported basis grew 7% year over year, with both Explore and Target contributing to kits growth that was near 50%. Second quarter kit mix was 36% of total revenue versus 26% a year ago, and down sequentially from Q1, 2023. This sequential trend was expected and we remain on track with our goal of achieving 50% kit mix for 2023. Explore revenue totaled 18.2 million, representing 62% of our total revenue in Q2 and 68% on a trailing 12 month basis. It was another strong quarter for Explore externalizations with 11 new sites and the total reaching 74 at the end of June. These sites in aggregate represented nearly 1.3 million in annual sample volume potential, and even greater potential when considering the ability of customers to upgrade to Explore HT, a process that is now underway for many customers. We also achieved approximately 700,000 in average customer pull-through during the 12 months ended June 30, 2023. This pull-through remains healthy, and the sequential quarterly decline was driven in part by the expected lower kit mix in Q2 versus Q1 of this year. On instruments, we delivered 15 new signature Q100s to customers during the quarter, reaching an installed base of 132. Geographic highlights included very strong performance from APAC, led by China and Japan, with APAC revenue nearly doubling year over year. In addition, while reported revenue growth in EMEA was negative in Q2 once again, due largely to the high-plex biopharma market, trends in the base business improved from the first quarter. Also, when adjusting for UKBB revenue in the second quarter of last year, EMEA grew more than 15% year-over-year in Q2 of 2023. Customer activity, more notably with biopharma customers, continued to be impacted by the macroeconomic environment, which we previously cited. The result has been an increase in deal friction that has lengthened our sales cycle and impacted timing of customer purchases, which has been compounded by customer anticipation of the recently launched Explore HT. The aggregate result on our revenue is that several late quarter orders were pushed into the second half of the year, particularly in the Americas, where year-over-year growth in the region is expected to rebound strongly in Q3. Our academic customer market continues to perform more strongly than the biopharma market and grew close to 30% year over year. Setting temporary factors aside, more recent customer conversations have been constructive and appetite for our products on a global basis continues to be robust with investing in next generation proteomics a priority. As usual, execution from our commercial team remains very strong and we are confident in our pipeline for the rest of the year. We have seen essentially no change in our high win rate, and we consider the recent launch of Explore HT, we anticipate our commercial mode will expand over time. While we considered Explore 3K to already be the best product in its class, Explore HT improves upon every major product feature that customers have been asking for. Significantly increased Plex, much higher sample throughput, and data throughput that enables true population scale proteomics, smaller environmental footprint, reduced sample size requirements, lower cost per data point, and less labor, all while maintaining our industry-leading data quality that is available plug-and-play for nearly all existing Explore users. Let me provide more detail on our early commercial efforts with Explore HT. There was tremendous anticipation for the launch, and the first few weeks of its introduction give us even more optimism. Yesterday, we announced that the Baylor College of Medicine Human Genome Sequencing Center is adopting Explore HT, and they're among today's initial HT adopters. In addition, there is already a substantial and growing Explore HT pipeline across all our major regions, with numerous requests for Explore upgrading and de novo HT installs, all from customers and prospects across biopharma, academia, and government, providing significant momentum as we head into the second half of the year. The spirit of innovation at Olink remains incredibly strong and Explore HT is just the latest in a series of new product launches since our IPO, which has included Explore 3K, Signature Q100, Olink Insight, and Olink Flex. We continue to strengthen our human capital as well, ending the second quarter with 667 employees, including 224 full-time employees on the commercial team. To expand upon our strong internal R&D capabilities, We're actively monitoring external opportunities, including tuck-in M&A that could augment our antibody antigen development and supply chain capabilities. Now to our outlook. We are reiterating our 2023 revenue guidance range of $192 million to $200 million, representing growth of approximately 37% to 43% on a reported basis, which incorporates a view of our overall sales pipeline and our strong opportunity with Explore HT. which is balanced by the ongoing macroeconomic headwinds and deal friction. Olink also expects its revenues will progress along a seasonal pattern weighted more towards the second half of 2023 than in recent years and the fourth quarter specifically, but with fundamentals that continue to be positive overall. I'll now turn the call over to Oscar to provide additional financial details. Thanks, Colin.
spk09: Hello, everyone. First, a quick reminder that tomorrow, Olin will be participating in the Canaccord Genuity Annual Growth Conference in Boston. Our fireside chat will be hosted at 11 a.m. Eastern, and we hope to see some of you there. Second quarter revenue growth was 7% on a reported basis and constant currency basis. Also, when adjusting for UK biobank revenue in the year-ago quarter, QQ at 2023 total revenue and EMEA revenue growth, revenue both grew more than 15% year-over-year. In addition, we reported adjusted EBITDA of negative 11.6 million versus negative 7.9 million in the second quarter of 2022. As Carl discussed, it was another robust quarter for externalization, and the average customer pull-through for Explorer Kit customers over the past 12 months remains strong. We continue to expect variability in quarter-to-quarter pull-through, which could be further impacted by our customer spending seasonality, though we anticipate continued growth over time. With contributions from Explore and Target, second quarter kits revenue grew 47% to 10.5 million as compared to 7.1 million in the second quarter of 2022. Analysis service revenue for the second quarter was 15.5 million versus 17.9 million for the second quarter of 2022. This brought the second quarter product mix to 36% kits and 53% services, shifting more towards services from Q1 as we expected, And looking into the remainder of the year, we continue to expect KITMIX to be 50% for 2023. Other revenue was 3.4 million compared to 2.5 million for the second quarter last year. By geography, revenue during the second quarter was 12.9 in North America, 11.9 in EMEA, and 4.7 million in China and the rest of the world. Consolidated adjusted gross profit margin was 62% during Q2. as compared to 65% for the second quarter of 2022. Adjusted gross profit margins for kits was 81% for the second quarter of 2023, as compared to 91% for the second quarter of 2022. The decrease were primarily due to increased supplier cost and logistic expenses, but additional impact in the second quarter from component scrapping that we expect will be transitory. In Q3 and Q4, we expect kit margins will improve sequentially. In addition, over the long term, we continue to see strong opportunity for kit gross margins to improve as we increase our own content on the platform. Adjusted gross profit margin for analysis services was 56% as compared to 58% in the second quarter of 2022. With improved AS efficiencies offset by increased component scrapping, they will be expected to be transitory. As we consider Q3 and Q4, we expect service margins will improve on a sequential basis. Adjusted gross profit margin for others was 27% in Q2 2023 as compared to 45% for Q2 2022. Total operating expenses for the second quarter were 36.3 million as compared to 31.7 million for the second quarter of 2022. The increase was largely due to expansion and investment into the overall O-Link organization. Operating expenses are broken out as follows. Selling expenses were $12.6 million versus $10.6 million for Q2 2022. Administrative expenses were $15.8 million for Q2 2023 versus $14 million for Q2 2022. And R&D totaled $8.1 million versus $7.3 million for Q2 2022. Net loss for the second quarter was $8.3 million as compared to a net loss of $4.8 million for the second quarter of 2022. while net loss per share was $0.07 as compared to a net loss per share of $0.04 for the second quarter of 2022. We exceeded the second quarter with $150 million in cash. As we consider our options to further accelerate investment into strategic internal initiatives and the evaluation of external opportunities, we'll remain disciplined with the use of our balance sheet and expect to operate within our previously issued profitability guidance. In addition to reiterating our 2023 revenue guidance, Olin believes it will return to profitability this year as measured by our adjusted EBITDA. Looking further ahead as we consider the strong launch of ExploreHG, our very strong competitive position, and our early days of penetrating the next generation proteomics market, we see exceptional room for growth. At this point, we'll open up the call for questions. Operator?
spk04: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. One moment.
spk02: And our first question comes from Kyle Mixon of Canaccord Genuity.
spk04: Please go ahead.
spk10: guys thanks for taking the questions um i guess on the reiteration of the 23 guidance i mean good to see that it does obviously apply pretty pretty like you know significant or healthy step up in the second half of the year i'm just kind of curious what you're assuming there and baking in in terms of delays and friction and biopharma um i guess internationally you know china's not an issue but are you confident in amia kind of having strength going forward and then finally maybe for Oscar on the gross margin. I mean, how high above the historical trend rate could that get to given this, you know, soft quarter that you just had? Thanks.
spk06: Hey, good morning, Kyle. Thanks for your question. So, yes, so as we sort of alluded to, you know, both in the form of script and in our earlier conversations, right? So, yeah, we are extremely excited, as you can hear, of the launch of ExploreHT. Uh, we had, uh, quite a significant number of customer discussions, uh, that we value very highly. And so, uh, we pushed some of the business from the first half of the year into the second half of the year. So these discussions has been ongoing for quite some time. Right. And, and, uh, that is why we, uh, uh, feel, you know, good where we're at or, or very optimistic and, and, uh, despite the softer quarter. Uh, so this is what's really from our side, like, uh, in, in our planning, really that, okay, we, uh, we're launching explore HD here very, very early in, uh, the first half of the, in the beginning of the, uh, of July. Uh, so, uh, taking all of that into account, the pipeline that we already see growing or the customer interaction and discussions we have. we feel very good where we're at, and then obviously maintaining our guide. So I don't know, Carl, Oscar, if you want to add to that.
spk07: Yeah, I'll just, thanks, and good morning, Carl. It's Carl. Yeah, I think as John noted, and we sort of considered all of these factors, including, you know, the health of the pipeline, the early and very, very positive reception of Explore HT. I mean, we launched just July 12th and already the response has been tremendous, to say the least. So, yeah, so we feel good about that. And we've considered, of course, as noted in the commentary, you know, some of those macro headwinds that exist out there. You know, while there's pockets of friction, I think it's also important to note there's also, you know, pockets of strength and optimism as well. um in the marketplace and and we're seeing that uh that positivity um carry through we believe in the second half and we see that reflected in our pipeline in our in our view of the second half okay that was great thanks so much guys and then oscar quick one for you just want to confirm i think you mentioned this at the end of your prepared remarks but
spk10: Again, given the margins here, you know, your path to just positivity and cash break even, I mean, all those targets remain in place, right? There's no risk to those at this point, correct?
spk09: No. So, I think as we sort of, you know, previously discussed and sort of John mentioned, I think sort of, you know, largely sort of, you know, the year is sort of unfolding as expected. I think we pointed earlier to the year, you know, you know, to sort of back and gear in terms of revenue seasonality. And with that sort of, you know, comes also seasonality, you know, in our profitability profile, both on the gross margin side and on the sort of EBITDA side. So as we look to the full year, you know, expecting sort of kit margins, you know, in the sort of, you know, mid 80s and, you know, service margin, you know, with sort of a six handle on them and then sort of a total sort of corporate cross-profit margin sort of, you know, close to and above sort of 70%. and, you know, reiterating the adjusted EBITDA profitability for the full year. So that's sort of very much intact.
spk10: Okay, awesome. If I could just ask one quick one before I hop off. On ExploreHT, congrats on the launch there. Sounds like it's a great ramp so far. Any thoughts on, you know, where pull-through could get to, how high above 700, 800K you can get to over time? And then which customers are getting, you know, which customers are interested in this relative to, you know, the 3K basically ExploreHT? And can we possibly see an acceleration in externalization given how robust this new kind of KIN platform is?
spk06: Yeah, all good questions. And that average pull-through number is something we often discuss together, right? And it's very difficult to predict. Obviously, XOR-HT tees up a significant improvement in throughput, as I stated in my script. So obviously that opens up for even higher annual pull-throughs. But I don't want to speculate on those numbers. The only thing we can very clearly state is that the throughput of HD is fourfold what the current Explorer 3K is. So it obviously sets up a meaningful possibility of increasing that. But we'll see how that will play out. And in terms of adoption, I mean, most of our customers, or I would actually say all, converted from Explorer 1536 to 3K. So we're expecting most and all of our customers also to convert over to the HT. We know that if they are running longitudinal projects or studies, they don't want to change platform in the middle of a program. So obviously 3K will be around for some time. But overall, we really think most customers will jump on to the HT platform. And with this extreme innovation that was done again, and the simplification of both the product itself and its workflow is really, really dramatic. So already, you know, now early in August here, We already have customers that sort of declined the 3K platform, but are now onboarded on the HT platform due to its simplified workflow. So it's, yeah, no, great, great product and a fantastic start. And yeah, it's going to be very meaningful to us as we look ahead.
spk10: Great. Thanks, John. Sounds promising. Thanks, guys. Thank you.
spk02: Thank you. One moment for our next question.
spk04: And our next question comes from Puneet Sudha of Luring Partners. Please go ahead.
spk08: Yeah, hi, guys. John, Oscar, Carl, thanks for taking the question. So the first one is really on the HT launch. You know, it seems like you're clearly excited about the launch here. The product appears very powerful. I would love to understand, you know, how much of the shift, if I may say, from 2Q into the second half, so to speak, for the revenue is because of the market sort of pausing or freezing ahead of the HT launch and adoption. You know, I would like to know what percent of Explorer customers are waiting or holding their, you know, orders, 3K orders in order to place the 5.3K order. HT order. And, you know, I mean, this is a phenomenon that frequently happens with your analytical backend instrumentation from Illumina Novaseq. But this is not something we have seen or familiar with on the O-Link side. So maybe just walk us through that, help us understand sort of what's happening as far as the customer orders and the behavior here with the Explore HT launch.
spk06: Good morning, Puneet. Thanks for good questions. Yeah, and also, I mean, how we operate with our customers, right? You know, obviously, this is a very close relationship that you have. And when in particular, I mean, across both academia, biopharma, and if we call it the population health segments of our market, they're not randomly sort of running projects. This is a process that goes underway with Thorough planning over time. So, obviously, I mean, we, we put a lot of effort into building those relationships for a very long time. And hence, you know, some of those programs that I just sort of referred to were happening in the first half of this year, where we then shared some information over what's coming. So this is careful planning. We're not going to share with you exact percentage or dollar amounts or whatnot. But as you heard on the script, right, obviously there were some orders that were pushed into the second half of the year because that was the better decision for the customer. And with sort of those discussions that we had, before and now after the launch I mean we are as you heard again right very very excited about the customer and market's reaction to the HT product and that's why we're reiterating our guidance so maybe I'm not sort of specifically asking your question in terms of actual dollar amounts or order sizes or percentages but I hopefully you can hear from sort of the narrative here that this was sort of expected from us, and that we believe we're sitting in a very good place. And yeah, that's why we are reiterating our guidance for the rest of the year.
spk08: Yeah, that's helpful. Yeah, please, Carl.
spk09: Yeah, go ahead. No, but just sort of adding to that, and I think sort of in terms of looking at, you know, I think we were very sort of clear sort of early in the year that sort of our seasonality of this year would sort of, you know, be more similar to 2021 than to 2022, you know, and 2021 was a year when we sort of launched, you know, Explore 3K, you know, late in the year. So I think sort of, you know, looking sort of at that seasonality profile and sort of comparing that to sort of, you know, the implied profile for this year, you know, I think those are, you know, very similar as you try and sort of understand sort of the buildup for the rest of the year.
spk08: Got it. Makes sense. John, just maybe a follow-up for you and maybe for Carl, too. I mean, you know, what can 5.3 or Explore HD do for you that, you know, the 3K product couldn't? And maybe what I'm asking along the lines of, you know, are there customers who are waiting to do larger studies here for HT or they can utilize HT and leverage and do those studies that they couldn't do before potentially or experiments they couldn't do before. And then just one small one that I'll just wrap it up in this question. China, could you, you know, you obviously grew their tools, companies haven't grown throughout the quarters, throughout this quarter, China has been a pain point. You seem to be doing well, Derek, if you could elaborate a little bit on that too. Thank you so much.
spk06: Sure, Puneet. Yeah. So, I mean, we've completely re-engineered and redesigned HT over 3K. So if we would have sort of continued with the old 3K design into, you know, well above 5,000 assays, we would have been looking at like 128 probe tubes or vials in the product and here we shrunk that with increased multiplexing down to 16 tubes so just imagine that how much simplified you know the product in itself is and with that simplification and higher multiplexing you will only need to run the sample once instead of several several times So if we would have continued the old explore design, we would basically run every sample 16 times. Now you're going to run it once. So, uh, and keep in mind, it's the exact same automation and, uh, set up, uh, for any explore lab. Uh, so it's very, very easy to, uh, move into HD from explore three K. So that is sort of the numbers that we're referring to with. the product design itself which gives you sort of fourfold increase in throughput if you take into account almost doubling the number of assays it's six times the throughput so this has been you know obviously very uh thoughtfully designed uh on from our uh perspective based on uh close discussions with the market we see appetite across academia biopharma And if we call it population health studies, you know, significant courts. And so being able, we, we, you know, this product is really opening up. If you want to run, as we said, the full UK biobank or, you know, projects of that scale, you can now run that basically within a year. Uh, at the back end of that, we invested significant in the data QC and, and, uh, in software development. So we also have designed the full product, not only sort of the physical parts, but also software support, et cetera, to be able to run and execute, you know, those significant scale and size population health programs or whatnot. So hopefully that will help you sort of get a better perspective of the dramatic improvements that we've done from 3K to HD. On the question of China, yeah, I mean, obviously, when you compare us to many others, we obviously start from smaller starting points in terms of dollar revenues, right? So we are extremely impressed about our Chinese team and their success in the market. They've been executing extremely well. But we're starting off from small numbers, so we're not facing maybe what other companies that already have a significant business there. But nevertheless, they've done fantastic. So I don't know, Carlos, if you also want to add on something on China or HT.
spk07: Yeah, I'll just reiterate what you said, John. I think on Explore HT, I think you captured it well. I think it's much more than the content. It's sort of what the platform enables with all of those innovations that are significant. And we've only touched on a few. I mean, we've improved all facets, including software, the way we do QC. So the list goes on and on, which just enables the market to adopt the technology even that much more easily. And the content is certainly important, and people want more high-quality assays, which is what we deliver. So we were very precise in... You know, in the effort to deliver a lot more high quality content for our customers. And I think that's, I think that'll be certainly a catalyst for for even more interest. There's no question there. And then China, you captured a while I would only add that we benefited from a little bit still in Q2 from the instrument stimulus program. that have been in China that have since discontinued. But otherwise, I mean, just fundamentally, yeah, we have a fantastic team that's executing very well, I think is really the statement. And so, yeah, so we've benefited greatly from it. And I think that also just sort of reflects the global trend of next generation proteomics really being significant. It's not a, you know, a regional or market specific opportunity. It's quite broad across the globe.
spk06: Yeah, thanks for highlighting that, Carl. I sort of skipped over the validation part, which is obviously crucial. And so we're taking it so much for granted, but it's really worth mentioning, right? So we're doing the exact identical validation on each and every assay that we've done across any target product or the 1536 or 1372. So each and every of the 5300 plus assays have gone through a single Plex validation. So it's, yeah, to ensure the highest data quality possible. So it's, yeah, very, very impressive.
spk08: That's great. Thanks, guys, and congrats on the HD launch. Thank you.
spk04: Thank you. One moment for our next question. And our next question comes from of Scotiabank. Please go ahead.
spk03: Hi. Thanks for taking the questions. On the Baylor College of Medicine adoption, congratulations on that. Just kind of curious if you guys have a sense of whether the All of Us project is implementing more proteomic profiling routinely. And if you could kind of talk about what's going on in terms of your pipeline for other population scale projects that might be ongoing, that might incorporate proteomic profiling as well.
spk06: Great. Carl, you can take both of these, right?
spk07: Yeah. Yeah, absolutely. Hey, Tongji. Good morning. Good morning. Yeah. So, Baylor, thank you. Yeah. I think that's, you know, yet another, you know, one of the top genome centers in the U.S., in the world. adopting the platform, so we're super excited about that. I'm not going to comment on any particular projects that we haven't made public yet, but I think similar to prior comments, nothing has changed there. I think the appetite for many of these population-scale studies is very strong for proteomics, and those conversations continue to continue to evolve and expand. And obviously, Explore HT is, as John was talking about, because the innovation is well beyond just adding more proteins, is yet again changing the conversation. You know, being able to contemplate now, you know, a study on the scale of, you know, 500,000, a million samples with the kind of throughput that we can do now is, is incredible to consider in how short a period of time that can now be executed, which is, I think, a very exciting proposition for the market. So we're very excited. And those conversations, again, we launched less than a month ago, really. But all of those conversations have now been and are being reengaged in light of a very significant product introduction here.
spk03: Great, thank you. And then just one other one on the signature placement and the revenue pull through, you know, seeing a sequential step down in terms of placements, but a significant step up in terms of the revenue pull through based on my calculations. And was just wondering kind of if you could talk more about the dynamics there, if this is kind of more the normalized placement rate, and then kind of if the revenue pull through at this level would be sustainable going forward.
spk07: Gosh, is the question about signature and midplex, or were you asking about the hyplex as well?
spk03: Just the midplex, yeah, the signature.
spk07: Okay, thank you. Yeah, no, we're very happy with the placements in Q2, met expectations for the first half. You know, really tremendous, and we've talked about this, obviously, as Explorer gets a lot of airtime, but again, strategically very important for us. So, We're really happy with that. We have a very strong pipeline going forward. And that revenue pull through has continued to be good there. We had good kit growth, again, as noted in Q2. So we're continuing to see positive effects of growing that install base of signature instruments. So we remain really positive on the outlook for the midplex business as well. And, yeah, those placements have continued to be, yeah, robust, and we expect that to continue in the future.
spk02: Sounds great. Thank you.
spk07: Thank you.
spk02: Thank you. One moment for our next question. And our next question comes from Matt Sykes of Goldman Sachs.
spk04: Please go ahead.
spk05: Good morning. Thanks for taking my questions. Just a question on sort of the back half growth, and then I have a follow-up on longer-term margins. But just kind of two elements in terms of giving you confidence for that back half growth. I know that when you launched HT, you had mentioned that that launch is already baked into the current guide, which you've maintained. But just given sort of the positive dynamics that you see in the launch and sort of some of the color that you've given us, Is some of the confidence in the back half that the HT launch, I realize it's only been about a month, but that HT launch is going far better than your initial expectations. And therefore, that actually gives you confidence in the back half. And then the second element to this question is understanding the orders get pushed into the second half. But as we get into Q4, is there an element that you've seen historically in terms of budget flush and the need for your customers to spend? that puts orders less at a risk of pushing from Q4 to Q1 relative to say Q2 to Q3?
spk07: Yeah. Hey, Matt. Good morning, Carl. I'll take some of that. Yeah. So, yeah, as noted in that second half, you know, outlook and our sort of full year guide, Yeah, we've sort of, you know, the optimism for Explore HT, I mean, we knew it was going to be a big hit. So we, you know, contemplated that when we thought about our year. And that certainly measured with, you know, we knew we were entering some stronger economic headwinds coming into the year as well. So it's all in balance, I guess, is the way we're looking at it right now. You know, so that's that doesn't change, again, as noted, our guide for the full year. But, you know, HT, we certainly expected it to have a very positive. Yeah, year end flush. I mean, you know, for sure, like every year, we're, you know, relying on a certain amount of that sort of typical year end spend. It's, you know, the degree of that is, you know, yet to be seen. of course. But again, I think we've sort of contemplated and risk adjusted and we look at our pipeline and so on. And we think that we're in good shape for the second half of the year. And yes, I think due to that fact, I think when budget needs to be spent within a year, a calendar year, a fiscal year, that does tend to mitigate some slippage. And so, yeah, we hope that will be, of course, a positive factor as well, you know, once we come to Q4. So, again, overall, we feel very positive, and HT is most definitely a part of, you know, that optimism, especially sort of the early signals that we're getting just in this past month.
spk05: Got it. Thanks for that. And then just as a follow-up, Oscar, you mentioned in your prepared comments that In regards to the kit margins that over the long term, you kind of continue to see, you know, strong opportunity for those margins. But on the back of that, you're looking to improve those margins by increasing your own content on the platform. Could you just kind of flesh that out a little bit more in terms of the pacing and sort of development of margin expansion due to the increase of content on the platform and what that could mean?
spk09: Yeah, so I think as we sort of previously discussed, and so I think sort of, you know, the sort of short to midterm, you know, kit volume, we're thinking about that sort of, you know, sort of, you know, mid-80s and sort of, you know, so this year is sort of, you know, largely progressing sort of along the lines of sort of those expectations. And then over the long term, but this is sort of, you know, I mean, you know, several years out as we look to sort of increase the own content of the platform, you know, that will sort of, you know, push, push the margins back, you know, perhaps to sort of the territory where we saw, you know, where we've sort of been historically and if you compare it to sort of, you know, 2022 and 2021 and sort of prior to that. But again, that is sort of, you know, a multiyear perspective on that sort of development. But, you know, it's proceeding according to plan.
spk05: Thanks very much.
spk12: Thanks, Matt.
spk02: Thank you. One moment for our next question. And our next question comes from Tejas Savant of Morgan Stanley.
spk04: Please go ahead.
spk01: Hi, this is Yuko on the call for Tejas. Starting with the first question on HT, how are you pricing HT versus Explorer 3K and somewhat related to that, are there any differences in margins for HT product versus 3K that we should be thinking about? And then also, while still pretty early, would you speak on what you're seeing in terms of elasticity of demand for those who started to use HD?
spk07: Hey, good morning. This is Carl. I'll take the first part of that question. So, yeah, HD pricing is roughly, you know, about a 20% premium over Explorer 3072. That said, part of the innovation which is important is actually the operating cost, meaning labor and ancillary reagents and so on is actually a reduction in cost per sample. So the incremental cost of an experiment isn't significantly greater for our customers when you consider cost of experiments. So that's a big positive in this product. I'll let Oscar comment on the margins. But as far as the elasticity, we've been launched less than a month. But I think more of the comment there is we expect actually just great demand there. So, so far, again, in the context of what I stated in terms of pricing and then total cost per experiment, the product is being received extremely well. I mean, the value we're deriving from, you know, from all of the benefits of the product, as we highlighted, you know, is a significant step up overall. And I think that's being recognized by our customers, you know, which is a really positive statement in terms of, again, customer reception. And then, Oscar, maybe you want to comment on the margin a bit. Yeah, thanks, Paul.
spk09: Yes, on the morning, I mean, the biggest sort of, you know, impact and sort of improvement we sort of see sort of the potential on the service side. You know, if you contemplate, you know, the increasing throughput and sort of, you know, the overall cost reduction in the workflow and efficiency, you know, so we're, you know, very excited about that and sort of, you know, how that will sort of, you know, improve sort of margins on the service side as we consider sort of, you know, the second half of the year and in particular sort of, you know, the, you know, 2024 and beyond.
spk01: Great. Thank you for that color. And then on the, it seems like from your opening comments, the academic end market clearly is holding up in the challenging macro compared to the biopharma customer segment. How are you thinking about that budget flush dynamics at your end, particularly by the customer segment between academic and biopharma?
spk07: Yeah, that, I mean, the year-end budget flush tends to be more of a pharma dynamic, biopharma dynamic. And again, you know, it's hard to, you know, sort of, you know, predict into the future. But as typical, I mean, I've been in this industry almost my entire life. I think even during some challenging times, this is a dynamic that tends to exist as some groups need to expend their budget for the full year. So, um, again, and as I noted, you know, the, the, the headwinds, even sort of you've heard in our peer groups talk about in the biopharma segment, it's, you know, there's pockets of headwinds. This may be a good way to describe it because that's, it's, you can't paint all accounts with the same brush. Um, so again, we remain sort of positive as we look at the second half of the year and we're, you know, paying close attention to customer conversations and, and their planning, but you know, the, um, Listening to the tone of those conversations and the building of the pipeline and the expansion we're hearing in terms of ambition levels to adopt next-generation proteomics makes us, again, quite optimistic for what we'll see in the second half here.
spk01: Thank you for taking our questions.
spk07: Thank you. Thank you.
spk04: Thank you. I would now like to turn the conference back to John Heimer for closing remarks.
spk06: Thank you for joining us today and for your interest in O-Link. We're excited about what the future holds, and we look forward to keeping you all updated on our progress. So have a great day, everyone, and thanks again.
spk04: This concludes today's conference call. Thank you for participating, and you may now disconnect.
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